| Mon 9 Feb 2009, 8:31 | | FUM - First Uranium Reports Financial And Operating Results For Third Quarter |
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FUM
FIU
FUM - First Uranium Reports Financial And Operating Results For Third Quarter
Ended December 31, 2008
First Uranium Corporation
(Continued under the laws of British Columbia, Canada)
(Registration number C0777384)
(South African registration number 2005/033680/07)
Share code: FUM & ISIN: CA33744R1029
FIRST URANIUM CORPORATION
NEWS RELEASE - February 9, 2008
FIRST URANIUM REPORTS FINANCIAL AND OPERATING RESULTS FOR THIRD QUARTER ENDED
DECEMBER 31, 2008
All amounts are in US dollars unless otherwise noted.
For a full discussion of financial and operating results, the Financial
Statements and Management Discussion & Analysis, please see the Company`s
website, www.firsturanium.com under "Investor Centre / Interim Reports"
Toronto and Johannesburg - First Uranium Corporation (TSX:FIU, JSE:FUM)
(ISIN:CA33744R1029) ("First Uranium" or "the Company") today announced its
financial and operating results for the three and nine months ended December
31, 2008 ("Q3 2009" and "2009 YTD", respectively) and provided technical
updates for both the underground Ezulwini Mine ("Ezulwini") and the Mine
Waste Solutions tailings recovery operation ("MWS").
During the quarter, First Uranium continued its focus on:
- the rehabilitation and bringing into production of the Ezulwini
underground mine;
- the commissioning of the Ezulwini uranium plant;
- the construction at MWS of the second gold module; and
- the construction at MWS of the first two uranium modules.
Through the balance of the fiscal year ending March 31, 2009 ("FY 2009"), the
Corporation will continue to focus its resources and efforts on the above-
mentioned activities.
During Q3 2009, First Uranium:
- advanced refurbishment, construction and development activities at both
Ezulwini and MWS, with capital expenditures of $53.4 million in the
quarter
- hoisted 30,892 tonnes of gold- and uranium-bearing ore at Ezulwini
- underground development at Ezulwini remained constrained because the
majority of shaft time availability was allocated to the shaft
refurbishment project, which was substantially completed subsequent to
the end of the quarter on February 7, 2009
- processed 80,079 tonnes of gold-bearing ore at Ezulwini, producing 6,411
ounces of gold
- successfully commissioned the second 50,000 tonne-per-month grinding mill
at Ezulwini
- reprocessed 1.8 million ones of tailings through the MWS gold plant at a
yield of 0.2 grams of gold per tonne, producing 12,235 ounces of gold at
a Cash Cost (as defined in the note (b) in the Financial Overview table
below) of $368 per ounce
- achieved unit operating costs at MWS of $2.12 per tonne that were 13%
lower than the forecast $2.43 per tonne in the Company`s most recent
technical report for MWS
- reported a 59% increase in revenue from gold sales at MWS compared to Q3
2008
- on November 5, 2008, signed a definitive agreement with Gold Wheaton
(Barbados) Corporation ("GW"), a wholly-owned subsidiary of Gold Wheaton
Gold Corp., whereby GW acquired the right to receive 25% of the estimated
2.1 million ounces of life-of-mine gold production from MWS (the "Gold
Stream Transaction")
- on December 18, 2008 received $50 million (the "First Payment") from GW
upon fulfilling the closing conditions under the Gold Stream Transaction;
a further $75 million (the "Balance Payment") is due on or before March
12, 2009, failing which the Gold Stream Transaction reverts to only 10%
of the life-of-mine gold production from MWS
- ended the quarter with $39.0 million of cash and cash equivalents
- on November 10, 2008 announced the results of an updated technical report
for Ezulwini and also applied several modifying factors to the MWS
technical report dated March 31, 2008 resulting from an improved
understanding of the project expansion milestones as well as the improved
operational performance of MWS in Q2 2009
Financial Overview
Q3 2009 Q3 2008 2009 YTD 2008 YTD
Ezulwini
Tonnes hoisted 30,892 27,951 97,595 27,951
Ounces of gold sold(a) 6,411 5,055 6,534 5,055
Average selling price 922 831 922 831
per ounce ($)
MWS
Tonnes reclaimed (000s) 1,798 832 5,302 2,461
Average gold recovery 0.21 0.28 0.19 0.21
grade (grams/tonne)
Total ounces of gold 12,235 7,357 32,586 20,901
reclaimed
Total ounces of gold 12,581 7,328 32,441 20,831
sold
Average selling price 838 905 860 723
per ounce ($)
Average cost per ounce 428 741 421 626
reclaimed ($)
Average Cash Cost per 368 677 385 562
ounce reclaimed ($)(b)
Summary of Consolidated
Financial Results
(in thousands of dollars,
except per share amounts)
Revenue
Ezulwini(a) 5,910 - 5,910 -
MWS( c) 10,548 6,633 27,899 15,059
16,458 6,633 33,809 15,069
Cost of sales (including
amortization)( c)
Ezulwini(a) (12,054) - (12,054) -
MWS (C) (5,385) (5,433) (13,645) (13,030)
(17,439) (5,433) (25,699) (13,030)
Gross (loss) profit
Ezulwini (6,144) - (6,144) -
MWS 5,163 1,200 14,254 2,039
(981) 1,200 8,110 2,039
Amortization (C) (760) (472) (1,148) (1,333)
Operating loss(d) (6,657) (4,484) (11,579) (9,838)
Income (loss) for the 1,281 (3,998) (5,620) 4,524
period
Basic and diluted (loss) 0.01 (0.03) (0.04) 0.04
income per share
Cash flow utilized in 3,679 (11,587) (740) 19,904
operations
Cash outflow from (51,388) (28,035) (174,983) (75,011)
investing activities
Notes:
(a) During Q3 2009, the gold processing plant at Ezulwini was regarded
as ready for commercial use, notwithstanding the fact that the plant
was operating at considerably less than capacity during these early
days of production. Accordingly, from the beginning of Q3 2009, the
revenues and related costs derived from the gold processing plant were
included in the Company`s financial results. Prior to Q3 2009, the
costs of production from Ezulwini were capitalized and related
proceeds of sales credited against capital.
(b) Cash cost per ounce is defined as cost of sales divided by ounces
of gold sold. Total cash costs exclude amortization expense and
inventory purchase accounting adjustments. For further information on
this non-GAAP performance measure see page 8 of the Company`s Q3 2009
MD&A.
(c) For Q3 2008 and 2008 YTD only the results of MWS for the month of
June 2007 were included in the Company`s consolidated results as the
effective date of acquisition of MWS was June 6, 2007.
(d) This is a non-GAAP measurement. Operating loss is loss before
interest income, interest and accretion expenses, foreign exchange
gains and income tax charges.
At Ezulwini, the delays encountered in commissioning of the gold elution
circuit during Q2 2009 were resolved and the gold processing plant commenced
operating in October 2008, generating revenue of $5.9 million from 6,411
ounces of gold sold at an average selling price of $922 per ounce during Q3
2009. As mentioned in note (a) above, from the beginning of Q3 2009, the
revenues and related costs derived from the gold processing plant were
included in the Company`s financial results. Ezulwini is still in a build-up
phase of production and the shaft refurbishment project limited the
underground mining and development activities during the quarter resulting in
lower tonnages, considerably higher unit costs and a negative margin on
Ezulwini production. As a result, Ezulwini incurred a gross loss of $6.1
million in Q3 2009. It is anticipated that the unit costs will decrease as the
underground mining and development activities increase.
At MWS, the Company operated at planned throughput and gold recovery rates
achieving 94.8% of its gold production forecast during Q3 2009 (6% above
technical report plan published in April 2008) and showed continued
improvement in its financial results. The higher average Cash Costs in Q3 2008
were attributable primarily to the high-cost mechanical load and placement
operation required to mine the remnants taken from the MWS No.2 tailings dam.
The increased revenues from continued improvement in gold production as well
as the reduction in operating costs at MWS (despite the inclusion of $0.8
million of costs related to the Gold Stream transaction) resulted in the
significant increase in gross profit from tailings processed at MWS from $1.2
million in Q3 2008 to $5.2 million in Q3 2009.
The consolidated operating loss in Q3 2009 was higher than the operating loss
in Q3 2008 despite the continuing improvement and much higher gross profit on
MWS production, principally due to the aforementioned gross loss during
production build-up at Ezulwini and higher general, consulting and
administrative expenses. The consolidated operating loss in Q3 2008 reflected
increased revenues at MWS, which were more than offset by the increase in
corporate and administration expenses as operating activities expanded during
the quarter.
The consolidated income in Q3 2009 was primarily the result of the significant
foreign exchange gains on translation of Canadian and South African assets,
liabilities, revenues and expenses converted to US dollars, which strengthened
against the other reporting currencies in the period. The Company reported a
consolidated loss in Q3 2008 that was primarily the result of operating losses
for the quarter, partially offset by foreign exchange translation gains net
interest income earned and taxes recovered.
The cash generated from operating activities during Q3 2009 was primarily
attributable to the additional cash generated from gold sales with the
commencement of gold production at Ezulwini during the quarter and the receipt
of a large value added tax receivable that more than offset the operating and
other expenditures. The cash utilized in operating activities during Q3 2008
reflected net operating expenses offset by net interest received during the
quarter.
The cash utilized in investing activities in Q3 2009 primarily related to
capital expenditures of $17.2 million and $36.3 million at Ezulwini and MWS,
respectively. The cash utilized in investing activities during Q3 2008
comprised capital expenditures of $17.4 million at Ezulwini and $10.7 million
at MWS. A further $1.9 million cash transferred to restricted cash during Q1
2009 was released during Q3 2009 to fund the final payment on the 30 MW power
plant acquired by MWS.
At the end of Q3 2009, First Uranium had total assets of $439.7 million, total
liabilities of $208.1 million and shareholders` equity of $231.6 million. The
Company had cash and cash equivalents of $39.0 million (excluding $0.5 million
of restricted cash on deposit) compared to $164.7 million at the end of FY
2008. The Company currently holds its funds in cash and bank-sponsored
guaranteed investment certificates with Canadian and South African banks.
The escalation of the recent market turbulence arising from the global credit
crisis has resulted in significantly reduced economic activity worldwide, a
severe limitation in access to capital, volatility and uncertainty of
prospects for global metal prices, exchange rates and the cost of materials.
Management is carefully monitoring these developments, the impact these
conditions may have on the Company`s operations, financial condition and
outlook, and is actively assessing non-critical capital expenditures and
opportunities to reduce overheads and operating costs. In particular,
considerable attention has been given to securing the near- and medium-term
funding requirements of the Company`s currently-identified capital projects.
Subsequent to the quarter, on January 27, 2009, the Company entered into a
bought deal private placement offering (the "Private Placement") through which
the Company expects to raise gross proceeds of Cdn$61.5 million (approximately
$49 million). The Private Placement is expected to close on February 11, 2009.
The Balance Payment of $75 million under the Gold Stream Transaction is also
due on or before March 12, 2009.
The additional cash expected from the closing of the Private Placement and the
Balance Payment under the Gold Stream Transaction will mitigate most, if not
all, of the financing risk that would otherwise confront the Corporation in
the near- to mid- term. Assuming the completion of these financing
activities, the Company anticipates that its capital programs will continue as
planned and that both operations will be generating free cash flow by April
2010.
At the end of Q3 2009, $199.1 million of cash has been invested in capital
projects at Ezulwini, of which $16.1 million and $86.8 million was invested
during Q3 2009 and 2009 YTD, respectively, including $31.9 million capitalized
pre-production costs, pumping and other capital related costs. The revised
project costs at Ezulwini released in November 2008 indicated that the total
capital required over the life of the mine was estimated at $300 million,
exclusive of sustaining capital.
At the end of Q3 2009, $108.4 million of cash has been invested in capital
projects at MWS, of which $46.7 million and $87.2 million were invested during
Q3 2009 and 2009 YTD, respectively. The revised project costs at MWS released
in November 2008 indicated that the total capital required over the life of
mine was estimated at $315 million, exclusive of sustaining capital.
Operational Overview
MWS QUARTERLY PRODUCTION RESULTS
Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009
Tonnes 832,208 1,592,242 1,664,537 1,839,188 1,798,022
processed
Head grade 0.455 0.370 0.369 0.407 0.420
Recovered 0.275 0.139 0.160 0.200 0.212
grade
Recovery % 60% 38% 43% 49% 50%
Gold 229 219 265 368 380
recovered
(kg)
Gold 7,357 7,030 8,530 11,821 12,235
recovered
(oz)
At MWS, the Company:
- reprocessed 1.8 million tonnes of tailings through the gold plant at a
yield of 0.21 grams of gold per tonne, producing 12,235 ounces of gold
compared to forecast of 12,900 ounces; and
- progressed construction of the second gold plant module and the first two
modules of the uranium plant, which are scheduled for commissioning
during Q1 2010.
At Ezulwini, the Company:
- milled 12,866 tonnes of gold-bearing ore sourced from surface stockpiles;
- allocated proportionately more time to fast-track the shaft refurbishment
project with resultant delays to underground development and production.
This resulted in only 30,892 tonnes of gold- and uranium-bearing ore
being hoisted;
- substantially completed the shaft refurbishment project subsequent to the
quarter on February 7, 2009, allowing the shaft to be available for full
utilization of underground mining and development activities;
- resolved the delays encountered in commissioning of the gold elution
circuit resulting in the gold processing plant commencing production of
gold;
- commissioned the second grinding mill (doubling the operation`s milling
capacity to 100,000 tonnes per month) thereby providing the flexibility
to concurrently process uranium- and gold-bearing ore from the Middle
Elsburg reefs, as well as gold-bearing ore from the Upper Elsburg reefs;
and
- at the end of Q3 2009, had stockpiled ore as shown in the following
table.
EZULWINI SURFACE STOCKPILE STATUS (as at December 31, 2008)
Gold grade
Source Tonnes (grams/tonne)* U3O8
grade
(%)*
Underground clean up 106,598 1.12 -
and development
Uranium ore stockpile 61,266 - 0.036
*Sampled belt grades
Subsequent to the end of Q3 2009
As mentioned above, on January 27, 2009, the Company announced that it entered
into a Private Placement agreement with a syndicate of underwriters who agreed
to purchase 20,500,000 Units of the Company at a price of $3.00 per Unit for
gross proceeds of CDN$61.5 million. Each Unit will consist of one common share
of First Uranium and one-half of one common share purchase warrant (each full
warrant, a "Warrant"); each full Warrant being exercisable to acquire one
common share of First Uranium at a purchase price of $4.15 for a period of 24
months following the closing date, which is expected to be February 11, 2009.
Closing is subject to customary conditions, including the receipt of all
necessary approvals.
On February 7, 2009, the shaft refurbishment project at Ezulwini was
substantially completed, allowing the shaft to be available for full
utilization of underground mining and development activities. Although some
shaft refurbishment activities and the plan to destress the shaft pillar will
continue throughout FY 2010, this activity is not expected to interfere with
planned mining activities.
Sulphuric Acid Plant Update
The Company completed an approximately + -10% specification and procurement
study for a 360 tonnes per day `fit-for-purpose` sulphuric acid plant
estimated to cost $70 million, which could be located at Ezulwini. The
recently completed metallurgical test work on the MWS tailings resources
concluded that the installation of a 600 tonne per day sulphuric acid plant at
a cost of $124 million at MWS will be technically more challenging and less
capital inefficient compared with the option of constructing an acid plant at
Ezulwini. Installing a smaller 360 tonnes per day `fit-for-purpose` sulphuric
acid plant at Ezulwini would improve capital efficiencies. As previously
reported, due to recent and continuing softening of sulphuric acid prices, the
Company has deferred its decision to build an acid plant until acid prices and
supply stabilize.
Power Update
During 2009 YTD the electrical power requirements of both MWS and Ezulwini
were supplied by South Africa`s national power utility, Eskom, without a
repeat of the major interruptions experienced in Q4 2008. As a backup plan to
secure a continuous supply of electrical power at Ezulwini, the Company has
connected the existing 14 megawatts ("MW") of standby diesel generated power
capacity to the new plant. Further diesel generating power, comprising 10
units with a capacity of 1 MW each (the "Gensets"), arrived on site and are
currently connected into the mine supply grid. The Gensets are ready for
immediate use should the need arise.
At MWS, the 30 MW power plant, which was acquired to ensure a sufficient
supply of power to start up the uranium and add-on gold plants, is currently
undergoing testing and refurbishment and civil construction work is in
progress for installation of the power plant in April 2009.
During 2009 YTD, capital expenditures of $9.1 million were spent on securing
the above sources of power to supplement the power supplied by Eskom.
By procuring these alternative sources of power, the Company has secured
sufficient capacity to meet its operating requirements during the early stages
of each operations` development and to run emergency systems at the
underground operation at Ezulwini, in the event of power disruptions. A
provision has been included in each operation`s operating costs in the event
of having to run these alternate power sources during peak demand periods,
although that need has not yet arisen.
One of the factors enabling Eskom to meet the Company`s power requirements in
Q3 2009 has been the decline in the current demand for Eskom power brought on
by the impact of the credit crisis in Southern Africa. Although it may be too
early to predict the outcome of the economic downturn, it is envisaged that
there may be no need for the Company to generate its own power, which could
result in a reduction in forecast operating cost estimates at both operations.
Outlook
"Our primary focus is to commission the uranium plant at the Ezulwini Mine and
the remaining gold and uranium plants at Mine Waste Solutions, said Gordon
Miller, President and CEO of First Uranium. He added: "This will allow us to
expand our gold production and also complete our transition from developer to
producer of uranium at both operations. With the expected receipt of the
proceeds from the recently announced private placement in mid-February, we can
push forward as planned on all phases of our plant construction and expect to
generate positive free cash flow by April 2010."
The critical portion of the shaft refurbishment at Ezulwini is complete and
the next major milestone there is the commissioning of the 100,000 tonne per
month uranium plant, which is on schedule to commence recovery of uranium
during Q4 2009.
First Uranium has not yet signed any long-term contracts to sell uranium. As
long-term uranium supply contracts generally require delivery of fixed amounts
of uranium over a fixed time period, the Company plans to complete the
commissioning of at least one of its uranium plants prior to entering into any
such uranium contracts.
The current and planned capital projects at MWS include:
- completion of the second gold module and the first two uranium modules
scheduled for Q1 2010;
- securing additional Eskom power for the planned expansion of MWS;
- construction of the third gold module and the third uranium module
scheduled for commissioning in December 2009, increasing plant capacity
to 1.9 million tonnes per month;
- permitting a single large tailings dam to accommodate all future
production tailings as well as tailings from processing the ore of Simmer
& Jack Mines` Buffelsfontein Gold Mine for uranium.
An upgrade to accommodate a deposition rate of 1.3 million tonnes of material
per month on the MWS No.5 tailings dam is already underway in advance of the
commissioning of the second module of the MWS gold plant and the first two
modules of the uranium plant. In the event that the MWS No.5 tailings dam is
found to be insufficient, additional un-reclaimed historic tailings dam
footprints have been identified.
.
Financial Results: Release and 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 5:00
p.m. local Johannesburg time on Tuesday, February 10, 2009. The conference
call will be available simultaneously to all interested analysts, investors
and media.
Callers may dial 1 800 319-4610 (Canada and the US) or 0800 981 705 (South
Africa). Callers from other international locations may call +1 604 638-
5340. The call will be webcast at
http://services.choruscall.com/links/firsturanium090210.html and available for
replay shortly after the call for 90 days.
A telephone 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 +1
604 638-9010 (Canada). Access to the replay will require the code 2128,
followed by #.
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
price of uranium and gold, requirements for additional capital, availability
of financing on acceptable terms, the availability of electrical power, the
planned addition of owner-operated power generation, price of electrical
power, supply and price of sulphuric acid, the estimation of mineral resources
and reserves, the realization of mineral reserve estimates, the realization of
estimated pyrite content in MWS tailings dams, 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, government regulation of mining
operations, environmental risks, unanticipated reclamation expenses and title
disputes or claims and limitations on insurance coverage. In certain cases,
forward-looking statements can be identified by the use of words such as
"goal", "objective", "assumes", "plans", "expects" or "does not expect", "is
expected", "indicated", "budget", "scheduled", "envisaged", "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 conclusions of economic evaluations, changes in project parameters
as plans continue to be refined, 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, to international
operations, to prices of uranium and gold, actual results of current
exploration activities. 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
at 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) the
conditions precedent to the private placement will be satisfied and the
successful financing by Gold Wheaton of the Balance Payment of the prospective
gold stream transaction will be completed; (ii) approvals to transfer or
grant, as the case may be, mining rights or prospecting rights will be
obtained; (iii) metal prices, exchange rates and discount rates applied in the
prefeasibility study or preliminary economic assessment, as the case may be,
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; (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; and (ix) consistent supply of sufficient power will be available to
develop and operate the projects as planned.
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
operation. 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 bob@firsturanium.ca or
+1 416 342-5639 (office) or +1 416 558-3858 (mobile)
Date: 09/02/2009 08:31:37 Produced by the JSE SENS Department.
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