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Uranium One shuts the Dominion mine
Brendan Ryan
Posted: Wed, 22 Oct 2008
[miningmx.com] -- URANIUM ONE has finally thrown in the towel on its troubled Dominion Mine near Klerksdorp and placed it on care and maintenance.
The move follows a year of growing market speculation that the project was fatally flawed which was consistently denied by current CEO Jean Nortier and his predecessor Neal Froneman who resigned abruptly in February this year.
Both Froneman and Nortier have at all times presented an overwhelmingly optimistic outlook on the future of Dominion despite repeated cuts in the mine’s forecast production profile over the past year.
As of end-June the Dominion mine was valued in the company’s books at US$1.9bn compared with a total value for mineral interests, plant and equipment of $4.6bn.
According to Nortier, in a statement released today on Sens, “Uranium One’s consolidated cash balance as at September 30, 2008 of US$99m
together with the US$65m subsequently drawn under Uranium One’s Canadian credit facility, will provide Uranium One with sufficient cash resources to permit it to continue with planned operational and capital expenditures in Kazakhstan and the United States after providing for estimated suspension costs at Dominion.”
The failure of Dominion is one of South Africa’s biggest mining venture collapses and, while Nortier is the man currently in the hot seat, most of the blame for the disaster has to be laid at the feet of former CEO Neal Froneman.
This was his project from the outset after he wrested control of the former Afrikander Lease mine from founder and former chairman Peter Skeat in an ugly corporate battle.
Faced with grim gold market conditions Froneman jumped on the uranium band wagon three years ago as the price started to shoot up after decades in the doldrums.
He succeeded as a mining entrepreneur in setting up Uranium One as a
Toronto-listed operation controlling uranium properties in South Africa, Australia, Kazakhstan and the United States.
But he failed when it came to delivering the goods on the nuts and bolts development of the Dominion Mine which was to be Uranium One’s flagship.
In the meantime the Uranium One share price soared to around C$13 from which it has collapsed to around C$1 over the past year as investors turned sour on the company despite management’s persistent upbeat stance.
The main allegations levelled at Froneman over Dominion were that he had overstated the grade of the resource as well as the forecast recovery efficiencies of the pressure leach recovery plant.
He consistently denied both allegations but, following his departure in February, Uranium One started making the first admissions about problems with achieving the forecast underground grade and operational problems with the recovery plant.
Both Froneman and Nortier
claimed that Dominion could breakeven at a price of $18/lb of U308 but the company has never published detailed working cost statistics for the mine. If they were correct then Dominion should still be viable at today’s uranium prices of around $45/lb.
In a conference call held today Nortier said the latest estimate on cash working costs at Dominion was in the "mid-$50's/lb."
Interviewed afterwards he denied claiming the $18/lb number or that he had been overly optimistic about Dominion's prospects pointing out he said the mine would be marginally profitable during the release of the second quarter results.
Nortier said the three main reasons leading to Dominion's closure were that the "real" price of uranium had fallen while mining inflation had shot up significantly and the development of the mine had taken place at a slower-than-expected rate.
Asked whether he believed he had misled Uranium One shareholders Nortier replied, " I strongly
disagree with that suggestion."
According to today’s statement Dominion has been closed following completion of a detailed life of mine planning process and budget “which has shown that the project would require a sustained recovery in uranium prices as well as significant additional capital investment in order to become economically viable.
Nortier said he was looking at all the options “potentially open” to Dominion and these included a possible sale of the mine.
Given SA’s new “use it or lose it” mining legislation it’s likely anyone wanting to take Dominion over would look to get the mining rights for free from the State which should now own them given that Uranium One has closed the mine.
In reply to that Nortier said, "there's a big difference between shutting a mine down and putting it on care and maintainance in a responsible fashion. We believe we will have a seat at the table in determining the mine's
future."
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