| Thu 14 Feb 2008, 9:14 | | FUM - First Uranium Corporation - Consolidated Unaudited Financial Statements |
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FUM
FIU
FUM - First Uranium Corporation - Consolidated Unaudited Financial Statements
For The Three And Nine Months Ended December 31, 2007
First Uranium Corporation
(Continued under the laws of British Columbia, Canada)
(Registration number C0777384)
(South African registration number 2007/009016/10)
ISIN: CA33744R1029
Share code: FUM
("First Uranium")
Consolidated Unaudited Financial Statements For The Three And Nine Months Ended
December 31, 2007
The interim consolidated financial statements contained herein have not been
audited by the Corporation`s independent auditors.
First Uranium Corporation
Consolidated Balance Sheets (unaudited)
(in United States Dollars)
December March 31
31
2007 2007
Notes US$`000 US$`000
ASSETS
Current assets
Cash and cash equivalents 215,216 138,914
Amounts receivable 5 14,038 1,713
Inventories 6 2,461 292
Receivables from related party 21 - 6,763
231,715 147,682
Non-current assets
Property, plant and equipment 7 166,677 30,954
Asset retirement funds 8 5,144 2,791
Loan to related party 21 1,019 -
172,840 33,745
Total assets 404,555 181,427
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 10 19,112 5,702
Payables to related party 21 832 -
19,944 5,702
Non-current liabilities
Senior unsecured convertible debentures 11 103,668 -
Future tax liability 15 10,342 -
Asset retirement obligations 12 14,172 5,377
128,182 5,377
SHAREHOLDERS` EQUITY
Share capital 13 215,637 182,673
Equity portion of senior unsecured convertible 11 46,504 -
debentures
Contributed surplus 14 4,549 2,460
Accumulated deficit (10,261) (14,785)
256,429 170,348
Total equity and liabilities 404,555 181,427
See accompanying notes to the Consolidated Financial Statements
First Uranium Corporation
Consolidated Statements of Operations and Deficit and Comprehensive Income
(unaudited)
(in United Stated Dollars)
Three months Nine months ended
ended
December 31 December 31
2007 2006 2007 2006
Notes US$`000 US$`000 US$`000 US$`000
Revenue 6,633 - 15,069 -
Cost of sales (5,433) - (13,030) -
1,200 - 2,039 -
Other Income 1,379 - 2,276 -
Expenditures
General, consulting and (4,058) (706) (8,548) (3,356)
administrative expenditures
Stock-based compensation 14 (1,079) (519) (2,513) (519)
Pumping, feasibility and (1,880) (350) (2,948) (350)
rehabilitation costs
Amortization of property, plant 7 (46) - (144) -
and equipment
(7,063) (1,575) (14,153) (4,225)
Operating loss (4,484) (1,575) (9,838) (4,225)
Interest income 4,467 529 12,840 422
Interest expense (1,629) - (4,087) (101)
Accretion expense on convertible 11 (3,724) - (8,103) -
debentures
Foreign exchange gains 16 1,245 (2,741) 13,636 (1,335)
Net income (loss) before income (4,125) (3,787) 4,448 (5,239)
taxes
Provision for income taxes 15 127 - 76
Net income (loss) for the period (3,998) (3,787) 4,524 (5,239)
Accumulated deficit at the (6,263) (8,309) (14,785) (6,857)
beginning of the period
Accumulated deficit at the end of (10,261) (12,096) (10,261) (12,096)
the period
Basic and diluted (loss) income 17
per common share ($) (0.03) (0.04) 0.04 (0.06)
Net (loss) income (3,998) (3,787) 4,524 (5,239)
Adjustments - - - -
Comprehensive (loss) income 3 (3,998) (3,787) 4,524 (5,239)
See accompanying notes to the Consolidated Financial Statements
First Uranium Corporation
Consolidated Statements of Cash Flows (unaudited)
(in United Stated Dollars)
Three months Nine months ended
ended
December 31 December 31
2007 2006 2007 2006
Notes US$`000 US$`000 US$`000 US$`000
Net (loss) income before taxes (4,125) (3,787) 4,448 (5,239)
Changes not affecting cash:
- Interest income 18.1 (48) (414) (146) -
- Interest expense 18.2 - - - (101)
- Accretion expense on 11 3,724 - 8,103 -
convertible debentures
- Amortization on property, 524 - 1,483 -
plant and equipment
- Stock-based compensation 14 1,079 519 2,648 519
Net income (loss) after interest 1,154 (3,682) 16,536 (4,821)
and non-cash items
Movement in working capital:
- (Increase)/decrease in 448 - (759) -
inventories
- Increase in accounts (5,848) - (11,079) -
receivable
- Increase in net (receivables
from)/payables to related parties 18.3 (460) (13,682) 6,576 (7,498)
- Increase/(decrease) in
accounts payable and accrued (7,835) 2,057 (1,951) 3,461
liabilities
Cash flows (utilized in)
generated from operating (12,541) (15,307) 9,323 (8,858)
activities
Additions to property, plant and 18.4 (28,035) (11,726) (76,395) (16,945)
equipment
Rehabilitation costs incurred - - (272) -
Net cash movement on acquisition 18.5 - - 1,249 -
of MWS
Cash flows from investing (28,035) (11,726) (75,419) (16,945)
activities
Issuance of senior unsecured 11 - 177,696 130,561 178,470
convertible debentures
Bridging loan to facilitate 13 43,618 - 43,618 -
Waterpan transaction
Repayment of bridging loan
pursuant to Waterpan transaction 14 (43,618) - (43,618) -
Proceeds from shares 13 506 - 848 -
Cash flows from financing 506 177,696 131,409 178,470
activities
Net effect of exchange rate
changes on cash held in foreign 954 2,741 10,989 1,335
currencies
Net (decrease) increase in cash
and cash equivalents for the (39,116) 153,404 76,302 154,002
period
Cash and cash equivalents at 254,332 1,158 138,914 560
beginning of the period
Cash and cash equivalents at end 215,216 154,562 215,216 154,562
of the period
See accompanying notes to the Consolidated Financial Statements
First Uranium Corporation
Notes to the Consolidated Financial Statements (unaudited)
December 31, 2007
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
First Uranium Corporation ("First Uranium" or "the Corporation") is a
Canadian resource company focused on the development of uranium and gold
projects in South Africa. See Note 7 "Property, Plant and Equipment" for a
description of the projects. The Corporation has a primary listing on the
Toronto Stock Exchange ("TSX") and a secondary listing on the Johannesburg
Stock Exchange ("JSE"). First Uranium owns 100% of First Uranium Limited
("FUL"), which in turn holds 100% of First Uranium (Proprietary) Limited
("FUSA") and 100% of Ezulwini Mining Company (Proprietary) Limited ("EMC"),
which owns and operates the Ezulwini Mine.
During the three months ending June 30, 2007, the Corporation acquired all
the issued and outstanding shares of Mine Waste Solutions (Proprietary)
Limited and its subsidiary, Chemwes (Proprietary) Limited (collectively
"MWS"), an existing tailings treatment company which had an operating gold
recovery plant in place. As a result of the MWS purchase, First Uranium
changed its plans for the Buffelsfontein Tailings Recovery Project so that
the historical and future tailings from the Buffelsfontein mine (the
"Buffelsfontein Tailings") will now be transported by pipeline to the MWS
site and processed through MWS`s existing gold plant and, subject to their
completion, through the new uranium recovery plant and additional gold
recovery facilities which are currently being constructed at the MWS site.
For greater clarity, the Buffelsfontein Tailings Recovery Project, as
enhanced and modified by the addition of MWS, will henceforth be referred
to as MWS.
During the three months ending December 31, 2007, First Uranium issued 6.1
million shares to Waterpan Mining Consortium ("Waterpan") completing the
purchase of the remaining 10% interest in EMC as contemplated in the
Corporation`s initial public offering in December 2006 ("the Offering")
(the "Waterpan transaction") and as disclosed in the Offering documents and
in the annual financial statements for the year ending March 31, 2007 and
the interim financial statements for the three months ending June 30, 2007
and September 30, 2007. This transaction resulted in EMC becoming wholly-
owned by First Uranium. First Uranium and Waterpan collaborated to effect
this transaction considering the terms of the Offering and as such the
acquisition of the remaining 10% interest in EMC is accounted for under
Canadian GAAP as a continuity of interests. Certain adjustments have been
reflected in the financial statements to reflect the acquisition as if the
share exchange had been effective for the period from inception to December
31, 2007.
The reporting currency of the Corporation is the US dollar, and all amounts
in these financial statements are in US dollars (US$), except where
otherwise indicated.
2. SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim consolidated financial statements have been prepared
by First Uranium in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP") for preparation of the interim financial
statements. The preparation of the unaudited interim consolidated financial
statements is based on the same accounting policies and practices as those
disclosed in Note 1 "Nature of operations" and Note 2 "Significant
accounting policies" to the Corporation`s audited consolidated financial
statements for the year ended March 31, 2007, except for changes as
described in Note 3 "Changes in accounting policies". These unaudited
interim consolidated financial statements do not include all disclosures
required by GAAP for annual financial statements, and accordingly should be
read in conjunction with the Corporation`s audited consolidated financial
statements for the year ended March 31, 2007.
2.1 Financial instruments
Transaction costs for financial assets and liabilities
For a financial asset or financial liability classified other than as held
for trading, the Corporation has added the transaction costs that are
directly attributable to the acquisition or issue of a financial asset or
financial liability to the fair value of the asset or liability established
at the recognition of the asset or liability.
2.2 Inventories
Inventories include ore stockpiles, gold in process and supplies and
spares, and are recorded at the lower of cost or net realizable value. The
cost of ore stockpiles and gold produced is determined principally by the
weighted average cost method using related production costs. Costs of gold
produced inventories include costs such as milling costs, mining costs and
mine general and administration costs but excluding transport, refining and
taxes. Net realizable value is determined with reference to current market
prices. Stockpiles consist of ore to be processed through the processing
plant. The stockpiles have been sampled and evaluated and are on surface.
All ore is expected to be fully processed within the life of mine. Spares
and consumable stores are valued at weighted average cost after appropriate
impairment of redundant and slow moving items.
2.3 Revenue recognition
Revenue from sales is recognized when significant risks and rewards of
title and ownership of the goods are transferred upon delivery to the final
refiner.
Interest income is recognized on a time proportion basis, taking account of
the principal outstanding and the effective rate over the period of
maturity, when it is determined that such income will accrue to the
Corporation.
2.4 Earnings or loss per share
Basic earnings or loss per share is computed by dividing earnings or loss
available to common shareholders by the weighted average number of common
shares outstanding during the period. The treasury stock method is used to
calculate diluted earnings or loss per share. Diluted earnings or loss per
share is similar to basic earnings or loss per share, except that the
denominator is increased to include the number of additional common shares
that would have been outstanding assuming that options with an average
market price for the period greater than their exercise price are exercised
and the proceeds used to repurchase common shares. In applying the treasury
stock method, options with an exercise price greater than the average
quoted market price of the common shares are not included in the
calculation of diluted earnings per share, as the effect is anti-dilutive.
3. CHANGES IN ACCOUNTING POLICIES
Effective April 1, 2007, the Corporation adopted two new accounting
standards that were issued by the Canadian Institute of Chartered
Accountants ("CICA"):
Handbook Section 1530 - Comprehensive Income
Handbook Section 3855 - Financial Instruments - Recognition and Measurement
As provided under the standards, the comparative interim consolidated
financial statements have not been restated. There were no transitional
effects and as a result no adjustments have been recorded to deficit as at
April 1, 2007.
Section 1530 - Comprehensive income
This section describes the reporting and disclosure standards with respect
to comprehensive income and its components. Comprehensive income is
composed of net income and other comprehensive income. At this time the
Corporation has none of the elements that will give rise to comprehensive
income.
Section 3855 - Financial instruments - recognition and measurement
This section establishes standards for recognizing and measuring financial
assets, financial liabilities and non-financial derivatives. It requires
that financial assets and liabilities including derivatives be recognized
on the balance sheet when the Corporation becomes a party to the
contractual provisions of the financial instrument or a non-financial
derivative contract. All financial instruments should be measured at fair
value on initial recognition except for certain related party transactions.
Fair value is the amount at which an item could be exchanged between
willing parties. Measurement in subsequent periods depends on whether the
financial instruments have been classified as held for trading, available-
for-sale, held-to-maturity, loans and receivables, or other liabilities.
The Corporation designated certain financial assets and liabilities and
adopted the following new accounting policies:
Cash and cash equivalents
Cash and cash equivalents are classified as "assets available-for-sale" and
are measured at fair value at each balance sheet date. Any changes in fair
value are recognized in net income in the period in which the change
arises. Fair value is calculated using published price quotations in an
active market, where applicable. The carrying values for cash and cash
equivalents at March 31 2007 approximated their fair values because of
their short terms of maturity; no adjustments were made to the opening
values.
Accounts receivable and receivables from related party
These assets are classified as "loans and receivables" and are recorded at
amortized cost, which upon their initial measurement is equal to their fair
value. Subsequent measurements are recorded at amortized cost using the
effective interest rate method. The carrying values for these assets at
March 31 2007 approximated their fair values because of their short terms
of maturity; no adjustments were made to the opening values.
Asset retirement funds
The asset retirement funds are classified as "assets available-for-sale"
and are measured at fair value at each balance sheet date. Any changes in
fair value are recognized in net income in the period in which the change
arises. Fair value is calculated using the quoted prices of South African
equities in an active market, with interest and dividends recognized in net
income; unrealized gains or losses are recognized in Other Comprehensive
Income. Any equities without market quotes are carried using the cost
method. The carrying values for the asset retirement funds at March 31 2007
approximated their fair values; no adjustments were made to the opening
values.
Accounts payable and accrued liabilities and payable to related party
These liabilities are classified as "other financial liabilities" and are
initially measured at their fair values. Subsequent measurements are
recorded at amortized cost using the effective interest rate method. The
carrying values for these liabilities at March 31 2007 approximated their
fair values; no adjustments were made to the opening values.
Senior unsecured convertible debentures
The sum of the carrying amounts assigned to the liability and equity
components of the convertible debenture on initial recognition is always
equal to the carrying amount that would be ascribed to the instrument as a
whole. No gain or loss arises from recognizing and presenting the
components of the instrument separately. The relative fair value method is
used to determine the value of the option directly either by reference to
the fair value of a similar option, if one exists, or by using an option
pricing model. The value determined for each component is then adjusted on
a pro rata basis to the extent necessary to ensure that the sum of the
carrying amounts assigned to the components equals the amount of the
consideration received for the convertible debenture.
Accounting Changes
In July 2006, the Canadian Institute of Chartered Accountants (CICA) issued
a new version of Section 1506 of the CICA Handbook, "Accounting Changes".
This new standard establishes criteria for changing accounting policies,
together with the accounting treatment and disclosure of changes in
accounting policies and estimates, and correction of errors. This new
section was adopted by the Company on January 1, 2007 with no impact on
results.
Accounting policy choice for transaction costs
On June 1, 2007, CICA Emerging Issues Committee issued Abstract no. 166,
"Accounting Policy Choice for Transaction Costs" (EIC - 166). This EIC
addresses the accounting policy choice of expensing or adding transaction
costs related to the acquisition of financial assets and financial
liabilities that are classified as other than held-for-trading.
Specifically, it requires the same accounting policy choice be applied to
all similar financial instruments classified as other than held-for-
trading, but permits a different policy choice for financial instruments
that are not similar. EIC - 166 requires retroactive application to all
transaction costs accounted for in accordance with Section 3855. The
current recognition policy for transaction costs is consistent with this
guidance.
Future accounting standards
The CICA has issued the following new sections which are effective for
interim periods beginning on or after October 1, 2007. These new standards
relate only to disclosure and presentation and will have no impact on the
Company`s results.
Financial instruments - disclosures
Section 3862, "Financial Instruments - Disclosures``, describes the
required disclosure for the assessment of the significance of financial
instruments for an entity`s financial position and performance and of the
nature and extent of risk arising from financial instruments to which the
entity is exposed and how the entity manages those risks.
Financial instruments - presentation
Section 3863, "Financial Instruments - Presentation", establishes standards
for presentation of the financial instruments and non-financial
derivatives. It carries forward the presentation related requirement of
Section 3861, "Financial Instruments - Disclosure and Presentation".
Capital disclosures
Section 1535, "Capital Disclosures", establishes standards for disclosing
information about an entity`s capital and how it is managed. It describes
the disclosure of the entity`s objectives, policies and processes for
managing capital, the quantitative data about what the entity regards as
capital, whether the entity has complied with any capital requirements,
and, if it has not complied, the consequences of such non compliance.
4. BUSINESS ACQUISITION
Acquisition of Mine Waste Solutions (Proprietary) Limited
First Uranium, through its wholly-owned subsidiary FUSA, acquired all of
the issued and outstanding shares of MWS. MWS owns and operates an
existing gold mine tailings and re-processing facility adjacent to First
Uranium`s Buffelsfontein Tailings Recovery Project in South Africa.
The MWS acquisition closed on June 6, 2007 (effective date of acquisition),
at which point First Uranium assumed management control of MWS. For
accounting purposes, net income from MWS operations of US$1.9 million for
the period from April 1, 2007 to June 6, 2007 has been applied to reduce
the cost of the MWS acquisition.
A total consideration of US$32.3 million was paid for the MWS acquisition
in the form of an issuance of 3.1 million First Uranium common shares
valued at US$31.6 million and US$0.7 million in cash for transaction costs.
The table below sets out the preliminary allocation of the purchase price
to the assets acquired and liabilities assumed, based on preliminary
estimates of fair value. Final valuations of the assets and liabilities
have not been completed. Furthermore, the future income tax assets and
liabilities are not yet complete due to the inherent complexity associated
with these valuations. The preliminary purchase price allocation is subject
to adjustments.
The acquisition was accounted for by the purchase method of accounting and
the estimated allocation of fair value to the assets acquired and
liabilities assumed as at June 6, 2007 was:
Reported Reported
at at
December Adjustments September
31, 2007 US$`000 30, 2007
US$`000 US$`000
Current assets 4,608 - 4,608
Asset retirement fund 1,950 - 1,950
Property, plant and equipment 40,430 - 40,430
Total assets acquired 46,988 - 46,988
Current liabilities 1,476 - 1,476
Lease obligations 28 - 28
Asset retirement obligation 2,777 - 2,777
Future tax liability 10,445 - 10,445
Total liabilities assumed 14,726 - 14,726
Net assets acquired 32,262 - 32,262
Current assets include cash and cash equivalents of US$1.3 million (net of
transaction costs) (see Note 18.5).
Although the estimated allocation of fair value to the assets acquired and
liabilities assumed is subject to changes as additional information becomes
available, the final allocation is not expected to differ materially from
the estimated allocation.
The excess of the purchase consideration over the net book value of MWS of
US$35.2 million was attributed to the tailings for processing of US$29.5
million and US$5.6 million adjustment of the fair value of property, plant
and equipment obtained with the MWS acquisition less the related future tax
liability arising on these assets.
5. AMOUNTS RECEIVABLE
December March 31
31
2007 2007
US$`000 US$`000
Trade receivables 5,017 99
Value Added Tax and Goods and Services Tax 8,866 1,463
Prepayments and advances 73 144
Deposits and guarantees 82 7
14,038 1,713
6. INVENTORIES
December March 31
31
2007 2007
US$`000 US$`000
Gold work-in-progress 751 -
Spares and consumables 835 292
Stockpiles 875 -
2,461 292
7. PROPERTY, PLANT AND EQUIPMENT
Accumulat Net
Cost ed carrying
December 31, 2007 US$`000 amortizat amount
ion US$`000
US$`000
Land and buildings 3,826 (32) 3,794
Mine infrastructure 27,558 - 27,558
Mining assets 64,127 - 64,127
Tailings for processing 29,642 (1,108) 28,534
Mining rights 82 - 82
Plant and equipment 41,191 (135) 41,056
Motor vehicles 862 (74) 788
Office furniture and equipment 366 (15) 351
Computer equipment and software 476 (89) 387
Total 168,130 (1,453) 166,677
Accumulat Net
Cost ed carrying
March 31, 2007 US$`000 amortizat amount
ion US$`000
US$`000
Land and buildings 863 - 863
Mine infrastructure 3,710 - 3,710
Mining assets 16,942 - 16,942
Mining rights 13 - 13
Plant and equipment 9,000 - 9,000
Motor vehicles 179 (8) 171
Office furniture and equipment 56 (1) 55
Computer equipment and software 205 (5) 200
Total 30,968 (14) 30,954
Included in the above are mining related assets with a net carrying value
of US$101.4 million (March 31, 2007: US$29.0 million) related to the
Ezulwini Mine and US$64.3 million (March 31, 2007: US$0.8 million) related
to MWS.
Included in the US$64.3 million net carrying value related to the MWS, is
US$28.5 million relating to the Tailings for processing acquired with the
MWS acquisition as well as US$5.4 million adjustment of the fair value of
property, plant and equipment obtained with the MWS acquisition (see Note
4).
As at December 31, 2007, all property, plant and equipment were owned by
the Corporation, except for motor vehicles with a net carrying value of
US$0.02 million which are held under capitalized lease contracts.
As at March 31, 2007, all property, plant and equipment were owned by the
Corporation.
Ezulwini Mine
The Ezulwini Mine project involves the recommissioning of an underground
uranium and gold mining operation located on the outskirts of the town of
Westonaria in Gauteng Province, South Africa. The Corporation has
substantially completed the re-commissioning of the Ezulwini Mine and has
been in the process of ramping up underground production. The development
of the Ezulwini Mine includes the rehabilitation and re-engineering of the
main mine shaft through the installation of a floating steel tower, de-
stressing the area where the shaft pillar intersects the shaft barrel, and
the construction of uranium and gold processing facilities.
EMC purchased certain surface and underground assets relating to the
Ezulwini Mine for a total consideration of US$7.8 million, effective
December 22, 2006.
As part of the Ezulwini acquisition, the related environmental
rehabilitation trust fund amounting to US$2.7 million (see Note 8 - Asset
retirement funds) was transferred into the Ezulwini trust fund and EMC took
over the related environmental rehabilitation provision of US$5.1 million
(see Note 12 - Asset retirement obligations) as determined by the South
African Department of Minerals and Energy (the "DME"). The difference of
US$2.4 million between the environmental rehabilitation trust fund and the
environmental rehabilitation provision has been capitalized as part of
mining infrastructure.
On December 8, 2006 the Ezulwini mining right was awarded to Simmer & Jack
by the DME. On December 20, 2006, EMC and Simmer & Jack entered into an
agreement (the "Ezulwini Mining Right Agreement") pursuant to which Simmer
& Jack agreed to take all necessary steps to obtain all ministerial
approvals in order to effect the transfer of the Ezulwini mining right from
Simmer & Jack to EMC.
MWS
MWS is a uranium and gold tailings recovery operation located in the
western portion of the Witwatersrand Basin. With the MWS acquisition (see
Note 4), the Corporation acquired an existing operating gold mine tailings
re-processing facility and an historic uranium plant, adjacent to the
Buffelsfontein property, where the Buffelsfontein Tailings are now being
treated. The Corporation commissioned the pump station and 10.5-kilometre
pipeline between the MWS property and the Buffelsfontein property during
December 2007 and hydraulic mining of the Buffelsfontein tailings dams
commenced. MWS is also in the process of expanding the plant facilities on
the MWS property.
During December 2006, FUSA entered into an agreement to acquire surface
tailings from Buffelsfontein Gold Mines Limited ("BGM"), a subsidiary of
Simmer & Jack (the "Buffelsfontein Tailings and Rights Agreement"). It was
originally contemplated that the transaction would be recognized upon the
satisfaction of the conditions precedent in the Buffelsfontein Tailings and
Rights Agreement. While the conditions have not yet been satisfied, MWS
commenced processing the material from the Buffelsfontein tailings dams and
receiving the benefits thereof, in December 2007 and consequently MWS
assumed the asset retirement obligation related to the Buffelsfontein
tailings dams (see Note 12 - Asset retirement obligations). The
corresponding asset of US$6.2 million associated with the Buffelsfontein
tailings dams is capitalized as part of tailings for processing and
amortized over the estimated life of the Buffelsfontein tailings dams.
8. ASSET RETIREMENT FUNDS
December March 31
31
2007 2007
US$`000 US$`000
Balance, beginning of the period 2,791 -
Trust fund assumed on acquisition of Ezulwini - 2,686
mine
Trust fund assumed on acquisition of MWS (see 1,950 -
Note 4)
Investment income 146 82
Contributions in respect of guarantee - 103
Costs incurred - (80)
Foreign exchange differences 257 -
Balance, closing of the period 5,144 2,791
The asset retirement funds consisting of environmental rehabilitation trust
funds are under the Corporation`s control and are to be used to fund the
respective mining operation`s rehabilitation liabilities. Funds in the
trust consist primarily of cash held in interest bearing accounts, together
with investments in South African equities. An accredited South African
financial institution manages the trust funds under the direction of the
trustees. The trust deed limits the trustees` investments to institutions
and investment vehicles as referred to in section 37A of the South African
Income Tax Act.
9. GUARANTEES
The following guarantees have been issued:
Guarantee
value
To Regarding US$`000
DME Ezulwini environmental 5,427
rehabilitation provision
Murray and Roberts Ezulwini shaft rehabilitation 2,174
Cementation (Pty) Ltd project
Eskom Holdings Ltd Electricity accounts 1,228
The Ezulwini rehabilitation trust funds included in the asset retirement
funds (see Note 8) have been pledged as security against the guarantees.
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
December March 31
31
2007 2007
US$`000 US$`000
Trade payables 17,083 5,302
Accruals 2,029 400
19,112 5,702
The trade payables primarily relate to committed purchases for capital
expenditure of US$11.5 million and US$2.4 million at the Ezulwini Mine and
MWS, respectively.
11. SENIOR UNSECURED CONVERTIBLE DEBENTURES
On May 3, 2007 First Uranium issued senior unsecured convertible debentures
(the "Debentures") in denominations of Cdn $1,000 in the principal amount
of US$135.1 million (Cdn$150 million). The interest rate on the Debentures
is 4.25% per annum. The Debentures pay interest semi-annually in arrears on
June 30th and December 31st and have a maturity date of June 30, 2012. The
Debentures are convertible at the option of the holder into common shares
at any time prior to the maturity date at an exchange price of Cdn$16.42
per share.
The Debentures may not be redeemed by the Corporation prior to June 30,
2010. On or after June 30, 2010 and prior to the maturity date, the
Debentures may be redeemed by the Corporation, in whole or in part from
time to time, provided that the weighted average trading price of the
Common Shares on the TSX for the 20 consecutive trading days ending five
trading days prior to the date on which notice of redemption is provided is
at least 130% of the exchange price of Cdn$16.42.
First Uranium has the option, subject to regulatory approval, to satisfy
its obligations to repay the principal amount of the Debentures upon
redemption or at maturity by issuing and delivering that number of freely
tradable Common Shares obtained by dividing the principal amount of the
Debentures by 95% of the weighted average trading price of the Common
Shares on the TSX for the twenty consecutive trading days ending five
trading days before the date fixed for the redemption or maturity.
The equity component of the Debentures was valued on issuance at US$46.5
million which is recorded as a separate component of shareholders` equity.
The conversion option was valued using the Black-Scholes pricing model with
the following assumptions: Expected dividend yield 0%, expected volatility
56%, risk free interest rate 4.2% and expected life of five years.
The liability component of the Debentures is being accreted such that the
liability at maturity will equal the gross proceeds of US$135.1 million
(Cdn$150 million) less conversions. The amounts accreted during the three
and nine months ending December 31, 2007 were US$3.7 million and US$8.1
million respectively. The cost of issuing the Debentures amounted to
US$4.5 million.
As at December 31, 2007, no portion of the Debenture had been converted.
Interest paid for the three and nine months ending December 31, 2007
amounted to US$1.6 million and US$ 4.1 million.
12. ASSET RETIREMENT OBLIGATIONS
December March
31 31
2007 2007
US$`000 US$`000
Balance, beginning of the period 5,377 -
Provision assumed on acquisition of the Ezulwini - 5,133
Mine
Provision assumed on acquisition of MWS (see Note 2,777 -
4)
Provision assumed with commencement of hydraulic
mining of the Buffelsfontein tailings dams 6,231 -
Accretion expense 59 244
Rehabilitation costs (272) -
Balance, closing of the period 14,172 5,377
The environmental rehabilitation provision assumed by EMC as part of the
acquisition of the Ezulwini assets was determined by the DME as at November
2006. During March 2007 an independent review was performed by Johan Fourie
& Associates on the Ezulwini assets relating to environmental
rehabilitation provision that confirmed the provision at March 31, 2007 was
sufficient.
The environmental rehabilitation provision assumed as part of the MWS
acquisition is to be partly funded by its rehabilitation trust fund (see
Note 8). During April 2007, an independent valuation of the rehabilitation
provision was completed by GCS (Proprietary) Limited, a water environmental
engineering and science consultancy company. The provision was based on the
estimated net cost to rehabilitate the mine.
The environmental rehabilitation provision associated with the
Buffelsfontein tailings dams was assumed with the commencement of the
hydraulic mining of the Buffelsfontein tailings dams in December 2007.
Management estimated the respective environmental rehabilitation provision
assumed at US$ 6.2 million (see Note 7).
13. SHARE CAPITAL
Number of shares
December March December March 31
31 31 31
2007 2007 2007 2007
Ordinary shares `000 `000 US$`000 US$`000
Balance, beginning of period 121,686 87,536 206,726 4,176
Shares issued pursuant to the
Waterpan transaction 6,141 - - -
Balance adjusted with shares 127,827 87,536 206,726 4,176
issued to Waterpan
Shares issued in public or - 33,350 - 201,795
private offering
Shares issued in respect of
acquisition (see Note 4) 3,094 - 31,557 -
Exercise of stock options 123 800 848 728
Contributed surplus relating
to stock options exercised - - 559 27
131,044 121,686 239,690 206,726
Less: Share issue costs - - (24,053) (24,053)
Balance, closing of period 131,044 121,686 215,637 182,673
Authorized
The authorized share capital of First Uranium consists of an unlimited
number of common shares.
Issued and outstanding
On June 1, 2006, 800,000 stock options were exercised for proceeds of
US$0.7 million.
During December 2006, First Uranium issued 33.35 million shares pursuant to
the Offering at Cdn$7 per share for gross proceeds of US$201.8 million;
On June 6, 2007, First Uranium issued 3,093,980 shares valued at US$31.6
million relating to the acquisition of MWS (see Note 4).
On December 14, 2007, First Uranium issued 6.1 million shares pursuant to
the Offering (see Note 1).
During the three and nine months ending December 31, 2007, 71,430 and
122,525 stock options were exercised respectively, at an exercise price of
Cdn$7 per share.
14. CONTRIBUTED SURPLUS - STOCK-BASED COMPENSATION
The Corporation maintains a stock-option plan (the "Option Plan") for
employees, officers, directors and for certain consultants who provide
ongoing support to First Uranium and its subsidiaries. Under the Option
Plan, options typically are granted for a period of up to ten years
following the date of grant. The amounts granted usually reflect the level
of responsibility of the particular optionee and his or her contributions
to First Uranium.
The Board of Directors has discretion to set the terms of any vesting
schedule of each option granted. Except in specified circumstances, options
are not assignable and non-transferable, and terminate 90 days after the
optionee ceases to be employed or associated with First Uranium.
The terms of the Option Plan further provide that the price at which shares
may be issued under the Option Plan shall not be less than the volume
weighted average trading price of the shares on the TSX for the five
trading days immediately preceding the day the option is granted.
The following table details the movements of contributed surplus during the
period:
December March 31
31
2007 2007
US$`000 US$`000
Balance, beginning of period 2,460 27
Transfer to share capital relating to stock (559) (27)
options exercised
Stock options granted during the period 2,648 2,460
Balance, end of period 4,549 2,460
Assumptions
The fair value of shares used to calculate the compensation expense was
determined as the share price on the grant date adjusted by the probability
of the recipients remaining employed or associated with the Corporation
until the vesting date.
For purposes of stock-based compensation, the fair values of these stock
options were estimated using the Black-Scholes option pricing model with
the assumptions used for the grants as follows:
December September June 30 March
31 30 31
2007 2007 2007 2007
Expected dividend yield 0% 0% 0% 0%
Expected volatility of the 63% 63% 56% 85%
Corporation`s share price
Risk free interest rate - 4.75% 4.75% 4.81% 3.90%
Canadian rates
Expected life 3 years 3 years 3 years 3
years
Due to the short history of First Uranium trading on the TSX, changes in
the subjective input assumptions can materially affect the fair value
estimate, and therefore, the existing model does not necessarily provide a
reliable measure of the fair value of First Uranium`s stock options.
During the 2007 fiscal year, 1,223,001 stock options were granted for a
period of 10 years following the date of the grant and are subject to
vesting within 2 years from the date of grant.
During the three and nine months ending December 31, 2007, 209,286 and
325,715 stock options were granted respectively for a period of 10 years
following the date of the grant and are subject to vesting within 2 years
from the date of grant.
The following table is a summary of the Corporation`s options granted under
its stock-based compensation plan:
Weighted average
Number of options exercise price
(Cdn$)
December March 31 December March
31 31 31
2007 2007 2007 2007
Outstanding options at 1,223,001 800,000 7.30 1.00
beginning of period
Granted during the period 325,715 1,223,001 10.48 7.30
Exercised during the period (122,525) (800,000) (7.00) (1.00)
Forfeited during the period (76,192) - (7.00) -
Outstanding options at end of 1,349,999 1,223,001 8.73 7.30
period
The stock-based compensation expense recognized in the statements of
operations and deficit was US$1.1 million and US$2.5 million for the three
and nine months ending December 31, 2007. respectively. For both the three
and nine months ending December 31, 2006, the stock-based compensation
expense was US$0.5 million. During the three and nine months ending
December 31, 2007 US$0.06 and US$0.2million stock-based compensation was
capitalized to the projects. No stock-based compensation was capitalized
to projects during the three and nine months ending December 31, 2006. As
at December 31, 2007, the aggregate unexpensed and fair value of unvested
stock options granted amounted to US$0.8 million (March 31, 2007: US$2.9
million).
The following table summarizes information about the First Uranium`s
outstanding stock options at December 31, 2007:
Options outstanding Options exercisable
Weighted Weighted Weighted Weighted
Exercise Number of average average Number of average average
price options remaining exercise options remaining exercise
ranges outstanding life price exercisable life price
Cdn$ (years) (Cdn$) (years) (Cdn$)
7.00 to 928,427 8.97 7.94 237,955 8.97 7.06
8.99
9.00 to 361,572 9.67 10.05 120,523 9.67 10.05
11.99
12.00 to 60,000 9.41 12.87 20,000 9.41 12.87
13.99
1,349,999 9.18 8.73 378,478 9.22 8.32
15. TAXATION
Provision for income taxes
The reconciliation of income taxes attributable to operations computed at
the statutory tax rates to income tax recovery, using a statutory tax rate
of 35.47% for the three and nine months ending December 31, 2007 (three and
nine months ending December 31, 2006: 36.12%), is as follows:
Three months ended Nine months ended
December 31 December 31
2007 2006 2007 2006
Net (loss) income before (4,125) 786 4,448 (1,452)
taxation
Income tax payable (1,463) 284 1,577 (525)
(receivable) at statutory
rate
Difference between Canadian
rates and foreign (300) (95) (345) 41
jurisdiction
Change in valuation allowance (229) - (834) -
Adjustment for future tax 3,385 (170) 1,924 417
rate difference
Permanent differences (1,419) (19) (2,514) 67
Other (101) - 116 -
(127) - (76) -
Future tax liability
Dec 31 Mar 31
2007 2007
US$`000 US$`000
Capital assets 11,043 -
Non-capital loss carry-forwards (995) (1,602)
Share issue costs (7,405) (6,629)
Foreign resource expenses (1,136) (1,099)
Foreign exchange (3,142) (850)
(1,635) (10,180)
Less: Valuation allowance 11,977 10,180
10,342
-
As at December 31, 2007, the Corporation had non-capital losses of
approximately US$3.3 million that may be applied against earnings in future
years. These losses are expected to expire in 2026.
Due to uncertainties in the Corporation`s ability to utilize its net
operating losses in all of its operations, the Corporation has provided a
valuation allowance against those future tax assets for which uncertainty
exist.
16. FOREIGN EXCHANGE GAINS
Three months Nine months
ended ended
December 31 December 31
2007 2006 2007 2006
US$`000 US$`000 US$`000 US$`000
Foreign exchange gains 1,245 (2,741) 13,636 (1,335)
The Corporation`s assets are held in Canadian dollars ("Cdn$") and South
African Rand ("ZAR"), while its accounts are presented in US dollars. The
foreign exchange gains on translation during the three and nine months
ending December 31, 2007 reflect the strengthening of the Canadian dollar
and the South African Rand against the US dollar.
The majority of the Corporation`s funds are currently held in Canadian
dollar denominated short-term deposits bearing interest at 4.85% per annum.
The approval of the South African Reserve Bank ("SARB"), which was required
in connection with the issue of the Debentures, includes a condition that
the Corporation transfers the net Debenture proceeds to bank accounts of
the Corporation in South Africa and convert the funds to ZAR, by May 3,
2008.
17. BASIC AND DILUTED (LOSS) EARNINGS PER SHARE
Three months Nine months
ended ended
December 31 December 31
2007 2006 2007 2006
Basic (loss) earnings per share of (0.03) (0.04) 0.04 (0.06)
(US$)
is calculated based on net (loss)
income for the period of (US$`000) (3,998) (3,787) 4,524 (5,239)
and a weighted average number of
shares outstanding of (`000) 129,614 94,975 128,622 95,243
Diluted (loss) earnings per share (0.03) (0.04) 0.04 (0.06)
of (US$)
is calculated based on net (loss)
income for the period of (US$`000) (3,998) (3,787) 4,524 (5,239)
and a diluted weighted average
number of shares outstanding of 129,993 93,048 128,642 89,393
(`000)
The impact of the Debentures issued on May 3, 2007, has been excluded from
the diluted shares computation because it was anti-dilutive for earnings
per share purposes.
The Waterpan transaction is accounted for under Canadian GAAP as a
continuity of interests. As a result the weighted average number of shares
outstanding has been adjusted to reflect the acquisition as if the share
exchange had been effective for the period from inception to December 31,
2007 (see Note 1).
18. NOTES TO THE CASH FLOW STATEMENT
18.1 Non-cash interest income
Three months Nine months
ended ended
December 31 December 31
2007 2006 2007 2006
US$`000 US$`000 US$`000 US$`000
Total interest income (4,467) (529) (12,840) (422)
Add back: Cash interest income 4,419 115 12,694 422
(48) (414) (146) -
18.2 Non-cash interest expense
Three months Nine months
ended ended
December 31 December 31
2007 2006 2007 2006
US$`000 US$`000 US$`000 US$`000
Total interest expense (1,629) - (4,087) (101)
Add back: Cash interest paid 1,629 - 4,087 -
- - - (101)
18.3 Decrease in net receivables from related parties
Three months Nine months
ended ended
December 31 December 31
2007 2006 2007 2006
US$`000 US$`000 US$`000 US$`000
Increase in receivables from (1,019) 457 5,744 1,052
related parties
Increase in payable to related 559 2,361 832 4,085
parties
Add back:
- Interest income accrued on - 63 - 133
amounts receivable
- Interest expense accrued on - (204) - (348)
amounts payable
(460) 2,677 6,576 4,922
18.4 Additions to property, plant and equipment
Three months Nine months ended
ended
December 31 December 31
2007 2006 2007 2006
US$`000 US$`000 US$`000 US$`000
Total additions to property, plant (48,122) (11,726) (96,482) (16,945)
and equipment
Add back:
- Asset associated with 6,231 - 6,231 -
Buffelsfontein tailings dams
- Accrued capital expenditure 13,856 - 13,856 -
(28,035) (11,726) (76,395) (16,945)
18.5 Net cash movement on acquisition of MWS
Three months Nine months
ended ended
December 31 December 31
2007 2006 2007 2007
US$`000 US$`000 US$`000 US$`000
Cash and cash equivalents taken
over on date of acquisition - - 1,954 -
Less: Expenses related to MWS - - (705) -
acquisition
- - 1,249 -
19. COMMITMENTS
Capital commitments
December March 31
31
2007 2007
US$`000 US$`000
Ezulwini Mine 53,390 14,836
MWS 3,393 -
Total contractual obligations 56,783 14,836
The capital commitments are payable within one year.
Toll treatment agreement
The Corporation entered into an agreement with a third party, commencing in
January 2009, to calcine the yellowcake from First Uranium to produce
uranium oxide packaged for dispatch to converters. Either party may
terminate the agreement on 18 months notice. The third party calciner will
construct a plant with one-half of the capacity of the plant to be
dedicated for the processing of the First Uranium yellowcake and will
acquire a road tanker to transport the yellowcake from the First Uranium
operations to the calciner`s operations. First Uranium will pay one-half
of the construction cost of the calcining plant up to a maximum of ZAR15
million and one-half of the cost of the tanker (together referred to as the
"Loan"). The Loan will be effective as of January 5, 2009 and is to be
repaid in monthly instalments over a seven year period commencing January
30, 2009. The Loan will bear interest equal to the prime overdraft rate as
quoted by the South African Reserve Bank, plus 2% commencing January 5,
2009. If First Uranium cancels the agreement, in the absence of a right
under the agreement to cancel the agreement in prescribed circumstances,
First Uranium will continue to be obligated to repay the entire Loan.
Royalty agreements
On December 20, 2006, FUSA, Simmer & Jack and Aberdeen entered into an
arrangement (the "Aberdeen Arrangement") pursuant to which (i) Simmer &
Jack confirmed that it will pay to Aberdeen the amount of any royalty owing
to Aberdeen under the Aberdeen Loan Agreement in respect of gold produced
from the tailings to be acquired by FUSA from BGM pursuant to the
Buffelsfontein Tailings and Rights Agreement, and (ii) FUSA confirmed that
it will pay to Simmer & Jack, immediately prior to any payment contemplated
in (i) above, an amount equal to the amount of any royalty payment to be
made by Simmer & Jack to Aberdeen in respect of gold produced from the
tailings to be acquired by FUSA from BGM pursuant to the Buffelsfontein
Tailings and Rights Agreement.
Pursuant to the Buffelsfontein Tailings and Rights Agreement dated December
20, 2006 among BGM, Simmer & Jack and FUSA, in consideration for the
cession of the Buffelsfontein Tailings and Mining Right from BGM to FUSA as
well as certain servitudes, and the right to the tailings arising from
future underground mining operations by BGM at the BGM Underground Mine,
FUSA agreed to pay to BGM a royalty of 1% plus value added tax of the gross
revenue earned by FUSA from the sale of uranium, gold, sulphur and other
minerals recovered from the processing of tailings acquired by FUSA from
BGM pursuant to the Buffelsfontein Tailings and Rights Agreement.
As and when there is production from the Buffelsfontein tailings dams
acquired from BGM pursuant to the Buffelsfontein Tailings and Rights
Agreement, FUSA will become liable to pay: (i) to Simmer & Jack, under the
Aberdeen Arrangement Agreement, an amount equal to the royalty payable by
Simmer & Jack to Aberdeen pursuant to the Aberdeen Loan Agreement in
respect of the tailings to be acquired from BGM pursuant to the
Buffelsfontein Tailings and Rights Agreement, and (ii) to BGM the above-
mentioned 1% royalty pursuant to the terms of the Buffelsfontein Tailings
and Rights Agreement.
During December 2007 MWS commenced processing the Buffelsfontein tailings
and as a result MWS is now obligated to pay a royalty to BGM pursuant to
the Buffelsfontein Tailings and Rights Agreement and make other payments to
Simmer & Jack pursuant to the Aberdeen Arrangement in respect of the metals
recovered from the Buffelsfontein tailings.
20. FINANCIAL INSTRUMENTS
Financial risk factors
The Corporation`s activities expose it to a variety of financial risks,
including the effects of changes in debt and equity market prices, foreign
currency exchange rates and interest rates. The Corporation`s overall risk
management program focuses on the unpredictability of financial markets and
seeks to minimize potential adverse effects on the financial performance of
the Corporation.
Risk management carried out by the Corporation is approved by the Board of
Directors.
(i) Foreign exchange and commodity price risk
The Corporation does not hedge its exposure to foreign currency exchange
risk nor does it hedge its exposure to commodity price fluctuation risk.
(ii) Interest rate risk
The Corporation does not hedge its exposure to interest rate risk. Deposits
attract interest at rates that vary with prime. The Corporation`s policy is
to manage interest rate risk so that fluctuations in variable rates do not
have a material impact on the statement of operations and deficit.
(iii) Credit risk
The Corporation has no significant concentrations of credit risk. The
Corporation has policies in place to ensure that sales of products and
services are made to customers with an appropriate credit history. The
Corporation has policies that limit the amount of credit exposure to any
one financial institution.
(iv) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities, the availability of funding through an adequate
amount of credit facilities and the ability to close out market positions.
The Corporation manages liquidity risk through an ongoing review of future
commitments and credit facilities. Cash flow forecasts are prepared and
adequate utilized borrowing facilities are monitored.
Fair value estimation
The fair value of publicly traded derivatives and trading securities is
based on quoted market prices at the balance sheet date.
In assessing the fair value of other financial instruments, the Corporation
uses a variety of methods and makes assumptions that are based on market
conditions existing at each balance sheet date. Option pricing models and
estimated discounted value of future cash flows, are used to determine fair
value for the remaining financial instruments.
The face value less any estimated credit adjustments for financial assets
and liabilities with a maturity of less than one year are assumed to
approximate their fair values. The fair value of financial liabilities for
disclosure purposes is estimated by discounting the future contractual cash
flows at the current market interest rate available to the Corporation for
similar financial instruments.
The actual disclosed values of the financial instruments all approximate
the fair values of these instruments.
21. RELATED PARTY TRANSACTIONS AND COMMITMENTS
December Mar 31
31
2007 2007
Related party balances US$`000 US$`000
FUSA amount (to)/from Simmer & Jack - 5,079
First Uranium amount (to)/from Simmer & Jack (832) 1,684
Loan to Chief Executive Officer 1,019 -
Three months Nine months ended
ended
December 31 December 31
2007 2006 2007 2006
Related party transactions US$`000 US$`000 US$`000 US$`000
Shared services fees to (907) (929) (1,893) (1,730)
Simmer & Jack
Fees to empowerment company (55) - (271) -
Interest to Simmer & Jack by - (46) - (101)
EMC
Interest from Simmer & Jack - 106 - 235
by FUSA
Interest on loan to Chief 9 - 9 -
Executive Officer
On December 20, 2006 First Uranium and Simmer & Jack entered into a shared
services agreement (the "Shared Services Agreement"). Pursuant to the
terms of the Shared Services Agreement, First Uranium may retain certain
services to be provided by Simmer & Jack, including project management and
technical services, cash management and investment services, accounting,
treasury and financial services, corporate secretarial support and human
resources and staffing services, including payroll and benefits
administration, and such other services as may be required by First Uranium
and which Simmer & Jack is able and willing to provide. The expenses for
the three and nine months ending December 31, 2007 relates to such services
received.
During the three months ending December 31, 2007, US$0.4 million (December
31, 2006: US$0.9 million) of the total shared services fees were
capitalized, representing services provided in respect of technical
services for the Ezulwini Mine and the Buffelsfontein Tailings Recovery
Project. During the nine months ending December 31, 2007, US$0.8 million
(December 31, 2006: US$1.0 million) of such costs were capitalized.
Prior to December 2006, the Corporation shared its premises with other
companies that had common directors and reimbursed the related companies
for its proportional share of expenses or was reimbursed by the related
companies for their proportional share of expenses. During both the three
and nine months ending December 31, 2006, the Corporation was charged $0.6
million for consulting services provided by related directors, officers and
consultants of the Corporation.
In addition, First Uranium has agreed to reimburse Simmer & Jack with
respect to 50% of fees that Simmer & Jack is required to pay to an
empowerment company for consulting services regarding transformation, human
resources and occupational health and safety. BJ Njenje, AX Sisulu and SLB
Mapisa, shareholders of the empowerment company, are also directors of
Simmer & Jack.
On September 27, 2007, the Board approved a loan in the amount of Cdn$1
million to the Chief Executive Officer of First Uranium for the purpose of
facilitating his purchase of a family home. The loan is for a term of six
years, is unsecured and bears interest at 4% payable monthly in arrears.
The loan was advanced on October 17, 2007.
As previously disclosed, the Corporation entered into an agreement on
December 12, 2006 with Waterpan for the purchase of the remaining 10% of
the shares of EMC in consideration for 6.1 million common shares of First
Uranium. On December 14, 2007, EMC obtained a bridging loan from a South
African banking institution to purchase Waterpan`s 10% shareholding in EMC.
Waterpan used the proceeds to partially fund the purchase of 6.1 million
common shares (the "Waterpan Shares") of First Uranium for a consideration
of $43.6 million. First Uranium used the proceeds from the sale of the
Waterpan Shares to repay the bridging loan to the South African banking
institution and to pay the taxes resulting from the purchase of the EMC
shares. Concurrent with the closing of this transaction, one million of
the Waterpan Shares were sold by way of a private placement. Waterpan has
a contractual agreement to retain the remaining Waterpan Shares until April
1, 2009. Certain shareholders of Waterpan are officers or employees of
First Uranium or directors of its subsidiaries. The Waterpan transaction
had no net impact on the cash flow of the First Uranium group of companies.
22. SUBSEQUENT EVENTS
Regular power outages have recently beset South Africa, causing disruption
in business activities. Coal-fed power stations are running low on fuel
and several power-generating facilities are down for maintenance. No new
power generating facilities are expected to start up in South Africa until
2012. The primary response of Eskom, South Africa`s national power
utility, to these power deficiencies is to ask that its customers conserve
energy and/or to restrict the amount of power supplied to them.
On January 25, 2008, Eskom advised that continuity of electric power supply
could not be guaranteed. Specific warnings were communicated to South
African mining companies, including the Corporation, which were
specifically asked by Eskom to reduce power consumption to 80% of load
requirements. While this was subsequently increased to 90%, Eskom also
informed mining companies that this authorization could be withdrawn at a
later date, as electrical power supply remains tight.
After a preliminary review of the feasibility of the Corporation generating
its own power, the Board has provisionally concluded that the Corporation`s
two projects are sufficiently robust to continue development as planned
based on the addition of power generation capacity.
The initial impact of this decision is as follows:
For the Ezulwini Mine:
- given the uncertainty of power supply at a third-party gold plant to
toll-treat the Corporation`s ore, the Board has decided to postpone
the ramp-up of the underground production and to accelerate the shaft
refurbishment program
- the weekly operating plan to date has been to focus on mine
development and hoisting for three days and on shaft rehabilitation
for four days; henceforth the intention is to focus entirely on shaft
refurbishment until the operation`s gold plant is commissioned in
April 2008
- the first 50,000 tonne per month module of the gold plant is on
schedule for commissioning in April 2008 using existing generator
capacity; should Eskom power not be forthcoming, the Ezulwini Mine has
existing power generating capacity of 13 MVA ("1 Megavolt Ampere = 1
Mega Watt") which will be utilized
- the first 50,000 tonne per month module of the uranium plant remains
on schedule for commissioning in June 2008; a feasibility study of
power generation options is underway to reduce power reliance on
Eskom;
- commissioning of the remaining modules of the gold and uranium plant
will be deferred by approximately a year to January 2010 to coincide
with the corresponding mine development plan
For MWS:
- the current MWS operation is presently unaffected by the power
situation as it has been drawing additional power from BGM
- upgrading of the MWS gold plant to increase the design capacity to
630,000 tonnes per month remains on schedule for completion in Q4 2008
- the expansion of the current operations, however, will require
additional power; a power generation feasibility study has been
initiated with the expected result that the expansion will be delayed
by approximately three months
The decision to invest in generating our own power is a temporary measure
until the power situation has normalized which may take several years. It
is expected that the Corporation will be able to monetize a significant
portion of its investment in owner-generated power at that time.
23. SEGMENTED INFORMATION
Segmented information is presented in respect of the Corporation`s business
and geographical segments. The primary format business segments, is based
on the Corporation`s management and internal reporting structure. Inter-
segment reporting is determined on an arm`s length basis.
Segment results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly income earning assets and revenue,
interest-bearing loans, borrowing and expenses, and corporate assets and
expenses. Segment capital expenditure is the total cost incurred during the
period to acquire segment assets that are expected to be used for more than
one period.
South Africa Canada
Ezulwini
Mine MWS* Corporate Total
Three months ended December US$`000 US$`000 US$`000 US$`000
31, 2007
Revenue - 6,633 - 6,633
Cost of sales - (5,433) - (5,433)
- 1,200 - 1,200
Other income 1,375 4 - 1,379
Expenditure
General, consulting and
administrative expenditures (1,478) (269) (2,311) (4,058)
Stock-based compensation (383) (147) (549) (1,079)
Pumping, feasibility and (1,607) (273) - (1,880)
rehabilitation costs
Amortization on property, (44) - (2) (46)
plant and equipment
(3,512) (689) (2,862) (7,063)
Operating profit (loss) (2,137) 515 (2,862) (4,484)
Interest income 142 152 4,173 4,467
Interest expense - - (1,629) (1,629)
Accretion expense on - - (3,724) (3,724)
convertible debentures
Foreign exchange gains 155 3,367 (2,277) 1,245
(losses)
Income (loss) before taxes (1,840) 4,034 (6,319) (4,125)
Provision for income taxes - 127 - 127
Net income (loss) for the (1,840) 4,161 (6,319) (3,998)
period
Total assets 125,733 76,312 202,510 404,555
Total liabilities (18,275) (24,640) (105,211) (148,126)
Capital expenditure (17,358) (10,677) - (28,035)
*Includes the Buffelsfontein Tailings Recovery Project.
South Africa Canada
Ezulwini
Mine MWS* Corporate Total
Three months ended December US$`000 US$`000 US$`000 US$`000
31, 2006
Expenditure
General, consulting and
administrative expenditure - (591) (115) (706)
Stock-based compensation - (519) (519)
Pumping and feasibility (350) - - (350)
costs
Operating loss (350) (591) (634) (1,575)
Interest income 247 102 180 529
Foreign exchange gains (2,266) 154 (629) (2,741)
(losses)
Loss before income taxes (2,369) (335) (1,083) (3,787)
Provision for income taxes - - - -
Net loss for the period (2,369) (335) (1,083) (3,787)
Total assets 24,302 16,419 154,653 195,374
Total liabilities (15,249) (256) (8,773) (24,278)
Capital expenditure (11,726) - - (11,726)
*Includes the Buffelsfontein Tailings Recovery Project.
South Africa Canada
Ezulwini
Mine MWS* Corporate Total
Nine months ended December US$`000 US$`000 US$`000 US$`000
31, 2007
Revenue - 15,069 - 15,069
Cost of sales - (13,030) - (13,030)
- 2,039 - 2,039
Other income 2,272 4 - 2,276
Expenditure
General, consulting and
administrative expenditures (2,168) (431) (5,949) (8,548)
Stock-based compensation (694) (225) (1,594) (2,513)
Pumping, feasibility and (2,316) (632) - (2,948)
rehabilitation costs
Amortization on property, (135) - (9) (144)
plant and equipment
(5,313) (1,288) (7,552) (14,153)
Operating profit (loss) (3,041) 755 (7,552) (9,838)
Interest income 273 264 12,303 12,840
Interest expense (4) - (4,083) (4,087)
Accretion expense on - - (8,103) (8,103)
convertible debentures
Foreign exchange gains (2,225) 4,622 11,239 13,636
(losses)
Income (loss) before income (4,997) 5,641 3,804 4,448
taxes
Provision for income taxes - 76 - 76
Net income (loss) for the (4,997) 5,717 3,804 4,524
period
Total assets 125,733 76,312 202,510 404,555
Total liabilities (18,275) (24,640) (105,211) (148,126)
Capital expenditure (59,548) (16,822) (25) (76,395)
*Includes the Buffelsfontein Tailings Recovery Project.
South Africa Canada
Ezulwini
Mine MWS* Corporate Total
Nine months ended December US$`000 US$`000 US$`000 US$`000
30, 2006
Expenditure
General, consulting and
administrative expenditures (1,228) (1,310) (818) (3,356)
Stock-based compensation - - (519) (519)
Pumping and feasibility (350) - - (350)
costs
Operating loss (1,578) (1,310) (1,337) (4,225)
Interest income - 235 187 422
Interest expense (101) - - (101)
Foreign exchange losses (106) (416) (813) (1,335)
Loss before income taxes (1,785) (1,491) (1,963) (5,239)
Provision for income taxes - - - -
Net loss for the period (1,785) (1,491) (1,963) (5,239)
Total assets 24,302 16,419 154,653 195,374
Total liabilities (15,249) (256) (8,773) (24,278)
Capital expenditure (16,945) - - (16,945)
*Includes the Buffelsfontein Tailings Recovery Project.
Date: 14/02/2008 09:14:45 Produced by the JSE SENS Department.
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