Check out the 4th to last paragraph. I don't think this reporting is correct, but it would be nice if it was.
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Gold One wants Rand Uranium for USD 250m
According to Rand Uranium CEO, John Munro, the deal comes at a time when, for well-known reasons, uranium prospects are finding financing challenging,
Author: Barry Sergeant
Posted: Thursday , 28 Apr 2011
JOHANNESBURG -
Johannesburg- and Australia-listed Gold One on Thursday announced a USD 250m friendly bid for 100% of Rand Uranium, formed in 2008 by the spin out from Harmony Gold of three Cooke underground mines and the Cooke surface operation, veteran assets west of Johannesburg. In line with other uranium resources on the Witwatersrand, gold is also mixed in with the uranium ores, dumps and tailings.
Given the nuclear accidents occasioned by the recent tsunami in Japan, this is hardly an auspicious time for uranium deals. Seen among global listed mining counters, uranium (along with platinum) stocks are the worst price performers over the past 12 months.
John Munro, CEO of Rand Uranium, said in a prepared statement that: "This is a good offer and enjoys the support of our shareholders. The current conditions in the uranium market have made the standalone financing and development of our company's uranium project challenging in the near term".
Spot uranium prices moved up from around USD 40/lb during the first half of 2010 to highs earlier this year near USD 75/lb, and have since retraced to around USD 55/lb. Gold One CEO Neal Froneman already has experience in uranium-gold in South Africa, as recorded during his days as CEO of Toronto- and Johannesburg-listed Uranium One, which launched as its flagship project the brownfields Dominion mine, near Klerksdorp.
By the latter parts of 2007, Froneman had for two years widely advertised that Uranium One's cash cost for uranium at Dominion would be around USD 18/lb. Uranium prices had been rising for some years, from less than USD 10.00/lb, and would peak out around USD 138/lb in June 2007. The first estimate of production for 2008 at Dominion was a world-class 2.8m lbs, suggesting cash flow profits of about USD 200m in a year.
In October 2007, Uranium One cut Dominion's projected 2008 output to 1.7m lbs and again in February 2008 to 0.55m lbs. Froneman stepped down as CEO at that stage, to be replaced on an interim basis by Jean Nortier, who was later confirmed as CEO, just as Dominion's "pre-commercial" uranium output projection for the year was again cut, this time to 0.32m lbs, some 89% less than Froneman's original projection of 2.8m lbs.
On 22 October 2008, Uranium One closed Dominion down, and in the Uranium One financial statements for 2008, an impairment of USD 1.8bn was taken. The mine was later sold for a derisory amount, given what had been invested there.
Froneman, ever the optimist, in a June 2009 presentation by Gold One had it that Modder East, near Johannesburg, would kick into production from the fourth quarter of 2009. It would ramp up from 20,000 ounces of gold in 2009 to 140,000 in 2010, and, beyond that, to 180,000 ounces a year.
As it turned out, Modder East produced 66,445 ounces of gold in 2010, just under half the number that had been projected in mid-2009. Production for 2011 is now projected at around 120,000 ounces. Back in June 2009, Gold One promised "cash costs of only USD 250 per ounce, well below industry average". Cash costs for 2010 were USD 484 per ounce, and are projected to fall to USD 417 an ounce this year.
Rand Uranium has been busy, constructing a new large scale processing facility to recover uranium from Cooke underground ores and also from the Cooke tailings dam. During early 2010 Rand Uranium completed a definitive feasibility study on the project and later in the year received the key permits required to commence development. Engineering was advanced to 70% by 2010 year end.
The terms of the USD 250m offer by Gold One for Rand Uranium have not yet been detailed, other than the information that completion of Gold One's financing is a condition precedent for the deal. Rand Uranium is currently owned 60% by a consortium of private equity including Pamodzi Resource Fund, First Reserve Corporation and AMCI Capital, and 40% by Harmony Gold.
Reworking veteran South African uranium-gold mines, dumps and tailings is proving a tough nut to crack. Toronto- and Johannesburg-listed First Uranium traded around CAD 14.00 a share upon debut in 2007, when spot uranium prices were testing the sky. From there the firm repeatedly missed production targets, and was eventually subjected to a significant management and board overhaul. The stock currently trades around CAD 0.86 a share.
Uranium One traded around CAD 18.00 a share in 2007, only to later fall to around a dollar a share. The firm reinvented itself on the back of its low cost in-situ-leach operations in Kazakhstan, and currently trades around CAD 4.00 a share, after having changed hands at nearly CAD 7.00 a share earlier this year.
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