Uranium One (TSX:UUU) painted a positive picture for the company in Kazakhstan today and said it was tackling the Dominion mine in South Africa's woes with the help of nine geologists. But the company still did not disclose the breakdown of its capital expenditure of $175m that is largely being spent on Dominion.
Uranium One interim chief executive officer Jean Nortier said today the company's assets in Kazakhstan, part of its core portfolio, presented upside as the company was ramping up production here and expected to obtain industrial production licenses in the first half of 2009.
Nortier said that the Akdala uranium mine (70% owned) was on track to produce 1.8m pounds of uranium at a cost of $12 per pound for the year. The uranium mine had attributable production of 431,500 lbs in first quarter 2008 and a higher inventory of 886,500 lbs compared to fourth quarter 2007's inventory of 748,900lbs.
The South Inkai uranium mine (70% owned) delivered attributable test mining production of 144,500 lbs in the first quarter, while test mining production attributable to Uranium One is expected to reach 500,000 lbs this year. The mine is expected to reach annual production of 3.6m pounds by 2011, said Nortier.
The company's Kharasan uranium mine (30%) owned was expected to reach production of 1.6m pounds by 2011 and test mining of 220,000lbs is expected during this year.
Nortier said the company was attempting to bring the issue of industrial production licenses expected in the first half of 2009 forward as this would enable the company to add significantly value, but at this stage it could not promise delivery in 2008.
Talking about the problematic Dominion mine in South Africa, Nortier said the company has increased the number of geologists on the project from three to nine in order to control mining grade dilution here. He said they did make progress at Dominion in the month of April when they managed to increase the blasting grade of 0.361kg/tonne to 0.555kg/tonne.
Nortier added the company was improving production at Dominion by training production staff and instilling a drilling discipline. The company was also opening up new mining areas and expected productivity to increase as new panels were available for mining over the next two quarters.
Dominion delivered pre-commercial production of 42,900lbs in the first quarter and 20,400lbs in April this year.
The company still remained tightlipped on the breakdown of its capital expenditure at this stage although Nortier conceded that Uranium One needed to improve on transparency in this area. He indicated that most of its capex would be spent on Dominion.
The interim CEO, who could be appointed as permanent chief executive officer of the company, said the company had suspended development at its Honeymoon project in Australia, as it was conducting a strategic review of the operation.
Uranium One expects to deliver 6.2m lbs of uranium this year and stressed that a uranium company should not be evaluated on quarterly performance as the majority of sales were executed on long-term contracts. About 80% of the company's production for this year has been sold on contract.
The company is confident that the uranium market will lift again over the next three to five years, but it expects it to be soft to neutral over the next 18 months. Demand is expected to come through over the next 12-18 months, said Nortier.
Uranium One yesterday reported a first-quarter loss of $114.9 million as uranium sales declined. The net loss per share was 24 cents, compared with net income of $7.97 million, or 4 cents, a year earlier. Sales fell 46 percent to $22.5 million.