| Wed 10 Aug 2011, 9:42 | | UUU - Uranium One Inc - Condensed interim consolidated Statements |
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UUU
UUU
UUU - Uranium One Inc - Condensed interim consolidated Statements
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
Condensed Interim Consolidated Financial Statements For the three and six months
ended June 30, 2011 (unaudited)
Three months Six months ended
ended
Jun 30, Jun 30,
2011 2010 Jun 30, Jun 30,
2011 2010
Note US$m US$m US$m US$m
s
Revenues 112.9 66.0 214.8 101.5
Cost of sales
Operating expense (28.5) (22.3) (51.8) (36.3)
Depreciation (22.7) (19.1) (50.1) (30.9)
Earnings from mine 61.7 24.6 112.9 34.3
operations
General and administrative 3 (11.2) (10.0) (23.4) (19.4)
Exploration expense (1.2) (1.4) (2.4) (2.3)
Impairment of mineral - (0.7) - (1.9)
interests, plant and
equipment
Care and maintenance (0.4) (0.4) (0.7) (2.0)
Operating earnings 48.9 12.1 86.4 8.7
Finance income 4 2.0 1.2 3.8 2.2
Finance expense 4 (12.1) (15.6) (23.6) (26.4)
Foreign exchange (loss) / (0.3) 17.1 (5.6) 21.1
gain
Other 1.7 (4.9) 0.8 3.5
Earnings before income taxes 40.2 9.9 61.8 9.1
Current and deferred income (10.5) (4.5) (18.1) (5.1)
tax expense
Net earnings 29.7 5.4 43.7 4.0
Net earnings per share
Basic 0.03 0.01 0.05 0.01
Diluted 0.03 0.01 0.05 0.01
Weighted average number of
shares (millions)
Basic 14 957.2 587.5 957.2 587.5
Diluted 14 1,049.7 680.3 1,049.7 680.3
Consolidated Statements of Comprehensive Income - Unaudited
For the three and six months ended June 30, 2011 and 2010
Three months Six months ended
ended
Jun 30, Jun 30,
2011 2010 Jun 30, Jun 30,
2011 2010
Note US$m US$m US$m US$m
s
Other comprehensive
income / (loss) for
the period
Unrealized (loss) / (4.6) (12.6) 11.3 (8.9)
gain recognized on
translation of
foreign operations
Unrealized fair value - (3.1) - (4.6)
adjustment on
available for sale
securities, net of
tax
Total other (4.6) (15.7) 11.3 (13.5)
comprehensive (loss)
/ income for the
period
Net earnings 29.7 5.4 43.7 4.0
Total comprehensive 25.1 (10.3) 55.0 (9.5)
income / (loss)
The accompanying notes, including note 23 - First time adoption of International
Financial Reporting Standards, form an integral part of these Condensed Interim
Consolidated Financial Statements.
As at As at As at
Jun 30, Dec 31, Jan 1,
2011 2010 2010
Notes US$m US$m US$m
ASSETS
Current assets
Cash and cash equivalents 13 318.4 324.4 148.5
Trade and other receivables 90.0 103.4 42.4
Inventories 6 109.8 90.0 68.8
Other assets 8 11.2 12.8 23.4
529.4 530.6 283.1
Non-current assets
Mineral interests, property, plant 7 2,364.6 2,339.9 1,305.0
and equipment
Loans to joint ventures 5 17.7 28.7 29.3
Other assets 8 60.6 58.9 85.7
2,442.9 2,427.5 1,420.0
Total assets 2,972.3 2,958.1 1,703.1
LIABILITIES
Current liabilities
Trade and other payables 41.3 62.3 45.7
Current tax payable 12.1 13.8 1.6
Interest bearing liabilities 9 49.4 60.1 68.6
Provisions 11 - - 20.2
Current portion of convertible 10 156.9 151.4 -
debentures
Other liabilities 12 36.4 45.9 132.1
296.1 333.5 268.2
Non-current liabilities
Interest bearing liabilities 9 78.7 86.2 47.6
Convertible debentures 10 219.0 208.7 140.9
Provisions 11 61.3 65.1 74.5
Deferred tax liabilities 327.4 334.0 138.4
Other liabilities 12 0.5 0.4 13.1
686.9 694.4 414.5
Total liabilities 983.0 1,027.9 682.7
EQUITY
Share capital 5,325.4 5,325.4 3,823.3
Reserves 16 251.6 236.2 178.9
Deficit (3,587.7) (3,631.4) (2,981.8)
1,989.3 1,930.2 1,020.4
2,972.3 2,958.1 1,703.1
Total equity and liabilities
The accompanying notes, including note 23 - First time adoption of International
Financial Reporting Standards, form an integral part of these Condensed Interim
Consolidated Financial Statements
Share Reserves Deficit Total
Number of capital (Note
shares 16)
(millions) US$m US$m US$m US$m
Balance as at 587.4 3,823.3 178.9 (2,981.8 1,020.4
January 1, 2010 )
Net loss for the - - - (153.7) (153.7)
period
Special cash - - - (492.9) (492.9)
dividend
Stock options - - 13.9 - 13.9
and restricted
shares vested
Exercise of 13.5 67.8 (32.5) - 35.3
stock options
and restricted
shares
Unrealized gain - - 6.9 - 6.9
on translation
of foreign
operations
Unrealized fair - - (10.7) - (10.7)
value
adjustments on
available for
sale securities
Realized fair - - 10.6 - 10.6
value
adjustments on
available for
sale securities
JUMI Debentures - - 125.7 - 125.7
issued
JUMI Debentures - - (125.7) (3.0) (128.7)
redeemed
2010 Debentures 0.1 - 69.1 - 69.1
issued and
converted
ARMZ private 178.1 602.7 - - 602.7
placement
Acquisition of 178.1 831.6 - - 831.6
Akbastau and
Zarechnoye
Balance as at 957.2 5,325.4 236.2 (3,631.4 1,930.2
December 31, )
2010
Net earnings for - - - 43.7 43.7
the period
Stock options - - 4.1 - 4.1
vested
Unrealized gain - - 11.3 - 11.3
on translation
of foreign
operations
Balance as at 957.2 5,325.4 251.6 (3,587.7 1,989.3
June 30, 2011 )
January 1, 2010 587.4 3,823.3 178.9 (2,981.8) 1,020.4
Net earnings for - - - 4.0 4.0
the period
Stock options and - - 3.8 - 3.8
restricted shares
vested
Exercise of stock - 0.7 (0.6) - 0.1
options and
restricted shares
Unrealized loss on - - (8.9) - (8.9)
translation of
foreign operations
Fair value - - (4.6) - (4.6)
adjustments on
available for sale
securities
JUMI Debentures - - 125.7 - 125.7
June 30, 2010 587.4 3,824.0 294.3 (2,977.8) 1,140.5
The accompanying notes, including note 23 - First time adoption of International
Financial Reporting Standards, form an integral part of these Condensed Interim
Consolidated Financial Statements.
Three months Six months
ended ended
Notes Jun Jun
30, 30, Jun Jun 30,
2011 2010 30, 2010
2011
US$m US$m US$m US$m
Net earnings 29.7 5.4 43.7 4.0
Items not affecting
cash:
- Depreciation 22.7 19.1 50.1 30.9
- Impairment of mineral - 0.7 - 1.9
interests, property
plant and equipment
- Loss on available for - 8.3 - 8.2
sale securities
- Finance income (2.0) (1.2) (3.8) (2.2)
- Finance expense 12.1 15.6 23.6 26.4
- Current income tax 13.1 6.2 26.4 9.4
expense
- Unrealized foreign (0.1) (20.0) 6.7 (25.1)
exchange (gain) / loss
- Deferred tax recovery (2.6) (1.7) (8.3) (4.3)
- Fair value adjustment (5.5) 4.6 (5.5) (5.8)
on financial liabilities
- Other 0.2 (15.5) 1.7 (17.0)
Movement in non-cash 13 (37.6) (30.1) (24.9) (30.2)
working capital
Operating cash flows 30.0 (8.6) 109.7 (3.8)
before interest and tax
Cash tax paid (14.9) (6.9) (28.1) (11.1)
Cash interest paid (12.2) (12.6) (13.7) (13.2)
Cash flows from / (used 2.9 (28.1) 67.9 (28.1)
in) operating activities
Additions to mineral (33.6) (24.9) (61.5) (45.9)
interests, property,
plant and equipment
Cash payments for other (6.7) (6.9) (12.4) (24.3)
assets
Acquisition of - - - (28.9)
Christensen Ranch and
Irigaray
Acquisition or sale of - 11.1 - (15.3)
available for sale
securities
Karatau promissory note - - - (111.8)
and contingent payment
Proceeds on sale of - 37.3 - 37.3
Dominion
Interest received 2.2 1.2 4.2 1.4
Other (0.3) (1.9) (0.3) (2.0)
Cash flows (used in) / (38.4) 15.9 (70.0) (189.5)
from investing
activities
Common shares issued, - - - 0.1
net of issue costs
Net loans (repaid) / (21.5) 14.5 (8.6) 26.9
received by joint
ventures
Advances received 3.2 7.9 3.2 7.9
Debentures issued, net - - - 498.6
of issue costs
Repayment of credit - (65.0) - (65.0)
facility
Cash flows (used in) / (18.3) (42.6) (5.4) 468.5
from financing
activities
Effects of exchange rate 0.4 (2.3) 1.5 3.5
changes on cash and cash
equivalents
Net (decrease) / (53.4) (57.1) (6.0) 254.4
increase in cash and
cash equivalents
Cash and cash equivalents at 371.8 460.0 324.4 148.5
the beginning of the period
Cash and cash equivalents at 318.4 402.9 318.4 402.9
the end of the period
Supplemental cash flow information (note 13)
The accompanying notes, including note 23 - First time adoption of International
Financial Reporting Standards, form an integral part of these Condensed Interim
Consolidated Financial Statements
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, Australia and Canada. The
Corporation`s head office address is 333 Bay Street, Suite 1710, Toronto,
Ontario, Canada, M5H 2R2.
Uranium One is a controlled company, with JSC Atomredmetzoloto ("ARMZ") owning
51.4% of the outstanding common shares. The Corporation holds a 70% interest in
the Betpak Dala joint venture, which owns the Akdala and South Inkai uranium
mines in Kazakhstan, a 50% interest in the Karatau joint venture, which owns the
Karatau uranium mine in Kazakhstan, a 50% interest in the Akbastau joint
venture, which owns the Akbastau uranium mine in Kazakhstan, a 49.67% interest
in the Zarechnoye joint venture, which owns the Zarechnoye 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.
The financial statements were approved on August 8, 2011 by the Corporation`s
Audit Committee.
2 SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation and consolidation
The condensed consolidated interim financial statements have been prepared in
accordance with International Accounting Standard 34 - Interim Financial
Reporting ("IAS 34"). This is the Corporation`s first year of preparing its
consolidated financial statements in accordance with International Financial
Reporting Standards ("IFRS") and IFRS 1 - First-time Adoption of International
Financial Reporting Standards has been applied.
The preparation of the interim financial statements in conformity with IAS 34
requires management to make judgments, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The interim financial statements do not include all of the
required disclosures which would be included in the annual financial statements.
The interim financial statements include the accounts of Uranium One, its
subsidiaries and the proportionate share of its interests in joint ventures. All
intercompany balances, transactions, revenue and expenses have been eliminated.
Functional and presentation currency
The interim financial statements are presented in US dollars. The functional
currency of Uranium One Inc, is the Canadian dollar. Judgment is requirement to
determine the functional currency of each entity. These judgments are
continuously evaluated and are based on management`s experience and knowledge of
the relevant facts and circumstances.
Adoption of new and revised International Financial Reporting Standards
The accounting policies applied in these condensed interim consolidated
financial statements are based on IFRS issued and outstanding as of August 8,
2011. Any subsequent changes to IFRS that are given effect in the Corporation`s
annual consolidated financial statements for the year ending December 31, 2011
could result in restatement of these condensed interim consolidated financial
statements, including the transition adjustments recognized on transition to
IFRS.
Detailed disclosures of the effects of transition to IFRS from Canadian GAAP can
be found below in note 23.
Joint ventures
The Corporation undertakes a number of business activities through joint
ventures. A joint venture is a contractual arrangement whereby two or more
parties undertake an economic activity that is subject to joint control. The
interim financial statements include the Corporation`s proportionate share of
the entities` assets, liabilities, revenue and expenses with items of a similar
nature on a line-by-line basis, from the date that joint control commences until
the date that joint control ceases. The Corporation has interests in two types
of joint ventures:
Jointly controlled entities
A jointly controlled entity is a corporation, partnership or other entity in
which each participant holds an interest. A jointly controlled entity operates
in the same way as other entities, controlling the assets of the joint venture,
earning its own income and incurring its own liabilities and expenses.
Jointly controlled assets
The Corporation has contractual agreements with other participants to engage in
joint activities that do not give rise to a jointly controlled entity. These
arrangements involve the joint ownership of assets dedicated to the purposes of
each venture but do not create a jointly controlled entity as the participants
directly benefit from the operation of their jointly owned assets, rather than
deriving returns from an interest in a separate entity.
Business combinations
Business combinations are accounted for by applying the acquisition method of
accounting, whereby the purchase consideration of the combination is allocated
to the identifiable net assets on the basis of fair value on acquisition.
Mineral rights that can be reliably valued are recognized in the assessment of
fair values on acquisition. Other potential mineral rights for which values
cannot be reliably determined are not recognized.
Measurement and reporting currency
Financial statements of subsidiaries, joint ventures and associates, are
maintained in their functional currencies and converted to US dollars for
consolidation of the Corporation`s results. The functional currency of each
entity is determined after consideration of the primary economic environment of
the entity.
The foreign currency transactions and balances of the Corporation`s
subsidiaries, associates and jointly controlled entities are translated as
follows: monetary assets and liabilities denominated in foreign currencies are
translated at closing exchange rates. Non-monetary assets and liabilities
measured at historical cost are translated at the historical rate in effect on
acquisition. Non-monetary assets and liabilities measured at fair value are
translated at the rate in effect when the fair value was determined.
On translation to the presentation currency of foreign operations with
functional currencies other than the US dollar, income statement items are
translated at average rates of exchange where this is a reasonable approximation
of the exchange rate at the dates of the transactions. Balance sheet items are
translated at closing exchange rates. Gains or losses on translation of foreign
operations are recorded in the foreign currency translation reserve in equity.
On disposal of a foreign entity, the deferred cumulative amount recognized in
equity relating to that particular foreign operation is recognized in the
consolidated income statement.
Inventories
Solutions and concentrates in process and finished concentrates are valued at
the lower of average production cost and net realizable value. Production costs
include the cost of raw materials, direct labour, mine-site related overhead
expenses and depreciation of Mineral interest, property, plant and equipment.
Net realizable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
Materials and supplies are valued on the weighted average basis and recorded at
the lower of average production cost and replacement cost.
Exploration and evaluation expenditure
Exploration and evaluation expenditure comprises costs that are directly
attributable to:
* researching and analyzing existing exploration data;
* conducting geological studies, exploratory drilling and sampling;
* examining and testing extraction and treatment methods; and
* activities in relation to evaluating the technical feasibility and
commercial viability of extracting a mineral resource.
Exploration expenditure relates to the initial search for deposits with economic
potential. Evaluation expenditure arises from a detailed assessment of deposits
or projects that have been identified as having economic potential. Expenditure
on exploration activity is not capitalized. Capitalization of evaluation
expenditure commences when there is a high degree of confidence in the project`s
viability and hence it is probable that future economic benefits will flow to
the Corporation.
The carrying values of capitalized amounts are reviewed annually, or when
indicators of impairment are present. In the case of undeveloped projects there
may be only inferred resources to form a basis for the impairment review. The
review is based on the Corporation`s intentions for development of the
undeveloped project. If a project does not prove viable, all irrecoverable costs
associated with the project are charged to the consolidated income statement.
Development expenditure
Development commences when approved by management. Development expenditures are
capitalized and classified as assets under construction. Development expenditure
includes the pre-commercial production costs, net of proceeds from the sale of
extracted product during the development phase, and wellfield development costs.
On completion of development, the completed assets included in assets under
construction are reclassified as property, plant and equipment.
Mineral interests
Mineral interests are recorded at cost less accumulated depreciation and
impairment charges. Mineral interest costs include the purchase price of mineral
properties.
The costs associated with mineral interests are separately allocated to
reserves, resources and exploration potential, and include acquired interests in
production, development and exploration stage properties representing the fair
value at the time they were acquired.
Upon sale or abandonment of any mineral interest, the cost and related
accumulated depreciation, are written off and any gains or losses thereon are
included in the consolidated income statement.
Property, plant and equipment
Property, plant and equipment is recorded at cost less accumulated depreciation
and accumulated impairment charges. Plant and equipment includes its purchase
price, any costs directly attributable to bringing plant and equipment to the
location and condition necessary for it to be capable of operating in the manner
intended by management and the estimated close down and restoration costs
associated with dismantling and removing the asset.
Upon sale or abandonment of any property, plant and equipment, the cost and
related accumulated depreciation, are written off and any gains or losses
thereon are included in the consolidated income statement.
Depreciation of mineral interests, property, plant and equipment
The carrying amounts of mineral interests, property, plant and equipment are
depreciated to their estimated residual value over the estimated economic life
of the specific assets to which they relate, or using the straight-line method
over their estimated useful lives indicated below.
Estimates of residual values and useful lives are reassessed annually and any
change in estimate is taken into account in the determination of remaining
depreciation charges. Depreciation commences on the date when the asset is
available for use.
* Mineral interests - based on reserves on a unit of production basis
* Assets under construction - not depreciated
* Plant and equipment - 2 to 15 years straight-line or on a unit of
production basis
* Buildings - 6 to 40 years straight-line or on a unit of production basis
Impairment
Formal impairment tests are carried out annually and whenever there is an
indication of impairment for intangible assets with indefinite useful lives. The
Corporation reviews the carrying amounts of its tangible and intangible assets
with finite lives to determine whether there are any indications of impairment,
at the end of each reporting period. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of
the impairment, if any. The recoverable amount is determined as the higher of
fair value less direct costs to sell and the asset`s value in use.
Fair value is defined as the amount that would be obtained from the sale, in an
arm`s length transaction, between knowledgeable and willing parties. Fair value
for mineral interests, plant and equipment is generally determined as the
present value of the estimated future cash flows expected to arise from the
continued use of the asset, including any expansion prospects, and its eventual
disposal, using assumptions that an independent market participant may take into
account.
Value in use is determined as the present value of the estimated future cash
flows expected to arise from the continued use of the asset in its present form
and its eventual disposal. Value in use is determined by applying assumptions
specific to the Corporation`s continued use and cannot take into account future
development.
The Corporation`s weighted average cost of capital is used as a starting point
for determining the discount rates, with appropriate adjustments for the risk
profile of the countries in which the individual cash generating units operate
and the specific risks related to the development of the project.
Where the asset does not generate cash flows that are independent of other
assets, the Corporation estimates the recoverable amount of the cash generating
unit to which the asset belongs. If the carrying amount of an asset or cash
generating unit exceeds its recoverable amount, the carrying amount of the asset
or cash generating unit is reduced to its recoverable amount. An impairment loss
is recognized as an expense in the consolidated income statement.
Non financial assets that have been impaired are tested at the end of each
reporting period for possible reversal of the impairment whenever events or
changes in circumstance indicate that the impairment may have reversed. Where an
impairment subsequently reverses, the carrying amount of the asset or cash
generating unit is increased to the revised estimate of its recoverable amount,
but only so that the increased carrying amount does not exceed the carrying
amount that would have been determined (net of amortization or depreciation) had
no impairment loss been recognized for the asset or cash generating unit in
prior years. A reversal of impairment is recognized as a gain in the
consolidated income statement.
Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amounts
will be recovered through a sales transaction rather than through continuing
use. This condition is regarded as met only when the sale is highly probable and
the assets or disposal groups are available for immediate sale in their present
condition. The Corporation must be committed to the sale which should be
expected to qualify for recognition as a completed sale within one year of the
date of classification.
Non-current assets held for sale are carried at the lower of the carrying amount
prior to being classified as held for sale, and the fair value less costs to
sell. Where the fair value less costs to sell is lower than the carrying amount
at the time of classification as held for sale, the resulting impairment is
recognized in the consolidated income statement in that period.
A non-current asset is not depreciated while classified as held for sale. A non-
current asset held for sale is presented separately in the consolidated balance
sheet. The assets and liabilities of a disposal group classified as held for
sale are presented separately as one line in the assets and liabilities sections
on the face of the balance sheet. Comparative balance sheet information is not
restated.
Borrowing costs
Borrowing costs directly relating to the financing of the acquisition,
construction or production of qualifying assets are capitalized to the cost of
those assets until such time as they are substantially ready for their intended
use or sale. Where funds have been borrowed specifically to finance an asset,
the amount capitalized is the actual borrowing costs incurred. Where the funds
used to finance an asset form part of general borrowings, the amount capitalized
is calculated using a weighted average of rates applicable to relevant general
borrowings of the Corporation during the period.
Transaction costs related to the establishment of a loan facility are
capitalized and amortized over the life of the facility using the effective
interest rate method, or set against fair value of debt. Other borrowing costs
are recognized in the consolidated income statement in the period in which they
are incurred.
Provisions
Provisions are recognized when the Corporation has a present legal or
constructive obligation as a result of past events, and it is probable that an
outflow of resources that can be reliably estimated will be required to settle
the obligation. Where a provision is measured using the cash flows estimated to
the settle the obligation, its carrying amount is the present value of those
cash flows.
Environmental protection, rehabilitation and closure costs
The mining, extraction and processing activities of the Corporation normally
give rise to obligations for site closure or rehabilitation. Provision is made
for close down, restoration and for environmental rehabilitation costs, which
include the dismantling and demolition of infrastructure, removal of residual
materials and remediation of disturbed areas, in the financial period when the
related environmental disturbance occurs, based on the estimated future costs
using information available at the balance sheet date.
At the time of establishing the provision, a corresponding asset is capitalized,
where it gives rise to a future benefit, and depreciated over future production
from the operations to which it relates. The provision is discounted to its
present value using a risk free rate relevant to the jurisdiction in which the
rehabilitation has to be performed. The unwinding of the discount is included in
the finance expense. Costs arising from unforeseen circumstances, such as the
contamination caused by unplanned discharges, are recognized as an expense and
liability when the event gives rise to an obligation which is probable and
capable of reliable estimation.
The provision is reviewed on an annual basis for changes to obligations,
legislation or discount rates that impact estimated costs or lives of
operations. The cost of the related asset is adjusted for changes in the
provision resulting from changes in the estimated cash flows or discount rate
and the adjusted cost of the asset is depreciated prospectively. Rehabilitation
trust funds holding monies committed for use in satisfying environmental
obligations are included within other assets on the consolidated balance sheet.
Revenue
Revenue from uranium sales is recognized when persuasive evidence of an
arrangement exists, the risks and rewards of ownership pass to the purchaser,
including delivery of the product, the selling price is fixed or determinable,
and collectability is reasonably assured.
On deliveries to conversion facilities ("Converters"), the Converter credits the
Corporation`s account for the volume of accepted uranium. Based on delivery
terms in a sales contract with its customer, the Corporation instructs the
Converter to transfer title of a contractually specified quantity of uranium to
the customer`s account at the Converter. At this point, the Corporation invoices
the customer and recognizes revenue for the uranium supply.
On deliveries to locations other than converters, as agreed with the customer,
the Corporation delivers uranium to the agreed location. At this point, the
Corporation invoices the customer and recognizes revenue for the uranium supply.
The Corporation does not recognize revenue in circumstances where it delivers
borrowed material into contracts.
Current tax
Current tax for each taxable entity in the Corporation is based on the local
taxable income at the local statutory tax rate enacted or substantively enacted
at the balance sheet date, and includes adjustments to tax payable or
recoverable in respect of previous years.
Deferred tax
Deferred tax is accounted for using the balance sheet liability method,
providing for the tax effect of temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and their
respective tax bases.
Deferred income tax liabilities are recognized for all taxable temporary
differences except where the deferred income tax liability arises from the
initial recognition of goodwill, or the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or
loss in respect of taxable temporary differences associated with investments in
subsidiaries and interests in joint ventures, where the timing of the reversal
of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognized for all deductible temporary
differences, carry-forward of unused tax credits and unused tax losses, to the
extent that it is probable that taxable profit will be available against which
the deductible temporary differences, and the carry-forward of unused tax
credits and losses can be utilized, except where the deferred income tax asset
related to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss. In respect of deductible temporary
differences associated with investments in subsidiaries and interests in joint
ventures, deferred tax assets are recognized only to the extent that it is
probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can
be utilized.
The carrying amount of deferred income tax assets is reviewed at each balance
sheet date and is adjusted to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the asset to
be utilized. To the extent that an asset not previously recognized fulfils the
criteria for recognition, a deferred income tax asset is recorded.
Deferred tax is measured on an undiscounted basis using the tax rates that are
expected to apply in the period when the liability is settled or the asset is
realized, based on tax rates and tax laws enacted or substantively enacted at
the balance sheet date.
Deferred tax assets and liabilities are offset when the corporation has a
legally enforceable right to offset them and when they relate to income taxes
levied by the same taxation authority, and the Corporation intends to settle its
current tax assets and liabilities on a net basis.
Current and deferred tax relating to items recognized directly in equity are
recognized in equity and not in the consolidated income statement.
Mining taxes and royalties are treated and disclosed as current and deferred
taxes if they have the characteristics of an income tax. This is considered to
be the case when they are imposed under government authority and the amount
payable is calculated by reference to revenue derived (net of any allowable
deductions) after adjustment for items comprising temporary differences.
Stock based compensation
The Corporation grants share-based awards, including restricted share rights and
options, to certain directors and employees. For equity-settled awards, the
fair value is charged to the consolidated income statement and credited to the
related reserve account, on a straight-line basis over the vesting period, after
adjusting for the estimated number of awards that are expected to vest.
The fair value of the equity-settled awards is determined at the date of the
grant. In calculating fair value, no account is taken of any vesting conditions,
other than conditions linked to the price of the shares of the Corporation. The
fair value is determined by using the Black-Scholes option pricing model. At
each balance sheet date, the cumulative expense representing the extent to which
the vesting period has expired and management`s best estimate of the awards that
are ultimately expected to vest is computed. The movement in cumulative expense
is recognized in the consolidated income statement with a corresponding entry
against the related reserve. No expense is recognized for awards that do not
ultimately vest.
Under Uranium One`s Stock Option Plan, options granted are non-assignable and
may be granted for a term not exceeding ten years. The plan is administered by
the Board of Directors, which determines individual eligibility under the plan,
the number of shares reserved underlying the options granted to each individual
(not exceeding 5% of issued and outstanding shares to any insider and not
exceeding 1% of the issued and outstanding shares to any non-employee director
on a non-diluted basis) and any vesting period which, pursuant to the stock
option plan is one-third on the first anniversary of the grant date, one-third
on the second anniversary of the grant date and the remainder on the third
anniversary of the grant date. The maximum number of shares of Uranium One that
are issuable pursuant to the plan is limited to 7.2% of issued and outstanding
shares.
Earnings / loss per share
Earnings / loss per share calculations are based on the weighted average number
of common shares and common share equivalents issued and outstanding during the
period. The calculation of diluted earnings per share assumes that outstanding
options and warrants that are dilutive to earnings per share are exercised and
the proceeds are used to repurchase shares of Uranium One at the average market
price of the shares for the period. The effect is to increase the number of
shares used to calculate diluted earnings per share. The impact of outstanding
share options and warrants are excluded from the diluted share calculation for
loss per share amounts when it is anti-dilutive. The if-converted method is used
to compute the dilutive effect of convertible debt. The dilutive effect of
contingently issuable shares is computed by comparing the conditions required
for issuance of shares against those existing at the end of the period.
Financial instruments
The Corporation`s financial instruments primarily consist of cash, short-term
money market investments, marketable securities, trade and other receivables,
trade and other payables and accrued liabilities, loans to joint ventures, draw
downs against credit facilities, other loans, asset retirement funds, uranium
loans, and convertible debentures. The fair value of these financial
instruments, except for the convertible debentures which are carried at
amortized cost, approximates their carrying values. Fair values of other
financial instruments have been estimated by reference to quoted market prices
for actual or similar instruments where available and disclosed accordingly.
Comprehensive income comprises the Corporation`s net earnings and other
comprehensive income. Comprehensive income represents changes in shareholders`
equity during a period arising from non-owner sources and, for the Corporation,
other comprehensive income includes currency translation adjustments on its net
investment in foreign operations.
Financial assets and liabilities initial recognition and classification
Financial assets and financial liabilities are recognized on the balance sheet
when the Corporation has become party to the contractual provisions of the
instruments. Financial instruments are initially measured at fair value, which
includes transaction costs for all financial instruments except for financial
instruments at fair value through profit or loss. All financial assets are
recognized on the trade date at market value, which is the date that the
Corporation commits to purchase or sell the asset. Financial assets are
classified into the following specified categories: financial assets `at fair
value through profit or loss`, `held-to-maturity` investments, `available-for-
sale` financial assets and `loans and receivables`. The classification depends
on the nature and purpose of the financial assets and is determined at the time
of initial recognition. Financial liabilities are classified as either
financial liabilities `at fair value through profit or loss` or `other financial
liabilities`. Financial assets and liabilities are classified as `at fair value
through profit or loss` when the financial asset and liability is either `held
for trading` or it is designated as `fair value through profit or loss`.
Subsequent to initial recognition these instruments are measured as set out
below:
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank balances, deposits held
at call and certificates of deposits, money market instruments, including
cashable guaranteed investment certificates, bearer deposit notes and commercial
paper with an original term to maturity of three months or less at date of
purchase, and are carried at amortized cost.
Available for sale investments
After initial recognition, investments which are classified as available for
sale are carried at fair value, with the fair value adjustments accounted for in
other comprehensive income. When available for sale investments are sold, the
cumulative fair value adjustment previously recorded in other comprehensive
income is recognized in the consolidated income statement.
Loans and receivables
Loans and receivables are carried at amortized cost unless a provision has been
recorded for uncollectability of these loans and receivables. A provision for
impairment of loans and receivables is established when there is objective
evidence that the Corporation may not be able to collect all amounts due
according to the original terms of the loans and receivables.
Impairment and uncollectability of financial assets
An assessment is made at each reporting date to determine whether there is
objective evidence that a financial asset or group of financial assets, other
than those at fair value through profit or loss, may be impaired. If such
evidence exists, the estimated recoverable amount of the asset is determined and
an impairment loss is recognized for the difference between the recoverable
amount and the carrying amount as follows: the carrying amount of the asset is
reduced to its estimated recoverable amount, either directly or through the use
of an allowance account and the resulting loss is recognized in the consolidated
income statement.
When an available for sale financial asset is considered to be impaired,
cumulative gains or losses previously recognized in other comprehensive income
are reclassified to the consolidated income statement.
With the exception of assets held for sale and available for sale equity
instruments, if, in a subsequent period, the amount of the impairment loss
decreases, the previously recognized impairment loss is reversed through income
to the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortized cost would have been
had the impairment not been recognized. In respect of available for sale equity
securities, impairment losses previously recognized in profit or loss are not
reversed through profit or loss. Any increase in fair value subsequent to an
impairment loss is recognized in other comprehensive income.
Financial liabilities
After initial recognition, financial liabilities, other than liabilities at fair
value through profit or loss, are subsequently measured at amortized cost using
the effective interest rate method. Amortized cost is calculated by taking into
account any transaction costs and any discount or premium on settlement.
Financial liabilities at fair value through profit or loss are recognized on the
trade date at fair value, which is the date that the Corporation commits to the
contract. After initial recognition, the liabilities are carried at fair value,
with the fair value adjustments accounted for in the consolidated income
statement.
Accounts payable
Liabilities for trade and other payables which are normally settled on 30 to 90
day terms are carried at amortized cost.
Interest bearing liabilities
Interest bearing liabilities are recognized initially at the proceeds received,
net of transaction costs incurred. Interest bearing liabilities are subsequently
measured at amortized cost using the effective interest rate method. Any
difference between proceeds (net of transaction costs) and the redemption value
is recognized in the consolidated income statement over the period of the loan.
Offset
Where a legally enforceable right of offset exists for recognized financial
assets and financial liabilities, and there is an intention to settle the
liability and realize the asset simultaneously, or settle on a net basis, all
related financial effects are offset.
Compound instruments
The component parts of compound instruments are classified separately as
financial liabilities and equity in accordance with the substance of the
contractual agreement. At the date of issue, the fair value of the liability
component is estimated using the prevailing market interest rate for similar non
convertible instruments. This amount is recorded as a liability on an amortized
cost basis until extinguished upon conversion or at the instrument`s maturity
date. The equity component is determined by deducting the amount of the
liability component from the total proceeds received for the instrument as a
whole. This is recognized and included in equity, net of income tax effects, and
is not subsequently remeasured.
Embedded derivatives
Derivatives may be embedded in contracts or financial instruments (the "host
instrument"). Embedded derivatives are treated as separate derivatives when
their economic characteristics and risks are not clearly and closely related to
those of the host instrument, the terms of the embedded derivative are the same
as those of a stand-alone derivative, and the combined contract is not held for
trading or designated at fair value. These embedded derivatives are measured at
fair value with subsequent changes recognized in gains or losses on derivatives
within interest and other in the consolidated income statement.
The entire hybrid contract may be designated as a financial asset or financial
liability at fair value through profit or loss, unless the embedded derivative
does not significantly modify the cash flows that otherwise would be required by
the contract, or it is clear with little or no analysis when a similar hybrid
instrument is first considered that separation of the embedded derivative is
prohibited. In this case, the entire hybrid contract is measured at fair value,
rather than only the embedded derivative.
Changes in accounting standards
At the date of authorization of the financial statements for the period ended 30
June, 2011 the following standards and interpretations, which are applicable to
the Corporation, were in issue but not yet effective. These standards and
interpretations are effective from January 1, 2013 and early adoption is
permitted. The Corporation is currently assessing the impact of these standards
and interpretations on its financial statements.
IFRS 9, Financial instruments
IFRS 9 Financial instruments is the first step in the project to replace IAS 39
Financial instruments: Recognition and Measurement.
IFRS 10, Consolidated financial statements
IFRS 10 replaces the consolidation requirements in IAS 27, Consolidated and
Separate Financial Statements, and SIC-12 Consolidation - Special Purpose
Entities. Earlier application is permitted, provided IFRS 11, IFRS 12 and the
related amendments to IAS 27 and 28 are adopted at the same time.
IFRS 11, Joint arrangements
IFRS 11 supersedes IAS 31, Interests in Joint Ventures, and SIC-13, Jointly
Controlled Entities - Non-Monetary Contributions by Venturer. Earlier
application is permitted, provided IFRS 10, IFRS 12 and the amendments to IAS 27
and 28 are adopted at the same time.
IFRS 12, Disclosure of interests in other entities
IFRS 12 is a new and comprehensive standard on disclosure requirements for all
forms of interests in other entities, including subsidiaries, joint
arrangements, associates and unconsolidated structured entities.
IFRS 13, Fair value measurement
IFRS 13 is a new standard that defines fair value, sets out in a single IFRS a
framework for measuring fair value and requires disclosures about fair value
measurements. IFRS 13 does not determine when an asset, a liability or an
entity`s own equity instrument is measured at fair value. Rather, the
measurement and disclosure requirements of IFRS 13 apply when another IFRS
requires or permits the item to be measured at fair value (with limited
exceptions).
IAS 27, Separate financial statements
IAS 27 was re-issued by the IASB on May 12, 2011 in order to conform to changes
as a result of the issuance of IFRS 10, IFRS 11, and IFRS 12. IAS 27 will now
only prescribe the accounting and disclosure requirements for investments in
subsidiaries, joint ventures and associates when an entity prepares separate
financial statements as the consolidation guidance will now be included in IFRS
10.
IAS 28, Investments in associates and joint ventures
IAS 28 was re-issued by the IASB on May 12, 2011 in order to conform to changes
as a result of the issuance of IFRS 10, IFRS 11, and IFRS 12. IAS 28 continues
to prescribe the accounting for investments in associates, but is now the only
source of guidance describing the application of the equity method. The amended
IAS 28 will be applied by all entities that are investors with joint control of,
or significant influence over, an investee.
Amendments to IAS 1 on presentation of items of other comprehensive income
The amendments retain the option to present profit or loss and other
comprehensive income either in one continuous statement or in two separate but
consecutive statements. Items of other comprehensive income are required to be
grouped into those that will and will not be subsequently reclassified to profit
or loss. Tax on items of other comprehensive income is required to be allocated
on the same basis. The measurement and recognition of items of profit or loss
and other comprehensive income are not affected by the amendments.
Amendments to IAS 19 - Employee benefits
The amendments require the recognition of changes in the defined benefit
obligation and in plan assets when those changes occur, eliminating the corridor
approach and accelerating the recognition of past service costs.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of consolidated financial statements in conformity with IFRS
requires the Corporation`s management to make estimates and assumptions about
future events that affect the amounts reported in the consolidated financial
statements and related notes to the consolidated financial statements. Actual
results may differ from those estimates. Information about areas of judgment and
key sources of uncertainty and estimation is contained in the accounting
policies and/or the notes to the consolidated financial statements.
The following are the key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial
year:
Recoverability of accounts receivable and investments
Provision is made against accounts that in the estimation of management may be
impaired. The recoverability assessment of accounts receivable is based on a
range of factors including the age of the receivable and the creditworthiness of
the customer. The provision is assessed monthly with a detailed formal review of
balances and security being conducted at year-end. Determining the
recoverability of an account involves estimation as to the likely financial
condition of the customer and their ability to subsequently make payment. To the
extent that future events impact the financial condition of the customers, these
provisions could vary significantly.
Investments in securities are reviewed for impairment at the end of each
reporting period. When the fair value of the investment falls below the
Corporation`s carrying value, and it is considered to be significant or
prolonged, an impairment charge is recorded to the consolidated income statement
for the difference between the investment`s carrying value and its estimated
fair value at the time. In making the determination as to whether a decline is
considered prolonged, the Corporation considers such factors as the duration and
extent of the decline, the investee`s financial performance, and the
Corporation`s ability and intention to retain its investment for a period that
will be sufficient to allow for any anticipated recovery in the investment`s
market value. Differing assumptions could affect whether an investment is
impaired in any period or the amount of the impairment.
Net realizable value of inventories
In determining the net realizable value of inventories, the Corporation
estimates the selling prices, based on published market rates, cost of
completion and cost to sell. To the extent that future events impact the
saleability of inventory these provisions could vary significantly.
Estimated reserves, resources and exploration potential
Reserves are estimates of the amount of product that can be extracted from the
Corporation`s properties, considering both economic and legal factors.
Calculating reserves and estimates requires decisions on assumptions about
geological, technical and economic factors, including quantities, grades,
production techniques, recovery rates, production costs, transport costs,
commodity demand, prices and exchange rates.
Estimating the quantity and/or grade of reserves require the analysis of
drilling samples and other geological data.
Estimates of reserves may change from period to period as the economic
assumptions used to estimate reserves change from period to period, and because
additional geological data is generated during the course of operations. Changes
in reported reserves may affect the Corporation`s financial position in a number
of ways, including the following:
* Asset carrying values may be affected due to changes in estimated future
cash flows;
* Depreciation and amortization charged in the consolidated income statement
may change where such charges are determined by the units of production
basis, or where the useful economic lives of assets change; and
* The carrying value of deferred tax assets may change due to changes in
estimates of the likely recovery of the tax benefits.
Impairment of mineral interests, property, plant and equipment
Assets or cash generating units are evaluated at each reporting date to
determine whether there are any indications of impairment. If any such
indication exists, a formal estimate of recoverable amount is performed and an
impairment loss recognized to the extent that carrying amount exceeds
recoverable amount. The recoverable amount of an asset or cash generating group
of assets is measured at the higher of fair value less costs to sell and value
in use.
Fair value is determined as the amount that would be obtained from the sale of
the asset in an arm`s length transaction between knowledgeable and willing
parties, and is generally determined as the present value of the estimated
future cash flows expected to arise from the continued use of the asset,
including any expansion prospects, and its eventual disposal. Present values are
determined using a risk-adjusted pre-tax discount rate appropriate to the risks
inherent to the asset. Future cash flow estimates are based on expected
production and sales volumes, commodity prices (considering current and
historical prices, price trends and related factors), reserves, operating costs,
restoration and rehabilitation costs and future capital expenditure. The
Corporation`s management is required to make these estimates and assumptions
which are subject to risk and uncertainty; hence there is a possibility that
changes in circumstances will alter these projections, which may impact the
recoverable amount of the assets. In such circumstances, some or all of the
carrying value of the asset may be impaired and the impairment would be charged
against the consolidated income statement.
Expected economic lives of, estimated future operating results and net cash
flows from mineral interests
The carrying amounts of mineral interests are depreciated to their estimated
residual value over the estimated economic life of the specific assets to which
they relate.
Depreciation commences on the date of commissioning and is based on reserves on
a unit of production basis.
Residual values and useful lives are reviewed, and adjusted if appropriate, at
least annually. Changes in estimated residual values or useful lives are
accounted for prospectively. In applying the units of production method,
depreciation is normally calculated using the quantity of material extracted
from the mine in the period as a percentage of the total quantity of material to
be extracted in current and future periods based on proved and proven reserves.
In assessing the life of a mine for accounting purposes, mineral resources are
only taken into account where there is a high degree of confidence of economic
extraction.
The Corporation`s operating result and net cash flow forecasts are based on the
best estimates of expected future revenues and costs, including the future cash
costs of production, capital expenditure, close down and restoration. These may
include net cash flows expected to be realized from extraction, processing and
sale of mineral resources that do not currently qualify for inclusion in proven
ore reserves. Such non reserve material is included where there is a high degree
of confidence in its economic extraction. This expectation is usually based on
preliminary drilling and sampling of areas of mineralization that are contiguous
with existing reserves.
The mine plan takes account of all relevant characteristics of the ore body, ore
grades, chemical and metallurgical properties of the ore impacting on process
recoveries and capacities of processing equipment that can be used. The mine
plan is therefore the basis for forecasting production output in each future
year and for forecasting production costs.
The Corporation`s cash flow forecasts are based on estimates of future commodity
prices. These long term commodity prices, for most commodities, are derived from
an analysis of the marginal costs of the producers of these commodities. These
assessments often differ from current price levels and are updated periodically.
In some cases, prices applying to some part of the future sales volumes of a
cash generating unit are predetermined by existing sales contracts. The effects
of such contracts are taken into account in forecasting future cash flows.
There are numerous uncertainties inherent in estimating ore reserves, and
assumptions that are valid at the time of estimation may change significantly
when new information becomes available. Changes in the forecast prices of
commodity, exchange rates, production costs or recovery rates may change the
economic status of reserves and may, ultimately, result in the reserves being
restated.
Fair value of financial instruments
The Corporation`s financial instruments primarily consist of cash, short-term
money market investments, marketable securities, trade and other receivables,
asset retirement funds, trade and other payables and accrued liabilities, loans
to joint ventures, draw downs against credit facilities, other loans, uranium
loans, and convertible debentures. The fair value of these financial
instruments, except for the convertible debentures, approximates their carrying
values, due primarily to their immediate or short-term maturity.
Fair value of financial instruments (continued)
Fair values of other financial instruments have been estimated by reference to
quoted market prices for actual or similar instruments where available and
disclosed accordingly.
The valuation models maximize the use of observable market inputs however
certain assumptions and estimates require management judgment including excess
spread, prepayment rates, expected credit losses and discount rates. Valuation
methodologies and assumptions are reviewed on an ongoing basis. A significant
change in this assessment may result in unrealized losses being recognized in
net income.
Fair value of stock-based compensation
The Corporation grants share-based awards, including restricted share rights and
stock options, to certain directors and employees. For equity-settled awards,
the fair value is charged to the consolidated income statement and credited to a
related reserve account on a straight-line basis over the vesting period, after
adjusting for the estimated number of awards that are expected to vest.
The fair value of the equity-settled awards is determined at the date of the
grant. In calculating fair value, no account is taken of any vesting conditions,
other than conditions linked to the price of the shares of the Corporation. The
fair value is determined by using the Black-Scholes option pricing model.
Option pricing models require the input of highly subjective assumptions,
including the expected price volatility. Changes in these assumptions can
materially affect the fair value estimate and, therefore, the existing models do
not necessarily provide a reliable measure of the fair value of the
Corporation`s stock options.
Fair value of assets and liabilities acquired in business combinations
Business combinations are accounted for by applying the acquisition method of
accounting, whereby the purchase consideration of the combination is allocated
to the identifiable net assets on the basis of fair value on acquisition. The
amount of goodwill initially recognized is dependent on the allocation of the
purchase price to the fair value of the identifiable assets acquired and the
liabilities assumed. The determination of the fair value of the assets and
liabilities is based, to a considerable extent, on management`s judgment.
Allocation of the purchase price affects the results of the Corporation as
finite lived intangible assets are amortized, whereas indefinite lived
intangible assets, including goodwill, are not amortized and could result in
differing amortization charges based on the allocation to indefinite lived and
finite lived intangible assets.
Reclamation and closure cost obligations
Reclamation and closure cost obligation provisions represent management`s best
estimate of the present value of the future costs. Significant estimates and
assumptions are made in determining the amount of reclamation and closure cost
obligations provisions. Those estimates and assumptions deals with uncertainties
such as: requirements of the relevant legal and regulatory framework; the
magnitude of possible contamination; and the timing, extent and costs of
required restoration and rehabilitation activity. These uncertainties may result
in future actual expenditure differing from the amounts currently provided.
Taxation
The provision for income taxes and composition of income tax assets and
liabilities requires management`s judgment as to the types of arrangements
considered to be a tax on income in contrast to an operating cost. Judgment is
also required in assessing whether deferred tax assets and certain deferred tax
liabilities are recognized in the balance sheet.
Assumptions about the generation of future taxable profits depend on
management`s estimates of future cash flows. These depend on estimates of future
production and sales volumes, commodity prices, reserves, operating costs, and
other capital management transactions. The application of income tax legislation
also requires judgments. These judgments and assumptions are subject to risk and
uncertainty, therefore there is a possibility that changes in circumstances will
alter expectations, which may impact the amount of deferred tax assets and
deferred tax liabilities recognized on the balance sheet and the amount of other
tax losses and temporary differences not yet recognized.
Exchange rates
The following exchange rates to the US dollar have been applied in the interim
financial statements:
Average Average Average Closing Closing
period period year period year
ended ended ended ended ended
Jun 30, Jun 30, Dec 31, Jun 30, Dec 31,
2011 2010 2010 2011 2010
Canadian dollar 0.98 1.04 1.03 0.98 1.00
Australian dollar 0.97 1.11 1.09 0.94 0.98
Kazakh tenge 146.01 147.71 147.39 146.25 147.40
Euro 0.71 0.72 0.76 0.70 0.76
3 GENERAL AND ADMINISTRATIVE
Three months Six months ended
ended
Jun 30, Jun 30,
2011 2010 Jun 30, Jun 30,
2011 2010
US$m US$m US$m US$m
General and 7.9 8.2 18.7 15.6
administrative
Stock option and 2.7 1.8 4.1 3.8
restricted share
expense
Restructuring cost 0.6 - 0.6 -
11.2 10.0 23.4 19.4
4 FINANCE INCOME AND EXPENSE
Three months Six months ended
ended
Jun 30, Jun 30,
2011 2010 Jun 30, Jun 30,
2011 2010
US$m US$m US$m US$m
Finance income
Interest income 2.0 1.2 3.8 2.2
2.0 1.2 3.8 2.2
Finance expense
Accrued interest (2.2) (0.6) (4.3) (1.2)
Convertible debenture (8.7) (11.9) (17.2) (18.7)
interest
Credit facility charges - (0.9) - (1.8)
Unwinding of contingent (0.4) (1.7) (0.9) (3.4)
payments
Unwinding of (0.6) (0.4) (0.8) (0.8)
environmental,
rehabilitation and
closure costs
Other (0.2) (0.1) (0.4) (0.5)
(12.1) (15.6) (23.6) (26.4)
Net finance costs (10.1) (14.4) (19.8) (24.2)
5 LOANS TO JOINT VENTURES
Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Non-current
Kyzylkum - 13.9 25.7
SKZ-U 17.7 14.8 3.6
Total 17.7 28.7 29.3
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 $80 million. The loans bear interest at LIBOR plus 1.5% per
annum, with interest payable on a semi-annual basis, commencing within two years
of initial funding.
Jun 30, Dec 31,
2011 2010
US$m US$m
Balance at January 1 19.0 35.0
Interest capitalized - 3.1
Repaid during the period (19.0) (19.1)
- 19.0
Accrued interest - 0.8
Balance at the end of the period - 19.8
Less: elimination of - (5.9)
proportionate share - 30%
- 13.9
Less: current portion - -
Long term portion - 13.9
The loans to Kyzylkum were unsecured.
SKZ-U loan
The Corporation made loans to SKZ-U pursuant to its obligation to provide
project financing for construction and commissioning of the sulphuric acid plant
project in the amount of $31.0 million. The loans bear interest at LIBOR plus
6% per annum, with interest payable on a semi-annual basis.
Jun 30, Dec 31,
2011 2010
US$m US$m
Balance at January 1 18.0 4.3
Repaid during the period - (4.3)
Additions during the period 3.5 18.0
21.5 18.0
Accrued interest 0.4 0.3
Balance at the end of the period 21.9 18.3
Less: elimination of (4.2) (3.5)
proportionate share - 19%
17.7 14.8
Less: current portion - -
Long term portion 17.7 14.8
The loans to SKZ-U are unsecured.
6 INVENTORIES
Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Finished uranium concentrates 78.1 62.8 39.4
Solutions and concentrates in 20.2 17.6 23.8
process
Product inventory 98.3 80.4 63.2
Materials and supplies 11.5 9.6 5.6
109.8 90.0 68.8
The value of inventory recognized in the income statement is $51.2 million,
$101.9 million and $189.4 million for the three months ended June 30, 2011, six
months ended June 30, 2011 and the year ended December 31, 2010 respectively.
7 MINERAL INTERESTS, PROPERTY, PLANT AND EQUIPMENT
June 30, 2011 Mineral Property Developmen Total
interes , plant t
ts and expenditur
equipmen e
t
US$m US$m US$m US$m
Cost
Balance at January 1 2,064.0 374.7 127.0 2,565.7
Additions - 32.0 40.7 72.7
Pre-production revenue - - (4.2) (4.2)
and costs capitalized
Disposals - (0.5) (0.8) (1.3)
Currency translation 15.6 1.8 1.0 18.4
adjustments taken to
reserves
Transfers (51.0) 72.5 (21.5) -
At the end of the period 2,028.6 480.5 142.2 2,651.3
Accumulated depreciation
Balance at January 1 (129.5) (96.3) - (225.8)
Charge for the period (35.6) (23.3) - (58.9)
Currency translation (1.8) (0.2) - (2.0)
adjustments taken to
reserves
At the end of the period (166.9) (119.8) - (286.7)
Net book value at June 1,861.7 360.7 142.2 2,364.6
30, 2011
December 31, 2010 Mineral Property Total
interest , plant Developmen
s and t
equipmen expenditur
t e
US$m US$m US$m US$m
Cost
Balance at January 1 1,092.7 196.0 124.0 1,412.7
Additions 0.2 27.7 100.7 128.6
Acquisitions of 956.8 103.9 7.5 1,068.2
subsidiaries
Pre-production revenue - - (6.0) (6.0)
and costs capitalized
Disposals (0.8) (5.1) (0.4) (6.3)
Impairment (2.8) (5.5) (40.6) (48.9)
Currency translation 11.7 (5.4) 11.1 17.4
adjustments taken to
reserves
Transfers 6.2 63.1 (69.3) -
At the end of the period 2,064.0 374.7 127.0 2,565.7
Accumulated depreciation
Balance at January 1 (68.8) (38.9) - (107.7)
Charge for the period (62.8) (61.0) - (123.8)
Disposals - 1.2 - 1.2
Impairment - 1.1 - 1.1
Currency translation 2.1 1.3 - 3.4
adjustments taken to
reserves
At the end of the period (129.5) (96.3) - (225.8)
Net book value at 1,934.5 278.4 127.0 2,339.9
December 31, 2010
8 OTHER ASSETS
Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Current
Borrowed uranium concentrates 10.9 12.5 8.9
Deposit for future business - - 8.8
acquisitions
Deferred expenditure - - 5.2
Other 0.3 0.3 0.5
11.2 12.8 23.4
Non-current
Asset retirement fund 40.1 37.8 13.5
Advances for plant and equipment 13.7 16.0 7.5
Long term inventory 3.4 1.5 1.2
Deferred tax assets - 1.3 1.1
Available for sale securities 0.3 0.3 9.3
Sales tax recoverable 2.4 1.5 0.5
Assets held for sale - - 51.5
Other 0.7 0.5 1.1
60.6 58.9 85.7
Uranium concentrates loans
The Corporation entered into a uranium concentrates borrowing agreement 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. The asset is recorded at its fair value.
The corresponding financial liability of $10.9 million, which was classified as
fair value through profit or loss, is also carried at fair value and is included
in uranium concentrates loans in current liabilities (note 12).
Available for sale securities
The Corporation holds available for sale securities with a cost of $0.3 million
and a fair value of $0.3 million.
9 INTEREST BEARING LIABILITIES
Facilities held by Uranium One Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Opening balance - 63.6 61.3
Amortized financing fees - 1.5 2.4
Interest paid - (0.8) (1.2)
Interest accrued - 0.7 1.1
Repaid - (65.0) -
- - 63.6
- - (63.6)
Less: current portion
Long term portion - - -
Proportionate share of joint Jun 30, Dec 31, Jan 1,
venture facilities 2011 2010 2010
US$m US$m US$m
Opening balance 146.3 52.6 36.0
Acquired on business combination - 59.1 5.0
Drawdown 21.6 40.9 12.0
Repaid (40.7) (6.7) -
Interest paid (2.7) (0.3) (0.4)
Interest accrued 3.6 0.7 -
128.1 146.3 52.6
(49.4) (60.1) (5.0)
Less: current portion
Long term portion 78.7 86.2 47.6
Consolidated Total
49.4 60.1 68.6
Current portion
Non-current portion 78.7 86.2 47.6
Total 128.1 146.3 116.2
Uranium One
On June 27, 2008, the Corporation established a $100 million bank debt senior
secured revolving credit facility (the "facility"). Under the terms of the
facility, the Corporation had the ability to borrow up to $100 million from the
lead lenders, Bank of Montreal and The Bank of Nova Scotia (the "Banks"). The
facility had a two year term which ended during 2010 with all borrowed amounts
being repaid.
Kyzylkum
Kyzylkum has loans outstanding of $48.5 million, $62.4 million and $44.1 million
from the Japan Bank for International Cooperation ("JBIC"), Citibank and
Kazatomprom, respectively. At June 30, 2011, the Corporation`s share of
Kyzlkum`s loans is $46.5 million.
SKZ-U
In addition to the $21.5 million loan (note 5) from the Corporation, SKZ-U has
loans outstanding of $18.9 million, $17.9 million and $55.0 million from
Sumitomo Mitsui Banking Corporation, Mizuho Corporate Bank and JBIC,
respectively. At June 30, 2011, the Corporation`s share of SKZ-U`s loans is
$17.4 million.
Akbastau
Akbastau had loans outstanding of $10.0 million, $3.5 million and $49.9 million
from Alpha Bank, GRK and Effective Energy. At June 30, 2011, the Corporation`s
share of these loans is $31.7 million.
Zarechnoye
Zarechnoye had loans outstanding of $62.0 million and $3.4 million from
Effective Energy and Citibank, respectively. At June 30, 2011, the Corporation`s
share of these loans is $32.5 million.
10 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. 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$15.76 per
share, which is equivalent to 63.45 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. The 2010 Debentures are convertible
into common shares of the Corporation, at a rate of 317.46 common shares per
C$1,000 principal and have a conversion price of C$3.15 per common share.
The debentures had a cash settlement option which was accounted for as an
embedded derivative. The Corporation had allocated the fair value of the
debentures to the individual liability and derivative components by establishing
the derivative component and then allocating the balance remaining, after
subtracting the fair value of the derivative from the face value, to the
liability component. The embedded derivative was designated as a financial
liability carried at fair value through profit or loss. On October 12, 2010, the
Corporation received all necessary Kazakh approvals for the conversion of the
2010 Debentures and as a result the cash settlement option was cancelled. The
embedded derivative was reclassified as equity on cancellation of the cash
settlement option.
The table below provide a breakdown of the liability and derivative allocation
on initial recognition of the 2010 Debentures:
2010
Debentures
US$m
Liability 211.6
Transaction costs (12.4)
Net liability 199.2
Derivative 41.7
liability
Net derivative 41.7
liability
Net proceeds 240.9
JUMI Debentures
On January 14, 2010, the Corporation issued to Japan Uranium Management Inc.
("JUMI") a C$269.1 million ($258.1 million) aggregate principal amount 3%
convertible unsecured subordinated debenture maturing ten years from the date of
issue (the "JUMI Debentures"). Pursuant to the terms of the JUMI Debentures,
the Corporation must offer to re-purchase the JUMI Debentures for 101% of the
outstanding principal amount plus accrued interest upon a "change of control".
The transaction with ARMZ during 2010 constituted a "change of control" and on
July 30, 2010, the Corporation made such a re-purchase offer to JUMI, which JUMI
accepted, after which the debentures were redeemed on December 29, 2010.
The table below indicates the movement in the liability:
June 30, 2011 2010 2006 Total
Debentures Debentures
US$m US$m US$m
Opening balance 208.7 151.4 360.1
Interest accrued 11.9 5.3 17.2
Coupon (6.6) (3.4) (10.0)
Foreign exchange 5.0 3.6 8.6
movement
Liability as at the 219.0 156.9 375.9
end of the period
Current portion - 156.9 156.9
Non-current portion 219.0 - 219.0
219.0 156.9 375.9
Fair value of 298.1 156.6
convertible
debentures
December 31, 2010 JUMI 2010 2006 Total
Debentures Debentures Debentures
US$m US$m US$m US$m
Opening balance - - 140.9 140.9
Issued 131.4 211.6 - 343.0
Interest accrued 14.5 18.3 9.9 42.7
Coupon payment (7.6) (14.0) (6.4) (28.0)
Transaction costs (1.0) (12.4) - (13.4)
Redemption (141.9) - - (141.9)
Foreign exchange 4.6 5.2 7.0 16.8
movement
Liability as at the - 208.7 151.4 360.1
end of the period
Current portion - - 151.4 151.4
Non-current portion - 208.7 - 208.7
- 208.7 151.4 360.1
11 PROVISIONS
Current Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Provision for contingent - - 20.0
payments
Other - - 0.2
- - 20.2
Non-current Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Environmental protection, 29.3 29.1 17.9
rehabilitation and closure
costs
Provision for contingent 29.5 33.3 54.9
payments
Provision for historical cost 2.5 2.7 1.7
61.3 65.1 74.5
Environmenta Provision Historica
l & closure for l Total
costs contingen cost
t
payments
US$m US$m US$m US$m
Balance at January 1, 29.1 33.3 2.7 65.1
2011
Unwinding of discount 0.8 0.9 - 1.7
rate
Fair value adjustment - (5.5) - (5.5)
Reductions arising (1.0) - (0.2) (1.2)
from payments
Foreign exchange 0.4 0.8 - 1.2
movement
At the end of the 29.3 29.5 2.5 61.3
period
12 OTHER LIABILITIES
Current Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Promissory note - - 90.2
Unfavorable contracts 10.6 11.4 11.7
Uranium concentrates loan 10.9 12.5 8.9
Advances received 13.8 20.5 19.9
Other 1.1 1.5 1.4
36.4 45.9 132.1
Non-current Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Liabilities held for sale - - 12.9
Other 0.5 0.4 0.2
0.5 0.4 13.1
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. In addition to the loan agreement, the Corporation incurred $0.4
million in loan arrangement fees, which have been expensed. The Corporation
recognized the borrowed uranium as an other asset (note 8). The loan was
classified as a financial liability carried at fair value through profit and
loss.
13 CASH FLOW INFORMATION
Cash and cash equivalents Jun 30, Dec 31, Jan 1,
2011 2010 2010
US$m US$m US$m
Cash 196.8 255.7 44.4
Money market instruments, 108.2 60.1 104.1
including cashable guaranteed
investment certificates, bearer
deposit notes and commercial
paper
Restricted cash 13.4 8.6 -
318.4 324.4 148.5
Cash equivalents include highly liquid investments that are readily convertible
to cash with a maturity of less than 90 days.
Restricted cash consists of a collateral deposit for the letter of credit that
was issued as a guarantee for the uranium concentrate loan (note 12).
Three months ended Six months ended
Jun 30, Jun 30, Jun 30, Jun 30,
2011 2010 2011 2010
US$m US$m US$m US$m
Changes in non-
cash working
capital excluding
business
combinations:
(Increase) / (20.0) (22.6) 14.1 (11.3)
decrease in trade
and other
receivables
Increase in (5.1) (0.7) (12.1) (6.4)
inventories
Decrease in trade (12.5) (6.8) (26.9) (12.5)
and other payables
(37.6) (30.1) (24.9) (30.2)
14 BASIC AND DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
Three months ended Six months ended
Jun 30, Jun 30, Jun 30, Jun 30,
2011 2010 2011 2010
Basic weighted- 957.2 587.5 957.2 587.5
average number of
shares
outstanding
(millions)
Effect of
dilutive
securities:
-stock options 0.1 0.4 0.1 0.4
-convertible 92.4 92.4 92.4 92.4
debentures
Diluted weighted- 1,049.7 680.3 1,049.7 680.3
average number of
shares
outstanding
15 FINANCIAL RISK MANAGEMENT
Designation and valuation of financial instruments
The following tables summarizes the designation and fair value hierarchy under
which the Corporation`s financial instruments are valued, other than trade and
other receivables and payables.
* Level 1 of the fair value hierarchy includes unadjusted quoted prices in
active markets for identical assets or liabilities;
* Level 2 of the hierarchy includes inputs that are observable for the asset
or liability, either directly or indirectly; and
* Level 3 includes inputs for the asset or liability that are not based on
observable market data. The Corporation does not have any financial
instruments included in Level 3.
As at June 30, 2011
Designation of financial Loans and Available Total
assets receivables for sale
securities
Notes US$m US$m US$m
Cash and cash 13 318.4 - 318.4
equivalents
Loans to joint ventures 5 17.7 - 17.7
Available for sale 8 - 0.3 0.3
securities
Asset retirement fund 8 40.1 - 40.1
Total 376.2 0.3 376.5
As at December 31, 2010
Loans and Available Total
receivables for sale
securities
Designation of financial Notes US$m US$m US$m
assets
Cash and cash 13 324.4 - 324.4
equivalents
Loans to joint ventures 5 28.7 - 28.7
Available for sale 8 - 0.3 0.3
securities
Asset retirement fund 8 37.8 - 37.8
Total 390.9 0.3 391.2
As at June 30, 2011
Held at fair Financial
Designation of financial value liabilities
liabilities through at amortized Total
profit or cost
loss
Notes US$m US$m US$m
Interest bearing 9 - 128.1 128.1
liabilities
Convertible debenture 10 - 375.9 375.9
Uranium concentrates 12 10.9 - 10.9
loan
Provision for contingent 11 - 29.5 29.5
payments
Other 12 - 1.6 1.6
Total 10.9 535.1 546.0
As at December 31, 2010
Held at fair Financial
value liabilities
through at amortized Total
profit or cost
loss
Designation of financial Notes US$m US$m US$m
liabilities
Interest bearing 9 - 146.3 146.3
liabilities
Convertible debenture 10 - 360.1 360.1
Uranium concentrates 12 12.5 - 12.5
loan
Provision for contingent 11 - 33.3 33.3
payments
Other 12 - 1.9 1.9
Total 12.5 541.6 554.1
As at June 30, 2011
Fair value hierarchy of Level 1 Level 2 Level 3 Total
financial assets and US$m US$m US$m US$m
liabilities measured at
fair value
Available for sale 0.3 - - 0.3
securities
Uranium concentrates - (10.9) - (10.9)
loan
Total 0.3 (10.9) - (10.6)
As at December 31, 2010
Fair value hierarchy of Level 1 Level 2 Level 3 Total
financial assets and
liabilities measured at
fair value
US$m US$m US$m US$m
Available for sale 0.3 - - 0.3
securities
Uranium concentrates - (12.5) - (12.5)
loan
Total 0.3 (12.5) - (12.2)
16 RESERVES
June Dec 31, Jun 30,
30, 2010 2010
2011 US$m US$m
US$m
Equity settled employee benefits
reserve
Balance at the beginning of the 113.7 132.3 132.3
period
Stock options issued and vested 4.1 13.9 3.8
Exercised stock options - (32.5) (0.6)
following vesting
Balance at the end of the period 117.8 113.7 135.5
Equity component of convertible
debentures
Balance at the beginning of the 115.6 46.5 46.5
period
JUMI Debentures issued - 125.7 125.7
JUMI Debentures redeemed - (125.7) -
2010 Debentures issued - 69.1 -
Balance at the end of the period 115.6 115.6 172.2
Foreign currency translation
reserve
Balance at the beginning of the 6.9 - -
period
Exchange fluctuations on 11.3 6.9 (8.9)
translation of foreign
operations
Balance at the end of the period 18.2 6.9 (8.9)
Fair value reserve
Balance at the beginning of the - 0.1 0.1
period
Net valuation loss taken to - (10.7) (4.6)
equity
Net valuation losses transferred - 10.6 -
to the income statement
Balance at the end of the period - - (4.5)
Total reserves 251.6 236.2 294.3
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 1, 18,564,160 6.26
2010
Granted options 10,526,100 3.89
Exercised options (13,073,222 2.73
)
Forfeitures of stock options (2,335,962) 8.18
Outstanding options as at December 13,681,076 7.49
31, 2010
Granted options 2,956,300 5.53
Exercised options (5,000) 2.79
Forfeitures and lapses of stock (2,307,615) 8.86
options
Outstanding options as at June 30, 14,324,761 6.87
2011
The following table summarizes stock options outstanding at June 30, 2011:
Options outstanding Options exercisable
Range of Number Weighted Weighted Number Weighted Weighted
exercise outstanding average average exercisabl average average
prices as at June remainin exercise e as at remainin exercise
30, g life price June 30, g life price
2011 2011
Cdn $ (years) Cdn $ (years) Cdn $
2.22 to 2,466 2.71 2.22 2,466 2.71 2.22
2.74
2.75 to 7,080,819 4.53 4.51 590,719 4.31 4.13
4.76
4.77 to 2,759,615 4.69 6.33 618,415 4.69 6.38
7.79
7.80 to 2,417,250 5.32 8.32 2,417,250 5.32 8.32
9.90
9.91 to 961,308 1.49 12.23 961,308 1.49 12.23
12.93
12.94 to 412,053 0.97 13.94 412,053 0.97 13.94
15.63
15.64 to 691,250 0.84 16.50 691,250 0.84 16.50
16.59
14,324,761 4.21 6.87 5,693,461 3.64 9.74
17 SUBSIDIARIES
Details of the Corporation`s significant subsidiaries as at June 30, 2011 are as
follows:
Name of Country of Project Principa Project Intere
subsidiary incorporati l stage st
on activity
Uranium One US United Mineral Developme 100%
Americas, states property nt
Inc Developme holdings
nt
projects
Uranium One US United Processi Developme 100%
USA Inc states ng nt
Developme facilty
nt and
projects mineral
property
holdings
18 JOINTLY CONTROLLED ENTITIES
The Corporation owns the following interests subject to joint control as a
result of governing contractual agreements:
Shareholding in Country of Principal Stage Interes
jointly incorporati activity t
controlled on
entities
Akbastau JSC Kazakhstan Uranium Productio 50%
mining n
Betpak Dala LLP Kazakhstan Uranium Productio 70%
mining n
Karatau LLP Kazakhstan Uranium Productio 50%
mining n
Zarechnoye JSC Kazakhstan Uranium Productio 49.67%
mining n
Kyzylkum LLP Kazakhstan Uranium Developme 30%
mining nt
SKZ-U LLP Kazakhstan Sulphuric Developme 19%
acid nt
The Corporation`s proportionate share of the assets and liabilities of the
jointly controlled entities are as follows:
As at June Akbastau Betpak Karata Zarech Kyzylk SKZ-U Total
30, 2011 Dala u noye um
US$m US$m US$m US$m US$m US$m US$m
Current
assets
Cash 3.2 28.2 1.9 3.2 4.8 3.9 45.2
Other 30.9 89.2 - 12.6 2.4 - 135.1
current
assets
34.1 117.4 1.9 15.8 7.2 3.9 180.3
Non-current
assets
Mineral 742.1 525.7 491.7 251.0 126.2 21.2 2,157.9
interests,
plant and
equipment
Other 1.8 5.4 1.7 6.1 1.4 7.7 24.1
assets
743.9 531.1 493.4 257.1 127.6 28.9 2,182.0
Total 778.0 648.5 495.3 272.9 134.8 32.8 2,362.3
assets
Current
liabilities
Current (2.7) (13.8) (4.4) (3.9) (2.2) (0.6) (27.6)
liabilities
Current (31.7) - - (1.7) (16.0) - (49.4)
portion of
interest
bearing
liabilities
(34.4) (13.8) (4.4) (5.6) (18.2) (0.6) (77.0)
Non-current
liabilities
Non-current - - - (30.8) (30.5) (17.4 (78.7)
portion of )
interest
bearing
liabilities
Other (7.5) (12.8) (15.9) (16.9) - - (53.1)
Deferred (116.6) (68.4) (88.9) (34.7) (11.6) - (320.2)
tax
liabilities
Provisions (2.6) (9.9) (3.2) (2.1) (1.6) - (19.4)
(126.7) (91.1) (108.0 (84.5) (43.7) (17.4 (471.4)
) )
Total (161.1) (104.9 (112.4 (90.1) (61.9) (18.0 (548.4)
liabilities ) ) )
Net assets 616.9 543.6 382.9 182.8 72.9 14.8 1,813.9
As at Akbastau Betpak Karata Zarech Kyzyl SKZ-U Total
December 31, Dala u noye kum
2010
US$m US$m US$m US$m US$m US$m US$m
Current
assets
Cash 4.8 37.2 1.3 2.3 1.1 6.8 53.5
Other current 14.1 100.2 7.8 13.3 0.9 - 136.3
assets
18.9 137.4 9.1 15.6 2.0 6.8 189.8
Non-current
assets
Mineral 737.5 532.2 498.3 249.6 124.1 12.8 2,154.5
interests,
plant and
equipment
Other assets 1.1 3.1 4.0 5.9 0.6 8.7 23.4
738.6 535.3 502.3 255.5 124.7 21.5 2,177.9
Total assets 757.5 672.7 511.4 271.1 126.7 28.3 2,367.7
Current
liabilities
Current (14.6) (9.1) (8.7) (3.4) (1.0) (0.2) (37.0)
liabilities
Current (14.7) - (18.8) (10.6) (16.0 - (60.1)
portion of )
interest
bearing
liabilities
(29.3) (9.1) (27.5) (14.0) (17.0 (0.2) (97.1)
)
Non-current
liabilities
Non-current - - - (33.8) (37.9 (14.5 (86.2)
portion of ) )
interest
bearing
liabilities
Other (6.3) (0.2) (24.5) (11.5) (4.2) - (46.7)
Deferred tax (117.0) (69.0) (89.7) (35.4) (11.6 - (322.7)
liabilities )
Provisions (2.6) (9.7) (2.9) (3.2) (1.6) - (20.0)
(125.9) (78.9) (117.1 (83.9) (55.3 (14.5 (475.6)
) ) )
Total (155.2) (88.0) (144.6 (97.9) (72.3 (14.7 (572.7)
liabilities ) ) )
Net assets 602.3 584.7 366.8 173.2 54.4 13.6 1,795.0
As at January 1, Betpak Karatau Kyzylku SKZ- Total
2010 Dala m U
US$m US$m US$m US$m US$m
Current assets
Cas 3.1 0.2 0.9 0.4 4.6
h
Other current 75.1 19.0 0.2 - 94.3
assets
78.2 19.2 1.1 0.4 98.9
Non-current
assets
Mineral 556.7 511.7 123.4 3.6 1,195.
interests, plant 4
and equipment
Other assets 1.5 1.8 0.4 7.0 10.7
558.2 513.5 123.8 10.6 1,206.
1
Total assets 636.4 532.7 124.9 11.0 1,305.
0
Current
liabilities
Current (8.5) (7.1) (4.1) - (19.7)
liabilities
Current portion - (5.0) - - (5.0)
of interest
bearing
liabilities
(8.5) (12.1) (4.1) - (24.7)
Non-current
liabilities
Non-current - - (47.6) - (47.6)
portion of
interest bearing
liabilities
Other financial (0.2) (31.6) (0.8) - (32.6)
liabilities
Deferred tax (55.8) (74.6) (7.9) - (138.3
liabilities )
Provisions (9.4) (56.3) (1.7) - (67.4)
(65.4) (162.5) (58.0) - (285.9
)
Total liabilities (73.9) (174.6) (62.1) - (310.6
)
Net assets 562.5 358.1 62.8 11.0 994.4
The Corporation`s proportionate share of revenue, expenses, net earnings /
(loss) and cash flows are as follows:
Three months Akbastau Betpak Karatau Zarech Kyzylku SKZ- Total
ended June 30, Dala noye m U
2011
US$m US$m US$m US$m US$m US$m US$m
Revenue 25.1 53.5 10.5 18.5 - - 107.6
Expenses and (11.1) (26.5) (6.7) (9.7) - - (54.0
other income )
Foreign (0.1) - - - 0.2 (0.2 (0.1)
exchange (loss) )
/ gain
Earnings / 13.9 27.0 3.8 8.8 0.2 (0.2 53.5
(loss) before )
income taxes
Current and (2.7) (5.5) (1.1) (2.2) - - (11.5
deferred income )
tax expense
Earnings / 11.2 21.5 2.7 6.6 0.2 (0.2 42.0
(loss) )
Cash flows from 0.2 49.3 8.9 18.5 - - 76.9
operating
activities
Cash flows used (1.9) (6.7) (4.5) (4.6) (3.1) (2.9 (23.7
in investing ) )
activities
Cash flows - (89.8) (7.5) (11.9) (3.4) 2.9 (109.
(used in) / 7)
from financing
activities
Net (decrease) (1.7) (47.2) (3.1) 2.0 (6.5) - (56.5
/ increase in )
cash
Six months ended Akbas Betpa Karat Zarech Kyzyl SKZ- Total
June 30, 2011 tau k au noye kum U
Dala
US$m US$m US$m US$m US$m US$m US$m
Revenue 33.3 115.7 33.7 23.9 - - 206.6
Expenses and (19.7 (52.7 (18.6 (14.8) (0.2) - (106.0
other income ) ) ) )
Foreign exchange 0.1 (0.6) 0.2 0.3 0.9 - 0.9
gain / (loss)
Earnings before 13.7 62.4 15.3 9.4 0.7 - 101.5
income taxes
Current and (2.3) (12.5 (4.0) (2.1) - - (20.9)
deferred income )
tax expense
Earnings 11.4 49.9 11.3 7.3 0.7 - 80.6
Cash flows from 4.2 92.1 27.6 20.4 - - 144.3
operating
activities
Cash flows used (5.8) (11.3 (8.2) (7.6) (7.2) (5.8 (45.9)
in investing ) )
activities
Cash flows (used - (89.8 (18.8 (11.9) 10.9 2.9 (106.7
in) / from ) ) )
financing
activities
Net (decrease) / (1.6) (9.0) 0.6 0.9 3.7 (2.9 (8.3)
increase in cash )
Three months Betpak Karata Kyzylku SKZ-U Total
ended June 30, Dala u m
2010
US$m US$m US$m US$m US$m
Revenue 51.2 11.4 - - 62.6
Expenses and (33.6) (9.2) 0.1 - (42.7
other income )
Foreign exchange 0.2 - - - 0.2
gain
Earnings before 17.8 2.2 0.1 - 20.1
income taxes
Current and (4.4) (1.5) - - (5.9)
deferred income
tax expense
Earnings 13.4 0.7 0.1 - 14.2
Cash flows from / 1.2 (10.9) - - (9.7)
(used in)
operating
activities
Cash flows used (6.4) (4.8) (4.3) (9.5) (25.0
in investing )
activities
Cash flows from 2.0 8.3 7.7 16.6 34.6
financing
activities
Net (decrease) / (3.2) (7.4) 3.4 7.1 (0.1)
increase in cash
Six months ended Betpak Karata Kyzylku SKZ-U Total
June 30, 2010 Dala u m
US$m US$m US$m US$m US$m
Revenue 79.2 16.9 - - 96.1
Expenses and (54.4) (14.8) (0.2) (0.1) (69.5
other income )
Foreign exchange (2.3) (0.9) 0.8 - (2.4)
(loss) / gain
Earnings / (loss) 22.5 1.2 0.6 (0.1) 24.2
before income
taxes
Current and (5.7) (2.1) - - (7.8)
deferred income
tax expense
Earnings / (loss) 16.8 (0.9) 0.6 (0.1) 16.4
Cash flows from / 23.3 (15.7) - - 7.6
(used in)
operating
activities
Cash flows used (11.1) (7.8) (5.4) (9.7) (34.0
in investing )
activities
Cash flows from - 23.4 8.0 16.6 48.0
financing
activities
Net increase / 12.2 (0.1) 2.6 6.9 21.6
(decrease) in
cash
19 JOINTLY CONTROLLED ASSETS
The jointly controlled assets in which the Corporation owns an interest and
which are proportionately included in the interim financial statements are as
follows:
Shareholding in Country of Principal Ownershi
jointly controlled incorporation activity Stage p
assets
Honeymoon Joint Australia Uranium Developmen 51%
Venture mining t
Australia Australia Uranium Exploratio 50.1%
exploration joint mining n
ventures
The Corporation`s proportionate share of the assets and liabilities of the joint
ventures are as follows:
As at June 30, 2011 Honeymoon Australia Total
exploration
US$m US$m US$m
Current assets
Cash 4.5 0.2 4.7
Other current assets 0.9 0.1 1.0
5.4 0.3 5.7
Non-current assets
Mineral interests, plant and 20.6 0.3 20.9
equipment
Other assets 2.2 - 2.2
22.8 0.3 23.1
Total assets 28.2 0.6 28.8
Current liabilities
Current liabilities (5.1) (0.1) (5.2)
(5.1) (0.1) (5.2)
Non-current liabilities
Provisions (1.9) - (1.9)
(1.9) - (1.9)
Total liabilities (7.0) (0.1) (7.1)
Net assets 21.2 0.5 21.7
As at December 31, 2010 Honeymoon Australia Total
exploration
US$m US$m US$m
Cash 9.3 0.7 10.0
Other current assets 0.4 0.2 0.6
9.7 0.9 10.6
Non-current assets
Mineral interests, plant and 12.3 0.3 12.6
equipment
12.3 0.3 12.6
Total assets 22.0 1.2 23.2
Current liabilities
Current liabilities (6.5) (0.4) (6.9)
(6.5) (0.4) (6.9)
Non-current liabilities
Provisions (1.7) - (1.7)
(1.7) - (1.7)
Total liabilities (8.2) (0.4) (8.6)
Net assets 13.8 0.8 14.6
As at January 1, 2010 Honeymoon Australia Total
exploration
US$m US$m US$m
Current assets
Cash 5.1 0.1 5.2
Other current assets 1.4 - 1.4
6.5 0.1 6.6
Non-current assets
Mineral interests, plant and 15.0 0.3 15.3
equipment
15.0 0.3 15.3
Total assets 21.5 0.4 21.9
Current liabilities
Current liabilities (2.6) - (2.6)
(2.6) - (2.6)
Non-current liabilities
Provisions (0.7) - (0.7)
(0.7) - (0.7)
Total liabilities (3.3) - (3.3)
Net assets 18.2 0.4 18.6
The Corporation`s proportionate share of revenue, expenses, net earnings /
(loss) and cash flows are as follows:
Three months ended June 30, Honeymoo Australian Total
2011 n exploration
US$m US$m US$m
Expenses and other income (0.2) - (0.2)
Loss before income taxes (0.2) - (0.2)
Current and deferred income (0.2) - (0.2)
tax expense
Loss (0.4) - (0.4)
Cash flows used in investing (6.4) (0.1) (6.5)
activities
Cash flows from financing 2.6 - 2.6
activities
Net decrease in cash (3.8) (0.1) (3.9)
Six months ended June 30, Honeymoo Australian Total
2011 n exploration
US$m US$m US$m
Expenses and other income (0.4) - (0.4)
Loss before income taxes (0.4) - (0.4)
Current and deferred income (0.2) - (0.2)
tax expense
Loss (0.6) - (0.6)
Cash flows used in investing (11.4) (0.5) (11.9)
activities
Cash flows from financing 6.6 - 6.6
activities
Net decrease in cash (4.8) (0.5) (5.3)
Three months ended June 30, Honeymoon Australian Total
2010 exploratio
n
US$m US$m US$m
Expenses and other income (0.2) - (0.2)
Loss before income taxes (0.2) - (0.2)
Current and deferred income 0.1 - 0.1
tax expense
Loss (0.1) - (0.1)
Cash flows used in investing (8.6) - (8.6)
activities
Cash flows from financing 8.2 - 8.2
activities
Net increase in cash (0.4) - (0.4)
Six months ended June 30, Honeymoo Australian Total
2010 n exploration
US$m US$m US$m
Expenses and other income (0.2) - (0.2)
Loss before income taxes (0.2) - (0.2)
Current and deferred income 0.1 - 0.1
tax expense
Loss (0.1) - (0.1)
Cash flows used in investing (20.0) - (20.0
activities )
Cash flows from financing 22.8 - 22.8
activities
Net increase in cash 2.8 - 2.8
20 SEGMENTED INFORMATION
Information reported to the Corporation`s chief operating decision maker for the
purposes of resource allocation and assessment of segment performance is
primarily the operating mine or mineral property and its location. The following
financial information is presented by operating segment and is reconciled to the
interim financial statements.
The Corporation`s reportable operating segments are summarized in the table
below:
For three months ended June 30, 2011:
Revenues Operatin Explor Net Taxation Depreci Net
g ation financ (expense) ation earning
expenses expens e /recovery s/
es costs (loss)
US$m US$m US$m US$m US$m US$m US$m
Kazakhstan
Akbastau Mine 25.1 (5.7) - (0.5) (2.7) (4.9) 11.2
Akdala Mine 15.8 (3.7) - (0.3) (1.2) (2.7) 8.3
South Inkai 43.0 (12.0) - (0.3) (4.3) (8.1) 18.0
Mine
Karatau Mine 10.5 (1.7) - (0.7) (1.1) (3.6) 2.7
Zarechnoye 18.5 (5.4) - (0.8) (2.2) (3.4) 6.6
Mine
Kharasan - - - (0.3) - - -
Project
United States
Development - - - - - - -
projects
Exploration - - (0.9) - 1.0 - 0.1
projects
Conventional - - - - - - (0.5)
mining
projects
Australia
Honeymoon - - (0.3) (0.3) (0.2) - (0.4)
Project
Corporate and - - - (6.9) 0.2 - (16.3)
other
112.9 (28.5) (1.2) (10.1) (10.5) (22.7) 29.7
For six months ended June 30, 2011:
Revenu Operating Explor Net Taxation Deprec Net
es expenses ation financ (expense) iation earning
expens e / s/
es costs recovery (loss)
US$m US$m US$m US$m US$m US$m US$m
Kazakhstan
Akbastau Mine 33.3 (7.4) - (1.1) (2.3) (11.3) 11.4
Akdala Mine 20.3 (4.6) - (0.7) (1.9) (3.5) 10.6
South Inkai 103.6 (27.3) - (1.0) (10.6) (18.0) 46.9
Mine
Karatau Mine 33.7 (5.3) - (1.6) (4.0) (11.3) 11.3
Zarechnoye 23.9 (7.2) - (1.7) (2.1) (6.0) 7.3
Mine
Kharasan - - - (0.6) - - 0.7
Project
United States
Development - - - - - - -
projects
Exploration - - (1.8) - 2.8 - 1.0
projects
Conventional - - - - - - (0.8)
mining
projects
Australia
Honeymoon - - (0.6) (0.3) (0.2) - (0.6)
Project
Corporate and - - - (12.8) 0.2 - (44.1)
other
214.8 (51.8) (2.4) (19.8) (18.1) (50.1) 43.7
For the three months ended June 30, 2010:
Revenue Operatin Explo Net Taxation Deprec Net
s g ratio finance (expense) iation earning
expenses n costs / s/
expen recovery (loss)
ses
US$m US$m US$m US$m US$m US$m US$m
Kazakhstan
Akdala Mine 26.0 (7.3) - (0.1) (2.7) (6.0) 9.7
South Inkai 28.6 (13.2) - (0.2) (1.7) (7.5) 5.8
Mine
Karatau Mine 11.4 (1.8) - (1.6) (1.5) (5.6) 0.7
Kharasan - - - (0.2) - - 0.1
Project
United States
Development - - - - 1.3 - 1.3
projects
Exploration - - (1.2) - - - (1.2)
projects
Conventional - - - - - - (0.3)
mining
projects
Australia
Honeymoon - - (0.2) - 0.1 - (0.1)
Project
Corporate and - - - (12.3) - - (10.6)
other
66.0 (22.3) (1.4) (14.4) (4.5) (19.1) 5.4
For the six months ended June 30, 2010:
Revenu Operating Explor Net Taxation Deprec Net
es expenses ation financ (expense iation earning
expens e ) s/
es costs /recover (loss)
y
US$m US$m US$m US$m US$m US$m US$m
Kazakhstan
Akdala Mine 34.8 (10.1) - (0.2) (3.2) (8.0) 12.8
South Inkai 49.8 (22.8) - (0.3) (2.4) (13.2) 10.5
Mine
Karatau Mine 16.9 (3.4) - (3.0) (2.1) (9.7) (0.9)
Kharasan - - - (0.2) - - 0.5
Project
United States
Development - - - - 2.6 - 2.6
projects
Exploration - - (1.9) - - - (1.9)
projects
Conventional - - - - - - (0.6)
mining
projects
Australia
Honeymoon - - (0.2) - 0.1 - (0.1)
Project
Corporate and - - (0.2) (20.5) (0.1) - (18.9)
other
101.5 (36.3) (2.3) (24.2) (5.1) (30.9) 4.0
As at June 30, 2011:
Mineral
interest
property, Total Deferred Total Capital
plant tax
and assets liabilitie liabilitie addition
equipment s s s
US$m US$m US$m US$m US$m
Kazakhstan
Akbastau Mine 742.1 778.0 116.6 161.1 6.7
Akdala Mine 130.0 178.4 19.2 26.9 1.7
South Inkai Mine 395.2 438.0 47.5 62.0 9.4
Karatau Mine 491.7 495.3 88.9 112.4 9.6
Zarechnoye Mine 251.0 272.9 34.7 90.1 7.3
Kharasan Project 147.4 167.6 11.6 79.9 15.4
United States
Development projects 126.6 148.6 - 5.9 13.7
Exploration projects 34.6 35.5 3.9 3.9 -
Conventional mining 15.6 23.8 5.0 10.2 -
projects
Australia
Honeymoon Project 20.9 28.8 - 7.1 7.9
Corporate and other 9.5 405.4 - 423.5 1.0
2,364.6 2,972.3 327.4 983.0 72.7
As at December 31, 2010:
Mineral
interest
property, Total Deferred Total Capital
plant tax
and assets liabilitie liabilitie addition
equipment s s s
US$m US$m US$m US$m US$m
Kazakhstan
Akbastau Mine 737.5 757.5 117.0 155.2 -
Akdala Mine 135.9 182.0 20.0 26.6 3.3
South Inkai Mine 396.0 462.7 49.0 60.3 22.0
Karatau Mine 498.3 511.4 89.7 144.6 24.2
Zarechnoye Mine 249.6 271.1 35.4 97.9 -
Kharasan Project 136.9 155.0 11.6 87.0 17.2
United States
Development projects 113.0 135.0 - 6.4 27.4
Exploration projects 34.6 35.5 6.3 6.7 -
Conventional mining 15.6 23.8 5.0 10.0 -
projects
Australia
Honeymoon Project 12.6 23.2 - 8.6 33.7
Corporate and other 9.9 400.9 - 424.6 0.8
2,339.9 2,958. 334.0 1,027.9 128.6
1
As at January 1, 2010:
Mineral
interest
plant and Total Deferred Total
tax
equipment assets liabilities Liabilities
US$m US$m US$m US$m
Kazakhstan
Akdala Mine 150.4 183.9 18.2 24.0
South Inkai Mine 406.0 448.3 37.7 49.0
Karatau Mine 511.7 532.7 74.6 174.6
Kharasan Project 127.0 135.9 7.9 62.1
United States
Development 29.1 29.6 - 0.2
projects
Exploration 33.1 33.9 - -
projects
Conventional 15.7 23.1 - 4.8
mining projects
Australia
Honeymoon 15.3 21.9 - 3.3
Project
Corporate and 16.7 293.8 - 364.7
other
1,305.0 1,703.1 138.4 682.7
21 CONTINGENT LIABILITIES
Betpak Dala is disputing a tax assessment of approximately $23 million in
respect of the 2004 to 2008 taxation years, which primarily relates to excess
profit tax. Excess profit tax is not applicable to the Corporation`s operations
in Kazakhstan following the January 1, 2009 amendments to Kazakhstan`s tax code.
Betpak Dala`s appeals against the tax assessment have so far been unsuccessful
and Betpak Dala intends to apply to the Kazakh Supreme Court for leave to appeal
the lower courts` decisions. Betpak Dala paid $18 million of the disputed
amount, to ensure that there is no interruption in their business. Following
consultation with external legal counsel, the Corporation assessed there to be a
high probability to successfully recover payments made in respect of the
assessment. Accordingly, the Corporation has not recognized the income tax
expense, but recorded the payment in trade and other receivables that the
Corporation expects to recover against future tax assessments.
22 ACQUISITION OF MANTRA
Following the announcement on December 15, 2010 that ARMZ had entered into a
definitive agreement to acquire all of the issued shares of Mantra Resources
Limited ("Mantra"), Uranium One and ARMZ jointly announced that they had entered
into an option agreement to allow Uranium One to acquire Mantra from ARMZ.
Mantra`s core asset is the Mkuju River Project in Tanzania which is nearing the
completion of a definitive feasibility study.
On March 21, 2011, Uranium One announced that Mantra and ARMZ revised the terms
of the agreement, which also resulted in a revised option agreement with ARMZ.
On June 7, 2011, ARMZ completed the acquisition of Mantra, and Uranium One
became the operator of Mantra`s Mkuju River Project in Tanzania pursuant to
agreements entered into with ARMZ in connection with the closing. As operator of
the project, Uranium One will be responsible to provide funding for the project
and consequently entered into a loan agreement with Mantra on June 6, 2011. The
loan agreement provides for a loan of $150 million which will increase after
receipt of a special mining license for the Mkuju River Project.
Pursuant to the revised agreement with ARMZ, Uranium One has a call option to
acquire Mantra from ARMZ, exercisable at any point up to June 7, 2012, with the
ability to extend the term of the option to 24 months from 12 months provided
that Uranium One partially exercises its call option and acquires approximately
15% of the shares of Mantra for $150 million before January 31, 2012. The
agreement also provides ARMZ with a put option to sell Mantra to Uranium One at
the end of the option term if all conditions precedent, including minority
shareholder approval have been met. The transaction falls out of the scope of
IAS 39, financial instruments and does not meet the recognition criteria of IFRS
3, business combinations for consolidation.
The purchase price to be paid by Uranium One will be equal to ARMZ`s acquisition
cost of Mantra (approximately $1.0 billion), including any additional
expenditures contributed by ARMZ to Mantra or its properties and interest
thereon at a rate of 2.65% per annum.
23 FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
The Canadian Accounting Standards Board has mandated the adoption of IFRS
effective for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2011 for Canadian publicly accountable profit-
orientated enterprises. The date of transition is January 1, 2010 and as a
result the 2010 comparative information has been adjusted to conform with IFRS.
Under IFRS 1: First time adoption of financial reporting standards, IFRS are
applied retrospectively at the transition balance sheet with all adjustments to
assets and liabilities as stated under Canadian generally accepted accounting
principles recorded to retained earnings unless certain exemptions are applied.
The primary exemptions applied by the Corporation are:
Fair value as deemed cost
IFRS 1 allows the Corporation to initially measure an item of property, plant
and equipment and investment property upon transition to IFRS at fair value as
deemed cost (or under certain circumstances using a previous GAAP revaluation)
as opposed to full retroactive application of the cost model under IFRS. Under
this option, fair value as deemed cost will become the new cost amount for
qualifying assets at transition.
The Corporation has elected to use the fair value as deemed cost for selected
properties. Applying the IFRS 1 elections for fair value as deemed cost to
certain long lived assets will limit the IFRS requirement to reverse impairments
previously recognized.
Business combinations
IFRS 1 generally provides for the business combinations standard to be applied
either retrospectively or prospectively from the date of transition to IFRS (or
to restate all business combinations after a selected date). Retrospective
application would require an entity to restate all prior transactions that meet
the definition of a business under IFRS. Prospective application requires that
the first-time adopter shall recognize at the previous carrying amount all its
assets and liabilities at the date of transition to IFRS`s that were acquired or
assumed in past business combinations, other than certain assets and liabilities
as defined by IFRS 1.
The Corporation has elected to apply the business combination standard
prospectively with adjustments as necessary, and have to recognize contingent
liabilities and payments not previously recognized that arose from past business
combinations. Contingent payments of a cash nature are recognized as liabilities
and payments that are equity in nature are recognized in equity as part of
reserves.
Cumulative translation differences
An entity may elect to deem the cumulative translation differences that resulted
from the translation of its foreign operations to the reporting currency to be
zero at the transition date. This will result in the exclusion of translation
differences that were recorded in accumulated other comprehensive income arose
prior to the transition date and from gains or losses on a subsequent disposal
of a foreign operation.
The Corporation has elected to reset the cumulative translation differences to
zero on transition date.
Borrowing costs
On adoption, an entity may designate any date on or before January 1, 2010 to
commence capitalization of borrowing costs relating to all qualifying
development projects commencing after such date.
The Corporation has elected to implement a policy for capitalization of
borrowing costs on January 1, 2010.
Asset retirement obligation ("ARO")
The Corporation elected to apply the exemption from full retrospective
application as allowed under IFRS 1. As such, the Corporation has remeasured the
rehabilitation liability as at January 1, 2010 under IAS 37 "Provisions,
Contingent Liabilities and Contingent Assets" and estimated the amount to be
included in the related asset by discounting the liability to the date in which
the 2010 liability arose, and recalculated the accumulated amortization under
IFRS.
IFRS 1 also outlines specific guidance that a first-time adopter must adhere to
under certain circumstances. The Corporation has applied the following
guidelines to its opening balance sheet dated January 1, 2010:
Assets and liabilities of subsidiaries and joint ventures
In accordance with IFRS 1, if a parent company adopts IFRS subsequent to its
subsidiary or joint venture adopting IFRS, the assets and liabilities of the
subsidiary or joint venture are to be included in the consolidated financial
statements at the same carrying amounts as in the financial statements of the
subsidiary or joint venture. The Corporation has subsidiaries and joint ventures
that have already adopted IFRS.
Estimates
In accordance with IFRS 1, an entity`s estimate under IFRS at the date of
transition to IFRS must be consistent with estimates made for the same date
under previous GAAP, unless there is objective evidence that those estimates
were erroneous. The Corporation applied estimates that are consistent with the
estimates made for its Canadian GAAP reporting.
Balance sheet reconciliation - January 1, 2010
Canadian IFRS Classificatio IFRS
GAAP adjustment n adjustments
Notes US$m US$m US$m US$m
ASSETS
Current assets
Cash, cash equivalents 148.5 - - 148.5
and restricted cash
Trade and other 42.4 - - 42.4
receivables (Accounts
and other
receivables)1
Inventories c 71.6 (2.8) - 68.8
Other assets 24.5 - (1.1) 23.4
287.0 (2.8) (1.1) 283.1
Non-current assets
Mineral interests, a 1,748.3 (312.1)
property, plant and - 1,305.
equipment 0
c (133.0) -
d 1.8
Loans to joint 29.3 - - 29.3
ventures
Other assets 33.1 - 52.6 85.7
Assets held for sale 51.5 - (51.5) -
1,862.2 (443.3) 1.1
1,420.
0
Total assets 2,149.2 (446.1) -
1,703.
1
LIABILITIES
Current liabilities
Trade and other g 65.9 - (20.2) 45.7
payables (Accounts and
other payables)1
Current tax payable 1.6 - - 1.6
(Income tax payable)1
Current portion of 5.0 - (5.0) -
joint venture debt
Interest bearing 63.6 - 5.0 68.6
liabilities (Current
portion of long term
debt)1
Provisions - - 20.2 20.2
Other financial g 132.1 - - 132.1
liabilities
268.2 - - 268.2
Non-current
liabilities
Interest bearing g - - 47.6 47.6
liabilities (Long term
debt)1
Joint venture debt 47.6 (47.6) -
Convertible debentures 140.9 - - 140.9
Asset retirement 16.1 (16.1) -
obligations
Provisions e - 56.7 17.8 74.5
Deferred tax a 180.7 (42.3) - 138.4
liabilities (Future
income tax)1
Other financial e,g 1.9 - 11.2 13.1
liabilities
Liabilities held for 12.9 - (12.9) -
sale
400.1 14.4 - 414.5
Equity 1,480.9 (460.5) - 1,020.
4
Total equity and 2,149.2 (446.1) - 1,703.
liabilities 1
(1) Terms used in brackets represent Canadian GAAP terminology
Balance sheet reconciliation - December 31, 2010
Canadian IFRS Classificati IFRS
GAAP adjustment on
adjustments
Notes US$m US$m US$m US$m
ASSETS
Current assets
Cash, cash equivalents 315.8 - 8.6 324.4
and restricted cash
Restricted cash 8.6 - (8.6) -
Trade and other 103.4 - - 103.4
receivables (Accounts
and other
receivables)1
Inventories c 91.0 (1.0) - 90.0
Other assets 13.6 - (0.8) 12.8
532.4 (1.0) (0.8) 530.6
Non-current assets
Mineral interests, a 2,729.9 (365.0) (25.0) 2,339
property, plant and .9
equipment
Loans to joint 28.7 - - 28.7
ventures
Other assets 78.0 (2.2) (16.9) 58.9
2,836.6 (367.2) (41.9) 2,427
.5
Total assets 3,369.0 (368.2) (42.7) 2,958
.1
LIABILITIES
Current liabilities
Trade and other 82.8 - (20.5) 62.3
payables (Accounts and
other payables)1
Current tax payable 13.8 - - 13.8
(Income tax payable)1
Interest bearing 60.1 - - 60.1
liabilities (Current
portion of long term
debt)1
Provisions - - - -
Current portion of 151.4 - - 151.4
convertible debentures
Other financial 25.4 - 20.5 45.9
liabilities
333.5 - - 333.5
Non-current
liabilities
Interest bearing - - 86.2 86.2
liabilities (Long term
debt)1
Joint venture debt 86.2 - (86.2) -
Convertible debentures d 206.3 2.4 - 208.7
Asset retirement 26.2 - (26.2) -
obligations
Provisions e - 73.9 (8.8) 65.1
Deferred tax a 377.3 (38.3) (5.0) 334.0
liabilities (Future
income tax)1
Other financial 3.1 - (2.7) 0.4
liabilities
699.1 38.0 (42.7) 694.4
Equity 2,336.4 (406.2) - 1,930
.2
Total equity and 3,369.0 (368.2) (42.7) 2,958
liabilities .1
(1) Terms used in brackets represent Canadian GAAP terminology
Income statement reconciliation for the three months ended June 30, 2010
Canadian IFRS Classificatio IFRS
GAAP adjustment n adjustments
Notes US$m US$m US$m US$m
Revenues 66.0 - - 66.0
Operating expenses c (22.2) (0.1) - (22.3
)
Depreciation c (19.4) 0.3 - (19.1
)
Earnings from mine 24.4 0.2 - 24.6
operations
General and (10.0) - - (10.0
administrative )
Exploration expense (1.4) - - (1.4)
Impairment of mineral (0.7) - - (0.7)
interests, plant and
equipment
Care and maintenance (0.4) - - (0.4)
Operating (loss) / 11.9 0.2 - 12.1
earnings
Finance income 1.2 - - 1.2
(Interest and other
income)1
Finance expense e (13.9) (1.7) - (15.6
(Interest and other )
income)1
Foreign exchange c 6.8 10.3 - 17.1
(loss) / gain
Other d,e (11.2) 6.3 - (4.9)
(Loss) / earnings (5.2) 15.1 - 9.9
before income taxes
Current income tax (6.2) - 6.2 -
expense
Deferred income tax 1.7 - (1.7) -
recovery
Current and deferred - - (4.5) (4.5)
income tax expense
Net (loss) / earnings (9.7) 15.1 - 5.4
Net loss per share
Basic (0.02) 0.01
Diluted (0.02) 0.01
Weighted average
number of shares
(millions)
Basic 587.5 587.5
Diluted 680.3 680.3
(1) Terms used in brackets represent Canadian GAAP terminology
Income statement reconciliation for the six months ended June 30, 2010
Canadia IFRS Classifica IFRS
n GAAP adjustme tion
nt adjustment
s
Note US$m US$m US$m US$m
s
Revenues 101.5 - - 101.5
Operating expenses c (36.3) - - (36.3)
Depreciation c (31.9) 1.0 - (30.9)
Earnings from mine operations 33.3 1.0 - 34.3
General and administrative (19.4) - - (19.4)
Exploration expense (2.3) - - (2.3)
Impairment of mineral (1.9) - - (1.9)
interests, property, plant
and equipment
Care and maintenance (2.0) - - (2.0)
Operating (loss) / earnings 7.7 1.0 - 8.7
Finance income (Interest and 2.2 - - 2.2
other income)1
Finance expense (Interest and e (23.0) (3.4) - (26.4)
other income)1
Foreign exchange (loss) / c (0.7) 21.8 - 21.1
gain
Other d,e (12.3) 15.8 - 3.5
(Loss) / earnings before (26.1) 35.2 - 9.1
income taxes
Current income tax expense (9.4) - 9.4 -
Deferred income tax recovery 4.3 - (4.3) -
Current and deferred income - - (5.1) (5.1)
tax expense
Net (loss) / earnings (31.2) 35.2 - 4.0
Net loss per share
Basic (0.05) 0.01
Diluted (0.05) 0.01
Weighted average number of
shares (millions)
Basic 587.5 587.5
Diluted 680.3 680.3
(1) Terms used in brackets represent Canadian GAAP terminology
Cash flow statement reconciliation for three months ended June 30, 2010
Canadian IFRS IFRS
GAAP adjustment
Notes US$m US$m US$m
Net (loss) / earnings from continuing (9.7) 15.1 5.4
operations
Items not affecting cash:
- Fair value adjustment included in (6.7) 6.7 -
revenue
- Depreciation c 19.4 (0.3) 19.1
- Impairment of mineral interest 0.7 - 0.7
plant and equipment
- Loss on available for sale 8.3 - 8.3
securities
- Stock option and restricted share 1.8 (1.8) -
expense
- Finance income - (1.2) (1.2)
- Finance expense 1.4 14.2 15.6
- Income tax expense - 6.2 6.2
- Unrealized foreign exchange loss / c (9.7) (10.3) (20.0)
(gain)
- Future income tax recovery (1.7) - (1.7)
- Fair value adjustment on financial d,e - 4.6 4.6
liabilities
- Other (0.6) (14.9) (15.5)
Movement in non-cash working capital (30.1) - (30.1)
Operating cash flow before interest (26.9) 18.3 (8.6)
and tax
- Tax paid - (6.9) (6.9)
- Cash interest paid - (12.6) (12.6)
Cash flows used in operating (26.9) (1.2) (28.1)
activities
Additions to mineral interests, (24.9) - (24.9)
property, plant and equipment
Cash payments for other assets (6.9) - (6.9)
Acquisition of available for sale 11.1 - 11.1
securities
Proceeds on sale of Dominion 37.3 - 37.3
Interest received - 1.2 1.2
Other (1.9) - (1.9)
Cash flows used in investing 14.7 1.2 15.9
activities
Net loans received by joint ventures 14.5 - 14.5
Advances received 7.9 - 7.9
Repayment of credit facility (65.0) - (65.0)
Cash flows used in financing (42.6) - (42.6)
activities
Effects of exchange rate changes on (2.3) - (2.3)
cash and cash equivalents
Net decrease in cash and cash (57.1) - (57.1)
equivalents
Cash and cash equivalents at the 451.4 8.6 460.0
beginning of the period
Cash and cash equivalents at the end 394.3 8.6 402.9
of the period
(1) Terms used in brackets represent Canadian GAAP terminology
Cash flow statement reconciliation for six months ended June 30, 2010
Canadian IFRS IFRS
GAAP adjustment
Notes US$m US$m US$m
Net (loss) / earnings from continuing (31.2) 35.2 4.0
operations
Items not affecting cash:
- Fair value adjustment included in (10.1) 10.1 -
revenue
- Depreciation c 31.9 (1.0) 30.9
- Impairment of mineral interest 1.9 - 1.9
plant and equipment
- Loss on available for sale 8.2 - 8.2
securities
- Stock option and restricted share 3.8 (3.8) -
expense
- Finance income - (2.2) (2.2)
- Finance expense 7.8 18.6 26.4
- Income tax expense - 9.4 9.4
- Unrealized foreign exchange loss / c (3.3) (21.8) (25.1)
(gain)
- Future income tax recovery (4.3) - (4.3)
- Fair value adjustment on financial d,e - (5.8) (5.8)
liabilities
- Other (0.1) (16.9) (17.0)
Movement in non-cash working capital (31.3) 1.1 (30.2)
Operating cash flow before interest (26.7) 22.9 (3.8)
and tax
- Tax paid - (11.1) (11.1)
- Cash interest paid - (13.2) (13.2)
Cash flows used in operating (26.7) (1.4) (28.1)
activities
Additions to mineral interests, (45.9) - (45.9)
property, plant and equipment
Cash payments for other assets (24.3) - (24.3)
Acquisition of Christensen Ranch and (28.9) - (28.9)
Irigaray
Acquisition of available for sale (15.3) - (15.3)
securities
Karatau promissory note and (111.8) - (111.8)
contingent payment
Proceeds on sale of Dominion 37.3 - 37.3
Interest received - 1.4 1.4
Restricted cash (8.6) 8.6 -
Other (2.0) - (2.0)
Cash flows (used in) / from investing (199.5) 10.0 (189.5)
activities
Common shares issued, net of issue 0.1 - 0.1
costs
Net loans received by joint ventures 26.9 - 26.9
Advances received 7.9 - 7.9
Debentures issued, net of issue costs 498.6 - 498.6
Repayment of credit facility (65.0) - (65.0)
Cash flows from financing activities 468.5 - 468.5
Effects of exchange rate changes on 3.5 - 3.5
cash and cash equivalents
Net increase in cash and cash 245.8 8.6 254.4
equivalents
Cash and cash equivalents at the 148.5 - 148.5
beginning of the period
Cash and cash equivalents at the end 394.3 8.6 402.9
of the period
(1) Terms used in brackets represent Canadian GAAP terminology
Reconciliation of comprehensive income
Not Three Six Year
es months months ended
ended ended
Jun 30, Jun 30, Dec 31,
2010 2010 2010
US$m US$m US$m
Comprehensive loss under (16.5) (37.5) (176.1)
Canadian GAAP
Income statement
adjustments:
Exchange differences on c 10.3 21.8 12.7
translation
Impairment of mineral a - - 65.7
interest, property, plant
and equipment
Fair value adjustment of d 0.1 5.0 (8.9)
financial liabilities
Fair value adjustment of d 6.2 10.8 (26.5)
embedded derivative
Unwinding of contingent e (1.7) (3.4) (7.0)
liabilities
Other 0.2 1.0 -
15.1 35.2 36.0
Other comprehensive income
adjustments:
Exchange differences on c (8.9) (7.2) (6.8)
translation
Total IFRS conversion 6.2 28.0 29.2
comprehensive income
adjustments
Comprehensive loss under (10.3) (9.5) (146.9)
IFRS
Reconciliation of shareholders` equity
Not Period Year
es ended ended Jan 1,
Jun 30, Dec 31, 2010
2010 2010
US$m US$m US$m
Under Canadian GAAP 1,617.0 2,336.4 1,480.9
IAS 36 - Impairment of assets a (267.6) (210.8) (269.8)
IAS 21 - Effects of changes c (123.0) (122.1) (135.8)
in foreign exchange rates
IAS 39 - Financial d (32.5) (2.3) -
instruments
IFRS 1 - Business e (53.4) (71.0) (54.9)
combinations
Under IFRS 1,140.5 1,930.2
1,020.4
Explanation of differences between Canadian GAAP and IFRS giving rise to the
adjustments in the reconciliations:
(a) IAS 36 - Impairment of assets
Under Canadian GAAP, impairment is recognized for non-financial assets based on
estimated fair value when the undiscounted future cash flows from an asset, or
group of assets, is less than the carrying value.
Under IFRS, an entity is required to assess at the end of each reporting period
where there is any indication that an asset may be impaired. If any such
indication exists, the entity estimates the recoverable amount of the asset,
determined as the higher of the estimated fair value less cost to sell or value
in use. Value in use is the discounted present value of estimated future cash
flows expected to arise from the planned use of an asset and from its disposal
at the end of its useful life.
IFRS also requires the reversal of an impairment loss when the recoverable
amount is higher than the carrying value (by no more than what the depreciated
amount of the asset would have been had the impairment not occurred) unlike
Canadian GAAP, which does not permit reversals.
The Corporation performed its analysis of impairment of its properties on the
transition date. The assessment resulted in IFRS opening balance sheet
impairments of $312.1 million on the Honeymoon Project ($62.8 million), the
Kharasan Project ($48.9 million), the Corporation`s United States Development
projects in Wyoming ($174.7 million) and its Conventional mining projects in the
United States ($25.7 million). The Honeymoon project was impaired under Canadian
GAAP for the year ended December 31, 2010, aligning the value with IFRS.
(b) IFRS 2 - Share based payments
Under Canadian GAAP, the Corporation elected to accrue compensation cost as if
all instruments granted were expected to vest and recognize the effect of actual
forfeitures as they occur.
Under IFRS, an entity is required to estimate the number of equity-settled
instruments that are expected to vest and then make adjustments to the actual
number that vest unless forfeitures are due to market-based conditions. The
application of a forfeiture rate on the options resulted in a larger portion of
the options being expensed on transition date.
( c) IAS 21- The effects of changes in foreign exchange rates
Under Canadian GAAP, there are various indicators to be considered in
determining the appropriate functional currency of a foreign operation and such
indicators are similar to those under IFRS.
When the assessment of functional currency under IFRS provides mixed indicators
and the functional currency is not obvious, priority should be given to certain
indicators.
As the Corporation has interests in entities that prepare stand alone IFRS
financial statements, the functional currency used in such financial statements
needs to be consistent with the functional currency used in the group financial
statements. The Corporation has identified certain entities where the functional
currency changed to the local currency on transition to IFRS and this resulted
in non-monetary assets and liabilities being translated to the reporting
currency using the closing rate on balance sheet date, compared to the
historical rate.
(d) IAS 39 - Financial instruments
Under Canadian GAAP, embedded derivative accounting is not required for a cash
conversion option included as a feature of a convertible debenture, as the cash
conversion feature is regarded as a settlement feature of the instrument.
Under IFRS, a cash conversion option included as a feature of a convertible
debenture meets the definition of an embedded derivative and is required to be
separated and accounted for as a derivative instrument.
The Corporation recognized the conversion option of the 2010 Debentures as a
liability carried at fair value through profit and loss. The adjustment had no
effect on the opening balance sheet as the convertible debentures were issued
during 2010. The comparative 2010 position has been adjusted.
(e) IFRS 1 - Business combinations election
The Corporation has elected to apply the business combination standard
prospectively with adjustments as necessary, and have to recognize contingent
liabilities and payments not previously recognized that arose from past business
combinations. Contingent payments of a cash nature are recognized as liabilities
and payments that are equity in nature are recognized in equity as part of
reserves.
(f) IFRS 1 - Cumulative translation losses election
The Corporation has elected to reset the cumulative translation losses to zero
on transition date.
(g) Reclassifications
The Corporation has reclassified certain balances on its balance sheet and cash
flow statement to conform with its adjusted note disclosures resulting from the
transition.
10 August 2011
Sponsor
Nedbank Capital
Date: 10/08/2011 09:42:14 Produced by the JSE SENS Department.
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