First Uranium stock price hops 74%
Over the last five trading days, First Uranium stock has jumped over 74% as dollar gold prices surged
Posted: Tuesday , 09 Nov 2010
Toronto- and Johannesburg-listed First Uranium has experienced a 74% stock price increase in Toronto over the past five trading days, rising to CAD 1.32 a share. The stock is only thinly traded in Johannesburg and spent most of Tuesday adjusting, rising by around 50%.
The stock price has soared despite a strong rand, indicating that investors continue global value hunting as dollar gold prices move from one record to another, lately, more than USD 1,400.00 an ounce was cracked for the first time.
First Uranium has for many months ranked as the world's worst performing uranium stock; it is a stock which may yet be reclassified as a gold stock (it produces both). First Uranium early this year announced a recapitalisation programme, aimed at revving up a cash infusion of between CAD 135m and CAD 150m.
It raised CAD 150m in convertible debentures, due in June 2012. The convertible debenture programme was partially supported by Johannesburg-listed Simmer & Jack, which holds 37.2% (since diluted to 34.4%) of First Uranium, and which could increase to as much as 48% if conversion is eventually chosen. Simmer & Jack currently holds a market value of USD 173m; its stake in First Uranium alone is worth USD 89m, and possibly USD 116m if conversion occurs.
First Uranium currently holds a market value of USD 241m. The First Uranium recapitalisation was also partially supported by Canada-listed Gold Wheaton, to which First Uranium was running delinquent on prior promises of deliveries of gold, swapped for up-front cash payments.
In March this year erstwhile First Uranium CEO Gordon Miller finally stepped down, after something of a shareholder revolt. In mid-December, Simmers announced, along with a new proposed board, that its then-CEO and then-chairman, Gordon Miller and Nigel Brunette, would be stepping down. Brunette went back to farming.
Deon van der Mescht moved to CEO of First Uranium; he resigned as CEO of Simmers, where he was replaced by Nico Schoeman. First Uranium, which operates the behind-schedule uranium and gold producing MWS retreatment entity, and also the refurbished Ezulwini mine, both in South Africa, saw its stock smashed up over a period of years, following successive cuts in forecast production, which in turn triggered a warning from Gold Wheaton that First Uranium may have to cough up penalties of USD 42m to Gold Wheaton.
First Uranium has several times slashed forecast production since April 2008, when for 2011 it anticipated production of 1.9m pounds of uranium, and 507,000 ounces of gold.
It seems that gold production for 2011 could now be in the order of 152,000 ounces. Spot uranium prices have been underperforming for years, following the bursting of a price bubble in 2007. Simmer & Jack in its own right is anticipating 2011 gold production of around 150,000 ounces.
First Uranium was spun out of Johannesburg-listed Simmer & Jack and listed in Toronto early in 2007. The stock price soon traded above CAD 13.00 a share, but declined, recently making record lows around CAD 0.71 a share. Due to constant dilutive stock issues, the Simmers stake in First Uranium had been whittled down to 34.4%. First Uranium had also raised USD 173m from Gold Wheaton from forward sales of gold it has not yet produced.
First Uranium's debt escalated, such that on 31 December 2009, it held net debt, including cash, of USD 146m. Since listing in Toronto, First Uranium has spent more than half a billion dollars on capital expenditure. The convertible debentures now held by Simmer & Jack and others largely resolved First Uranium's liquidity issues, freeing up the company to move ahead under management prepared and able to deal with realities.