Sxr Uranium One (SXR-T) has come a long ways in less than two years.
Formed at the end of 2005 with the aim of becoming a senior uranium producer, its drive towards commissioning a mine by April and the recent acquisition of a uranium producer has made the bold statement look very attainable.
The company announced initial production from its flagship Dominion Reefs uranium mine in South Africa in late February and followed that up by gaining approval from UrAsia Energy‘s (UUU-T, UUU-L) shareholders for its offer of 0.45 of its shares for every one share of UrAsia.
The deal gives the combined company UrAsias 1.8 million lbs. of U3O8 production from Kazakhstan.
Uranium Ones position as acquirer of UrAsia is, however, made somewhat dubious by the fact that the share swap will result in UrAsia shareholders holding roughly 60% of the combined company leaving Uranium One shareholders with roughly 40%.
Seemingly insatiated by the deal, Uranium One followed it up with news that it was buying U.S. Energy Corp.s (USEG-Q) Shootaring Canyon Uranium Mill in Utah, as well as a collection of uranium exploration properties in the southwest U.S. that Uranium One is paying the equivalent of 6.6 million of its common shares plus $750,000 in cash for.
“Upon completion of the UrAsia and U.S. Energy transactions, we will become a globally diversified uranium producer with uranium assets in the world’s five major uranium resource jurisdictions – South Africa, Australia, the United States, Canada and Kazakhstan, Neal Froneman, Uranium Ones president and chief executive says in a prepared statement.
Beyond the acquisitions, organic growth is moving along well as construction at Dominion is proceeding on schedule.
The project is slated to cost roughly US$152 million to build and will produce 3.8 million lbs. U3O8 by 2011 at an average cost of US$14.50 per lb. net of gold by-product credits.
Processing of underground uranium ore started in late February after the atmospheric leach circuit began working at the mill. The mill also includes a pressure leach circuit which uses two autoclaves that will be brought online this year in a staged approach.
The first autoclave is slated to come on in April and will bring the throughput to100,000 tonnes per month. The second autoclave slated to come on in August — will up capacity to 200,000 tonnes per month.
In 2006, the company was able to grow indicated resources at Dominion by 303% to 36.4 million tonnes grading 0.81 kg/t U3O8 for 64.9 million pounds U3O8, while inferred resources gained 25% to 219.4 million tonnes grading 0.38 kg/t U3O8, for 183.6 million pounds U3O8.
And, it says, it can grow those resources further with its recent acquisition of prospecting rights adjacent to Dominion. The company says there is substantial exploration potential on the shallow strike extensions that the properties contain.
As far as hedging, the company has currently agreed to sell 4.7 million pounds of U3O8 between 2008 and 2012 to western utilities with market-related pricing and escalating floor price protection.
Uranium Ones financial results from 2006 show a company that was growing revenue marginally and taking heavy losses. However with Dominion coming online this year and its next largest project, Honeymoon, coming online in 2008, substantial cash flows are not far away.
For 2006 the company reported revenues of US$3.3 million, compared to US$2.7 million in 2005, crediting higher gold prices for the gains. The company sold roughly 5,000 oz. of gold, largely from stockpiles at its Bonanza gold project in South Africa.
Operating losses rose to US$50.7 million with a net loss of US$43.1 million, or 38.33 per share compared to operating losses of US$27.3 million and net loss of US$41.7 million, or 58.67 per shares.
It says those losses were in line with expectations and were due to administrative and exploration costs.
On the positive side, the company increased its non-current assets by US$131.8 million to US$290.3 million as a result of additions to property, plant and equipment at Dominion, Honeymoon and at its Modder East gold project which is managed by its gold spin-off company Aflease Gold (AFO-J).
Cash balances rose to US$327.5 million compared with just $10.9 million from the 2005. The bulk of the funds came from share issuance and a convertible debenture.
As for its second most important project — Honeymoon in South Australia the company has completed its feasibility study and begun construction.
Honeymoon has an indicated resource of 1.2 million tonnes grading 0.24% U3O8 for 6.5 million pounds U3O8 .
The project has a production level estimate of 880,000 lbs. U3O8 per year assuming a 70% recovery rate, with average cash operating costs over the life of the project estimated at US$14.13 per lb.
Uranium will be extracted via in situ leach (ISL), and the project is fully permitted, with a mining license for 20 years.
Uranium One says the project has a short lead time of less than 18 months and production is slated to begin early in 2008.
While Uranium One is about uranium, it is also partial to gold. But so that its fondness for the yellow metal doesnt interfere with its uranium pure-play status on the Street the company created its spin-off Aflease Gold.
Aflease is controlled by Uranium One and holds its East Rand assets with a separate operational management team.
Afleases main project the Modder East gold project had it feasibility study finished in 2006. The project has a probable reserve of 1.3 million oz. grading 4.02 grams gold. It has an indicated resource of 2 million oz. grading 2.79 grams gold and an inferred resource of 1 million oz. grading 2.5 grams gold.
With all the activity at Uranium One, raising capital is obviously a prime consideration.
In 2006 the company raised US$137.6 million via a private placement, and also completed a common share prospectus offering for US$143.4 million. In addition it did a convertible debenture prospectus offering that raised US$128.9 million.
The financing activity, the company says, has put it in a position to see its projects through.
Uranium One maintains a strong balance sheet and has sufficient liquidity and capital resources to fund its current commitments, the company says in its most recent management discussion and analysis report.
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