Honeymoon moves one step closer to production

By Freya Purnell & Paula Wallace

On April 24th it held a ceremony at its administrative office in Broken Hill, South Australia heralding the start of major construction work, which will continue throughout the remainder of the year.
Commissioning of the mine is scheduled for mid-2010 and production in the second half of that year.
South Australia’s Premier, Hon. Mike Rann MP, and the Minister for Mineral Resources Development, Hon. Paul Holloway MP, were joined by the Japanese Ambassador, Takaaki Kojima, at the ceremony.
Tokyo-based executives from Mitsui & Co, Uranium One’s joint venture partner in the project, were also in attendance.
Faced with escalating capital costs early last year, Uranium One decided to review its strategy for Honeymoon and consequently sought a partner. Shortly after, Mitsui came on board and the transaction was closed at the end of December.
“…that’s allowed us to get back underway again,” said Uranium One’s executive vice president Australia and Asia, Greg Cochran.
“Uranium One is also very proud to have Mitsui & Co, one of Japan’s leading trading houses, as a partner in this project. We expect to benefit from their expertise and experience in world markets and we look forward to working with them on developing our other tenements in South Australia,” he said.
Uranium One is one of the world’s largest publicly traded uranium producers, with a globally diversified portfolio of assets located in Kazakhstan, the United States, South Africa and Australia.
When asked whether he thinks the company’s share price reflects to true value of the company’s assets, Cochran said, “It’s not for me to comment on the company share price, but what I can say is that we have come through the ongoing financial crisis although it isn’t over yet.”
He said the company was in a strong position due to “…the joint venture transaction we did with Mitsui at an Australian level, and then more recently at a parent company level in Canada…the transaction we are trying to close with another Japanese consortium which would further inject capital funds into the company.”
Cochran said that the recent reopening of capital markets, beyond equity, has been positive for “good companies with good assets”, but that for smaller “one asset companies” the joint venture approach is the best option currently.
As a result of the transaction with Mitsui, Uranium One is looking towards the future and to developing another mine as a joint venture.
“Honeymoon is just the first step. So by continuing to do exploration we are looking for Honeymoon’s replacement in effect,” said Cochran.
This is especially important to the company given that Honeymoon is a relatively small deposit for which Uranium One conservatively estimates a mine life of five to six years.
In regard to critical issues in the industry, Cochran said the primary discussion is around securing supply for the future.
“…to supply the resurgent nuclear industry, we need to ensure that there are adequate returns for the developers and the producers of uranium, and historically that has not been the case,” said Cochran.
“…we are looking for price movements to be reflected in both the spot and the longer term market to incentivise producers to go out there to develop these new mines.”
He said the current spot price for uranium does not support this, but the long term price in the order of $70/lb provides considerable incentive.
“Consistently being able to plan around a term price and getting some sort of security that one would actually receive the $70-80/lb is probably what’s needed for broader development in the industry.”
The other benefit for Honeymoon has been the support of Government and regulatory authorities for the project and the uranium industry in general.
“Australia’s fourth uranium mine and the third in South Australia is being watched closely by the industry as proof that South Australia is open for uranium mine development. We are pleased that its development helps pave the way for others to follow in South Australia,” said Cochran.
 

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