Bat­tling on

Mar­ket looking bet­ter but miner’s per­for­mance is not

Finweek English Edition - - Companies & Markets - BREN­DAN RYAN bren­danr@fin­week.co.za

THE SPOT PRICE OF ura­nium has kicked up in re­cent weeks, spark­ing hopes it may be on a re­cov­ery track. How­ever, Ura­nium One’s share­hold­ers seem un­likely to reap much ben­e­fit. The ura­nium price has risen 18% to US$65/lb from $55/lb that had ruled dur­ing much of June and July. Those prices com­pare with a high of $138/lb reached in June 2007.

Nuf­cor chair­man Kelvin Wil­liams says the fun­da­men­tals for nu­clear en­ergy re­main “strongly favourable”. He says long-term con­tract prices for ura­nium have been far more sta­ble than on the spot mar­ket and have stayed around $80/lb for most of this year.

De­spite that, Ura­nium One’s price has re­mained flat at lev­els around C$3,70/share due to con­tin­u­ing prob­lems at its strug- gling Do­min­ion Mine near Klerks­dorp, where fore­cast pro­duc­tion for 2008 has been re­duced yet again. That’s 72% down on the 12-month high of C$13,34/share.

CEO Jean Nortier now says fore­cast pro­duc­tion from Do­min­ion has been dropped to 320 000lb of U3O8 from the es­ti­mate of 590 000lb made in March. That num­ber was a rad­i­cal chop on the pre­vi­ous es­ti­mate of 2m lb.

De­spite that, Nortier is main­tain­ing his to­tal pro­duc­tion fore­cast for 2008 un­changed at 3m lb for Do­min­ion. That’s due to bet­terthan-ex­pected pro­duc­tion from the de­vel­op­ing South Inkai mine in Kaza­khstan, which is ex­pected to hit 910 000lb at­trib­ut­able to Ura­nium One com­pared with 500 000lb pre­vi­ously. How­ever, there’s a caveat. It de­pends on the mine be­ing granted a per­mit to move into in­dus­trial pro­duc­tion later this year, as it’s cur­rently only per­mit­ted much lower “pi­lot” pro­duc­tion.

Ura­nium One is sell­ing off some of its ura­nium ex­plo­ration projects in the United States – some­thing that Nortier said in March wouldn’t hap­pen. Now var­i­ous US projects are be­ing dubbed “non-core” as Ura­nium One fo­cuses on de­vel­op­ing its Wy­oming prop­er­ties at the ex­pense of oth­ers in states such as Utah, where the Shootar­ing Canyon Mill (plant) might be up for sale.

For­mer CEO Neal Frone­man – on his ini­tial ex­pan­sion drive – bought those prop­er­ties, and their sale is forc­ing Ura­nium One to take im­pair­ment charges in its in­come state­ment. Ura­nium One an­nounced in May it had sus­pended de­vel­op­ment of its Hon­ey­moon project in South Aus­tralia, which was sup­posed to come into pro­duc­tion later this year. Nortier says share­hold­ers can ex­pect to see an im­pair­ment charge against Hon­ey­moon be­ing made in the sec­ond half.

He re­mains op­ti­mistic about Ura­nium One’s prospects, say­ing the com­pany has “suf­fi­cient liq­uid­ity and cap­i­tal re­sources” to meet ap­proved de­vel­op­ment plans for at least the next 12 months. * Also see ‘Ura­nium looks at bright side’ by David McKay on Fin24.

Re­mains op­ti­mistic. Jean Nortier

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