| Thu 15 Nov 2007, 9:32 | | UUU - Uranium One Inc - Consolidated balance sheet |
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UUU
UUU
UUU - Uranium One Inc - Consolidated balance sheets as at September 30, 2007 and
December 31, 2006
Uranium One Inc
(Incorporated in Canada)
(Registration number: 15096422420)
Share code on the JSE: UUU & ISIN: CA91701P1053
Share code on the TSX: UUU & ISIN: CA91701P1053
November 15, 2007
Consolidated Balance Sheets
As at September 30, 2007 and December 31, 2006
(in United States dollars)
UNAUDITED Note Sep 30, Dec 31,
s 2007 2006
$`000 $`000
ASSETS
Current assets
Cash and cash equivalents 5 284,613 61,838
Restricted cash - 500
Accounts and other receivables 6 29,261 49,186
Current portion of loans to joint 7.2 26,667 13,488
ventures
Inventories 8 26,417 12,044
366,958 137,056
Non-current assets
Mineral interests, plant and equipment 9 4,994,124 768,887
Goodwill 9 248,324 -
Loans to joint ventures 7.2 30,745 39,850
Available for sale securities 10 7,324 -
Other assets 11 63,130 25,825
5,343,647 834,562
Total assets 5,710,605 971,618
LIABILITIES
Current liabilities
Accounts payable and accrued 12 61,158 12,947
liabilities
Income taxes payable 2,523 1,018
63,681 13,965
Non-current liabilities
Convertible debentures 13 134,903 -
Asset retirement obligations 14 21,331 2,856
Future income tax liabilities 1,804,003 337,642
Long term debt 7.1 12,000 -
Other long term payables 14,110 1,466
1,986,347 341,964
Non-controlling interest 10,444 -
SHAREHOLDERS` EQUITY
Share capital 15 3,491,568 613,607
Contributed surplus 16 129,002 31,286
Convertible debentures 3 46,480 -
Deficit (52,184) (29,204)
Accumulated other comprehensive income 35,267 -
3,650,133 615,689
Total shareholders` equity and 5,710,605 971,618
liabilities
Basis of presentation and principles of consolidation (note 2.1)
Commitments and contingencies (note 4 & 21)
Subsequent event (note 22)
The accompanying notes form an integral part of these Unaudited Interim
Consolidated Financial Statements.
Uranium One Inc.
Consolidated Statements of Operations and Deficit
For the three and nine months ended September 30, 2007 and October 31, 2006
(in United States dollars)
3 months ended 9 months ended
UNAUDITED Sep 30, Oct Sep 30, Oct 31,
2007 31, 2007 2006
2006
Note $`000 $`000 $`000 $`000
s
Revenues 8,019 4,193 73,014 21,498
Operating expenses (660) (1,417 (9,761) (8,405)
)
Depreciation and depletion (1,067) (1,209 (7,950) (5,479)
)
Earnings from mine operations 6,292 1,567 55,303 7,614
General and administrative (1) (28,992) (2,294 (52,326) (9,520)
)
Exploration expense (5,573) (1,779 (11,990) (4,427)
)
Operating loss (28,273) (2,506 (9,013) (6,333)
)
Interest income 6,006 2,215 11,568 6,017
Interest expense (5,909) - (8,906) -
Dilution gain on disposal of 872 - 551 -
investment
Other income / (expense) 567 (130) 1,955 (267)
Foreign exchange gain / (loss) 17 10,727 27,023 (2,684) (14,087)
(Loss) / earnings before income (16,010) 26,602 (6,529) (14,670)
taxes and non-controlling
interest
Current income tax expense (1,961) (1,069 (22,336) (5,728)
)
Future income tax recovery 668 379 5,114 2,077
(Loss) / earnings before non- (17,303) 25,912 (23,751) (18,321)
controlling interest
Non-controlling interest 46 - 771 -
Net (loss) / earnings (17,257) 25,912 (22,980) (18,321)
(1) - Stock option and 16 15,477 1,099 28,587 6,073
restricted share expense (non-
cash) included in general and
administrative
Basic (loss) / earnings per 19 (0.04) 0.12 (0.07) (0.08)
common share
Diluted (loss) / earnings per (0.04) 0.12 (0.07) (0.08)
common share
Weighted average number of 19 422,308, 217,16 324,894,474 217,164,830
common shares outstanding - 439 4,830
basic
Weighted average number of 19 422,308, 217,16 324,894,474 217,164,830
common shares outstanding - 439 4,830
diluted
See accompanying notes to the Unaudited Interim Consolidated Financial
Statements
Uranium One Inc.
Consolidated Statements of Changes in Equity
For the three and nine months ended September 30, 2007
(in United States dollars)
UNAUDITED Equity Accumulate
componen d other Deficit Total
Share Contribu t of comprehens
capital ted converti ive income
surplus ble
debentur
e
Balance as at 613,607 31,286 - - (29,204) 615,689
December 31, 2006
Net profit for the - 13,110 - - (5,723) 7,387
period
Exercise of warrants 82 - - - - 82
Exercise of stock 42,802 (23,859) - - - 18,943
options and
restricted shares
Uranium One Inc. / 1,709,64 62,042 46,480 - -
1,818,169
UrAsia Energy Ltd 7
business combination
U.S. Energy Corp 99,401 - - - - 99,401
asset
purchase
consideration
Shares issued for 1,694 - - - - 1,694
services rendered
Unrealized gains - - - (8,578) - (8,578)
recognized on
translation of self
sustaining foreign
operations (1)
Balance as at June 2,467,23 82,579 46,480 (8,578) (34,927)
2,552,787
30, 2007 3
Net loss for the - 15,477 - - (17,257) (1,780)
period
Exercise of warrants 2,033 (1,035) - - - 998
Exercise of stock 6,794 (3,326) - - - 3,468
options and
restricted shares
Energy Metals 1,013,21 35,307 - - -
1,048,522
Corporation asset 5
purchase
consideration
Unrealized gains - - - 44,216 - 44,216
recognized on
translation of self
sustaining foreign
operations
Shares issued for 2,293 - - - - 2,293
services rendered
Loss on available - - - (371) - (371)
for sale securities,
net of tax benefit
(note 10)
Balance as at 3,491,56 129,002 46,480 35,267 (52,184)
3,650,133
September 30, 2007 8
(1) - This amount was incorrectly reported as $77,5 million at June 30, 2007.
Uranium One Inc.
Consolidated Statements of Comprehensive Income
For the three and nine months ended September 30, 2007
(in United States dollars)
UNAUDITED 3 months 9 months
ended ended
Sep 30, Sep 30,
2007 2007
$`000 $`000
Note Total Total
s
Net loss (17,257) (22,980)
Unrealized gains recognized on 44,216 35,638
translation of self-sustaining foreign
operations
Loss on available for sale securities, 10 (371) (371)
net of tax benefit
Comprehensive income (26,588) 12,287
See accompanying notes to the Unaudited Interim Consolidated Financial
Statements
Uranium One Inc.
Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2007 and October 31, 2006
(in United States dollars)
UNAUDITED 3 months ended 9 months ended
Sep 30, Oct 31, Sep 30, Oct 31,
2007 2006 2007 2006
Note $`000 $`000 $`000 $`000
s
Net (loss) / earnings (17,257) 25,912 (22,980) (18,321)
Items not affecting cash:
- Depreciation and depletion 1,067 1,209 7,950 5,479
- Accretion of asset retirement 14 280 8 588 68
obligation
- Stock option expense 16 15,477 1,099 28,587 6,073
- Interest accrued on loans and 3,707 - 5,226 -
debentures
- Unrealized foreign exchange (1,545) (27,885 11,146 14,777
(gain) / loss )
- Future income tax recovery (668) (379) (5,114) (2,077)
- Non-controlling interest (46) - (771) -
- Other (654) - 856 78
Movement in working capital 18 556 (805) 4,918 (2,841)
Cash flows (to) / from operating 917 (841) 30,406 3,236
activities
Acquisition of Uranium One Inc., 3 - - 271,935 -
net of acquisition cost
Acquisition of Energy Metals 82,410 - 82,410 -
Corporation, net of acquisition
cost
Acquisition of interest in Betpak - - - (1,177)
Dala
Acquisition of interest in - - - (45)
Kyzylkum
Acquisition of mineral interests, (82,770) (14,332 (167,494) (23,820)
plant and equipment )
Advance cash payment for other (1,331) (2,409) (5,644) (11,035)
assets
Joint Venture earn in payments 800 - 800 -
received
Restricted cash - - (500) (2,500)
Cash advances to joint ventures 7 - (4,500) (22,400) (23,913)
Cash proceeds from joint ventures 7 - - 18,780 -
Cash flows (to) / from investing (891) (21,241 177,887 (62,490)
activities )
Common shares issued, net 4,466 395 22,197 117,850
Shares issued by subsidiary to 161 - 499 -
non-controlling shareholders
Loans received 12,000 - 12,000 -
Short term loan repaid 18 (53,131) - (53,131) -
Subscriptions for special 6,072 - 6,072 -
warrants received by subsidiary
Other - - (175) (106)
Cash flows (to) / from financing (30,432) 395 (12,538) 117,744
activities
Effects of exchange rate changes 16,738 836 27,020 836
on cash and cash equivalents
Net (decrease) / increase in cash (13,668) (20,851 222,775 59,326
and cash equivalents )
Cash and cash equivalents at the 298,281 128,328 61,838 48,151
beginning of the period
Cash and cash equivalents at the 5 284,613 107,477 284,613 107,477
end of the period
Supplemental cash flow information (note 18)
See accompanying notes to the Unaudited Interim Consolidated Financial
Statements
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 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 engaged through subsidiaries and joint ventures in the
mining and production of uranium, and in the acquisition, exploration and
development of properties for the 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.
Uranium One owns the Dominion Uranium Mine in South Africa and a 70% interest in
the producing Akdala Uranium Mine in Kazakhstan. Uranium One is also developing
the South Inkai Project, in which it owns a 70% interest and the Kharasan
Project, in which it owns a 30% interest, both located in Kazakhstan. The
Corporation owns the Honeymoon Uranium Project in Australia. In the United
States, the Corporation owns the Shootaring Mill in Utah and the Hobson ISR
Uranium Processing Facility in Texas. The Corporation also owns a large
portfolio of uranium exploration properties in the western United States, South
Australia, the Athabasca Basin of Saskatchewan, Canada and the Kyrgyz Republic.
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 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 October 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 Locatio Ownersh Status
/ Operation n ip
Betpak Dala Akdala Uranium Kazakhs 70% Proportionatel
LLP Mine (1) tan y consolidated
Betpak Dala South Inkai Kazakhs 70% Proportionatel
LLP Uranium Project tan y consolidated
(1)
Kyzylkum LLP Kharasan Uranium Kazakhs 30% Proportionatel
Project (1) tan y consolidated
Uranium One Dominion Uranium South 100% Consolidated
Africa Mine (2) (5) Africa
Limited
Aflease Gold Modder East Gold South 68% Consolidated
Limited Project (3) Africa
Uranium One
Australia
(Proprietary) Honeymoon Uranium Austral 100% Consolidated
Limited Project (2) ia
Uranium One Shootaring Canyon United 100% Consolidated
USA Inc Uranium Mill (4) States
South Texas Hobson Facility United 99% Consolidated
Mining and La Palangana States
Venture Project (6)
Pitchstone Pitchstone Joint Canada 50% Proportionatel
Joint Venture Venture (2) y 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 Corp (note 4)
(5) - Refer to note 21 for the
contingent sale of an interest in the
Dominion Uranium Project
(6) - Legacy Energy Metals Corporation
assets (note 4)
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.
The financial statements of the entities that are determined to be integrated
foreign operations have been translated into United States dollars by
translating foreign currency denominated monetary assets and liabilities, which
includes future income tax, 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 entities that are determined to be self-
sustaining foreign operations have been translated into United States dollars by
translating all assets and liabilities, which includes future income tax, 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 are
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. Resource value and exploration potential for development
projects not in commercial production is noted as non-depletable mineral
properties. 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.
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
Business 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
recorded 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, at least 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.
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 3861 - Financial Instruments - Disclosure and presentation
Section 3865 - Hedges
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 carried at fair value, with the fair value adjustments
accounted for in other comprehensive income.
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.
Compound instruments
The component parts of compound instruments are classified separately as
financial liabilities and equity in accordance with substance of the contractual
agreement. At the date of issue, the fair value of the liability component is
estimated using the prevailing market interest rate for similar non-convertible
instruments. This amount is recorded as a liability on a amortized cost basis
until extinguished upon conversion or at the instrument`s maturity date. The
equity component is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is
recognized and included in equity, net of income tax effects, and is not
subsequently remeasured.
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.
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 with respect to 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, each UrAsia Energy share was
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 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. Upon
completion of the transaction, Uranium One was held approximately 60% by former
UrAsia Energy shareholders and approximately 40% by former Uranium One
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.
The value of the deemed issuance of UrAsia Energy shares was calculated using
the weighted average share price of UrAsia Energy shares two days before, the
day of, and two days after the date of the announcement of the arrangement. The
following weighted average 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 4.17%
Expected volatility of the share price 61%
Expected life 3.79 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 Mining assets -
Impairment and business combinations. 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) 1,709,6
47
Options, warrants and restricted shares 62,042
Equity component of convertible debentures 46,480
Acquisition costs 19,153
1,837,3
22
Net assets acquired:
Cash and cash equivalents 291,088
Other current assets 33,442
Mineral interests, plant and equipment 2,430,1
60
Goodwill 243,297
Other assets 13,502
Accounts payable and accrued liabilities (56,057
)
Short term loans (55,345
)
Asset retirement obligations (4,602)
Convertible debentures (118,45
0)
Future income tax liabilities (928,05
0)
Non-controlling interest (11,663
)
1,837,3
22
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
4 ASSET PURCHASE
4.1 U.S. Energy
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 45,739
Exploration properties and geological information 67,364
Stock pile 4,797
Asset retirement obligation (9,381)
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).
4.2 Energy Metals Corporation
On June 3, 2007, Uranium One and Energy Metals Corporation ("EMC") entered into
a definitive agreement whereby Uranium One agreed to acquire all of the issued
and outstanding common shares and options to purchase common shares of EMC. The
agreement was approved by the shareholders of EMC on July 31, 2007 and the
acquisition was completed on August 10, 2007. Under the agreement, Uranium One
exchanged 1.15 common shares of Uranium One for each common share of EMC. A
total of 100,444,543 Uranium One common shares were issued in exchange for
87,343,081 EMC common shares.
The cost of the acquisition includes the fair value of the issuance of
100,444,543 Uranium One common shares at $10.09 per share, plus 8,123,798 stock
options of EMC, of which 3,913,102 were exercisable at the date of acquisition,
exchanged for those of Uranium One with an average exercise price of $5.07 per
share and a fair value of the vested portion of $35.3 million plus Uranium One`s
estimated transaction costs of $9.4 million for a total purchase price of
$1,057.9 million.
The value of the Uranium One common shares issued was calculated using the share
price of Uranium One`s shares on the date of acquisition. The following weighted
average assumptions were used for the Black-Scholes option pricing model for
fair value of the stock options:
Risk-free interest rate 4.57%
Expected volatility of the share price 60%
Expected life 3.07 years
Dividend rate Nil
The transaction was accounted for as an asset purchase and the cost of each item
of property, plant and equipment acquired as part of 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. Uranium
One will continue to review the information and perform further analysis with
respect to these assets prior to finalizing the allocation of the purchase
price. The summarized results of the allocation is indicated in the table below:
Purchase price: $`000
100.4 million shares of Uranium One 1,013,2
15
Options of Uranium One 35,307
Acquisition costs 9,382
1,057,9
04
Net assets acquired:
Cash and cash equivalents 91,792
Marketable securities 6,909
Other current assets 3,550
Mining interests 1,452,5
24
Other non-current assets 21,442
Accounts payable and accrued liabilities (6,160)
Asset retirement obligations (3,241)
Other long term liabilities (6,235)
Future income tax liability (502,67
7)
1,057,9
04
5 CASH AND CASH EQUIVALENTS
Sep 30, Dec 31,
2007 2006
$`000 $`000
Cash 238,495 21,624
Money market instruments, including cashable 46,118 40,214
guaranteed investment certificates, bearer
deposit notes and commercial paper
284,613 61,838
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
6 ACCOUNTS AND OTHER RECEIVABLES
Sep 30, Dec 31,
2007 2006
$`000 $`000
Trade receivables 3,562 47,798
Value added tax and general sales tax 11,918 51
Prepayments and advances 7,877 894
Deposits and guarantees 4,391 -
Other receivables 4,620 443
32,368 49,186
Less: non current deposits and guarantees 3,107 -
included in other assets (note 11)
29,261 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 September 30, 2007 Betpak Kyzylku Pitchst Total
Dala m one
$`000 $`000 $`000 $`000
Cash 9,589 7,124 42 16,755
Other current assets 24,007 1,479 187 25,673
Mineral interests, plant and 641,125 164,641 5,609 811,375
equipment
Other assets 14,000 6,583 - 20,583
Current liabilities (10,721 (1,914) - (12,635
) )
Intercompany loan (1) - (24,000 - (24,000
) )
Long term debt (2) - (12,000 - (12,000
) )
Other (1,543) (132) - (1,675)
Future income taxes (276,02 (65,075 - (341,09
0) ) 5)
Asset retirement obligation (3,265) - - (3,265)
Net assets 397,172 76,706 5,838 479,716
As at December 31, 2006 Betpak Kyzylku Total
Dala m
$`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 (268,93 (68,662 (337,60
8) ) 0)
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.
(2) In addition to the $80 million loan (note 7.2) from the Corporation,
Kyzylkum negotiated unsecured bank loan facilities totaling $100 million. One
facility in the amount of $70 million was obtained from the Japan Bank for
International Cooperation and the other facility in the amount of $30 million
was obtained from Citibank. The first draw down against these facilities of $40
million was received in September 2007. The loan facilities will be repayable
after full repayment of the loan from the Corporation. The Corporation`s
proportionate share of these facilities will amount to $30 million when fully
drawn down. The loan facilities have floating interest rates of LIBOR plus 0.25%
and 0.35%, respectively.
The Corporation`s proportionate share of revenue, expenses, net income and cash
flows for the three and nine months ended September 30, 2007 are as follows:
Three months ended September Betpak Kyzylku Pitchst Total
30, 2007 Dala m one
$`000 $`000 $`000 $`000
Revenue 8,019 - - 8,019
Expenses (2,053) 2 (772) (2,823)
Foreign exchange gain 119 886 - 1,005
Income / (loss) before income 6,085 888 (772) 6,201
taxes
Provision for income taxes (1,625) - - (1,625)
Net income / (loss) 4,460 888 (772) 4,576
Nine months ended September 30, Betpak Kyzylku Pitchst Total
2007 Dala m one
$`000 $`000 $`000 $`000
Revenue 73,014 - - 73,014
Expenses (18,505 (685) (1,314) (20,504
) )
Foreign exchange loss (5,918) (456) - (6,374)
Income / (loss) before income 48,591 (1,141) (1,314) 46,136
taxes
Provision for income taxes (19,943 - - (19,943
) )
Net income / (loss) 28,648 (1,141) (1,314) 26,193
During 2007, approximately 60% of Betpak Dala`s sales are
expected to be under one contract. This contract was signed
prior to the acquisition of the Corporation`s interest in
Betpak Dala.
The Corporation`s proportionate share of revenue, expenses,
net income and cash flows for the three and nine months ended
October 31, 2006 are as follows:
Three months ended October 31, Betpak Kyzylku Total
2006 Dala m
$`000 $`000 $`000
Revenue 4,193 - 4,193
Expenses (1,505) - (1,505)
Foreign exchange gain 22,125 4,776 26,901
Profit before income taxes 24,813 4,776 29,589
(Provision for) / recovery of (791) 101 (690)
income taxes
Net income 24,022 4,877 28,899
Nine months ended October 31, Betpak Kyzylku Total
2006 Dala m
$`000 $`000 $`000
Revenue 21,498 - 21,498
(Expenses) / other income (9,808) 12 (9,796)
Foreign exchange loss (10,794 (3,545) (14,339
) )
Profit / (loss) before income 896 (3,533) (2,637)
taxes
Provision for income taxes (4,081) (5) (4,086)
Net loss (3,185) (3,538) (6,723)
7.2 Loans to Joint Ventures
Sep 30, Dec 31,
2007 2006
$`000 $`000
Current portion
Betpak Dala - 12,736
Kyzylkum 26,667 752
26,667 13,488
Long term portion
Betpak Dala - 6,250
Kyzylkum 30,745 33,600
30,745 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.
Sep 30, Dec 31,
2007 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 2,017 1,074
82,017 49,074
Less elimination of proportionate share - 30% (24,605 (14,722
) )
57,412 34,352
Less current portion (26,667 (752)
)
Long term portion 30,745 33,600
The loans to Kyzylkum are unsecured.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
8 INVENTORIES
Sep 30, Dec 31,
2007 2006
$`000 $`000
Finished uranium concentrates 12,678 5,791
Solutions and concentrates in process 7,138 5,035
Materials and supplies 6,601 1,218
Stockpiles 4,797 -
31,214 12,044
Less: non current inventory included in other 4,797 -
assets (note 11)
26,417 12,044
9 MINERAL INTERESTS, PLANT AND EQUIPMENT
September 30, 2007 December 31, 2006
Cost Accumul Net Cost Accumul Net
ated carryi ated carryi
amortiz ng amortiz ng
ation amount ation amount
$`000 $`000 $`000 $`000 $`000 $`000
Mineral interests 4,494, (29,244 4,465, 761,62 (17,539 744,08
723 ) 479 7 ) 8
Plant and equipment 538,23 (9,592) 528,64 25,348 (549) 24,799
7 5
5,032, (38,836 4,994, 786,97 (18,088 768,88
960 ) 124 5 ) 7
Owned assets 4,991, 768,88
974 7
Leased assets 2,150 -
Total net carrying 4,994, 768,88
amount as at end of the 124 7
period
A summary by property of the net book value is as follows (alphabetically by
country):
Mineral interests Total
Country Deplet Non- Total Plant June
able deplet and 30,
able equipm 2007
ent
$`000 $`000 $`000 $`000 $`000
Honeymoon Australia - 129,34 129,34 16,092 145,44
Project 8 8 0
Australia Australia - 77,351 77,351 - 77,351
exploration
Pitchstone Canada - 29,053 29,053 - 29,053
exploration
Akdala Uranium Kazakhstan 112,55 74,358 186,91 14,007 200,92
Mine 6 4 1
South Inkai Kazakhstan - 411,77 411,77 25,228 437,00
Project 5 5 3
Kharasan Uranium Kazakhstan - 141,54 141,54 23,234 164,78
Project 8 8 2
Kyrgyzstan Kyrgyzstan - 133 133 289 422
exploration
Dominion Uranium South Africa - 1,912, 1,912, 300,16 2,212,
Mine 646 646 3 809
Modder East Gold South Africa - 103,93 103,93 13,597 117,52
project 1 1 8
Sub-Nigel and South Africa - 22,798 22,798 439 23,237
other gold
projects
United States United States - 1,449, 1,449, 13,626 1,463,
exploration 982 982 608
projects
Shootaring United States - - - 45,496 45,496
Canyon Mill
Hobson Facility United States - - - 48,891 48,891
and La Palangana
Project
Corporate and - - - 27,583 27,583
other
Total 112,55 4,352, 4,465, 528,64 4,994,
6 923 479 5 124
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
9 MINERAL INTERESTS, PLANT AND EQUIPMENT (continued)
Mineral interests Total
Country Deplet Non- Total Plant Dec
able deplet and 31,
able equipm 2006
ent
$`000 $`000 $`000 $`000 $`000
Akdala Uranium Kazakhstan 118,75 74,358 193,11 16,294 209,40
Mine 5 3 7
South Inkai Kazakhstan - 404,12 404,12 3,312 407,43
Uranium Project 5 5 7
Kharasan Uranium Kazakhstan - 146,71 146,71 4,020 150,73
Project 7 7 7
Kyrgyzstan Kyrgyzstan - 133 133 220 353
exploration
Corporate and - - - 953 953
other
Total 118,75 625,33 744,08 24,799 768,88
5 3 8 7
The goodwill arising in the Uranium One / UrAsia Energy business combination
included in the respective reportable operating segments is shown in the table
below:
Recognize Foreign Total
d on exchange Sep 30,
acquisiti resulting 2007
on date from
translati
on
$`000 $`000 $`000
Aflease Gold 112,864 2,332 115,196
Dominion Uranium Project 130,433 2,695 133,128
243,297 5,027 248,324
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
10 AVAILABLE FOR SALE SECURITIES
Sep 30, Dec 31,
2007 2006
Fair Market to Fair Market to
value market value market
gain / gain /
(loss) (loss)
included included
in other in other
comprehen comprehen
sive sive
income income
$`000 $`000 $`000 $`000
Marketable Securities 7,324 (371) - -
Movement in available for sale securities
$`000
Balance as at December 31, 2006 -
Received as part of a joint venture 698
earn in payment
Purchased as part of the EMC 6,909
acquisition (refer note 4.2)
Purchased during the period 88
Fair value adjustment taken to other (371)
comprehensive income
Balance as at September 30, 2007 7,324
The Corporation has recognized a future income tax asset of $0.1 million that
relates to the cumulative mark-to-market losses on the available-for-sale
securities. The tax estimate is based on the assumption that if the securities
were sold at their September, 2007 fair market value of the capital losses would
be calculated at the appropriate tax rate of the jurisdiction in which the
security is held.
By holding these long-term investments the Corporation is inherently exposed to
various risk factors including currency risk, market price risk and liquidity
risk.
11 OTHER ASSETS
Sep 30, Dec 31,
2007 2006
$`000 $`000
Prepaid drill rigs 2,586 13,295
Advances for plant and equipment 11,077 9,790
Long term deposits (note 6) 3,107 -
Long term inventory (note 8) 4,797 -
Asset retirement fund (note 14) 20,061 -
Deferred charges for toll milling 10,546 -
agreement
Other 10,956 2,740
63,130 25,825
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
12 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Sep 30, Dec 31,
2007 2006
$`000 $`000
Trade payables 10,001 6,471
Accruals 43,496 260
Other 7,661 6,216
61,158 12,947
13 CONVERTIBLE DEBENTURES
On December 20, 2006, Uranium One completed a debt offering of Cdn $155.3
million ($133.2 million), (including the exercised over-allotment option of Cdn
$20.3 million ($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:
Sep 30, Dec 31,
2007 2006
$`000 $`000
Liability component on date of business 118,450 -
combination (note 3)
Interest charged 7,694 -
Coupon payment (3,201) -
Foreign exchange movement 11,960 -
Liability as at the end of the period 134,903 -
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
14 ASSET RETIREMENT OBLIGATIONS
Sep 30, Dec 31,
2007 2006
$`000 $`000
Opening balance 2,856 1,953
Acquisition of Uranium One (note 3) 4,602 -
Acquisition of US Energy assets (note 4.1) 9,389 -
Acquisition of EMC assets (note 4.2) 3,241 -
Incurred during the period 44 -
Accretion expense 588 604
Revision 27 299
Foreign exchange movement 584 -
Closing Balance 21,331 2,856
Sep 30, Dec 31,
2007 2006
$`000 $`000
Undiscounted and uninflated amount of 30,452 4,284
estimated cash flows ($`000)
Payable in years 1 - 4 - 18
10.5
Inflation rate 2.69% - 7.00%
7.00%
Discount rate 7.39% - 12.00%
14.5%
Security of $20.1 million for reclamation obligations has been provided in the
form required by the relevant country`s authorities (note 11).
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
15 SHARE CAPITAL
Common shares Number of Value of
shares shares
Sep Dec Sep Dec
30, 31, 30, 31,
2007 2006 2007 2006
Not $`000 $`000
e
UrAsia Energy - movement from
January 1, 2007 to April 20, 2007
Opening balance of common shares 480,24 479,72 613,60 612,94
in issue 0,704 2,871 7 1
Exercise of warrants 481,00 268,00 82 48
0 0
Exercise of stock options 1,866, 249,83 7,601 618
807 3
Closing balance of issued and 482,58 480,24 621,29 613,60
outstanding shares on April 20, 8,511 0,704 0 7
2007
Uranium One - Movement from April
20, 2007 to September 30, 2007
Conversion of UrAsia Energy shares 3 217,16 621,29
to Uranium One shares at a ratio 4,830 0
of 0.45
Shares of Uranium One owned by 138,12 1,709,
Uranium One shareholders at 9,435 647
acquisition
Exercise of warrants 150,00 2,033
0
Exercise of stock options and 3,850, 41,995
restricted shares 570
U.S. Energy asset purchase 4.1 6,607, 99,401
consideration 605
EMC asset purchase consideration 4.2 100,44 1,013,
4,543 215
Shares issued for services 323,74 3,987
rendered 8
Closing balance of issued and 466,67 480,24 3,491, 613,60
outstanding shares 0,731 0,704 568 7
16 CONTRIBUTED SURPLUS
The following table details the movements of contributed surplus during the
period:
Movement for the nine months ended Warran Restri Option TOTAL
September 30, 2007 ts cted s
shares
Not $`000 $`000 $`000 $`000
e
As at January 1, 2007 - - 31,286 31,286
Issued on Uranium One / UrAsia 3 26,407 853 34,782 62,042
Energy business combination
Issued on EMC asset acquisition 4.2 - - 35,307 35,307
Share options expensed - - 25,290 25,290
Share options exercised - - (26,11 (26,11
0) 0)
Restricted shares expensed - 3,297 - 3,297
Restricted shares exercised - (1,075 - (1,075
) )
Warrants exercised (1,035 - - (1,035
) )
As at September 30, 2007 25,372 3,075 100,55 129,00
5 2
Movement for the 5 months ended Warran Restri Option TOTAL
December 31, 2006 ts cted s
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
Assumptions
The fair value of stock options and restricted shared used to calculate the
compensation expense was estimated using the Black scholes option pricing model
with the following assumptions:
Sep 30, Dec 31,
2007 2006
Risk free interest rate 4.28% - 3.80%
4.64%
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:
Weighted
Number average
of
options exercise
price
Cdn $
Balance as at August 1, 2006 11,785,0 2.16
00
Granted 10,190,0 3.74
00
Exercised (249,833 1.95
)
Forfeiture or expiry of share options (66,667) 3.00
Outstanding options at December 31, 2006 21,658,5 2.90
00
Granted up to April 20, 2007 1,935,00 5.99
0
Exercised up to April 20, 2007 (1,866,8 2.11
07)
Forfeiture of share options up to April 20, (30,000) 1.80
2007
Outstanding options as at April 20, 2007 21,696,6 5.86
93
Converted UrAsia Energy share options on date 9,763,49 7.33
of business combination 8
Existing Uranium One share options on April 5,390,75 6.67
20, 2007 4
EMC replacement options 8,382,54 8.14
6
Granted subsequent to April 20, 2007 1,679,90 15.77
0
Exercised subsequent to April 20, 2007 (3,769,8 4.63
73)
Forfeiture of share options subsequent to (114,069 12.82
April 20, 2007 )
Outstanding options as at September 30, 2007 21,332,7 8.47
56
The stock option compensation expense for the three and nine months ended
September 30, 2007 was $15.5 million and $28.6 million (October 31, 2006: $1.1
million and $6.1 million ) for the Uranium One options and $0.1 and $0.2 million
for the Aflease Gold options for the three and nine months ended September 30,
2007. As at September 30, 2007, the aggregate unexpended fair value of unvested
stock options granted amounted to $30.8 million.
The following table summarizes certain information about Uranium One`s stock
options outstanding at September 30, 2007:
Options outstanding Options exercisable
Range of Exercise Number Weighte Weight Number Weighte Weight
Prices d ed d ed
outsta average averag exerci average averag
nding e sable e
as at remaini exerci as at remaini exerci
ng se ng se
Sep life price Seps life price
30, 30,
US$ 2007 (years) Cdn $ 2007 (years) Cdn $
1.09 to 2.74 1,713, 2.68 2.34 1,362, 2.68 2.48
519 474
3.03 to 4.81 3,625, 3.69 4.02 2,990, 3.69 4.02
221 887
5.00 to 7.79 3,725, 6.46 6.67 3,062, 6.46 6.57
229 141
8.26 to 9.90 5,586, 4.69 8.42 5,231, 4.69 8.42
828 246
10.40 to 11.91 746,75 5.72 11.60 365,00 5.72 11.55
0 0
12.02 to 13.70 3,511, 4.64 12.25 1,710, 4.64 12.09
800 528
14.12 to 16.87 2,423, 6.42 15.92 442,28 6.42 16.21
409 0
21,332 4.89 8.47 15,164 4.74 7.38
,756 ,556
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
Sep 30, Dec 31,
2007 2006
Restricted shares issued on business combination 404,231 -
(note 3)
Granted 20,000 -
Exercised during the period (80,697 -
)
Lapsed during the period (2,722) -
Total restricted shares outstanding at the end 340,812 -
of the period
Of the outstanding number of Restricted share rights, the grant date was July 1,
2007 for 20,000 Restricted share rights, December 8, 2006 for 95,720 Restricted
share rights, and June 7, 2006 for 225,092 Restricted share rights. Restricted
share rights will not expire while the participant is in the employ of the
Corporation.
The Restricted share rights expense for the three and nine months ended
September 30, 2007 was $0.7 million and $3.3 million. As at September 30, 2007
the aggregate unexpensed fair value of unvested restricted share rights granted
amounted to $1.5 million.
Warrants Number of Allocated
warrants value
Sep 30, Dec 31, Sep 30, Dec 31,
2007 2006 2007 2006
$`000 $`000
Issued on business combination 2,731,6 - 26,407 -
(note 3) 19
Exercised during the period (150,00 - (1,035) -
0)
At the end of the period 2,581,6 - 25,372 -
19
Number of Average
warrants exercise price
Sep 30, Dec 31, Sep 30, Dec 31,
Warrants comprise: 2007 2006 2007 2006
2008 Warrants 2,431,6 - 3.55 -
19
Series D Warrants 150,000 - 6.95 -
Total 2,581,6 - 3.75 -
19
Series D warrants represents 150,000 warrants that 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.
The Corporation has assumed all of the obligations of EMC arising under certain
agreements with its subsidiaries and third parties in connection with property
option and joint venture agreements of EMC or its subsidiaries, as the case may
be. Uranium One has reserved a total of 2,017,100 common shares of Uranium One
for issuance pursuant to the assumed obligations under the Contingent Share
Rights Agreements.
17 FOREIGN EXCHANGE GAINS / (LOSSES)
3 months ended 9 months ended
A summary of the foreign exchange Sep 30, Oct 31, Sep 30, Oct 31,
gain / (loss) by item is as
follows:
2007 2006 2007 2006
$`000 $`000 $`000 $`000
Unrealized foreign exchange (loss) (2,009) 26,900 (16,786 (15,702
/ gain on future income tax ) )
liability
Foreign exchange gain on other 12,736 123 14,102 1,615
items
10,727 27,023 (2,684) (14,087
)
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
18 CASH FLOW INFORMATION
3 months ended 9 months ended
Sep 30, Oct 31, Sep 30, Oct 31,
2007 2006 2007 2006
$`000 $`000 $`000 $`000
Changes in non-cash working
capital:
- Decrease / (increase) in 25,533 5,784 47,885 (2,497)
accounts and other receivables
- Increase in inventories (9,476) (4,810) (17,817 (7,870)
)
- (Decrease) / increase in (10,277 (1,779) (26,227 7,526
accounts payable and accrued ) )
liabilities
- (Decrease) / Increase in income (5,224) - 1,077 -
taxes payable
556 (805) 4,918 (2,841)
Significant non-cash investing
activities
EMC asset purchase 1,048,5 - 1,048,5 -
22 22
- common shares 1,013,2 - 1,013,2 -
15 15
- options 35,307 - 35,307 -
Uranium One business combination - - 1,818,1 -
69
- common shares - - 1,709,6 -
47
- options, warrants and restricted - - 62,042 -
share rights
- equity component of convertible - - 46,480 -
debentures
U.S. Energy asset purchase - - 99,401 -
Supplemental cash flow information
Cash interest paid - - 3,201 -
Cash taxation paid 7,184 748 20,831 6,239
Short term loans
The February 2005 Nedcor Securities loan represented 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.
The August 2006 Nedcor Securities loan represented draw-downs on a facility
provided by Nedcor Securities, secured by Uranium One Africa`s investment in
Aflease Gold shares.
Both loans were repaid during the quarter for a total cash consideration of
$55.2 million, including accrued interest with the security over the investments
being released upon repayment.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
19 BASIC LOSS PER SHARE AND DILUTED LOSS PER SHARE
3 months ended 9 months ended
Sep 30, Oct 31, Sep 30, Oct 31,
Basis (loss) / earnings per share (0.04) 0.12 (0.07) (0.08)
($); and
Diluted (loss) / earnings per (0.04) 0.12 (0.07) (0.08)
share ($)
is calculated based on a net (17,257 25,912 (22,980 (18,321
(loss) / profit for the period of ) ) )
($`000) and;
a weighted average basic number of 422,308 217,164 324,894 217,164
shares outstanding of ,439 ,830 ,474 ,830
a weighted average diluted number 422,308 217,164 324,894 217,164
of shares outstanding of ,439 ,830 ,474 ,830
For the three and nine month periods ended September 30, 2007 and the nine month
period ended October 31, 2006, the impact of outstanding share options and
warrants was excluded from the diluted share calculation because it was anti-
dilutive for loss per share purposes.
20 SEGMENTED INFORMATION
The Corporation`s reportable operating segments are summarized in the table
below (alphabetically by country):
For the three months ended September 30, 2007: (in $`000)
Countr Reven Opera Depre Explo Net Capit
y ue ting ciati ratio profi al
expen on & n t / expen
ses deple expen (loss ditur
tion ditur ) e
e
$`000 $`000 $`000 $`000 $`000 $`000
Honeymoon Uranium Austra - - (104) (491) (906) 6,102
Project and lia
exploration
Pitchstone Canada - - - (772) (772) -
Exploration
Akdala Uranium Mine Kazakh 8,019 (660) (655) - 1,998 769
stan
South Inkai Uranium Kazakh - - - - (3) 11,49
Project stan 1
Kharasan Uranium Kazakh - - - - 888 7,463
Project stan
Kyrgyzstan Kyrgyz - - (22) (541) (755) 3
exploration stan
Dominion Uranium Mine South - - - (167) (150) 49,04
Africa 1
Modder East Gold South - - (3) - 881 1,970
Project Africa
Shootaring Canyon United - - (121) (23) (536) 5
Uranium Mill States
Hobson facility and United - - (75) - (2,63 3,073
La Palangana Project States 6)
Exploration United - - (78) (2,26 (4,87 381
States 1) 5)
Corporate and other - - (9) (1,31 (10,3 2,472
8) 91)
Total 8,019 (660) (1,06 (5,57 (17,2 82,77
7) 3) 57) 0
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
20 SEGMENTED INFORMATION (continued)
For the nine months ended September 30, 2007:
Countr Reven Opera Depre Explo Net Capit
y ue ting ciati ratio profi al
expen on & n t / expen
ses deple expen (loss ditur
tion ditur ) e
e
$`000 $`000 $`000 $`000 $`000 $`000
Honeymoon Uranium Austra - - (197) (909) (1,80 11,55
Project and lia 4) 4
exploration
Pitchstone Canada - - - (1,31 (1,31 -
Exploration 4) 4)
Akdala Uranium Mine Kazakh 73,01 (9,76 (7,25 - 26,06 4,211
stan 4 1) 2) 0
South Inkai Uranium Kazakh - - - - 123 30,50
Project stan 4
Kharasan Uranium Kazakh - - - - (1,14 14,64
Project stan 1) 9
Kyrgyzstan Kyrgyz - - (42) (2,54 (3,09 49
exploration stan 9) 2)
Dominion Uranium Mine South - - - (520) 247 88,60
Africa 1
Modder East Gold South - - (6) - 871 3,534
Project Africa
Shootaring Canyon United - - (201) (31) (850) 5
Uranium Mill States
Hobson facility and United - - (75) - (2,63 3,073
La Palangana Project States 6)
Exploration United - - (161) (3,22 (26,7 381
States 9) 43)
Corporate and other - - (16) (3,43 (12,7 10,93
8) 01) 3
Total 73,01 (9,76 (7,95 (11,9 (22,9 167,4
4 1) 0) 90) 80) 94
As at September 30, 2007: (in $`000)
Country Minera Total Total
l assets liabil
proper ities
ty,
plant
and
equipm
ent
$`000 $`000 $`000
Honeymoon Uranium Australia 222,79 256,50 59,638
Project and 1 1
exploration
Pitchstone Canada 29,053 22,277 3,031
exploration
Akdala Uranium Mine Kazakhstan 200,92 247,68 85,483
1 0
South Inkai Uranium Kazakhstan 437,00 441,43 207,44
Project 3 9 0
Kharasan Uranium Kazakhstan 164,78 179,91 94,137
Project 2 5
Kyrgyzstan Kyrgyzstan 422 1,750 65
exploration
Dominion Uranium Mine South Africa 2,212, 2,221, 889,43
809 778 7
Modder East Gold South Africa 140,76 111,75 47,886
Project 5 8
Shootaring Canyon United States 45,496 57,657 7,266
Uranium Mill
Hobson facility and United States 48,891 1,475, 506,38
La Palangana Project 506 9
Exploration United States 1,463, 62,336 29,981
608
Corporate and other 27,583 632,00 119,27
8 5
Total 4,994, 5,710, 2,050,
124 605 028
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
20 SEGMENTED INFORMATION (continued)
For the three months ended October 31, 2006: (in $`000)
Countr Revenu Operat Deprec Explor Net Capita
y e ing iation ation profit l
expens & expend / expend
es deplet iture (loss) iture
ion
$`000 $`000 $`000 $`000 $`000 $`000
Akdala Uranium Kazakh 4,192 (1,417 (1,189 - 7,972 11,550
Mine stan ) )
South Inkai Kazakh - - - - 15,337 -
Uranium Project stan
Kharasan Kazakh - - - - 4,877 3,379
Uranium Project stan
Kyrgyzstan Kyrgyz - - 17 (1,779 (1,733 (138)
exploration stan ) )
Corporate and - 2,436 3 - (541) (459)
other
Total 4,192 1,019 (1,169 (1,779 25,912 14,332
) )
For the nine months ended October 31, 2006: (in $`000)
Countr Revenu Operat Deprec Explor Net Capita
y e ing iation ation profit l
expens & expend / expend
es deplet iture (loss) iture
ion
$`000 $`000 $`000 $`000 $`000 $`000
Akdala Uranium Kazakh 21,498 (8,406 (1,189 - 4,347 18,574
Mine stan ) )
South Inkai Kazakh - - - - (8,901 -
Uranium Project stan )
Kharasan Kazakh - - - - (3,548 5,555
Uranium Project stan )
Kyrgyzstan Kyrgyz - - 92 (4,427 (4,358 150
exploration stan ) )
Corporate and - 6,187 3 - (5,861 (459)
other )
Total 21,498 (2,219 (1,094 (4,427 (18,32 23,820
) ) ) 1)
As at December 31, 2006: (in $`000)
Country Minera Total Total
l assets liabil
proper ities
t,
plant
and
equipm
ent
$`000 $`000 $`000
Akdala Uranium Kazakhstan 209,40 285,65 89,317
Mine 7 4
South Inkai Kazakhstan 407,43 407,43 194,23
Uranium Project 7 7 6
Kharasan Kazakhstan 150,73 156,26 68,816
Uranium Project 7 7
Kyrgyzstan Kyrgyzstan 353 1,271 166
exploration
Corporate and 953 120,98 3,394
other 9
Total 768,88 971,61 355,92
7 8 9
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements
as at September 30, 2007 and December 31, 2006
UNAUDITED
21 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 for 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 September 30, 2007, Micawber 397 has not paid any part of
the purchase price.
22 SUBSEQUENT EVENT
Aflease Gold convertible bonds
Aflease Gold announced on October 25, 2007 that it had secured commitments for
subscriptions for approximately $90 million of convertible bonds, due 2012, to
international institutional investors. The bonds issued by Aflease Gold will,
subject to the terms and conditions of the bonds, be convertible at the option
of the bondholders into ordinary shares of Aflease Gold. The bonds will be
issued at 100% of their principal amount. The coupon and the yield to maturity
on the bonds have been set at 8.5% and 10.0% respectively and the coupon will be
payable quarterly in arrears. The conversion price has been set at a premium of
25% to the volume weighted average price of the ordinary shares on the JSE on
Friday, 19 October 2007. The issuance of the bonds is subject to approval by
shareholders and the JSE (Johannesburg Stock Exchange).
Corporate Information
Corporate Office
Uranium One Inc.
390 Bay Street, Suite 1610
Toronto, Ontario M5H 2Y2
Telephone: (416) 350 3657
Facsimile: (416) 363 6806
E-mail: info@uranium1.com
Website: www.uranium1.com
Registrar and Transfer Agent
Computershare Investor Services Inc.
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
Telephone: (416) 981 9500
Facsimile: (416) 981 9800
Auditors
Deloitte & Touche LLP
Four Bentall Centre
2800-1055 Dunsmuir Street
Vancouver, BC V7X1P4
Telephone: (604) 669 4466
Facsimile: (604) 685 0395
Legal Counsel
Fasken Martineau DuMoulin LLP
Toronto Dominion Bank Tower
Toronto-Dominion Centre
66 Wellington Street West, Suite 4200
Toronto, Ontario M5K 1N6
Telephone: (416) 366 8381
Facsimile: (416) 364 7813
Stock Exchange Listings
The Toronto Stock Exchange
Trading Symbol: UUU
The Johannesburg Securities Exchange
Trading Symbol: UUU
Date: 15/11/2007 09:32:14 Produced by the JSE SENS Department.
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