| Fri 19 Jun 2009, 7:21 | | FUM - First Uranium Comments On Results Released June 17 2009 |
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FUM
FIU
FUM - First Uranium Comments On Results Released June 17, 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 COMMENTS ON RESULTS RELEASED JUNE 17, 2009
All amounts are in US dollars unless otherwise noted.
Toronto and Johannesburg - First Uranium Corporation (TSX:FIU, JSE:FUM)
(ISIN:CA33744R1029) ("First Uranium" or "the Company") announced the filing
of the Company`s audited consolidated financial statements for FY 2009 (the
"Financial Statements") and related Management Discussion and Analysis
("MD&A") on June 17, 2009. The Company`s shareholders have raised a number of
questions, which are addressed below.
Management`s Outlook
As reported on June 17, 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 start-up 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,
which ended March 31, 2009, and at MWS in FY 2010, which ends March 31, 2010."
MWS Capital Expenditure Projections
Consistent with the use of proceeds described in our prospectus dated May 25,
2009, First Uranium has taken steps to accelerate construction of the pressure
leach portion of the uranium circuit at its Mine Waste Solutions project
("MWS"). First Uranium also explained in its MD&A that it continues to update
its capital and operating cost expectations, which have risen from estimates
of approximately two years ago. The total capital cost of the MWS project,
inclusive of project acceleration, 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.
Further to the information provided in the Company`s disclosure and discussed
on the conference call yesterday, there are several factors underpinning the
increase in capital costs:
- the previous pre-feasibility estimate compiled by RSV Kenyuka was base
dated November 2007, and since then there have been significant escalations in
construction materials, which have been calculated at approximately 12%
annually;
- the decision to optimize the flotation circuit by introducing additional
flotation cells to maximize both gold and uranium recoveries;
the decision to introduce raft civil foundations as a result of recently
concluded geotechnical work;
- the decision to accelerate the introduction of pressure leach; and
- the reluctance of the Department of Water Affairs to allow the
establishment of our life of mine deposition tailings facility on a site
adjacent to the project and the resultant incremental capital required to
equip such a facility 13 kilometres from the project.
First Uranium believes that the sequencing of construction, including deferral
of construction of the third uranium plant module, will allow additional
funding to be derived from future anticipated cash flows, which combined with
existing cash, will enable it to finance the MWS capital needs without
additional equity capital. Due to the prevailing uranium price expectations,
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.
Net Present Value ("NPV") Projections for the Company
This measure does not have a standardized meaning prescribed by GAAP and is,
therefore, unlikely to be comparable to similar measures presented by other
issuers. Our financial reporting is contained in the MD&A and Financial
Statements filed on June 17, 2009.
Based upon the assumptions and projections discussed below, the Company`s
total NPV has decreased marginally from $1,565 million (as reported in the
press release of the Company dated November 11, 2008) to $1,482 million
(inclusive of the impact of the $125 million payment from the Gold Stream
Transaction).
Ezulwini Mine Development and Production Projections
Management has updated its outlook for future prices of uranium and gold and
for the weaker value of the U.S. dollar against the South African rand as
follows:
Revised Metal Price and Foreign Exchange Rate Assumptions
FY FY 2011 FY FY FY FY FY Long
2010 2012 2013 2014 2015 2016 term
Gold Price ($ per ounce)
New 925 952 930 884 846 797 788 788
Old 940 999 957 881 835 748 748 748
Uranium ($ per pound)
New 52 62 69 69 64 56 53 50
Old 83 93 84 79 70 52 52 52
Exchange Rate: (ZAR/$US)
New 8.14 8.46 9.25 8.99 9.03 9.18 9.28 9.33
Old 7.88 8.14 8.46 8.63 9.66 8.95 8.95 8.95
The following chart illustrates the expected effect of the revised metal price
and foreign exchange rate assumptions, as well as slight adjustments to
reflect actual operating costs and spent capital costs, to the November 2008
technical report model on the NPV for the Ezulwini Mine.
Revised life of mine ("LOM") project economics for the Ezulwini Mine
LOM as LOM as LOM as
of April of of
2008 Nov. June
2008 2009
Rock value per tonne milled $72 $147 $153
($/tonne)
Uranium Cash Cost ($/pound) 33 25 23
Gold Cash Cost ($/ounce) 376 340 349
Capital expenditures ($ $220 $276 $275
million)
LOM production
Uranium (000 pounds) 15,990 18,426 18,334
Gold (000 ounces) 5,211 5,805 5,786
Average annual LOM production
Uranium (000 pounds) 952 1,117 1,146
Gold (000 ounces) 306 352 362
Annual uranium production
(000 pounds)
FY 2010 606 352 295
FY 2011 691 647 611
FY 2012 822 737 737
Annual gold production (000
ounces)
FY 2010 243 141 141
FY 2011 346 252 252
FY 2012 375 281 281
NPV8 ($ million) $667 $924 $1,008
Notes:
Co-product costs assume that operating cash costs are split in proportion to
the revenue earned from each product.
NPV is calculated using a nominal discount rate of 8%
Capital expenditures estimates are exclusive of sustaining capital.
The NPV in the right-hand column was calculated using a start date of April 1,
2009.
MWS Project Development and Production Projections
At MWS, management previously estimated that the second gold plant module and
the first two uranium plant modules would commence commissioning in Q1 2010
(ending June 30, 2009) to be completed in Q2 2010 (ending September 30, 2009).
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 expected
to commence in Q3 2010 (ending December 31, 2009) due to delays in project
design, which in turn postponed the procurement of certain 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, the Company has decided to defer portions
of the third uranium plant module until such time that higher uranium prices
are expected to occur. The new plan includes 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 the
Company has recently received updated capital and operating cost estimates
which are higher than the original estimate 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. (See also "MWS Capital Expenditure
Projections" on page 2 of this news release.) 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.
The following chart illustrates the expected impact of the above factors on
the NPV for MWS. The NPV in the right-hand column was calculated using a
start date of April 1, 2009. The November 2008 NPV, revised to include the
disclosed changes in metal price and exchange rates assumptions, cost
escalation and the change in the configuration of the final phase of the MWS
plants, results in a NPV of $474 million, inclusive of the $125 million paid
to the Company from the Gold Stream Transaction.
Revised LOM project economics for MWS
LOM as of LOM as of LOM as of
April November June 2009
2008 2008
Rock value per tonne $8.17 $8.91 $7.70
reclaimed ($/tonne)
Uranium Cash Cost ($/pound) 22 21 25
Gold Cash Cost ($/ounce) 347 279 319
Capital expenditures ($ $251 $254 $322
million)
LOM production
Uranium (000 pounds) 19,749 19,444 17,141
Gold (000 ounces) 1,956 2,130 2,062
Average annual LOM
production
Uranium (000 pounds) 1,316 1,388 1,257
Gold (000 ounces) 130 141 139
Annual uranium production
(000 pounds)
FY 2010 1,077 855 457
FY 2011 1,204 1,798 1,185
FY 2012 1,910 2,171 1,241
Annual gold production (000
ounces)
FY 2010 120 129 90
FY 2011 161 196 175
FY 2012 182 175 161
NPV8 ($ million) $414 $641 $349
Inclusive of the $125 - - $474
million paid to the Company
from the Gold Stream
Transaction ($ million)
Notes:
Co-product costs assume that operating cash costs are split in proportion to
the revenue earned from each product.
NPV is calculated using a real discount rate of 8%.
The NPV in the right-hand column was calculated using a start date of April 1,
2009 .
Summary spreadsheets for the related economics of the two operations have been
posted on the Company`s website at www.firsturanium.com.
Sovereign Risk
While many of our competitors operate in Canada, the United States and
Australia, all of our current operations are in South Africa. Management and
a number of the directors have considerable experience doing business in South
Africa and have positive working relationships with authorities at all levels
in South Africa. We are bullish on South Africa as the leading jurisdiction
in Africa in which to work, live and do business.
Technical Disclosure
All updates to the technical disclosure in this news release relating to the
Ezulwini Mine have been reviewed and approved by Syd Caddy, EVP and Chief
Operating Officer of First Uranium. Mr. Caddy is a Fellow of the South African
Institute of Mining and Metallurgy and a "qualified person" under NI 43-101
with regard to these updates.
All updates to the technical disclosure in this news release relating to the
MWS operation have 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.
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)
18 June 2009
Sponsor:Investec Bank Limited
Date: 19/06/2009 07:21:24 Produced by the JSE SENS Department.
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