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Uranium One finally throws in the towel at Dominion
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22nd October 2008
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TORONTO ( – TSX- and JSE-listed Uranium One on Wednesday announced what many observers have suspected for some time now would be inevitable – the company's recalcitrant Dominion project, in South Africa, will be placed on care-and-maintenance while the miner considers looking for a buyer or closing the operation completely.

Plummeting uranium prices, cost inflation and a slower-than-expected ramp-up at the mine, which has yet to achieve commercial production, had resulted in a “significant deterioration” in the economics of Dominion, CEO Jean Nortier said on Wednesday.

While Uranium One expects the mothballing will cost it about $30-million, plus a cool $1-million a month in ongoing care-and-maintenance costs, Nortier said that this was still significantly cheaper than the $150-million to $200-million that the company estimates would be needed to see the mine to profitability.

Further, even with this investment, the project would require “sustained increases” in the uranium price to become economically viable.

Uranium One shares fell 10,4% in Toronto, to C$0,95 a share by midday.


The Dominion operation has repeatedly missed expectations since Uranium One, under erstwhile CEO Neal Froneman, shipped the first yellow cake from the mine in July 2007.

Froneman quit unexpectedly in February this year, after the company cut its production forecast for the second time in three months, largely thanks to lower expectations for Dominion.

He was replaced, initially temporarily but now on a permanent basis, by Nortier, who reduced 2008 production forecasts again in August, to 320 000 lbs for Dominion. (Going into the year, the mine was originally expected to produce two-million pounds of yellow cake in 2008.)

At the time, Nortier insisted that the troubled operation was “definitely profitable” at prevailing uranium prices, despite allegations that the company had misrepresented the viability of the project.

However, speaking on a conference call on Wednesday, he pointed out that, from a peak of $136/lb last year, the spot uranium price has since plunged to a low this week of $44/lb.

The operation has also been crippled this month by an illegal strike, which resulted in about 1 000 workers being handed termination notices.


In its most recent guidance, Uranium One had assumed 1,1-million pounds of production from Dominion for 2009, and the company has contracts with utilities for sales of 4,2-million pounds of uranium oxide from the mine between 2008 and 2012.

These obligations will be met by dipping into inventories, sourcing production from other operations, or through purchases on the spot market, Nortier said.

He also noted that, as of September 30, the company had a consolidated cash balance of about $99-million, and has since drawn down $65-million from a Canadian credit facility.

This would provide the company with "sufficient liquidity and flexibility to ensure that going forward we are ensured of meeting the operating expenses and capital requirements of our business" in Kazakhstan, the US and elsewhere.

Any impairment related to placing Dominion on care-and-maintenance will be included in the company's third-quarter financial results, and will be dependent on the fair value of the project.

At the end of June, the carrying value for Dominion on the company's balance sheet was $1,4-billion.


Edited by: Liezel Hill


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Uranium One CEO Jean Nortier
Picture by: Duane Daws
Uranium One CEO Jean Nortier