[miningmx.com] — RAND Uranium CEO John Munro hopes to finalise funding for the company’s uranium project near Randfontein within three to six months, now that the uranium market has turned around decisively.
He told Miningmx that Rand Uranium had also been restructured to separate the gold interests – the former Randfontein division of Harmony’s Randfontein Gold Mines – from its uranium assets.
Harmony holds a 40% stake in Rand Uranium, which it earned from injecting the Randfontein mine and the Cooke 3 Dump containing an estimated 35 million pounds of uranium into the company.
Munro said the Randfontein mine would now be run largely by Harmony management, which would report to the Rand Uranium board. This would leave him free to focus on developing the uranium side of the business.
He said: “It has become clear to us that gold and uranium are two very different metals with almost zero investment overlap.
“Potential investors interested in uranium liked the concept of an industial operation retreating surface dumps, but did not like the exposure to underground gold mining.
“Restructuring the business into two clearly defined divisions makes it easier to spin out the uranium assets as a separate operation, should it be decided that is the way to go.’
Munro said Rand Uranium had started looking for funding early last year, but gave up in April because of the steady decline in the uranium price which finally bottomed out in June at around $40/lb.
“There was no sense in continuing because dealing at those price levels would have damaged the company. Instead, we focused on the front-end engineering and design of the project, taking it to the 60% engineering stage.
“We have also got our four main construction and operating permits in place, which means we have completed the bulk of the permitting exercise.
“That means we can start construction within eight weeks of putting the funding in place.’
Munro added the new design – in particular the decision to use existing brownfields sites for the deposition of the material treated by the plant – had dropped the capital cost estimate to R2.8bn from the original R3.5bn.
For that money Rand Uranium will build a plant that will produce about 2m lb of uranium annually over a 15-year economic life based on the high-grade Cooke 3 Dump resource.
Since June, the spot uranium price has recovered sharply to current levels of around $70/lb, mainly because of renewed concerns in the market over future shortages of supply given the rising number of nuclear reactors planned around the world.
Munro said: “We estimate our operating costs at $23/lb of uranium, so at current uranium prices and rand/dollar exchange rates you are looking at a 200% profit margin and a business which will generate annual operating profits of $100m.’
Munro added that a number of options were being looked at to raise the funds required, ranging from an initial public offering (IPO) through to a major backer buying a controlling stake and keeping the company private.
He said that ideally he would like to see Rand Uranium listed, because of the importance of having access to public equity markets.
Munro said a possible business strategy was to start Rand Uranium based on the Cooke Dump, and then grow the business to take in other uranium assets on the West Rand as well as diversify into uranium operations in other African countries.
He said: “The potential to build an African uranium business run out of South Africa is phenomenal, given our strategic advantages which make it a lot easier to run such a business from Johannesburg than from Toronto.’
