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UUU
UUU
UUU - Uranium One Inc - Interim consolidated financial statements for the
three and six months ended June 30, 2008 (Unaudited)
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
Interim Consolidated Financial Statements for the three and six months ended
June 30, 2008 (Unaudited)
Uranium One Inc.
Interim Consolidated Balance Sheets - Unaudited
As at June 30, 2008 and December 31, 2007
(in United States dollars)
Jun 30, 2008 Dec 31, 2007
Notes $`000 $`000
ASSETS
Current assets
Cash and cash equivalents 133,148 159,592
Accounts and other receivables 4 66,475 70,318
Current portion of loans to joint 5.2 19,244 32,867
ventures
Inventories 6 23,092 20,952
Other assets 1,025 18,056
Discontinued operations 3 - 94,986
242,984 396,771
Non-current assets
Mineral interests, plant and equipment 7 4,596,034 4,827,353
Loans to joint ventures 5.2 23,333 24,359
Available for sale securities 8 2,692 21,257
Other assets 9 55,758 56,543
Assets held for sale 10 17,078 -
Discontinued operations 3 32,238 286,614
4,727,133 5,216,126
Total assets 4,970,117 5,612,897
LIABILITIES
Current liabilities
Accounts payable and accrued 11 44,633 70,802
liabilities
Income taxes payable 4,601 4,237
Discontinued operations 3 - 5,245
49,234 80,284
Non-current liabilities
Convertible debentures 136,990 136,548
Asset retirement obligations 9,824 13,926
Future income tax liabilities 1,407,513 1,496,060
Long term debt 5.1 29,872 18,205
Other long term payables 2,052 1,824
Liabilities relating to assets held 10 1,596 -
for sale
Discontinued operations 3 - 183,145
1,587,847 1,849,708
SHAREHOLDERS` EQUITY
Share capital 12 3,507,048 3,496,884
Contributed surplus 13 139,064 134,387
Equity component of convertible 46,480 46,480
debentures
Accumulated other comprehensive (loss) (129,953) 51,967
/ income
Deficit (229,603) (46,813)
3,333,036 3,682,905
Total shareholders` equity and 4,970,117 5,612,897
liabilities
Basis of presentation and principles of consolidation (note 2.1)
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements
Uranium One Inc.
Interim Consolidated Statements of Operations - Unaudited
For the three and six months ended June 30, 2008 and June 30, 2007
(in United States dollars)
Three months ended Six months ended
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
Notes $`000 $`000 $`000 $`000
Revenues 49,390 23,265 71,907 64,995
Operating expenses (9,487) (2,058) (12,779) (9,101)
Depreciation and (6,960) (2,016) (9,891) (6,875)
depletion
Earnings from mine 32,943 19,191 49,237 49,019
operations
General and (13,948) (18,049) (29,229) (22,730)
administrative (1)
Exploration expense (5,035) (4,364) (6,715) (5,823)
Operating earnings / 13,960 (3,222) 13,293 20,466
(loss)
3,129 4,324 5,889 5,346
Interest income
Interest expense (3,940) (2,991) (7,711) (2,991)
Impairment of assets 10 (105,089) - (105,089) -
held for sale
Gain on sale of 8 8,602 - 7,467 -
available for sale
securities
Foreign exchange gain 14 2,440 (5,980) (186) (13,411)
/ (loss)
Other 987 362 1,644 1,382
(Loss) / earnings from (79,911) (7,507) (84,693) 10,792
continuing operations
before income taxes
(17,452) (7,847) (23,911) (20,375)
Current income tax
expense
Future income tax 29,168 2,246 30,096 4,446
recovery
Loss from continuing (68,195) (13,108) (78,508) (5,137)
operations
Earnings / (loss) from 3 274 (586) (104,282) (586)
discontinued
operations
(67,921) (13,694) (182,790) (5,723)
Net loss
(1) Stock option and 13 4,483 9,647 10,597 13,024
restricted share
expense (non-cash)
included in general
and administrative
Loss per share from
continuing operations
Basic and diluted (0.15) (0.04) (0.17) (0.02)
Loss per share from
discontinued
operations
Basic and diluted 0.00 (0.00) (0.22) (0.00)
Net loss per share
Basic and diluted (0.15) (0.04) (0.39) (0.02)
Weighted average
number of shares (in
thousands)
Basic and diluted 16 468,166 332,956 467,809 275,380
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements
Uranium One Inc.
Interim Consolidated Statements of Changes in Equity - Unaudited
For the three and six months ended June 30, 2008 and June 30, 2007
(in United States dollars)
Share Cont- Accu- Deficit Total
capital ributed mulated $`000 $`000
$`000 surplus other
$`000 Equity compre-
compone hensive
nt of income /
convert (loss)
ible $`000
debentu
re
$`000
Balance as at 613,607 31,286 - - (29,204) 615,689
January 1,
2007
- - (17,609)
Net loss for - - (17,609)
the year
Stock options - 37,660 - - - 37,660
and restricted
shares vested
Exercise of 2,115 (1,035) - - - 1,080
warrants
Exercise of 54,912 (30,873) - - - 24,039
stock options
and restricted
shares
Uranium One 1,709,647 62,042 46,480 - - 1,818,169
Inc / UrAsia
Energy Ltd
business
combination
U.S. Energy 99,401 - - - - 99,401
Corp asset
purchase
consideration
Energy Metals 1,013,215 35,307 - - - 1,048,522
Corporation
asset purchase
consideration
Unrealized - - - 47,536 - 47,536
gains
recognized on
translation of
self-
sustaining
foreign
operations
Unrealized - - - 4,243 - 4,243
gains
recognized on
translation of
self-
sustaining
foreign
discontinued
operations
Shares issued 3,987 - - - - 3,987
for services
rendered
Gain on - - - 188 - 188
available for
sale
securities,
net of tax
(note 8)
Balance as at 3,496,884 134,387 46,480 51,967 (46,813) 3,682,905
December 31,
2007
- - - - (182,790) (182,790)
Net loss for
the period
Stock options - 10,597 - - - 10,597
and restricted
shares vested
Exercise of 2,104 (1,062) - - - 1,042
warrants
Exercise of 8,060 (4,858) - - - 3,202
stock options
and restricted
shares
Unrealized - - - (164,641) - (164,641)
loss
recognized on
translation of
self-
sustaining
foreign
operations
Unrealized - - - (26,070) - (26,070)
loss
recognized on
translation of
self-
sustaining
foreign
discontinued
operations
Realized loss - - - 9,920 - 9,920
on sale of
Aflease Gold
(note 3)
Fair value - - - (953) - (953)
adjustments on
available for
sale
securities
(note 8)
Realized loss - - - (176) - (176)
on sale of
available for
sale
securities,
net of tax
(note 8)
Balance as at 3,507,048 139,064 46,480 (129,953) (229,603) 3,333,036
June 30, 2008
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements
Uranium One Inc.
Interim Consolidated Statements of Comprehensive Income / (Loss) - Unaudited
For the three and six months ended June 30, 2008 and June 30, 2007
(in United States dollars)
Three months Six months ended
ended
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
Notes $`000 $`000 $`000 $`000
Net loss (67,921) (13,694) (182,790) (5,723)
Unrealized gain / (loss) 64,946 (8,050) (164,640) (8,050)
recognized on
translation of self-
sustaining foreign
operations
Unrealized gain / (loss) 3,341 (528) (26,070) (528)
recognized on
translation of self-
sustaining foreign
discontinued operations
Realized loss on sale of 3 9,920 - 9,920 -
Aflease Gold
Fair value adjustments 8 102 - (953) -
on available for sale
securities
Realized loss / (gain) 8 14 - (176) -
on sale of available for
sale securities, net of
tax
Comprehensive income / 10,402 (22,272) (364,709) (14,301)
(loss)
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements
Interim Consolidated Statements of Accumulated Other Comprehensive (Loss) /
Income - Unaudited
As at June 30, 2008 and December 31, 2007
(in United States dollars)
Jun 30, Dec 31,
2008 2007
$`000 $`000
Accumulated other comprehensive income at 51,967 -
January 1
Other comprehensive (loss) / income for the (181,920) 51,967
period
(129,953) 51,967
Components of other comprehensive loss at the
end of the period:
Unrealized foreign exchange adjustment - (117,255) 47,562
continuing operations
Unrealized foreign exchange adjustment - (11,907) 4,243
discontinued operations
Available for sale marketable securities and (791) 162
investments
(129,953) 51,967
Uranium One Inc.
Interim Consolidated Statements of Cash Flows - Unaudited
For the three and six months ended June 30, 2008 and June 30, 2007
(in United States dollars)
Six months ended
Three months ended
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
Notes $`000 $`000 $`000 $`000
Net loss from continuing (68,195) (13,108) (78,508) (5,137)
operations
Items not affecting cash:
- Depreciation and 6,960 2,016 9,891 6,875
depletion
- Impairment of assets 10 105,089 - 105,089 -
held for sale
- Stock option and 13 4,483 9,647 10,597 13,024
restricted share expense
- Interest accrued on 3,926 4,720 7,617 4,720
loans and debentures
- Unrealized foreign 14 (1,431) 4,745 (3,644) 11,962
exchange (gain) / loss
- Future income tax (29,168) (2,246) (30,096) (4,446)
recovery
- Gain on sale of (8,602) - (7,467) -
available for sale
securities
- Other 298 1,470 194 1,819
Movement in non-cash 15 (43,723) (24,523) (4,577) 5,322
working capital
Cash flows (used in) / (30,363) (17,279) 9,096 34,139
from operating activities
Acquisition of Uranium - 271,935 - 271,935
One Inc., net of
acquisition costs
Acquisition of mineral (68,420) (66,467) (122,437) (83,160)
interests, plant and
equipment
Advance cash payments for - - - (4,313)
other assets
Proceeds on sale of 8 22,550 - 24,927 -
available for sale
securities
Cash advances to joint - (15,400) (3,900) (22,400)
ventures
Cash proceeds from joint 4,667 - 18,334 18,780
ventures
Restricted cash - (500) - (500)
Other (151) - (953) -
Cash flows from / (used (41,354) 189,568 (84,029) 180,342
in) investing activities
Cash flows from investing 3 43,456 - 43,456 -
activities of
discontinued operations
Common shares issued, net 2,645 17,224 4,788 17,731
of issue costs
Financing fees 9 (5,666) - (5,666) -
Loans received by 6,000 - 12,000 -
Kyzylkum
Coupon interest payment (3,267) (3,201) (3,267) (3,201)
on convertible debentures
Other - (175) - (175)
Cash (used in) / flows (288) 13,848 7,855 14,355
from financing activities
Effects of exchange rate 1,471 10,002 (2,822) 10,216
changes on cash and cash
equivalents
Net (decrease) / increase (27,078) 196,139 (26,444) 239,052
in cash and cash
equivalents from
continuing operations
Cash and cash equivalents at the 160,226 91,893 159,592 48,980
beginning of the period
Cash and cash equivalents 133,148 288,032 133,148 288,032
at the end of the period
Cash flows of discontinued operations
Cash flows used in - (1,449) (6,941) (1,449)
operating activities
Cash flows used in - (1,564) (5,351) (1,564)
investing activities
Cash flows from / (used in) - 338 (13,741) 338
financing activities
Supplemental cash flow information (note 15)
The accompanying notes form an integral part of these Interim Consolidated
Financial StatementsUranium One Inc.
Notes to the Interim Consolidated Financial Statements - Unaudited
as at June 30, 2008 and December 31, 2007
(in United States dollars)
1 NATURE OF OPERATIONS
Uranium One Inc. ("Uranium One") and its subsidiaries (`the Corporation")
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, the United States, Australia and Canada. The
Corporation is in the process of disposing of its remaining 36% interest
in Aflease Gold Limited ("Aflease Gold"), which is engaged in the
development of the Modder East Gold Project in South Africa.
Uranium One owns a 70% interest in both the producing Akdala Uranium Mine
and the South Inkai Uranium Project, which is being commissioned. The
Kharasan Project in Kazakhstan, in which the Corporation owns a 30%
interest, is being developed by the Kyzylkum Joint Venture. The
Corporation also owns the Dominion Uranium Project in South Africa. In
the United States, the Corporation owns the Hobson Uranium Processing
Facility and La Palangana Project in Texas, projects in the Powder River
and Great Divide Basins in Wyoming and the Shootaring Canyon Mill in
Utah. The Corporation is evaluating corporate development opportunities
for its Honeymoon Uranium Project in Australia. The Corporation owns,
either directly or through joint ventures, a large portfolio of uranium
exploration properties in South Africa, the western United States, South
Australia, and the Athabasca Basin of Saskatchewan in Canada.
2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of presentation and principles of consolidation
These interim unaudited consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting
principles for interim financial information and they follow the same
accounting policies and methods of application as the audited
consolidated financial statements of the Corporation for the year ended
December 31, 2007, except as discussed in note 2.2. These interim
unaudited consolidated financial statements do not include all the
information and note disclosure required by the generally accepted
accounting principles for annual financial statements and therefore
should be read in conjunction with the most recent annual audited
consolidated financial statements.
The consolidated balance sheet, statement of operations and certain
comparative figures have been restated for discontinued operations
(note 3).
The consolidated financial statements include the accounts of Uranium One
and all of its subsidiaries and the proportionate share of its interests
in joint ventures. All intercompany balances and transactions have been
eliminated.
The following are the Corporation`s principal mineral properties and
operations as at June 30, 2008:
Operating mine:
Entity Mineral Location Ownership Status
property/Operation
Betpak Akdala Uranium Kazakhstan 70% Proportionately
Dala LLP Mine consolidated
Advanced development projects:
Entity Mineral Location Ownership Status
property/Operation
Betpak South Inkai Kazakhstan 70% Proportionately
Dala LLP Uranium Project consolidated
Kyzylkum Kharasan Uranium Kazakhstan 30% Proportionately
LLP Project consolidated
Uranium Dominion Uranium South 100% Consolidated
One Africa Project Africa
Ltd
The Corporation is also developing the following mineral properties:
Entity Mineral Location Ownership Status
property/Operation
South Texas Hobson Facility United 99% Consolidated
Mining and La Palangana States
Venture Project
Energy Metals US development United 100% Consolidated
Corp US projects States
Uranium One Honeymoon Uranium Australia 100% Consolidated
Australia Project
(Proprietary)
Limited
2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 Adoption of new standards
Effective January 1, 2008, the Corporation adopted new accounting
standards for Capital Disclosures (CICA Handbook Section 1535),
Inventories (CICA Handbook Section 3031), and Financial Instruments -
Disclosure and Presentation (CICA Handbook Sections 3862 and 3863).
Under Section 1535, the Corporation discloses its objectives, policies
and procedures for managing capital, any summary quantitative data about
what the Corporation manages as capital, whether the Corporation has
complied with any externally imposed capital requirements and, if the
Corporation has not complied with them, any consequences of non-
compliance with these capital requirements.
The new Sections 3862 and 3863 replace Section 3861 Financial Instruments
- Disclosure and Presentation. Disclosure requirements are revised and
enhanced, while presentation requirements remain essentially unchanged.
The new disclosure requirements expand discussion around the significance
of financial instruments for the Corporation`s financial position and
performance, the nature and extent of risks arising from financial
instruments to which the entity is exposed during the period and at the
balance sheet date and how the entity manages those risks.
Section 3031 establishes standards for the measurement and disclosure of
inventories and provides a Canadian equivalent to International
Accounting Standard IAS 2 - Inventories. The main recommendations of the
new Section 3031 are:
- Measurement of inventories at the lower of cost and net realizable
value, with guidance on the determination of cost, including
allocation of overheads and other costs to inventory.
- Specific identification of cost of inventories of items that are not
ordinarily interchangeable, and goods or services produced and
segregated for specific projects.
- Consistent use (by type of inventory with similar nature and use) of
either first-in, first-out (FIFO) or weighted average cost formula
to measure the cost of other inventories.
- Reversal of previous write-downs to net realizable value when there
is a subsequent increase in the value of inventories.
The adoption of Section 3031 on January 1, 2008, did not have a material
impact on the Corporation`s financial position or operating results.
International Financial Reporting Standards (IFRS)
In February 2008, the Canadian Accounting Standards Board confirmed that
publicly accountable enterprises will be required to adopt IFRS for
fiscal years beginning on or after January 1, 2011, with earlier adoption
permitted. Accordingly, the conversion to IFRS will be applicable to the
Corporation`s reporting no later than in the first quarter of 2011, with
restatement of comparative information presented. The conversion to IFRS
will impact the Corporation`s accounting policies, information technology
and data systems, internal control over financial reporting, and
disclosure controls and procedures. The transition may also impact
business activities, such as foreign currency, certain contractual
arrangements, debt covenants and capital requirements. The Corporation is
currently evaluating the future impact of IFRS on its financial
statements and will continue to invest in training and additional
resources to ensure a timely conversion.
3 DISCONTINUED OPERATIONS - AFLEASE GOLD
On March 27, 2008, the Corporation entered into an agreement to sell its
shareholding in Aflease Gold. On April 8, 2008 the Corporation sold
152.2 million Aflease Gold shares for $41.3 million (ZAR320 million),
decreasing the Corporation`s ownership to 38% of the common shares of
Aflease Gold. An option granted to the purchaser to acquire Uranium One
Africa`s remaining shareholding in Aflease Gold lapsed on May 8, 2008.
In the first quarter of 2008, the Corporation`s investment in Aflease
Gold was written down to its fair value, based on a combination of the
contracted sales price and the market price on the Johannesburg Stock
Exchange ("JSE"). The impairment, net of future income taxation recovery,
amounted to $103.5 million.
During June 2008, the Corporation sold an additional 9.1 million Aflease
Gold shares for $2.8 million (ZAR21.9 million), decreasing the
Corporation`s shareholding to 36%. The Corporation realized a gain of
$0.7 million on the sale of these shares. The tax on these transactions
was offset against the assessed tax losses of Uranium One Africa Limited,
a wholly owned subsidiary of the Corporation.
The assets and liabilities of Aflease Gold have been classified as
discontinued operations for all periods presented in these financial
statements. As a result of the Corporation`s partial disposal of its
interest in Aflease Gold, consolidation of Aflease Gold is no longer
appropriate. The Corporation has equity accounted for its investment in
Aflease Gold for the three months ended June 30, 2008 and its share of
Aflease Gold`s earnings is recorded in the discontinued operations line
in the consolidated statement of operations for the three months ended
June 30, 2008. The Corporation`s net equity investment in Aflease Gold is
recorded as discontinued operations (non-current assets) in the
consolidated balance sheet as at June 30, 2008. The Board of Directors
has approved the sale of the remaining portion of Uranium One Africa`s
shareholding in Aflease Gold.
The investment in Aflease Gold was reported as the Modder East Gold
Project for segment reporting purposes in previous periods.
The financial statement effects on the net investment in Aflease Gold and
the statement of operations are illustrated below:
Balance Statement of
sheet operations
$`000 $`000
December 31, 2007 193,210 -
Loss from discontinued operations (1,076) (1,076)
Impairment (103,480) (103,480)
Effect of foreign exchange and other (31,507) -
57,147 (104,556)
March 31, 2008
Net carrying value sold during the (27,837) -
period
Gain on sale of investment, net of tax - 685
Share of net loss for the period (1) (411) (411)
Effect of foreign exchange 3,339 -
June 30, 2008 (104,282)
32,238
(1) The Corporation estimated its share of net loss for Aflease Gold for
the three months ended June 30, 2008.
3 DISCONTINUED OPERATIONS - AFLEASE GOLD (continued)
Selected financial information of the discontinued operations included in
the comparative periods of the Consolidated Statement of Operations are
as follows:
Three Six
month month
period period
ended ended
Jun Jun
30, 30,
2007 2007
$`000 $`000
Net loss from
discontinued
operations
Revenues - -
Loss from (1,200) (1,200)
discontinued
operations
Interest and other (111) (111)
expenses
Non-controlling 725 725
interest
(586) (586)
The major classes of assets and liabilities of the discontinued
operations are as follows:
Jun 30, Dec
2007 31,
2007
$`000 $`000
Assets
Cash and cash equivalents - 92,623
Accounts receivable and other - 2,321
receivables
Inventories - 42
Current assets of discontinued - 94,986
operations
Mineral interests, plant and equipment - 285,553
Investment 32,238 -
Other assets - 1,061
Non-current assets of discontinued 32,238 286,614
operations
Total assets of discontinued operations 32,238 381,600
Liabilities
Accounts payable, accrued liabilities - 5,080
and other
Income taxes payable - 165
Current liabilities of discontinued - 5,245
operations
Future income tax liabilities - 80,201
Convertible debentures - 90,551
Other long term liabilities - 1,085
Non-controlling interest - 11,308
Non-current liabilities of discontinued - 183,145
operations
Total liabilities of discontinued - 188,390
operations
4 ACCOUNTS AND OTHER RECEIVABLES
Jun Dec
30, 31,
2008 2007
$`000 $`000
Trade receivables 48,757 55,520
Value added tax and general sales tax 10,442 7,446
Prepayments and advances 6,346 5,558
Deposits and guarantees 3,004 3,220
Other receivables 930 1,794
69,479 73,538
Less: non current deposits and 3,004 3,220
guarantees included in other assets
(note 9)
66,475 70,318
5 JOINT VENTURES
5.1 Proportionate interests in joint ventures
The Corporation owns the following interests in joint ventures:
Betpak Dala 70%
Kyzylkum 30%
The Corporation`s proportionate share of the assets and liabilities of
the joint ventures are as follows:
As at June 30, 2008
Betpak
Dala Kyzylkum Total
$`000 $`000 $`000
Cash 9,923 7,727 17,650
Other current assets 53,329 677 54,006
Mineral interests, plant 677,425 190,243 867,668
and equipment
Other assets 2,557 10,829 13,386
Current liabilities (13,570) (7,955) (21,525)
Long term debt (1) (87) (29,785) (29,872)
Other (1,551) (574) (2,125)
Future income taxes (274,367) (72,216) (346,583)
Asset retirement (1,298) (74) (1,372)
obligation
Net Assets 452,361 98,872 551,233
(1) In addition to the $60 million loan (note 5.2) from the Corporation,
Kyzylkum negotiated unsecured bank loan facilities totaling $100 million
in Q2 2007. 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. $60 million of the
facilities has been drawn down for the year ended December 31, 2007, with
the remainder being drawn down during the current period. These loan
facilities will be repayable after full repayment of the loan from the
Corporation. The Corporation`s proportionate share of these facilities
amounts to $30 million. The loan facilities have floating interest rates
of LIBOR plus 0.25% and 0.35%, respectively.
5 JOINT VENTURES (continued)
5.1 Proportionate interests in joint ventures (continued)
As at December 31, 2007
Betpak
Dala Kyzylkum Total
$`000 $`000 $`000
Cash 1,643 3,659 5,302
Other 73,039 291 73,330
current
assets
Mineral 680,046 182,740 862,786
interests, plant
and equipment
and
equipment
Other 4,070 4,771 8,841
assets
Current (19,395) (900) (20,295)
liabilities
Long term - (18,205) (18,205)
debt
Other long (1,567) (135) (1,702)
term
liabilities
Future (280,075) (72,486) (352,561)
income
taxes
Asset (3,377) - (3,377)
retirement
obligation
Net Assets 454,384 99,735 554,119
The Corporation`s proportionate share of revenue, expenses, net earnings
/ (loss) and cash flows for the three and six month periods ended June
30, 2008 and 2007 are as follows:
Three months ended June 30, 2008
Betpak
Dala Total
Kyzylkum
$`000 $`000 $`000
Revenue 49,390 - 49,390
Expenses (16,877) 57 (16,820)
Foreign exchange loss (3) (4) (7)
Earnings before income 32,510 53 32,563
taxes
Current income (15,230) (11) (15,241)
tax expense
Future income tax 2,549 - 2,549
recovery
Earnings 19,829 42 19,871
Cash flows from / (used in) 12,076 243 12,319
operating activities
Cash flows used in (14,391) (158) (14,549)
investing
activities
Cash flows from financing 85 4,008 4,093
activities
Net (decrease) / (2,230) 4,093 1,863
increase in cash
5 JOINT VENTURES (continued)
5.1 Proportionate interests in joint ventures (continued)
Six months ended June 30, 2008
Betpak
Dala Total
Kyzylkum
$`000 $`000 $`000
Revenue 71,907 - 71,907
Expenses (21,826) 11 (21,815)
Foreign (121) (11) (132)
exchange loss
Earnings before income 49,960 - 49,960
taxes
Current income (21,572) (44) (21,616)
tax expense
Future income tax 3,649 - 3,649
recovery
Earnings / (loss) 32,037 (44) 31,993
Cash flows from operating 46,893 (65) 46,828
activities
Cash flows used in (26,789) (4,306) (31,095)
investing activities
Cash flows (used in) / from (11,796) 8,152 (3,644)
financing activities
Net increase 8,308 3,781 12,089
in cash
Three months ended June 30, 2007
Betpak
Dala Kyzylkum Total
$`000 $`000 $`000
Revenue 23,265 - 23,265
Expenses (4,841) (687) (5,528)
Foreign 102 52 154
exchange gain
Earnings / (loss) before 18,526 (635) 17,891
income taxes
Current income tax (7,659) - (7,659)
expense
Future income tax 670 - 670
recovery
Earnings / (loss) 11,537 (635) 10,902
Cash flows from / (used in) 8,928 (470) 8,458
operating activities
Cash flows used in (12,831) (2,780) (15,611)
investing activities
Cash flows from financing 155 2,750 2,905
activities
Net decrease (3,748) (500) (4,248)
in cash
5 JOINT VENTURES (continued)
5.1 Proportionate interests in joint ventures (continued)
Six months ended June 30, 2007
Betpak
Dala Total
Kyzylkum
$`000 $`000 $`000
Revenue 64,995 - 64,995
Expenses (16,452) (687) (17,139)
Foreign (6,037) (1,342) (7,379)
exchange
loss
Earnings / (loss) before 42,506 (2,029) 40,477
income taxes
Current income tax (18,318) - (18,318)
expense
Future income tax 1,155 - 1,155
recovery
Earnings / (loss) 25,343 (2,029) 23,314
Cash flows from / (used 70,696 (353) 70,343
in) operating activities
Cash flows used in (25,525) (8,565) (34,090)
investing activities
Cash flows (used in) / (45,733) 9,177 (36,556)
from financing activities
Net (decrease) / (562) 259 (303)
increase in cash
5.2 Loans to Joint Ventures
Jun 30, Dec
2008 31,
2007
$`000 $`000
Current portion
Betpak Dala - 5,175
Kyzylkum 19,244 27,692
19,244 32,867
Long term portion
Betpak Dala - -
Kyzylkum 23,333 24,359
23,333 24,359
Total 42,577 57,226
During the three months ended March 31, 2008, Betpak Dala repaid the
principal amount of $5 million to the Corporation, together with $0.2
million of accrued interest.
5 JOINT VENTURES (continued)
5.2 Loans to Joint Ventures (continued)
Kyzylkum Loan
The Corporation made loans to Kyzylkum pursuant to its obligation to
provide project financing for construction and commissioning of the
Kharasan Project in the amount of $80 million. The loans bear interest at
LIBOR plus 1.5% per annum, with interest payable on a semi-annual basis,
commencing within two years of funding.
Jun 30, Dec 31,
2008 2007
$`000 $`000
Balance at January 1 73,333 80,000
Repaid during the period (13,333) (6,667)
60,000 73,333
Interest accrued 824 1,025
60,824 74,358
Less: elimination of proportionate (18,247) (22,307)
share - 30%
42,577 52,051
Less: current portion (19,244) (27,692)
Long term portion 23,333 24,359
The loans to Kyzylkum are unsecured.
6 INVENTORIES
Jun 30, Dec
2008 31,
2007
$`000 $`000
Finished uranium concentrates 12,060 10,093
Solutions and concentrates in process 1,032 5,731
Product inventory 13,092 15,824
Materials and supplies 10,000 5,128
Stockpiles 7,772 7,772
30,864 28,724
Less: non-current inventory included in 7,772 7,772
other assets (note 9)
23,092 20,952
7 MINERAL INTERESTS, PLANT AND EQUIPMENT
June 30, 2008 Accumulated Net
carrying
Cost amount
amortization
$`000 $`000 $`000
Mineral interests 3,971,653 (40,266) 3,931,387
Plant and equipment 674,162 (9,515) 664,647
4,645,815 (49,781) 4,596,034
December 31, 2007 Accumulated Net
carrying
Cost amount
amortization
$`000 $`000 $`000
Mineral interests 4,299,828 (32,771) 4,267,057
Plant and equipment 566,612 (6,316) 560,296
4,866,440 (39,087) 4,827,353
7 MINERAL INTERESTS, PLANT AND EQUIPMENT (continued)
A summary by property of the net book value is as follows:
June 30, Mineral interests
2008
Non- Plant Total
Deple- and
table equip-
ment
Deple- Total
table
Country $`000 $`000 $`000 $`000 $`000
Akdala Kazakhstan 105,648 74,358 180,006 18,644 198,650
Uranium Mine
South Inkai Kazakhstan - 404,470 404,470 74,049 478,519
Uranium
Project
Kharasan Kazakhstan - 146,768 146,768 40,495 187,263
Uranium
Project
Dominion South - 1,543,590 1,543,590 363,994 1,907,584
Uranium Africa
Project
United United - 279,422 279,422 10,198 289,620
States States
development
projects
United United - 970,031 970,031 1,443 971,474
States States
exploration
projects
Hobson United - 56,869 56,869 41,409 98,278
Facility and States
la Palangana
project
Shootaring United - 50,361 50,361 51,323 101,684
Canyon Mill States
Honeymoon Australia 299,628 299,628 37,868 337,496
Uranium
Project
Corporate - 242 242 25,224 25,466
and other
Total 105,648 3,825,739 3,931,387 664,647 4,596,034
(1) The Corporation has decided to suspend development activities at Honeymoon
to allow for evaluation of corporate development opportunities for the
project.
December 31, Mineral interests
2007
Non- Plant Total
and
equipment
Total
Depletable depletable
Country $`000 $`000 $`000 $`000 $`000
Akdala Kazakhstan 111,302 74,358 185,660 15,906 201,566
Uranium Mine
South Inkai Kazakhstan - 422,631 422,631 31,388 454,019
Uranium
Project
Kharasan Kazakhstan - 146,538 146,538 29,376 175,914
Uranium
Project
Dominion South - 1,756,018 1,756,018 350,146 2,106,164
Uranium Africa
Project
United States United - 278,654 278,654 7,184 285,838
development States
projects
United States United - 1,073,130 1,073,130 1,285 1,074,415
exploration States
projects
Hobson United - 56,869 56,869 33,503 90,372
Facility and States
la Palangana
Project
Shootaring United - 50,009 50,009 47,614 97,623
Canyon Mill States
Honeymoon Australia - 276,087 276,087 23,951 300,038
Uranium
Project
Corporate - 21,461 21,461 19,943 41,404
and other
Total 111,302 4,155,755 4,267,057 560,296 4,827,353
8 AVAILABLE FOR SALE SECURITIES
Jun 30, Dec 31,
2008 2007
$`000 $`000
Available for sale securities 2,692 21,257
$`000
Balance as at January 1, 2007 -
Received as part of a joint venture 1,268
earn-in payment
Purchased as part of the EMC 20,391
acquisition
Purchased during the period 278
Impairment of available for sale
securities included in the statement
of operations (932)
Increase due to foreign exchange 64
translation
Fair value adjustment included in other 188
comprehensive income
Balance as at December 31, 2007 21,257
Received as part of a joint venture 470
earn-in payment
Disposed during the period (17,425)
Impairment of available for sale (657)
securities included in the statement
of operations
Fair value adjustment included in other (953)
comprehensive income
Balance as at June 30, 2008 2,692
During the three months ended June 30, 2008, the Corporation disposed of
its investment in Randgold and Exploration Company Limited ("Randgold").
The securities had a carrying value of $Nil. No value was allocated to
the investment as part of the purchase price allocation on April 20,
2007, due to the suspension of Randgold on the Johannesburg stock
exchange. Proceeds on the sale of these securities amounted to $13.0
million which resulted in a pre-tax gain on sale of securities of $13.0
million. Capital gains tax of $1.5 million on the sale was offset
against the assessed losses of Uranium One Africa.
For the three months ended June 30, 2008, the Corporation also disposed
of other available for sale securities with a fair market value of $14.0
million. The securities had a cost basis of $14.0 million and fair value
losses included in other comprehensive income of $Nil. Proceeds on the
sale of these securities were $9.6 million which resulted in a pre-tax
loss on sale of securities of $4.4 million. Capital gains tax of $0.9
million was offset against the Corporation`s assessed losses.
For the six months ended June 30, 2008, the Corporation disposed of
available for sale securities with a fair market value of $17.4 million.
The securities had a cost basis of $17.2 million and fair value losses
included in other comprehensive income of $0.2 million. Proceeds on the
sale of these securities were $11.7 million which resulted in a loss on
sale of securities of $5.5 million. Capital gains tax of $0.9 million was
offset against the Corporation`s assessed losses.
By holding these long-term investments the Corporation is inherently
exposed to various risk factors including currency risk, market price
risk and liquidity risk (note 18).
9 OTHER ASSETS
Jun Dec
30, 31,
2008 2007
$`000 $`000
Asset retirement fund 20,076 20,316
Advances for future services 10,312 10,629
Long term inventory (note 6) 7,772 7,772
Advances for plant and equipment 6,018 12,643
Prepaid financing fees 5,666 -
Long term deposits and guarantees (note 3,004 3,220
4)
Reclamation bond payment on behalf of 1,094 1,094
UPC joint venture
Other 1,816 869
55,758 56,543
Prepaid financing fees relate to upfront costs and other costs incurred
associated with establishing a $100 million bank debt senior secured
revolving credit facility (the "facility") during the 3 months ended June
30, 2008. Under the terms of the facility, the Corporation has the
ability to borrow up to $100 million from the lead lenders, Bank of
Montreal and The Bank of Nova Scotia (the "Banks"). The facility has a
two year term, and may be extended for a further year with lender
consent.
Draw downs under the facility can be made at interest rates based on
either the US dollar LIBOR rate or the Bank of Montreal base rate for US
dollar denominated loans. (Refer note 18). Undrawn amounts are subject
to a commitment fee ranging from 0.4% to 0.5% per annum.
Letters of credit can be issued under the facility at a fee of between
1.25% and 2.00% per annum.
The margins over the base interest rates, the commitment fee and the
letter of credit fee, are dependent on the ratio of the Corporation`s net
debt (consisting of total debt less certain cash balances) to its
earnings before interest, taxes, share based compensation, depreciation
and depletion and other non-cash items.
Draw downs under the facility may be used for general corporate purposes,
including working capital requirements and funding capital expenditures
and acquisitions.
On drawdown of the facility, the fees relating to loan origination costs
will be offset against the long term debt and will be amortized over the
term of the facility using the effective interest rate method.
10 ASSETS HELD FOR SALE
In March 2008 the Corporation decided to sell non-core properties and as
a result certain exploration properties previously included in the United
States Exploration operating segment are classified as held for sale. The
Corporation has received letters of intent from potential buyers to
acquire certain of these properties. These assets held for sale have
been written down to their estimated fair value, less selling costs,
resulting in an impairment charge of $105.1 million and a future income
tax recovery of $23.9 million.
Mineral Future Net
Interest Income
Tax
$`000 $`000 $`000
Carrying value as at 122,659 25,650 97,009
December 31, 2008
Carrying value on date of 122,167 (25,476) 96,691
transfer
Impairment (105,089) 23,880 (81,209)
Carrying value as at June 17,078 (1,596) 15,482
30, 2008
11 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Jun Dec
30, 31,
2008 2007
$`000 $`000
Trade payables 24,369 25,334
Accruals 19,191 24,461
Commodity and other taxes payable 523 11,280
Other 550 9,727
44,633 70,802
12 SHARE CAPITAL
Number of Value of
Issued and outstanding common shares shares shares
$`000
Common shares on January 1, 2007 480,240,704 613,607
Exercise of warrants 481,000 82
Exercise of stock options 1,866,807 7,601
Common shares on April 20, 2007 482,588,511 621,290
Conversion of UrAsia Energy shares to 217,164,830 621,290
Uranium One shares at a ratio of 0.45
Shares of Uranium One owned by Uranium 138,129,435 1,709,647
One shareholders at acquisition
Exercise of warrants 150,000 2,033
Exercise of stock options and restricted 4,354,617 47,311
shares
U.S. Energy asset purchase consideration 6,607,605 99,401
EMC asset purchase consideration 100,444,543 1,013,215
Shares issued for services rendered 322,393 3,987
Common shares on December 31, 2007 467,173,423 3,496,884
Exercise of warrants 150,000 2,104
Exercise of stock options 978,141 6,678
Exercise of restricted shares 95,564 1,382
Balance of issued and outstanding common 468,397,128 3,507,048
shares at June 30, 2008
13 CONTRIBUTED SURPLUS
The following table details the movement of contributed surplus during
the period:
Restricted
shares Options Total
Warrants
$`000 $`000 $`000 $`000
As at January 1, - - 31,286 31,286
2007
Issued on Uranium
One / UrAsia Energy
business 26,407 853 34,782 62,042
combination
Issued on EMC - - 35,307 35,307
asset acquisition
Stock options - - 33,734 33,734
issued and vested
Stock options - - (29,213) (29,213)
exercised
Restricted shares - 3,926 - 3,926
vested
Restricted shares - (1,660) - (1,660)
exercised
Warrants exercised (1,035) - - (1,035)
As at December 31, 25,372 3,119 105,896 134,387
2007
Stock options - - 9,793 9,793
issued and vested
Stock options - - (3,476) (3,476)
exercised
Restricted shares - 804 - 804
issued and vested
Restricted shares - (1,382) - (1,382)
exercised
Warrants exercised (1,062) - - (1,062)
As at June 30, 24,310 2,541 112,213 139,064
2008
13 CONTRIBUTED SURPLUS (continued)
Assumptions
The fair value of stock options and restricted shares used to calculate
the compensation expense was estimated using the Black-Scholes option
pricing model with the following assumptions:
June 30, December
2008 31, 2007
Risk free interest rate 3.11% 4.38%
Expected dividend yield 0% 0%
Expected volatility of the Uranium One`s 69% 61%
share price
Expected life 5 years 5 years
Options
Under Uranium One`s Stock 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, the 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 of average
options
exercise
price
Cdn $
Outstanding options as at January 1, 21,658,500 2.90
2007
Granted up to April 20, 2007 1,935,000 5.99
Exercised up to April 20, 2007 (1,866,807) 2.11
Forfeitures of stock options up to April (30,000) 1.80
20, 2007
Outstanding options as at April 20, 2007 21,696,693 3.29
Converted UrAsia Energy stock options on 9,763,498 7.33
date of business combination
Existing Uranium One share options on 5,390,754 6.67
April 20, 2007
EMC replacement options 8,382,546 8.14
Granted subsequent to April 20, 2007 1,867,817 15.27
Exercised subsequent to April 20, 2007 (4,228,640) 5.14
Forfeitures of stock options subsequent (351,187) 13.14
to April 20, 2007
Outstanding options as at December 31, 20,824,788 8.55
2007
Granted options 2,371,342 3.78
Exercised options (978,141) 3.80
Forfeitures of stock options (2,834,925) 9.76
Outstanding options as at June 30, 2008 19,383,064 8.02
The stock option compensation expense for the three and six months ended
June 30, 2008 was $4.0 million and $9.8 million respectively and for the
three and six months ended June 30, 2007 it was $7.0 million and $10.4
million respectively. As at June 30, 2008, the aggregate unexpensed fair
value of unvested stock options granted amounted to $13.0 million. The
fair value of options granted during the six months amounts to $5.4
million.
13 CONTRIBUTED SURPLUS (continued)
The following table summarizes certain information about Uranium One`s
stock options outstanding at June 30, 2008:
Options outstanding Options exercisable
Range of Number Number
exercise outsta Weight Weight exerci Weight Weighte
prices nding ed ed sable ed d
as at as at
June averag averag June averag average
30, e e 30, e
2008 2008 exercis
remain exerci remain e
ing se ing price
life price life
Cdn $ Cdn $ Cdn $
(years (years
) )
1.09 to 1,417, 2.16 2.36 1,417, 2.16 2.36
2.74 992 992
3.03 to 4,633, 3.90 3.85 2,452, 3.90 4.00
4.76 273 694
4.81 to 3,552, 4.87 6.57 3,421, 4.87 6.64
7.79 004 873
8.26 to 3,940, 4.21 8.46 3,823, 4.21 8.46
9.90 696 278
10.40 to 3,799, 4.32 12.06 2,503, 4.32 12.03
12.93 850 505
13.23 to 849,93 4.80 14.08 310,12 4.80 14.27
15.63 1 7
15.90 to 1,189, 3.98 16.53 396,87 3.98 16.55
16.87 318 2
19,383 4.15 8.03 14,326 4.15 7.63
,064 ,341
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 three 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
Balance at January 1, 2007 404,231
Granted 20,000
Exercised during the period (125,977)
Expired (2,722)
Balance at December 31, 2007 295,532
Granted 609,000
Exercised during the period (95,564)
Expired (1,020)
Balance at June 30, 2008 807,948
The following is a summary of the outstanding restricted share rights:
Number of restricted
shares
Jun 30, Dec 31.
2008 2007
Grant date
June 7, 2006 129,528 225,092
December 8, 2006 49,420 50,440
July 1, 2007 20,000 20,000
April 7, 2008 578,500 -
April 28, 2008 30,500 -
Balance at the end of the period 807,948 295,532
Restricted share rights will not expire while the right holder is an
employee of the Corporation.
The restricted share rights expense for the three and six months ended
June 30, 2008 was $0.4 million and $0.8 million respectively and for both
the three and six months ended June 30, 2007 was $2.6 million. As at June
30, 2008 the aggregate unexpensed fair value of unvested restricted share
rights granted amounted to $2.3 million. The fair value of restricted
shares granted during the six months amounts to $2.4 million.
13 CONTRIBUTED SURPLUS (continued)
Warrants
Number
of Allocated
warrants value
$`000
Balance at January 2,731,619 26,407
1, 2007
Exercised during (150,000) (1,035)
the period
Balance at 2,581,619 25,372
December 31, 2007
Exercised during (150,000) (1,062)
the period
Balance at June 2,431,619 24,310
30, 2008
Warrants Number of warrants Average exercise
price
Jun 30, Dec 31, Jun Dec
2008 2007 30, 31,
2008 2007
$`000 $`000
2008 Warrants 2,431,619 2,431,619 3.55 3.55
Series D Warrants - 150,000 - 6.95
Total 2,431,619 2,581,619 3.55 3.75
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 assumed all of the obligations of EMC and its
subsidiaries arising under certain option and joint venture agreements
with third parties. Uranium One has reserved a total of 1,925,100 common
shares for issuance pursuant to the assumed obligations under contingent
share rights agreements.
14 FOREIGN EXCHANGE GAINS / (LOSSES)
A summary of the foreign exchange loss by item is as follows:
3 months ended 6 months ended
Jun Jun Jun Jun 30,
30, 30, 30, 2007
2008 2007 2008
$`000 $`000 $`000 $`000
Unrealized foreign 171 (6,177) 1,309 (14,777)
exchange gain /
(loss) on future
income tax
liability
Unrealized foreign 1,260 1,432 2,335 2,815
exchange gain on
other items
Realized foreign 1,009 (1,235) (3,830) (1,449)
exchange gain /
(loss) on other
items (1)
2,440 (5,980) (186) (13,411)
(1) A foreign exchange loss amounting to $9.9 million was realized on the
sale of the investment in Aflease Gold (Note 3).
15 CASH FLOW INFORMATION
3 months ended 6 months ended
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
$`000 $`000 $`000 $`000
Changes in non-
cash working
capital excluding
business
combinations:
(Increase) / (33,650) 2,186 1,801 22,495
decrease in
accounts and
other receivables
(Increase) / (437) - 17,413 -
decrease in prepaid
expenses
and other
Decrease / 1,594 (9,842) (4,376) (8,341)
(increase) in
inventories
Decrease in (8,029) (17,276) (22,195) (15,133)
accounts payable
and accrued
liabilities
(Decrease) / (3,201) 409 2,780 6,301
increase in
income taxes
payable
(43,723) (24,523) (4,577) 5,322
Supplemental cash
flow information
Cash interest 3,267 3,201 3,267 3,201
paid
Cash taxation 20,662 7,338 28,660 13,647
paid
16 BASIC AND DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
3 months ended 6 months ended
Jun 30, Jun Jun Jun 30,
2008 30, 30, 2007
2007 2008
$`000 $`000 $`000 $`000
Basic weighted-
average number of
shares 468,166 332,956 467,809 275,380
outstanding
(`000)
Effect of
dilutive
securities:
- stock options - - - -
- warrants - - - -
Diluted weighted-
average number of
shares 468,166 332,956 467,809 275,380
outstanding
For the three and six month periods ended June 30, 2008 and June 30,
2007, convertible debentures, stock options, warrants and restricted
shares were not included in the dilutive weighted average number of
shares outstanding as they were anti-dilutive.
17 CAPITAL DISCLOSURES
The Corporation`s objectives when managing capital are to:
(i) Maintain a flexible capital structure which optimizes the cost of capital
at acceptable risk;
(ii) Continue the development and exploration of its mineral properties; and
(iii)Support any expansion plans.
In the management of capital, the Corporation includes shareholders`
equity, long term debt, cash, and the current portion of loans to joint
ventures.
The Corporation manages its capital structure and makes adjustments to it
when the economic and risk conditions of the underlying assets require
change. In order to maintain or adjust the capital structure, the
Corporation may issue new shares, issue new debt, and/or issue new debt
to replace existing debt with different characteristics. The Corporation
has in place a rigorous planning and budgeting process to help determine
the funds required to ensure the Corporation has the appropriate
liquidity to meet its operating and growth objectives.
The Corporation monitors the following ratios in this respect: total
debt to total capitalization and net debt to total capitalization.
For periods ended
Jun 30, Dec 31,
2008 2007
$`000 $`000
Total debt (excluding future income tax 229,568 453,751
liabilities)
Net debt (total debt less cash,
receivables, and current portion of loans
to joint ventures) 10,701 190,974
Total capitalization (total shareholders` 3,333,036 3,682,905
equity)
Total debt as a percentage of 7% 12%
shareholders` equity
Net debt as a percentage of shareholders` 0% 5%
equity
18 FINANCIAL INSTRUMENTS
The Corporation`s financial instruments primarily consist of cash, short-
term money market investments, marketable securities, accounts
receivable, accounts payable, loans to joint Ventures and convertible
debentures. For cash, short-term money market investments, and current
accounts receivable and payable, carrying value is considered to be a
reasonable approximation of fair value due to the short term nature of
these items. The fair value of the convertible debentures represents the
quoted market value.
Convertible debentures Jun 30, Dec
2008 31,
2007
$`000 $`000
Liability component 136,990 136,548
Equity component 46,480 46,480
183,470 183,028
Fair value 138,173 145,888
18 FINANCIAL INSTRUMENTS (continued)
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 global nature of
the Corporation`s business exposes the reported financial results and
cash flows of operating segments to risks arising from fluctuations in
exchange rates.
The Corporation continuously monitors its exposure to risk. The risk
management carried out by the Corporation is approved by the Board of
Directors. The following describes the type of risks that the Corporation
is exposed to and its objectives and policies for managing those risk
exposures.
(i) Foreign exchange risk
The foreign exchange risk relates to the risk that the value of
financial commitments, recognized assets or liabilities will
fluctuate due to changes in foreign currency rates.
The most significant impact of foreign exchange on the Corporation`s
net earnings and other comprehensive income is the translation of
foreign operations into US dollars. The effect of translating the
financial statements of the entities that are determined to be
integrated foreign operations are included in the consolidated
statements of operations, and the effect of translating the
financial statements of entities that are determined to be self-
sustaining are included in other comprehensive income.
The Corporation is also exposed to foreign exchange risk arising from:
- borrowings denominated in foreign currencies; and
- firm commitments or highly probable forecasted transactions for
receipts and payments settled in foreign currencies or with prices
dependent on foreign currencies.
The Corporation does not hedge its exposure to foreign currency exchange
risk.
The Corporation is primarily exposed to foreign currency risk through the
following assets and liabilities denominated in currencies other than US
dollars:
Financial assets and liabilities Non-financial assets
and liabilities
Cash and Accounts Accounts Convertible Future
cash recei- payable debentures Mineral income tax
equi- vable and interest liabilities
valents accrued plant and
liabi- equipment
lities (1)
June 30,
2008
$`000 $`000 $`000 $`000 $`000 $`000
Canadian 93,047 3,058 3,037 136,990 - -
dollar
South 19,542 24,165 17,678 - 1,907,584 506,368
African
rand
Kazakhstan 18,897 40,096 17,308 - - 346,583
tenge
Australian 847 872 3,164 - 337,496 75,676
dollar
132,333 68,191 41,187 136,990 2,245,080 928,627
Financial assets and liabilities Non-financial assets
and liabilities
December 31, Cash Accounts Accounts Conver- Mineral Future
2007 and recei- payable and tible interest income tax
cash vable accrued Deben- plant and liabilities
equi- liabilities tures equipment
valents $`000 (1)
$`000 $`000 $`000 $`000 $`000
Canadian 78,938 3,683 10,357 136,548 21,216 5,831
dollar
South 1,330 9,606 33,168 - 2,106,164 567,577
African
rand
Kazakhstan 2,787 3,128 16,411 - - 351,207
tenge
Australian 24,966 558 5,540 - 300,038 69,039
dollar
108,021 16,975 65,476 136,548 2,427,418 993,654
(1) Only includes mineral interests, plant and equipment of self sustaining
operations.
18 FINANCIAL INSTRUMENTS (continued)
(i) Foreign exchange risk (continued)
The following table shows the effect on earnings and other comprehensive
income after tax as at June 30, 2008 of a 10% appreciation or
depreciation in the foreign currencies against the US dollar on the
abovementioned financial and non-financial assets and liabilities of the
Corporation.
Other
comprehensive Net
income
earnings
A 10% appreciation in all foreign 191,125 (30,032)
currencies against the US dollar,
with all other variables held
constant.
A 10% depreciation in exchange rates would have the exact opposite effect
on other comprehensive income and net earnings.
(ii) Credit risk
Credit risk is primarily associated with trade receivables, however, it
also arises on cash equivalents.
The Corporation closely monitors its financial assets and does not have
any significant concentration of credit risk. The Corporation sells its
products exclusively to organizations with strong credit ratings. Cash
and cash equivalents are held through large international financial
institutions. Cash and cash equivalents are comprised of financial
instruments issued by Canadian banks and companies with high investment-
grade ratings. These investments mature at various dates.
The Corporation`s maximum exposure to credit risk at the balance sheet
date is as follows:
Jun 30, Dec 31,
2008 2007
$`000 $`000
Short-term money market instruments 46,683 12,059
Accounts receivable 69,479 73,538
Available for sale securities 2,692 21,257
118,854 106,854
(iii) Liquidity risk
The Corporation has a cash forecast and budgeting process in place to
assist with the determination of funds required to support the
Corporation`s operating requirements on an ongoing basis and its
expansion plans. The Corporation manages liquidity risk through the
management of its capital structure and financial leverage as outlined in
note 17.
The Corporation has established a credit facility as part of its
liquidity risk management process (note 9). No funds have been drawn down
from the facility. The following table summarizes the contractual
maturities of the Corporation`s significant financial liabilities:
Less 1 to 3 4 to 5 After 5
than
1 year years years years Total
Lease 1,102 3,463 1,265 1,539 7,369
obligations
Kyzylkum Long - 16,700 13,070 - 29,770
term debt
Capital 19,939 381 - - 20,320
commitments
Asset - - - 16,168 16,168
retirement
obligations
Accounts 44,633 - - - 44,633
payable and
accrued
liabilities
Convertible - 155,200 - - 155,200
debentures
65,674 175,744 14,335 17,707 273,460
The convertible debenture is convertible in cash or shares, and may not
result in a cash outflow.
The Corporation has interests in Joint Ventures, and is responsible for
partial funding of these Joint Ventures pursuant to the terms of the
Joint Venture agreements. The Corporation does not bear direct liquidity
risk for liquidity of these joint ventures.
18 FINANCIAL INSTRUMENTS (continued)
(iv) Interest rate risk
The Corporation is exposed to interest rate risk on its outstanding
borrowings and short-term investments. The only outstanding interest-
bearing borrowings as at June 30, 2008 are the loan facility obtained by
Kyzylkum (note 5.1) which bears interest at floating rates, and the
convertible debentures, with a fixed interest rate.
Draw downs under the Corporation`s credit facility (note 9) can be made
at interest rates based on either the US dollar LIBOR rate or the Bank of
Montreal base rate for US dollar denominated loans. The margin on LIBOR
loans is between 1.25% and 2.00% per annum and between 0.25% and 1.00%
per annum on US base rate loans.
A 100 basis point change in the interest rate would impact the
Corporation`s net earnings as follows:
Jun Dec
30, 31,
2008 2007
$`000 $`000
A 100 basis point appreciation in
interest rates, with all other
variables
held constant 119 40
A 100 basis point depreciation in the interest rate would have the exact
opposite effect on net earnings.
(v) Commodity price risk
The Corporation is exposed to price risk with respect to commodity
prices. The Corporation does not hedge its exposure to price risk, other
than having market related pricing structures in the long term sales
contracts which the Corporation has entered into. Increases in uranium
prices would have a positive impact on profitability given that the
majority of the Corporation`s sales contracts are priced based on market
values for uranium.
A 10% change in commodity prices would impact the Corporation`s net
earnings as follows:
Jun 30, Jun
2008 30,
2007
$`000 $`000
A 10% appreciation in commodity
prices, with all other
variables held constant 7,191 6,500
A 10% depreciation in the commodity price would have the exact opposite
effect on net earnings.
19 SEGMENTED INFORMATION
The Corporation`s reportable operating segments are summarized in the
table below:
For the three months ended June 30, 2008: (in $`000)
Country Revenues Opera- Depre- Explo- Net Capital
ting ciation ration earnings expen-
expenses and dep- expense / (loss) diture
letion from
conti-
nuing
opera-
tions
$`000 $`000 $`000 $`000 $`000 $`000
Akdala Kazakhs 49,390 (9,487) (6,960) - 17,240 3,241
Uranium Mine tan
South Inkai Kazakhs - - - - 819 11,373
Uranium tan
Project
Kharasan Kazakhs - - - - 745 6,962
Uranium tan
Project
Dominion South - - - (488) (1,367) 32,266
Uranium Africa
Project
United United - - - - (37) 3,019
States States
development
projects
United United - - - (1,445) (1,980) -
States States
exploration
projects
Hobson United - - - - 99 4,560
Facility and States
La Palangana
Project
Shootaring United - - - (11) (251) 1,359
Canyon Mill States
Honeymoon Austral - - - (1,251) (2,214) 4,797
Uranium ia
Project (1)
Corporate - - - (1,840) (81,249) 843
and other
Total 49,390 (9,487) (6,960) (5,035) (68,195) 68,420
(1) The Corporation suspended development activities at Honeymoon to allow
for evaluation of corporate development opportunities for the project.
For the six months ended June 30, 2008: (in $`000)
Country Opera- Depre- Explo- Net Capital
Revenues ting ciation ration earnings/ expendi-
expen- and expense (loss) ture
ses deple- from
tion conti-
nuing
opera-
tions
$`000 $`000 $`000 $`000 $`000 $`000
Akdala Kazakhstan 71,907 (12,779) (9,891) - 26,417 4,855
Uranium
Mine
South Inkai Kazakhstan - - - - 1,159 15,762
Uranium
Project
Kharasan Kazakhstan - - - - 928 12,000
Uranium
Project
Dominion South - - - (540) (1,814) 55,905
Uranium Africa
Project
United United - - - - (57) 5,643
States States
development
projects
United United - - - (1,814) (1,885) 221
States States
exploration
projects
Hobson United - - - - (6) 11,902
Facility States
and La
Palangana
Project
Shootaring United - - - (11) (308) 2,849
Canyon Mill States
Honeymoon Australia - - - (1,528) (2,928) 11,180
Uranium
Project
Corporate - - - (2,822) (100,014) 2,120
and other
Total 71,907 (12,779) (9,891) (6,715) (78,508) 122,437
19 SEGMENTED INFORMATION (continued)
For the three months ended June 30, 2007: (in $`000)
Country Reve- Opera- Depre- Explo- Net Capital
nues ting ciation ration earnings/ expen-
expen- and expense (loss) diture
ses deple- from
tion conti-
nuing
opera-
tions
$`000 $`000 $`000 $`000 $`000 $`000
Akdala Kazakhstan 23,265 (2,058) (2,016) - 10,993 2,016
Uranium
Mine
South Inkai Kazakhstan - - - - 126 11,441
Uranium
Project
Kharasan Kazakhstan - - - - (635) 7,186
Uranium
Project
Dominion South - - - (353) 397 39,560
Uranium Africa
Project
United United - - - (2,120) (2,310) -
States States
exploration
projects
Shootaring United - - - (8) (314) -
Canyon Mill States
Honeymoon Australia - - - (418) (898) 5,452
Uranium
Project
Corporate - - - (1,465) (20,467) 812
and other
Total 23,265 (2,058) (2,016) (4,364) (13,108) 66,467
For the six months ended June 30, 2007: (in $`000)
Country Reve- Opera- Depre- Explo- Net Capital
nues ting ciation ration earnings/ expen-
expen- and expense (loss) diture
ses deple- from
tion conti-
nuing
opera-
tions
$`000 $`000 $`000 $`000 $`000 $`000
Akdala Kazakhstan 64,995 (9,101) (6,875) - 24,062 3,442
Uranium
Mine
South Inkai Kazakhstan - - - - 126 19,013
Uranium
Project
Kharasan Kazakhstan - - - - (2,029) 7,186
Uranium
Project
Dominion South - - - (353) 397 39,560
Uranium Africa
Project
United United - - - (2,120) (2,310) -
States States
exploration
projects
Shootaring United - - - (8) (314) -
Canyon Mill States
Honeymoon Australia - - - (418) (898) 5,452
Uranium
Project
Corporate - - - (2,924) (24,171) 8,507
and other
Total 64,995 (9,101) (6,875) (5,823) (5,137) 83,160
-
19 SEGMENTED INFORMATION (continued)
As at June 30, 2008: (in $`000)
Mineral Future
interest
plant and Total income tax Total
Country assets
equipment liabilities liabilities
$`000 $`000 $`000 $`000
Akdala Uranium Kazakhstan 198,650 240,170 70,078 79,606
Mine
South Inkai Kazakhstan 478,519 477,199 204,289 210,621
Uranium Project
Kharasan Uranium Kazakhstan 187,263 199,313 72,216 110,342
Project
Dominion Uranium South 1,907,584 1,921,358 506,368 528,084
Project Africa
United States United 289,620 289,712 90,506 91,409
development States
projects
United States United 971,474 979,350 349,790 351,761
exploration States
projects
Hobson Facility United 98,278 99,778 19,933 21,406
and La Palangana States
Project
Shootaring Canyon United 101,684 116,971 18,613 21,984
Mill States
Honeymoon Uranium Australia 337,496 338,964 75,676 79,722
Project
Corporate and 25,466 275,064 44 142,146
other
Total 4,596,034 4,937,879 1,407,513 1,637,081
As at Dec 31, 2007: (in $`000)
Mineral Future
interest
plant and Total income tax Total
Country equipment assets liabilities liabilities
$`000 $`000 $`000 $`000
Akdala Uranium Kazakhstan 201,566 266,240 73,623 94,710
Mine
South Inkai Kazakhstan 454,019 457,510 205,053 207,461
Uranium Project
Kharasan Uranium Kazakhstan 175,914 184,283 72,486 92,422
Project
Dominion Uranium South 2,106,164 2,111,565 567,577 598,102
Project Africa
United States United 285,838 285,838 90,517 92,187
development States
projects
United States United 1,074,415 1,079,794 370,229 374,210
exploration States
projects
Hobson Facility United 90,372 91,879 19,729 22,639
and La Palangana States
Project
Shootaring Canyon United 97,623 112,894 18,613 21,186
Mill States
Honeymoon Uranium Australia 300,038 300,043 69,040 86,613
Project
Corporate and 41,404 341,251 9,193 152,072
other
Total 4,827,353 5,231,297 1,496,060 1,741,602
Date: 13/08/2008 13:27:01 Produced by the JSE SENS Department.
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