| Mon 21 Apr 2008, 8:26 | | FUM - First Uranium To Meet Future Production Grow |
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FUM
FIU
FUM - First Uranium To Meet Future Production Growth Plans At Its South
African Operations By Installing Power Plants And A Sulphuric Acid Plant
First Uranium Corporation
(Continued under the laws of British Columbia, Canada)
(Registration number C0777384)
(South African registration number 2007/009016/10)
Share code: FUM ISIN: CA33744R1029
"First Uranium" or "the Company"
NEWS RELEASE - April 21, 2008
FIRST URANIUM TO MEET FUTURE PRODUCTION GROWTH PLANS AT ITS SOUTH AFRICAN
OPERATIONS BY INSTALLING POWER PLANTS AND A SULPHURIC ACID PLANT
All amounts are in US dollars unless otherwise noted.
Toronto and Johannesburg - First Uranium Corporation (TSX:FIU, JSE:FUM)
(ISIN:CA33744R1029) ("First Uranium" or "the Company") today confirmed
its decision, previously announced on February 13, 2008, to generate a
portion of its future electrical power requirements at its underground
Ezulwini Mine ("Ezulwini") and the Mine Waste Solutions tailings recovery
project ("MWS") in South Africa. While these arrangements to generate
additional power to supplement that supplied by South Africa`s national
power utility, Eskom, will increase the projected capital and operating
costs of the Company`s two operations, this investment in power is
justified by securing supply of electrical power and it will have been
more than offset by the increased realized price for gold and the decline
in the value of the South African rand against the US dollar.
Taking into consideration the capital and operating costs of generating
additional power, revised acid price assumptions and a revaluation of
metal price and exchange rate assumptions (each of which is described in
further detail in this news release), the revised net present value
("NPV" at an 8% discount rate) is expected to be $667 million for
Ezulwini and $420 million for MWS and the internal rates of return
("IRR") for the projects are expected to be 336% for Ezulwini and 75% for
MWS.
In a separate news release, also dated April 18, 2008, the Company
announced that it will establish a separate business unit to build and
operate an acid plant to supply sulphuric acid to Ezulwini and MWS.
RATIONALE FOR THE COMPANY TO GENERATE ITS OWN POWER
The Company conducted a study assessing the economic viability of First
Uranium generating its own power at Ezulwini and MWS for the next five
years, as a result of the significantly reduced supply of electrical
power currently available in South Africa and Eskom`s concerns about its
ability to supply power to the country`s mining industry in the short and
medium term. On January 24, 2008, Eskom communicated to the mining
industry that the utility could not guarantee power availability and
asked the industry to operate at electrical power levels below historical
load requirements until 2012 (the "Power Situation"). While Eskom has
announced plans to increase the supply of power incrementally in the
years leading up to 2012, Eskom also reports that full power availability
cannot be guaranteed until then.
At both Ezulwini and MWS, based on the positive economic results of each
study, the Company plans to initially lease diesel generators for a term
of up to five years. In addition, the Company plans to purchase and
install 30 megawatts ("MW") of electrical power generating capacity at a
cost of approximately $20 million. The Company expects to power its
generators using a combination of diesel fuel and heavy fuel oil for
approximately five years and to recover approximately 50% of its
investment by selling the power generators when they are no longer
needed.
"First Uranium is determined to start up its uranium recovery plants at
its Ezulwini Mine and MWS on schedule," said Gordon Miller, President and
CEO of First Uranium. "We have adjusted our uses and sources of
electrical power to enable us to fulfill our production commitments to
our investors. We do not intend to let the Power Situation nor the
ongoing increases in the cost of sulphur and sulphuric acid threaten our
business or use them as an excuse to miss our project milestones. Given
that we are mining uranium and gold at both projects we are confident
that the project economics are robust enough, assuming our forecast metal
prices, to allow us to overcome the electrical power shortages and
rapidly increasing acid prices that are prevalent in South Africa."
IMPACT ASSESSMENT BY PROJECT
Based on the positive results of the studies of the impact of generating
power and the impact of building and operating the acid plant, the
Company, with the full support of its Board, will proceed with the full
development of its two projects and acid plant as follows:
For the Ezulwini Mine:
given the uncertainty of power supply, since January 24 2008, at a third-
party gold plant to toll-treat the Company`s ore, the Company reduced
mine development and hoisting ore to surface during February and March,
2008, and focused on shaft refurbishment until the operation`s gold plant
commences commissioning at the end of April 2008, when mine development
and hoisting ore are expected to resume at planned rates the Company
expects to recover any interim production shortfalls arising from the
reduction of mine development as the processing plant has available
milling capacity to accommodate additional throughput for the next 12
months the first 50,000 tonne per month module of the gold plant remains
on schedule for commissioning commencing in April 2008 using Eskom power
(as available) augmented by existing installed diesel generator capacity
if necessary the first 50,000 tonne per month module of the uranium plant
remains on schedule for commissioning commencing in June 2008 using the
Company`s new power generation capacity. Current mine production from
the gold section and uranium section will be stockpiled separately on
surface in the interim the Company does not expect any material
adjustment to previously reported production forecasts full operation of
Ezulwini is expected to require a maximum demand of 56 MW of power, of
which Eskom has amended its committed supply to 32 MW, requiring the
Company to generate 24 MW, 10 MW more than its existing generator
capacity of 14 MW prior to the Power Situation, electrical power costs
were expected to represent about 9% of the operating costs. The impact of
additional operating costs for power generation are estimated to be an
additional $3.59 (a 12% overall increase) per pound for uranium and an
additional $35.50 (an 8% overall increase) per ounce for gold over the
five-year period of self power generation.
Expected costs to generate additional power over the life of the mine at
Ezulwini subsequent to the Power Situation and to purchase Eskom power at
higher rates are listed in the table below and are expected to result in
average annual operating costs, on a co-product basis, of $0.86 per pound
for uranium and $8.62 per ounce for gold.
Table 1: Operating Cost Impact of Electrical Power at the Ezulwini Mine
Fiscal year
ending Additional operating Additional Additional
March 31 cost unit cost power cost as a
($ millions) ($ per tonne) % of operating
costs
2009 8.6 14.24 20%
2010 18.3 12.51 21%
2011 16.8 8.53 17%
2012 8.80 4.00 11%
2013 5.89 2.67 10%
Life of mine 58.35 1.19 18%
For MWS:
the current MWS operation remains unaffected by the Power Situation as it
is drawing additional power from Buffelsfontein Gold Mines Limited
("BGM")
upgrading of the MWS gold plant to increase the design capacity to
633,000 tonnes per month was completed on schedule
although announced on February 13 that a three-month delay was expected
to complete a feasibility study for the additional power requirements,
the Company now expects to start commissioning the second gold plant
module and the first two modules of the uranium plant in December 2008
the construction schedule for the third modules of its gold and uranium
plants will be completed by December 2009
full operation of MWS is expected to require a maximum demand of 43 MW of
power by February 2010, of which Eskom has committed to supply 29 MW by
this date, requiring the Company to generate 14 MW
prior to the Power Situation, electrical power costs were expected to
represent about 9% of the operating costs. The impact of additional
operating costs for power generation are estimated to be an additional
$2.49 (a 10% overall increase) per pound for uranium and an additional
$44.70 (a 13% overall increase) per ounce for gold over the five-year
period of self power generation.
Expected costs to generate additional power over the life of the mine at
MWS subsequent to the Power Situation and to purchase Eskom power at
higher rates are listed in the table below and are expected to result in
average annual operating costs, on a co-product basis, of $1.04 per pound
for uranium and $17.00 per ounce for gold.
Table 2: Operating Cost Impact of Electrical Power at MWS
Fiscal year
ending Additional Additional Additional
March 31 operating unit cost power cost as
cost ($ per tonne) a % of
($ millions) operating
costs
2009 3.41 0.98 11%
2010 18.58 1.06 23%
2011 22.13 0.95 21%
2012 6.28 0.27 8%
2013 0.45 0.02 1%
Life of mine 50.89 0.56 13%
Technical reports for both projects are expected to be completed by June
2, 2008.
ECONOMIC AND COMMODITY PRICE ASSUMPTIONS
To assess the financial impact of the costs of generating additional
power and revised cost of sulphuric acid, the following tables show the
Company`s commodity price assumptions for May 2007 (the date of the
previous technical report for Ezulwini), November 2007 (the date of the
previous technical report for MWS and April 2008 (the most recent survey
of assumptions). The November 2007 and April 2008 assumptions are based
on an average nominal consensus forecast from the investment research
analysts at 13 North American-based brokerage firms, adjusted downward by
the US inflation rate for the period covering the construction of the
projects.
Table 3: NOVEMBER 2007 ECONOMIC AND COMMODITY PRICE ASSUMPTIONS
Unit Mar Mar Mar Mar Beyond Mar
2009 2010 2011 2012 2012
Gold price $/ounce 737 734 683 627 635
Uranium price $/pound 104 104 91 78 45
Currency ZAR/$US 7.40 7.40 7.40 7.40 7.40
exchange rate
Market $/tonne 60 60 60 60 60
sulphuric
acid price
(incl.
transport)
Project $/tonne 60 60 60 60 60
sulphuric
acid price
(MWS)
Project $/tonne 60 60 60 60 60
sulphuric
acid price
(Ezulwini)
Table 4: APRIL 2008 ECONOMIC AND COMMODITY PRICE ASSUMPTIONS
Unit Mar Mar Mar Mar Beyond
2009 2010 2011 2012 Mar
2012
Gold price ($/oz.) 890 907 874 797 711
Uranium price ($/lb.) 96 92 79 75 50
Currency (ZAR/$US) 7.27 7.36 7.50 7.45 7.57
exchange rate
Market $/tonne 350 265 170 95 95
sulphuric
acid price
(incl.
transport)
Project $/tonne 266 266 34.2 34.2 34.2
sulphuric
acid price
(MWS)
Project $/tonne 565 565 47.5 47.5 47.5
sulphuric
acid price
(Ezulwini)
REVISED PROJECT ECONOMICS
The following tables summarize the impact of the power supply and acid
cost changes at Ezulwini and MWS. More details of the project economics
from the financial models upon which the information in Tables 5 and 6
are based, will be posted to the Company`s web site
(www.firsturanium.com) in due course.
Table 5: REVISED PROJECT ECONOMICS FOR THE EZULWINI MINE
From May
2007 April 2008 April 2008
technical with May 2007 with April
report assumptions 2008
assumptions
Uranium price ($ per 50 50 see April 2008
pound) assumptions
Gold price ($ per 500 500 See April 2008
ounce) assumptions
Electrical power 56MW 56MW 56MW
required
Eskom commitment 80MW 32MW 32MW
Self-generated power - 24MW 24MW
Life-of-mine average
co-product operating
costs
Operating cost per 56.87 71.82 71.82
tonne milled
($/tonne)
Uranium cash cost 29 41 33
($/pound)
Gold cash cost 297 385 376
($/ounce)
Capital expenditures $271 million $220 million $220 million
Average annual life-
of-mine production
Uranium (pounds) 888,000 951,000 951,000
Gold (ounces) 290,000 306,000 306,000
Production
milestones
Gold plant April 2008 April 2008 April 2008
commissioning
commences
1st 50,000 tpm mill April 2008 April 2008 April 2008
Uranium plant June 2008 June 2008 June 2008
commissioning
commences
2nd 50,000 tpm mill Sep 2008 Sep 2008 Sep 2008
3rd 50,000 tpm mill Jan 2009 Jan 2009 Jan 2009
4th 50,000 tpm mill Jan 2009 Jan 2009 Jan 2009
NPV8 $332 million $191 million $667 million
IRR 32% 34% 336%
Notes:
The assumed exchange rate for South African rand for all dates in the
table above is as shown in the table above.
Co-product costs assume that operating cash costs are split in proportion
to the revenue earned from each product.
NPV is calculated using a nominal discount rate of 8%
Table 6: REVISED PROJECT ECONOMICS FOR MWS
April 2008
From November with November April 2008
2007 Technical 2007 with April
Report assumptions 2008
assumptions
Uranium price ($ per see November see November see April
pound) 2007 2007 2008
assumptions assumptions assumptions
Gold price ($ per ounce) See November See November See April
2007 2007 2008
assumptions assumptions assumptions
Electrical power 43 MW 43 MW 43 MW
required
Eskom commitment 43 MW 29 MW 29 MW
Self-generated power - 14 MW 14 MW
Life-of-mine average co-
product operating costs
Gold operating cost per 1.93 2.16 2.12
tonne reclaimed
($/tonne)
Uranium operating cost 8.09 10.00 9.82
per concentrate tonne
($/tonne)
Uranium cash cost 24 22 22
($/pound)
Gold cash cost ($/ounce) 264 353 347
Capital expenditures $260 million $264 million $241
million
Average annual life-of-
mine production
Uranium (pounds) 1,339,000 1,317,000 1,317,000
Gold (ounces) 126,000 130,000 130,000
Production milestones
1st module of gold plant June 2007 June 2007 June 2007
2nd module of gold plant Nov. 2008 Dec. 2008 Dec. 2008
3rd module of gold plant Nov. 2009 Dec. 2009 Dec. 2009
1st module of uranium Nov. 2008 Dec. 2008 Dec. 2008
plant
2nd module of uranium Nov. 2008 Dec. 2008 Dec. 2008
plant
3rd module of uranium Nov. 2009 Dec. 2009 Dec. 2009
plant
NPV8 $505 million $133 million $419
million
IRR 151% 22% 75%
Notes:
This table differs from the November 2007 model in that the Company`s
fiscal year 2008, which ended on March 31, 2008, has not been considered
in the above calculations.
The assumed exchange rate for South African rand for all dates in the
table above is as shown in the table above.
Co-product costs assume that operating cash costs are split in proportion
to the revenue earned from each product.
NPV is calculated using a real discount rate of 8%
The first gold plant module became operational with the acquisition of
the Chemwes gold plant in June 2007.
"With Eskom being unable to meet the power demands of the country, we
knew that we had no choice but to generate our own power," said Mr.
Miller. "The real task was to find a way to minimize the upfront capital
costs of acquiring this additional power generating capacity. We were
able to do that and also design power-savings solutions into the plant
construction that would reduce the dependence on self-generated power.
Fortunately, the rising price for the gold we are producing is expected
to more than offset the additional costs of our own power generation.
Rapidly increasing prices of sulphur have also had a very positive impact
on the economic assessment of our large above ground source of sulphur
which is contained in pyrite in the tailings dams at MWS."
Technical Disclosure
All technical disclosure in this news release relating to the Mine Waste
Solutions tailings recovery project ("MWS" and formerly named the
Buffelsfontein tailings recovery project) has been prepared in accordance
with National Instrument 43-101 ("NI 43-101) by Daan van Heerden, B.Sc.,
M.Comm., Charles Muller, B.Sc, Pr.Sci.Nat, and Johan Odendaal, B.Sc.,
M.Sc., Pr.Sci.Nat all of Minxcon Pty Ltd. ("Minxcon"), Treavor Pearton,
B.Sc Eng PhD, FGSA and Mike Valenta, Pr Eng, B.Sc., of Metallicon Process
Consulting (Pty) Ltd. ("Metallicon`) each of whom is a "qualified person"
under NI 43-101 and is independent of First Uranium.
Historical technical disclosure in this new release relating to MWS is
extracted from a technical report entitled "Technical Report - Pre-
Feasibility of the Buffelsfontein Tailings Recovery Project, located in
Stilfontein, North West Province, Republic of South Africa" submitted on
November 1, 2007, and prepared by Mssrs. van Heerden, Muller, Odendaal,
Pearton and Valenta. The disclosure contained in this news release
relevant to their respective contributions has been reviewed and approved
by Messrs. van Heerden, Muller, Odendaal, Pearton and Valenta.
All technical disclosure in this news release relating to the Ezulwini
Mine has been prepared in accordance with NI 43-101 by R. Dennis Bergen,
P.Eng and Wayne Valliant P.Geo of Scott Wilson Roscoe Postle Associates
Inc. ("Scott Wilson RPA") each of whom is a "qualified person" under NI
43-101 and is independent of First Uranium.
Historical technical information is this news release relating to the
Ezulwini Mine is extracted from a technical report entitled "Technical
Report - Preliminary Assessment of the Ezulwini Project, Gauteng
Province, Republic of South Africa" originally submitted on November 8,
2006, revised on December 5, 2006, January 31, 2007 and May 9, 2007
prepared in accordance with NI 43-101 by Messrs. Bergen and Valliant, who
have also reviewed and approved the disclosure in this news release.
The economic analysis contained in this news release is contained in a
the above technical reports and is based, in part, on inferred resources,
and is preliminary in nature. Inferred resources are considered too
geologically speculative to have mining and economic considerations
applied to them and to be categorized as Mineral Reserves. There is no
certainty that the reserves development, production and economic
forecasts on which the preliminary assessment contained in the technical
reports is based, will be realized.
Cautionary Language Regarding Forward-Looking Information
This news release contains certain forward-looking statements. Forward-
looking statements include but are not limited to those with respect to
the availability of electrical power, the planned addition of owner-
operated power generation, price of uranium and gold, price of electrical
power and sulphuric acid, the estimation of mineral resources and
reserves, the realization of mineral reserve estimates, the timing and
amount of estimated future production, costs of production, capital
expenditures, costs and timing of development of new deposits, success of
exploration activities, permitting time lines, currency fluctuations,
requirements for additional capital, availability of financing on
acceptable terms, government regulation of mining operations,
environmental risks, unanticipated reclamation expenses, title disputes
or claims and limitations on insurance coverage and the timing and
possible outcome of pending litigation. In certain cases, forward-
looking statements can be identified by the use of words such as "goal",
"objective", "plans", "expects" or "does not expect", "is expected",
"projected", "assumed", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates", or "does not anticipate", or "believes" or
variations of such words and phrases, or state that certain actions,
events or results "may", "could", "would", "might" or "will" be taken,
occur or be achieved. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of First Uranium to be materially
different from any future results, performance or achievement expressed
or implied by the forward-looking statements. Such risks and
uncertainties include, among others, the actual results of current
exploration activities, conclusions of economic evaluations, changes in
project parameters as plans continue to be refined, availability of
equipment, materials and fuel, possible variations in grade and ore
densities or recovery rates, failure of plant, equipment or processes to
operate as anticipated, accidents, labour disputes or other risks of the
mining industry, delays in obtaining government approvals or financing or
in completion of development or construction activities, risks relating
to the integration of acquisitions, to international operations, to
prices of uranium and gold, to price of electrical power and sulphuric
acid. Although First Uranium has attempted to identify important factors
that could cause actual actions, events or results to differ materially
from those described in forward-looking statements, there may be other
factors that cause actions, events or results not to be as anticipated,
estimated or intended. It is important to note, that: (i) unless
otherwise indicated, forward-looking statements indicate the Company`s
expectations as of the date of this news release; (ii) actual results may
differ materially from the Company`s expectations if known and unknown
risks or uncertainties affect its business, or if estimates or
assumptions prove inaccurate; (iii) the Company cannot guarantee that any
forward-looking statement will materialize and, accordingly, readers are
cautioned not to place undue reliance on these forward-looking
statements; and (iv) the Company disclaims any intention and assumes no
obligation to update or revise any forward-looking statement even if new
information becomes available, as a result of future events or for any
other reason.
In making the forward-looking statements in this news release, First
Uranium has made several material assumptions, including but not limited
to, the assumption that: (i) consistent supply of sufficient power will
be available to develop and operate the projects as planned; (ii)
approvals to transfer or grant, as the case may be, mining rights will be
obtained; (iii) metal prices, exchange rates and discount rates applied
in the preliminary economic assessments are achieved; (iv) mineral
resource estimates are accurate; (v) the technology used to develop and
operate its two projects has, for the most part, been proven and will
work effectively; (vi) that labour and materials will be sufficiently
plentiful as to not impede the projects or add significantly to the
estimated cash costs of operations; (vii) that Black Economic Empowerment
("BEE") investors will maintain their interest in the Company and their
investment in the Company`s common shares to a sufficient level to
continue to support the Company`s compliance with 2014 BEE requirements;
and (viii) that the innovative work on stabilizing the main shaft at the
Ezulwini Mine will be successful in maintaining a safe and uninterrupted
working environment until 2024.
Conference Call
First Uranium will conduct a conference call with investors to discuss
the information in this news release at 10:00 a.m. local Toronto time and
4:00 p.m. local Johannesburg time on Monday, April 21, 2007. The
conference call will be available simultaneously to all interested
investors and news media.
Callers may dial 1 800 319-4610 (Canada and the US) or 0800 200 648
(South Africa). Callers from other international locations may call +1
604 638-5340 (Canada) or +27 11 535 3600 (South Africa). The call will
be webcast at
http://services.choruscall.com/links/firsturanium080421.html and an
archive will be available through the same link shortly after the live
event for 90 days.
A replay of the conference call will be available for 30 days. To access
the replay, callers may dial 1 800 319-6413 (Canada and the US). Callers
from other international locations may access the replay by dialing +27
11 305 2030 (South Africa) or +1 604 638-9010 (Canada). Access to the
replay will require the code 2128, followed by #.
About First Uranium Corporation
First Uranium Corporation (TSX:FIU, JSE:FUM) is focused on the
development of its South African uranium and gold mines with the goal of
becoming a significant producer through the re-opening and underground
development of the Ezulwini Mine and the expansion of the Mine Waste
Solutions tailings recovery facility. First Uranium also plans to grow
production by pursuing value-enhancing acquisition and joint venture
opportunities in South Africa and elsewhere.
First Uranium Corporation
1240-155 University Avenue, Toronto, ON Canada M5H 3B7
www.firsturanium.com
For further information, please contact:
Bob Tait, VP Investor Relations
at 416 342-5639 (office), 416 558-3858 (mobile) or bob@firsturanium.ca
Sponsor: Investec Bank
Date: 21/04/2008 08:26:15 Produced by the JSE SENS Department.
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