Neal Froneman: Former CEO, Uranium One

Dodgy uranium deals in Kazakhstan? The allegations of corruption around the company's Kazakhstan operations.

ALEC HOGG: Neal Froneman joins us now. Neal is the former chief executive of Uranium One. Earlier this week the Uranium One share price took an awful pounding on news coming out of Kazakhstan that some of the principals involved in the state-owned uranium business, were being arrested and allegedly had operated fraudulently. Neal, you were the man running Uranium One at the time that you did the deal with UrAsia, which brought these Kazakhstan assets into the Uranium One picture. Just going back to that, was there anything untoward in the negotiations?

NEAL FRONEMAN: Good evening, Alec. No, there wasn't. We conducted appropriate due diligence. But I think, more importantly, the government has approved ownership changes with those assets twice now. When we bought them, that was approved, and then prior to that the previous company had it approved as well. So there was absolutely no sign of anything untoward.

ALEC HOGG: So why did the share price of Uranium One take such an awful pounding?

NEAL FRONEMAN: Well, I think clearly there's a concern. I must say I think it's a total over-reaction, and I think investors are looking for clarity. You know, when something like this happens an investigation casts the net very wide, and it drags everyone into it, including companies like Cameco, Uranium One and Areva.

ALEC HOGG: So what is going on in Kazakhstan? What is all the ruckus about?

NEAL FRONEMAN: Alec, as far as I can understand, the previous head of KazAtomProm, which is the state-owned entity that owned these uranium assets, and also partners, the Western world companies that have operations there - the head of KazAtomProm was arrested for so-called theft. Now, that's as vague as it is, and as soon as something like that transpires they investigate anything associated with anything he may have done.

ALEC HOGG: Has there been a regime change in Kazakhstan? Is there any reason why shareholders should be worried that the politicians have changed shape, and as a consequence there could be alterations to the old contracts?

NEAL FRONEMAN: You know, I don't think so. The Western world and the capital markets have been acknowledged as a very important part of providing capital to countries like Kazakhstan. Uranium itself is one of the most important commodities generating revenue in a country that has been heavily hit with the fall in the resources market. There could well be power plays taking place, but certainly the operations will continue to run and I think that Kazakhstan and the government know that it's important that the Western world is treated in an appropriate way.

ALEC HOGG: So no worries from a Uranium One shareholder perspective?

NEAL FRONEMAN: I don't think there's anything to be worried about.

ALEC HOGG: That share price down from R25 a couple of days ago, trading today at R18 after touching R17.60 earlier today. So it might present an opportunity.
    Just having a look at your own operations very briefly, Neal - you've now completed the merger between your Gold One and the Australian company listed on both the Australian Stock Exchange and here in South Africa. Interesting to note that the price in Australia seems to trade at a premium here to the JSE. Any reason for that?

NEAL FRONEMAN: It is surprising, and that must represent a very nice arbitrage opportunity. I know a couple of people have been looking at it and trying to find ways to benefit from that. To answer your question, no, I don't know of any specific reason. I think that certainly when you do have transactions like this taking place there's a while before the share prices run in accordance with each other. I think that arbitrage will close up, and hopefully it closes upwards and not downwards.

ALEC HOGG: And shareholders have doubled their money in a very short period of time. Doesn't that worry you - that perhaps things might be a little overvalued now?

NEAL FRONEMAN: Not at all, Alec. You know, when we look at what the sort of market value of a gold company should be, there's a number of measures. Certainly we are trading at a discount to our NAV, which is the most appropriate method. But when you look at measures like enterprise value per resource ounce and so on, we are still trading well behind our peers in Australia. So no, I still think there's lots of upside.

ALEC HOGG: Neal Froneman, the chief executive of Gold One, and the founding chief executive of Uranium One, putting a little bit of perspective on that. So if you're a Uranium One shareholder, well, last night the current CEO, Jean Nortier, felt that it was so unimportant that he's rather go off to a museum ... - he said there really wasn't a whole lot that he could add to the whole story there, the decline of 40% of the share price in a week. Neal also seems to suggest that it's much ado about nothing. So if you are holding on to those shares, remember it's a long-term investment.

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