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FUM
FIU
FUM - First Uranium Corporation - Production update for the three months ended
March 31, 2012 all amounts are in US dollars unless otherwise noted.
First Uranium Corporation
(Continued under the laws of British Columbia, Canada)
(Registration number C0777384)
(South African registration number 2007/009016/10)
Share code: FUM ISIN: CA33744R1029
April 19, 2012
PRODUCTION UPDATE FOR THE THREE MONTHS ENDED MARCH 31, 2012
All amounts are in US dollars unless otherwise noted.
Toronto and Johannesburg - First Uranium Corporation (TSX:FIU), (JSE:FUM)
(ISIN:CA33744R1029) ("First Uranium" or "the Company") today released its
production results for the three months ended March 31, 2012 ("Q4 2012") .
Abbreviation Period Abbreviation Period
Q1 2012 April 1, 2011 - Q1 2011 April 1, 2010 - June
June 30, 2011 30, 2010
Q2 2012 July 1, 2011 - Q2 2011 July 1, 2010 -
September 30, 2011 September 30, 2010
Q3 2012 October 1, 2011 - Q3 2011 October 1, 2010 -
December 31, 2011 December 31, 2010
Q4 2012 January 1, 2012 - Q4 2011 January 1, 2011 -
March 31, 2012 March 31, 2011
FY 2012 April 1, 2011 - FY 2011 April 1, 2010 -
March 31, 2012 March 31, 2011
FY 2013 April 1, 2012 - Q1 2013 April 1, 2012 - June
March 31, 2013 30, 2012
For Q4 2012, the Company sold 32,923 ounces of gold, a 15% decrease on the
38,548 ounces of gold sold in Q3 2012. Only 86 pounds of uranium was produced
in Q4 2012, compared to 30,887 pounds in Q3 2012.
The following table summarizes the production from each operation during Q4
2012, compared to the previous quarters in FY 2012:
FY 2012 Q4 2012 Q3 2012 Q2 2012 Q1 2012
MWS
Tonnes of ore reclaimed 19,813 4,981 5,107 4,822 4,903
(000s)
Average gold head grade 0.324 0.321 0.319 0.348 0.309
(g/t)
Gold plant recovery (%) 49% 48% 51% 51% 44%
Gold sold (oz) 99,003 24,862 25,142 27,453 21,546
Ezulwini Mine
Tonnes of ore milled 566,216 91,302 148,072 162, 577 164,265
Average gold recovery
grade (g/t) 2.66 3.11 2.40 2.53 2.79
Gold sold (oz) 47,435 8,061 13,406 13,076 12,892
Uranium produced (lbs) 87,340 86 30,887 36,006 20,361
EZULWINI MINE
At Ezulwini Mine, a total of 8,061 ounces of gold was sold in Q4 2012, compared
to 13,406 ounces of gold sold in Q3 2012. Although the Ezulwini Mine only
produced 86 pounds of uranium in Q4 2012, the sale of 23,756 pounds of uranium
produced in Q3 2012, is reflected in this quarter`s revenue. The decline in both
gold and uranium production for Q4 2012 is primarily a result of the
restructuring of Ezulwini as announced in December 2011 and reflects both the
reduction in the workforce and the limited number of working areas available as
a result of the new mine plan. Indications are that production is beginning to
stabilise.
The planned restructuring in accordance with Section 189a of The South African
Labour Relations Act has now been concluded. Following consultation and
negotiations with organized labour, the staff complement was reduced by 1,320
employees, with many being offered alternative positions at neighbouring
operations. As at April 1, 2012, the Ezulwini Mine employed 1,980 employees.
In Q4 2012, the on-going drive to improve safety performance resulted in a
significant improvement in key safety metrics. On March 14, 2012, the mine
reached 250,000 fatality free shifts, which is the first important milestone
towards the operation`s goal of 1,000,000 fatality free shifts by the end of FY
2013.
Aligned to the restructuring of the Ezulwini Mine, management has completed a
new ten-year operating plan which includes more detailed analysis of the Upper
Elsburgs ("UEs", a gold-only massive ore body) and plans for further technical
work to be conducted, in order to define a four-year mineral reserve and a
corresponding production plan which yields sustainable and profitable results.
In terms of the new four-year plan, mining of all marginal production panels has
ceased. As a consequence, mining in the Middle Elsburgs ("MEs", a gold and
uranium ore body with relatively low gold grades) has been temporarily halted
and the operation of the uranium plant suspended due to the combination of low
uranium prices and the high costs associated with mining the MEs. The MEs are on
average 1,500 metre further from the shaft and 300 metre deeper than the UE
orebody which adds significantly to the cost of mining this area. The lower gold
grades and persistently low uranium prices do not generate sufficient revenue
per tonne mined to off-set the high cost per tonne. This is further exacerbated
by the high cost per tonne associated with operating the under-utilized uranium
plant and the Company`s limited cash reserves. As a result and as part of the
restructuring, the Ezulwini uranium plant was placed on care and maintenance at
the end of February 2012.
Notwithstanding the restructured operation at Ezulwini, and the reduction in the
required delivery of gold to Franco-Nevada Barbados Corporation to 7% of gold
production, the turnaround in operations at Ezulwini has not yet been realized
or yielded the expected results. While the quantity and grade of the blasted
tonnes is substantially in-line with the new operating plan, a fall of ground on
one of the major ore transfer levels has required that the underground
production be trammed at a much greater distance to the shaft. The mobile
trackless equipment on this major ore transfer level, is currently not
sufficiently robust to sustain the required rate of transport of ore to the
shaft. As a result, the operation continues to lose money and consume cash at a
greater rate than planned despite the fact that all efforts continue to resolve
this issue. In order to address these issues, management is in the process of
implementing a detailed action plan, which includes clearing the fall of ground,
correcting the trackless section operating conditions and addressing the
mechanical condition of the trackless equipment on the level. These actions are
expected to yield the desired results as early as May 2012.
MINE WASTE SOLUTIONS
During Q3 2012, management downgraded its FY 2012 guidance from a range of
between 105,000 and 115,000 ounces to a range of between 98,000 and 100,000
ounces. MWS achieved 99,003 ounces. Quarter on quarter gold sales remained
stable with a marginal 1% decrease from Q3 2012 to Q4 2012. The throughput which
decreased marginally in aggregate across the three gold modules was offset by a
slight improvement in aggregate feed grade delivered to the three gold modules.
Gold circuit one (Phase 1A) saw a 7% drop in grade and an associated drop in
recovery. As previously reported, the drop off in grade was anticipated as the
resources from the high grade Buffelsfontein No. 2 tailings dam diminish and the
proportion of the mining mix from the lower grade Buffelsfontein No. 3 tailings
dam increases. As previously reported, process optimisation test work has been
undertaken in an effort to try and improve recoveries and mitigate the
production impacts of a reduced feed grade. As a result of the test work, an
extended leach circuit (utilising existing infrastructure) will be commissioned
during Q1 2013 targeting improved recoveries.
The second gold circuit (Phase 1B) continues to perform well, the feed grade
delivered to the plant during Q4 2012 increased by 9%, largely due to the
proportion of high grade floor material from Buffelsfontein No. 4 tailings dam
which is approaching the end of its life. Despite the increase in feed grade
compared to Q3 2012, there was no commensurate increase in recoveries.
Management attribute this to the recent clay intersections on Buffelsfontein No.
3 tailings dam and anticipate that the clay will continue to impact on recovery
performance. In addition, management anticipate that throughput performance will
be diminished as a result of the increased difficulty of handling clay bearing
material. Historical experience from reclamation activities on Buffelsfontein
No. 2 tailings dam suggest that throughput rates will reduce by approximately
10%, however this will largely depend upon the extent of the clay.
While a certain quantity of clay was anticipated in processing the
Buffelsfontein No. 3 tailings dam, the performance for March was negatively
affected by the unexpected exposure of material with a high clay content
(approximately 70% compared to an anticipated 20%). The Buffelsfontein No. 3
tailings dam supplies 90% of the tonnes processed in the Phase 1A and Phase 1B,
and the high clay content negatively impacted the tonnage as well as the
recovery and consequently the revenue of these two phases. Management has made
immediate adjustments to the MWS mining sequence to reduce the amount
(percentage) of clay material delivered to the plant for processing. Early
indications are that these adjustments are having a positive impact on
throughput and recoveries in the first and second gold circuits (Phase 1A and
1B).
Gold circuit three (Phase 2) processes material from the relatively lower grade
Hartebeesfontein No. 1 tailings dam. To preserve feed grade delivered to the
plant, the mining mix to date has been supplemented by high grade material from
the small satellite resources located on the western perimeter of the project
footprint. Throughput rates remained fairly constant, however marginal quarter
on quarter decreases in feed grade to the plant coupled with decreased recovery
performance impacted negatively on Q4 2012 production compared to Q3 2012. The
high grade contribution to the mining mix from the satellite resources will
dissipate going forward and consequently the grade delivered to the plant will
reduce by approximately 15%. This is not a surprise, and in previous disclosure
management indicated that it was focusing on test work to improve recovery
performance. This test work is ongoing with no definitive process modifications
identified to date, consequently it is anticipated that recovery performance
will reduce in line with a lower feed grade being delivered to the plant.
AFFECT ON PRO FORMA DISTRIBUTIONS FROM SALE PROCEEDS
As at March 31, 2012, the cash reserves of the Company, net of the semi-annual
interest paid on April 2, 2012 in respect of the secured convertible notes due
March 31, 2013, were $6.7 million.
The Company announced on March 2, 2012, that it had entered into a definitive
agreement (the "AGA Agreement") for the sale indirectly of the MWS tailing
recovery project to AngloGold Ashanti Limited ("AGA") (the "AGA Transaction").
Under the terms of the AGA Agreement, AGA will pay $335 million in cash for all
of the shares and associated claims of First Uranium (Proprietary) Limited,
which holds indirectly the MWS tailings reprocessing project, subject to the
fulfilment of a number of conditions precedent. In a separate transaction, the
Company also announced that it entered into a binding letter agreement providing
for the sale of all of the shares of First Uranium Limited (a wholly-owned
subsidiary of the Company), which owns all of the shares of Ezulwini, to Gold
One International Limited ("Gold One") for $70 million in cash (the "Gold One
Transaction" and together with the AGA Transaction, the "Transactions") and a
credit agreement with Gold One for a $10 million loan facility (the "Gold One
Loan"). On April 2, 2012, the Company announced that it had entered into a
definitive agreement with Gold One to complete the Gold One Transaction subject
to fulfilment of a number of conditions precedent. (See news releases dated
March 2, 2012 and April 2, 2012.)
On the announcement of the Transactions on March 2, 2012, the Company outlined
the Pro Forma Use of Proceeds, including an approximate amount expected to be
available to shareholders on closing of $36.6 million. The Pro Forma amounts
were subject to change due to, among other things, currency fluctuations
(conversion rates were based on the Bank of Canada noon rate as of March 1,
2012), results of operations and the repayment at closing of the Transactions of
any amount drawn under the Gold One Loan.
The Company has accessed $5 million of the Gold One Loan and expects that it
will have to draw on the remaining $5 million to sustain operations. As the
Gold One Loan must be repaid at the closing of the Gold One Transaction, the
repayment of the loan will reduce the Pro Forma Proceeds at closing by $10
million. In addition, under the terms of the Transactions, the working capital
of the operations acquired must be positive, or at a minimum there must be at
least sufficient cash and other current assets to fund current liabilities. If
there is a further shortfall in operating performance, that may further reduce
the Pro Forma Proceeds and result in material reduction in the cash available
for distribution to Shareholders at the closing of the Transactions.
MWS PERMITTING
As reported in the Company`s news release issued on February 14, 2012, MWS
received a notice of intention on February 10, 2012 to issue a directive ("Pre-
Directive") in terms of section 31 A of the Environment Conservation Act (No. 73
of 1989) ("ECA") and Section 28 of the National Environmental Management Act
(No. 107 of 1998) from the Department of Environmental Affairs ("DEA"). The Pre-
Directive lists certain concerns that the DEA has with the MWS reclamation
project and the environmental impact thereof. MWS submitted a formal response to
the DEA on February 24, 2012. Whilst no further communication has been received
from the DEA related to the submission, management is confident that the issues
raised have been materially addressed. MWS continues to operate legally in terms
of current authorizations and legislation.
About First Uranium Corporation
First Uranium Corporation (TSX:FIU, JSE:FUM) operates the Ezulwini Mine, an
underground mining operation, and Mine Waste Solutions (MWS), a tailings
recovery facility. Both operations are situated in South Africa.
For further information, please contact:
Scot Sobey scot.sobey@firsturanium.com
Tel: +27 82 786 1039
Gail Strauss, gailstrauss@mweb.co.za
Tel: +27 82 936 8481
Cautionary Language Regarding Forward-Looking Information
This news release contains and refers to forward-looking information
based on current expectations. All other statements other than statements of
historical fact included in this release are forward-looking statements
(or forward-looking information). The Company`s plans involve various estimates
and assumptions and its business and operations are subject to various risks
and uncertainties. For more details on these estimates, assumptions, risks and
uncertainties, see the Company`s most recent Annual Information Form and
most recent Management Discussion and Analysis on file with the Canadian
provincial securities regulatory authorities on SEDAR at www.sedar.com.
These forward-looking statements are made as of the date hereof and there can
be no assurance that such statements will prove to be accurate, such statements
are subject to significant risks and uncertainties, and actual results and
future events could differ materially from those anticipated in such statements,
including without limitation, the statements regarding the proposed transactions
with Gold One International Limited and AngloGold Ashanti Limited. Accordingly,
readers should not place undue reliance on forward-looking statements that are
included herein, except in accordance with applicable securities laws.
www.firsturanium.com
Date: 19/04/2012 16:00:05 Produced by the JSE SENS Department.
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