Market looking better but miner’s performance is not
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