Operations suspended at Dominion

24 October 2008

Uranium One has placed its South African Dominion project in a state of care and maintenance. The decision was made due to the “decline in uranium prices,” as well as “inflation-related increases in project costs,” and “a slower than expected ramp-up,” the company said.

At the time of Uranium One’s announcement the uranium spot price was $44 per pound of U3O8. In July 2007 it peaked at $136 per pound before beginning a downward slide to $64 where it hovered through July and August 2008, before falling to current levels.

In a conference call a Uranium One executive said that the cash cost for production at Dominion was estimated at around $55 per pound U3O8 – higher than the current spot price.

As a result, further capital expenditure on the mine is not viable – at least not until the spot market price increases – which leaves the long-term future of the mine unknown.

“Uranium One will be exploring strategic alternatives available to it at Dominion, including a sale or other disposition of its interest in the project and, absent any improvement in project economics, the potential closure of the project,” the company said in a statement.

Uranium One has said it will meet outstanding contracts with utilities either from its inventory, stocks from other companies, or spot market transactions. The company has contracts for the delivery of 4.2 million pounds U3O8 between 2008 and 2012 and was expected to produce 1.1 million pounds U3O8 from Dominion in 2009.

After providing for the estimated $30 million suspension costs at Dominion, cash reserves of $99 million and an additional $65 million would allow Uranium One to continue with plans in Kazakhstan and the USA. An estimated $1 million per month would be required to maintain Dominion once in a state of care and maintenance.


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