| Thu 27 Jan 2011, 14:45 | | FUM - First Uranium Corporation - Q3 2011 Production results for the three |
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FUM
FIU
FUM - First Uranium Corporation - Q3 2011 Production results for the three
months ended December 31, 2010 and an independent technical review of the
Ezulwini Life of Mine Model
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
NEWS RELEASE - January 27, 2011
Q3 2011 PRODUCTION RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 AND AN
INDEPENDENT TECHNICAL REVIEW OF THE EZULWINI LIFE OF MINE MODEL
All amounts are in US dollars unless otherwise noted.
Q3 2011 PRODUCTION HIGHLIGHTS
MINE WASTE SOLUTIONS
- Higher gold sales reported
- Expected gold output at MWS on track for 72,000 ounces for fiscal year
2011
- MWS continues to deliver on planned production with plant and tailings
expansion projects on-track for completion in May 2011 and on schedule
for the re-structured Gold Wheaton Completion Test
EZULWINI MINE
- Highest-ever quarterly gold sales achieved
- Expected gold output for fiscal 2011 at Ezulwini Mine downgraded from
80,000 ounces to 70,000 ounces as a result of important maintenance work
with respect to Ezulwini Mine`s shaft system undertaken during December
2010, with further adjustments to the shaft system planned for completion
in April 2011
- Progress in respect of the design, manufacture and installation of the
two columns in the Ion Exchange section of the uranium plant at Ezulwini
Mine on track for commissioning by the end of March 2011
Toronto and Johannesburg: First Uranium Corporation (TSX:FIU, JSE:FUM)
(ISIN:CA33744R1029) ("First Uranium" or "the Company") today announced that
during the three months ended December 31, 2010 ("Q3 2011"), 21,040 ounces of
gold were sold from production from the Mine Waste Solutions` tailings
recovery project ("MWS") in South Africa, and 19,477 ounces of gold were sold
from production from the Ezulwini Mine. This represents quarter-on-quarter
increases in gold sales of 12% and 29%, respectively.
In the same quarter last year, MWS sold 21,099 ounces of gold while Ezulwini
Mine sold 8,315 ounces.
MWS had a particularly good production quarter, notwithstanding heavy
rainfalls that caused intermittent flooding at its Phase 1a and Phase 1b pump
stations. The third pump station, which is being constructed as part of the
Phase 2 capital expenditure program is on track for completion by May 2011 to
coincide with the completion of the Phase 2 gold circuit and the new tailings
storage facility ("TSF").
Despite production stoppages, including a fatal accident on November 16, 2010,
which resulted in a shut-down of four days in all of the underground workings,
the Ezulwini Mine reported its highest-ever quarterly gold production. This
largely reflects the positive impact of the upgrade to the backfill plant
completed during September 2010, as well as the enhanced logistics management
that resulted in increased face availability and an improved rate of shaft
hoisting increasing the tonnage hoisted.
No uranium was produced at the Ezulwini Mine in Q3 2011 as a result of the
repairs currently taking place in two columns of the Ion Exchange ("IX")
section of the uranium plant, as disclosed by the Company in a news release
dated August 31, 2010. It is expected that re-commissioning will occur by the
end of March 2011.
In January 2011, the Ezulwini Mine`s management finalised an updated life of
mine model which provides an update on its mine plan, along with updated
guidance on cash flow to execute on capital programs and milestones to achieve
its business plan. R. Dennis Bergen, P.Eng and Wayne Valliant P.Geo of Scott
Wilson Roscoe Postle Associates ("SWRPA") Inc., each of whom is a "qualified
person" under NI 43-101 and is independent of First Uranium, have completed an
independent review of management`s life of mine model and mineral resource
estimate and are finalizing the NI 43-101 compliant updated technical report
for the Ezulwini Mine. A summary of the project economics per the updated
life of mine model compared to the economics of the indicative life of mine
plan that was issued by management in July 2010 is provided later in this news
release.
"I am pleased that the updated technical information confirms the Ezulwini
mineral resource estimate and mine plans and that these plans are largely in
line with the implementation and ramp-up initiatives currently in place" said
Deon van der Mescht, President and CEO. "Management remains firmly committed
to executing these plans."
First Uranium`s revenue increased to $51.3 million in the third quarter ended
December 31, 2010 (Q2 2011: $38.3 million) and gross profits from the
operations increased to $7.6 million (Q2 2011: $0.1 million). The Company`s
consolidated pre-tax loss for the quarter of $19.1 million (Q2 2011: $27.1
million) was lower than the second quarter. Cash utilized in the Company`s
operating activities amounted to $3.7 million (Q2 2011: $10.3 million) while
$32.3 million (Q2 2011: $23.8 million) was spent on capital projects at the
operations comprising mainly the MWS Phase 2 and TSF capital projects. As at
December 31, 2010, current assets were $53.4 million and included cash and
cash equivalents of $30.0 million.
The foregoing financial information has not yet been reviewed by the Company`s
auditors or signed off by the Audit Committee. The Company plans to release
its unaudited interim financial statements and related Management`s Discussion
and Analysis for Q3 2011 in the first week of February 2011. In January 2011
the Company changed its auditors from Pricewaterhouse Coopers LLP which is
based in Toronto to Pricewaterhouse Coopers Inc. which is based in
Johannesburg, to align the external audit function with the move of most of
the Company`s head office function to South Africa and proximity to the
Company`s operations.
The Company`s production and financial results for the quarter were negatively
impacted primarily because of lost production time at the Ezulwini Mine
resulting from the fall of ground in November 2010 and the shaft maintenance
program, which is currently underway and explained in more detail under the
Ezulwini Mine section below. The Company`s fourth quarter results may also be
negatively impacted by the latter. The Company`s current cash resources may
be insufficient to address its medium-term working capital needs. Accordingly,
the Company has retained RBC Capital Markets as its financial advisor to
review all funding alternatives.
The following table summarizes the production from each operation during Q3
2011. Production from the previous three quarters has been included for
comparison purposes.
Quarterly Production Results
2011 Q3 2011 Q2 2011 Q1 2011 2010 YTD Q3 2010
YTD
MWS
Tonnes of ore 9,796 3,521 3,170 3,105 7,839 3,528
reclaimed
(000s)
Average gold 0.35 0.34 0.35 0.36 0.38 0.34
head grade
(g/t)
Gold plant 55% 55% 52% 56% 49% 58%
recovery (%)
Gold sold (oz) 60,791 21,040 18,743 21,008 43,514 21,099
Ezulwini Mine
Tonnes of ore 441,983 162,166 146,854 132,963 295,570 108,503
milled
Average gold 3.24 3.3 3.1 3.3 2.32 2.8
recovery grade
(g/t)
Gold sold (oz) 48,296 19,477 15,066 13,753 18,740 8,315
Uranium 31,408 - 31,408 - 23,761 23,761
produced (lbs)
Abbreviation Period Abbreviation Period
Q1 2010 April 1, 2009 - Q1 2011 April 1, 2010 -
June 30, 2009 June 30, 2010
Q2 2010 July 1, 2009 - Q2 2011 July 1, 2010 -
September 30, 2009 September 30, 2010
Q3 2010 October 1, 2009 - Q3 2011 October 1, 2010 -
December 31, 2009 December 31, 2010
Q4 2010 January 1, 2010 - Q4 2011 January 1, 2011 -
March 31, 2010 March 31, 2011
2010 YTD April 1, 2009 - 2011 YTD April 1, 2010 -
December 31, 2009 December 31, 2010
FY 2010 April 1, 2009 - FY 2011 April 1, 2010 -
March 31, 2010 March 31, 2011
Operations Overview
Mine Waste Solutions
MWS experienced an excellent quarter and continues to deliver into its plan.
This represents the fourth successive quarter that MWS has either achieved or
exceeded its targeted production levels. MWS remains on-track to increase its
throughput from 1,200,000 tpm to 1,800,000 tpm by September 2011.
The remaining capital program comprising the third gold plant module (Phase
Two) and the new TSF, including adjoining infrastructure, are on track for
completion by May 2011, which should ensure that the re-structured Gold
Wheaton completion test will be satisfied prior to September 1, 2011. As at
December 31, 2010, $113 million (ZAR831 million) of the $147 million (ZAR980
million) allocated for the completion of the Phase Two expansion program has
been spent, while $28 million (ZAR216 million) of the $45 million (ZAR295
million) allocated for the new TSF has been spent.
Ezulwini Mine
The Ezulwini Mine experienced its highest-ever production quarter with a 29%
increase in gold sold in Q3 2011. This reflects the positive impact of the
upgrade to the backfill plant completed during September 2010, which has
allowed for improved gold sales and, more importantly, safer extraction of
pillars adjacent to mined-out voids.
During December 2010, the shaft hoisting capacity was restricted due to
lateral pressures being placed onto the shaft sidewall, which in turn created
pinch points along the hanging tower structure. The Company has therefore
undertaken a work program to moil (clear) the pinch points limiting movement
of the hanging tower, which resulted in the hoisting capacity of the mine
being restricted during the December 2010 and January 2011 period.
The initial moiling program was successfully concluded between December 23,
2010 and January 2, 2011 and the normal hoisting program resumed. Additional
shaft inspections were undertaken shortly thereafter and it was noted that
further tight spots between the shaft sidewalls and hanging tower occurred as
the tower realigned itself. As a precautionary safety measure, management
halted the shaft for additional rehabilitation work, losing four production
shifts in the process. As of January 7, 2011, the shaft had returned to normal
operating conditions.
A work program to conduct further moiling around the shaft`s hanging tower is
underway and precautions are in place to ensure that any further effect on
production is minimized. The moiling program may have intermittent impacts on
production until the end of April 2011.
Improvements to hoisting procedures have increased hoisting efficiency (rate
through the shaft), providing the ability to meet planned production rates
with fewer shifts.
As a result of the four shifts lost in January 2011, and the possibility of
further production disruptions until April 2011, management has downgraded the
gold forecast from the Ezulwini Mine for Q4 2011 resulting in a reduction in
the FY 2011 gold forecast, from 80,000 ounces to between 69,000 and 70,000
ounces of gold.
The total ounces of gold sold for Q3 2011 include 996 ounces, which were drawn
from the plant leach tanks to enable the annual maintenance on the leach
tanks.
The Ezulwini Mine`s uranium plant is on schedule for re-commissioning by the
end of March 2011.
Updated Project Economics for the Mine
There is no material difference between the July 2010 life of mine plan and
management`s updated life of mine model. The results of the independent
review performed by Dennis Bergen and Wayne Valiant of SWRPA on management`s
updated life of mine model are summarized below:
Table 1 - Updated project economics for the Ezulwini Mine
Life of mine - average July 2010 January January
operating costs 2011 (Old 2011
Price (New Price
Deck) Deck)
Operating cost per tonne 75 79 84.2
milled ($/tonne)
Gold cash ($/ounce) - co- 486 482 516
product
Uranium cash cost ($/Lb) - 31 31 32
co-product
Projected capital 363 385 405
expenditure ($ million)
Average annual life of
mine production:
Gold (ounces) 263,631 279,000 279,000
Uranium (pounds) 717,000 743,000 743,000
NPV ($ million) 586 612 773
Notes:
1. In the January 2011 life of mine model the gold unit cost was calculated
with uranium as a by-product as uranium is only expected to represent
approximately 14% of the revenue over the life of mine. The cost per ounce of
gold is estimated to be $440 after taking the uranium by-product credit of
$161/oz gold.
2. NPV is calculated using a real discount rate of 8%.
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 LoM
Updated Spot 1,400 1,300 1,200 1,100 1,000 1,000 1,020
LoM Gold
($/oz)
Uranium 65 65 65 65 60 60 60.24
($/lb)
ZAR / 6.90 7.50 8.10 8.50 9.10 9.10 8.93
US$
July Spot 1,168 1,062 1,003 1,004 971 867 867
2010 Gold
Life of ($/oz)
Mine
Model
Uranium 45 62 58 57 55 55 55
($/lb)
ZAR / 8.00 8.45 8.83 8.93 9.33 9.64 9.64
US$
The economic analysis contained in this news release is based, in part, on
inferred resources and is preliminary in nature. Inferred resources are
considered too geologically speculative to have mining and economic
considerations applied to them and to be categorized as Mineral Reserves.
There is no certainty that the interpretations and conclusions of this
Preliminary Assessment, or reserve development, production and economic
forecasts on which this Preliminary Assessment is based, will be realized.
OUTLOOK
Mine Waste Solutions: As a result of MWS exceeding its plan for the nine
months ending December 2010 by approximately 6,500 ounces, guidance for FY
2011 has been upgraded from 72,000 ounces to between 78,500 ounces and 80,000
ounces. This is a 9% improvement on the production plan for the nine months
ending December 2010 which was achieved at an average Cash Cost* of $488/oz.
Ezulwini Mine: The work program around the hanging tower is expected to be
completed by the end of April 2011. As a result of the shaft work program, FY
2011 gold forecast has been downgraded from 80,000 ounces to between 69,000
ounces and 70,000 ounces. The IX columns in the uranium plant are planned for
commissioning during the end of Q4 2011, allowing the resumption of uranium
production. Uranium production in FY 2012 is expected to be between 120,000
pounds and 140,000 pounds at cash costs of approximately $53/lb.
Conference Call
First Uranium will conduct a conference call with investors to discuss the
information in this news release at 9 a.m local Toronto time and 4 p.m local
Johannesburg time on Thursday 27 January, 2011.
The conference call will be available simultaneously to all interested
analysts, investors and media. Callers may dial +27 11 535 3600 from all
international locations or 0800 200 648 (South Africa).
A telephone replay of the conference call will be available for 3 days. To
access the replay, callers may dial +27 11 305 2030. Access to the replay will
require the code/ account number 16696 followed by #.
Technical Disclosure
All technical disclosure in this news release relating to the January 2011
update (new price deck) of the technical information on the Ezulwini Mine has
been prepared in accordance with National Instrument ("NI") 43-101 by R.
Dennis Bergen, P.Eng and Wayne Valliant, P.Geo of Scott Wilson Roscoe Postle
Associates ("SWRPA") Inc., each of whom is a "qualified person" under NI 43-
101 and is independent of First Uranium.
*"Cash Costs" are costs directly related to the physical activities of
producing gold and uranium 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 such as uranium and silver 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 Corporation`s Financial
Statements.
Non-GAAP Measures
The Company believes that in addition to conventional measures prepared in
accordance with Canadian GAAP, the Company and certain investors and analysts
use certain other non-GAAP financial measures to evaluate the Company`s
performance including its ability to generate cash flow and profits from its
operations. The Company has included certain non-GAAP measures throughout this
document. Non-GAAP measures do not have any standardized meaning prescribed
under Canadian GAAP, and therefore they may not be comparable to similar
measures employed by other companies.
The data is intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with Canadian GAAP.
About First Uranium Corporation
First Uranium Corporation (TSX:FIU, JSE:FUM) is focused on its goal of
becoming a 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 (MWS) 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:
Julian Gwillim: julian@aprio.co.za
Gail Strauss: gailstrauss@mweb.co.za
Cautionary Language Regarding Forward-Looking Information
This news release contains and refers to forward-looking information based on
current expectations. All other statements other than statements of
historical fact included in this release including, without limitation,
statements regarding the timing and amount of estimated future production, the
processing and development plans, operating and capital cost estimates,
resource estimates, metal prices, exchange rates, discount rates, the timing
and receipt of required permits, the ability to satisfy the Gold Wheaton
Completion Test and future plans and objectives of First Uranium are forward-
looking statements (or forward-looking information) that involve various
estimates, assumptions, risks and uncertainties. For more details on these
estimates, assumptions, risks and uncertainties, see the Company`s most recent
Annual Information Form ("AIF") and Management`s Discussion and Analysis
("MD&A") on file with the Canadian provincial securities regulatory
authorities on SEDAR at www.sedar.com. No assurance can be given that a
financing transaction will be concluded. These forward-looking statements are
made as of the date hereof and there can be no assurance that such statements
will prove to be accurate, such statements are subject to significant risks
and uncertainties, and actual results and future events could differ
materially from those anticipated in such statements. Accordingly, readers
should not place undue reliance on forward-looking statements that are
included herein, except in accordance with applicable securities laws. For
details on the Gold Wheaton Completion Test see the AIF and MD&A.
Date: 27/01/2011 14:45:03 Produced by the JSE SENS Department.
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