Graham Briggs, CEO, Harmony Gold
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» John Munro stakes his future on uranium

» JSE:HARMONY GOLD MINING COMPANY LIMITED:
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Harmony right behind Rand Uranium
Brendan Ryan
Posted: Thu, 17 Apr 2008

[miningmx.com] -- Harmony intends maintaining its 40% stake in Rand Uranium, the joint venture it has set up with Pamodzi Resources Fund (PRF) which was previously dubbed “newco.”

That implies further investment in Rand Uranium by Harmony to avoid dilution of its shareholding given the company’s stated intention of being a “platform” for further growth and consolidation in South Africa’s resurgent uranium sector.

Rand Uranium was created when Harmony agreed to inject the Cooke and “old Randfontein” sections of its Randfontein Estates mine into the joint venture.

Harmony’s strategy was to realise value from these uranium assets while minimising its financial commitments to their development given the requirements it faced to finance the group’s major expansion projects.

Asked whether Harmony would kick in cash or more assets to maintain its stake Briggs replied; “There are other assets that Harmony could put into Rand Uranium but we have not investigated those aspects yet.”

He added the intention was to list Rand Uranium on a major stock exchange in about three years time once the Cooke uranium plant was in production.

“We are not sure where the listing will be but there will be a secondary listing on the JSE if the primary listing is placed on another exchange,” he said.

Rand Uranium CEO John Munro said the company’s strategy was different to that of many other uranium junior companies in that the listing would take place only once the viability of the project had been proven through bringing it into production.

“We are not listing the company up-front on the basis of making all sorts of promises and we will not rush this project. Instead, we will do all our homework up-front.”

That approach is being made possible through funding into Rand Uranium by various private equity funds like PRF along with First Reserve Corporation from Greenwich, Connecticut and AMCI Capital from London.

According to Munro, Rand Uranium’s backers are prepared to put more money into the company to expand it through further acquisitions.

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He commented; “there is significant appetite from the private investment sector to put more money into uranium. They are keen to open up a new uranium business in South Africa even though initial developments here have been disappointing.

“Reason is that South Africa was a very reliable supplier of uranium in the past and the outlook for the uranium market looks extremely strong on the demand and supply fundamentals.”

Munro’s comment on “disappointing initial developments” was a reference to the problems at Uranium One’s Dominion Mine.

He declined to comment on what was happening at Dominion other than to point out that Rand Uranium’s plans to recover uranium from surface dumps was far less risky than any underground mining operation.

Munro said the key asset owned by Rand Uranium was the high grade Cooke Dump holding 83Mt of material which contained an estimated 39m lbs of U3O8.

The dump had been drilled to the extent that its reserves could be classified in the “measured and indicated” categories at a grade of 0,215kg/t of U308. That compared with typical grades for dumps on the West Rand of 0,05 to 0,07kg/t of U308.

“The in situ value of that resource is US$40/t of which gold accounts for $6,7/t and uranium for $33,6/t. You can apply whatever haircut you want to that resource in terms of assumptions on costs and recovery efficiencies and you still come up with a significant margin,” Munro said.

He added his top management priority at this stage was to get the Cooke treatment plant up and running but said he was also aware of the consolidation possibilities in the sector.

“There are those companies which will consolidate and others which will be consolidated. You cannot predict when consolidation opportunities may come up and you have to be prepared for them,” Munro said.