For Uranium One, the Honeymoon’s over (August 25, 2008)

VANCOUVER — Uranium One’s (UUU-T, SXRZF-O) decision to sell some of its earlier-stage uranium properties this spring has hit it with a US$105-million impairment charge in its second quarter for a US$68-million loss. And there will be more to come, Uranium One CEO Jean Nortier said in a conference call.

Nortier said he expects another charge in the third quarter with the potential sale or joint venture of its Australian Honeymoon project.

Although Nortier had said in the first quarter that he didn’t expect to sell any uranium properties, Uranium One has since decided to sell its smaller development projects and refocus its efforts on its core assets. These include the Dominion uranium mine in South Africa, the Akdala mine in Kazakhstan and the Moore Ranch project — for which a feasibility study was recently completed — in the U. S.

Investor relations manager Rob Buchanan says the decision to shed the Honeymoon project was painful, but with capital limited, especially in today’s market, the company needs to be disciplined.

Uranium One re-evaluated its priorities this spring, Buchanan says, and the Honeymoon project didn’t make the cut — primarily because of its projected six-year mine life. He says the company is now focusing on longer-life properties.

The Honeyoon project, located in the state of South Australia, holds an indicated resource of 1.2 million tonnes grading 0.24% U3O8. Construction at Honeymoon was expected to begin this year, after the project received long-awaited governmental approval.

Uranium One went as far as completing an 18-month leach trial and projected it would produce 880,000 lbs. U3O8 a year. But now those plans are almost certainly on hold.

“I can’t speculate on the size of the impairment,” Nortier says of the impending sale of Honeymoon. He says the company is currently in discussion with potential suitors.

Buchanan adds that all options are on the table and that a deal could come in the form of a joint venture or an outright sale.

One thing is for certain. “The company’s not going ahead as one-hundred per cent owner of the project,” he says.

On news of the second-quarter results, Uranium One’s share price jumped 43 to close at $3.71. The stock was likely buoyed by stumbling at Cameco’s (CCO-T, CCJ-N) Cigar Lake uranium project, which saw more water problems in August.

Uranium One also posted record uranium production numbers this quarter at 767,100 lbs. U3O8, up 24% from the previous quarter.