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To: LoneClone who wrote (9388)	11/1/2007 10:52:37 AM
From: LoneClone	Read Replies (1) \| Respond to of 192834

Uranium One Widely Misses 2007 Output Target; Drops Forecast for 2008 By Jane Louis and Jon A. Nones 31 Oct 2007 at 05:27 PM GMT-04:00 resourceinvestor.com St. LOUIS (ResourceInvestor.com) -- Uranium One [TSX:UUU] shares slid more than 17% today - at one point nearing a 52-week low - after hugely missing its uranium production target for 2007 and dropping its target for 2008. The firm said today it cut its production forecast for 2007 by 16%, from 2.5 million pounds of uranium to 2.1 million pounds, due to an “extended autoclave commissioning period at the Dominion Reefs Uranium Mine plant in South Africa” - contradicting CEO Neal Froneman’s recent comments that commissioning at the mine was going well. With indicated resources of 64.9 million pounds of uranium at a grade of 0.81kg/t and probable reserves of 31.3 million pounds at a grade of 0.77kg/t at Dominion Reef, the company had been planning to produce an average of 3.8 million pounds per year by 2011 from the mine. Uranium One was also in the process of assessing whether output could be increased to 7 million pounds annually, according to its website. Now, pre-commercial production for Dominion Reefs in 2007 is expected to be approximately 200,000 pounds uranium. Uranium One also announced it has lowered its 2008 production outlook by a whopping 38%, from 7.4 million pounds of uranium to 4.6 million pounds. A temporary sulphuric acid shortage in Kazakhstan will impact both its South Inkai and Kharasan projects. South Inkai holds indicated resources of 43.5 million pounds at a grade of 0.043% uranium, and Kharasan holds indicated resources of 22.6 million pounds at a grade of 0.095% uranium. Cash operating costs are expected to be $20 per pound. “Together with its joint venture partner, Kazatomprom, (Uranium One) is seeking longer-term solutions to the sulphuric acid constraint; however, until these solutions have been identified, the company is adjusting its 2008 production forecast downwards,” Uranium One said in a press release. The company said it expects the shortage to be resolved by the second half of 2008. Attributable uranium production for all of Uranium One’s mines for 2008 is forecast to be: * Akdala - 1.8 million pounds * Dominion - 2 million pounds * South Inkai - 500,000 pounds * Kharasan - 220,000 pounds * Honeymoon - 50,000 pounds * Hobson - 35,000 pounds The company is targeting output of approximately 8 million pounds of uranium in 2009 and 11 million pounds in 2010, assuming the sulphuric acid shortage is over and production licences for South Inkai and Kharasan are granted as expected in the first half of 2009. Falling Supply In October 2006, uranium prices were trading in the mid-$50s. Then Cameco’s Cigar Lake disaster happened. Prices rapidly rose 150% in just eight months as the market digested just how tight uranium supplies had suddenly become. Cameco’s Cigar Lake deposit was originally forecast to produce up to 18 million pounds starting in 2008, equivalent to 10% of global uranium demand and 16% of global uranium production. Production has now been postponed until 2011. By 2011, 40% to 50% of new production was slated to come from Cigar Lake with the remaining 45% to come from Kazakhstan, which was the world’s third top producer of uranium in 2006, behind Australia and Canada. All three hold 60% of the world’s resources. If all uranium production in Kazakhstan is reduced by the sulphuric acid shortage, look for prices to boom - especially as oil prices continue hitting record highs and the world ramps up its search for alternative fuel options. Furthermore, No. 2 uranium producing Ranger mine in Australia was hit with floods that could reduce the mine’s output by about 25% this year, while the No. 1 producing McArthur mine is facing challenges with expansion. Grades at Olympic Dam, the world’s largest uranium deposit, are falling as well. Given the 15-20 years required to bring a uranium mine into full production, and the fact that 66% of the world’s uranium production comes from just 10 mines, the demand on uranium production is expected to continue. Rising Demand According to the World Nuclear Association, mines produced about 39,655 tonnes in 2006, while nuclear plants consumed about 66,529 tonnes. This puts the supply deficit at about 60 million pounds minus inventories. Primary supply makes up about 61% of total supply with secondary supply making up the balance - and secondary supply is dwindling. Russia has indicated that it will not renew its uranium agreement to supply the market with its stockpiles after 2013 and the U.S. plans to slow its uranium sales this year considerably. And now, China aims to build a strategic uranium reserve in the coming years. Over the next 10 years, China will construct as many as three new nuclear power plants each year. There are currently 20 plants under construction with plans for 72 more in Russia, China, India and Japan. In the U.S., 16 companies have submitted proposals for 25 new plants. Uranium Price Outlook The uranium spot price is $85 per pound this week, a $5 gain over last week. The price is up nearly 88% in the past five years but down from record highs of $138 after sales of U.S. stockpiles earlier this year. In September, Andrew Ferguson, co-fund manager of the Geiger Counter Fund, told RI that he expects prices to reach or even exceed current highs. “Given the current supply/demand imbalance there is nothing to stop it going above $150 per pound in the next three to four years,” he said. Share Price Analysis Uranium One closed down C$2.24 to C$10.49 on the Toronto Stock Exchange today, a 17.6% drop. RBC Dominion Securities has downgraded the stock to “under perform” from “sector outperform” and cut the price target from $12 to $9.