Toronto and Johannesburg listed Uranium One on Wednesday announced that it had secured a debt facility of up to USD 100m from lead lenders Bank of Montreal and The Bank of Nova Scotia. An announcement from the company also provided some limited updates on uranium sales, but was silent on production updates, and also silent on whether the company's key Dominion operation in South Africa had turned the corner, both from an operational and financial viewpoint.

Dominion had been slated to produce 2.8m pounds of uranium in 2008, but that expectation was slashed by Uranium One to 1.7m pounds in October 2007, and then to 0.55m pounds in February this year, when erstwhile CEO suddenly stepped down, to be replaced by interim CEO Jean Nortier. 

Nortier has declined requests to provide finer details on Dominion. In its financial report for the first quarter of 2008, Uranium One stated that Dominion had lost USD 0.5m during the quarter, but had absorbed USD 23.6m in capital expenditure.

The one bright spot was the Akdala Uranium Mine in Kazakhstan, which posted profits of USD 9.2m in the first quarter. Uranium One reported an extraordinarily high amount of USD 18m under corporate and other during the first quarter, without giving details, and reported an overall operating loss of USD 10.3m for the quarter. 

In Wednesday's announcement, Uranium One stated that in addition to the USD 100m funds available under its debt facility, its consolidated cash position was approximately USD 145m on June 15. The company did not provide an explanation for why it was raising debt when its cash position was substantially positive.

On its sales, Uranium One said that in line with the timing for deliveries under existing uranium sales contracts, the company's attributable sales volume of uranium oxide during the second quarter 2008 was 685,000 pounds, an increase of 180% over the 244,300 pounds sold in second-quarter 2007, and an increase of 142% over the 283,300 pounds sold in first-quarter 2008.   

This limited detail is confusing, however, given that production from Akdala is sold into a contract that provides the buyer with the ability to determine sales timing. During first-quarter 2008, the production from Akdala attributable to Uranium One was 431,500 pounds; sales were 283,300 pounds. In the result, the company's for-sale inventory increased by 137,600 pounds.

Uranium One also said on Wednesday that its South Inkai operation in Kazakhstan had been permitted to increase production from 780,000 to 5.2m pounds of uranium a year, of which 70% is attributable to Uranium One. 

However, this good news does not to relieve the opacity over the cash burn at Dominion. Froneman had repeatedly claimed that the operation would produce uranium at a cost of $18.00 per pound. This was a very sexy prospect when the first estimate of production for 2008 at Dominion was 2.8m pounds, suggesting cash flow profits of about $200m in a year. 

Beyond Dominion's production debacle, margins have also fallen massively below expectations. Events at Dominion over the past 18 months suggest that this cash cost is not $18.00 but in fact more like $100.0 a pound, dragging the mine increasingly into the red. Spot uranium prices have more than halved over the past 12 months, to just under $60 a pound.