Still twitch­ing

Finweek English Edition - - Openers -

BACK IN APRIL, I posed the ques­tion: “Re­cov­ery or dead cat bounce?” af­ter Ura­nium One had plunged from around C$13 to a low of C$3,04 on the To­tonto stock ex­change and then re­cov­ered abruptly to C$4,38.

Ura­nium One is now do­ing it again, re­cov­er­ing to cur­rent lev­els of around C$1,13. So is this fi­nally the long-awaited re­cov­ery or just a secondary “dead cat bounce?” The three driv­ers push­ing the share down are the ura­nium price, the global fi­nan­cial melt­down, which has ham­mered stocks across the board, and the clo­sure of Ura­nium One’s trou­bled Do­min­ion mine.

Af­ter pick­ing up from around US$55/ lb to $65/lb in July, the spot price of ura­nium ox­ide has fallen again and cur­rently sits at around $50/ lb. There’s noth­ing Ura­nium One’s man­age­ment can do about that or the fall­out from the sub-prime credit mess that, ac­cord­ing to CEO Jean Nortier, is the main rea­son for the drop in its share price as hedge funds liq­ui­dated their po­si­tions.

I have long be­lieved the main is­sue was the Do­min­ion mine, where man­age­ment hasn’t suc­ceeded in mak­ing it de­liver at any­where near its fore­cast pro­duc­tion vol­umes and re­cov­ered grade. That was con­firmed on Oc­to­ber 22 when Ura­nium One shut down Do­min­ion af­ter a year of re­fus­ing to pro­vide detailed work­ing cost in­for­ma­tion for the mine or to dis­close what it’s cost­ing the group in terms of “cash burn” through work­ing losses and the amount of cap­i­tal ex­pen­di­ture still be­ing pumped into it.

Do­min­ion had been closed since 13 Oc­to­ber, when op­er­a­tions were “tem­po­rar­ily sus­pended” due to labour trou­ble. More than 1 000 work­ers were fired be­cause of an il­le­gal strike.

Nortier reck­oned at the time Do­min­ion had noth­ing to do with Ura­nium One’s share price col­lapse. The truth is now out at last and it has cost share­hold­ers bil­lions of rands.

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