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Neal Froneman heads Down Under
Brendan Ryan
Posted: Thu, 20 Nov 2008
[miningmx.com] -- GOLD One - the new name for Aflease Gold once it merges with Australian junior BMA Gold - was deliberately chosen so investors would reflect on Uranium One, according to Aflease Gold CEO Neal Froneman.
“We have put it flatly on the table because we think there’s a certain brand here which in the longer run is a positive,” he said.
Froneman resigned abruptly as CEO of Uranium One in February and the company has just closed the Dominion mine near Klerksdorp, taking a $1.8bn (about R18bn) impairment charge against the development.
Briefing investors in Sandton on Thursday morning, Froneman said: “The experience with Dominion was disappointing, but I look past Dominion and see a very successful uranium company which will outlast most uranium companies around today.
“If we can be half as successful with Gold One as with Uranium One I will be very
happy,” he added.
Froneman declined to comment on developments concerning Dominion and Uranium One, saying he was under confidentiality agreements as well as a restraint of trade agreement.
He said the merger with BMA was strategically a company-making development for Aflease Gold, because it would give it the ability to raise funds on the Australian Stock Exchange (ASX).
Aflease Gold’s main focus was to bring its Modder East mine into production, for which it needed to raise extra money.
The construction cost of Modder East was originally estimated at R800m, which was funded through R200m sourced from private equity placings and R600m through a convertible debenture issue.
Aflease Gold has cash of R331m remaining, but it will need another R80m to R90m on top of this to complete Modder East which is due to pour its first gold in the fourth quarter of 2009.
Plans are to raise another R120m before June 2009 once the
merger has been completed. This is expected to happen by February.
Gold production from Modder East is estimated at 180,000 ounces/year from 2011 and the first phase of the mine has an estimated economic life of eight years.
Development of the mine is running about six months behind schedule. This is because of delays in sinking the main decline shaft through water-bearing, dolomitic geological structures.
Froneman said: “The capital markets in North America are effectively closed which is why we are not going for a listing there, although ultimately we would like to have a listing on the Toronto Stock Exchange.
“You can still raise funds in Australia and it is easier to raise capital there than it is in South Africa.
“I believe Gold One will be an attractive investment on the ASX as a company with the fifth-largest gold resource inventory there. It will fill a void in the ASX mid-tier gold producer space.
“I believe
there is strong potential for the share to be re-rated, despite the fact that almost certainly an ‘African discount’ will be applied to Gold One because its operations are located here.
“We have also taken cognisance of the experience that DRDGold had when it went into Australia and listed on the ASX.
“Having said that, there are plenty of resource stocks listed on the ASX whose operations are entirely located in African countries.”
Froneman said the Modder East mine carried a far lower risk than Dominion because it had been put through all the conventional feasibility study stages, which was why it had taken so long to develop. The initial conceptual study on Modder East was done in 2003.
Froneman said: “Dominion was developed to take advantage of a certain window of opportunity in the uranium market. The mine was developed in parallel with the feasibility study and that came with a risk factor.”
Aflease Gold’s other projects include
the re-commissioning of the Sub Nigel One shaft as a training centre for Modder East staff, as well as further work on the Ventersburg project near Welkom where a feasibility study is targeted for the end of 2009.
The company also has exploration projects near Bothaville in the Free State, as well as in Mozambique and Namibia.
The sole asset brought in by BMA - other than its ASX listing - is the Twin Hills project in Central Queensland. Froneman said development of this project lay “much further down the pipeline”.
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