RE: Through 70.00 in futurefrom moneyweb
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$65m in three weeks
By Alec Hogg
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LONDON – Neal Froneman would never claim a dynamic presentation style among his strong points. A typical miner, he can’t hide a sense of being more comfortable scratching at ore bodies than the backs of prospective funders.
Monotone or not, Froneman enjoyed rapt attention from the two dozen professional investors who attended his presentation-over-lunch at London’s Grocer’s Hall on Wednesday. Primarily because he told the kind of story his audience really wanted to hear.
In a room dominated by a life-sized painting of then youthful Maggie Thatcher – appropriate given her shop-keeping background – Froneman quietly explained why a $65m capital injection will transform his company’s prized Dominion Reefs into one of the world’s leading uranium producers.
I caught up with Froneman on what was the second day of a three-week road show. He had just returned from Geneva on a schedule that will take him to Toronto, New York, Chicago, San Francisco and Houston before the end of the month.
Once it’s done, he’ll have met with more than 100 investment professionals ( mostly one-on-one ) and told his story between six and eight times each day. But if the reaction from the London group is anything to go, there is no danger of the fund raising exercise flopping.
Stock exchange regulations preclude me from sharing the details of his presentation. Even though most of it is already in the public domain, regulators in the big markets are highly conservative. Froneman, too, was cautious before agreeing to my gatecrashing: “you know the rules; don’t get me into trouble OK?”
But he knows my affection for the project – which I visited last October – and is confident the story was sound enough for there to be no embarrassing issues uncovered by the hard-nosed Londoners.
Dominion Reefs, near Klerksdorp in the North West province, owns the second biggest uranium resource in the world after BHPB’s Olympic Dam in Australia. Anglo American mined it in spurts in the 1950s and again in the late 1970s. The mine has been in mothballs after the uranium price tanked at the end of the Cold War.
A changed energy equation fuelled by China’s industrial expansion, global warming and no “incident” for a couple of decades have helped rehabilitate public perceptions.
This has helped the uranium price treble to $36,50 a pound, transforming Dominion fortunes. According to the old Anglo figures, its reefs hold 350m pounds of the stuff. With costs projected between $15 and $18 a pound, the profit margin now approaches 100%.
With that kind of ore-body and production planned at 4m pounds a year, provided the uranium price doesn’t go belly-up again, the mills at Dominion Reefs will be turning for decades. Probably long after those youthful fund managers now being wooed by Froneman are doting on their grandchildren.
Dominion is the core asset of the freshly packaged sxr Uranium One, a Toronto and JSE listed stock. It was created through the merger of the old Afrikander Leases and Canada’s Southern Cross uranium.
From virtual bankruptcy when Froneman took over, the market’s enthusiasm for its refocus on uranium has seen the value of the public company surge to more than $500m.
After adjusting for a consolidation which accompanied the merger and name, the share price has risen six-fold in 18 months. Buying after that kind of move might be brave. But if Absa’s economist Chris Hart is right, and uranium is indeed the “play of the decade”, sxr shares may yet have a long way to go.
Alec Hogg presents the Moneyweb Power Hour every week night between 6pm and 7pm on Radio 2000. "