| Tue 14 Aug 2007, 10:25 | | SXR - Uranium One - Consolidated results: six mo |
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SXR
SXR
SXR - Uranium One - Consolidated results: six months ended June 30, 2007
SXR Uranium One Inc
(Incorporated in Canada)
(Registration number: 15096422420)
Share code on the JSE: SXR & ISIN: CA87112P1062
Share code on the TSX: SXR & ISIN: CA87112P1062
("Uranium One" or "the Company")
Consolidated Balance Sheets
As at June 30, 2007 and December 31, 2006
(in United States dollars)
UNAUDITED Notes June 30, Dec 31,
2007 2006
$`000 $`000
ASSETS
Current assets
Cash and cash equivalents 5 298,281 61,838
Restricted cash - 500
Accounts and other receivables 6 61,208 49,186
Current portion of loans to joint 7.2 - 13,488
ventures
Inventories 8 16,829 12,044
376,318 137,056
Non-current assets
Mineral interests, plant and equipment 9 3,508,618 768,887
Goodwill 9 255,342 -
Loans to joint ventures 7.2 57,072 39,850
Other assets 10 49,826 25,825
3,870,858 834,562
Total assets 4,247,176 971,618
LIABILITIES
Current liabilities
Accounts payable and accrued 11 65,671 12,947
liabilities
Income taxes payable 7,746 1,018
Short term loans 12 53,131 -
126,548 13,965
Non-current liabilities
Convertible debentures 13 122,699 -
Asset retirement obligations 14 17,369 2,856
Future income tax liabilities 1,328,361 337,642
Other long term payables 2,023 1,466
1,470,452 341,964
Non-controlling interest 11,309 -
SHAREHOLDERS` EQUITY
Share capital 15 2,467,233 613,607
Contributed surplus 16 82,579 31,286
Convertible debentures 3 46,480 -
Deficit (34,927) (29,204)
Accumulated other comprehensive income 77,502 -
2,638,867 615,689
Total equity and liabilities 4,247,176 971,618
Basis of presentation and principles of consolidation (note 2.1)
Commitments and contingencies (note 4, 9 & 20)
Subsequent event (note 21)
The accompanying notes form an integral part of these Interim Unaudited
Consolidated Financial Statements.
Uranium One Inc.
Consolidated Statements of Operations and Deficit
For the three and six months ended June 30, 2007 and July 31, 2006
(in United States dollars)
3 months ended 6 months ended
UNAUDITED Jun 30, 2007 Jul 31, 2006 Jun 30, 2007 Jul 31, 2006
Not $`000 $`000 $`000 $`000
es
Revenues 23,265 2,922 64,995 17,305
Operating expenses (2,058) (1,630) (9,101) (6,988)
Depreciation and (2,024) (3,294) (6,883) (4,270)
depletion
Earnings / (loss) 19,183 (2,002) 49,011 6,047
from mine operations
General and (18,653) (4,494) (23,334) (7,226)
administrative(1)
Exploration expense (4,958) (1,562) (6,417) (2,648)
Operating (loss) / (4,428) (8,058) 19,260 (3,827)
profit
Interest income 4,540 2,312 5,562 3,802
Interest expense (2,997) - (2,997) -
Dilution loss on (321) - (321) -
disposal of
investment
Other income / 368 118 1,388 (137)
(expense)
Foreign exchange 17 (5,980) (28,707) (13,411) (41,110)
losses
(Loss) / profit (8,818) (34,335) 9,481 (41,272)
before income taxes
and non-controlling
interest
Current income tax (7,847) 729 (20,375) (4,659)
(expense) / recovery
Future income tax 2,246 1,441 4,446 1,698
recovery
Loss before non- (14,419) (32,165) (6,448) (44,233)
controlling interest
Non-controlling 725 - 725 -
interest
Net loss (13,694) (32,165) (5,723) (44,233)
Deficit at the (21,233) (16,723) (29,204) (4,655)
beginning of the
period
Deficit at the end of (34,927) (48,888) (34,927) (48,888)
the period
(1)- Stock option and 16 9,733 1,602 13,110 4,974
restricted share
expense (non-cash)
included in general
and administrative
Basic and diluted 18 (0.04) (0.15) (0.02) (0.20)
loss per common share
Weighted average 18 332,955,827 217,164,830 275,380,193 217,164,830
number of basic and
diluted common shares
outstanding
See accompanying notes to the Interim Unaudited Consolidated Financial
Statements
Uranium One Inc.
Consolidated Statements of Comprehensive Income
For the three and six months ended June 30, 2007
(in United States dollars)
UNAUDITED 3 months 6 months
ended ended
Jun 30, Jun 30,
2007 2007
$`000 $`000
Total Total
Net loss (13,694) (5,723)
Unrealized gains recognized on translation 77,502 77,502
of self-sustaining foreign operations
Comprehensive income 63,808 71,779
Uranium One Inc.
Consolidated Statements of Cash Flows
For the three and six months ended June 30, 2007 and July 31, 2006
(in United States dollars)
UNAUDITED 3 months ended 6 months ended
Jun 30, Jul 31, Jun 30, Jul 31,
2007 2006 2007 2006
Not $`000 $`000 $`000 $`000
es
Net loss (13,694) (32,165) (5,723) (44,233)
Items not affecting cash:
- Depreciation and depletion 2,024 3,294 6,883 4,270
- Accretion of asset retirement 14 308 78 308 78
obligation
- Stock option expense 16 9,733 1,602 13,110 4,974
- Interest accrued on loans and 4,720 - 4,720 -
debentures
- Unrealized foreign exchange loss 5,474 28,560 12,691 42,662
- Future income tax recovery (2,246) (1,441) (4,446) (1,698)
- Non-controlling interest (725) - (725) -
- Other 1,161 73 1,510 60
Changes in non-cash working
capital:
- Increase / (Decrease) in 2,043 16,756 22,352 (8,281)
accounts and other receivables
- Increase in inventories (9,842) (3,909) (8,341) (3,060)
- ( Decrease) / increase in (18,093) 3,505 (15,950) 9,305
accounts payable and accrued
liabilities
- Increase in income taxes payable 409 - 6,301 -
Cash flows (from) / to operating (18,728) 16,353 32,690 4,077
activities
Acquisition of Uranium One, net of 3 271,935 - 271,935 -
acquisition costs
Acquisition of interest in Betpak - (578) - (1,177)
Dala
Acquisition of interest in - 79 - (45)
Kyzylkum
Acquisition of mineral interests, (68,031) (5,836) (84,724) (9,488)
plant and equipment
Advance cash payment for other - (8,420) (4,313) (8,626)
assets
Restricted cash (500) (500) (500) (2,500)
Cash advances to joint ventures 7 (15,400) (13,996) (22,400) (19,413)
Cash proceeds from joint ventures 7 - - 18,780 -
Cash flows from / (to) investing 188,004 (29,251) 178,778 (41,249)
activities
Common shares issued, net 17,224 28 17,731 117,455
Shares issued by subsidiary to non- 338 - 338 -
controlling shareholders
Coupon interest payment on 13 (3,201) - (3,201) -
convertible debentures
Other (175) (78) (175) (106)
Cash flows from / (to) financing 14,186 (50) 14,693 117,349
activities
Effects of exchange rate changes 10,068 - 10,282 -
on cash and cash equivalents
Net increase / (decrease) in cash 193,530 (12,948) 236,443 80,177
and cash equivalents
Cash and cash equivalents at the 104,751 141,276 61,838 48,151
beginning of the period
Cash and cash equivalents at the 5 298,281 128,328 298,281 128,328
end of the period
Significant non-cash investing
activities include:
Uranium One business combination 3 1,818,169 - 1,818,169 -
- Common shares 1,709,647 - 1,709,647 -
- Options, warrants and restricted 62,042 - 62,042 -
shares
- Equity component of convertible 46,480 - 46,480 -
debentures
U.S. Energy asset purchase 4 99,401 - 99,401
Supplemental information
Cash interest paid 3,201 - 3,201 -
Cash taxation paid 7,338 1,069 13,647 5,491
See accompanying notes to the Interim Unaudited Consolidated Financial
Statements
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
1 NATURE OF OPERATIONS
Uranium One Inc. (previously sxr Uranium One Inc.) ("Uranium One") is a Canadian
uranium corporation with a primary listing on the Toronto Stock Exchange and a
secondary listing on the JSE Limited (the Johannesburg stock exchange), engaged
through subsidiaries and joint ventures in the mining and production of uranium,
and in acquisition, exploration, and development of properties for production of
uranium in Kazakhstan, South Africa, Australia, the United States, Canada, and
the Kyrgyz Republic. Through Aflease Gold Limited ("Aflease Gold"), Uranium One
is engaged in the development of the Modder East Gold Project in South Africa.
2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of presentation and principles of consolidation
The consolidated financial statements of Uranium One and its subsidiaries
(collectively the "Corporation") have been prepared by Uranium One 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 audited financial
statements of UrAsia Energy Limited ("UrAsia Energy") for the period ended
December 31, 2006.
The consolidated financial statements include the accounts of the Corporation
and all of its subsidiaries and the proportionate share of its interests in
joint ventures. All intercompany balances and transactions have been eliminated.
Uranium One acquired all of the issued and outstanding shares of UrAsia Energy
on April 20, 2007 (note 3). UrAsia Energy shareholders received 0.45 Uranium One
common shares for each for each UrAsia Energy common share. For accounting
purposes, the transaction is treated as a reverse takeover whereby UrAsia Energy
is considered the acquiring company as the shareholders of UrAsia Energy
acquired a majority shareholding in Uranium One. The comparative consolidated
balance sheet as at December 31, 2006 and the consolidated statements of
operations and deficit and cash flows for the periods ended July 31, 2006 are
those of UrAsia Energy. The results of operations of Uranium One have been
included from April 20, 2007.
The principal mineral properties and operations of the Corporation are listed
below:
Entity Mineral property / Location Ownership Status
Operation
Betpak Dala Akdala Uranium Mine Kazakhstan 70% Proportionately
LLP (1) consolidated
Betpak Dala South Inkai Uranium Kazakhstan 70% Proportionately
LLP Project (1) consolidated
Kyzylkum LLP Kharasan Uranium Kazakhstan 30% Proportionately
Project (1) consolidated
Uranium One Dominion Uranium South Africa 100% Consolidated
Africa Project (2) (5)
Limited
Aflease Gold Modder East Gold South Africa 68% Consolidated
Limited Project (3)
Uranium One
Australia
(Proprietary) Honeymoon Uranium Australia 100% Consolidated
Limited Project (2)
Uranium One Shootaring Canyon United States 100% Consolidated
USA Inc Uranium Mill (4)
Pitchstone Pitchstone Joint Canada 50% Proportionately
Joint Venture Venture (2) consolidated
(1) - Legacy UrAsia Energy assets
(2) - Legacy Uranium One assets
(3) - Legacy Uranium One assets. The Modder East Gold
Project is owned by Aflease Gold, an indirect subsidiary of
Uranium One
(4) - Purchased from U.S. Energy
(note 4)
(5) - Refer to note 20 for the contingent sale of
an interest in the Dominion Uranium Project
2.2 Measurement and reporting currency
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").
The Corporation`s reporting currency is the United States dollar. Uranium One,
its subsidiaries and joint ventures operate in Kazakhstan, South Africa,
Australia, the United States, Canada, and the Kyrgyz Republic.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
The financial statements of the joint ventures and subsidiaries that are
determined to be integrated foreign operations have been translated into United
States dollars using the temporal method. The temporal method provides for
foreign currency denominated monetary assets and liabilities, which includes
future income tax, to be translated into United States dollars at rates of
exchange in effect at the balance sheet date. Non-monetary items are translated
at historical exchange rates and revenues and expenses at average rates of
exchange during the period. Exchange gains and losses arising on translation are
included in the consolidated statements of operations and deficit.
The financial statements of the joint ventures and subsidiaries that are
determined to be self-sustaining foreign operations have been translated into
United States dollars using the current rate method. The current rate method
provides for all assets and liabilities, which includes future income tax, to be
translated into United States dollars at rates of exchange in effect at the
balance sheet date. Revenues and expenses are translated at average exchange
rates for the period. All resulting exchange differences are included in
accumulated other comprehensive income on the balance sheet.
2.3 Inventories
Inventories of solutions and uranium concentrates are valued at the lower of
average production cost or net realizable value. Production costs include the
cost of raw materials, direct labour, mine-site related overhead expenses and
depreciation and depletion of mining interests.
The related direct production costs associated with in process gold are deferred
and charged to costs as the contained gold is recovered. In process metals is
identified and measured from the ore stockpiles up to and including the on-site
refining plant.
Consumable stores are valued on the weighted average basis and recorded at the
lower of average cost or replacement cost.
2.4 Mineral interests, plant and equipment
Mineral interests, plant and equipment are recorded at cost less accumulated
depreciation and depletion.
Mineral interests represent capitalized expenditures related to the development
of mineral properties and related plant and equipment. Capitalized costs are
depreciated and depleted using either a unit-of-production method, over the
estimated economic life of the mine to which they relate, or using the straight-
line method over their estimated useful lives.
The costs associated with mineral interests are separately allocated to
reserves, resources and exploration potential, and include acquired interests in
production, development and exploration stage properties representing the fair
value at the time they were acquired. The value allocated to reserves is
depreciated on a unit-of-production method over the estimated recoverable proven
and probable reserves at the mine. The reserve value is noted as depletable
mineral properties for operations in commercial production in Note 9. The
resource value represents the property interests that are believed to
potentially contain economic mineralized material such as inferred material;
measured, indicated, and inferred resources with insufficient drill spacing to
qualify as proven and probable reserves; and inferred resources in close
proximity to proven and probable reserves.
Resource value and exploration potential value is noted as non-depletable
mineral properties for operations in commercial production in note 9. At least
annually or when otherwise appropriate, value from the non-depletable category
will be transferred to the depletable category as a result of an analysis of the
conversion of resources or exploration potential into reserves. Costs related to
property acquisitions are capitalized until the viability of the mineral
property is determined. When it is determined that a property is not
economically viable the capitalized costs are impaired. Exploration expenditures
on properties not advanced enough to identify their development potential are
charged to operations as incurred.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Mining expenditures incurred either to develop new ore bodies or to develop mine
areas in advance of current production are capitalized. Commercial production is
deemed to have commenced when management determines that the completion of
operational commissioning of major mine and plant components is completed,
operating results are being achieved consistently for a period of time and that
there are indicators that these operating results will be continued. Mine
development costs incurred to sustain current production are included in
production costs.
Upon sale or abandonment of any mineral interest, plant and equipment, the cost
and related accumulated depreciation or accumulated depletion, are written off
and any gains or losses thereon are included in the statement of operations.
2.5 Impairment of long-lived assets
Management regularly reviews the net carrying value of each long lived asset
whenever events or changes in circumstances indicate that the carrying amounts
may not be recoverable. 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.
Where impairment is identified, the carrying value of the related mineral
interest, plant and equipment is written down to fair value.
2.6 Goodwill
Acquisitions are accounted for using the purchase method whereby assets and
liabilities acquired are recorded at their fair values as of the date of
acquisition and any excess of the purchase price over such fair value is recoded
as goodwill. Goodwill is identified and allocated to reporting units by
preparing estimates of the fair value of each reporting unit and comparing this
amount to the fair value of assets and liabilities in the reporting unit.
Goodwill is not amortized.
The Corporation evaluates, on an annual basis, the carrying amount of goodwill
to determine whether current events and circumstances indicate that such
carrying amount may no longer be recoverable. To accomplish this, the
Corporation compares the fair value of its reporting units to their carrying
amounts. If the carrying value of a reporting unit exceeds it fair value, the
Corporation compares the implied fair value of the reporting unit`s goodwill to
its carrying amount, and any excess of the carrying value over the fair value is
charged to operations. Assumptions underlying fair value estimates are subject
to significant risks and uncertainties.
2.7 Asset retirement obligations
The Corporation recognizes liabilities for statutory, contractual or legal
obligations associated with the retirement of mineral property, plant and
equipment, when those obligations result from the acquisition, construction,
development or normal operation of the assets. Initially, the fair value of the
liability for an asset retirement obligation is recognized in the period
incurred. The net present value of the liability is added to the carrying amount
of the associated asset and amortized over the asset`s useful life. The
liability is accreted over time through periodic charges to earnings and is
reduced by actual costs of reclamation. 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.
Provision is made in full for the estimated future costs of pollution control
and rehabilitation, in accordance with statutory requirements.
2.8 Revenue recognition
Revenue from uranium is recognized, net of value added tax, when: (i) persuasive
evidence of an arrangement exists; (ii) the risks and rewards of ownership pass
to the purchaser including delivery of the product; (iii) the selling price is
fixed or determinable, and (iv) collectibility is reasonably assured.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Interest income is recognized on a time proportion basis, taking account of the
principal outstanding and the effective rate over the period to maturity, when
it is determined that such income will accrue to the Corporation.
2.9 Future income and mining taxes
The Corporation uses the liability method of accounting for income and mining
taxes. Under the liability method, future tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and for tax losses and other deductions carried
forward. For business acquisitions, the liability method results in a gross up
of mining interests to reflect the recognition of the future tax liabilities for
the tax effect of such differences.
Future 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. A reduction in respect of the benefit of a future tax asset (a
valuation allowance) is recorded against any future tax asset if it is not
likely to be realized. The effect on future tax assets and liabilities of a
change in tax rates is recognized in the statement of operations in the period
in which the change is substantively enacted.
2.10 Stock based compensation
The Corporation`s stock-based compensation plans are described in note 16.
The Corporation uses the fair value method of accounting for all stock option
awards. Under this method, the Corporation determines the fair value of the
compensation expense for all stock options on the date of grant using an option
pricing model. The fair value of the options is expensed over the vesting period
of the options.
Upon exercise of the stock option, consideration received and the related amount
of stock based compensation, is transferred from contributed surplus and
recorded as share capital.
2.11 Earnings / loss per share
Earnings / loss per share calculations are based on the weighted average number
of common shares and common share equivalents issued and outstanding during the
period. Diluted earnings per share are calculated using the treasury method
which requires the calculation of diluted earnings per share by assuming that
outstanding stock options and warrants with an average market price that exceeds
the average exercise prices of the options and warrants for the year are
exercised, and the assumed proceeds are used to repurchase shares of Uranium One
at the average market price of the common shares for the period. The impact of
outstanding share options and warrants are excluded from the diluted share
calculation for loss per share amounts, because it is anti-dilutive.
2.12 Financial instruments
On January 1, 2007, the Corporation adopted the following financial instrument
accounting standards:
Section 1530 - Comprehensive Income
Section 3855 - Financial Instruments - Recognition and measurement
Section 3865 - Hedges
The adoption of these standards had no material financial impact on the
financial statements of the Corporation. The newly adopted policies are
explained below:
Financial assets and financial liabilities are recognized on the balance sheet
when the Corporation has become party to the contractual provisions of the
instruments. 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 of investments are recognized on the trade date at fair
value, which is the date that the Corporation commits to purchase or sell the
asset. After initial recognition, listed investments are classified as available
for sale investments and are carried at fair value, with the fair value
adjustments accounted for in other comprehensive income.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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.
Loans payable
Loans payable are recognized initially at the proceeds received, net of
transaction costs incurred. Loans payable are subsequently stated at amortized
cost using the effective yield method; any difference between proceeds (net of
transaction costs) and the redemption value is recognized in the income
statement over the period of the loan.
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 Uranium One are recorded at the proceeds 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.
2.13 Use of estimates
The preparation of financial statements in conformity with Canadian GAAP
requires the Corporation`s management to make estimates and assumptions about
future events that affect the amounts reported in the consolidated financial
statements and related notes to the financial statements. Actual results may
differ from those estimates.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Significant estimates used in the preparation of these consolidated financial
statements include, but are not limited to, the recoverability of accounts
receivable and investments, the proven and probable reserves and resources and
the related depletion and amortization, the estimated net realizable value of
inventories, the accounting for stock-based compensation, the provision for
income and mining taxes and composition of future income and mining tax assets
and liabilities, the expected economic lives of and the estimated future
operating results and net cash flows from mining interests, the anticipated
costs of reclamation and closure cost obligations, and the fair value of assets
and liabilities acquired in business combinations.
2.14 Non-controlling interest
Non-controlling interests exist in less than wholly-owned subsidiaries of the
Corporation and represent the outside interest`s share of the carrying values of
the subsidiaries. When the subsidiary company issues its own shares to outside
interests, a dilution gain or loss arises as a result of the difference between
the Corporation`s share of the proceeds and the carrying value of the underlying
equity..
2.15 Variable interest companies
Variable interest entities ("VIE`s") as defined by the Accounting Standards
Board in Accounting Guideline ("AcG") 15, "Consolidation of Variable Interest
Entities" are entities in which equity investors do not have characteristics of
a "controlling financial interest" or there is not sufficient equity at risk for
the entity to finance its activities without additional subordinated financial
support. VIE`s are subject to consolidation by the primary beneficiary who will
absorb the majority of the entities expected losses and / or expected residual
returns. The Corporation has determined that none of its equity investments
qualify as VIE`s.
3 BUSINESS COMBINATION
On February 11, 2007, Uranium One entered into a definitive arrangement
agreement whereby Uranium One agreed to acquire all of the outstanding common
shares of UrAsia Energy. Under the agreement, every UrAsia Energy share would be
exchanged for 0.45 Uranium One common shares. Each UrAsia Energy warrant and
stock option, which previously gave the holder the right to acquire common
shares of UrAsia Energy was agreed to be exchanged for a warrant or stock option
which gives the holder the right to acquire common shares of Uranium One on the
same basis as the shareholders of UrAsia Energy, with all other terms of such
warrants and options (such as term and expiry) remaining unchanged.
The shareholders of UrAsia Energy approved the arrangement at a Special Meeting
held on April 5, 2007, with the transaction closing on April 20, 2007. As a
result of the transaction, Uranium One is held approximately 60% by former
UrAsia Energy shareholders and approximately 40% by former sxr Uranium One Inc.
shareholders. Accordingly, this business combination is accounted for as a
reverse takeover under Canadian GAAP with UrAsia Energy being identified as the
acquirer and Uranium One as the acquiree.
The cost of acquisition includes the fair value of the deemed issuance of the
following instruments: 307.0 million UrAsia Energy common shares at $5.57 per
share, plus 9.3 million share purchase warrants with an average exercise price
of $1.45 per share and a fair value of $26.4 million, plus 12.0 million stock
options, of which 6.9 million are exercisable at the date of acquisition, with
an average exercise price of $2.66 per share and a fair value of $34.8 million,
plus 0.9 million restricted shares with a fair value of $0.9 million, plus the
fair value of the equity component of the Uranium One convertible debenture of
$46.5 million plus UrAsia Energy`s transaction costs of $19.2 million, providing
a total preliminary purchase price of $1,837.3 million.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
3 BUSINESS COMBINATION (continued)
The value of the deemed issuance of UrAsia Energy shares was calculated using
the weighted average share price of UrAsia shares two days before, the day of,
and two days after the date of the announcement of the arrangement. The
following assumptions were used for the Black-Scholes option pricing model for
the fair value of the stock options, warrants and restricted shares and equity
component of the convertible debenture:
Risk-free interest rate 4.19 - 4.25%
Expected volatility of the share price 61%
Expected life 0.58 - 4.07 years
Dividend rate Nil
For the purposes of these consolidated financial statements, the purchase
consideration has been allocated on a preliminary basis to the fair value of
assets acquired and liabilities assumed, with goodwill assigned to a specific
reporting unit, based on management`s best estimates and taking into account all
available information at the time of the acquisition as well as applicable
information at the time these consolidated financial statements were prepared.
The Corporation will continue to review information and perform further analysis
with respect to these assets, including an independent valuation, prior to
finalizing the allocation of the purchase price. This process will be performed
in accordance with Emerging Issues Committee Abstract 152. Although the results
of this review are presently unknown, it is anticipated that it may result in a
material change to the amount assigned to goodwill and a change to the value
attributable to tangible assets and future income tax liabilities.
The aggregate preliminary fair values of assets acquired and liabilities assumed
were as follows on acquisition date:
$`000
Purchase price:
Common shares (note 15) 1,709,647
Options, warrants and restricted shares 62,042
Equity component of convertible debentures 46,480
Acquisition costs 19,153
1,837,322
Net assets acquired:
Cash and cash equivalents 291,088
Other current assets 33,442
Mineral interests, plant and equipment 2,430,160
Goodwill 241,855
Other assets 13,502
Accounts payable and accrued liabilities (56,057)
Short term loans (53,903)
Asset retirement obligations (4,602)
Convertible debentures (118,450)
Future income tax liabilities (928,050)
Non-controlling interest (11,663)
1,837,322
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
4 ASSET PURCHASE
On April 30, 2007, Uranium One completed the purchase, from U.S. Energy
Corporation ("U.S. Energy"), of the Shootaring Canyon Uranium Mill in Utah, as
well as a land package comprising uranium exploration properties in Utah,
Wyoming, Arizona and Colorado and a substantial database of geological
information for consideration equal to 6,607,605 Uranium One common shares
valued at $99.4 million, a cash payment of $6.9 million, and transaction costs
of $2.6 million including $750,000 paid in cash by Uranium One on the execution
of an exclusivity agreement with the vendor. The purchase agreement provides for
further payments by Uranium One of $27.5 million dependent on the achievement of
certain production targets. U.S. Energy will receive a royalty equal to 5% of
the gross proceeds from the sale of commodities produced at the Mill, to a
maximum amount of $12.5 million.
The transaction was accounted for as an asset purchase and the cost of each item
of property, plant and equipment acquired as part the group of assets acquired
was determined by allocating the price paid for the group of assets to each item
based on its relative fair value at the time of acquisition. The Corporation
will continue to review information and perform further analysis with respect to
these assets prior to finalizing the allocation of the purchase price. The
summarized result of the allocation is indicated in the table below:
Purchase price: $`000
6.6 million common shares of Uranium One 99,401
Cash payment 6,515
Acquisition costs, including exclusivity fee 2,603
108,519
Allocation of purchase price to assets:
Shootaring Canyon Mill 38,948
Exploration properties and geological information 64,774
Stock pile 4,797
108,519
Pursuant to the asset purchase agreement, the reclamation bonds and guarantees
given by U.S. Energy in connection with the acquired assets were substituted by
Uranium One surety bonds with the appropriate Governmental Entity to provide
coverage for the reclamation obligations of the acquired assets. The bond
payments of $9.3 million are included in other assets as part of the asset
retirement fund. The asset retirement obligation was assessed and accounted for
on acquisition date (Refer note 14).
5 CASH AND CASH EQUIVALENTS
Jun 30, Dec 31,
2007 2006
$`000 $`000
Cash 256,843 21,624
Money market instruments, including cashable 41,438 40,214
guaranteed investment certificates, bearer
deposit notes and commercial paper
298,281 61,838
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
6 ACCOUNTS AND OTHER RECEIVABLES
Jun 30, Dec 31,
2007 2006
$`000 $`000
Trade receivables 26,992 47,798
Value added tax and general sales tax 26,659 51
Prepayments and advances 5,367 894
Deposits and guarantees 3,934 -
Other receivables 1,183 443
64,135 49,186
Less: non current deposits and guarantees 2,927 -
included in other assets (note 10)
61,208 49,186
7 JOINT VENTURES
7.1 Proportionate interests in joint ventures
The Corporation owns the following interests in joint ventures:
Betpak Dala 70%
Kyzylkum 30%
Pitchstone 50%
The Corporation`s proportionate share of assets and liabilities are as
follows:
As at June 30, 2007 Betpak Dala Kyzylkum Pitchstone Total
$`000 $`000 $`000 $`000
Cash 4,866 4,010 168 9,044
Other current assets 42,958 339 151 43,448
Mineral interests, plant and 627,636 156,407 5,164 789,207
equipment
Other assets 17,827 5,993 - 23,820
Current liabilities (19,858) (1,599) - (21,457)
Intercompany loan (1) - (24,128) - (24,128)
Other (1,525) (130) - (1,655)
Future income taxes (276,020) (65,075) - (341,095
)
Asset retirement obligation (3,155) - - (3,155)
Net assets 392,729 75,817 5,483 474,029
As at December 31, 2006 Betpak Dala Kyzylkum Total
$`000 $`000 $`000
Cash 5,321 3,055 8,376
Other current assets 56,424 2,357 58,781
Mineral interests, plant and 617,740 150,739 768,479
equipment
Other assets 10,732 1,679 12,411
Current liabilities (3,717) (154) (3,871)
Intercompany loan (1) (18,986) (34,352) (53,338)
Other (1,466) - (1,466)
Future income taxes (268,938) (68,662) (337,600
)
Asset retirement obligation (2,856) - (2,856)
Net assets 394,254 54,662 448,916
(1) The intercompany loan represents the portion of the loan from Uranium One
that is eliminated on consolidation.
Kyzylkum has arranged unsecured bank loan facilities totaling $100 million. $70
million of the facility is from Japan Bank for International Cooperation, and
$30 million from Citibank. The first draw-down on these facilities is planned
for August 2007. The loan facilities, when drawn down, will be repayable after
full repayment of the loan from Uranium One. Uranium One`s proportionate share
of these loans will be $30 million when fully drawn down. The loan facilities
have floating interest rates of Libor plus 0.25% - 0.35% respectively.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
7 JOINT VENTURES (continued)
The Corporation`s proportionate share of revenue, expenses, net income and cash
flows for the three and six months ended June 30, 2007 are as follows:
Three months ended June 30, Betpak Dala Kyzylkum Pitchstone Total
2007
$`000 $`000 $`000 $`000
Revenue 23,265 - - 23,265
Expenses (4,841) (687) (542) (6,070)
Foreign exchange gain 102 52 - 154
Income / (loss) before income 18,526 (635) (542) 17,349
taxes
Provision for income taxes (7,659) - - (7,659)
Net income / (loss) 10,867 (635) (542) 9,690
Six months ended June 30, 2007 Betpak Dala Kyzylkum Pitchstone Total
$`000 $`000 $`000 $`000
Revenue 64,995 - - 64,995
Expenses (16,452) (687) (542) (17,681)
Foreign exchange loss (6,037) (1,342) - (7,379)
Income / (loss) before income 42,506 (2,029) (542) 39,935
taxes
Provision for income taxes (18,318) - - (18,318)
Net income / (loss) 24,188 (2,029) (542) 21,617
The Corporation`s proportionate share of revenue, expenses, net income and cash
flows for the three and six months ended July 31, 2006 are as follows:
Three months ended July 31, Betpak Dala Kyzylkum Total
2006
$`000 $`000 $`000
Revenue 2,922 - 2,922
Expenses (3,338) 25 (3,313)
Foreign exchange loss (22,646) (5,963) (28,609)
Loss before income taxes (23,062) (5,938) (29,000)
Provision for income taxes (3,290) (3,290) (6,580)
Net loss (26,352) (9,228) (35,580)
Six months ended July 31, 2006 Betpak Dala Kyzylkum Total
$`000 $`000 $`000
Revenue 17,305 - 17,305
Expenses (8,303) 12 (8,291)
Foreign exchange loss (32,919) (8,321) (41,240)
Loss before income taxes (23,917) (8,309) (32,226)
Provision for income taxes (3,290) (106) (3,396)
Net loss (27,207) (8,415) (35,622)
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
7 JOINT VENTURES (continued)
7.2 Loans to Joint Ventures
Jun 30, Dec 31, 2006
2007
$`000 $`000
Current portion
Betpak Dala - 12,736
Kyzylkum - 752
- 13,488
Long term portion
Betpak Dala - 6,250
Kyzylkum 57,072 33,600
57,072 39,850
During the 3 months ended March 31, 2007, in advance of scheduled payment dates,
Betpak Dala repaid the principal amount of $62.6 million to the Corporation,
together with $0.9 million of accrued interest.
Jun 30, 2007 Dec 31, 2006
$`000 $`000
Pursuant to its obligation to provide project
financing for construction and commissioning
of the Kharasan Project in the amount of $80
million on or before December 31, 2007, the
Corporation has made the following loans to
Kyzylkum:
Loan advanced in July 2006:
The loan bears interest at LIBOR plus 1.5% per 30,000 30,000
annum, with interest payable on a semi-annual
basis commencing January 2007. The principal
amount is to be repaid in six equal
consecutive amounts on a semi-annual basis
commencing October 2007.
Loan advanced in November 2006:
The loan bears interest at LIBOR plus 1.5% per 18,000 18,000
annum, with interest payable on a semi-annual
basis commencing May 2007. The principal
amount is payable in six equal consecutive
amounts on a semi-annual basis commencing
February 2008.
Loan advanced in March 2007:
The loan bears interest at LIBOR plus 1.5% per 10,000 -
annum, with interest payable on a semi-annual
basis commencing June 2007. The principal
amount is payable in six equal consecutive
amounts on a semi-annual basis commencing
December 2007.
Loan advanced in April 2007:
The loan bears interest at LIBOR plus 1.5% per 22,000 -
annum, with interest payable on a semi-annual
basis commencing June 2007. The principal
amount is payable in six equal consecutive
amounts on a semi-annual basis commencing
January 2008.
80,000 48,000
Interest accrued 1,200 1,074
81,200 49,074
Less elimination of proportionate share - 30% (24,128) (14,722)
57,072 34,352
Less current portion - (752)
Long term portion 57,072 33,600
The loans to Kyzylkum are unsecured.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
8 INVENTORIES
Jun 30, 2007 Dec 31, 2006
$`000 $`000
Finished uranium concentrates 7,192 5,791
Solutions and concentrates in process 4,890 5,035
Materials and supplies 4,747 1,218
Stockpiles 4,797 -
21,626 12,044
Less: non current inventory included in other 4,797 -
assets (note 10)
16,829 12,044
9 MINERAL INTERESTS, PLANT AND EQUIPMENT
June 30, 2007 December 31, 2006
Cost Accumu- Net Cost Accumu- Net
lated carrying lated carrying
Amorti- amount Amorti- amount
zation zation
$`000 $`000 $`000 $`000 $`000 $`000
Mineral 3,168,696 (25,591) 3,143,105 761,627 (17,539) 744,088
interests
Plant and 372,378 (6,865) 365,513 25,348 (549) 24,799
equipment
3,541,074 (32,456) 3,508,618 786,975 (18,088) 768,887
Owned assets 3,499,691 768,887
Leased assets 8,927 -
Total net 3,508,618 768,887
carrying amount
as at end of the
period
A summary by property of the net book value is as follows (alphabetically by
country):
Mineral interests Total
Country Depletable Non- Total Plant and June 30,
depletable equipment 2007
$`000 $`000 $`000 $`000 $`000
Honeymoon Australia - 128,900 128,900 9,368 138,268
Project
Australia Australia - 74,171 74,171 - 74,171
exploration
Pitchstone Canada - 27,235 27,235 - 27,235
exploration
Akdala Kazakhstan 115,669 74,358 190,027 13,348 203,375
Uranium Mine
South Inkai Kazakhstan - 406,871 406,871 17,390 424,261
Project
Kharasan Kazakhstan - 141,460 141,460 14,947 156,407
Uranium
Project
Kyrgyzstan Kyrgyzstan - 133 133 309 442
exploration
Dominion South - 1,985,102 1,985,102 237,165 2,222,267
Uranium Africa
Project
Modder East South - 101,622 101,622 11,403 113,025
Gold project Africa
Sub-Nigel and South - 22,811 22,811 417 23,228
other gold Africa
projects
Shootaring United - - - 45,611 45,611
Canyon Mill States
United States United - 64,773 64,773 2,618 67,391
exploration States
Corporate and - - - 12,937 12,937
other
Total 115,669 3,027,436 3,143,105 365,513 3,508,618
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
9 MINERAL INTERESTS, PLANT AND EQUIPMENT (continued)
Mineral interests Total
Country Depletable Non- Total Plant and Dec 31,
depletable equipment 2006
$`000 $`000 $`000 $`000 $`000
Akdala Kazakhstan 118,755 74,358 193,113 16,294 209,407
Uranium Mine
South Inkai Kazakhstan - 404,125 404,125 3,312 407,437
Uranium
Project
Kharasan Kazakhstan - 146,717 146,717 4,020 150,737
Uranium
Project
Kyrgyzstan Kyrgyzstan - 133 133 220 353
exploration
Corporate and - - - 953 953
other
Total 118,755 625,333 744,088 24,799 768,887
Commitments exist for capital expenditures of $69.8 million.
The goodwill arising in the Uranium One / UrAsia Energy business combination
included in the respective reportable operating segments is shown in the table
below:
Recognized Foreign Total
on exchange June 30,
acquisition resulting 2007
date from
translation
$`000 $`000 $`000
Aflease Gold 112,864 6,294 119,158
Dominion Uranium Project 128,991 7,193 136,184
241,855 13,487 255,342
10 OTHER ASSETS
Jun 30, Dec 31, 2006
2007
$`000 $`000
Prepaid drill rigs 4,324 13,295
Advances for plant and equipment 14,064 9,790
Long term deposits (note 6) 2,927 -
Long term inventory (note 8) 4,797 -
Asset retirement fund (note 14) 13,892 -
Other 9,822 2,740
49,826 25,825
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
11 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Jun 30, Dec 31, 2006
2007
$`000 $`000
Trade payables 10,643 6,471
Accruals 45,032 260
Other 9,996 6,216
65,671 12,947
12 SHORT TERM LOANS
Jun 30, Dec 31, 2006
2007
$`000 $`000
February 2005 Nedcor Securities loan 352 -
August 2006 Nedcor Securities loan 52,779 -
Total liability 53,131 -
The February 2005 Nedcor Securities loan represents draw-downs on a facility
provided by Nedcor Securities, secured by the investment held by Uranium One`s
wholly owned subsidiary, Uranium One Africa Limited ("Uranium One Africa"), in
Randgold and Exploration Company Limited ("Randgold") shares. This loan bears
interest at a variable rate currently at 8.95%. The loan has no fixed repayment
terms and is denominated in South African rand.
The August 2006 Nedcor Securities loan represents draw-downs on a facility
provided by Nedcor Securities, secured by Uranium One Africa`s investment in
Aflease Gold shares. This loan bears interest at a flat rate of 9% per annum.
Interest on the loan is offset by interest income received on offsetting
deposits required in connection with this loan. The interest on the deposits in
influenced by movements in the Aflease Gold share price. The loan will be repaid
on September 20, 2007 and is denominated in South African rand. Nedcor can
request early payment for a portion of the August 2006 loan, if Aflease Gold`s
share price decline to levels below approximately ZAR 1.65 per share. During the
six months ended June 30, 2007, Aflease Gold traded between ZAR 2.75 and ZAR
4.20, closing at ZAR 2.99 on June 29, 2007.
The combined effective interest rate for the three and six month period was 6.4%
and 5.8% respectively.
Uranium One`s investments in Randgold and Aflease Gold are encumbered while
these finance arrangements remain in place. These loans are classified as
liabilities held to maturity and are carried at amortized cost.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
13 CONVERTIBLE DEBENTURES
On December 20, 2006, Uranium One completed a debt offering of $133.2 million
(including the exercised over-allotment option of $17.4 million granted to
underwriters) convertible unsecured subordinated debentures maturing December
31, 2011 (the "debentures"). The debentures were issued at Cdn $1,000 per
debenture and the underwriters` fees amounted to Cdn $30 per debenture, which
resulted in the net proceeds to the Corporation of Cdn $970 per debenture. The
debentures bear interest at an annual rate of 4.25%, payable semi-annually in
arrears on June 30 and December 31 of each year, commencing June 30, 2007. The
June 30, 2007 interest payment represents accrued interest from the closing of
the offering to June 30, 2007. The conversion price was set at Cdn $20 per
share, which is equivalent to 50 common shares for each Cdn $1,000 principal
amount of debentures. The debt and equity component were revalued on April 20,
2007, and were included as part of the purchase price for the Uranium One /
UrAsia Energy business combination (note 3). The table below indicates the
breakdown of the liability:
Jun 30, Dec 31, 2006
2007
$`000 $`000
Liability component on date of business 118,450 -
combination (note 3)
Interest charged 3,988 -
Coupon payment (3,201) -
Foreign exchange movement 3,462 -
Liability as at the end of the period 122,699 -
14 ASSET RETIREMENT OBLIGATIONS
June 30, 2007 December 31, 2006
$`000 $`000
Opening balance 2,856 1,953
Acquisition of Uranium One (note 3) 4,602 -
Acquisition of US Energy assets (note 4) 9,389 -
Accretion expense 308 604
Revision 27 299
Foreign exchange movement 187 -
Closing Balance 17,369 2,856
June 30, 2007 December 31, 2006
Undiscounted and uninflated amount of 30,452 4,284
estimated cash flows ($`000)
Payable in years 4 - 10.5 4 - 18
Inflation rate 2.69% - 7.00% 7.00%
Discount rate 7.39% - 14.5% 12.00%
Funding of $13.9 million of these obligations has been provided in Asset
Retirement Funds in Kazakhstan, South Africa and the United States.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
15 SHARE CAPITAL
Common shares Number of shares Value of shares
Jun 30, Dec 31, Jun 30, Dec 31,
2007 2006 2007 2006
Not $`000 $`000
e
UrAsia Energy - movement
from January 1, 2007 to
April 20, 2007
Opening balance of common 480,240,704 479,722,871 613,607 612,941
shares in issue
Exercise of warrants 481,000 268,000 82 48
Exercise of stock options 1,866,807 249,833 7,601 618
Closing balance of issued 482,588,511 480,240,704 621,290 613,607
and outstanding shares on
April 20, 2007
Uranium One - Movement from
April 20, 2007 to June 30,
2007
Conversion of UrAsia Energy 3 217,164,830 621,290
shares to Uranium One
shares at a ratio of 0.45
Shares of Uranium One owned 138,129,435 1,709,647
by Uranium One shareholders
at acquisition
Exercise of stock options 3,180,386 35,201
and restricted shares
U.S. Energy asset purchase 4 6,607,605 99,401
consideration
Shares issued for services 124,379 1,694
rendered
Closing balance of issued 365,206,635 480,240,704 2,467,233 613,607
and outstanding shares
16 CONTRIBUTED SURPLUS
The following table details the movements of contributed surplus during the
period:
Movement for the 6 months ended Warrants Restricted Options TOTAL
June 30, 2007
shares
$`000 $`000 $`000 $`000
As at January 1, 2007 - - 31,286 31,286
Issued on business acquisition 26,407 853 34,782 62,042
Share options expensed - - 10,541 10,541
Share options exercised - - (23,006) (23,006)
Restricted shares expensed - 2,569 - 2,569
Restricted shares exercised - (853) - (853)
As at June 30, 2007 26,407 2,569 53,603 82,579
Movement for the 5 months ended Warrants Restricted Options TOTAL
December 31, 2006
shares
$`000 $`000 $`000 $`000
As at August 1, 2006 - - 9,307 9,307
Share options expensed - - 22,162 22,162
Share options exercised - - (183) (183)
As at December 31, 2006 - - 31,286 31,286
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
16 CONTRIBUTED SURPLUS (continued)
Assumptions
The fair value of stock options used to calculate the compensation expense was
estimated using the Black scholes pricing model with the following assumptions:
Jun 30, 2007 Dec 31,
2006
Risk free interest rate 4.14% 3.80%
Expected dividend yield 0% 0%
Expected volatility of Uranium One`s share 69% 46%
price
Expected life 5 years 10 years
Options
Under Uranium One`s Option plan, options granted are non-assignable and may be
granted for a term not exceeding ten years. The plan is administered by the
Board of Directors, which determines individual eligibility under the plan,
number of shares reserved underlying the options granted to each individual (not
exceeding 5% of issued and outstanding shares to any insider and not exceeding
1% of the issued and outstanding shares to any non-employee director on a non-
diluted basis) and any vesting period which, pursuant to the stock option plan
was previously one-third on the grant date, one-third on the first anniversary
of the grant date and the remainder on the second anniversary of the grant date.
On December 8, 2006 the Board of Directors decided to adopt an amended vesting
schedule such that any options granted on and after December 8, 2006, would vest
as to one-third on the first anniversary of the grant date, one-third on the
second anniversary of the grant date and one-third on the third anniversary of
the grant date. The maximum number of shares of Uranium One that are issuable
pursuant to the plan is limited to 7.2% of issued and outstanding shares.
The following is a summary of Uranium One`s options granted under its stock-
based compensation plan:
Number of Weighted
options average
exercise
price
Cdn $
Balance as at August 1, 2006 11,785,000 2.16
Granted 10,190,000 3.74
Exercised (249,833) 1.95
Forfeiture or expiry of share options (66,667) 3.00
Outstanding options at December 31, 2006 21,658,500 2.90
Granted up to April 20, 2007 1,935,000 5.99
Exercised up to April 20, 2007 (1,866,807) 2.11
Forfeiture of share options up to April 20, (30,000) 1.80
2007
Outstanding options as at April 20, 2007 21,696,693 5.86
Converted UrAsia Energy share options on date 9,763,498 7.33
of business combination
Existing Uranium One share options on April 5,390,754 6.67
20, 2007
Granted subsequent to April 20, 2007 1,310,400 16.59
Exercised subsequent to April 20, 2007 (3,116,519) 5.28
Forfeiture of share options subsequent to (57,198) 13.09
April 20, 2007
Outstanding options as at June 30, 2007 13,290,935 8.43
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
16 CONTRIBUTED SURPLUS (continued)
The stock option compensation expense for the three and six months ended June
30, 2007 was $7.0 and $10.4 million (July 31, 2006: $1.6 million and $5.0
million ) for the Uranium One options and $0.1 million for the Aflease Gold
options for the three and six months ended June 30, 2007. As at June 30, 2007,
the aggregate unexpensed fair value of unvested stock options granted amounted
to $13.1 million.
The following table summarizes certain information about Uranium One`s stock
options outstanding at June 30, 2007:
Options outstanding Options exercisable
Range of Number Weighted Weighted Number Weighted Weighted
Exercise Prices
outstanding average average exercisable average average
as at remaining exercise as at remaining exercise
Jun 30, life price Jun 30, life price
US$ 2007 (years) Cdn $ 2007 (years) Cdn $
1.33 to 2.74 507,684 3.09 1.73 151,354 3.09 1.62
3.03 to 4.76 2,996,267 4.02 4.06 2,362,163 4.02 4.06
5.00 to 7.79 2,452,703 7.49 7.06 1,695,341 7.49 7.08
8.32 to 9.90 4,279,903 5.88 8.35 3,924,321 5.88 8.34
11.78 to 12.93 749,849 7.90 12.33 249,917 4.39 12.23
14.12 to 15.63 792,929 7.13 14.61 231,333 6.78 15.36
16.59 to 16.87 1,511,600 3.71 16.63 250,000 4.83 16.84
13,290,935 5.78 8.43 8,864,429 5.61 7.38
Restricted shares
Under the Uranium One Restricted Share Plan, restricted share rights are granted
to eligible employees, contractors and directors. Each restricted share right is
exercisable for one common share of Uranium One at the end of the restricted
period for no additional consideration. The vesting period is generally two-
thirds on the first anniversary of the grant date and the remainder on the
second anniversary of the grant date. The aggregate maximum number of shares
available for issuance under the restricted share plan was initially capped at
one million and subsequently increased to 3 million at Uranium One`s annual and
special meeting held on June 7, 2007. The number of shares for issuance to non-
employee directors may not exceed 0.5% of the total number of common shares
outstanding on a non-diluted basis.
The following is a summary of Uranium One`s restricted shares issued under the
Restricted Share Plan:
Number of restricted
shares
Jun 30, Dec 31,
2007 2006
Restricted shares issued on business combination 404,231 -
(note 3)
Exercised during the period (64,112) -
Total restricted shares outstanding at the end 340,119 -
of the period
Of the outstanding number of Restricted shares, the grant date of 92,123
Restricted shares was December 8, 2006 and grant date of 247,996 Restricted
shares was June 7, 2006. Restricted shares will not expire while the participant
is in the employ of the Corporation.
The Restricted share expense for both the three and six months ended June 30,
2007 was $2.6 million. As at June 30, 2007 the aggregate unexpensed fair value
of unvested restricted shares granted amounted to $2.5 million.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
16 CONTRIBUTED SURPLUS (continued)
Warrants Number of warrants Allocated value
Jun 30, Dec 31, Jun 30, Dec 31,
2007 2006 2007 2006
$`000 $`000
Issued on business combination 2,731,619 - 26,407 -
(note 3)
At the end of the period 2,731,619 - 26,407 -
Number of warrants Average exercise price
Jun 30, Dec 31, Jun 30, Dec 31,
Warrants comprise: 2007 2006 2007 2006
2008 Warrants 2,431,619 - 3.55 -
Series D Warrants 300,000 - 6.95 -
Total 2,731,619 - 3.92 -
Series D warrants represents 150,000 warrants that expire on September 16, 2007
and 150,000 that warrants expire on January 4, 2008. The 2008 warrants expire on
September 24, 2008.
Contingently issuable shares
Under the terms of the acquisition agreement for the Kyzylkum JV interest,
Uranium One is obligated to issue 6,964,200 common shares of Uranium One upon
commencement of commercial production from Kyzylkum.
17 FOREIGN EXCHANGE LOSSES
3 months ended 6 months ended
A summary of the foreign exchange Jun 30, Jul 31, Jun 30, Jul 31,
gain / (loss) by item is as
follows:
2007 2006 2007 2006
$`000 $`000 $`000 $`000
Unrealized foreign exchange loss (6,177) (28,578) (14,777) (42,602)
on future income tax liability
Foreign exchange gain / (loss) on 197 (129) 1,366 1,492
other items
(5,980) (28,707) (13,411) (41,110)
18 BASIC LOSS PER SHARE AND DILUTED LOSS PER SHARE
3 months ended 6 months ended
Jun 30, Jul 31, Jun 30, Jul 31,
2007 2006 2007 2006
Basic and diluted loss per (0.04) (0.15) (0.02) (0.20)
share ($)
is calculated based on a net (13,694) (32,165) (5,723) (44,233)
loss for the period of
($`000)
and a weighted average 332,955,827 217,164,830 275,380,193 217,164,830
number of shares outstanding
of
For the three and six month periods ended June 30, 2007 and July 31, 2006, the
impact of outstanding share options and warrants was excluded from the diluted
share calculation because it was anti-dilutive for earnings per share purposes.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
19 SEGMENTED INFORMATION
The Corporation`s reportable operating segments are summarized in the table
below (alphabetically by country):
For the three months ended June 30, 2007:
Country Revenue Opera- Depre- Explo- Net Capital
$ ting ciation ration profit/ expendi-
expenses & expendi- (loss) ture
$ depletio ture $ $
n $
$
Honeymoon Australia - - (93) (418) (898) 5,452
Uranium
Project and
exploration
Exploration - Canada - - - (542) (542) -
Pitchstone
Akdala Kazakhstan 23,265 (2,058) (1,738) - 10,993 2,016
Uranium Mine
South Inkai Kazakhstan - - - - 126 11,441
Uranium
Project
Kharasan Kazakhstan - - - - (635) 7,186
Uranium
Project
Kyrgyzstan Kyrgyzstan - - (20) (549) (857) 46
exploration
Dominion South - - - (353) 397 39,560
Uranium Africa
Project
Modder East South - - (3) - (10) 1,564
Gold Project Africa
Shootaring United - - (80) (8) (314) -
Canyon States
Uranium Mill
Exploration United - - (7) (2,120) (2,310) -
States
Corporate and - - (83) (968) (19,644) 766
other
Total 23,265 (2,058) (2,024) (4,958) (13,694) 68,031
For the six months ended June 30, 2007:
Country Revenue Operatin Depre- Explo- Net Capital
$ g ciation ration profit/ expendi-
expenses & deple- expendi- (loss) ture
$ tion ture $ $
$ $
Honeymoon Australia - - (93) (418) (898) 5,452
Uranium
Project and
exploration
Exploration - Canada - - - (542) (542) -
Pitchstone
Akdala Kazakhstan 64,995 (9,101) (6,597) - 24,062 3,442
Uranium Mine
South Inkai Kazakhstan - - - - 126 19,013
Uranium
Project
Kharasan Kazakhstan - - - - (2,029) 7,186
Uranium
Project
Kyrgyzstan Kyrgyzstan - - (20) (2,008) (2,337) 46
exploration
Dominion South - - - (353) 397 39,560
Uranium Africa
Project
Modder East South - - (3) - (10) 1,564
Gold Project Africa
Shootaring United - - (80) (8) (314) -
Canyon States
Uranium Mill
Exploration United - - (7) (2,120) (2,310) -
States
Corporate and - - (83) (968) (21,868) 8,461
other
Total 64,995 (9,101) (6,883) (6,417) (5,723) 84,724
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
19 SEGMENTED INFORMATION (continued)
As at June 30, 2007:
Country Mineral Total Total
property, assets liabilities
plant and $ $
equipment
$
Honeymoon Uranium Australia 212,439 235,081 54,959
Project and
exploration
Exploration - Canada 27,235 26,505 2,700
Pitchstone
Akdala Uranium Mine Kazakhstan 203,375 261,051 93,361
South Inkai Uranium Kazakhstan 424,261 432,236 207,197
Project
Kharasan Uranium Kazakhstan 156,407 166,749 73,405
Project
Kyrgyzstan Kyrgyzstan 442 1,422 231
exploration
Dominion Uranium South Africa 2,222,267 2,376,557 921,613
Project
Modder East Gold South Africa 113,025 255,880 51,911
Project
Shootaring Canyon United States 45,611 57,421 6,886
Uranium Mill
Exploration United States 67,391 69,861 2,918
Corporate and other 36,165 364,413 181,819
Total 3,508,618 4,247,176 1,597,000
For the three months ended July 31, 2006:
Country Revenue Opera-ting Depre- Explo- Net Capital
$ expenses ciation ration profit/ expendi-
$ & deple- expendi- (loss) ture
tion ture $ $
$ $
Akdala Kazakhstan 2,922 (1,886) (3,286) - 2,119 3,620
Uranium
Mine
South Inkai Kazakhstan - - - - (24,237) -
Uranium
Project
Kharasan Kazakhstan - - - - (6,058) 2,168
Uranium
Project
Kyrgyzstan Kyrgyzstan - - - (1,562) (1,459) 48
exploration
Corporate - 256 (8) - (2,530) -
and other
Total 2,922 (1,630) (3,294) (1,562) (32,165) 5,836
For the six months ended July 31, 2006:
Country Revenue Opera-ting Depre- Explo- Net profit Capital
$ expenses ciation ration / (loss) expendi-
$ & deple- expendi- $ ture
tion ture $
$ $
Akdala Kazakhstan 17,305 (6,988) (4,252) - (3,625) 7,024
Uranium
Mine
South Inkai Kazakhstan - - - - (24,237) -
Uranium
Project
Kharasan Kazakhstan - - - - (8,425) 2,176
Uranium
Project
Kyrgyzstan Kyrgyzstan - - - (2,648) (2,626) 288
exploration
Corporate - - (18) - (5,320) -
and other
Total 17,305 (6,988) (4,270) (2,648) (44,233) 9,488
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
19 SEGMENTED INFORMATION (continued)
As at December 31, 2006:
Country Mineral Total Total
property, assets liabilities
plant and $ $
equipment
$
Akdala Uranium Kazakhstan 209,407 285,654 89,317
Mine
South Inkai Kazakhstan 407,437 407,437 194,236
Uranium Project
Kharasan Kazakhstan 150,737 156,267 68,816
Uranium Project
Kyrgyzstan Kyrgyzstan 353 1,271 166
exploration
Corporate and 953 120,989 3,394
other
Total 768,887 971,618 355,929
20 CONTINGENT SALE OF AN INTEREST IN THE DOMINION URANIUM PROJECT
On June 7, 2005, Uranium One Africa and Micawber 397 (Proprietary) Limited
("Micawber 397"), a company owned by historically disadvantaged South Africans,
entered into a definitive purchase and sale agreement, a management and skills
transfer agreement and a joint venture agreement.
Pursuant to these agreements, Uranium One Africa agreed to sell to Micawber 397
an undivided 26% interest in the Dominion Uranium Project at a cash
consideration equal to 26% of the net present value of the Dominion assets at
the date when Micawber elects to pay at least 20% of the purchase price. This
election must occur within three years after receipt of Micawber 397 of their
first profit distribution from the joint venture. After the first payment,
Micawber is obliged to pay at least 20% of the purchase price during each
subsequent three year period, so that the purchase price is paid in full within
twelve years of the date of the first payment.
The parties agreed to contribute their interests in the assets to a joint
venture to be managed by Uranium One Africa, and to fund the development and
operation of those assets in accordance with their respective joint venture
interests. Uranium One agreed to lend to Micawber 397 the funds required to
contribute their share under the joint venture agreement. The aggregate amount
of that loan, plus accrued interest, is repayable from Micawber 397`s share of
joint venture profits.
The Micawber transaction was approved by Uranium One Africa`s shareholders in
September 2005, following which the South African Department of Minerals and
Energy granted a "new order" mining right to the Corporation for the Dominion
Uranium Project in October 2006.
The Micawber 397 transaction will be accounted for in Uranium One`s consolidated
financial statements when the risks and rewards of the transaction are deemed to
have passed to Micawber 397. Management has determined that this event will
occur on the day that Micawber 397 elects to pay at least 20% of the purchase
price, prompting the determination of the purchase price. As at June 30, 2007,
Micawber 397 has not paid any part of the purchase price.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
21 SUBSEQUENT EVENT
Energy Metals Corporation
On June 3, 2007, Uranium One and Energy Metals Corporation ("EMC") entered into
a definitive arrangement agreement whereby Uranium One agreed to acquire all of
the outstanding common shares and options to purchase common shares of EMC. The
shareholders of EMC will receive 1.15 Uranium One common shares for each EMC
common share held on closing of the transaction. Each EMC stock option, which
previously gave the holder the right to acquire common shares of EMC, will be
exchanged for 1.15 stock options which gives the holder the right to acquire
common shares of Uranium One on the same basis as the shareholders of EMC, with
all other terms of such options (such as term and expiry) remaining unchanged.
The shareholders of EMC approved the arrangement at a Special Meeting held on
July 31, 2007, and the transaction closed on August 10, 2007, after receipt of,
among other items, court approval and certain regulatory approvals. As a result
of the transaction, EMC shareholders will hold approximately 21 percent of the
issued Uranium One shares.
The cost of acquisition includes the fair value of the issuance of 99.3 million
Uranium One common shares at $15.06 per share, plus 7.8 million stock options of
EMC, of which 5.6 million are exercisable at the date of acquisition, exchanged
for those of Uranium One with an average exercise price of $5.47 per share and a
fair value of $72.5 million, plus Uranium One`s estimated transaction costs of
$8.0 million, providing a total preliminary purchase price of $1,575.2 million.
The value of the Uranium One common shares to be issued was calculated using the
weighted average share price of Uranium One`s shares two days before, the day
of, and two days after the date of the announcement of the arrangement. The
following assumptions were used for the Black-Scholes option pricing model for
fair valuation of the stock options:
Risk free interest rate 4.70%
Expected volatility 55%
Expected life 0.8 - 5.0 years
Dividend rate Nil
The excess of the purchase consideration over the adjusted book values of EMC`s
assets and liabilities has been presented as "unallocated purchase price" in the
table below. The fair value of all identifiable assets and liabilities acquired
as well as any goodwill arising upon the acquisition will be determined through
an independent valuation as at the date of closing of the transaction.
Therefore, it is likely that the fair values of assets and liabilities acquired
will vary from the book values shown in the table below and the differences may
be material.
On completion of the valuation, with corresponding adjustments to the carrying
amounts of mining interests, or on recording of any finite life intangible
assets on acquisition, these adjustments will impact the measurement of
amortization recorded in the consolidated statements of operations of the
combined company for periods after the date of acquisition. No adjustments have
been reflected in the table below for any changes in future tax assets or
liabilities that would result from recording EMC`s identifiable assets and
liabilities at fair value as the process of estimating the fair value of
identifiable assets and liabilities is not complete.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at June 30, 2007 and December 31, 2006
UNAUDITED
21 SUBSEQUENT EVENT (continued)
Based on the March 31, 2007 balance sheet of EMC, the preliminary allocation of
the purchase price, summarized in the table below, is subject to change:
$`000
Purchase price:
99.3 million shares of Uranium One 1,494,700
Options of Uranium One 72,500
Acquisition costs 8,000
1,575,200
Net assets required:
Cash and cash equivalents 76,500
Marketable securities 31,800
Other current assets 2,100
Mining interests 128,300
Other non-current assets 5,900
Accounts payable and accrued liabilities (1,400)
Asset retirement obligations (2,300)
Future income tax liability (28,500)
Unallocated purchase price 1,362,800
1,575,200
Date: 14/08/2007 10:25:01 Produced by the JSE SENS Department.
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