what is going on , page-55

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Harmony exits uranium
Miner agrees with Pamodzi to sell unlisted Rand Uranium to Gold One shareholders in unlisted Rand Uranium supporting the deal
ALLAN SECCOMBE
Published: 2011/04/29 06:59:54 AM

HARMONY Gold and Pamodzi Resources Fund?s backers have drawn a line under their involvement in Rand Uranium, agreeing yesterday to sell it to Gold One for $250m after a series of setbacks crippled efforts to finance a R2,8bn uranium project.

Shareholders in unlisted Rand Uranium have all supported the transaction, for which Gold One has secured a $210m underwritten facility from an international financial institution.

The shortfall may be made up in Gold One shares if Sydney- and JSE-listed Gold One fails to raise the balance.

The completion of the transaction will mark the demise of Pamodzi Resources Fund, which secured funding for its 60% stake in Rand Uranium from US investors who no longer want to be involved in the project, said Gerard Kemp, chief investment officer at the fund.

"Our investment period is three years and it became time to reap the returns," Mr Kemp said. "The US investors decided they did not want to invest any more in Rand Uranium to build the uranium plant.

"We are closing the fund and not raising any more money into the fund," he said.

Rand Uranium?s plans to raise R2,8bn to build a uranium treatment plant were scuppered last year with the European sovereign debt crisis and low uranium prices, CEO John Munro said yesterday.

The second big knock came with the damage to Japan?s Fukushima nuclear plant in the March earthquake, which sent the price of uranium and companies producing it into a downward spin, making funding for the project difficult, he said.

"The conclusion we as a board and our shareholders came to is that funding of our uranium project in the short term was impossible," Mr Munro said.

"As a result, having a company continuing in a status quo type situation was not tenable for the company or our shareholders."

Gold One, which is the subject of a change of control transaction, plans to produce 120000oz of gold at its Modder East mine.

Rand Uranium?s three shafts will add at least 163000oz more gold to Gold One, which has plans to shave 20% off production costs of about $1222/oz.

Gold One will inject R200m over 18 months to recapitalise the mine and re-engineer Rand Uranium?s Cooke plant to process underground ore again at a cost of about R30m after it was configured to treat dump material, said CEO Neal Froneman.

The plan is for underground ore to be diverted back to the Cooke plant instead of being toll treated at Harmony?s Doornkop plant, bringing production costs down by about 15%, he said.

Harmony pointed out Rand Uranium had a toll treatment agreement with Doornkop and it could require a year?s notice to terminate the arrangement. "It?s still early days and there is a lot of negotiating still to do," said Harmony spokeswoman Marian van der Walt.

The balance of the cost savings will come from having a single head office, and continuing a restructuring programme Rand Uranium had begun, Mr Froneman said.

There are conditions still to be met, including the mineral resources minister approving the deal, which could take time.

Mr Froneman has experience of uranium, having founded Uranium One. But the company ran into difficulties. It shut its Dominion mine in SA and sold it.

The primary focus at the Rand Uranium assets is to create a viable gold mining company with uranium as a by product rather than making uranium the main focus, he said.

Using the uranium sales to offset the cost of gold production, cash costs could drop to around $400 per gold ounce, he said.
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