| Mon 13 Aug 2007, 13:58 | | FUM - First Uranium - Consolidated unaudited finan |
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FUM
FIU
FUM - First Uranium - Consolidated unaudited financial statements for the three
months ended June 30, 2007 and June 30, 2006
First Uranium Corporation
(Continued under the laws of British Columbia, Canada)
(Registration number C0777384)
(South African registration number 2007/009016/10)
ISIN: CA33744R1029
Share code: FUM
("First Uranium")
CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30,
2007 AND JUNE 30, 2006
The interim consolidated financial statements contained herein have not been
reviewed or audited by the Corporation`s independent auditors.
First Uranium Corporation
Consolidated Balance Sheet (unaudited)
(in United States Dollars)
As at As at
June 30, March
31,
2007 2007
Notes US$`000 US$`000
ASSETS
Current assets
Cash and cash equivalents 275,234 138,914
Accounts receivable 5 3,772 1,713
Inventories 6 1,345 292
Amount receivable from related party 21 890 6,763
281,241 147,682
Non-current assets
Property, plant and equipment 7 87,433 30,954
Asset retirement funds 8 4,875 2,791
92,308 33,745
Total assets 373,549 181,427
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 10 9,350 5,702
Current portion of lease obligations 11 13 -
Amount payable to related party 21 156 -
9,519 5,702
Non-current liabilities
Senior unsecured convertible debentures 12 89,266 -
Asset retirement obligations 13 9,011 5,377
Lease obligations 11 15 -
Future tax liability 4 11,089 -
109,381 5,377
SHAREHOLDERS` EQUITY
Share capital 14 214,230 182,673
Contributed surplus 15 3,230 2,460
Equity portion of senior unsecured convertible 12 46,503 -
debentures
Accumulated deficit (9,314) (14,785)
Accumulated other comprehensive income 3 - -
254,649 170,348
Total equity and liabilities 373,549 181,427
See accompanying notes to the Consolidated Financial Statements
First Uranium Corporation
Consolidated Statement of Operations and Deficit and Other Comprehensive Income
(unaudited)
(in United Stated Dollars)
For the For the
three three
months months
to to
June 30, June 30,
2007 2006
Notes US$`000 US$`000
Revenue 2,183 -
Cost of sales (2,255) -
Loss from mining operations (72) -
Expenditures (3,220) (2,910)
General, consulting and administrative 21 2,075 1,373
expenditures
Stock-based compensation 15 770 -
Pumping and feasibility costs 347 1,537
Amortization of property, plant and equipment 7 28 -
Operating loss (3,292) (2,910)
Interest income 21 4,366 70
Interest expense 21 (957) (144)
Accretion expense on convertible debentures 12 (1,071) -
Foreign exchange gains 16 6,425 746
Net income (loss) before income taxes 5,471 (2,238)
Provision for income taxes - -
Net income (loss) for the period 5,471 (2,238)
Accumulated deficit at the beginning of the period (14,785) (6,857)
Accumulated deficit at the end of the period (9,314) (9,095)
Basic and diluted earnings (loss) per common share 17 0.04 (0.03)
(US$)
Net income (loss) 5,471 (2,238)
Adjustments - -
Comprehensive income (loss) 3 5,471 (2,238)
See accompanying notes to the Consolidated Financial Statements
First Uranium Corporation
Consolidated Statement of Cash Flows (unaudited)
(in United Stated Dollars)
For the For the
three three
months months
to to
June 30, June 30,
2007 2006
Notes US$`000 US$`000
Net income (loss) for the period 5,471 (2,238)
Changes not affecting cash:
- Interest income 18.1 (197) (70)
- Interest expense - 144
- Accretion expense on convertible debentures 1,071 -
- Amortization on property, plant and equipment 327 -
- Contributions to asset retirement funds 105 -
- Stock-based compensation 15 770 -
Net income (loss) after interest and non-cash 7,547 (2,164)
items
Movement in working capital:
- Increase in inventories 355 -
- Increase in accounts receivable (813) (40)
- (Increase)/decrease in net amounts receivable 18.2 6,086 2,245
from related parties
- Decrease in accounts payable and accrued (3,091) 471
liabilities
Cash flows from operating activities 10,084 512
Additions to property, plant and equipment 18.3 (9,812) (590)
Net cash movement on acquisition of MWS 18.4 1,310 -
Cash flows from investing activities (8,502) (590)
Issuance of senior unsecured convertible 12 130,561 -
debentures (net of issue costs)
Proceeds from shares issuance (net of issue costs) 14 - 728
Cash flows from financing activities 130,561 728
Net effect of exchange rate changes on cash held 4,177 -
in foreign currencies
Net increase in cash and cash equivalents for the 136,320 650
period
Cash and cash equivalents at beginning of the 138,914 560
period
Cash and cash equivalents at end of the period 275,234 1,210
See accompanying notes to the Consolidated Financial Statements
First Uranium Corporation
Notes to the Consolidated Financial Statements (unaudited)
June 30, 2007
1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
First Uranium Corporation ("First Uranium" or "the Corporation") is a
Canadian corporation with a primary listing on the Toronto Stock Exchange
("TSX") and a secondary listing on the JSE Limited ("JSE"). First Uranium
is a resource company focused on the development of uranium and gold
projects in southern Africa and beyond, see Note 7 "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"). During the quarter, First Uranium, through
FUSA, acquired all the issued and outstanding shares of Mine Waste
Solutions (Proprietary) Limited and its subsidiary, Chemwes (Proprietary)
Limited (collectively "MWS"), see Note 4 "Business Acquisitions". As at
June 30, 2007, Simmer and Jack Mines, Limited ("Simmer & Jack") owned 65.5%
of First Uranium`s common shares.
2 SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim consolidated financial statements have been prepared
by First Uranium in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). The preparation of the unaudited interim
consolidated financial statements is based on the same accounting policies
and practices as those disclosed in note 1 "Nature of operations" and note
2 "Significant accounting policies" to the Corporation`s audited
consolidated financial statements for the year ended March 31, 2007, except
for changes as described below and in note 3 "Changes in accounting
policies".
The unaudited interim consolidated financial statements should be read in
conjunction with the Corporation`s audited consolidated financial
statements for the year ended March 31, 2007.
2.1 Goodwill
Goodwill represents the excess purchase price over the fair value of
identifiable assets and liabilities acquired in business combinations.
Goodwill is not amortized but is assessed for impairment annually, or more
frequently as events occur that may indicate impairment. Impairment is
assessed by comparing the fair value of each reporting unit to the book
value of the reporting unit. If the fair value of the reporting unit is
less than the book value then impairment of goodwill is measured by
deducting the fair value of the reporting unit`s individual assets and
liabilities from the fair value of the reporting unit to determine the
implied fair value of goodwill. This is compared to the amount of the book
value of the reporting unit`s goodwill. Any excess of the book value of
goodwill over the implied fair value of goodwill is the impairment amount.
2.2 Financial instruments
Transaction costs for financial assets and liabilities
For a financial asset or financial liability classified other than as held
for trading, the Corporation has added the transaction costs that are
directly attributable to the acquisition or issue of a financial asset or
financial liability to the fair value of the asset or liability established
at the recognition of the asset or liability.
2.3 Revenue recognition
Revenue from sales is recognized when significant risks and rewards of
title and ownership of the goods are transferred upon delivery to the final
refiner.
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.
2.4 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 period. 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 period greater than their exercise price are exercised
and the proceeds used to repurchase common shares. In applying the treasury
stock method, options with an exercise price greater than the average
quoted market price of the common shares are not included in the
calculation of diluted earnings per share, as the effect is anti-dilutive.
3 CHANGES IN ACCOUNTING POLICIES
Effective April 1, 2007, the Corporation adopted two new accounting
standards that were issued by the Canadian Institute of Chartered
Accountants ("CICA"):
Handbook Section 1530 - Comprehensive Income
Handbook Section 3855 - Financial Instruments - Recognition and Measurement
As provided under the standards, the comparative interim consolidated
financial statements have not been restated, but any transitional effects
have been recorded as an adjustment to deficit as at April 1, 2007.
Section 1530 - Comprehensive income
This section describes the reporting and disclosure standards with respect
to comprehensive income and its components. Comprehensive income is
composed of net income and other comprehensive income. The components of
comprehensive income are disclosed in the consolidated statement of
comprehensive income. The Corporation`s had no other comprehensive income
during the period ending June 30, 2007.
Section 3855 - Financial instruments - recognition and measurement
This section establishes standards for recognizing and measuring financial
assets, financial liabilities and non-financial derivatives. It requires
that financial assets and liabilities including derivatives be recognized
on the balance sheet when the Corporation becomes a party to the
contractual provisions of the financial instrument or a non-financial
derivative contract. All financial instruments should be measured at fair
value on initial recognition except for certain related party transactions.
Fair value is the amount at which an item could be exchanged between
willing parties. Measurement in subsequent periods depends on whether the
financial instruments have been classified as held for trading, available-
for-sale, held-to-maturity, loans and receivables, or other liabilities.
The Corporation designated certain financial assets and liabilities and
adopted the following new accounting policies:
Cash and cash equivalents
Cash and cash equivalents are classified as "assets available-for-sale" and
are measured at fair value at each balance sheet date. Any changes in fair
value are recognized in net income in the period in which the change arise.
Fair value is calculated using published price quotations in an active
market, where applicable. The carrying values for cash and cash equivalents
at March 31 2007 approximated their fair values because of their short
terms of maturity; no adjustments were made to the opening values.
Accounts receivable and amount receivable from related party
These assets are classified as "loans and receivables" and are recorded at
amortized cost, which upon its initial measurement is equal to its fair
value. Subsequent measurements are recorded at amortized cost using the
effective interest rate method. The carrying values for these assets at
March 31 2007 approximated their fair values because of their short terms
of maturity; no adjustments were made to the opening values.
Asset retirement fund
The asset retirement funds are classified as "assets available-for-sale"
and are measured at fair value at each balance sheet date. Any changes in
fair value are recognized in net income in the period in which the change
arises. Fair value is calculated using the quoted prices of South African
equities in an active market, with interest and dividends recognized in net
income; unrealized gains or losses are recognized in Other Comprehensive
Income. Any equities without market quotes are carried using the cost
method. The carrying values for the asset retirement funds at March 31 2007
approximated their fair values; no adjustments were made to the opening
values.
Accounts payable and accrued liabilities and amount payable to related
party
These liabilities are classified as "other financial liabilities" and are
initially measured at their fair values. Subsequent measurements are
recorded at amortized cost using the effective interest rate method. The
carrying values for these liabilities at March 31 2007 approximated their
fair values; no adjustments were made to the opening values.
Senior unsecured convertible debentures
The sum of the carrying amounts assigned to the liability and equity
components of the convertible debenture on initial recognition is always
equal to the carrying amount that would be ascribed to the instrument as a
whole. No gain or loss arises from recognizing and presenting the
components of the instrument separately. The relative fair value method is
used to determine the value of the option directly either by reference to
the fair value of a similar option, if one exists, or by using an option
pricing model. The value determined for each component is then adjusted on
a pro rata basis to the extent necessary to ensure that the sum of the
carrying amounts assigned to the components equals the amount of the
consideration received for the convertible debenture.
4 BUSINESS ACQUISITION
Acquisition of Mine Waste Solutions (Proprietary) Limited
First Uranium, through its wholly-owned subsidiary FUSA, acquired all of
the issued and outstanding shares of MWS. 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 (effective date of acquisition),
at which point First Uranium assumed management control of MWS. For
accounting purposes, net income from MWS operations of $2,100,772 for the
period from April 1, 2007 to June 6, 2007 has been applied to reduce the
cost of the MWS acquisition.
A total consideration of US$32,201,377 was paid for the MWS acquisition in
the form of an issuance of 3,093,980 First Uranium common shares valued at
US$31,557,061 and US$644,316 in cash for transaction costs.
The table below sets out the preliminary allocation of the purchase price
to the assets acquired and liabilities assumed, based on preliminary
estimates of fair value. Final valuations of the assets and liabilities
listed below have not been completed. The future income tax assets and
liabilities are not yet complete due to the inherent complexity associated
with these valuations. The purchase price allocation is only preliminary
and is subject to adjustments.
The acquisition was accounted for by the purchase method of accounting and
the estimated allocation of fair value to the assets acquired and
liabilities assumed as at June 6, 2007 was:
US$`000
Current assets 4,608
Property, plant and equipment 41,729
Asset retirement fund 1,950
Total assets acquired 48,287
Current liabilities 1,476
Asset retirement obligation 3,493
Lease obligations 28
Future tax liability 11,089
Total liabilities assumed 16,086
Net assets acquired 32,201
Current assets include cash and cash equivalents of US$1,309,519 (net of
transaction costs) (see Note 18.4).
Although the estimated allocation of fair value to the assets acquired and
liabilities assumed is subject to changes as additional information becomes
available, the final allocation is not expected to differ materially from
the estimated allocation.
The goodwill was assigned to the MWS operating unit.
5 ACCOUNTS RECEIVABLE
June 30, March 31,
2007 2007
US$`000 US$`000
Trade receivables 273 99
Value Added Tax and Goods and Services Tax 3,347 1,463
Prepayments and advances 142 144
Deposits and guarantees 10 7
3,772 1,713
6 INVENTORIES
June 30, March 31,
2007 2007
US$`000 US$`000
Spares and consumables 694 292
Gold work-in-progress 651 -
1,345 292
7 PROPERTY, PLANT AND EQUIPMENT
Accumulated Net
Cost amortization carrying
June 30, 2007 US$`000 US$`000 amount
US$`000
Land and buildings 863 - 863
Mine infrastructure 6,982 - 6,982
Mining assets 26,612 - 26,612
Tailings for processing 24,228 24,228
Mining rights 13 - 13
Plant and equipment 28,591 (294) 28,297
Motor vehicles 202 (18) 184
Office furniture and equipment 66 (4) 62
Computer equipment and software 216 (24) 192
Total 87,773 (340) 87,433
Accumulated Net
Cost amortization carrying
March 31, 2007 US$`000 US$`000 amount
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 30,968 (14) 30,954
Included in the above are mining related assets with a net carrying value
of US$44.6 million (March 31, 2007: US$29.0 million) related to the
Ezulwini Mine and US$39.3 million (March 31, 2007: US$0.8 million) related
to the Buffelsfontein Tailings Recovery Project.
As at June 30, 2007, all property, plant and equipment were owned by the
Corporation, except for motor vehicles with a net carrying value of
US$21,217 which are held under lease contracts.
As at March 31, 2007, all property, plant and equipment were owned by the
Corporation.
Ezulwini Mine
The Ezulwini Mine involves the re-commissioning 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.
The development of the Ezulwini Mine includes 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 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 8 - Asset
retirement funds) was transferred into the Ezulwini trust fund and EMC took
over the related environmental rehabilitation provision of US$5.1 million
(see Note 13 - Asset retirement obligation) as determined by the South
African Department of Minerals and Energy (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.
On December 8, 2006 the Ezulwini mining right was awarded 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 approvals in order to
effect the transfer of the Ezulwini mining right from Simmer & Jack to EMC.
The Ezulwini Mine shaft stabilization is expected to be completed by
September 2007. The Corporation expects to commence hoisting ore in October
2007, with the first gold plant module scheduled for completion in April
2008 (accelerating the previously disclosed planned dates for production by
three months) and the first uranium plant module scheduled for completion
in June 2008. The Corporation is in discussions with third parties to toll
treat the ore prior to the commissioning of the gold plant.
The Corporation is commencing the development to access the shaft destress
cut and have accessed most of the Upper Elsburg horizon.
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. Hydraulic mining of the tailings dams on the Buffelsfontein property
will be conducted using high pressure water cannons to slurry the tailings
which will then be pumped to processing plants for the recovery of uranium
and gold. Following the MWS acquisition (see Note 4), First Uranium will
conduct hydraulic mining of two tailings dams on the MWS property. The
Corporation will construct a pipeline between the MWS property and the
Buffelsfontein property and expand the plant facilities on the MWS
property.
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 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 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 MWS, a wholly-owned subsidiary of 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.
8 ASSET RETIREMENT FUNDS
June 30, March 31,
2007 2007
US$`000 US$`000
Opening balance 2,791 -
Trust fund obtained on acquisition of Ezulwini mine - 2,686
Trust fund obtained on acquisition of MWS (see Note 1,950 -
4)
Investment income 140 82
Contributions in respect of guarantee - 103
Costs incurred (105) (80)
Foreign exchange differences 99 -
Closing balance 4,875 2,791
The asset retirement funds consisting of environmental rehabilitation trust
funds are under the Corporation`s control and are to be used to fund the
respective mining operation`s rehabilitation liabilities. Funds in the
trust consist of primarily cash held in interest bearing accounts, together
with investments in South African equities. An accredited South African
financial institution manages the trust funds under the direction of the
trustees. The trust deed limits the trustees` investments to institutions
and investment vehicles as referred to in section 37A of the South African
Income Tax Act.
9 GUARANTEES
The following guarantees have been issued:
Guarantee
value
To Regarding US$`000
DME Ezulwini environmental 5,309
rehabilitation provision
Murray and Roberts Ezulwini shaft rehabilitation 1,413
Cementation (Pty) Ltd project
Eskom Holdings Ltd Electricity accounts 1,201
The Ezulwini rehabilitation trust funds included in the asset retirement
funds (see Note 8) have been pledged as security against the guarantees.
10 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
June 30, March 31,
2007 2007
US$`000 US$`000
Trade payables 8,404 5,302
Accruals 946 400
9,350 5,702
The trade payables primarily relate to committed purchases for capital
expansion at the Ezulwini Mine and the Buffelsfontein Tailings Recovery
Project.
11 LEASE OBLIGATIONS
June 30, March 31,
2007 2007
US$`000 US$`000
Present value of finance lease obligations payable 13 -
within 1 year
- Minimum lease payments 16 -
- Finance charges (3) -
Present value of finance lease obligations payable 15 -
within 2 to 5 years
- Minimum lease payments 16 -
- Finance charges (1) -
Payable in: 28 -
2007 5 -
2008 23 -
Total debt 28 -
Current portion of lease obligations 13 -
Non-current portion of lease obligations 15 -
Finance leases were obtained for the purchase of motor vehicles. The
average monthly instalments payable are US$1,618 and interest is charged at
the South African prime rate minus 1%.
12 SENIOR UNSECURED CONVERTIBLE DEBENTURES
On May 3, 2007 First Uranium issued senior unsecured convertible debentures
(the "Debentures") in denominations of Cdn $1,000 in the principal amount
of US$135,060,000 (Cdn$150,000,000). The interest rate on the Debentures is
4.25% per annum. The Debentures pay interest semi-annually in arrears on
June 30th and December 31st and have a maturity date of June 30, 2012. The
Debentures are convertible at the option of the holder into common shares
at any time prior to the maturity date at an exchange price of Cdn$16.42
per share.
The Debentures may not be redeemed by the Corporation prior to June 30,
2010. On or after June 30, 2010 and prior to the maturity date, the
Debentures may be redeemed by the Corporation, in whole or in part from
time to time, provided that the weighted average trading price of the
Common Shares on the TSX for the 20 consecutive trading days ending five
trading days prior to the date on which notice of redemption is provided is
at least 130% of the exchange price of Cdn$16.42.
First Uranium has the option, subject to regulatory approval, to satisfy
its obligations to repay the principal amount of the Debentures upon
redemption or at maturity by issuing and delivering that number of freely
tradable Common Shares obtained by dividing the principal amount of the
Debentures by 95% of the weighted average trading price of the Common
Shares on the TSX for the twenty consecutive trading days ending five
trading days before the date fixed for the redemption or maturity.
The equity component of the Debentures was valued on issuance at
US$46,503,825 which is recorded as a separate component of shareholders`
equity. The conversion option was valued using the Black-Scholes pricing
model with the following assumptions: Expected dividend yield 0%, expected
volatility 56%, risk free interest rate 4.2% and expected life of five
years.
The liability component of the Debentures is being accreted such that the
liability at maturity will equal the gross proceeds of US$135,060,000
(Cdn$150,000,000) less conversions. The amount accreted in the quarter
ended June 30, 2007 was US$1,070,402. The cost of issuing the Debentures
amounted to US$4,498,778.
As at June 30, 2007, no portion of the Debenture had been converted.
Interest paid on the Debentures for the period ended June 30, 2007 amounted
to US$956,679.
13 ASSET RETIREMENT OBLIGATIONS
June 30, March 31,
2007 2007
US$`000 US$`000
Opening balance 5,377 -
Provision taken over with acquisition of the - 5,133
Ezulwini Mine
Provision taken over with acquisition of MWS (see 3,500 -
Note 4)
Accretion expense - 244
Foreign exchange differences 134 -
Total obligation 9,011 5,377
The environmental rehabilitation provision taken over by EMC as part of the
acquisition of the Ezulwini assets was determined by the DME as at November
2006. During March 2007 an independent review was performed by Johan Fourie
& Associates on the Ezulwini assets relating to environmental
rehabilitation provision.
The environmental rehabilitation provision taken over as part of the MWS
acquisition is to be partly funded by its rehabilitation trust fund
(see Note 8). The balance of the provision is in respect of post cessation
of operations expenditure and will be financed out of the proceeds from the
sale of plant and equipment following cessation of the respective
operations.
14 SHARE CAPITAL
Number of shares
June 30, March 31, June 30, March 31,
2007 2007 2007 2007
Ordinary shares `000 `000 US$`000 US$`000
Balance, beginning of period 121,686 87,536 206,726 4,176
Shares issued in public or - 33,350 - 201,795
private offering
Shares issued in respect of 3,094 - 31,557 -
acquisition (see Note 4)
Exercise of stock options - 800 - 728
Contributed surplus relating - - - 27
to stock options exercised
124,780 121,686 238,283 206,726
Less: Share issue costs - - (24,053) (24,053)
Balance, closing of period 124,780 121,686 214,230 182,673
Authorized
The authorized share capital of First Uranium consists of an unlimited
number of common shares.
Issued and outstanding
In December 2005 and January 2006 First Uranium raised 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.
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 33.35 million shares to the public at Cdn$7 per
share for gross proceeds of US$201.8 million;
Under continuity of interest, the shares issued to Simmer & Jack for EMC
and FUSA are deemed to have always been outstanding.
On June 6, 2007, First Uranium issued 3,093,980 shares valued at
US$31,557,061 relating to the acquisition of MWS (see Note 4).
15 CONTRIBUTED SURPLUS - STOCK-BASED COMPENSATION
The stock-option plan (the "Option Plan") for employees, officers,
directors and certain consultants provides ongoing support to First Uranium
and its subsidiaries. Under the Option Plan, options typically are granted
for a period of up to ten years following the date of grant. The amounts
granted usually reflect the level of responsibility of the particular
optionee and his or her contributions to First Uranium.
The Board of Directors has the discretion to set the terms of any vesting
schedule of each option granted. Except in specified circumstances, options
are not assignable and non-transferable, and terminate 90 days after the
optionee ceases to be employed or associated with First Uranium.
The terms of the Option Plan further provide that the price at which shares
may be issued under the Option Plan shall not be less than the volume
weighted average trading price of the shares on the TSX for the five
trading days immediately preceding the day the option is granted.
The following table details the movements of contributed surplus during the
period:
June 30, March 31,
2007 2007
US$`000 US$`000
Balance, beginning of period 2,460 27
Transfer to share capital surplus relating to stock - (27)
options exercised
Stock options granted during the period 770 2,460
Balance, end of period 3,230 2,460
Assumptions
The fair value of shares used to calculate the compensation expense was
determined as the share price on the grant date adjusted by the probability
of the recipients remaining employed or associated with the Corporation
until the vesting date.
For purposes of stock-based compensation, the fair values of these stock
options were estimated using the Black-Scholes option pricing model with
the assumptions used for the grants as follows:
June 30, March 31,
2007 2007
Expected dividend yield 0% 0%
Expected volatility of the Corporation`s 56% 85%
share price
Risk free interest rate - Canadian rates 4.81% 3.9%
Expected life 3 years 3 years
Due to the short history of First Uranium trading on the TSX, changes in
the subjective input assumptions can materially affect the fair value
estimate, and therefore, the existing model does not necessarily provide a
reliable measure of the fair value of First Uranium`s stock options.
During the 2007 fiscal year, 1,223,001 stock options were granted for a
period of 10 years following the date of the grant and are subject to
vesting within 2 years from the date of grant.
During the quarter ending June 30, 2007, 60,000 stock options were granted
for a period of 10 years following the date of the grant and are subject to
vesting within 2 years from the date of grant.
The following table is a summary of the Corporation`s options granted under
its stock-based compensation plan:
Weighted average
Number of options exercise price (Cdn$)
June 30, March 31, June 30, March 31,
2007 2007 2007 2007
Outstanding options at 1,223,001 800,000 7.30 1.00
beginning of period
Granted during the period 60,000 1,223,001 12.87 7.30
Exercised during the period - (800,000) - (1.00)
Outstanding options at end of 1,283,001 1,223,001 7.56 7.30
period
The stock-based compensation expense recognized in the statements of
operations and deficit is US$770,094 for the quarter (June 30, 2006:
US$nil). As at June 30, 2007, the aggregate unexpensed fair value of
unvested stock options granted amounted to US$2,366,912 (March 31, 2007:
US$2,858,354).
The following table summarizes information about the First Uranium`s
outstanding stock options at June 30, 2007:
Options outstanding Options exercisable
Number Weighted Weighted Number Weighted Weighted
Exercise outstanding average average outstanding average average
price at June 30, remaining exercise at June 30, remaining exercise
ranges 2007 life price 2007 life price
Cdn$ (years) (Cdn$) (years) (Cdn$)
7.00 to 1,127,144 9.48 7.04 339,051 9.48 7.04
8.99
9.00 to 95,857 9.68 10.37 31,952 9.68 10.37
11.99
12.00 to 60,000 9.91 12.87 20,000 9.91 12.87
13.99
1,283,001 9.51 7.56 391,003 9.51 7.61
16 FOREIGN EXCHANGE GAINS
June 30, June 30,
2007 2006
US$`000 US$`000
Foreign exchange gains 6,425 746
The foreign exchange gains of $6.4 million during the three months ending
June 30, 2007 are the combined result of the fact that the Corporation
reports in US dollars, while the majority of its cash funds are held in
Canadian dollar ("Cdn$") and in South African rand ("ZAR"), each of which
have strengthened against the US dollar ("US$") during the quarter ending
June 30, 2007. The increase in value of the Canadian dollar versus the US
dollar during the quarter ending June 30, 2007 was partially offset by the
Corporation having Canadian dollar denominated debt with the issue of the
Debentures.
The net proceeds from the Offering were held in South African rand during
the quarter ending June 30, 2007. At the beginning of the quarter the
US$/ZAR exchange rate was 7.305, while at the end of the quarter the
US$/ZAR exchange rate was 7.076.
On May 3, 2007, when First Uranium received the net proceeds from the issue
of the Debentures (the majority of the Corporation`s Canadian funds held
during the quarter ending June 30, 2007), the Cdn$/US$ exchange rate was
0.900. At June 30, 2007, the Cdn$/US$ exchange rate was 0.944.
17 BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
June 30, June 30,
2007 2006
Basic earnings (loss) per share of (US$) 0.04 (0.03)
is calculated based on net income (loss) for the 5,471 (2,238)
period of (US$`000)
and a weighted average number of shares outstanding 122,502 87,602
of (`000)
Diluted earnings (loss) per share of (US$) 0.04 (0.03)
is calculated based on net income (loss) for the 5,471 (2,238)
period of (US$`000)
and a diluted weighted average number of shares 122,989 87,602
outstanding of (`000)
The impact of the debentures issued on May 3, 2007, has been excluded from
the diluted shares computation because it was anti-dilutive for earnings
per share purposes.
18 NOTES TO THE CASH FLOW STATEMENT
18.1 Non-cash interest income
June 30, June 30,
2007 2006
US$`000 US$`000
Total interest income (4,366) (70)
Add back: Cash interest income 4,169 -
(197) (70)
18.2 (Increase)/decrease in net amounts receivable from related parties
18.3
18.4
June 30, June 30,
2007 2006
US$`000 US$`000
Decrease in amounts receivable from related parties 5,873 594
Increase in amounts payable to related parties 156 1,725
Add back:
- Interest income accrued on amounts receivable 57 70
- Interest expense accrued on amounts payable - (144)
6,086 2,245
18.5 Additions to property, plant and equipment
18.6
18.7
June 30, June 30,
2007 2006
US$`000 US$`000
Total additions to property, plant and equipment (15,075) (590)
Add back:
- Accrued capital expenditure 5,263 -
(9,812) (590)
18.8 Net cash movement on acquisition of MWS
18.9
18.10
June 30, June 30,
2007 2006
US$`000 US$`000
Cash and cash equivalents taken over on date of 1,954 -
acquisition
Less: Expenses related to MWS acquisition (644) -
1,310 -
19 COMMITMENTS AND CONTINGENCIES
Commitments
June 30, March 31,
2007 2007
US$`000 US$`000
Capital commitments - Ezulwini Mine 26,100 14,836
Capital commitments - Buffelsfontein Tailings 3,841 -
Recovery Project
Total contractual obligations 29,941 14,836
The capital commitments are payable within one year.
Contingencies
A loan agreement (the "Aberdeen Loan Agreement") was entered into by Simmer
& Jack with Aberdeen International Inc. ("Aberdeen") dated March 30, 2006
pursuant to which Aberdeen provided to Simmer & Jack a loan facility in the
amount of US$10 million in respect of the financing of Simmer & Jack`s
acquisition of BGM and the BGM Underground Mine. As part of the
consideration for the facility, Simmer & Jack granted to Aberdeen a net
smelter royalty on all of the gold assets held by Simmer & Jack through
BGM. The royalty as determined in the Aberdeen Loan Agreement will be
applicable to any gold produced by FUSA from tailings acquired from BGM
pursuant to the Buffelsfontein Tailings and Rights Agreement (see Note 7)
and will continue until the loan is repaid to Aberdeen, which is expected
to occur by December 31, 2008 (unless extended by Simmer & Jack to December
31, 2010). In addition, pursuant to the Aberdeen Loan Agreement, Aberdeen
has the sole option, at any time following the one year anniversary of the
first advance there under to convert the amount of the facility outstanding
at that time into ordinary shares of Simmer & Jack at a conversion rate of
ZAR0.80, subject to the approval of Simmer & Jack`s shareholders. In the
event that such shareholder approval is not obtained within a reasonable
period of time, Aberdeen will be entitled to a 1.0% net smelter royalty in
perpetuity on gold produced by properties held by BGM, including the
Buffelsfontein Tailings Recovery Project.
On December 20, 2006, FUSA, Simmer & Jack and Aberdeen entered into an
arrangement agreement (the "Aberdeen Arrangement Agreement") pursuant to
which (i) Simmer & Jack confirmed that it will pay to Aberdeen the amount
of any royalty owing to Aberdeen under the Aberdeen Loan Agreement in
respect of gold produced from the tailings to be acquired by FUSA from BGM
pursuant to the Buffelsfontein Tailings and Rights Agreement, and (ii) FUSA
confirmed that it will pay to Simmer & Jack, immediately prior to any
payment contemplated in (i) above, an amount equal to the amount of any
royalty payment to be made by Simmer & Jack to Aberdeen in respect of gold
produced from the tailings to be acquired by FUSA from BGM pursuant to the
Buffelsfontein Tailings and Rights Agreement.
Pursuant to the Buffelsfontein Tailings and Rights Agreement dated December
20, 2006 among BGM, Simmer & Jack and FUSA, in consideration for the
cession of the Buffelsfontein Tailings and Mining Right from BGM to FUSA as
well as certain servitudes, and the right to the tailings arising from
future underground mining operations by BGM at the BGM Underground Mine,
FUSA agreed to pay to BGM a royalty of 1% plus value added tax of the gross
revenue earned by FUSA from the sale of uranium, gold, sulphur and other
minerals recovered from the processing of tailings acquired by FUSA from
BGM pursuant to the Buffelsfontein Tailings and Rights Agreement.
In summary, as and when there is production from the tailings acquired from
BGM pursuant to the Buffelsfontein Tailings and Rights Agreement, FUSA will
become liable to pay: (i) to Simmer & Jack, under the Aberdeen Arrangement
Agreement, an amount equal to the royalty payable by Simmer & Jack to
Aberdeen pursuant to the Aberdeen Loan Agreement in respect of the tailings
to be acquired from BGM pursuant to the Buffelsfontein Tailings and Rights
Agreement, and (ii) to BGM the above-mentioned 1% royalty pursuant to the
terms of the Buffelsfontein Tailings and Rights Agreement.
20 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 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.
21 RELATED PARTY TRANSACTIONS AND COMMITMENTS
As at As at
June 30, March 31,
2007 2007
Related party balances US$`000 US$`000
FUSA amount (payable to)/receivable from Simmer & (156) 5,079
Jack
First Uranium amount receivable from Simmer & Jack 890 1,684
734 6,763
Three Three
months months to
to
June 30, June 30,
2007 2006
Related party transactions US$`000 US$`000
Shared services fees paid to Simmer & Jack (528) (445)
Fees paid to empowerment company (53) -
Interest paid to Simmer & Jack by EMC - (144)
Interest received from Simmer & Jack by FUSA 57 70
On December 20, 2006 First Uranium and Simmer & Jack entered into 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. Subsequent to
entering into the agreement, the Corporation hired eight senior executives,
including Mr. Miller, President and Chief Executive Officer, Mr. Fisher,
Executive Vice President and Chief Operating Officer and Ms. Emma
Oosthuizen, Senior Vice President and Chief Financial Officer, and other
staff, resulting in certain of these services being no longer required to
be provided by Simmer & Jack. The 2007 expense relates to such services
received, together with those provided prior to December 2006.
During the three months ending June 30, 2007, $527,881 shared services fees
were charged by Simmer & Jack of which $467,910 were capitalized,
representing services provided in respect of technical services for the
Ezulwini Mine and the Buffelsfontein Tailings Recovery Project.
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 three months ending June 30, 2007, the
Corporation was charged $303,306 for consulting services provided by
related directors, officers and consultants of the Corporation.
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. One shareholder of Waterpan is a director of EMC, two other
shareholders of Waterpan are officers and/or employees of First Uranium and
EMC.
22 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 three months ended US$`000 US$`000 US$`000 US$`000
June 30, 2007
Revenue - 2,183 - 2,183
Cost of sales - (2,255) - (2,255)
Loss from mining operations - (72) - (72)
Expenditure (689) (535) (1,996) (3,220)
General, consulting and 316 535 1,224 2,075
administrative expenditures
Stock-based compensation - - 770 770
Pumping and feasibility 347 - - 347
costs
Amortization on property, 26 - 2 28
plant and equipment
Operating loss (689) (607) (1,996) (3,292)
Interest income 134 55 4,177 4,366
Interest expense - - (957) (957)
Accretion expense on - - (1,071) (1,071)
convertible debentures
Foreign exchange gains (645) 473 6,597 6,425
(losses)
Income (loss) before income (1,200) (79) 6,750 5,471
taxes
Provision for income taxes - - - -
Net income (loss) for the (1,200) (79) 6,750 5,471
period
Total assets 52,642 51,672 269,235 373,549
Total liabilities (11,902) (16,869) (90,129) (118,900)
Capital expenditure (9,229) (573) (10) (9,812)
*The Buffelsfontein Tailings Recovery Project segment includes the MWS
operations.
South Africa Canada
Ezulwini Buffelsfontein Total
Mine Tailings
Recovery
Project Corporate
For the three months ended US$`000 US$`000 US$`000 US$`000
June 30, 2006
Expenditure
Consulting and management 794 255 268 1,317
fees
General and administrative 3 - 53 56
expenditure
Pumping and feasibility 1,482 55 - 1,537
costs
Operating loss (2,279) (310) (321) (2,910)
Interest income - 70 - 70
Interest expense (144) - - (144)
Foreign exchange gains 1,110 (354) (10) 746
(losses)
Loss before income taxes (1,313) (594) (331) (2,238)
Provision for income taxes - - - -
Net loss for the period (1,313) (594) (331) (2,238)
Total assets 714 2,135 1,270 4,119
Total liabilities (7,644) - (638) (8,282)
Capital expenditure (590) - - (590)
13 August 2007
Sponsor: Investec Bank
Date: 13/08/2007 13:58:16 Produced by the JSE SENS Department.
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