Uranium One Cuts Production Forecast 32%; CEO Resigns (Update3)
By Carli Lourens and Yuriy Humber
Feb. 21 (Bloomberg) -- Uranium One Inc., the developer of South Africa's largest deposit of the nuclear fuel, cut its 2008 output forecast by a third and said Chief Executive Officer Neal Froneman quit. The shares lost almost a quarter of their value.
A slower-than-expected rate of underground development at the Dominion mine in South Africa was the main reason for the revision, the Toronto-based company said in a statement to Johannesburg's stock exchange today. Uranium One now estimates production this year at 3.15 million pounds, and cut its 2009 forecast 15 percent to 6.8 million pounds.
``We're removing 1.5 million pounds that the market anticipated having'' this year, Executive Vice President of Business Development Jean Nortier, appointed interim CEO, said from his mobile phone today.
Uranium One fell as much as 24 percent to C$4.90 in Toronto trading and was at C$5.20 as of 11:52 a.m. local time.
``They're being punished today and I have to say it's accordingly,'' Ian T. Parkinson of Versant Partners said by phone from Toronto. ``They've lost credibility because they've failed to execute.''
The original plan for the South African mine was based on assumptions including equipment availability and mineworker rates that didn't materialize, Nortier said, adding that power cuts and equipment failures also slowed development.
``There's nothing wrong at Dominion,'' he said.
`Always Pressure'
The company cut so-called ``inferred uranium resources'' at the mine to 138.4 million pounds, down a quarter from its estimate of 183.6 million pounds a year ago. Uranium prices have fallen about 46 percent to $75 a pound, from a record $138 a pound on June 6 last year, according to Metal Bulletin data.
``The new targets are more achievable,'' Nortier said, adding the cut in its production forecast ``could put a nice floor on the uranium price and could even lift it.''
Froneman, who will remain as CEO for Aflease Gold Ltd., worked for Harmony Gold Mining Co., Western Areas Ltd. and Gold Fields Ltd. before founding Uranium One. He flies his own helicopters and planes and owns a game farm, according to a February report in Johannesburg's Sunday Times newspaper.
``If you have operational issues, there's always going to be pressure,'' Nortier said when asked if the former CEO resigned of his own accord or whether there was pressure on him to leave. Froneman didn't answer a call to his mobile phone when Bloomberg News tried to contact him for comment.
Poster Boy
``Uranium One was the poster boy for up and coming uranium companies,'' Kevin Smith, head of uranium trading at Traxys SA, said by phone from New York today. ``They were under a lot of pressure to put out regular statements, targets. Inevitably you hit a problem and then you get punished for it.''
Non-executive director David Hodgson has been appointed acting Chief Operating Officer.
Dominion has suffered power rationing since November because of a national electricity shortage, Uranium One said in the statement. Diesel generators that will render the mine ``completely independent'' have been ordered, Nortier said.
To contact the reporters on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net . Yuriy Humber in Moscow at yhumber@bloomberg.net .
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