Neal Froneman, CEO Aflease Gold
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Uranium One offtake deals break new ground
Allan Seccombe
Posted: Thu, 11 Jan 2007

[miningmx.com] -- SXR Uranium One feels it is breaking new ground with the offtake agreements it is putting in place for U3O8 from its Dominion mine in South Africa, CEO Neal Froneman said on Thursday.

Toronto- and Johannesburg-listed Uranium One has in place four more un-capped market price-related offtake agreements for 3.2m pounds of U3O8 with a floor price that is well above the breakeven production price at Dominion of about $20 a pound.

“These are sort of market-leading contracts. It’s hard to imagine how you would get better contracts than these,” Froneman told Miningmx in a telephonic interview.

“To get contracts that have floors and are uncapped is not easy. I was told six months ago you could not get contracts like this as a junior,” he said.
market-leading contracts
The agreements have been struck with power providers, who are driving uranium demand hard in the rush to build more nuclear power stations to meet rising energy demands. Some 251 reactors are planned or are under construction compared to 442 in operation.

AngloGold Ashanti and First Rand’s jointly owned Nufcor International Ltd facilitated the contracts and Uranium One is keen to continue the long-standing relationship with Nufcor.

These contracts, along with one agreed in November, bring the total offtake to 4.7m pounds from 2008 to end-2012, representing 28% of production.

The latest four contracts are subject to the completion of definitive contractual documentation.

Uranium One is unlikely to sell much more than half of its production into forward contracts.

“We’re not sure we want to contract all our production. We would like to contract at least 50% of it and have flexibility with the other 50%. There are a number of alternatives and there’s no difficulty in selling uranium on the spot market as long as it’s not in large quantities, which would be disruptive,” Froneman said.

Uranium One has forecast Dominion will produce 500,000 pounds of U3O8 in 2007, which will be sold on the spot market.

A strategic review will be made public in the next week on the project.

Final work is underway on the uranium plant at Dominion to begin production at the end of February. The plant project is 90% completed and stainless steel piping is being installed.
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“The project is going very well and we’re confident that we will reach our targets on time,” Froneman said.

Uranium One received a setback to it plans in the United States when Rio Tinto Energy America, a business unit of London-listed Rio Tinto, pulled out of the sale of its Sweetwater uranium assets for which Uranium One was the preferred bidder.

Uranium One expects to close a second transaction with US Energy Group to buy the Shootaring Canyon uranium mill by March this year. US Energy has given no indications of wanting to copy Rio Tinto, Froneman said.

“We’ve got a very clear strategy in the US and we’ve got a lot of other things in the pipeline,” he said. “Sweetwater was just one aspect of that and it wasn’t the be all and end all of that strategy.”

Further acquisitions in Australia where Uranium One is busy with its Honeymoon project are unlikely because it is extremely difficult to find a decent value proposition, he said.

Uranium prices could rise by $3 to $4 a month because of the increased demand for the heavy metal in energy generation, he said, forecasting a price of $100 a pound by mid-2007.

Uranium prices have increased 260% over the past two years to $72 a pound.