Jean Nortier, Uranium One CEO
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Uranium One toughs it out over Dominion
Brendan Ryan
Posted: Mon, 31 Mar 2008

[miningmx.com] -- Uranium One acting CEO Jean Nortier toughed it out over the troubled Dominion operation in the face of a barrage of questions at today’s conference call covering the annual results to end-December.

But he refused to disclose the “cash burn” at the loss-making operation or to specify how much of Uranium One’s forecast US$200m (R1,6bn) capital expenditure estimate for 2008 would be spent at Dominion.

“We don’t disclose the breakdown of the US$200m,” he said in reply to a suggestion from one analyst that some $50m was earmarked for the Honeymoon project in South Australia and the bulk of the rest could go to Dominion.

The start-up of commercial operations at Dominion has been pushed back by major problems at both the underground mine and the recovery plant. These have chopped forecast production in 2008 to 590,000lbs of U3O8 from the previous forecast of 2m lbs.

But the results indicate that “mine development costs” at Dominion from April 20 to end-December amounted to $20,6m (about R165m) while plant development costs over the same period amounted to $55,4m (about R443m).

That’s a total of R608m equivalent to expenditure of R67m a month before any offsetting revenue from the limited amount of U3O8 produced.

In reply to another query on possible sale of assets Nortier said Uranium One’s financial position was sound and he did not expect to sell “anything on the uranium side,” during 2008.

But Uranium One is selling its 67% stake in Aflease Gold to an unnamed buyer for around US$89m in two tranches. This should bring in an initial $40m during April with the buyer holding an option to take up the rest before May 8.

That will result in a book loss of around $90m because Aflease Gold sits in Uranium One’s accounts at a carrying value of $180m.

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When this was pointed out by an analyst, Nortier replied Uranium One would still make a large profit because the original purchase price for the asset was $15m. He said the present carrying value resulted from its revaluation during last year’s reverse takeover.

To reach its production target of 590,000lbs of U3O8 this year the Dominion mine will have to produce at an average monthly rate of 50,000lbs but the results for the first two months of the year reveal it is running way below this level.

According to Nortier, Dominion produced 12,000lbs in January and 18,000lbs in February.

He commented that; “higher grade areas planned to be mined towards the end of the year, an increased ratio of stoping to on-reef development and a programme to minimize the dilution of ore are anticipated to result in improved delivery grades to the plant by the end of the year.”

He added; “the plant is operating in line with recovery expectations but below throughput design capacity.

“Overall plant recoveries are expected to increase with time as the lower grade surface material is displaced by higher grade and quantities of underground ore.

“Once the surface tailings material has been entirely replaced with underground ore, recoveries are expected to increase in line with feasibility study test work.

Nortier said Uranium One’s strategy was to continue to push its projects towards commercial operation with the intention of being a “reliable supplier” of U3O8 to the nuclear industry.

Investors on the TSX took a dim view of Uranium One’s latest results knocking the share price down 43c – equivalent to an 11% drop - to C$3,5 in early trading in Toronto.

On the JSE the share closed at R32 which is almost back to the 12-month low of R30 it hit when former CEO Neal Froneman quit abruptly on February 21 and the latest round of production cuts were announced. The 12-month high is R114.