Hauptpobleme in 2008 - Verzögerungen Südafrika, Kasachstan uns Australien- bis 2010 dort, wo sie bis 2010 sein wollten..etc.
http://www.moneyweb.co.za/mw/view/mw/en/page55?oid=168206&sn=Detail
Neal Froneman: CEO, Uranium One
31 October 2007 23:08
MONEYWEB: You're with the Moneyweb Power Hour, and on the stock market today Uranium One share price took a pummelling - down 17%. Chief executive Neal Froneman is with us in the studio. David Shapiro was saying as he walked in, Neal, you've had it too easy for too long. So you've got to face a bit of the pressure now. But whew, the announcements that you brought out today have certainly been interpreted very negatively.
NEAL FRONEMAN: Yeah - and listen, it's not something that we didn't expect. Ja, we have to deal with it. We're facing an acid shortage, which is the bulk of our problem in Kazakhstan for next year. We will work on solutions to that - but, you know, that's the name of the game for a start-up operation.
MONEYWEB: Let's just go through the announcement that you did bring out today. You are busy with five development projects and the production targets have been cut back substantially, 2008 being the worst year where you're talking about almost 40% of your production that you had expected is not coming on stream.
NEAL FRONEMAN: Yes, that's correct. And if you look at 2007, there's a revision of our forecast there downwards, but that's not the big issue - and most of that is related to the commissioning of Dominion. The good news is that Dominion is effectively commissioned. There's one more order close to commission, but the most complex part of that plant is now commissioned, and that delayed production out of Dominion for this year. It has a knock-on effect to next year, but in next year...
MONEYWEB: Let's just finish that off. That's the Klerksdorp operation. So it's now settled down, and one anticipates that Dominion's going to be full-steam ahead from here.
NEAL FRONEMAN: Yes, it's full-steam ahead, but there is a knock-on effect into next year, which is in the numbers that you see for 2008. The biggest impact next year is related to our start-up projects in Kazakhstan, which are dependent on sulphuric acid. A copper smelter that was meant to come into production this year has not come on stream as planned. In fact the scheduling is now only for April next year.
MONEYWEB: Neal, what's the reason for that?
NEAL FRONEMAN: It's just a commissioning problem of a copper smelter - got nothing to do with us...
MONEYWEB: And nothing to do with Kazakhstan being a bad place?
NEAL FRONEMAN: No, again, it's just difficult to bring new mining projects in. But it dos produce sulphuric acid as a by-product, and that product was expected to be used to provide acid to our start-up operation. We're not the only one affected, but it does affect us.
MONEYWEB: Can you not get sulphuric acid from other sources?
NEAL FRONEMAN: We can, and what we've provided the market with here is what we believe the absolute worse-case scenario is. We will now go and do what we can to find an alternative source of supply, but it's not that easy. It's these are remote locations, there's a lot of red tape involved bringing sulphuric acid into Kazakhstan. It's seen as a strategic commodity. The other thing we're finding is that sulphuric acid is short globally. It's not just a Kazak issue. It's something that is being driven by the commodity boom.
MONEYWEB: So it's Kazakhstan and the delays here in South Africa in Klerksdorp that have caused the problem?
NEAL FRONEMAN: Yes, mainly. There is one other aspect, or there's another factor involved here, and that is Honeymoon in Australia. We are experiencing very significant capital cost increases, and we've gone back to re-design the plant which has caused the delay. Honeymoon was meant to start up early in 2008; that's been delayed until the end of 2008. So that's another knock-on effect.
MONEYWEB: What does all of this mean for shareholder returns? For dividends?
NEAL FRONEMAN: Well, again we see this as a blip on the radar screen, because we have a long-term view of our business. We basically catch up quite a lot of this in 2009, but by 2010 we're just about where we think we should be. But, depending on how you value a company, if you take a one-year view then of course it has a huge impact. If you take a five-year view I don't think it's that material.
MONEYWEB: Dividend streams going into the future? When did you anticipate you'd pay your fist dividend? And, as a result of these production cuts or targets being reduced now, when might the first dividend come?
NEAL FRONEMAN: Well, we've never developed a dividend policy as of yet, so it would be remiss of me to say we expected to pay dividends. We've never said we'd pay dividends. Of course, it would be very nice to pay dividends. I think we expected to be cash-flow positive in 2008. That's always been our intention. I think that will probably now move into 2009. And from there we can make a decision around dividends.
MONEYWEB: So it bumps everything out by roughly a year?
NEAL FRONEMAN: Almost yes.
MONEYWEB: Because of primarily what's going in Kazakhstan with sulphuric acid. It seems as though you'd expect something a lot bigger to cause this kind of a disruption.
NEAL FRONEMAN: Well, you know if you understand the mining process of an in situ recovery [ISR] mine, it's totally dependent on acid. You know, the acid is like your drills, and it's your explosive, although you're not breaking rock. So it's a very basic commodity for mining ISR mines.
MONEYWEB: But then why didn't you have other options available? Why put all your eggs into one copper-manufacturing basket?
NEAL FRONEMAN: Yes, again, and I don't want this to sound like an excuse, we're not the operators there. Remember, our joint-venture partners is the government. Of course we try and stay close to it, but we are not the operators. So we can only try and influence, which we do do, and I think we've been promised the smelter coming on line for some time. We've now had to say "enough's enough".
MONEYWEB: Neal, it once again emphasises that mining is not an easy business, and everything doesn't go according to what the accountants and what the spreadsheets tend to suggest.
NEAL FRONEMAN: Well, exactly. And my forecasts of the uranium price are driven by knowing how difficult it is to bring new mines into production. But even more so uranium mines, and I think you've seen the spot price turn around, as I said it would, and it's based on knowing that supply's going to be constrained because it's very, very difficult to produce uranium.
MONEYWEB: Now, with the constraints in supply coming out of your company, Uranium One, has that has an impact or a knock-on effect on the uranium price itself?
NEAL FRONEMAN: You know, a few years ago it would have been very difficult to sit here and say we're going to impact the uranium price, but I think it is - because what we are highlighting here is not just a Uranium One issue. We're highlighting an industry issue, and in fact we're highlighting the potential shortage globally of acid.
MONEYWEB: You've raised a lot of capital in the last couple of years. Have you had some angry shareholders who supported you in those fundraising issues, saying "But you should have known"?
NEAL FRONEMAN: Well, certainly as management we deserve to be criticised. I think we've always tried to provide a balanced perspective of the risks associated with what we're doing. Certainly we don't have happy shareholders. We know that. But we're also working on solutions. And, as I say, we take a long-term view. I don't in any way suggest that the price decrease today is not a big issue. It is a big issue in our life, but I also know the market tends to overreact on situations like this.
MONEYWEB: So it's like a profit warning for an industrial company, and one has to expect that the share price would reflect it.
NEAL FRONEMAN: Correct.
MONEYWEB: Sitting next to you is a gentleman who knows and, as they say, in their commiserations - Graham Briggs, chief executive Harmony Gold. Must feel like a little big of déjà vu, Graham.
GRAHAM BRIGGS: Yes we're back together again, but in the studio. Not in the boardroom.
MONEYWEB: You were together at Harmony for a period.
NEAL FRONEMAN: That's correct.
MONEYWEB: And I guess you've both gone through tough times. You with the problems that Harmony's had, and of course Neal not only today but going back a few years as well, when Afrikander Lease started off.
GRAHAM BRIGGS: I think the only way we'll find out who went through the toughest time is over a beer or two, Alec.
MONEYWEB: Neither of you have got too many grey hairs. I guess there is life after these difficult series.
We're going to be talking to Graham Briggs of Harmony in just a little while. You've been listening to Neal Froneman from Uranium One.
ABOUT THE INTERVIEWER
Alec Hogg - Alec Hogg is a writer and broadcaster. He founded Moneyweb and is its editor-in-chief.
Email: alec@moneyweb.co.za |
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