| Wed 17 Jun 2009, 15:20 | | FUM - First Uranium Corporation - First Uranium Reports Results For Year Ended |
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FUM
FIU
FUM - First Uranium Corporation - First Uranium Reports Results For Year Ended
March 31, 2009
First Uranium Corporation
(Continued under the laws of British Columbia, Canada)
(Registration number C0777384)
(South African registration number 2007/009016/10)
Share code: FUM ISIN: CA33744R1029
FIRST URANIUM REPORTS RESULTS FOR YEAR ENDED MARCH 31, 2009
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 / Annual Reports"
Toronto and Johannesburg - First Uranium Corporation (TSX:FIU, JSE:FUM)
(ISIN:CA33744R1029) ("First Uranium" or "the Company") today announced its
financial results for the three- and twelve-month periods ended March 31, 2009
("Q4 2009" and "FY 2009", respectively). References to "Q4 2008" and "FY 2008"
respectively refer to the three- and twelve-month periods ended March 31, 2008.
References to "Q1 2010" refer to the Company`s three-month period ending June
30, 2009.
During FY2009, the Company recorded a consolidated loss of $16.3 million,
compared to a consolidated loss of $22.3 million in FY 2008. The year-over-year
change was primarily a result of the significant foreign exchange gain on
translation in the value of Canadian and South African assets, liabilities,
revenues and expenses converted to US dollars, which strengthened against the
South African rand and the Canadian dollar during the year. The higher revenue
from increased gold sales also contributed to reducing the size of the
consolidated loss in FY 2009. The gain on translation more than offset the
decrease in interest income during the year.
Production increased in FY 2009 relative to FY 2008, as the gold plant at the
Ezulwini Mine commenced gold production in Q3 2009 and the processing of
tailings at Mine Waste Solutions ("MWS") continued to improve. Notwithstanding
the progress made, neither the Ezulwini Mine nor MWS were operating at full
production capacity during FY 2009.
Revenue for FY 2009 was generated from the sale of gold from the MWS operations
and, beginning in Q3 2009, also included a limited amount of revenue from the
sale of gold from the Ezulwini Mine. Prior to Q3 2009, the Ezulwini Mine was
still in a ramp-up phase and did not achieve commercial levels of production.
Consequently, results from the mining operations at the Ezulwini Mine were only
included in the consolidated results for the second half of FY 2009, but since
the mine had not yet achieved full production capacity, this operation generated
a substantial loss due to the mine`s fixed operating costs being spread over a
limited amount of early-stage production. Gross profit from MWS increased year
over year by 309% as a result of increased throughput and gold sales, but was
not sufficient to offset the negative operating results from the Ezulwini Mine.
The Company had no uranium production during FY 2008 or FY 2009.
Gordon Miller, First Uranium`s President and Chief Executive Officer commented,
"While not yet recording positive cash flow and earnings, we are encouraged that
our financial performance is headed in the right direction and reflects our
status as a gold producer at both operations and that, with the startup of
uranium production, the majority of our capital expenditures at the Ezulwini
Mine are now behind us. We expect that operating profit and cash flow will
benefit from the completion of the significant capital expenditure programs at
the Ezulwini Mine in FY 2009 and at MWS in FY 2010."
Financial Overview
Q4 2009 Q4 2008 FY 2009 FY 2008
The Ezulwini Mine
Tonnes hoisted (000s) 29 - 127 -
Tonnes milled (000s) 109 18 233 46
Ounces of gold sold(a) 4,267 2,680 10,802 7,735
Average selling price per ounce 917 940 910 869
($)
Average cost per ounce produced 2,069 - 1,933 -
and sold
Average Cash Cost per ounce(b) 2,032 - 1,919 -
MWS
Tonnes reclaimed (000s) 1,693 1,592 6,995 4,053
Average gold recovery grade 0.19 0.28 0.19 0.22
(grams/tonne)
Total ounces of gold reclaimed 10,513 7,289 43,099 28,192
Total ounces of gold sold 10,417 7,263 42,857 28,094
Average selling price per ounce 948 876 881 763
($)(b)
Average cost per ounce reclaimed 412 489 418 590
($)
Average Cash Cost per ounce 379 458 397 535
reclaimed ($)(c)
Summary of Consolidated Financial
Results
(in thousands of dollars, except
per share amounts)
Revenue
Ezulwini Mine(a) 3,915 - 9,825 -
MWS(c) 9,872 6,360 37,771 21,429
13,787 6,360 47,596 21,429
Cost of sales (including
amortization)
Ezulwini Mine(a) (8,829) - (20,883) -
MWS(c) (4,288) (3,550) (17,933) (16,580)
(13,117) (3,550) (38,816) (16,580)
Gross (loss) profit
Ezulwini Mine (4,914) - (11,058) -
MWS 5,584 2,810 19,838 4,849
670 2,810 8,780 4,849
Operating loss(d) (5,668) (8,512) (17,247) (18,454)
Loss for the period (10,722) (26,871) (16,342) (22,347)
Basic and diluted loss per common (0.08) (0.21) (0.12) (0.18)
share
Cash flow (utilized in) generated 411,005 (313,897) (11,745) 6,007
from operations
Cash outflow from investing (36,913) (36,795) (211,896) (111,806)
activities
Cash inflow from financing 120,907 215 170,907 131,624
activities
Notes:
(a) As of Q3 2009, the gold processing plant at the Ezulwini Mine was regarded
as ready for commercial use from an accounting perspective, 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 the Ezulwini Mine were capitalized and related
proceeds of sales credited against capital.
(b) Pursuant to an agreement entitling Gold Wheaton (Barbados) Corporation to
purchase 25 percent of the MWS gold production (the "Gold Stream
Transaction"), as further described in the Management`s Discussion and
Analysis for the period ending March 31, 2009 ("FY 2009 MD&A)", the ounces
delivered by MWS into the Gold Stream Transaction during Q4 2009 were
accounted for in revenue at the gold spot rate per ounce at the time of
delivery.
(c) 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 FY 2009 MD&A.
(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.
The Ezulwini Mine generated revenue of $3.9 million from 4,267 ounces of gold
sold at an average selling price of $917 per ounce during Q4 2009. During FY
2009 the Ezulwini Mine generated revenue of $9.8 million from 10,802 ounces of
gold sold at an average selling price of $910 per ounce. The revenues and
related costs derived from the gold processing plant were included in the
Company`s financial results beginning Q3 2009.
As mine production was in the early stages of development and management had
decided to focus on the completion of the refurbishment of the shaft, the time
available for active mining was limited so that the Ezulwini Mine recorded
reduced tonnages and higher than planned Cash Costs (as defined in note (b) to
the table above) of $2,032 per ounce in Q4 2009 and $1,919 per ounce in FY 2009.
Consequently the Ezulwini Mine incurred a gross loss of $4.9 million in Q4 2009
and $11.1 million in FY 2009, respectively. It is anticipated that the high
unit costs will decrease and operating and financial performance will improve
significantly as the underground mining, development and production activities
increase.
In Q4 2009, the Ezulwini Mine sold 4,267 ounces of gold, contributing to the
10,082 ounces of gold sold during FY 2009, compared to a plan of 19,001 ounces.
The lower than planned gold sales were primarily due to limited mining activity
and the processing of the low-grade surface stockpiles, while the shaft
rehabilitation work was being completed.
At MWS, the Company achieved 94.3% of its gold sales forecast during FY 2009 and
showed significant improvement in its financial results. Gold sold by MWS in FY
2009 was 42,857 ounces compared to a plan of 45,461 ounces. Decreased
throughput, grade and recovery during Q4 2009 compared to Q3 2009 were primarily
the result of lower feed grade and higher clay content, combined with
intermittent work stoppages due to unusually severe thunderstorms during the
rainy season.
MWS generated $9.9 million of revenue from 10,417 ounces of gold sold at an
average selling price of $948 per ounce in Q4 2009 compared to $6.4 million from
7,263 ounces of gold sold at an average selling price of $876 per ounce in Q4
2008. During FY 2009, MWS generated $37.8 million of revenue from 42,857 ounces
of gold sold at an average selling price of $881 per ounce compared to $21.4
million from 28,094 ounces of gold sold at an average selling price of $874 per
ounce in FY 2008. Pursuant to the Gold Stream Transaction, the ounces delivered
by MWS into the contract during Q4 2009 were accounted for in revenue at the
gold spot rate per ounce at the time of delivery and the proceeds from these
ounces were used to settle against a derivative liability. If the ounces
delivered into the Gold Stream Transaction were recognized at $400 per ounce as
per the agreement, then the average selling price would have been $815 per
ounce.
A total of 43,099 ounces of gold were produced at MWS in FY 2009 at an average
Cash Cost of $397 per ounce compared to 28,192 ounces of gold produced during FY
2008 at an average Cash Cost of $535 per ounce. The increased revenues as well
as the reduction in operating costs at MWS (despite the inclusion of $1.7
million of costs related to the Gold Stream Transaction) resulted in the
significant increase in gross profit from tailings processed at MWS from $4.8
million in FY 2008 to $19.8 million in FY 2009.
At the end of FY 2009, First Uranium had total assets of $566.5 million, total
liabilities of $296.4 million and shareholders` equity of $270.1 million. The
Company had cash and cash equivalents of $112.0 million 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 decrease in cash and cash equivalents from the end of FY 2008
to the end of FY 2009 was the net result of $211.3 million of cash utilized
during FY 2009 on capital expenditures for the ongoing development of the
Company`s two mining operations partially offset by the $170.9 million from
financing activities.
The cash utilized in operating activities during FY 2009 was primarily
attributable to the overall increase in operating costs, which more than offset
the cash generated from gold sales. The cash generated from operating
activities during FY 2008 was mainly the result of the net interest earned on
cash balances during the year and the payment by associate company, Simmer and
Jack Mine, Limited, of an outstanding receivable.
In February 2009, the Company raised net proceeds of $47.6 million from a
private placement of 20.5 million units at Cdn$3.00 per unit, each unit
comprised of one common share and one-half of a common share purchase warrant.
In March, 2009, the Company also received the gross amount of $75 million as the
second tranche payment pursuant to the Gold Stream Transaction.
Operational Overview
During Q4 2009, First Uranium:
- at the Ezuwlini Mine, milled 108,622 tonnes of ore at an average recovered
grade of 1.22 grams of gold per tonne, producing 4,267 ounces of gold;
- at MWS treated a total of 1.7 million tonnes of tailings through the gold
plant at an average recovered grade of 0.19 grams of gold per tonne,
producing a total of 10,513 ounces of gold at a Cash Cost of $379 per
ounce;
- installed and connected 10 MW of diesel-fired electrical power generators
at the Ezulwini Mine and installed a 30 MW power plant at MWS; and
- in line with the accelerated schedule, completed key elements of the
rehabilitation of the Ezulwini Mine shaft, which allowed the shaft to be
dedicated entirely to the development and mining of the Middle Elsburg and
Upper Elsburg ore bodies.
Since the beginning of FY 2009, First Uranium focused on:
- operating safely;
- rehabilitating the Ezulwini Mine main shaft, with full utilization by Q4
2009;
- improving the confidence in the Ezulwini Mine`s estimated mineral resource;
- hoisting of uranium ("U3O8") and gold ("Au") ore from underground;
- constructing and commissioning the Ezulwini Mine`s gold plant by Q2 2009;
- constructing and commissioning the Ezulwini Mine`s uranium plant by Q1
2010;
- implementing solutions to more effectively mine the clay content in the MWS
tailings;
- permitting of a single site for tailings deposition at MWS;
- completing the upgrade to the existing MWS gold plant to increase its
capacity;
- commencing the construction of the second gold plant module and the first
two uranium plant modules at MWS;
- installing stand-by power generation at the Ezulwini Mine and a power plant
at MWS to ensure a backup supply of electrical power;
- updating technical reports for both operations;
- completing financings to fund the Company`s capital expenditures,
accelerate the implementation of a pressure leach circuit at MWS and for
potential consolidation opportunities; and
- exploring growth opportunities in North America and South Africa.
Subsequent to the end of FY 2009:
- the uranium plant at the Ezulwini Mine completed its final commissioning
process and began to produce ammonium diuranate ("yellowcake"), with the
intent to make the first shipment to the local calcining plant enroute to
conversion and enrichment, and
- the Company completed a bought deal equity financing (the "Bought Deal") on
June 1, 2009 and raised gross proceeds of Cdn$106.8 million on the issuance
of 15,250,000 common shares at a price per share of Cdn$7.00. The Company
also granted an over-allotment option to purchase an additional 2,287,500
common shares at Cdn$7.00 exercisable in whole or in part, within 30 days
of the closing of the Bought Deal.
Outlook
"Our primary focus is to develop more working areas and increase the amount of
ore hoisted from underground at the Ezulwini Mine and to commission the
remaining gold and uranium plants at Mine Waste Solutions," added Gordon Miller.
"Although we have made solid progress from when we went public at the end of
2006, we have a significant amount of work to do to complete our current mine
plan to produce 7.9 million ounces of gold and 35.8 million pounds of uranium
over the life of these two operations."
The Ezulwini Mine
While uranium and gold sales were restricted in the early stages of this mine as
a result of delays in the commissioning of the gold and uranium plants and
limited mining due to the decision to focus on shaft rehabilitation, the
critical elements of that project are now complete and the focus has shifted
back to underground mine development and ramping up underground production of
mineral-rich ore.
The increase in mine production is expected to be gradual over several years.
Until full underground production is reached, the spare plant capacity should
allow gold production shortfalls in FY 2009 and uranium production shortfalls
caused by the delay in plant commissioning to be recovered by processing ore
stockpiles and ore already loaded in the system during commissioning.
MWS
At MWS, management previously estimated that the second gold plant module and
the first two uranium plant modules would commence commissioning in Q1 2010 to
be completed in Q2 2010. Consistent with that commissioning schedule, the
second gold plant module is expected to produce gold on carbon by the end of Q2
2010. Production of yellowcake from the first two uranium modules at MWS,
however, is now not expected to commence until Q3 2010 due to delays in project
design, which in turn postponed the procurement of construction materials.
In addition, other events have impacted the economics of MWS including:
- the revised outlook for metal prices and foreign exchange rates;
- the Gold Stream Transaction; and
- the decision to accelerate the implementation of the pressure leach
circuit.
For the final phase of construction, management has decided to delay portions of
the third uranium plant module until such time that higher uranium prices are
expected to occur. Management plans to reconfigure the plant design and change
the mine plan to achieve approximately 91% of the previously planned life of
mine uranium production resulting in a more efficient capital investment program
and optimized cash flow profile. The new plan requires an immediate start to the
construction of the third gold plant module as well as the third stream of the
uranium flotation plant, which will be used to optimize flotation mass pull and
thereby uranium grades delivered to the plant. Inception of the third stream of
the uranium flotation plant is expected to ensure that planned life of mine gold
production will be realized in all material respects. Management also plans to
accelerate the change from an atmospheric leach process to a pressure leach
process concurrent with the commissioning of the third gold plant module. The
acceleration of the pressure leach process is expected to enhance gold
recoveries and reduce operating costs significantly.
For the construction and operation of this final phase of the MWS plants
management has recently received updated capital and operating cost estimates
which were higher than were originally estimated two years ago. The total
capital cost of the MWS plants, inclusive of the accelerated pressure leach
process and final completion of the third uranium plant is expected to be
approximately $451.6 million, of which $129.6 million has been spent to date and
$322 million remains to be spent. The consent of South Africa`s national power
utility, Eskom, to supply power to MWS has reduced the projected operating costs
in the short term by reducing the need to generate power on site with diesel
generators. However, this has been offset by unexpected price increases, notably
cyanide, projected over the life of the project. As a result, the operating cash
cost for MWS on a co-product basis is expected to average $319 per ounce of gold
and $25 per pound of uranium over the life of the project.
Uranium contracts
Contracts to sell uranium to nuclear utilities are expected to be negotiated by
the end of FY 2010, once management is sufficiently satisfied that the Company`s
uranium plants can produce enough uranium to fulfill these contracts.
Acid
First Uranium`s consideration in FY 2009 to construct an acid plant at one of
its operations, was prompted by rising prices for sulphuric acid. Recent
declines in acid prices have prompted the Company to defer its decision to build
an acid plant for the foreseeable future. On May 11, 2009, management entered
into a 36-month strategic supply agreement with Petronex (Pty) Ltd for the
guaranteed supply of sulphuric acid.
Power
In FY 2010, First Uranium expects to be able to run its operations, including
the additional mill at the Ezulwini Mine and the MWS plants that are yet to be
commissioned without having to run its backup power system of diesel generators,
as power supply from Eskom is sufficient due to the decline in demand by other
heavy power consumers in South Africa. The 10 MW leased generators and the four
3.5 MW legacy generators at the Ezulwini Mine are connected and ready to use at
a moment`s notice. Although tested regularly, the mine has not yet had to use
these backup units. Similarly, a 30 MW power plant has been installed at MWS.
Cost expectations
While acid and power costs are expected to be lower than plan in FY 2010, other
costs have risen substantially including the cost of other re-agents.
Growth opportunities
First Uranium`s primary focus is on the completion of the capital projects and
increasing production at its existing operations. Beyond that, the Company has
identified several avenues of growth including acquisition of uranium mines in
North America and regional consolidation in South Africa. In North America, the
Company continues to assess uranium projects based on certain criteria including
being within two to three years of commencing production, low-cost and
accretive. In South Africa, the Company is seeking and assessing synergistic
and/or strategic acquisitions and/or partnerships. At the same time, several
South African projects in close proximity to the Company`s operations are
becoming more attractive, thus shifting the emphasis of First Uranium`s growth
agenda.
Technical Disclosure
All updates to the technical disclosure in this news release relating to the MWS
operation has been reviewed and approved by James Fisher, EVP Corporate
Development of First Uranium. Mr. Fisher is a Chartered Engineer, a Fellow of
The Institute of Materials, Minerals and Mining, a member of the South African
Institute of Mining and Metallurgy and a "qualified person" under NI 43-101 with
regard to these updates.
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 a.m. local Toronto time and 4 p.m. local
Johannesburg time on Wednesday, June 17, 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/firsturanium090617.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 costs of
production, capital expenditures, price of uranium and gold, supply and price of
sulphuric acid, the availability and price of electrical power, the estimation
of mineral resources and reserves, the realization of mineral reserve estimates,
the timing and amount of estimated future production, costs and timing of
development of new deposits, success of exploration activities, permitting time
lines, currency fluctuations, requirements for additional capital, availability
of financing on acceptable terms, government regulation of mining operations,
environmental risks, unanticipated reclamation expenses 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",
"plans", "expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or
"believes" or variations of such words and phrases, or state that certain
actions, events or results "may", "could", "would", "might" or "will" be taken,
occur or be achieved. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of First Uranium to be materially different from any
future results, performance or achievement expressed or implied by the forward-
looking statements. Such risks and uncertainties include, among others, the
actual results of current exploration activities, conclusions of economic
evaluations, changes in project parameters as plans continue to be refined,
possible variations in grade and ore densities or recovery rates, failure of
plant, equipment or processes to operate as anticipated, accidents, labour
disputes or other risks of the mining industry, delays in obtaining government
approvals or financing or in completion of development or construction
activities, risks relating to the integration of acquisitions, to international
operations, to prices of uranium and gold. 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) operating
and capital cost estimates, metal prices, exchange rates and discount rates
applied in the preliminary economic assessment for the Ezulwini Mine and the
prefeasibility study for MWS are achieved; (ii) approvals to transfer or grant,
as the case may be, mining rights or prospecting rights will be obtained; (iii)
consistent supply of sufficient power will be available to develop and operate
the projects as planned; (iv) mineral reserve and resource estimates are
accurate; (v) the technology used to develop and operate its two projects has,
for the most part, been proven and will work effectively; (vi) that labour and
materials will be sufficiently plentiful as to not impede the projects or add
significantly to the estimated cash costs of operations; (vii) that Black
Economic Empowerment ("BEE") investors will maintain their interest in the
Company and their investment in the Company`s common shares to a sufficient
level to continue to support the Company`s compliance with 2014 BEE
requirements; and (viii) that the innovative work on stabilizing the main shaft
at the Ezulwini Mine will be successful in maintaining a safe and uninterrupted
working environment until 2024.
About First Uranium Corporation
First Uranium Corporation (TSX:FIU, JSE:FUM) is focused on its goal of becoming
a significant low-cost producer of uranium and gold through the expansion of
the underground development to feed the new uranium and gold plants at the
Ezulwini Mine and through the expansion of the plant capacity of the Mine Waste
Solutions tailings recovery facility, both in South Africa. 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)
17 June 2009
Sponsor: Investec Bank Limited
Date: 17/06/2009 15:20:01 Produced by the JSE SENS Department.
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