| Mon 17 Aug 2009, 7:38 | | FUM - First Uranium Corporation - First Uranium Reports Results For First |
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FUM
FIU
FUM - First Uranium Corporation - First Uranium Reports Results For First
Quarter Ended June 30, 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 CORPORATION
NEWS RELEASE - August 14, 2009
FIRST URANIUM REPORTS RESULTS FOR Q1 2010 -
RECEIVES APPROVAL OF "NEW ORDER" MINING RIGHTS
FOR ITS MINE WASTE SOLUTIONS OPERATION
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 results for the three-month period ended June 30, 2009 ("Q1 2010").
The Company continues to advance the construction of its third gold plant and
first two uranium plants at its Mine Waste Solutions tailings recovery
operation ("MWS") and accelerate the underground development at its Ezulwini
Mine to feed its completed gold and uranium plants. The Company`s investments
to increase uranium and gold production have contributed to a net loss for the
quarter of $33.3 million or $0.22 per share. The substantial increase in the
consolidated loss was primarily due to the gross loss incurred at the Ezulwini
Mine, which is continuing to ramp up its underground development to fill its
underutilized uranium and gold plants, combined with the significant foreign
exchange loss on translation during the quarter.
Gordon Miller, First Uranium`s President and Chief Executive Officer
commented, "Significant to our future success was the progress made regarding
necessary permits and approvals related to our MWS operation. In July 2009, we
received formal approval from South Africa`s North West Province Department of
Agriculture, Conservation and Environment for the new tailings deposition
site, thus enabling MWS to proceed on schedule with construction of this
tailings facility for completion in Q1 2011. In addition, the Department of
Mining and Minerals granted MWS a `new order` mining right, which signals
their approval of our Environmental Management Plan and our Social and Labour
Plan, thus establishing a firm foundation for the future of this operation."
"In turn, the Ezulwini Mine has recently completed its currently-identified
capital projects and is accelerating underground development to drive
increases in the production of uranium and gold. Ezulwini is expected to turn
cash positive in Q3 2010," continued Mr. Miller.
During Q1 2010, First Uranium achieved the following milestones:
- treated a total of 1.8 million tonnes of tailings through the MWS gold
plant at an average recovered grade of 0.18 grams of gold per tonne of
ore, producing a total of 11,007 ounces of gold at a Cash Cost of $338
per ounce (as defined in the notes to the Consolidated Results of
Operations table on the next page);
- milled 92,468 tonnes of ore from the Ezulwini Mine at an average
recovered grade of 1.28 grams of gold per tonne of ore, producing 3,791
ounces of gold;
- dispatched the first batch of ammonium diuranate ("yellowcake") from the
Ezulwini Mine to a third party calcining facility;
- completed final commissioning of the first of two streams of the Ezulwini
Mine`s 100,000 tonne per month uranium plant;
- entered into a strategic supplier contract with Petronex (Pty) Ltd for
the guaranteed supply of sulphuric acid to MWS for a 36-month period;
- entered into a letter of intent to supply Eskom with uranium for their
Koeberg nuclear power station beginning 2011 to 2017. The agreement to be
finalized in September 2009, will be based upon a portion of the supply
delivered at the uranium spot price and the remainder based on an
escalated price; and
- completed a bought deal financing (the "Bought Deal") on June 1, 2009 and
raised gross proceeds of Cdn$106.8 million from 15,250,000 common shares
at a price per share of Cdn$7.00.
Financial considerations with respect to the completion of capital projects
Future expansion will be subject to capital availability. Having access to
capital and maintaining the flexibility to react to negative, unforeseen
events are clearly prudent objectives in these uncertain markets. As at June
30, 2009, the remaining capital required to complete the current projects at
Ezulwini and MWS was $266 million, of which $232 million is planned to be
spent in the next twelve months. To support its financial position while
completing planned capital projects over the next twelve months, and to
enhance financial flexibility, the Corporation has recently finalized a one-
year term credit facility of ZAR160 million (approximately $20 million) (the
"Facility") with Simmer & Jack and is in negotiations with a South African
bank to establish additional access to longer-term debt capital.
The Company believes that the cash resources of $123.0 million at June 30,
2009 and the cash forecasted to be generated from the sale of gold and uranium
from both its operations, together with the Facility, will provide sufficient
funding to complete the current capital projects at the two operations. Should
management in future determine that the funding is not sufficient, it will at
that time look to a potential new South African project financing facility, if
it is available, or reprioritize development and expansion activities to
reduce potential funding requirements.
Consolidated Results of Operations
Production Summary
Q1 2010 Q1 2009 % Change
Ezulwini Mine
Tonnes hoisted (000s) 64,965 - 100%
Tonnes milled (000s) 92,468 - 100%
Ounces of gold produced 3,794 - 100%
Ounces of gold sold 3,378 - 100%
Average selling price per 957 - 100%
ounce ($)
MWS
Tonnes reclaimed (000s) 1,835 1,665 10.2%
Average gold recovery grade 0.18 0.16 12.5%
(grams/tonne)
Ounces of gold reclaimed 11,007 8,530 29.0%
Ounces of gold sold 10,676 7,741 37.9%
Average selling price per 905 879 3.0%
ounce ($)
Average cost per ounce (367) (482) (23.9%)
reclaimed ($)
Average Cash Cost per ounce (338) (464) (27.2%)
reclaimed ($)(a)
Summary of Consolidated Financial
Results
(in thousands of dollars, except per
share amounts)
Revenue 12,895 6,805 89.5%
Ezulwini Mine 3,233 - 100%
MWS 9,662 6,805 42.0%
Cost of sales (excluding (15,584) (3,340) 367%
amortization)
Ezulwini Mine (11,974) - 100%
MWS (3,610) (3,340) 8.1%
Amortization (1,236) (189) 554%
Ezulwini Mine (924) - 100%
MWS (312) (189) 65.1%
Gross (loss) profit (3,925) 3,276 (220%)
Ezulwini Mine (9,665) - (100%)
MWS 5,740 3,276 75.2%
Other income 280 318 (11.9%)
Other expenditures(b) (6,799) (7,442) (8.6%)
Operating loss(c) (10,444) (3,848) 171%
Investment income 706 1,832 (61.5%)
Interest and accretion (3,558) (2,149) 65.6%
expenditures
Fair value loss on derivative (477) - 100%
liability
Accretion expense on asset retirement (492) (381) 29.1%
obligations
Foreign exchange loss (16,408) (524) 3031%
Loss before income taxes (30,673) (5,070) 505%
Income tax charge (2,591) (725) 257%
Loss for the period (33,264) (5,795) 474%
Basic and diluted loss per (0.22) (0.04) 450%
common share
Notes:
a. "Cash Costs" are costs directly related to the physical activities of
producing gold and include mining, processing and other plant costs;
third-party refining and smelting costs; marketing expense, on-site
general and administrative costs; royalties; on-mine drilling
expenditures that are related to production and other direct costs. Sales
of by-product metals are deducted from the above in computing cash costs.
Cash costs exclude depreciation, depletion and amortization, corporate
general and administrative expense, exploration, interest, and pre-
feasibility costs and accruals for mine reclamation. Cash costs are
calculated and presented using the "Gold Institute Production Cost
Standard" applied consistently for all periods presented. The Gold
Institute was a non-profit industry association comprised of leading gold
producers, refiners, bullion suppliers and manufacturers. This institute
has now been incorporated into the National Mining Association. The
guidance was first issued in 1996 and revised in November 1999. Total
cash costs per ounce is a non-GAAP measurement and investors are
cautioned not to place undue reliance on it and are advised to read all
GAAP accounting disclosures presented in the Company`s audited
consolidated financial statements for FY 2009 and accompanying footnotes
thereto.
b. Other expenditures include general, consulting and administrative
expenditures, pumping feasibility and rehabilitation costs, stock-based
compensation and non-production related amortization. See page 3 to the
Financial Statements for detail.
c. This is a non-GAAP measurement. Operating loss is loss before interest
income, interest and accretion expenses, fair value loss on derivative
liability, foreign exchange loss and income tax charges. See page 3 to
the Financial Statements for more detail.
As with all early stage mines, investment in site preparation and production
capabilities are prerequisites to full production.
In Q1 2010, the Ezulwini Mine gold plant was deemed to be in commercial
production, even though it was operating at substantially less than full
capacity as underground development continued. This resulted in a substantial
loss as the mine`s fixed operating costs were being applied against a limited
amount of early-stage production.
Although the uranium plant at the Ezulwini Mine was commissioned in Q1 2010,
the plant is not yet deemed to be in commercial production. Therefore, the
Company has reported no uranium (U3O8) production and any revenues and the
related costs derived from the uranium plant are capitalized against property,
plant and equipment.
At MWS, Q1 2010 throughput increased by 10% compared to Q1 2009 as a result of
improved mining methods implemented during FY 2009. Similarly, the higher
recoveries in Q1 2010 compared to Q1 2009 were due to a number of positive
changes implemented in the gold plant and at the reclamation station. These
improvements helped boost revenues and contributed to the significant increase
in gross profit from tailings processed at MWS.
The 9% decrease in other expenditures was primarily attributable to the lower
stock-based compensation of $0.8 million in Q1 2010 compared to $1.6 million
in Q1 2009. No stock options were issued during Q1 2010 or Q1 2009.
The gross loss generated by the Ezulwini Mine, however, more than offset the
improvement and higher gross profit on MWS production and the decrease in
expenditures, resulting in the larger consolidated operating loss.
Investment income primarily relates to interest income earned on cash and cash
equivalents invested in short-term deposits with the Company`s bankers until
required for capital projects or to fund operating costs. The lower interest
income in Q1 2010 reflects the on average lower cash balance compared to the
cash on hand on average during Q1 2009 as well as lower interest rates. The
stronger Canadian dollar compared to the US dollar resulted in higher interest
and accretion expense in Q1 2010 relative to the comparative period.
The significant foreign exchange loss in Q1 2010 resulted from the translation
of the value of Canadian and South African denominated assets, liabilities,
revenues and expenses into US dollars, which currencies strengthened against
the US dollar during the quarter.
Consolidated Financial Position
Summary Balance Sheet and Key financial ratios
(thousands of
dollars) Q1 2010 FY 2009 % Change
Cash and cash equivalents 122,982 112,005 9.8%
Other current assets (a) 19,274 12,670 52.1%
Current liabilities (64,705) (57,213) 13.1%
Total assets 640,672 566,472 13.1%
Total liabilities (310,505) (296,375) 4.8%
Debt (b) (131,223) (121,416) 8.1%
Total shareholders` equity (330,167) (270,097) 22.2%
Key financial ratios:
Current ratio (c) 2.20:1 2.18:1
Debt-to-equity (d) 0.39:1 0.45:1
Notes:
a. Represents total current assets excluding cash and cash equivalents.
b. Represents the total of the convertible debentures liability of Cdn$150
million translated to US$ at the exchange rate at the end of the period
plus the toll treatment liability.
c. Represents current assets divided by current liabilities as the end of
the reporting period.
d. Represents debt divided by total shareholder`s equity at the end of the
reporting period.
Total assets primarily comprise property, plant and equipment, reflecting the
capital intensive projects at the Ezulwini Mine and MWS, and cash and cash
equivalents.
The 13% increase in total assets represents an increase in cash as a result of
the Bought Deal in June 2009, an increase in other current assets related to
the increase in production at the Ezulwini Mine and an increase in property,
plant and equipment as a result of the capital projects at both operations.
The 5% increase in total liabilities represents an increase in accounts
payable and accrued liabilities, reflecting:
- the increase in capital activities at MWS during Q1 2010;
- an increase in the Cdn$ denominated debt portion of the senior unsecured
convertible debentures due to the weakening of the US dollar against the
Cdn$; and
- an increase in loan payable to a related party offset by a decrease in
income tax payable as a result of a provisional tax payment by MWS to the
South African Revenue Services.
Operational Overview
Ezulwini Mine
During the quarter the Ezulwini Mine continued significant underground work to
access the underground ore bodies. At the end of Q1 2010, the workable face
length in the Upper Elsburg ("UE") gold-only ore body was 369 metres at a
grade of 4.66 grams per tonne. The workable face length for the Middle Elsburg
co-product gold and uranium ore body was 408 metres at a gold grade of 2.95
grams per tonne and a uranium grade of 0.049 grams per tonne.
The de-stress cuts, which are designed to reduce pressure on the load-bearing
shaft pillar of the UE ore body and to open up mining of the high-grade ore in
the shaft pillar, have proceeded as planned. The current mine plan includes
the processing of low-grade ore from the de-stress cuts through the gold plant
until the cuts have been completed at the end of September 2009. At that time,
gold grades from the UE ore body are expected to significantly improve.
In July 2009, the mine dispatched its first batch of yellowcake from the
recently commissioned uranium plant to the local calcining facility. Once a
sufficient quantity of yellowcake has been calcined , the uranium will be
shipped from South Africa to a conversion facility, after which the Company
will sell the uranium to a nuclear power utility, a minimum of three months
after leaving the Company`s uranium plant.
The Ezulwini Mine gold plant is working to design specifications.
MWS
The commissioning of the second gold plant module (Phase 1B) is proceeding
well and the second reclamation station that will feed ore to the new plant
module has been commissioned. Commissioning of the Phase 1B uranium plant
modules is expected in Q3 2010.
The plans for construction and commissioning of the third gold plant module
and the third stream of the uranium flotation plant at MWS have been
finalized, the long-lead items have been ordered, major supplier contracts
have been entered into and construction is underway and is expected to be
operational by the end of June 2010.
Management is concluding test work to finalize heat and oxygen control
elements within the pressure leach process. The outcome of the test work will
be integrated into the cost budget estimate ("CBE") of the pressure leach
process. The CBE is expected to be completed by the end of Q2 2010.
Construction is dependent upon having sufficient financial resources to
proceed and is expected to take from nine to twelve months.
Outlook
Mr. Miller commented: "Our primary focus at the Ezulwini Mine is to develop
more working areas in both ore bodies, which we measure by the length of
active mining rock face, grade and facelength buildup. Our success in
underground development will result in more ore available for hoisting to
surface and, in turn, drive production through the uranium and gold plants.
At Mine Waste Solutions, our priorities are to commission the remaining Phase
1B gold and uranium plants by December 2009 and the Phase 2 gold plant module
and the third stream of the uranium flotation plant by the end of June 2010."
Ezulwini Mine Outlook
The key elements that will drive gold and uranium production and operating
results at the Ezulwini Mine are:
- favourable prices for gold and uranium;
- the successful sale of uranium to nuclear power utilities;
- the de-stress cuts required to open up mining of the high-grade ore in
the shaft pillar of the UE ore body, which is scheduled for completion in
Q3 2010; and
- the creation of workable face length, with grades of gold and uranium
that correlate well within planned grades.
Underground, the development of mining faces at economical grades of uranium
and gold are the key to the success as the plant depends upon a consistent
high-grade supply of ore from the Ezulwini Mine.
It is anticipated that the high unit costs will decrease and operating and
financial performance will improve as the underground mine development and
production activities increase.
MWS Outlook
The second gold plant module at MWS has commenced commissioning and management
estimates that it will produce gold by the end of Q2 2010. The additional
Phase 1B gold plant module will increase MWS`s gold plant capacity from
633,000 tonnes per month to 1.3 million tonnes per month, an increase of
650,000 tonnes per month.
The first two uranium plant modules, which are also part of Phase 1B, are
expected to be completed and producing yellowcake during Q3 2010.
For the final phase (Phase 2) of construction, management has decided to delay
portions of the third uranium plant module until such time that higher uranium
prices are offered in the uranium market. Management has reconfigured the
plant design and changed 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 required an immediate start to the construction of the third gold
plant module (also part of Phase 2) as well as the third stream of the uranium
flotation plant. The mine plan includes combining the optimized flotation mass
pull with direct feed from four high-grade tailings dams to improve the
operating margin. The plans for construction and commissioning of the third
gold module of the plant have been finalized, the long-lead items have been
ordered, major supplier contracts have been entered into and construction is
underway.
Management is concluding test work to finalize elements within the pressure
leach process. The outcome of the test work will be integrated into the cost
budget estimate ("CBE") of the pressure leach process. The CBE is expected to
be completed by the end of Q2 2010. The pressure leach process is expected to
enhance gold and uranium recoveries and reduce operating costs per unit
significantly.
Special considerations for the "monetization" of uranium
After calcining the Company`s yellowcake by a third party, the uranium will be
shipped overseas to uranium convertors for conversion and sale. Including the
time required for shipping and converting uranium, uranium sales are expected
on average to lag production by three months.
While no contracts for uranium supply have been undertaken to date, the
Company has entered into a letter of intent to supply Eskom with uranium for
their Koeberg nuclear power station beginning 2011 to 2017. The intended
agreement is structured to deliver a portion of the uranium order at the
prevailing spot price and the remainder based on an escalated price. A signed
contract with Eskom is expected by the end of Q2 2010, once due diligence and
other conditions are met.
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 4:00 p.m.
local Johannesburg time on Tuesday, August 18. 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/firsturanium090812.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 and as updated by the Company in its continuous
disclosure from time to time 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 operations situated
in South Africa. First Uranium also plans to grow production by pursuing
value-enhancing acquisition and joint venture opportunities in South Africa
and elsewhere.
For further information, please contact:
Bob Tait, Vice President, Investor Relations at bob@firsturanium.ca
+1 416 342-5639 (office) or +1 416 558-3858 (mobile)
1240-155 University Avenue, Toronto, ON M5H 3B7
Date: 17/08/2009 07:38:01 Produced by the JSE SENS Department.
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