8:35p ET Wednesday, February 19, 2003

Dear Friend of GATA and Gold:

In his "Midas" commentary a few weeks ago at
www.LeMetropoleCafe.com, GATA Chairman
Bill Murphy warned that its hedge book would
emasculate Sons of Gwalia. As you'll see from
the story from the Sydney Morning Herald
appended here, it has happened.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *


Sons of Gwalia digs itself into a big hole

By Michael Weir
Sidney Morning Herald, Australia
February 20, 2003
http://www.smh.com.au/articles/2003/02/19/1045638366147.html

Sons of Gwalia was on the verge of a crisis yesterday
after it abandoned its interim dividend for the first time
in more than 10 years and said it would struggle to
meet its already revised full year net profit.

The company revealed it was cash-flow negative to
the tune of $21.6 million for the six months to
December 31 and had no cash in the bank due to
the crippling impact of its hedge book, operational
problems in its gold division, and the severe
downturn in the global market for tantalum, of which
Sons of Gwalia is the world's biggest producer.

The company's decision to conserve cash -- it would
have cost $12 million to maintain the 7.5-cent dividend
paid in the second half last year -- was seen as
evidence the problems were bigger than the market
first thought.

Its shares plunged a further 22 cents, or 12 percent, to
a fresh 11-year low of $1.61.

The latest fall leaves the miner valued at just $305.2
million compared to $1.33 billion 12 months ago and
raises further questions about the future role of founding
directors Peter and Chris Lalor.

Sons of Gwalia reported a 79 percent slump in net
profit to $7.2 million for the December half, which
included significant items of $3 million.

The company had negative operating cash flows of
$21.6 million, which included $13.2 million in interest
payments on the company's $385.4 million debt,
and exploration expenditure of $7.2 million.

Sons of Gwalia had no cash in the bank at December
31 and a bank overdraft of $1.3 million, although it
had deposits at call of $9.7 million and gold on its
metal account of $16.2 million.

Gold division earnings before interest and tax (EBIT)
fell to $2.5 million, compared to $30.6 million in the
previous corresponding period, while tantalum
generated EBIT of $28.7 million, down from $34.5 million.

Executive chairman Peter Lalor would not return calls
yesterday, but said in a statement the gold division had
been hit by lower-than-forecast production and higher
costs. Tantalum was hit after the company was forced
to cut production due to a slump in demand, he said.

The company said it would "not be prudent, nor good
business practice" to pay a dividend to the company's
17,000, mostly small shareholders.

It also said it would decide on a final dividend when the
full-year result was known.

The company said it expected the second-half profit
to be higher.

"I hope this is as bad as it gets," Euroz Securities
analyst Andy Clayton said.

-END-