Uranium One CEO resigns on plunging production forecasts

VANCOUVER — Uranium One’s (UUU-T, SXRZF-O) share price has been in freefall with news that the uranium upstart has slashed its production forecast for the second time in four months. This time president and CEO Neal Froneman took the fall, resigning both posts on Feb. 21 as the company’s share price tumbled to a 26-month low.

Uranium One lowered its 2008 production forecast to 3.15 million lbs. U3O8 from the previous forecast of 4.6 million lbs. The 32% drop follows a 38% reduction in October — 2008 production was initially targeted at 7.4 million lbs.

Uranium One also revised its 2009 production forecast downward by 15%, to 6.8 million lbs. U3O8.

The company says the changes result primarily from slower-than-anticipated development at its Dominion Reefs uranium mine in South Africa. Uranium One started processing ore at the mine in February 2007 but ramp-up has been delayed several times.

The recent delays have stemmed from obstacles in developing the three declines on which the mine is based. Power supply disruptions and equipment breakdowns have hindered progress. In addition, the company is finding that near-surface ore is more leached and therefore of lower grade than expected. The slowed development rates mean that only one of the two autoclaves at Dominion is processing material while the other waits on standby.

When Uranium One downgraded its production forecast in October, the company blamed a shortage of sulphuric acid in Kazakhstan, where the South Inkai and Kharasan mines were working through ramp-up. Another factor was the need for extra time to commission the autoclave at Dominion.

Plans call for Dominion to ramp up to 3.8 million lbs. U3O8 per year by 2011. The new forecast predicts production will reach only 590,000 lbs. U3O8 for 2008.

The string of bad news did not escape investors’ notice. The company’s share price has fallen dramatically over the past year. In April 2007 the stock reached $18. On Feb. 22, Uranium One closed at $4.63, having fallen $1.82 in two days.

In 2007, the company’s largest mine, Akdala in Kazakhstan, produced 1.83 million lbs. U3O8. Dominion production came in second at 171,000 lbs. U3O8.South Inkai produced 39,600 lbs.

Two appointments filled the gap left by Froneman’s departure. Jean Nortier, executive vice-president of business development, has been appointed interim CEO. David Hodgson, a non-executive director, has been appointed acting chief operating officer.