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Aflease hits market cap milestone
By: Gareth Tredway
Posted: '16-AUG-05 15:00' GMT © Mineweb 1997-2004
JOHANNESBURG (Mineweb.com) --Aflease, South Africa’s near-production uranium company closed at R5.35 per share on the Johannesburg bourse on Monday, valuing the company at over R2 billion. Coincidently, the company released a mid-year review on Tuesday, updating shareholders on current corporate initiatives and developments.
But one needs to delve back further than six months to see just how far Aflease has come.
Since Neal Froneman officially took up the chief-executive position in April 2003, the company has doubled in value, but not without a few hiccups on the way.
On December 9 of Froneman’s first year, he and the board, had to make the tough decision of closing the company’s gold operations, because a strong rand had pushed them into the red.
The company’s shares tanked, and finished the year R3.25 a share, valuing Aflease at R685 million.
The next year, 2004, was even worse. In March, Harmony Gold terminated an agreement to sell its Kalgold mine to Aflease, after the terms of the financing agreement were deemed unacceptable.
When a share-swap agreement was announced between Aflease and Randgold & Exploration in July, the company’s shares fell as low as R0.85 each, valuing Aflease at R179 million, before the new shares were issued. Including the 94 million shares issued to Randgold, Aflease was worth R255 million.
At the meeting where the share swap was voted on, disgruntled shareholders, showed their concern at the dilution in Aflease shares. Marais Steyn, Aflease’s financial director at the time, said the transaction was “the best opportunity available. It places our company in a going concern position and in a position to bring our high-grade assets to account,” Steyn told shareholders.
After that, the company’s strategy became largely about uranium. The name was changed, further shares were issued to follow the strategy, and the company’s shareholder base changed dramatically.
Aflease’s previous chief executive and chairman Peter Skeat acquired the Dominium Uranium project in 1998, which is estimated to hold about 6% of the world’s uranium resources – resources that mining has barely scratched. He told Mineweb earlier this year that the asset was purchased in the hope of higher uranium prices.
“When I acquired the mine from Anglo in 1998 it was primarily for the uranium resource, despite the low uranium price at the time,” he said, “It was understood that with time, this status would change, and it seems this status is changing now.”
By April 2005, 46% of Aflease was owned by offshore funds, and another 13% through the company’s ADR’s.
And while 2004, saw the company drop another R250 million in market capitalisation, 2005 has been a much better year, so far.
Without cash flow, the company has had to issue shares to fund capital requirements. Currently 377.43 million shares are in issue, according to Bloomberg data, at the end of 2002, 173.33 million shares were outstanding.
Mid-year review
The new look of the company is evident from the opening paragraph of its mid-year review, titled: ‘Uranium’.
In it Aflease points out the robustness of the uranium market and notes how the price has tripled since 2003.
“Over the last 18 months, Aflease has been positioning itself to take advantage of these favourable market fundamentals,” says the review, “Our primary focus continues to be the development of our Dominion Reefs uranium property.”
The company has not yet signed an off-take agreement for its uranium supply, expected from 2007, because it expects even better prices. “…We remain committed to delivering uranium to the market in the first quarter of 2007, when we anticipate uranium market conditions to be more favourable than they are currently.”
Last month $20 million was raised for shares, to begin developing the project. The review says that $2.16 million of the funds will go towards a bankable feasibility study to be completed by April 2006.
The project will be funded through equity and debt. “We have identified a number of alternatives for the debt funding, ranging from pure project financing to end-user financing, and over the next six months we will seek the most attractive terms and structures available.”
Aflease also says its proposed reverse takeover of Canada’s Southern Cross Resources, a uranium explorer, will be complete within the next three months, whereby the listed company will be called SXR Uranium One.
In gold, Aflease is again a producer, after opening its Bonanza South project in June. The Weltevreden deposit was also acquired from AngloGold Ashanti in July.
The company now wants to separate its gold assets into a separately-listed gold subsidiary on the JSE.
So far the dilutionary effects of all the share issues have failed to halt Aflease’s share price. So far this year, the company’s shares are up 200% from R1.79 each to R5.35 on Monday.
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Aflease raises $20.5 million
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