Uranium One cuts production target

Brendan Ryan | Mon, 16 Nov 2009 10:12
[miningmx.com] -- URANIUM One will meet its 2009 production forecast but has been forced to chop back on its 2010 target because of operating problems at two of its mines in Kazakhstan.

Despite this Uranium One shares rose 4% on the Toronto Stock Exchange on Friday after release of the September quarterly numbers reaching C$3.37 which compares with a 12-month high of $4.07 set in May.

Uranium One CEO Jean Nortier said the company expected total attributable production for 2009 to remain at 3.5 million pounds (m lbs) of U308 of which the company expected to sell 2.5m lbs.

He revised the production estimate for 2010 down to 6.8m lbs from the previous estimate of 7.5m lbs made in the June quarter. Nortier added Uranium One expected to sell 6m lbs of U308 in 2010.

The 2010 production estimate is based on the assumption that Uranium One will be able to complete the acquisition of a 50% stake in the Karatau uranium mine joint venture which is also in Kazakhstan.

Nortier reported today that Uranium One had received approval from the Kazakh Ministry of Energy and Mineral Resources (MEMR) for the purchase of the 50% stake from ARMZ.

He commented, “Uranium One expects to close the acquisition on or about December 15, 2009 subject to approvals from the Kazakh anti-monopoly commission and the Australian foreign investment review board which are expecte to be received in due course.”

Still pending from MEMR is approval for Uranium One to raise C$270m through the issue of 117m shares to a consortium of three Japanese companies with which it will also sign long-term offtake and strategic relationship agreements.

Reason for the revised production estimates concerns operating problems at the Kharasan and South Inkai mines.

Kharasan was officially opened in April but production has run below expectation with recoveries from the well field currently running below 50% from the first operations.

According to Nortier, “it is apparent from the information obtained during the current ramp up that the Maastrich ore horizon selected for the pilot block is not representative of the deposit as a whole.

“New well fields on the Campan and the Santon horizons, which lie directly below the Maastrich horizon, are being proposed.

“Production from the new Campan and Santon well fields is expected to commence in 2010. Based on expected improved performance from the Campan and Santon well fields, a feasibility study and application for industrial production are forecast to be prepared in 2011 with industrial production approvals granted in 2012. “

Uranium One is negotiating extensions to the loan facilities put in place to fund Kharasan.

Nortier said “a more gradual ramp-up profile” is being implemented at the South Inkai mine which is now expected to reach its annual design production capacity of 5.2m lbs of U308 in 2011 on an annualised basis.

Uranium One made a net loss of $7.8m for the September quarter and a cumulative net loss of $26.2m for the nine months to end-September.

The group has not yet been able to sell the mothballed Dominion uranium plant in South Africa despite earlier optimism by Nortier.

On August 11, Nortier told Miningmx that “we are pretty far advanced in negotiations to sell the Dominion mine but, at this point, we are not yet in a position where we can announce anything.”

The cost of keeping Dominion mothballed amounted to $3.2m in the September quarter.