| Thu 14 Jun 2007, 17:57 | | FUM - First Uranium Corporation - Reports results |
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FUM
FIU
FUM - First Uranium Corporation - Reports results for year ended March 31,
2007
FIRST URANIUM CORPORATION
Registration Number: C0777384
ISIN: CA33744R1029
(Continued under the laws of British Columbia, Canada)
SA Company Registration Number: 2007/009016/10
TSX Share code: FIU
JSE Share code: FUM
NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S.
NEWSWIRE SERVICES
FIRST URANIUM REPORTS RESULTS FOR YEAR ENDED MARCH 31, 2007
All amounts are in US Dollars unless otherwise noted.
Toronto and Johannesburg - First Uranium Corporation (TSX:FIU, JSE:FUM)
(CA33744R1029:ISIN) ("First Uranium" or "the Company") today announced its
financial results for the year ended March 31, 2007 ("Fiscal 2007") as
compared to the year ended March 31, 2006 ("Fiscal 2006") and provided a
progress update on its Ezulwini Mine and Buffelsfontein tailings recovery
project (the "Current Projects") in South Africa.
Highlights
During Fiscal 2007, First Uranium:
* Completed the Company`s initial public offering in December 2006 on
the Toronto Stock Exchange, raising gross proceeds of $201.8 million
* Commenced underground development at the Ezulwini Mine in February
2007 (two months ahead of schedule)
* Completed an evaluation to optimize uranium recovery using pressure
leaching at the Buffelsfontein tailings recovery project
* Ended Fiscal 2007 with cash and cash equivalents of $138.9 million
* Incurred a net loss of $7.9 million
* Invested $24.3 million to develop the Current Projects
* Completed a secondary listing on the Johannesburg Stock Exchange
Subsequent to the end of Fiscal 2007, First Uranium:
* Raised gross proceeds of Cdn$150 million through an issue of senior
unsecured convertible debentures
* Filed revised technical reports for each of the Current Projects,
which improved their NPV and IRR reflecting the accelerated timetables
of both projects
* Accelerated capital investment at the Ezulwini Mine to advance by
three months plant commissioning and production startup
* Acquired Mine Waste Solutions (Proprietary) Limited to advance the
Buffelsfontein tailings recovery project
* Received acceptance by the South African Department of Mines and
Energy for a prospecting permit application on incremental ground
contiguous to the Ezulwini Mine
* Added a Chief Financial Officer and an Executive Vice-President,
Compliance to round out the executive management team
Overview
First Uranium recorded a net loss of $7.9 million during Fiscal 2007 as
compared to a loss of $6.9 million during Fiscal 2006. On a per share
basis the Company recorded a net loss of $0.08 in Fiscal 2007 as compared
to a loss of $0.08 in Fiscal 2006, based on the weighted number of average
common shares outstanding of 97.5 million and 84.2 million respectively.
During both Fiscal 2006 and Fiscal 2007, the Company was still in the
development phase and, accordingly, had no operating revenue in either
period.
"We have made good progress on the development of our two South African
uranium and gold projects, the Ezulwini underground mine and the
Buffelsfontein tailings recovery project," said Gordon Miller, President
and Chief Executive Officer of First Uranium.
"We have taken significant strides to advance production at both projects
by accelerating the construction schedule at Ezulwini and completing the
acquisition of an existing gold plant adjacent to Buffelsfontein,"
continued Mr. Miller. "By advancing production at both projects in an
environment of high uranium demand and prices, we expect that the near-term
revenue contribution from Ezulwini and Buffelsfontein will be much higher
than we originally anticipated. The combined proceeds of the initial
public offering and the recent convertible debenture offering, as well as
the prospect for higher than planned revenue, gives us confidence that we
are well funded to advance our current projects to full production."
Expenses
Expenses during the last two fiscal years reflected normal costs associated
with the start-up of a new company and the development of new mining
projects, including:
* Consulting and management fees, which increased in Fiscal 2007
compared to Fiscal 2006 by 49% to $2.2 million, principally due to the
costs associated with its initial public offering and listing on the
Toronto Stock Exchange (the "TSX") and expenditures in connection with
the management of the timely development of the Current Projects
* General and administrative expenses increased in Fiscal 2007 as new
employees were hired and the Johannesburg and Toronto offices were
established
* Stock-based compensation costs of $2.5 million in Fiscal 2007,
principally related to the granting of stock options to management and
the new Board of Directors. Comparable costs in Fiscal 2006 were
insignificant
* Pumping and feasibility costs of $0.8 million related to the Current
Projects, decreased from $5.1 million in Fiscal 2006, as such costs
were capitalized in Fiscal 2007 based on the planned development of
the Current Projects
* A foreign exchange loss of $4.6 million in Fiscal 2007, which was
primarily related to the conversion of the net Canadian dollar
denominated proceeds from the initial public offering in December 2006
to South African rand in accordance with the requirements of the South
African Reserve Bank
All of the above expenses were partially offset in Fiscal 2007 by $3.4
million of interest income from the proceeds of the Company`s initial
public offering, which net of underwriting fees, raised $189 million.
Cash and Capital Expenditures
First Uranium ended Fiscal 2007 with cash and cash equivalents of $138.9
million ($0.6 million at the end of Fiscal 2006), which reflects the net
proceeds of the initial public offering less the cost of certain assets
acquired from the Company`s controlling shareholder Simmer and Jack Mines,
Limited, cash utilized in operations and capital invested for additions to
property, plant and equipment.
Including cash, the Company had $181.4 million of assets at the end of
Fiscal 2007. During Fiscal 2007 the Company has invested $24.3 million of
cash in property, plant and equipment, comprised primarily of the mining
and plant assets at Ezulwini.
Production Forecast
At the Ezulwini Mine, gold production is planned to commence in October
2007 and uranium production is expected to begin in June 2008 to achieve an
average annual production of 290,000 ounces of gold and 888,000 pounds of
uranium over the 18-year life of the mine. With the acquisition of MWS,
the Company`s Buffelsfontein tailings recovery project is producing gold
and is expected to commence uranium production in November 2008 to achieve
an average annual production of 128,000 ounces of gold and 922,000 pounds
of uranium over the 16-year life of the project.
Management Appointment
Effective June 1, 2007 John Berry has joined the First Uranium management
team as Executive Vice-President, Compliance to oversee, among other
things, the Corporation`s applications process for mining and prospecting
rights and environmental permits. Mr. Berry has been involved in the
mining industry since 1977 and is an Executive Director with Simmer and
Jack Mines, Limited. He will divide his time evenly between the two
companies.
Third Quarter Restatement
First Uranium has restated the consolidated interim financial statements
for the three months ended December 31, 2006 to reflect additional costs
relating to the Offering. These additional costs include fees payable to
Investec Bank Limited of South Africa, in respect of various advisory and
regulatory services provided in connection with the Offering, as well
as advisory fees payable to a number of technical consultants.
Technical Disclosure
All technical disclosure in this news release relating to the Ezulwini
project is extracted from a technical report entitled "Technical Report -
Preliminary Assessment of the Ezulwini Project, Gauteng Province, Republic
of South Africa" originally submitted on November 8, 2006 and December 5,
2006 and revised on May 9, 2007 prepared in accordance with NI 43-101 by
Wayne Valliant, P.Geo. and R. Dennis Bergen, P.Eng of Scott Wilson Roscoe
Postle Associates Inc. ("Scott Wilson RPA"). All technical disclosure in
this news release relating to the Buffelsfontein tailings recovery project
is extracted from a technical report entitled "Technical Report -
Preliminary Assessment of the Buffelsfontein Project, Northwest Province,
Republic of South Africa" originally submitted on November 8, 2006, revised
on December 5, 2006 and January 31, 2007 and further revised on May 22,
2007 prepared in accordance with National Instrument 43-101 ("NI 43-101")
by R. Dennis Bergen, P.Eng and Wayne Valliant, P.Geo. of Scott Wilson RPA.
Each of Mr. Valliant and Mr. Bergen is a "qualified person" under NI 43-101
and is independent of First Uranium. The technical disclosure contained in
this news release has been reviewed and approved by Mr. Bergen and Mr.
Valliant.
The economic analysis contained in this news release is contained in the
technical reports mentioned above and is based, in part, on inferred
resources, and is preliminary in nature. Inferred resources are considered
too geologically speculative to have mining and economic considerations
applied to them and to be categorized as Mineral Reserves. There is no
certainty that the reserves development, production and economic forecasts
on which the preliminary assessment contained in the technical reports are
based, will be realized.
Cautionary Language Regarding Forward-Looking Information
This news release contains certain forward-looking statements. Forward-
looking statements include but are not limited to those with respect to the
price of uranium and gold, the estimation of mineral resources and
reserves, the realization of mineral reserve estimates, the timing and
amount of estimated future production, costs of production, capital
expenditures, costs and timing of development of new deposits, success of
exploration activities, permitting time lines, currency fluctuations,
requirements for additional capital, government regulation of mining
operations, environmental risks, unanticipated reclamation expenses, title
disputes or claims and limitations on insurance coverage and the timing and
possible outcome of pending litigation. In certain cases, forward-looking
statements can be identified by the use of words such as "plans", "expects"
or "does not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", or "does not anticipate", or
"believes" or variations of such words and phrases, or state that certain
actions, events or results "may", "could", "would", "might" or "will" be
taken, occur or be achieved. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of First Uranium to be materially
different from any future results, performance or achievement expressed or
implied by the forward-looking statements. Such risks and uncertainties
include, among others, the actual results of current exploration
activities, conclusions of economic evaluations, changes in project
parameters as plans continue to be refined, possible variations in grade
and ore densities or recovery rates, failure of plant, equipment or
processes to operate as anticipated, accidents, labour disputes or other
risks of the mining industry, delays in obtaining government approvals or
financing or in completion of development or construction activities, risks
relating to the integration of acquisitions, to international operations,
to prices of uranium and gold. Although First Uranium has attempted to
identify important factors that could cause actual actions, events or
results to differ materially from those described in forward-looking
statements, there may be other factors that cause actions, events or
results not to be as anticipated, estimated or intended. It is important
to note, that: (i) unless otherwise indicated, forward-looking statements
indicate the Corporation`s expectations as at June 13, 2007; (ii) actual
results may differ materially from the Corporation`s expectations if known
and unknown risks or uncertainties affect its business, or if estimates or
assumptions prove inaccurate; (iii) the Corporation cannot guarantee that
any forward-looking statement will materialize and, accordingly, readers
are cautioned not to place undue reliance on these forward-looking
statements; and (iv) the Corporation disclaims any intention and assumes no
obligation to update or revise any forward-looking statement even if new
information becomes available, as a result of future events or for any
other reason.
In making the forward-looking statements in this news release, First
Uranium has made several material assumptions, including but not limited
to, the assumption that: (i) approvals to transfer or grant, as the case
may be, mining rights will be obtained; (ii) metal prices, exchange rates
and discount rates applied in the preliminary economic assessments are
achieved; (iii) mineral resource estimates are accurate; (iv) the
technology used to develop and operate its two projects has, for the most
part, been proven and will work effectively; (v) that labour and materials
will be sufficiently plentiful as to not impede the projects or add
significantly to the estimated cash costs of operations; (vi) that
outstanding approvals for the completion of an acquisition, the transfer of
mining rights and the approval of mining rights will be granted; (vii) that
Black Economic Empowerment ("BEE") investors will maintain their interest
in the Corporation and their investment in the Corporation`s common shares
to a sufficient level to continue to support the Corporation`s compliance
with 2014 BEE requirements; and (viii) that the innovative work on
stabilizing the main shaft at the Ezulwini Mine will be successful in
maintaining a safe and uninterrupted working environment until 2024.
About First Uranium Corporation
First Uranium Corporation is focused on the development of South African
uranium and gold mines with the goal of becoming a significant producer
through the re-opening and development of the Ezulwini Mine, and the
construction of the Buffelsfontein tailings recovery facility. First
Uranium also plans to grow production by pursuing acquisition and joint
venture opportunities.
First Uranium Corporation
1240-155 University Avenue, Toronto, ON Canada M5H 3B7
www.firsturanium.com
For further information, please contact:
Bob Tait, VP Investor Relations at 416 558-3858 or bob@firsturanium.com
Management`s Responsibility for Financial Reporting
The accompanying consolidated financial statements have been prepared by
management and are in accordance with Canadian generally accepted
accounting principles and reflect informed judgments and estimates based on
currently available information and with due consideration given to
materiality. Management acknowledges its responsibility for the fairness,
integrity and objectivity of all information in the consolidated financial
statements.
As a means of fulfilling its responsibility, management relies on the
Corporation`s system of internal controls. This system has been
established to ensure, within reasonable limits, that the assets are
safeguarded, transactions are properly recorded and are executed in
accordance with management`s authorization and that the accounting records
provide a solid foundation from which to prepare the consolidated financial
statements.
The Board of Directors carries out its responsibility for the consolidated
financial statements principally through its Audit Committee, consisting
solely of non-management directors. The Audit Committee meets with
management as well as the external auditors to ensure that management is
properly fulfilling its financial reporting responsibilities to the
Directors who approve the financial statements. The external auditors have
full and unrestricted access to the Audit Committee to discuss the scope of
the external audit, the adequacy of the system of internal controls and
financial reporting issues.
The consolidated financial statements have been audited by
PricewaterhouseCoopers LLP, Chartered Accountants. Their report outlines
the scope of their examination and opinion on the consolidated financial
statements.
Gordon Miller Emma Oosthuizen
Chief Executive Officer Chief Financial Officer
June 13, 2007
Auditors` Report to the Shareholders
We have audited the consolidated balance sheet of First Uranium Corporation
as at March 31, 2007 and 2006 and the consolidated statements of
expenditures and deficit and cash flows for the years then ended. These
financial statements are the responsibility of the Corporation`s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Corporation as at
March 31, 2007 and 2006 and the results of its operations and its cash
flows for the years then ended in accordance with Canadian generally
accepted accounting principles.
PricewaterhouseCoopers LLP
Chartered Accountants
Licensed Public Accountants
Toronto, Ontario, Canada
June 13, 2007
First Uranium Corporation
Consolidated Balance Sheets
as at March 31, 2007 and March 31, 2006
(in United States Dollars)
2007 2006
Notes US$`000 US$`000
ASSETS
Current assets
Cash and cash equivalents 138,914 560
Accounts receivable 3 1,713 143
Inventories 4 292 -
Amount receivable from related party 19 6,763 2,730
147,682 3,433
Non-current assets
Property, plant and equipment 5 30,954 -
Asset retirement fund 6 2,791 -
33,745 -
Total assets 181,427 3,433
LIABILITIES
Current liabilities
Accounts payable and accrued 8 5,702 787
liabilities
Amount payable to related party 19 - 5,300
5,702 6,087
Non-current liabilities
Asset retirement obligation 9 5,377 -
5,377 -
SHAREHOLDERS` EQUITY
Share capital 10 182,673 4,176
Contributed surplus 11 2,460 27
Accumulated deficit (14,785) (6,857)
170,348 (2,654)
Total equity and liabilities 181,427 3,433
See accompanying notes to the Consolidated Financial Statements, including:
Basis of preparation
Contractual obligations
Subsequent events
Approved on behalf of the Board of Directors
Nigel R. G. Brunette Robert M. Franklin
Non-executive Chairman Non-executive Director
June 13, 2007
First Uranium Corporation
Consolidated Statements of Expenditures and Deficit
for the years ended March 31, 2007 and March 31, 2006
(in United Stated Dollars)
2007 2006
Notes US$`000 US$`000
Expenditures
Consulting and management fees 19 2,224 1,494
General and administrative 1,024 261
expenditure
Stock-based compensation 11 2,460 27
Pumping and feasibility costs 844 5,104
Amortization of property, plant and 5 14 -
equipment
Operating loss (6,566) (6,886)
Interest income 19 3,433 -
Interest expense 19 (162) -
Foreign exchange (losses)/gains 12 (4,612) 29
Loss before income taxes (7,907) (6,857)
Provision for income taxes 13 (21) -
Net loss for the year (7,928) (6,857)
Accumulated deficit at the beginning (6,857) -
of the year
Accumulated deficit at the end of (14,785) (6,857)
the year
Basic and diluted loss per common 14 (0.08) (0.08)
share (US$)
Weighted average number of basic and 14 97,522 84,172
diluted common shares outstanding
(`000)
See accompanying notes to the Consolidated Financial Statements
First Uranium Corporation
Consolidated Statements of Cash Flows
for the years ended March 31, 2007 and March 31, 2006
(in United States Dollars)
2007 2006
Notes US$`000 US$`000
Net loss for the year (7,928) (6,857)
Changes not affecting cash:
- Interest income 15.2 (666) -
- Interest expense 162 -
- Amortization 14 -
- Expenses in respect of asset 6 80 -
retirement fund
- Accretion expense in respect of asset 9 244 -
retirement obligation
- Stock-based compensation 2,460 27
Net loss after interest and non-cash (5,634) (6,830)
items
Movement in working capital:
- Increase in inventories (292) -
- Increase in accounts receivable (1,570) (143)
- (Increase)/decrease in net amounts 15.1 (9,880) 2,570
receivable from related parties
- Increase in accounts payable and 1,633 787
accrued liabilities
Cash flows from operating activities (15,743) (3,616)
Additions to property, plant and 15.3 (24,270) -
equipment
Increase in asset retirement fund 6 (103) -
Cash flows from investing activities (24,373) -
Proceeds from shares issuance (net of 10 178,470 4,176
issue costs)
Cash flows from financing activities 178,470 4,176
Net increase in cash and cash 138,354 560
equivalents for the year
Cash and cash equivalents at beginning 560 -
of the year
Cash and cash equivalents at end of the 138,914 560
year
See accompanying notes to the Consolidated Financial Statements
First Uranium Corporation
Notes to the Consolidated Financial Statements
March 31, 2007
1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The consolidated financial statements have been prepared by First Uranium
Corporation ("First Uranium" or "the Corporation") in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP"). The
preparation of the consolidated financial statements is based on accounting
policies and practices consistent with those used in the prior year.
First Uranium is a Canadian corporation with a primary listing on the
Toronto Stock Exchange ("TSX") and a secondary listing on the Johannesburg
Stock Exchange ("JSE"). First Uranium is a resource company focused on the
development of uranium and gold projects in South Africa, see Note 5
"Property, Plant and Equipment" for a description of the projects. First
Uranium owns 100% of First Uranium Limited ("FUL"), which in turn holds
100% of First Uranium (Proprietary) Limited ("FUSA") and 90% of Ezulwini
Mining Company (Proprietary) Limited ("EMC"). As at March 31, 2007, Simmer
and Jack Mines, Limited ("Simmer & Jack") owned 67.2% of First Uranium`s
common shares.
1.1 Investment in subsidiaries
Group financial statements
The acquisition by First Uranium of shareholdings in FUSA and EMC are
accounted for under Canadian GAAP as a continuity of interests. Certain
adjustments have been reflected in the financial statements to reflect the
reorganization pursuant to which First Uranium acquired 100% of FUSA and
90% of EMC as if the share exchange had been effective for the period from
inception to March 31, 2007.
Acquisition from entities under common control
A business combination involving entities or businesses under common
control is a business combination in which all of the combining entities or
businesses are ultimately controlled by the same party or parties both
before and after the business combination, and that control is not
transitory.
The assets and liabilities acquired in a business combination under common
control are recognized at the carrying amounts recognized previously in the
Group`s controlling shareholder, Simmer & Jack`s, consolidated financial
statements.
2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada.
2.2 Consolidation
The consolidated financial statements include the accounts of First Uranium
and all of its subsidiaries. All significant inter-company balances and
transactions are eliminated on consolidation.
2.2.1 Subsidiaries
A subsidiary is an entity which is controlled by the Corporation. The
consolidated financial statements include all the assets, liabilities,
revenues, expenses and cash flows of First Uranium and its subsidiaries
after eliminating inter-company balances and transactions. For partly
owned subsidiaries, the net assets and net earnings attributable to
minority shareholders are presented as minority interests on the
consolidated balance sheet and consolidated statement of expenditures and
deficit.
2.3 Use of estimates
The preparation of these consolidated financial statements in accordance
with Canadian generally accepted accounting practice requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amount of
revenues and expenses during the reporting period.
Significant areas requiring the use of management estimates relate to the
determination of impairment of capital assets, goodwill estimation of
future site restoration costs and future income taxes, and classification
of current portion of long term debt. Financial results as determined by
actual events could differ from those estimated.
2.4 Foreign currency translation
Items included in the financial statements of each entity in the
Corporation are measured using the currency that best reflects the economic
substance of the underlying events and circumstances relevant to that
entity ("the functional currency").
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies are recognized in the statements of
expenditures and deficit.
The Corporation considers the United States dollar ("US$") to be the
functional and reporting currency. The translated amounts are of a foreign
entity where its subsidiaries are accounted for as integrated foreign
operations and as such, the translation to US dollar was made using the
temporal method. Monetary assets and liabilities denominated in foreign
currencies are translated in United States dollars at the year-end exchange
rates, while non-monetary items are translated at the exchange rate in
effect at the transaction date. Revenue and expense items are translated
at the exchange rates in effect on the date of the transaction. Exchange
gains and losses resulting from the translation of these amounts are
included in the consolidated statements of operations.
2.5 Financial instruments
Financial assets and financial liabilities are recognized on the balance
sheet when the Corporation has become party to the contractual provisions
of the instruments.
Measurement
Financial instruments are initially measured at cost, which includes
transaction costs. Subsequent to initial recognition these instruments are
measured as set out below:
Investments
Purchases and sales are recognized on the trade date, which is the date
that the Corporation commits to purchase or sell the asset. After initial
recognition, investments, which include the Corporation`s listed
investments and which are designated as long term investments, are measured
at the lesser of historic cost or net realizable value. Listed
investments, which are designated as short term investments, are measured
at fair value. Losses on long term investments and profits and losses on
short term investments are recognized in the consolidated statement of
expenditures and deficit.
Other long term investments that are intended to be held to maturity are
subsequently measured at amortized cost using the effective interest rate
method. Amortized cost is calculated by taking into account any discount
or premium on acquisition over the period to maturity. For investments
carried at amortized cost, gains and losses are recognized in the income
statement when the investments are derecognized or impaired, as well as
through the amortization process.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank balances, deposits
held at call and certificate of deposits with a remaining maturity of three
months or less. Bank and cash balances are reported separately from bank
overdraft balances, which are included in accounts payable.
Accounts receivable
Accounts receivable are carried at original invoice amount unless a
provision has been recorded for impairment of these receivables. A
provision for impairment of accounts receivable is established when there
is objective evidence that the Corporation will not be able to collect all
amounts due according to the original terms of receivables.
Financial liabilities
After initial recognition, financial liabilities other than trading
liabilities are subsequently measured at amortized cost using the effective
interest rate method. Amortized cost is calculated by taking into account
any transaction costs and any discount or premium on settlement.
Accounts payable
Liabilities for trade and other payables which are normally settled on 30
to 90 day terms are carried at cost.
Impairment and uncollectability of financial assets
An assessment is made at each balance sheet date to determine whether there
is objective evidence that a financial asset or group of financial assets
may be impaired. If such evidence exists, the estimated recoverable amount
of the asset is determined and an impairment loss is recognized for the
difference between the recoverable amount and the carrying amount as
follows: The carrying amount of the asset is reduced to its discounted
estimated recoverable amount, either directly or through the use of an
allowance account and the resulting loss is recognized in the income
statement for the period.
Offset
Where a legally enforceable right of offset exists for recognized financial
assets and financial liabilities, and there is an intention to settle the
liability and realize the asset simultaneously, or settle on a net basis,
all related financial effects are offset.
Equity instruments
Equity instruments issued by the Corporation are recorded on the date the
proceeds are received, net of direct issue costs.
The carrying amounts for cash and cash equivalents, short term investments,
accounts receivable and accounts payable and accrued liabilities
approximate fair value due to the short maturities of these instruments.
2.6 Property, plant and equipment
The cost of an item of property, plant and equipment is recognized as an
asset when:
it is probable that future economic benefits associated with the item will
flow to the Corporation; and
the cost of the item can be measured reliably.
Costs include costs incurred initially to acquire or construct an item of
property, plant and equipment and costs incurred subsequently to add to,
replace part of, or service it. If a replacement cost is recognized in the
carrying amount of an item of property, plant and equipment, the carrying
amount of the replaced part is derecognized.
Property, plant and equipment are carried at cost less accumulated
depreciation and any impairment losses.
Depreciation is provided on all property, plant and equipment other than
freehold land, to write down the cost, less residual value, on a straight-
line basis over their useful lives as follows:
Item Average useful life
Buildings 20 years
Plant and equipment 25 years
Office furniture and equipment 6 years
Motor vehicles 5 years
Computer equipment and software 3 years
Mining assets Life of mine
Mining assets are stated at cost
less accumulated amortization and
impairments. Cost includes
pre-production expenditures
incurred during the development of
the mine. Cost also includes
borrowing costs capitalized during
the construction period where such
costs are financed by borrowings.
Amortization is first charged on
new mining ventures from the date
on which production reaches
commercial quantities.
Mine development costs Measured and
indicated mineral
resources
Mine development costs include
expenditures incurred to develop
new ore bodies, to define further
mineralization in existing ore
bodies and to expand the capacity
of a mine.
Mine development costs are
amortized using the
units-of-production method based
on estimated measured and
indicated mineral resources.
These resources are reassessed
annually.
Mine infrastructure Measured and
indicated mineral
resources
Plant, equipment and buildings are
amortized using the
units-of-production method based
on estimated measured and
indicated mineral resources
Mining rights Mining period as
per licence
The cost of acquiring mining
rights are capitalized and
amortized over the mining period
awarded by the Department of
Minerals and Energy ("DME") to the
Corporation for the respective
mining right.
Exploration Life of mine
Exploration costs incurred to the
date of establishing that a
property has mineral resources,
which have the potential of being
economically recoverable, are
expensed; exploration and
development expenses incurred
subsequent to this date are
capitalized. If the project
becomes feasible, the costs are
amortized over the life of the
mine. If the project is stopped,
the costs are written off
immediately.
The residual value and the useful life of each asset are reviewed at each
financial year-end.
Each part of an item of property, plant and equipment with a cost that is
significant in relation to the total cost of the item shall be depreciated
separately.
The depreciation charge for each period is recognized in profit or loss
unless it is included in the carrying amount of another asset.
2.7 Capitalization of interest
Net interest costs incurred during the development, construction and start
up phase of major projects are capitalized.
2.8 Asset retirement obligations
The Corporation recognizes the fair value of a future asset retirement
obligation as a liability in the year in which it incurs a legal obligation
associated with the retirement of tangible long-lived assets that results
from the acquisition, construction, development, and/or normal use of the
assets. The Corporation concurrently recognizes a corresponding increase
in the carrying amount of the related long-lived asset that is depreciated
over the life of the asset. The fair value of the asset retirement
obligation is estimated using the expected cash flow approach that reflects
a range of possible outcomes discounted at credit adjusted risk-free
interest rate. Provision is made in full for the estimated future costs of
pollution control and rehabilitation, in accordance with statutory
requirements. The fair value of asset retirement obligations is recognized
and provided for in the financial statements and capitalized to mining
assets when incurred.
Subsequent to the initial measurement, the asset retirement obligation is
adjusted at the end of each year to reflect the passage of time and changes
in the estimated future cash flows underlying the obligation.
Changes in the obligation due to the passage of time are recognized in
income as an operating expense using the interest method. Changes in the
obligation due to changes in estimated cash flows are recognized as an
adjustment of the carrying amount of the long-lived asset that is
depreciated over the remaining life of the asset.
Annual increases in the provision are accreted into income and consist of
financing costs relating to the change in present value of the provision
and inflationary increases in the provision estimate. The present value of
additional environmental disturbances created is capitalized to mining
assets against an increase in rehabilitation provision.
2.9 Impairment of long-lived assets
Where impairment is identified, the carrying value of the related property,
plant and equipment is written down to fair value. Recoverability of the
long term assets of the Corporation, which includes development costs and
undeveloped property costs, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amounts may not be
recoverable, based on future undiscounted cash flows. In preparing this
evaluation, the Corporation compares the carrying amount of the asset to
its fair value. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable
cash flows. To determine fair value, management makes its best estimates
of the future cash inflows that will be obtained each year over the life of
the asset and discounts the cash flows by a rate that is based on the time
value of money, adjusted for the risk associated with the applicable asset.
Management`s best estimate includes only those projections which it
believes are reliable. These estimates are subject to risks and
uncertainties including future metal prices. It is therefore reasonably
possible that changes could occur which may affect the recoverability of
the assets.
2.10 Future income and mining taxes
The Corporation utilizes the asset and liability method of accounting for
income and mining taxes. Under the asset and liability method, future
income and mining tax assets are recognized for the future tax consequences
attributable to differences between the consolidated financial statements
carrying amounts of existing assets and liabilities and their respective
tax bases reduced by a valuation allowance to reflect the recoverability of
any future income tax asset. Future income and mining tax assets and
liabilities are measured using enacted or substantively enacted tax rates
expected to apply when the asset is realized or the liability settled. The
effect on future income and mining tax assets and liabilities of a change
in tax rates is recognized in income in the year the enactment or
substantive enactment occurs.
2.11 Stock-based compensation
The Corporation has a stock-based compensation plan which is described in
note 11. The Corporation accounts for all stock-based payments under the
fair value based method.
Under the fair value based method, compensation cost is measured at fair
value at the grant date. Compensation cost is recognized in earnings on a
straight-line basis over the relevant vesting period. The counterpart is
recognized in contributed surplus. Upon the exercise of a stock option,
share capital is recorded at the sum of the proceeds received and the
related amount of contributed surplus. Any consideration paid upon the
exercise of stock options, in addition to the fair value attributable to
stock options granted, is credited to share capital. The fair value
attributable to stock options that expire unexercised is credited to
contributed surplus.
2.12 Interest recognition
Interest income is recognized on a time proportion basis, taking account of
the principal outstanding and the effective rate over the period of
maturity, when it is determined that such income will accrue to the
Corporation.
2.13 Leased assets
Leases of property, plant and equipment where the Corporation has
substantially all the risks and rewards of ownership, are classified as
finance leases. Finance leases are capitalized at the inception of the
lease at the lower of the fair value of the leased property or the present
value of the minimum lease payments. Each lease payment is allocated
between the liability and finance charges so as to achieve a constant rate
on the finance balance outstanding. The corresponding rental obligations,
net of finance charges, are included in other long-term payables. The
interest element of the installment is charged to the income statement over
the lease period so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each period. The property,
plant and equipment acquired under finance leases are depreciated over the
shorter of the useful life of the asset or the lease term.
2.14 Inventories
Inventories, which include in-circuit metals and consumable stores, are
stated at the lower of cost or net realizable value. The related direct
production costs associated with in-circuit metals are deferred and charged
to costs as the contained gold is recovered. Consumable stores are valued
on the weighted average cost basis. In-circuit metals are identified and
measured from the ore stockpiles up to and including the on-site refining
plant.
2.15 Earnings or loss per share
Basic earnings or loss per share is computed by dividing earnings or loss
available to common shareholders by the weighted average number of common
shares outstanding during the year. The treasury stock method is used to
calculate diluted earnings or loss per share. Diluted earnings or loss per
share is similar to basic earnings or loss per share, except that the
denominator is increased to include the number of additional common shares
that would have been outstanding assuming that options with an average
market price for the year greater than their exercise price are exercised
and the proceeds used to repurchase common shares. As a result of the loss
for each of the reporting years, the potential effect of exercising stock
options has not been included in the calculation of diluted loss per share
as to do so would be anti-dilutive.
3 ACCOUNTS RECEIVABLE
2007 2006
US$`000 US$`000
Trade receivables 99 -
Value Added Tax and General Sales Tax 1,463 13
Prepayments and advances 144 130
Deposits and guarantees 7 -
1,713 143
4 INVENTORIES
2007 2006
US$`000 US$`000
Spares and consumables 292 -
PROPERTY, PLANT AND EQUIPMENT
Accumulat Net
2007 Cost ed carrying
Owned assets US$`000 amortizat amount
ion US$`000
US$`000
Land and buildings 863 - 863
Mine infrastructure 3,710 - 3,710
Mining assets 16,942 - 16,942
Mining rights 13 - 13
Plant and equipment 9,000 - 9,000
Motor vehicles 179 (8) 171
Office furniture and equipment 56 (1) 55
Computer equipment and software 205 (5) 200
Total net carrying amount 30,968 (14) 30,954
Included in the above are mining related assets with a net carrying value
of US$29 million related to the Ezulwini Mine and US$0.8 million related to
the Buffelsfontein Tailings Recovery Project.
First Uranium had no property, plant or equipment in the year ending March
31, 2006.
Ezulwini Mine
The Ezulwini Mine involves the recommissioning of an underground uranium
and gold mining operation located on the outskirts of the town of
Westonaria in Gauteng Province, South Africa. The mine, previously on care
and maintenance, is being readied for production. The mine was constructed
in the 1960s. In 2001, mine production at Ezulwini was ceased primarily as
a result of capital constraints compounded by a weak gold and uranium
market environment. The geology of the Ezulwini property includes a number
of reef packages, with the Upper Elsburg and Middle Elsburg reefs being the
primary focus of First Uranium`s mine reopening plans at the Ezulwini Mine.
First Uranium`s plans for the development of the Ezulwini Mine include the
rehabilitation and re-engineering of the main mine shaft through the
installation of a floating steel tower, de-stressing the area where the
shaft pillar intersects the shaft barrel, and the construction of uranium
and gold processing facilities.
On December 8, 2006 the Ezulwini mining right was registered to Simmer &
Jack. On December 20, 2006, EMC and Simmer & Jack entered into an
agreement (the "Ezulwini Mining Right Agreement") pursuant to which Simmer
& Jack agreed to take all necessary steps to obtain all ministerial
approval in order to effect the ceding of the Ezulwini mining right from
Simmer & Jack to EMC.
On October 19, 2006, EMC entered into an agreement with Randfontein Estates
Limited ("REL"), a wholly-owned subsidiary of Harmony Gold Mining Company
Limited ("Harmony"), in respect of the purchase of certain surface and
underground assets relating to the Ezulwini Mine, including two shaft
headgears and four winders, fans, compressors, generators and underground
equipment as well as the necessary surface freehold required to operate the
mine. A total consideration of US$7.8 million was paid to REL. The
effective date of the transaction was December 22, 2006.
As part of the Ezulwini acquisition, the related environmental
rehabilitation trust fund amounting to US$2.7 million (see Note 6) was
transferred into the Ezulwini trust fund and EMC took over the related
environmental rehabilitation provision of US$5.1 million (see Note 9) as
determined by the DME. The difference of US$2.4 million between the
environmental rehabilitation trust fund and the environmental
rehabilitation provision has been capitalised as part of mining
infrastructure.
Buffelsfontein Tailings Recovery Project
The Buffelsfontein Tailings Recovery Project is a uranium and gold tailings
recovery operation located in the western portion of the Witwatersrand
Basin. First Uranium will conduct hydraulic mining of thirteen tailings
dumps on the Buffelsfontein property and two dams on the property of MWS
(as defined below) using high pressure water cannons to slurry the tailings
which will then be pumped to processing plants for the recovery of uranium
and gold.
In October 2005, Simmer & Jack purchased Buffelsfontein Gold Mines Limited
("BGM"), consisting of the Buffelsfontein and Hartebeesfontein underground
gold mines and mill (the "BGM Underground Mine"), out of provisional
liquidation (the "Buffelsfontein Liquidation Acquisition").
BGM holds an old order mining right in respect of mining gold at the BGM
Underground Mine but not for the recovery of the gold and uranium in the
tailings dams at Buffelsfontein. On June 4, 2007 the DME granted to BGM a
prospecting right with respect to uranium and other minerals in the
Buffelsfontein property and tailings dams subject to certain conditions
which are expected to be satisfied in due course. BGM has also filed with
the DME an application to convert its old order mining right for BGM into a
new order mining right. If and when this conversion application is
approved, BGM intends to file with the DME one or more applications (which,
together with the foregoing conversion application, are collectively
referred to herein as the "Buffelsfontein Conversion Application") to:
(i) amend, with effect from the date of conversion, the new order mining
right to include the authority to mine for uranium underground and for
gold, uranium and other minerals in respect of the tailings; (ii) divide
the new order mining right, if granted, into two separate new order mining
rights - one in respect of the mining for gold, uranium and other minerals
at the BGM Underground Mine and the other, the Buffelsfontein Tailings
Mining Right, in respect of the mining of the gold, uranium and other
minerals in the Buffelsfontein tailings dams; and (iii) cede the
Buffelsfontein Tailings Mining Right, if granted, to FUSA. The recognition
of the BGM transaction will only take effect when the above stated
conditions precedent are met.
On December 20, 2006, FUSA, BGM and Simmer & Jack entered into an agreement
(the "Buffelsfontein Tailings and Rights Agreement") pursuant to which,
among other things:
(i) BGM agreed to take all necessary steps to obtain all ministerial
approvals required for the items requested in the Buffelsfontein Conversion
Application in order to effect the transfer of the Buffelsfontein Tailings
Mining Right to FUSA as soon as possible;
(ii) BGM agreed to sell to FUSA upon FUSA`s receipt of the
Buffelsfontein Tailings Mining Right, the Buffelsfontein tailings dams as
well as certain property required for construction of the proposed
processing plants, and grant to FUSA a right to the tailings arising from
BGM`s ongoing mining operations at its underground Buffelsfontein mine; and
(iii) BGM agreed to grant a servitude to FUSA for access and egress to
BGM`s property to enable FUSA, its employees, consultants, agents and
subcontractors access for purposes of constructing, servicing and operating
the uranium and gold processing plants and tailings pipelines to be built
by FUSA.
The underground mines that were purchased by Simmer & Jack pursuant to the
Buffelsfontein Liquidation Acquisition will not form part of First
Uranium`s assets at the Buffelsfontein Tailings Recovery Project.
The Corporation plans to acquire from BGM three additional tailings dams
(Harties - Flanagan, Harties - Ellaton and Harties - NKGE).
The Corporation, through its wholly-owned subsidiary FUSA, also acquired
Mine Waste Solutions (Proprietary) Limited ("MWS") and its subsidiary
Chemwes (Proprietary) Limited on April 1, 2007 ("the MWS Acquisition").
The MWS Acquisition closed on June 6, 2007, at which point First Uranium
assumed management control of MWS. For accounting purposes, any net income
from MWS operations for the period from April 1, 2007 to June 6, 2007 will
be applied to reduce the cost of the MWS Acquisition. MWS owns and
operates an existing gold mine tailings and re-processing facility adjacent
to First Uranium`s Buffelsfontein Tailings Recovery Project in South
Africa. See Note 18.
6 ASSET RETIREMENT FUND
2007 2006
US$`000 US$`000
Investment in Environmental Trust Fund
- Trust fund obtained on acquisition of mine 2,686 -
- Investment income 82 -
- Contributions in respect of guarantee 103 -
- Costs incurred (80) -
2,791 -
The environmental rehabilitation trust fund is under the Corporation`s
control and is to be used to fund the rehabilitation liabilities. Funds in
the trust consist of primarily cash held in interest bearing accounts,
together with investments in South African equities. An accredited South
African financial institution manages the trust funds under the direction
of the trustees. The trust deed limits trustees to make investments to
institutions and investment vehicles as referred to in section 37A of the
South African Income Tax Act.
7 GUARANTEES
The following guarantees have been issued:
Guarantee
value
To Regarding US$`000
DME Ezulwini environmental 5,162
rehabilitation provision
Murray and Robberts Ezulwini shaft rehabilitation 1,374
Cementation (Pty) Ltd project
Eskom Holdings Ltd Electricity accounts 1,168
The funds in the Ezulwini rehabilitation trust fund have been pledged as
security against the guarantees.
8 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
2007 2006
US$`000 US$`000
Trade payables 5,302 408
Accruals 400 379
5,702 787
9 ASSET RETIREMENT OBLIGATION
2007 2006
US$`000 US$`000
Provision taken over with acquisition of the 5,133 -
Ezulwini Mine
Accretion expense 244 -
Total obligation 5,377 -
The following are the key assumptions used during 2007:
2007 2006
US$`000 US$`000
Undiscounted and uninflated amount of estimated cash 23,206 -
flows
Currency payable ZAR -
Payable in years 19 -
Risk-free interest rate - South African rate 8% -
The environmental rehabilitation provision taken over by EMC as part of the
acquisition of the Ezulwini assets was determined by the DME as at November
2006. During March 2007 an independent review was performed by Johan
Fourie & Associates on the Ezulwini assets relating to environmental
rehabilitation provision.
An environmental rehabilitation trust fund (see Note 6) has been set up as
sinking funds for the purposes of funding the environmental rehabilitation
and closure costs. The trust deed prohibits use of the funds for any other
purpose. In addition, the Corporation raised financial guarantees with
Lombards Insurance in favour of the DME to top-up the difference between
the environmental rehabilitation trust fund and the environmental
rehabilitation provision (see Note 7). The fair value of the Ezulwini
Mine`s restricted assets at year end is US$29.0 million (2006: US$nil). See
Note 5.
10 SHARE CAPITAL
Number of shares Value of shares
2007 2006 2007 2006
Ordinary shares `000 `000 US$`000 US$`000
Opening balance of shares in 87,536 - 4,176 -
issue and share capital
Shares issued relating to share- - 938 - -
split
Shares issued in public or 33,350 86,598 201,795 4,176
private offering
Exercise of stock options 800 - 728 -
Contributed surplus relating to - - 27 -
stock options exercised
121,686 87,536 206,726 4,176
Less: Share issue costs - - (24,053) -
Closing balance of shares in 121,686 87,536 182,673 4,176
issue and share capital
Authorized
The authorized capital of First Uranium consists of an unlimited number of
common shares.
Issued and outstanding
In December 2005 and January 2006 First Uranium raised a total of US$4.2
million through the private placement issues of 4,875,000 shares at Cdn$1
per share. US$3 million of the capital raised was used to acquire the 20%
interest in FUSA. There were share issue costs of US$218,749 for the
period.
On June 1, 2006, 800,000 stock options were exercised for proceeds of
US$728,480.
As part of the First Uranium reorganization (the "Reorganization") and
initial public offering (the "Offering") in December 2006:
* the 5,675,001 issued and outstanding shares of First Uranium where
split resulting in an increase in the issued and outstanding shares to
6,613,394. This split was determined based on the initial public
offering issue price of Cdn$7 per share and the agreed valuation of
the assets, which was supported by a valuation assessment provided by
an independent valuator;
* First Uranium issued to Simmer & Jack 26,416,295 shares valued at
US$187,495,878 for 1,196 FUL shares relating to the 80% FUSA shares
previously owned by Simmer & Jack;
* First Uranium issued to Simmer & Jack 55,306,358 shares valued at
US$391,732,461 for 2,504 FUL shares relating to the 90% EMC shares
previously owned by Simmer & Jack;
* First Uranium issued 29 million shares to the public at Cdn$7 per
share for gross proceeds of US$175.5 million;
* First Uranium issued an additional 4.35 million shares at Cdn$7 per
share pursuant to the exercise of an over-allotment option granted for
gross proceeds of US$26.3 million.
Under the continuity of interests, the shares issued to Simmer & Jack for
EMC and FUSA are deemed to have always been outstanding.
The share issue costs include fees payable to Investec Bank Limited of
South Africa, in respect of various advisory and regulatory services
provided in connection with the Offering, as well as advisory fees payable
to a number of technical consultants.
11 CONTRIBUTED SURPLUS - STOCK-BASED COMPENSATION
The stock-option plan (the "Option Plan") is for employees, officers,
directors and consultants that provide ongoing support to First Uranium and
its subsidiaries. Under the Option Plan, options typically are granted for
a period of up to ten years following the date of grant. The amounts
granted usually reflect the level of responsibility of the particular
optionee and his or her contributions to First Uranium.
The Board of Directors has the complete discretion to set the terms of any
vesting schedule of each option granted. Except in specified circumstances,
options are not assignable and non-transferable, and terminate upon the
optionee ceasing to be employed or associated with First Uranium.
The terms of the Option Plan further provide that the price at which shares
may be issued under the Option Plan shall not be less than the volume
weighted average trading price of the shares on the TSX for the five
trading days immediately preceding the day the option is granted.
The following table details the movements of contributed surplus during the
year:
2007 2006
US$`000 US$`000
Balance, beginning of year 27 -
Transfer to share capital surplus relating to stock (27) -
options exercised
Stock options granted during the period 2,460 27
Balance, end of year 2,460 27
Assumptions
The fair value of shares used to calculate the compensation expense was
determined as the share price on the grant date adjusted by the probability
of the recipients remaining employed or associated with the Corporation
until the vesting date.
For purposes of stock-based compensation, the fair values of these stock
options were estimated using the Black-Scholes option pricing model with
the assumptions used for the grants as follows:
2007 2006
Expected dividend yield 0% 0%
Expected volatility of the Corporation`s 85% 0%
share price
Risk free interest rate - Canadian rates 3.9% 4.1%
Expected life 3 years 1 year
Due to the short history of First Uranium trading on the TSX, changes in
the subjective input assumptions can materially affect the fair value
estimate, and therefore, the existing model does not necessarily provide a
reliable measure of the fair value of First Uranium`s stock options.
During the 2006 year, 800,000 stock options were granted to directors,
officers, and consultants of First Uranium with an exercise price of
Cdn$1 per share. The options fully vested on the date of grant. On June 1,
2006, the total 800,000 stock options were exercised for proceeds of
US$728,480.
During the 2007 year, 1,223,001 stock options were granted for a period of
10 years following the date of the grant and are subject to vesting within
2 years from the date of grant.
The following table is a summary of the Corporation`s options granted under
its stock-based compensation plan:
Weighted average
Number of options exercise price
(Cdn$)
2007 2006 2007 2006
Outstanding options at beginning 800,000 - 1.00 -
of year
Granted during the year 1,223,001 800,000 7.30 1.00
Exercised during the year (800,000) - 1.00 -
Outstanding options at end of year 1,223,001 800,000 7.30 1.00
The stock-based compensation expense recognised in the statements of
expenditure and deficit is US$2,459,569 (2006: US$26,620). As at March 31,
2007, the aggregate unexpensed fair value of unvested stock options granted
amounted to US$2,858,354 (2006: US$nil).
The following table summarizes information about the First Uranium`s
outstanding stock options at March 31, 2007:
Options outstanding Options exercisable
Number Weighted Weighted Numbe Weighte Weighte
Exercise outstanding average average r d d
price at Mar 31, remaining exercise outst average average
ranges 2007 life price andin remaini exercis
Cdn$ (years) (Cdn$) g at ng life e price
Mar (years) (Cdn$)
31,
2007
7.00 to 1,127,144 9.73 7.04 339,051 9.73 7.04
8.99
9.00 to 95,857 9.93 10.37 31,952 9.93 10.37
11.99
1,223,001 9.74 7.30 371,003 9.74 7.33
12 FOREIGN EXCHANGE (LOSSES)/GAINS
2007 2006
US$`000 US$`000
Foreign exchange (losses)/gains (4,612) 29
The foreign exchange losses incurred in the year ending March 31, 2007, are
mainly the result of the foreign currency conversion of the net proceeds
from the Offering placed by the Corporation into a South African bank
account at year-end.
Pursuant to the terms of the approval granted by the South African Reserve
Bank ("SARB") of the Reorganization, the Corporation was required to
convert the net proceeds of the Offering into South African Rand and
transfer such amount to a South African bank account within 30 days from
the date of closing the Offering. Subsequent to the conversion of the
funds from the Offering into South African Rand, the South African Rand
weakened against the US dollar resulting in the foreign exchange loss at
year-end.
13 INCOME TAXES
Provision for income taxes
The reconciliation of income taxes attributable to operations computed at
the statutory tax rates to income tax recovery, using a statutory tax rate
of 36.12% is as follows:
2007 2006
US$`000 US$`000
Net loss/(income) before taxation 7,928 6,857
Income tax payable at statutory rate 2,864 2,477
Difference between Canadian rates and foreign (130) (2,304)
jurisdiction
Change in valuation allowance (3,536) (74)
Adjustment for future tax rate difference 612 -
Permanent differences 211 (99)
Normal taxation - current 21 -
Future income taxes
2007 2006
US$`000 US$`000
Non-capital loss carry-forwards 1,602 -
Share issue costs 6,629 46
Foreign resource expenses 1,099 -
Foreign exchange 850 95
10,180 141
Less: Valuation allowance (10,180) (141)
- -
As at March 31, 2007, the Corporation had non-capital losses of
approximately US$4.9 million that may be applied against earnings in future
years. These losses are expected to expire US$0.5 million in 2025 and
US$4.4 million in 2027.
The Corporation has provided a full valuation allowance against future tax
assets as at March 31, 2007 due to uncertainties in the Corporation`s
ability to utilize its net operating losses.
13 BASIC LOSS PER SHARE AND DILUTED LOSS PER SHARE
2007 2006
Basic and diluted loss per share of (US$) (0.08) (0.08)
is calculated based on net loss for the period of (7,928) (6,857)
(US$`000)
and a weighted average number of shares outstanding 97,522 84,172
of (`000)
For the years ended March 31, 2007 and 2006, the impact of outstanding
share options was excluded from the diluted share calculation because it
was anti-dilutive for earnings per share purposes.
15 NOTES TO THE CASH FLOW STATEMENT
15.1 (Increase)/decrease in net amounts receivable from related parties
2007 2006
US$`000 US$`000
Increase in amounts receivable from related (4,033) (2,730)
parties
(Decrease)/increase in amounts payable to (5,300) 5,300
related parties
Add back:
- Interest income accrued on amounts 583 -
receivable
- Interest expense accrued on amounts (1,130) -
payable
(9,880) 2,570
15.2 Non-cash interest income
2007 2006
US$`000 US$`000
Total interest income 3,433 -
Add back: Cash interest income (2,767) -
666 -
15.2 Additions to property, plant and equipment
2007 2006
US$`000 US$`000
Total additions to property, plant and equipment (30,968) -
Add back:
- Capitalized mining infrastructure 2,447 -
- Capitalized interest 969 -
- Accrued capital expenditure 3,282
(24,270) -
The capitalized mining infrastructure is the difference between the
environmental rehabilitation trust fund and the environmental
rehabilitation provision that were taken over from REL with the acquisition
of the Ezulwini assets. See Notes 5, 6 and 9.
16 CONTRACTUAL OBLIGATIONS
2007 2006
US$`000 US$`000
Capital commitments 14,836 -
Total contractual obligations 14,836 -
The capital commitments relate to capital expenditure on the Ezulwini Mine
and are payable within one year.
17 FINANCIAL INSTRUMENTS
Financial risk factors
The Corporation`s activities expose it to a variety of financial risks,
including the effects of changes in debt and equity market prices, foreign
currency exchange rates and interest rates. The Corporation`s overall risk
management program focuses on the unpredictability of financial markets and
seeks to minimize potential adverse effects on the financial performance of
the Corporation. The Corporation does not hedge its exposure to foreign
currency exchange risk.
Risk management carried out by the Corporation is approved by the Board of
Directors.
(i) Foreign exchange and commodity price risk
The Corporation does not hedge its exposure to foreign currency exchange
risk nor does it hedge its exposure to commodity price fluctuation risk.
(ii) Interest rate risk
The Corporation does not hedge its exposure to interest rate risk.
Deposits attract interest at rates that vary with prime. The Corporation`s
policy is to manage interest rate risk so that fluctuations in variable
rates do not have a material impact on the statement of operations and
deficit.
(iii) Credit risk
The Corporation has no significant concentrations of credit risk. The
Corporation has policies in place to ensure that sales of products and
services are made to customers with an appropriate credit history. The
Corporation has policies that limit the amount of credit exposure to any
one financial institution.
(iv) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities, the availability of funding through an adequate
amount of committed credit facilities and the ability to close out market
positions. The Corporation manages liquidity risk through an ongoing
review of future commitments and credit facilities. Cash flow forecasts
are prepared and adequate utilized borrowing facilities are monitored.
Fair value estimation
The fair value of publicly traded derivatives and trading securities is
based on quoted market prices at the balance sheet date.
In assessing the fair value of other financial instruments, the Corporation
uses a variety of methods and makes assumptions that are based on market
conditions existing at each balance sheet date. Option pricing models and
estimated discounted value of future cash flows, are used to determine fair
value for the remaining financial instruments.
The face value less any estimated credit adjustments for financial assets
and liabilities with a maturity of less than one year are assumed to
approximate their fair values. The fair value of financial liabilities for
disclosure purposes is estimated by discounting the future contractual cash
flows at the current market interest rate available to the Corporation for
similar financial instruments.
The actual disclosed values of the financial instruments all approximate
the fair values of these instruments.
18 SUBSEQUENT EVENTS
Mine Waste Solutions
The Corporation, through its wholly-owned subsidiary FUSA, acquired MWS and
its subsidiary Chemwes (Proprietary) Limited on June 6, 2007, with an April
1, 2007 effective date ("the MWS Acquisition") for the equivalent of ZAR200
million (approximately $27.5 million) to be satisfied in exchange for
3,093,980 First Uranium common shares. MWS owns and operates an existing
gold mine tailings and re-processing facility adjacent to First Uranium`s
Buffelsfontein Tailings Recovery Project in South Africa. The MWS
Acquisition closed on June 6, 2007, at which point First Uranium assumed
management control of MWS. For accounting purposes, any net income from
MWS operations for the period from April 1, 2007 to June 6, 2007 will be
applied to reduce the cost of the MWS Acquisition.
Convertible debentures
On May 3, 2007, First Uranium completed a private placement of Cdn$150
million aggregate principal amount of senior unsecured convertible
debentures (the "Debentures") due June 30, 2012. The Debentures bear
interest at a rate of 4.25% per annum payable semi-annually and are
convertible into common shares of the Corporation at Cdn$16.42 per share.
The Corporation may redeem all or a portion of the Debentures for cash at
any time on or after June 30, 2010 at a redemption price equal to the
principal amount of the Debentures plus accrued and unpaid interest
provided that the weighted average trading price of the common shares of
the Corporation on the TSX for the 20 consecutive days prior to the notice
of redemption is 130% of the conversion price.
The Corporation at its option, and subject to regulatory approval, may
satisfy its obligations to repay the Debentures upon redemption or maturity
by issuing freely tradeable common shares at a price per share equal to 95%
of the weighted average trading price of the common shares of the
Corporation on the TSX for the 20 consecutive days ending five trading days
before the date fixed for redemption or maturity, as the case may be.
Holders of the Debentures may require the Corporation to repurchase the
Debentures if there is an acquisition of voting control or direction of at
least 50.1% of the aggregate voting rights attached to the common shares
outstanding at the relevant time by any person or group of persons acting
jointly or in concert at par plus accrued and unpaid dividends. If such an
event occurs and it results from a transaction in respect of which the
consideration for the common shares is or can be received partially in
cash, holders of the Debentures may, prior to completion of the offer to
purchase for all Debentures, elect to convert their Debentures and receive,
in addition to the number of common shares they otherwise would have been
entitled to receive on conversion, an additional number of common shares
which will vary depending upon the effective date and the share price.
The proceeds from the sale of the Debentures, net of underwriters` fees and
other expenses of $136.6 million, are held in Canadian dollars. The
approval of the SARB to the sale of the Debentures included a condition
that the Corporation transfer the Debentures net proceeds and convert the
funds to South African Rand by May 3, 2008.
19 RELATED PARTY TRANSACTIONS AND COMMITMENTS
2007 2006
Related party balances US$`000 US$`000
FUSA receivable from Simmer & Jack 5,079 2,730
First Uranium advance to Simmer & Jack 1,684 -
EMC payable to Simmer & Jack - (5,300)
6,763 (2,570)
Related party transactions
Management fees paid to Simmer & Jack (2,639) (798)
Fees paid to empowerment company (53) -
Interest paid to Simmer & Jack by EMC (1,130) -
Interest received from Simmer & Jack by FUSA 583 -
Prior to December 2006, the Corporation shared its premises with other
companies, including Simmer & Jack, which had common management and
directors and reimbursed the related companies for its proportional share
of expenses or was reimbursed by the related companies for their
proportional expenses. During the year ended March 31, 2007, the
Corporation was charged $575,665 (2006: $368,599) for consulting services
provided by related directors, officers and consultants of the Corporation.
The inter-company receivable between Simmer & Jack and FUSA and payable
between Simmer & Jack and EMC bears interest at South African prime rate.
The inter-company advance to Simmer & Jack by FUC bears no interest. All
the inter-company receivables, payables and advances are due by June 30,
2007.
Subsequent to the Reorganization and the Offering in December 2006, Simmer
& Jack had a 67.2% shareholding in First Uranium. Prior to the
Reorganization, Simmer & Jack held directly 70% in FUSA and 90% in EMC.
On December 20, 2006 First Uranium and Simmer & Jack entered into a
corporate opportunity agreement (the "Corporate Opportunity Agreement"), a
maintenance agreement (the "Maintenance Agreement") and a shared services
agreement (the "Shared Services Agreement").
Pursuant to the terms of the Shared Services Agreement, First Uranium may
retain certain services to be provided by Simmer & Jack, including project
management and technical services, cash management and investment services,
accounting, treasury and financial services, corporate secretarial services
and human resources and staffing services, including payroll and benefits
administration, and such other services as may be required by First Uranium
and which Simmer & Jack is able and willing to provide. The 2007 expense
relates to such services received, together with those provided prior to
December 2006. Fees paid to Simmer & Jack in the amount of $2 million were
capitalized in 2007, representing services provided in respect of technical
services for the Ezulwini Mine and the Buffelsfontein Tailings Recovery
Project.
In addition, First Uranium has agreed to reimburse Simmer & Jack with
respect to 50% of fees (to a maximum of ZAR125,000 per month) that Simmer &
Jack is required to pay to an empowerment company for consulting services
regarding transformation, human resources and occupational health and
safety. BJ Njenje, AX Sisulu and SLB Mapisa, shareholders of the
empowerment company, are also directors of Simmer & Jack.
Waterpan Mining Consortium ("Waterpan") currently holds a 10% shareholding
in EMC. On December 20, 2006, Waterpan, FUL and the Corporation entered
into a purchase agreement (the "Waterpan Purchase Agreement") pursuant to
which Waterpan agreed to sell its shares in EMC to FUL and as consideration
for such sale, First Uranium will issue 6,141,009 common shares of First
Uranium to Waterpan (the "Waterpan Shares"). The closing of the
transaction is subject to approval of the South African Reserve Bank.
Pursuant to the Waterpan Purchase Agreement, Waterpan has agreed not to
sell or transfer 90% of the Waterpan Shares for a period of two years from
the date of issuance and 100% of the Waterpan shares will be subject to a
lock-up until June 18, 2007. One shareholder of Waterpan is a director of
EMC, two other shareholders of Waterpan are officers and/or employees of
First Uranium and EMC.
20 SEGMENTED INFORMATION
Segmented information is presented in respect of the Corporation`s business
and geographical segments. The primary format business segments, is based
on the Corporation`s management and internal reporting structure.
Inter-segment reporting is determined on an arm`s length basis.
Segment results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly income earning assets and revenue,
interest-bearing loans, borrowing and expenses, and corporate assets and
expenses. Segment capital expenditure is the total cost incurred during
the period to acquire segment assets that are expected to be used for more
than one period.
South Africa Canada
Ezulwini Buffelsfontein
Mine Tailings
Recovery
Project Corporate Total
For the year ended US$`000 US$`000 US$`000 US$`000
March 31, 2007
Expenditure
Consulting and 287 709 1,228 2,224
management fees
General and 374 - 650 1,024
administrative
expenditure
Stock-based - - 2,460 2,460
compensation
Pumping and feasibility 844 - - 844
costs
Amortization 14 - - 14
Operating loss (1,519) (709) (4,338) (6,566)
Interest income 98 583 2,752 3,433
Interest expense (162) - - (162)
Foreign exchange 1,072 (993) (4,691) (4,612)
gains/(losses)
Loss before income (511) (1,119) (6,277) (7,907)
taxes
Provision for income (21) - - (21)
taxes
Net loss for the year (532) (1,119) (6,277) (7,928)
Total assets 33,953 6,051 141,423 181,427
Total liabilities (9,718) (238) (1,123) (11,079)
Capital expenditure (23,656) (579) (35) (24,270)
South Africa Canada
Ezulwini Buffelsfontein Total
Mine Tailings
Recovery
Project Corporate
For the year ended US$`000 US$`000 US$`000 US$`000
March 31, 2006
Expenditure
Consulting and 544 260 690 1,494
management fees
General and - - 261 261
administrative
expenditure
Stock-based - - 27 27
compensation
Pumping and feasibility 4,987 117 - 5,104
costs
Operating loss (5,531) (377) (978) (6,886)
Foreign exchange (54) 81 2 29
gains/(losses)
Loss before income (5,585) (296) (976) (6,857)
taxes
Provision for income - - - -
taxes
Net loss for the year (5,585) (296) (976) (6,857)
Total assets 132 2,730 571 3,433
Total liabilities (5,717) (1) (369) (6,087)
Capital expenditure - - - -
Date: 14/06/2007 17:57:19 Produced by the JSE SENS Department.
