Uranium One shares plunge on Froneman's surprise exit, forecast cuts

21st February 2008 By: Matthew Hill

TSX- and JSE-listed uranium-miner Uranium One's share price dropped sharply on Thursday after CEO Neal Froneman shocked the market with his sudden resignation and the firm slashed its 2008 production forecast by one-third.

He will be replaced by interim CEO Jean Nortier, who served under him as business development vice-president.

Nortier declined to comment whether there had been pressure from the board for Froneman to step down, but did say that "in a company with a very strong profile, there is immense internal pressure".

Speaking in a telephone interview with Mining Weekly Online, he said that the fact that South Africa's biggest uranium mine, Dominion, would produce 590 000 lb of the nuclear fuel in 2008 instead of the previous estimate of two-million pounds "was a contributing factor" in Froneman's decision to step down. "Its very obvious that we had a number of internal pressures."

Nortier added that these "operational pressures helped" Froneman make his decision.

The company's stock closed in Johannesburg 17,8% down at R42,70 a share, after diving to a year low of R39,91 a share in a short space of time.

Uranium One said it would produce 3,15-million pounds of yellow cake in 2008, which was 32% less than its previous forecast.

Two analysts contacted agreed that it was likely that Froneman fell on his own sword.

"I think its a Bernard Swanepoel-type scenario, he messed up and quit," one of them said.

Swanepoel suddenly left gold major Harmony Gold late last year, at the same time as when the firm said that it had uncovered massive accounting errors.

"It's probably quite obvious that one would assume that," the other analyst said. Neither expert's company policy allowed them to be named.

'MUTUAL CONSENT'

However, Froneman said that Dominion did not play a part, and that the decision for his resignation was a mutual one.

"It was something that was done by mutual consent," he stated

Asked if Dominion's disappointing start up had played a role in his stepping down, he replied "not really".

"I thought that it was an opportune time to move on," Froneman said in a telephone interview, adding that Uranium One was now moving into a new operational phase.

"It was my decision," he stressed.

Meanwhile, one of the experts said that Dominion was "turning out to be a bit of a disaster". He expressed surprise that analysts taken on a site visit to Dominion on February 8 did not receive any indication that production forecasts could be slashed for the second time.

The same analyst said that it was a good move that former AngloGold Ashanti COO Dave Hodgson had now been appointed as COO of Uranium One .

Froneman had previously served as head of operations at gold major Gold Fields, as well as an executive at Harmony.

SPECIFIC PLAN

Nortier, a CA, had the board's mandate to take Uranium One forward in the short to medium term, he said.

"We have a very specific plan to make sure the company functions well," Nortier said. "The company knows exactly what it needs to do."

He said that the Dominion mine's faliure to meet its forecast was "exclusively" responsible for the group's revised targets.