Neal Froneman, CEO Aflease Gold
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» Mvelaphanda buys into Aflease Gold
» Aflease plots 500,000 oz gold strategy
» Aflease wraps up funding of flagship gold project
» AfGold bid "completely off the table" for Great Basin
» Uranium One may quit Aflease Gold
» Aflease Gold weighs a second gold mine


Froneman's track record a decider
Brendan Ryan
Posted: Thu, 17 Apr 2008

[miningmx.com] -- A critical factor facing investors considering buying Aflease Gold (Afgold) shares is whether they believe the team of CEO Neal Froneman and COO Izak Marais can deliver the goods.

It's critical because the recent track records of both executives are poor. Yet Froneman says he has the full support of Afgold's new majority shareholder - private equity fund African Global Capital (AGC).

AGC was formed in January by Mvelaphanda Holdings (Mvela) and two overseas investor groups. It's buying Uranium One's 64,6% stake in Afgold for US$89m, in two tranches. AGC has bought 29% of Afgold and holds an option to buy a further 35,6% stake. An offer to Afgold minorities will be made as and when it exercises that option.
have to be a bit forgiving
Froneman also gets a vote of confidence from Quinton George, CEO of Trinity Holdings, which owns around 5% of Afgold. However, Froneman isn't happy with some of George's views.

George - who's a long-time backer of Froneman - says: "We're bullish on Afgold. We think Neal will be far better at running Afgold than he was at Uranium One and we think it will be refreshing for Afgold to belong to an owner that believes in the company's prospects.

"You have to be a bit forgiving here. Neal bit off a lot more than he could chew at Uranium One. He had a lot of balls in the air at the same time and he dropped a couple of them trying to run a business spread around the world.

"At Afgold he'll be totally focused on running an operation close to home and I think he's perfect for the job, as he's obviously going to put his guts into it."

Froneman retorts: "I don't believe I dropped any balls at Uranium One. The company is currently in a very difficult position but it will be radically different in a year's time, with strong cash flows from the operations coming through. I also don't believe it's fair to single out Uranium One when the entire uranium sector has dropped by around 60%."

Froneman quit Uranium One abruptly on 21 February this year as the company revised, yet again, its production forecasts. It dropped expected production from its Dominion mine during 2008 to 590 000lb of U3O8 from 2m lb previously. Reasons were a string of technical problems with the plant, plus serious problems with its underground mining operation.

Uranium One is by far the worst performer in its sector. It hit a 52-week low of C$3,04 on the Toronto Stock Exchange, which meant it lost 83,5% of its value against its 52-week high of C$18,39. Uranium One currently sits at C$4,38/share, with much of that recovery coming over the past week.

Marais is the former CEO of long-troubled fluorspar producer Sallies. He left Sallies in October 2007, denying he'd been fired but stating: "The ongoing losses being suffered by shareholders warranted a change at the helm."

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Afgold's first project is the Modder East mine under development on the East Rand, which is supposed to pour its first gold in third quarter 2009 and reach production of 110 000oz/year from 2010. Mvela CEO Mark Willcox says the Modder East mine is "a very attractive asset".

Froneman indicates big changes are coming at Afgold now his attention is focused on the company. He says he'll be looking at internal and external growth, including potential acquisitions as well as greater emphasis on "marketing" the company, including looking at other listings.

Froneman confirms he's settled the civil action brought against him and associated parties by former minority shareholders in the New Kleinfontein Mining Company (NKMC) acquired by Afgold. He refuses to disclose details but it's understood the minorities have been paid out nearly R3m in total.

Froneman says he's not part of the AGC consortium but would like to increase his stake in Afgold and is looking at ways to achieve that.

In broad terms, Uranium One under Froneman was long on corporate action and strategic developments but short on operating and technical delivery on its key project - Dominion.

Though the jury is still out on what will eventually happen at Uranium One, there are two lessons that Afgold minorities should have learnt from the way Froneman ran it.

The first is to take profits should the share price shoot up on the back of a burst of corporate activity instead of more fundamentally sound reasons, such as rising gold production. The second is to realise that, should things start going wrong at Afgold, you'll be the last to find out - judging by the late disclosure of adverse developments at Uranium One.