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UUU
UUU
UUU - Uranium One Inc - Interim Consolidated Financial Statements for the
three and nine months ended September 30, 2010
Uranium One Inc
(Incorporated in Canada)
(Registration number: 15096422420)
Share code on the JSE: UUU & ISIN: CA91701P1053
Share code on the TSX: UUU & ISIN: CA91701P1053
Interim Consolidated Financial Statements
for the three and nine months ended September 30, 2010
(Unaudited)
Interim Consolidated Balance Sheets - Unaudited
As at September 30, 2010 and December 31, 2009
(in United States dollars)
Sep 30, Dec 31,
2010 2009
Notes $`000 $`000
ASSETS
Current assets
Cash and cash equivalents 421,983 148,465
Restricted cash 8 8,577 -
Accounts and other receivables 41,389 42,405
Inventories 5 89,878 71,634
Other assets 7 10,667 24,472
572,494 286,976
Non-current assets
Mineral interests, plant and 6 1,817,834 1,748,284
equipment
Loans to joint ventures 4.2 28,221 29,250
Other assets 7 49,957 33,137
Assets held for sale - 51,460
1,896,012 1,862,131
Total assets 2,468,506 2,149,107
LIABILITIES
Current liabilities
Accounts payable and accrued 43,164 65,908
liabilities
Income taxes payable 1,308 1,633
Current portion of long term 8 - 63,579
debt
Other liabilities 10 44,661 137,043
89,133 268,163
Non-current liabilities
Convertible debentures 9 490,041 140,862
Asset retirement obligations 20,936 16,100
Future income tax liabilities 187,657 180,687
Other liabilities 10 53,907 49,451
Assets held for sale - 12,944
752,541 400,044
SHAREHOLDERS` EQUITY
Share capital 11 3,830,885 3,823,297
Contributed surplus 12 135,179 133,478
Equity component of convertible 216,186 46,480
debentures
Accumulated other comprehensive 24,799 16,392
income
Deficit (2,580,217) (2,538,747)
1,626,832 1,480,900
Total shareholders` equity and 2,468,506 2,149,107
liabilities
Basis of presentation and principles of consolidation (note 2.1)
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements
Interim Consolidated Statements of Operations - Unaudited
For the three and nine months ended September 30, 2010 and 2009
(in United States dollars)
Three months Nine months ended
ended
Sep 30, 2010 Sep 30, Sep 30, Sep 30,
2009 2010 2009
Notes $`000 $`000 $`000 $`000
Revenues 73,054 21,333 174,556 82,859
Operating expenses (19,739) (6,331) (56,062) (28,067)
Depreciation and (25,455) (5,576) (57,363) (22,858)
depletion
Earnings from mine 27,860 9,426 61,131 31,934
operations
General and (10,177) (9,013) (29,561) (27,163)
administrative (1)
Exploration expense (1,211) (2,292) (3,514) (6,762)
Impairment of (8,969) (1,886) (260,033)
mineral interests, -
plant and equipment
Care and (593) (4,059) (2,562) (11,653)
maintenance and
closure costs
Operating earnings 15,879 (14,907) 23,608 (273,677)
/ (loss)
Interest and other 13 (11,430) (2,165) (32,214) (5,859)
(Loss) / gain on (2,231) 134 (10,449) 126
sale of available
for sale securities
Foreign exchange 14 (1,611) (6,442) (2,344) 62,749
(loss) / gain
Corporate (5,451) - (8,484) -
development
expenses
Other 632 1,596 (424) 1,400
Loss from (4,212) (21,784) (30,307) (215,261)
continuing
operations before
income taxes
Current income tax (9,302) (3,836) (18,747) (18,683)
expense
Future income tax 3,291 10,311 7,584 16,265
recovery
Loss from (10,223) (15,309) (41,470) (217,679)
continuing
operations
Earnings from - 3,408 - 1,991
discontinued
operations
Net loss (10,223) (11,901) (41,470) (215,688)
(1) Stock option 12 2,139 1,926 5,910 5,690
and restricted
share expense (non-
cash) included in
general and
administrative
Loss per share from
continuing
operations
Basic and diluted (0.02) (0.03) (0.07) (0.46)
Earnings per share
from discontinued
operations
Basic and - 0.01 - 0.00
diluted
Net loss per share
Basic and diluted (0.02) (0.03) (0.07) (0.46)
Weighted average
number of shares
(in thousands)
Basic and diluted 16 588,015 469,799 587,651 469,702
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements.
Interim Consolidated Statements of Changes in Equity - Unaudited
For the nine months ended September 30, 2010 and year ended December 31, 2009
(in United States dollars)
Share Contributed Equity
capital surplus component of
$`000 $`000 convertible
debentures
$`000
Balance as at January 1, 2009 3,522,824 131,602 46,480
Net loss for the year - - -
Stock options and restricted - 7,502 -
shares vested
Exercise of stock options and 6,856 (5,626) -
restricted shares
Issuance of contingent shares 388 - -
Unrealized gain recognized on - - -
translation of self-sustaining
foreign operations
Realized loss on sale of Gold - - -
One
Realized loss on sale of Uranium - - -
One Africa
Acquisition of Karatau 293,229 - -
Fair value adjustments on - - -
available for sale securities
Balance as at December 31, 2009 3,823,297 133,478 46,480
Net loss for the period - - -
Stock options and restricted - 5,910 -
shares vested
Exercise of stock options and 7,588 (4,209) -
restricted shares
Unrealized gain recognized on - - -
translation of self-sustaining
foreign operations
Unrealized fair value - - -
adjustments on available for
sale securities
Realized fair value adjustments - - -
on available for sale securities
JUMI Debentures (note 9) - - 125,692
2010 Debentures (note 9) - - 44,014
Balance as at September 30, 2010 3,830,885 135,179 216,186
Accumulated other Deficit Total
comprehensive income / $`000 $`000
(loss)
$`000
Balance as at January 1, (247,708) (2,502,660) 950,538
2009
Net loss for the year - (36,087) (36,087)
Stock options and - - 7,502
restricted shares vested
Exercise of stock - - 1,230
options and restricted
shares
Issuance of contingent - - 388
shares
Unrealized gain 16,391 - 16,391
recognized on
translation of self-
sustaining foreign
operations
Realized loss on sale of 13,074 - 13,074
Gold One
Realized loss on sale of 234,533 - 234,533
Uranium One Africa
Acquisition of Karatau - - 293,229
Fair value adjustments 102 - 102
on available for sale
securities
Balance as at December 16,392 (2,538,747) 1,480,900
31, 2009
Net loss for the period - (41,470) (41,470)
Stock options and - - 5,910
restricted shares vested
Exercise of stock - - 3,379
options and restricted
shares
Unrealized gain 8,510 - 8,510
recognized on
translation of self-
sustaining foreign
operations
Unrealized fair value (10,552) - (10,552)
adjustments on available
for sale securities
Realized fair value 10,449 - 10,449
adjustments on available
for sale securities
JUMI Debentures (note 9) - - 125,692
2010 Debentures (note 9) - - 44,014
Balance as at September 24,799 (2,580,217) 1,626,832
30, 2010
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements.
Interim Consolidated Statements of Accumulated Other Comprehensive Income /
(Loss) - Unaudited
As at September 30, 2010 and December 31, 2009
(in United States dollars)
Three months ended Nine months ended
Sep 30, Sep 30, 2009 Sep 30, Sep 30,
2010 2010 2009
$`000 $`000 $`000 $`000
Unrealized gain recognized 10,202 6,307 8,510 19,198
on translation of self-
sustaining foreign operations
Realized foreign exchange - 1,690 - 13,073
loss on sale of Gold One Ltd
Realized foreign exchange - - - 234,513
loss on sale of Uranium One
Africa Ltd
Unrealized fair value
adjustments on available for 2,246 - (10,552) 307
sale securities
Realized fair value
adjustment on available for 2,231 (282) 10,449 (282)
sale securities
Other comprehensive income 14,679 7,715 8,407 266,809
for the period
Net loss (10,223) (11,901) (41,470) (215,688)
Comprehensive income / (loss) 4,456 (4,186) (33,063) 51,121
Sep 30, 2010 Dec 31, 2009
$`000 $`000
Accumulated other comprehensive income / (loss) 16,392 (247,708)
at January 1
Other comprehensive income for the period 8,407 264,100
24,799 16,392
Deficit (2,580,217) (2,538,747)
Accumulated other comprehensive loss and (2,555,418) (2,522,355)
deficit
Components of accumulated other comprehensive
income at the end of the period:
Unrealized foreign exchange adjustment - 24,800 16,290
continuing operations
Available for sale marketable securities and (1) 102
investments
24,799 16,392
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements.
Interim Consolidated Statements of Cash Flows - Unaudited
For the three and nine months ended September 30, 2010 and 2009
(in United States dollars)
Three months ended Nine months ended
Sep 30, 2010 Sep 30, 2009 Sep 30, 2010 Sep 30,
2009
Notes $`000 $`000 $`000 $`000
Net loss from (10,223) (15,309) (41,470) (217,679)
continuing
operations
Items not affecting
cash:
- Fair value 10 (282) - (10,386) -
adjustment included
in revenue
- Depreciation and 25,455 5,576 57,363 22,858
depletion
- Impairment of - 8,969 1,886 260,033
mineral interests,
plant and equipment
Loss / (gain) on 2,231 (134) 10,449 (126)
sale of available
for sale securities
- Stock option and 12 2,139 1,926 5,910 5,690
restricted share
expense
- Interest accrued 11,888 2,722 19,643 6,401
on loans and
debentures
- Unrealized 14 1,548 7,561 (1,756) (60,560)
foreign exchange
loss / (gain)
- Future income tax (3,291) (10,311) (7,584) (16,265)
recovery
- Other 1,284 240 1,238 1,769
Movement in non- 15 7,449 6,880 (23,865) (120)
cash working
capital
Cash flows from 38,198 8,120 11,428 2,001
operating
activities
Acquisition of (31,703) (22,737) (77,572) (50,443)
mineral interests,
plant and equipment
Cash payment for (7,670) (360) (33,595) (3,526)
other assets
Acquisition of 3.1 - (8,750) (28,869) (8,750)
Christensen Ranch
and Irigaray
Cash received in - 1,290 - 1,290
acquisition of SKZ-
U LLP
Disposal / 10,715 283 (4,622) 283
(acquisition) of
available for sale
securities
Karatau promissory - - (111,773) -
note and contingent
payment
Cash advance for - - - (5,385)
sulphuric acid
plant investment
Proceeds on sale of 3.3 - - 37,300 -
Uranium One Africa
Ltd
Proceeds on sale of - 6,274 - 20,972
Gold One Ltd
Uranium purchases - - - 5,954
Cash proceeds from 7,780 - 1,226 8,167
joint ventures
Proceeds on sale of
mineral interests, 3,600 - 3,600 5,172
plant and equipment
Restricted cash 10 - - (8,577) -
Other 133 - (326) -
Cash flows used in (17,145) (24,000) (223,208) (26,266)
investing
activities
Common shares 3,271 25 3,379 215
issued, net of
issue costs
Loans received by 887 - 34,297 12,000
joint ventures
UPC loan received - - - 1,094
Advances received - - 7,948 -
Debentures issued, - - 498,626 -
net of issue costs
Repayment of credit 8 - - (65,000) -
facility
Cash flows from 4,158 25 479,250 13,309
financing
activities
Effects of exchange 2,429 2,634 6,048 5,444
rate changes on
cash and cash
equivalents
Net increase / 27,640 (13,221) 273,518 (5,512)
(decrease) in cash
and cash
equivalents from
continuing
operations
Cash and cash 394,343 183,934 148,465 176,225
equivalents at the
beginning of the
period
Cash and cash 421,983 170,713 421,983 170,713
equivalents at the
end of the period
Supplemental cash flow information (note 15)
The accompanying notes form an integral part of these Interim Consolidated
Financial Statements.
Notes to the Interim Consolidated Financial Statements - Unaudited
as at September 30, 2010 and December 31, 2009
(in United States dollars)
1 NATURE OF OPERATIONS
Uranium One Inc. ("Uranium One"), its subsidiaries and joint ventures
(collectively, the "Corporation") is a Canadian Corporation engaged through
subsidiaries and joint ventures in the mining and production of uranium, and
in the acquisition, exploration and development of properties for the
production of uranium in Kazakhstan, the United States and Australia.
Through the Betpak Dala joint venture, Uranium One owns a 70% interest in the
Akdala and South Inkai uranium mines in Kazakhstan. The Corporation holds a
50% interest in the Karatau joint venture, which owns the Karatau uranium mine
in Kazakhstan, and a 30% interest in the Kyzylkum joint venture, which owns
the Kharasan Project in Kazakhstan. In the United States, the Corporation
owns projects in the Powder River and Great Divide basins in Wyoming. The
Corporation owns a 51% interest in the Honeymoon Uranium Project in Australia.
The Corporation owns, either directly or through joint ventures, a large
portfolio of uranium exploration properties in the western United States,
South Australia, and Canada.
On April 14, 2010, the Corporation sold its South African development and
exploration assets.
2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of presentation and principles of consolidation
These interim unaudited consolidated financial statements have been prepared
in accordance with Canadian generally accepted accounting principles for
interim financial information, they follow the same accounting policies, and
methods of application as the audited consolidated financial statements of the
Corporation for the year ended December 31, 2009, except as discussed in note
2.2. These interim unaudited consolidated financial statements do not include
all the information and note disclosure required by the generally accepted
accounting principles for annual financial statements and therefore should be
read in conjunction with the most recent annual audited consolidated financial
statements.
The consolidated financial statements include the accounts of Uranium One, its
subsidiaries and the proportionate share of its interests in joint ventures.
All intercompany balances and transactions have been eliminated.
The following are the Corporation`s principal mineral properties as at
September 30, 2010:
Operating mines:
Entity Mineral Location Ownership Status
property/Operation
Betpak Dala Akdala Uranium Kazakhstan 70% Proportion
LLP Mine ately
consolidat
ed
Betpak Dala South Inkai Kazakhstan 70% Proportion
LLP Uranium Mine ately
consolidat
ed
Karatau LLP Karatau Uranium Kazakhstan 50% Proportion
Mine ately
consolidat
ed
Advanced development projects:
Entity Mineral Location Ownership Status
property/Operation
Kyzylkum Kharasan Uranium Kazakhstan 30% Proportionately
LLP Project consolidated
The Corporation is also developing the following mineral properties:
Entity Mineral Location Ownership Status
property/Operation
Uranium United States United 100% Consolidated
One development projects States
Americas,
Inc.
Honeymoon Honeymoon Project Australia 51% Proportionately
Uranium consolidated
Project
Joint
Venture
The Corporation owns a 19% interest in the SKZ-U joint venture, which is
constructing a sulphuric acid plant in Kazakhstan (note 4.1).
2.2 Adoption of new standards and recent accounting pronouncements
Business combinations
CICA Section 1582 - "Business Combinations", which replaces CICA Section 1581
- "Business Combinations", establishes standards for the accounting for a
business combination. It is the Canadian GAAP equivalent to International
Financial Reporting Standard ("IFRS") 3, "Business Combinations". This
standard is effective for the Corporation`s business combinations with
acquisition dates on or after January 1, 2011. Early adoption is permitted
and the Corporation adopted this standard effective January 1, 2010. The
adoption of this standard did not result in a material impact on the
Corporation`s consolidated financial statements.
Consolidated financial statements and non-controlling interests
CICA Section 1601 - "Consolidated Financial Statements" ("Section 1601") and
Section 1602 - "Non-controlling Interests" ("Section 1602") replaces CICA
Handbook Section 1600 - "Consolidated Financial Statements". Sections 1601
and 1602 establish standards for preparation of consolidated financial
statements and the accounting for non-controlling interests in financial
statements that are equivalent to the standards under IFRS. These standards
are effective for the Corporation for interim and annual financial statements
beginning on January 1, 2011. Early adoption is permitted and the Corporation
adopted this standard effective January 1, 2010. The adoption of this
standard did not result in a material impact on the Corporation`s consolidated
financial statements.
Financial instruments - recognition and measurement
In June 2009, the CICA amended Section 3855 to clarify the application of the
effective interest rate method after a debt instrument has been impaired and
when an embedded prepayment option is separated from its host debt instrument
at initial recognition for accounting purposes. The amendments are applicable
for the Corporation`s interim and annual financial statements for its fiscal
year beginning January 1, 2011. Earlier adoption is permitted. The
Corporation is currently evaluating the future impact of this section on its
financial statements. The adoption of this standard did not result in a
material impact on the Corporation`s consolidated financial statements.
3 ACQUISITIONS AND DISPOSALS
3.1 Acquisition of Christensen Ranch and Irigaray
The Corporation entered into a definitive agreement on August 7, 2009 to
acquire 100% of the MALCO Joint Venture ("MALCO") from wholly-owned
subsidiaries of AREVA and ElectricitE de France for $35.3 million in cash.
The assets of MALCO include the licensed and permitted Irigaray ISR central
processing plant, the Christensen Ranch satellite ISR facility and associated
U3O8 resources located in the Powder River Basin of Wyoming. The Corporation
also assumed MALCO`s reclamation liabilities in respect of uranium properties
in Texas.
Pursuant to the acquisition agreement, the Corporation placed a deposit of
$8.8 million in escrow to be applied against the purchase price. The
acquisition closed on January 25, 2010. The Corporation accounted for the
acquisition as a business combination.
The Corporation agreed to pay a portion of operating costs and all of the
Texas reclamation costs incurred from the execution date of August 7, 2009 to
the closing date of January 25, 2010 which amounted to $2.6 million.
Transaction costs incurred in connection with the acquisition were $0.5
million, which were expensed as incurred.
The aggregate fair values of assets acquired and liabilities assumed were as
follows on acquisition date:
$`000
Purchase price:
Cash 35,315
Operating and remediation costs 2,619
37,934
Net assets acquired:
Cash and cash equivalents 315
Accounts and other receivables 2,005
Mineral interests, plant and equipment 56,364
Accounts payable and accrued liabilities (34)
Asset retirement obligations (7,320)
Future income tax liabilities (13,396)
37,934
3.2 Acquisition of Akbastau Uranium Mine and Zarechnoye Uranium Mine
The Corporation announced on June 8, 2010, the signing of a definitive
purchase and subscription agreement to acquire a 50% joint venture interest in
the Akbastau Uranium Mine ("Akbastau") and a 49.67% joint venture interest in
the Zarechnoye Uranium Mine ("Zarechnoye") in Kazakhstan from JSC
Atomredmetzoloto ("ARMZ"), the Russian state-owned uranium mining company.
Kazatomprom owns 50% and 49.67% joint venture interests in Akbastau and
Zarechnoye, respectively. The remainder of the interest in Zarechnoye is held
by a Kyrgyz company.
Pursuant to the transaction, ARMZ will contribute its interests in the
Akbastau and Zarehnoye joint ventures and a cash investment in return for
common shares of the Corporation. Following closing, the Corporation will pay
a special cash dividend to shareholders other than ARMZ. Each of the cash
investment, number of shares and special dividend is dependent on whether
Japan Uranium Management Inc. ("JUMI") exercises its right of repurchase under
the terms of its convertible debenture which will be triggered by the
transaction with ARMZ. On July 30, 2010, JUMI undertook to exercise its right
of repurchase. As a result of this election, the cash investment by ARMZ will
be $610 million; the number of shares to be issued by the Corporation will be
356 million; and the special dividend to be paid to shareholders other than
ARMZ will be $1.06 per share.
Upon completion of the transaction, ARMZ will own not less than 51% of Uranium
One`s outstanding common shares. ARMZ has agreed to a standstill of 18 months
from closing during which it may not, without prior consent, dispose of or
acquire any additional Uranium One shares, except pursuant to agreed anti-
dilution rights, which will permit ARMZ to maintain not less than a 51%
interest in Uranium One and to certain other exceptions.
On July 15, 2010 the Independent Committee and the Board of Directors of
Uranium One have resolved to recommend the transaction to shareholders, who
approved the transaction on August 31, 2010, and announced the completion of
legal due diligence reviews by both parties.
The transaction is anticipated to be completed before the end of 2010, subject
to receipt of one remaining US regulatory approval.
3.3 Disposal of Uranium One Africa Ltd
The Corporation completed the sale of Uranium One Africa during April 2010,
and received cash proceeds of $37.3 million. The net carrying value of the
investment of $38.5 million as at December 31, 2009 was further impaired to
the proceeds of $37.3 million, resulting in an impairment of $1.2 million in
the three months ended March 31, 2010.
4 JOINT VENTURES
4.1 Proportionate interests in joint ventures
The Corporation owns the following interests in joint ventures:
Betpak Dala 70%
Kyzylkum 30%
Karatau 50%
SKZ-U LLP 19%
Honeymoon 51%
Australia Exploration 50%
The Corporation`s proportionate share of the assets and liabilities of the
joint ventures are as follows:
As at Betpak Kyzylkum Karatau SKZ-U Honeymo Total
Septembe Dala on &
r 30, Austral
2010 ia
explora
tion
$`000 $`000 $`000 $`000 $`000 $`000
Cash 11,064 556 1,742 9,186 10,666 33,214
Other 87,678 647 21,539 25 833 110,722
current
assets
Mineral 633,892 205,186 496,601 9,161 110,388 1,455,228
interest
s, plant
and
equipmen
t
Other 2,304 321 4,517 11,557 909 19,608
assets
Current (10,933) (3,886) (9,070) (1,828) (1,634) (27,351)
liabilit
ies
Other (1,342) (54,031) (42,524) (14,670) (38) (112,605)
liabilit
ies (1)
(2) (3)
Future
income (54,027) (12,307) (73,156) - (4,288) (143,778)
tax
liabilit
ies
Asset
retireme (8,708) (1,450) (3,045) - (837) (14,040)
nt
obligati
on
Net 659,928 135,036 396,604 13,431 115,999 1,320,998
Assets
1. In addition to the $17.5 million loan (note 4.2) from the
Corporation, Kyzylkum negotiated unsecured bank loan facilities
totaling $160 million in prior periods. One facility, in the amount
of $70 million, was obtained from the Japan Bank for International
Cooperation ("JBIC") and the other facility, in the amount of $90
million, was obtained from Citibank. $66.0 million was outstanding
on the JBIC facility and $84.9 million was outstanding on the
Citibank facility as at September 30, 2010. During the period,
Kyzylkum also negotiated a secured loan totaling $42.2 million from
Kazatomprom of which $28.6 million was outstanding as at September
30, 2010. The proceeds were used to repay $17.5 million to the
Corporation, $4.0 million to JBIC and $6.3 million to Citibank. The
Corporation`s share of these facilities is $53.9 million.
2. Karatau negotiated and drew down on a secured short term bank loan
totaling $10 million with Citibank during 2009. During the nine
months ended September 30, 2010, Karatau negotiated additional
secured bank loans from Citibank in the amount of $6.5 million,
Halyk Bank in the amount of $11 million and Unicredit Bank in the
amount of $40 million. The Halyk Bank and Citibank facilities were
drawn down in full and $10 million was outstanding against the The
Unicredit Bank facility. The Corporation issued a guarantee to
Unicredit Bank to secure the $40 million facility. At September 30,
2010, the Corporation`s share of these loans is $18.8 million.
3. In addition to the $18 million loan (note 4.2) from the Corporation,
SKZ-U received unsecured loans from Sumitomo Mitsui Banking
Corporation, Mizuho Corporate Bank and JBIC in the amounts of $17.4
million, $15 million and $44.9 million respectively. At September
30, 2010, the Corporation`s share of these loans is $14.7 million.
As at Betpak Kyzylkum Karatau SKZ-U Honeymo Total
December Dala on &
31, 2009 Austral
ia
explora
tion
$`000 $`000 $`000 $`000 $`000 $`000
Cash 3,062 871 160 412 5,163 9,668
Other 77,871 274 18,930 5 1,388 98,468
current
assets
Mineral 658,509 205,293 510,494 3,537 78,039 1,455,872
interests
, plant
and
equipment
Other 1,479 389 1,924 7,018 - 10,810
assets
Current (8,494) (4,034) (27,020) (38) (2,575) (42,161)
liabiliti
es
Other (1,479) (48,781) (16,687) - (34) (66,981)
liabiliti
es (1)
(2)
Future (55,844) (12,223) (74,637) - (4,074) (146,778)
income
tax
liabiliti
es
Asset (8,170) (1,356) (2,847) - (705) (13,078)
retiremen
t
obligatio
n
Net 666,934 140,433 410,317 10,93 77,202 1,305,820
Assets 4
1. In addition to the $35 million loan (note 4.2) from the Corporation,
Kyzylkum negotiated unsecured bank loan facilities totaling $160
million in prior periods. One facility, in the amount of $70
million, was obtained from the Japan Bank for International
Cooperation ("JBIC") and the other facility, in the amount of $90
million, was obtained from Citibank. These facilities were fully
drawn down as at December 31, 2009, and the Corporation`s share of
these facilities is $48 million.
2. Karatau negotiated a secured short term bank loan totaling $10
million with Citibank and the Corporation`s share of this loan is $5
million.
4.1 Proportionate interests in joint ventures (continued)
The Corporation`s proportionate share of revenue, expenses, net earnings /
(loss) and cash flows for the three and nine months ended September 30, 2010
and 2009 are as follows:
Three months ended
September 30, 2010
Betpak Kyzylku Karatau SKZ-U Honeymo Total
Dala m on &
Austral
ia
explora
tion
$`000 $`000 $`000 $`000 $`000 $`000
Revenue 29,617 - 41,164 - - 70,781
Expenses
and other (18,201) (290) (27,889) (10) (117) (46,507)
income
Foreign
exchange (240) (44) 281 9 - 6
(loss) /
gain
Earnings
/ (loss) 11,176 (334) 13,556 (1) (117) 24,280
before
income
taxes
Current
income (2,919) - (6,372) - - (9,291)
tax
expense
Future
income 238 (2) 2,324 - (81) 2,479
tax
recovery
/
(expense)
Earnings 8,495 (336) 9,508 (1) (198) 17,468
/ (loss)
Cash 5,385 - 19,197 - - 24,582
flows
from
operating
activitie
s
Cash (9,676) (3,525) (7,890) (3,799 (3,808) (28,698)
flows )
used in
investing
activitie
s
Cash - 625 (9,660) 5,706 6,512 3,183
flows
from /
(used in)
financing
activitie
s
Net (4,291) (2,900) 1,647 1,907 2,704 (933)
(decrease
) /
increase
in cash
Three months ended
September 30, 2009
Betpak Kyzylku SKZ-U Honeymo Total
Dala m on &
Austral
ia
explora
tion
$`000 $`000 $`000 $`000
Revenue 20,514 - - - 20,514
Expenses (10,168) (589) - (121) (10,878)
and other
income
Foreign 4,649 165 (183) - 4,631
exchange
loss
Earnings 14,995 (424) (183) (121) 14,267
/ (loss)
before
income
taxes
Current (3,846) - - - (3,846)
income
tax
expense
Future 1,513 - - - 1,513
income
tax
expense
Earnings 12,662 (424) (183) (121) 11,934
/ (loss)
Cash 13,070 342 - (604) 12,808
flows
from /
(used in)
operating
activitie
s
Cash (6,689) (1,544) - (9,917) (18,150)
flows
used in
investing
activitie
s
Cash - - - 17,881 17,881
flows
from
financing
activitie
s
Net 6,381 (1,202) - 7,360 12,539
increase
/
(decrease
) in cash
4.1 Proportionate interests in joint ventures (continued)
Nine months ended
September 30, 2010
Betpak Kyzylku Karatau SKZ- Honeymoon Total
Dala m U &
Australia
explorati
on
$`000 $`000 $`000 $`00 $`000 $`000
0
Revenue 108,664 - 58,147 - - 166,811
Expenses
and other (72,886) (506) (41,623) 3 (385) (115,397)
income
Foreign
exchange (4,296) 124 (168) 5 - (4,335)
(loss) /
gain
Earnings (385) 47,079
/ (loss) 31,482 (382) 16,356 8
before
income
taxes
Current
income (10,455) - (8,161) - - (18,616)
tax
expense
Future
income 2,152 (10) 1,933 - (1) 4,074
tax
recovery
/
(expense)
Earnings 23,179 (392) 10,128 8 (386) 32,537
/ (loss)
Cash
flows 28,731 - 3,491 - - 32,222
from
operating
activitie
s
Cash
flows (20,729) (8,888) (15,659) (9,3 (23,839) (78,430)
used in 15)
investing
activitie
s
Cash
flows - 8,573 13,750 18,0 29,342 69,754
from 89
financing
activitie
s
Net 8,002 (315) 1,582 8,77 5,503 23,546
increase 4
/
(decrease
) in cash
Nine months ended
September 30, 2009
Betpak Kyzylku SKZ-U Honeymoon Total
Dala m &
Australia
explorati
on
$`000 $`000 $`000 $`000
Revenue 82,039 - - - 82,039
Expenses (48,781) (608) - (572) (49,961)
and other
income
Foreign 61,605 12,700 (183) - 74,122
exchange
gain
Earnings 94,863 12,092 (183) (572) 106,200
/ (loss)
before
income
taxes
Current (16,571) - - - (16,571)
income
tax
expense
Future 4,517 - - - 4,517
income
tax
recovery
Earnings 82,809 12,092 (183) (572) 94,146
/ (loss)
Cash 25,059 716 - (630) 25,145
flows
from /
(used in)
operating
activitie
s
Cash (12,323) (13,148 - (12,519) (37,990)
flows )
used in
investing
activitie
s
Cash - 12,000 - 17,881 29,881
flows
from
financing
activitie
s
Net 12,736 (432) - 4,732 17,036
increase
/
(decrease
) in cash
4.2 Loans to joint ventures
Sep 30, Dec 31,
2010 2009
$`000 $`000
Long term portion
Kyzylkum 13,614 25,698
SKZ-U 14,607 3,552
Total 28,221 29,250
Kyzylkum loan
The Corporation made loans to Kyzylkum pursuant to its obligation to provide
project financing for construction and commissioning of the Kharasan Project
in the amount of $80 million. The loans bear interest at LIBOR plus 1.5% per
annum, with interest payable on a semi-annual basis, commencing within two
years of initial funding.
Sep 30, Dec 31,
2010 2009
$`000 $`000
Balance at January 1 35,000 46,666
Repaid during the period (17,500) (11,666)
17,500 35,000
Interest accrued 1,949 1,711
Balance at the end of the period 19,449 36,711
Less: elimination of (5,835) (11,013)
proportionate share - 30%
13,614 25,698
Less: current portion - -
Long term portion 13,614 25,698
The loans to Kyzylkum are unsecured.
Kyzylkum repaid 50% of the outstanding loan during the nine months ended
September 30, 2010.
SKZ-U loan
The Corporation made loans to SKZ-U pursuant to its obligation to provide
project financing for construction of a sulphuric acid plant in the amount of
$18.0 million. The loans bear interest at LIBOR plus 6.0% per annum, with
interest payable on a semi-annual basis, commencing within three years of
initial funding.
Sep 30, Dec 31,
2010 2009
$`000 $`000
Balance at January 1 4,291 -
Repaid during the period (4,291) -
Additions during the period 17,995 4,291
17,995 4,291
Interest accrued 39 94
Balance at the end of the period 18,034 4,385
Less: elimination of (3,427) (833)
proportionate share - 19%
14,607 3,522
Less: current portion - -
Long term portion 14,607 3,552
The loans to SKZ-U are unsecured.
5 INVENTORIES
Sep 30, Dec 31,
2010 2009
$`000 $`000
Finished uranium concentrates 53,686 41,055
Solutions and concentrates in 27,684 24,871
process
Product inventory 81,370 65,926
Materials and supplies 8,508 5,708
89,878 71,634
All operating expenses and depreciation and depletion are processed to
inventory and expensed when the product is sold.
Finished uranium concentrates includes a fair value adjustment of $8.9 million
at December 31, 2009 that was recognized on acquisition of Karatau, to
increase the carrying value to fair market value. The full amount was
released to the statement of operations as non-cash depreciation and depletion
for sales made up to September 30, 2010.
6 MINERAL INTERESTS, PLANT AND EQUIPMENT
September 30, 2010 Accumulated Net carrying
Cost Amortization Amount
$`000 $`000 $`000
Mineral interests 1,534,972 (127,038) 1,407,934
Plant and equipment 479,282 (69,382) 409,900
2,014,254 (196,420) 1,817,834
December 31, 2009 Accumulated Net carrying
Cost Amortization Amount
$`000 $`000 $`000
Mineral interests 1,485,968 (82,852) 1,403,116
Plant and equipment 385,621 (40,453) 345,168
1,871,589 (123,305) 1,748,284
A summary by property of the net book value is as follows:
September Mineral interests
30, 2010
Non- Plant Total
depleta and
ble equipmen
t
Deplet Total
able
Coun $`000 $`000 $`000 $`000 $`000
try
Akdala Kaza 66,012 74,358 140,370 26,358 166,728
Mine khst
an
South Kaza 94,325 269,817 364,142 102,655 466,797
Inkai khst
Mine an
Karatau Kaza 119,73 312,575 432,306 64,295 496,601
Mine khst 1
an
Kharasan Kaza - 140,078 140,078 74,269 214,347
Project khst
an
United Unit - 139,287 139,287 53,872 193,159
States ed
developme Stat
nt es
projects
United Unit - 116,515 116,515 489 117,004
States ed
explorati Stat
on es
projects
United Unit - 39,107 39,107 823 39,930
States ed
conventio Stat
nal es
mining
projects
Honeymoon Aust - 34,569 34,569 75,819 110,388
Project rali
a
Corporate - 1,560 1,560 11,320 12,880
and other
Total 280,06 1,127,8 1,407,93 409,900 1,817,8
8 66 4 34
6 MINERAL INTERESTS, PLANT AND EQUIPMENT (CONTINUED)
MINERAL INTERESTS
December
31, 2009
Non-
Depletable depletable
Country $`000 $`000
Akdala Mine Kazakhstan 77,199 74,358
South Inkai Kazakhstan 194,753 181,068
Mine
Karatau Mine Kazakhstan 141,052 312,575
Kharasan Kazakhstan - 140,078
Project
United States United States - 94,653
development
projects
United States United States - 114,905
exploration
projects
United States United States - 38,896
conventional
mining projects
Honeymoon Australia - 31,830
Project
Corporate and - 1,749
other
Total 413,004 990,112
December 31, 2009
Plant and Total
equipment
Total
$`000 $`000 $`000
Akdala Mine 151,557 28,149 179,706
South Inkai Mine 375,821 102,598 478,419
Karatau Mine 453,627 56,867 510,494
Kharasan Project 140,078 68,752 208,830
United States 94,653 26,873 121,526
development
projects
United States 114,905 493 115,398
exploration
projects
United States 38,896 1,014 39,910
conventional
mining projects
Honeymoon Project 31,830 46,209 78,039
Corporate and 1,749 14,213 15,962
other
Total 1,403,116 345,168 1,748,284
7 OTHER ASSETS
Sep 30, 2010 Dec 31, 2009
$`000 $`000
Current
Borrowed uranium concentrates 9,301 8,900
Future income tax assets 1,070 1,070
Deposit for acquisition of Christensen Ranch - 8,750
and Irigaray (note 3.1)
Deferred business development expenditure - 5,174
Other 296 578
10,667 24,472
Non-current
Asset retirement fund 30,106 13,500
Advances for plant and equipment 14,470 7,487
Long term deposits and guarantees 157 347
Long term inventory 649 1,244
Available for sale securities 3,089 9,287
Other 1,486 1,272
49,957 33,137
Asset retirement fund
The Corporation contributed $15.4 million to its asset retirement fund as part
security for the additional asset retirement obligations acquired as part of
the acquisition of Christensen Ranch and Irigaray (note 3.1).
Uranium concentrates borrowed
The Corporation entered into uranium concentrates borrowing agreements to
mitigate the risk of delivery delays, enabling the Corporation to meet its
contractual obligations in terms of current uranium sales contracts. The
asset represents the borrowed uranium concentrates, which are held at a
conversion facility in the Corporation`s account.
Available for sale securities
The Corporation holds available for sale securities with a cost of $3.1
million and a fair value of $3.1 million. Unrealized losses of one thousand
are included in accumulated other comprehensive income.
8 LONG TERM DEBT
Sep 30, Dec 31,
2010 2009
$`000 $`000
Opening balance 63,579 61,275
Amortized financing fees 1,507 2,371
Interest paid (806) (1,210)
Interest accrued 720 1,143
Repaid (65,000) -
Closing balance - 63,579
Current portion - 63,579
Long term portion - -
- 63,579
The Corporation established a $100 million credit facility with the Bank of
Montreal and the Bank of Nova Scotia in 2008. According to the terms of the
credit facility, the Corporation repaid the outstanding amount of $65 million
in June 2010 and extended the maturity date of the facility to November 30,
2010. In October 2010 the credit facility was cancelled and the letters of
credit in the amount of $8.7 million which had been issued under the credit
facility were transferred to another financial institution.
9 CONVERTIBLE DEBENTURES
2006 Debentures
The Corporation has outstanding convertible unsecured subordinated debentures
maturing December 31, 2011 (the "2006 Debentures") with a face value of
C$155.3 million ($152.4 million). The 2006 Debentures were originally issued
at C$1,000 per debenture and bear interest at an annual rate of 4.25%, payable
semi-annually in arrears on June 30 and December 31 of each year. The
conversion price is C$20 per share, which is equivalent to 50 common shares
for each C$1,000 principal amount of debentures.
2010 Debentures
On March 12, 2010 the Corporation issued convertible unsecured subordinated
debentures for gross proceeds of C$260 million ($253.3 million), including
C$10 million taken up under an underwriters` over-allotment option. The 2010
Debentures have a March 13, 2015 maturity date, with interest payable at a
rate of 5.0% per annum, payable semi-annually from the date of receipt of all
necessary Kazakh approvals for the conversion of the 2010 Debentures, or at a
rate of 7.5% per annum, payable semi-annually before the receipt of the
necessary Kazakh approvals. The 2010 Debentures will be convertible into
common shares of the Corporation after receipt of all necessary Kazakh
approvals, at a rate of 250 common shares per C$1,000 principal and will have
a conversion price of C$4.00 per common share.
On October 12, 2010 the Corporation received all necessary Kazakh approvals
for the conversion of the 2010 Debentures and the interest rate on the
Debentures was consequently reset to 5%.
JUMI Debentures
On January 14, 2010, the Corporation issued to Japan Uranium Management Inc.
("JUMI") a C$269.1 million ($258.1 million ) aggregate principal amount 3%
convertible unsecured subordinated debenture maturing ten years from the date
of issue (the "JUMI Debentures"). Pursuant to the JUMI Debentures, the
Corporation must offer to re-purchase the JUMI Debentures for 101% of the
outstanding principal amount plus accrued interest upon a "change of control".
The proposed transaction with ARMZ (note 3.2) constitutes a "change of
control" and on July 30, 2010, the Corporation made such a re-purchase offer
to JUMI which JUMI accepted, subject to the closing of the transaction with
ARMZ. The JUMI Debentures was also amended on July 30, 2010 such that the
JUMI Debentures cannot be converted into common shares of the Corporation
unless the proposed transaction with ARMZ is terminated.
The debentures contain both a liability component and an equity component,
being the holders` conversion right, which is presented separately on the
consolidated balance sheet as illustrated in the table below. The Corporation
has allocated the fair value of the debentures to the individual liability and
equity components by establishing the liability component and then allocating
the balance remaining, after subtracting the fair value of the liability from
the issue price, to the equity component. The fair value of the liability
component was determined by discounting the stream of future payments of
interest and principal amounts at the estimated prevailing market rate for a
debt instrument of comparable maturity and credit quality but excluding any
conversion privilege by the holder. A rate of 10.38% was used for the 2010
Debentures and 11.33% for the JUMI Debentures.
The table below provides a breakdown of the equity and liability allocation on
initial recognition of the JUMI Debentures and 2010 Debentures:
JUMI 2010
Debentures Debentures
$`000 $`000
Liability 131,378 207,203
Transaction costs (1,050) (10,357)
Net liability 130,328 196,846
Equity 126,727 46,068
Transaction costs (1,035) (2,054)
Net equity 125,692 44,014
Net proceeds 256,020 240,860
The table below indicates the movement in the liability:
September 30, 2010
JUMI 2010 2006 Total
Debentures Debentures Debentures
$`000 $`000 $`000 $`000
Opening balance as - - 140,862 140,862
at Jan 1, 2010
Issued 131,378 207,203 - 338,581
Interest accrued 10,736 12,596 7,354 30,686
Coupon payment (3,556) (5,658) (3,176) (12,390)
Transaction costs (1,050) (10,357) - (11,407)
Foreign exchange 1,712 (751) 2,748 3,709
movement
Liability as at the 139,220 203,033 147,788 490,041
end of the period
December 31, 2009
2006 Total
Debentures
$`000 $`000
Opening balance as 118,042 118,042
at Jan 1, 2009
Interest incurred 8,739 8,739
Coupon payment (6,049) (6,049)
Foreign exchange 20,130 20,130
movement
Liability as at the 140,862 140,862
end of the period
10 OTHER LIABILITIES
Sep 30, Dec 31,
2010 2009
$`000 $`000
Current
Promissory note - 90,211
Contingent payment - 20,000
Unfavorable contract - 11,655
Uranium concentrates loan 9,300 8,900
Joint venture external loan 34,750 5,000
facilities
Other 611 1,277
44,661 137,043
Non-current
Joint venture external loan 52,211 47,574
facilities
Due to the Republic of Kazakhstan 1,514 1,696
Other 182 181
53,907 49,451
Uranium concentrates loan
On September 22, 2008, the Corporation entered into a loan agreement to borrow
200,000 pounds of U3O8 to be repaid on September 30, 2010. In July 2010, the
maturity of the loan was extended to September 30, 2011. Under the loan
agreement, loan fees of 3.5% per annum are payable based on the value of the
borrowed U3O8. The loan was classified as a financial liability held for
trading and is recorded at fair value. The Corporation deposited $8.6 million
as cash collateral for the letter of credit that was issued as a guarantee for
the loan during the period.
A director of Uranium One, is also a senior officer of an entity that advanced
a uranium loan to the Corporation.
The Corporation does not recognize revenue when borrowed material is delivered
into a contract, and revenue will be recognized on the date when the material
is returned into the Corporation`s account from its own production.
Unfavourable contract
The Corporation acquired an unfavourable contract as part of the Karatau
acquisition during 2009, which is carried at fair value. The Corporation
realized $0.3 million and $10.4 million of the fair value in revenue during
the three and nine months ended September 30, 2010 respectively, for
deliveries into the unfavorable contract. A fair value adjustment of $1.3
million was recorded in the statement of operations for the change in the
uranium price during the nine months ended September 30, 2010.
Promissory note
During 2009, the Corporation issued a $90 million promissory note as part of
the consideration for the purchase of Karatau. The promissory note was due
not later than 12 months from closing and was repaid on January 18, 2010.
Contingent payment
The Karatau purchase agreement provides for contingent payments to ARMZ of up
to $60 million, payable in three equal tranches over the period between 2010
and 2012 subject to certain, post-closing tax related adjustments. The first
payment of $20 million was made during January 2010. The Corporation has not
recognized the remaining $40 million contingent payments as a liability, as
the requirement to make such payment will not be determinable until January 1,
2011 and 2012, respectively.
11 SHARE CAPITAL
Number of Value of
Issued and outstanding common shares shares
shares
$`000
Common shares on January 1, 2009 469,612,956 3,522,824
Exercise of stock options 600,184 6,599
Exercise of restricted shares 44,836 257
Contingent shares issued 165,600 388
Karatau acquisition shares 117,000,000 293,229
issued
Issued and outstanding common 587,423,576 3,823,297
shares at December 31, 2009
Exercise of stock options 1,657,166 7,417
Exercise of restricted shares 37,221 171
Issued and outstanding common 589,117,963 3,830,885
shares at September 30, 2010
12 CONTRIBUTED SURPLUS
The following table details the movement of contributed surplus during the
period:
Restric
ted
Warrants shares Options Total
$`000 $`000 $`000 $`000
As at January 1, 13,912 1,606 116,084 131,602
2009
Stock options - - 7,027 7,027
issued and vested
Stock options - - (5,369) (5,369)
exercised
Restricted shares - 475 - 475
issued and vested
Restricted shares - (257) - (257)
exercised
As at December 31, 13,912 1,824 117,742 133,478
2009
Stock options - - 5,605 5,605
issued and vested
Stock options - - (4,038) (4,038)
exercised
Restricted shares - 305 - 305
issued and vested
Restricted shares - (171) - (171)
exercised
As at September 30, 13,912 1,958 119,309 135,179
2010
Assumptions
The fair value of stock options and restricted shares used to calculate the
compensation expense was estimated using the Black-Scholes option pricing
model with the following assumptions:
September 30, 2010 December 31, 2009
Risk free interest rate 2.06% - 2.79% 1.70% - 2.82%
Expected dividend yield 0% 0%
Expected volatility of the 89% - 94% 98% - 115%
Uranium One`s share price
Expected life 5 years 5 years
Warrants
The Corporation has no outstanding warrants at September 30, 2010 (December
31, 2009: nil).
Stock options
The following is a summary of options granted under the stock-based
compensation plan:
Weighted
Number of average
options
exercise
price
Cdn $
Outstanding options as at January 15,858,517 7.82
1, 2009
Granted options 6,292,351 2.23
Exercised options (600,184) 2.25
Forfeitures of stock options (2,986,524) 6.89
Outstanding options as at December 18,564,160 6.26
31, 2009
Granted options 4,495,400 2.80
Exercised options (1,657,166) 2.12
Forfeitures of stock options (2,136,810) 7.97
Outstanding options as at 19,265,584 5.62
September 30, 2010
The stock option compensation expense for the three and nine month periods
ended September 30, 2010 was $2.0 million and $5.6 million respectively, and
for the three and nine month periods ended September 30, 2009 it was $1.7
million and $5.3 million. As at September 30, 2010, the aggregate unexpensed
fair value of unvested stock options granted amounted to $7.7 million. The
fair value of options granted during the nine month period amounts to $9.1
million, $2.02 per option (during the nine months ended September 30, 2009:
$8.2 million, $1.30 per option).
The following table summarizes stock options outstanding at September 30,
2010:
Options outstanding
Range of Number Weighted Weighted
exercise outstanding as average average
prices at September remaining exercise price
30, life
2010
Cdn $ (years) Cdn $
0.78 to 2.74 4,303,105 3.45 2.20
2.75 to 4.76 7,618,873 3.73 3.25
4.77 to 7.79 1,660,372 2.12 7.28
7.80 to 9.90 3,012,950 4.96 8.43
9.91 to 12.93 1,448,908 1.85 12.12
12.94 to 15.63 474,126 1.63 13.94
15.64 to 16.59 747,250 1.54 16.51
19,265,584 3.45 5.62
Options exercisable
Range of Number Weighted Weighted
exercise exercisable average average
prices as at remaining life exercise price
September
30,
2010
Cdn $ (years) Cdn $
0.78 to 2.74 832,308 3.40 2.24
2.75 to 4.76 2,826,923 2.83 3.86
4.77 to 7.79 1,655,687 2.12 7.28
7.80 to 9.90 2,994,703 4.98 8.43
9.91 to 12.93 1,418,575 1.84 12.11
12.94 to 15.63 474,126 1.63 13.94
15.64 to 16.59 747,250 1.54 16.51
10,949,572 3.09 7.87
Restricted share rights
The following is a summary of Uranium One`s restricted shares issued under the
Restricted Share Plan:
Number of
restricted
shares
Balance at January 1, 2009 623,495
Exercised during the year (44,836)
Expired (127,500)
Balance at December 31, 2009 451,159
Exercised during the year (37,221)
Expired (22,000)
Balance at September 30, 2010 391,938
The following is a summary of the outstanding restricted share rights:
Number of restricted shares
Sep 30, 2010 Dec 31, 2009
Grant date
June 7, 2006 72,083 72,083
December 8, 2006 1,355 4,576
April 7, 2008 318,500 374,500
Balance at the end of the period 391,938 451,159
12 CONTRIBUTED SURPLUS (CONTINUED)
Restricted share rights will not expire while the rights holder is an employee
of the Corporation.
The restricted share rights expense for the three and nine month periods ended
September 30, 2010 was $0.1 million and $0.3 million respectively, and for the
three and nine month periods ended September 30, 2009 was $0.2 million and
$0.4 million. As at September 30, 2010 the aggregate unexpensed fair value of
unvested restricted share rights granted amounted to $0.2 million (2009: $0.8
million). No restricted shares were granted during the three and nine months
ended September 30, 2010.
Contingently issuable shares
Under the terms of the acquisition agreement for the Kyzylkum JV interest,
Uranium One is obligated to issue 6,964,200 common shares of Uranium One upon
commencement of commercial production from Kyzylkum.
The Corporation assumed all of the obligations of Uranium One Americas, Inc.
(previously Energy Metals Corporation Inc.) and its subsidiaries arising under
certain option and joint venture agreements with third parties. At September
30, 2010 Uranium One has reserved a total of 57,500 common shares for issuance
pursuant to the assumed obligations under contingent share rights agreements.
No contingent shares were issued during the period and no contingent share
rights have lapsed during the period.
13 INTEREST AND OTHER
3 months ended 9 months ended
Sep 30, Sep 30, Sep 30, Sep 30,
2010 2009 2010 2009
$`000 $`000 $`000 $`000
Interest income 1,914 1,331 4,125 3,957
Interest paid (1,111) (397) (3,166) (1,090)
Convertible (11,960 (2,271) (30,687 (6,337)
debenture interest ) )
Credit facility (116) (718) (1,868) (2,114)
charges
Interest and costs
incurred on (73) (110) (225) (275)
uranium
concentrates loan
Costs incurred in (393) -
relation to (84) -
letters of credit
(11,430 (2,165) (32,214
) ) (5,859)
14 FOREIGN EXCHANGE GAIN / (LOSS)
A summary of the foreign exchange gain / (loss) by item is as follows:
3 months ended 9 months ended
Sep 30, Sep 30, Sep 30, Sep 30,
2010 2009 2010 2009
$`000 $`000 $`000 $`000
Unrealized foreign
exchange (loss)/ (111) 1,326 (752) 68,449
gain on future
income tax
liabilities
Unrealized foreign
exchange (loss)/ (1,437) (8,887) 2,508 (7,889)
gain on other
items
Foreign exchange
(loss) / gain on (63) 1,119 (4,100) 2,189
cash and other
items
(1,611) (6,442) (2,344) 62,749
15 CASH FLOW INFORMATION
3 months ended 9 months ended
Sep 30, Sep 30, Sep 30, Sep 30,
2010 2009 2010 2009
$`000 $`000 $`000 $`000
Changes in non-
cash working
capital
excluding
business
combinations:
Decrease in 14,654 10,487 3,285 29,881
accounts and
other
receivables
Decrease in - 991 - 991
prepaid expenses
and other
Decrease / 2,623 (6,920) (3,756) (16,262)
(increase) in
inventories
(Decrease) / (11,234) 1,633 (23,163) (11,184)
increase in
accounts payable
and accrued
liabilities
Increase / 1,406 689 (231) (3,546)
(decrease) in
income taxes
payable
7,449 6,880 (23,865) (120)
Supplemental
cash flow
information
Cash interest 3,365 397 16,575 3,897
paid
Cash tax paid 7,999 6,674 19,071 25,756
Cash equivalents 192,629 114,352 192,629 114,352
Money market
instruments,
including
cashable
guaranteed
investment
certificates,
bearer deposit
notes and
commercial paper
16 BASIC AND DILUTED WEIGHTED-
AVERAGE NUMBER OF SHARES OUTSTANDING
3 months ended 9 months ended
Sep 30, Sep 30, Sep 30, Sep 30,
2010 2009 2010 2009
`000 `000 `000 `000
Basic weighted- 588,015 469,799 587,651 469,702
average number of
shares outstanding
Effect of dilutive
securities:
-convertible - - - -
debentures
-restricted shares - - - -
-stock options - - - -
-warrants - - - -
Diluted weighted- 588,015 469,799 587,651 469,702
average number of
shares outstanding
For the three and nine months ended September 30, 2010 and 2009, convertible
debentures, stock options, warrants and restricted shares were not included in
the dilutive weighted average number of shares outstanding as they were anti-
dilutive.
17 FINANCIAL INSTRUMENTS
As at September 30, 2010: (in $`000)
Convertible JUMI 2010 2006
debentures Debenture Debenture Debenture
Liability component 139,220 203,033 147,788
Equity component 127,304 43,847 51,745
266,524 246,880 199,533
Fair value of N/A 268,360 148,554
convertible
debentures (1)
As at December 31, 2009: (in $`000)
Convertible 2006
debentures Debenture
Liability component 140,862
Equity component 46,480
187,342
Fair value of 131,668
convertible
debentures
(1) The fair value of the JUMI debenture is not determinable as it was
issued pursuant to a private placement and does not have a quoted market
price. The debenture is redeemable at 101% of its face value during closing of
the ARMZ transaction.
The Corporation`s activities expose it to a variety of financial risks,
including the effects of changes in debt and prices of equity instruments
held, foreign currency exchange rates, interest rates, and commodity prices.
The Corporation continuously monitors its exposure to risk. The risk
management carried out by the Corporation is approved by the Board of
Directors. The following section describes the type of significant risks that
the Corporation is exposed to and its objectives and policies for managing
those risk exposures.
(i) Foreign exchange risk
The foreign exchange risk relates to the risk that the value of financial
commitments, recognized assets or liabilities will fluctuate due to changes in
foreign currency rates.
The Corporation is primarily exposed to foreign currency risk through the
following assets and liabilities denominated in currencies other than US
dollars:
Financial assets and liabilities Non-financial
assets
and
liabilities
Cash Account Account Conver Minera Future
and s s tible l income
cash receiva payable debent intere tax
equiva ble and ures sts liabil
lents accrued plant ities
liabili and
ties equipm
ent
(1)
Septemb
er 30,
2010
$`000 $`000 $`000 $`000 $`000 $`000
Canadia 118,83 1,448 9,919 490,04 - -
n 1 1
dollar
Austral 19,334 783 2,900 - 110,38 4,288
ian 8
dollar
Kazakhs 14,889 22,012 22,629 - - 139,49
tan 0
tenge
Euro 86 - 101 - - -
153,14 24,243 35,549 490,04 110,38 143,77
0 1 8 8
17 FINANCIAL INSTRUMENTS (CONTINUED)
Financial assets and liabilities Non-financial
assets and
liabilities
Decembe Cash Account Accoun Conver Minera Future
r 31, and s ts tible l income
2009 cash receiva payabl debent intere tax
equival ble e and ures st liabil
ents accrue plant ities
d and
liabil equipm
ities ent
$`000 (1)
$`000 $`000 $`000 $`000 $`000
Canadia 170 2,539 6,186 140,86 - -
n 2
dollar
Austral 22,071 1,571 4,369 - 78,039 4,074
ian
dollar
Kazakhs 3,496 28,981 37,761 - - 142,70
tan 4
tenge
Euro 41 - 9 - - -
South 674 - - - - -
African
rand
26,452 33,091 48,325 140,86 78,039 146,77
2 8
(1) Only includes mineral interests, plant and equipment of self-sustaining
operations.
The following table shows the effect on earnings and other comprehensive
income after tax as at September 30, 2010 of a 10% appreciation or
depreciation in the foreign currencies against the US dollar on the above-
mentioned financial and non-financial assets and liabilities of the
Corporation.
Other
comprehe Net
nsive
income Earning
s
A 10% appreciation in all foreign (1,341) 14,349
currencies against the US dollar,
with all other variables held
constant.
A 10% depreciation in exchange rates would have the exact opposite effect on
other comprehensive income and net earnings.
(ii) Interest rate risk
The Corporation is exposed to interest rate risk on its outstanding borrowings
and short-term investments. The Corporation has outstanding interest-bearing
borrowings as at September 30, 2010 which include the loan facilities obtained
by Kyzylkum and Karatau (note 4.1) which bear interest at floating rates and
the convertible debentures, with fixed interest rates.
A 100 basis point change in interest rate would impact the Corporation`s net
earnings as follows:
Sep 30, 2010 Dec 31, 2009
$`000 $`000
A 100 basis point appreciation in
interest rates, with all other variables
held constant 2,577 1,659
A 100 basis point depreciation in interest rate would have the exact opposite
effect on net earnings.
18 SEGMENTED INFORMATION
The Corporation`s reportable operating segments are summarized in the table
below:
For the three months ended September 30, 2010: (in $`000)
Country Revenues Operating Depreciation
expenses and depletion
$`000 $`000 $`000
Akdala Mine Kazakhstan 11,265 (2,651) (2,320)
South Inkai Mine Kazakhstan 20,625 (8,086) (5,528)
Karatau Mine Kazakhstan 41,164 (9,002) (17,607)
Kharasan Project Kazakhstan - - -
United States United States - - -
development
projects
United States United States - - -
exploration
projects
United States United States - - -
conventional mining
projects
Honeymoon Project Australia - - -
Corporate and other - - -
Total 73,054 (19,739) (25,455)
Country Exploration Net earnings/ Capital
expense (loss) from expenditu
continuing re
operations
$`000 $`000 $`000
Akdala Mine Kazakhstan - 5,140 1,305
South Inkai Mine Kazakhstan - 4,720 8,128
Karatau Mine Kazakhstan - 9,508 4,328
Kharasan Project Kazakhstan - (156) 4,250
United States United States - (1,633) 8,300
development
projects
United States United States (930) 1,231 -
exploration
projects
United States United States - (311) 3
conventional
mining projects
Honeymoon Project Australia (209) (168) 5,220
Corporate and (72) (28,554) 169
other
Total (1,211) (10,223) 31,703
For the nine months ended September 30, 2010: (in $`000)
Country Revenues Operating Depreciation
expenses and depletion
$`000 $`000 $`000
Akdala Mine Kazakhstan 45,986 (12,753) (10,691)
South Inkai Mine Kazakhstan 70,423 (30,904) (19,433)
Karatau Mine Kazakhstan 58,147 (12,405) (27,239)
Kharasan Project Kazakhstan - - -
United States United States - - -
development projects
United States United States - - -
exploration projects
United States United States - - -
conventional mining
projects
Honeymoon Project Australia - - -
Corporate and other - - -
Total 174,556 (56,062) (57,363)
Country Explorati Net earnings/ Capital
on (loss) from expenditu
expense continuing re
operations
$`000 $`000 $`000
Akdala Mine Kazakhstan - 15,914 3,065
South Inkai Mine Kazakhstan - 10,228 16,606
Karatau Mine Kazakhstan - 10,128 8,196
Kharasan Project Kazakhstan - (2,137) 8,492
United States United States - 800 16,962
development projects
United States United States (2,698) (480) -
exploration projects
United States United States - (929) 15
conventional mining
projects
Honeymoon Project Australia (618) (257) 23,722
Corporate and other (198) (74,737) 514
Total (3,514) (41,470) 77,572
For the three months ended September 30, 2009: (in $`000)
Country Revenues Operating Depreciatio
expenses n and
depletion
$`000 $`000 $`000
Akdala Mine Kazakhsta 12,936 (3,047) (2,863)
n
South Inkai Kazakhsta 8,397 (3,284) (2,713)
Project n
Kharasan Project Kazakhsta - - -
n
United States United - - -
development States
projects
United States United - - -
exploration States
projects
United States United - - -
conventional States
mining projects
Honeymoon Australia - - -
Project
Corporate and - - -
other
Total 21,333 (6,331) (5,576)
Country
Explora Net Capital
tion earnings expendi
expense / (loss) ture
from
continui
ng
operatio
ns
Akdala Mine Kazakhstan $`000 $`000 $`000
South Inkai Project Kazakhstan - 1,592 635
Kharasan Project Kazakhstan - 5,413 8,871
United States United - (517) 1,691
development projects States
United States United - 1,318 2,767
exploration projects States
United States United (1,905) (4,255) -
conventional mining States
projects
Honeymoon Project Australia - 50 70
Corporate and other (188) 557 8,387
Total (199) (19,467) 316
(2,292) (15,309) 22,737
For the nine months ended September 30, 2009: (in $`000)
Country Revenues Operating Depreciation
expenses and depletion
$`000 $`000 $`000
Akdala Mine Kazakhstan 41,331 (10,492) (9,506)
South Inkai Project Kazakhstan 41,528 (17,575) (13,352)
Kharasan Project Kazakhstan - - -
United States United States - - -
development projects
United States United States - - -
exploration projects
United States United States - - -
conventional mining
projects
Honeymoon Project Australia - - -
Corporate and other - - -
Total 82,859 (28,067) (22,858)
Country Explorati Net Capital
on earnings/ expenditu
expense (loss) from re
continuing
operations
$`000 $`000 $`000
Akdala Mine Kazakhstan - 19,142 2,596
South Inkai Project Kazakhstan - 60,578 14,648
Kharasan Project Kazakhstan - 11,999 9,289
United States development United States - 1,306 9,775
projects
United States exploration United States (5,094) (5,216) -
projects
United States conventional United States - (642) 114
mining projects
Honeymoon Project Australia (672) 106 13,456
Corporate and other (996) (304,952) 565
Total (6,762) (217,679) 50,443
18 SEGMENTED INFORMATION (CONTINUED)
As at September 30, 2010: (in $`000)
Mineral Future
interest
plant and Total income Total
tax
Country equipment assets liabiliti liabilitie
es s
$`000 $`000 $`000 $`000
Akdala Mine Kazakhstan 166,728 196,480 17,096 24,350
South Inkai Kazakhstan 466,797 525,911 36,931 49,416
Mine
Karatau Mine Kazakhstan 496,601 524,399 73,156 127,795
Kharasan Kazakhstan 214,347 236,678 12,307 88,211
Project
United States United 193,159 208,961 - 3,789
development States
projects
United States United 117,004 117,978 35,384 35,415
exploration States
projects
United States United 39,930 47,339 8,495 11,768
conventional States
mining projects
Honeymoon Australia 110,388 122,795 4,288 6,796
Project
Corporate and 12,880 487,965 - 494,134
other
Total 1,817,834 2,468,506 187,657 841,674
As at December 31, 2009: (in $`000)
Mineral
interest
plant and Total
Country equipment assets
$`000 $`000
Akdala Mine Kazakhstan 179,706 214,121
South Inkai Project Kazakhstan 478,419 522,574
Karatau Mine Kazakhstan 510,494 531,508
Kharasan Project Kazakhstan 208,830 217,800
United States development United States 121,526 122,040
projects
United States exploration United States 115,398 116,148
projects
United States conventional United States 39,910 47,324
mining projects
Honeymoon Project Australia 78,039 85,380
Corporate and other 15,962 240,752
Total (1) 1,748,284 2,097,647
Future
income tax Total
Country liabilities liabilities
$`000 $`000
Akdala Mine Kazakhstan 18,231 24,004
South Inkai Project Kazakhstan 37,613 49,017
Karatau Mine Kazakhstan 74,637 141,192
Kharasan Project Kazakhstan 12,223 66,433
United States development United States - 154
projects
United States exploration United States 28,711 28,742
projects
United States United States 5,198 8,226
conventional mining
projects
Honeymoon Project Australia 4,074 7,389
Corporate and other - 330,106
Total (1) 180,687 655,263
Excludes assets held for sale and discontinued operations
19 SUBSEQUENT EVENTS
Material transactions occurring subsequent to September 30, 2010 are described
in note 3.2, note 8 and note 9.
Date: 15/11/2010 13:08:01 Produced by the JSE SENS Department.
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