Aflease reveals gold strategy
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Presenter: Lindsay Williams Guest(s): Neal Froneman
Aflease Gold and Uranium issues a strategic update - setting out in some detail for the first time its new gold strategy. With Aflease chief executive Neal Froneman
LINDSAY WILLIAMS: You’re doing a great investor relations job - setting it all out in black and white! This half-year update focuses on your gold assets - maybe you could give us you plans, and tell us exactly what they are at the moment?
NEAL FRONEMAN: We’ve been saying for some time that in essence we need to create a focused uranium company - that we would deal with our gold assets in the near term. On our recent capital raising road show we canvassed opinions from our major shareholders on their views regarding our gold assets - it became very clear to us that very few would want to see our gold assets disposed of totally. They still would like us to strive for focused attention on uranium - but they see gold as a very nice risk diversification option, so we’ve designed a structure that we’ve clarified in the update today that essentially says we’re going to achieve the uranium focus by placing our purely gold assets in a subsidiary that would also be listed. That would then allow us to liquidate our position as and when required, and in fact probably more importantly will allow us to raise funding for our gold business without diluting our uranium shareholders.
LINDSAY WILLIAMS: When you say purely gold assets - you mean gold that’s not a by-product of uranium mining?
NEAL FRONEMAN: Correct. That’s a good point - our uranium ore body has gold as a by-product. We’ve got one gold mine in the Klerksdorp area that has uranium as a by-product - that stays with the uranium business. On the East Rand we have a pure gold asset known as Modder East - which has no uranium potential really to speak of, that’s purely gold. The recently acquired Weltevreden property - we’re busy determining its uranium potential. If it doesn’t have significant uranium potential we’ll also vend it into this new vehicle.
LINDSAY WILLIAMS: Critical mass, though, has to be achieved in order for you to spin this off presumably - and list it separately. How far away are you from achieving critical gold mass?
NEAL FRONEMAN: That’s a good question - certainly I don’t have an exact answer for you. What we do know is that Modder East on its own is not going to give us critical mass, with Weltevreden it’s questionable - so we do think there is a need to grow it still further, but it’s a very difficult question to give an exact answer on.
LINDSAY WILLIAMS: But it is likely, then, that you will have to expand your gold interest in the future - in order to achieve your goals?
NEAL FRONEMAN: I think that’s quite clear, yes.
LINDSAY WILLIAMS: Back to the uranium side of things - how is it going with Southern Cross Resources Inc, your planned merger?
NEAL FRONEMAN: It’s going well, we’ve essentially completed the due diligence study on both sides. Last time we spoke we were doing confirmatory due diligence - that is complete, we are essentially busy with some of the regulatory issues still. It’s one of these processes that’s frustratingly slow - shareholders will be able to vote in about September 2005. We feel we’re still on track for that, and the transaction should certainly be closed by October or November.
LINDSAY WILLIAMS: I always ask you these two questions at the end of our interviews - when are you going to produce your first uranium, and what’s the price doing at the moment?
NEAL FRONEMAN: Our first uranium will be produced in the first quarter of 2007. The spot price has increased again since we last spoke - it’s now $29.50 a pound, and the long term price has gone up to $31 a pound - so the uranium bull market is still intact.
LINDSAY WILLIAMS: Aflease shares on the JSE reach R5.60 before falling 2.8% to close at R5.20.
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