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SXR
SXR
sxr Uranium One Inc - Unaudited Interim Consolidated Financial Statements for
the quarter ended March 31, 2006
sxr Uranium One Inc
(Formerly Southern Cross Resources Inc.)
(Incorporated in Canada)
(Registration number: 15096422420)
Share code on the JSE: SXR ISIN: CA87112P1062
Share code on the TSX: SXR ISIN: CA87112P1062
("SXR")
Unaudited Interim Consolidated Financial Statements for the quarter ended March
31, 2006
Consolidated Balance Sheets
as at March 31, 2006 and December 31, 2005
(in US Dollars)
Unaudited as Unaudited as at
at Mar 31, Dec 31, 2005
2006
Notes US$"000 US$"000
ASSETS
Current assets
Cash 134,930 10,891
Accounts receivable 10,472 8,823
Inventories 638 681
146,040 20,395
Non-current Assets
Property, plant and equipment 2 189,820 157,255
Asset retirement fund 1,406 1,275
191,226 158,530
Total assets 337,266 178,925
LIABILITIES
Current liabilities
Accounts payable and accrued 13,549 15,045
liabilities
Current portion of lease 1,494 1,452
obligations
Short term loan 3 6,374 993
21,417 17,490
Non-current liabilities
Asset retirement obligation 4,249 4,094
Lease obligations 1,225 1,560
Future taxation liability 6 32,264 21,156
37,738 26,810
Non-controlling interest 3,265 -
SHAREHOLDERS" EQUITY
Share capital 4 356,285 216,123
Contributed surplus 5 14,013 11,367
Accumulated deficit (116,309) (114,399)
Currency translation adjustments 20,857 21,534
274,846 134,625
Total equity and liabilities 337,266 178,925
See accompanying notes to the Consolidated Financial Statements, including:
- Nature of operations and basis of presentation (note 1)
sxr Uranium One Inc.
Consolidated Statement of Operations and Deficit
for the 3 months ended March 31, 2006
(in US Dollars)
Unaudited
3 months
Notes ended
March 31,
2006
US$"000
Gold sales 1,021
Cost of sales (3,373)
Gross loss (2,352)
Sundry income 114
General and administrative (1,545)
expenditure
Share options expensed (3,201)
Exploration expenditure (2,597)
Other net costs ( 49)
Operating loss (9,630)
Interest received 776
Interest paid ( 340)
Profit on disposal of investments 8 8,135
Non-controlling interest in 171
earnings of subsidiary
Loss before income taxes ( 888)
Provision for income taxes 6 (1,022)
Net loss (1,910)
Accumulated deficit at the (114,399)
beginning of the period
Accumulated deficit at the end of (116,309)
the period
Basic and fully diluted loss per 7 ( 1.91)
common share (cents)
Weighted average number of basic 7 99,934,468
common shares outstanding
See accompanying notes to the Consolidated Financial Statements
sxr Uranium One Inc.
Consolidated Statement of Cash Flows
for the 3 months ended March 31, 2006
(in US Dollars)
Unaudited
3 months
Notes ended
March 31,
2006
US$"000
Net Loss (1,910)
Add back: Net finance costs (436)
Add back: Non-cash items:
- Non-controlling interest in (171)
earnings of subsidiary
- Depreciation and amortization 228
- Expensing share options 3,201
- Profit on disposal of (8,135)
investments
- Future income taxes 1,022
(6,201)
Movement in working capital:
- Increase in inventories 52
- Increase in trade receivables (1,583)
and prepayments
- Increase/(decrease) in trade and (1,047)
other payables
Increase in rehabilitation and ( 183)
cost closure obligations
Cash utilized by operations (8,962)
Net interest received 436
Cash flows from operating (8,526)
activities
Cash taken over from Sub-Nigel 8 1,933
Additions to property, plant and (12,965)
equipment
Increase in environmental trust (5)
and other investments
Cash flows from investing (11,037)
activities
Net proceeds from the issue of 139,607
ordinary shares
Loan received during the year 5,381
Decrease in capital element of (293)
finance lease and other long term
debt
Cash flows from financing 144,695
activities
Effects of exchange rate changes (1,093)
on cash held in foreign currencies
Net increase in cash 124,039
Cash at the beginning of the 10,891
period
Cash at the end of the period 134,930
See accompanying notes to the Consolidated Financial Statements
sxr Uranium One Inc.
Notes to the unaudited Interim Consolidated Financial Statements
March 31, 2006
1 NATURE OF OPERATIONS and basis of presentation
These unaudited interim consolidated financial statements have been prepared by
the Corporation in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). The preparation of the financial statements is
based on accounting policies and practices consistent with those used in the
preparation of the audited annual consolidated financial statements. The
accompanying unaudited interim consolidated financial statements should be read
in conjunction with the Notes to the Corporation"s audited annual consolidated
financial statements for the year ended December 31, 2005, since they do not
contain all disclosures required by Canadian GAAP for annual financial
statements. The unaudited interim consolidated financial statements reflect all
normal and recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of the interim period presented.
sxr Uranium One Inc. (the "Corporation") is a Canadian corporation with a
primary listing on the Toronto Stock Exchange and a secondary listing on the
JSE Limited (the Johannesburg stock exchange), engaged in the acquisition,
exploration and development of properties for production of uranium in South
Africa, Australia and Canada and gold in South Africa.
The Corporation owns 100% of the Dominion Uranium project in South Africa and
the permitted Honeymoon Uranium project in South Australia. Through a joint
venture with Pitchstone Exploration Ltd., the Corporation is also engaged in
uranium exploration activities in the Athabasca Basin of Saskatchewan. The
Corporation"s Aflease Gold Limited subsidiary owns the Modder East gold
property and related gold assets in South Africa.
The exploration and development of mineral properties involves significant
financial risk. In the event these properties are determined to be commercially
viable, additional financing will be required.
Aflease Gold Limited
On January 10, 2006 Sub Nigel Gold Mining Company Limited ("Sub Nigel")
acquired all of the issued and outstanding ordinary shares of New Kleinfontein
Mining Company Limited ("New Kleinfontein"), a wholly-owned subsidiary of
Aflease Gold and Uranium Resources Limited ("Aflease"), and all amounts due by
New Kleinfontein to Aflease on loan account. The net assets so acquired had a
carrying value of $15.0 million at December 31, 2005 and the purchase
consideration was $53.2 million, settled by issuing 339,011,680 new Sub Nigel
ordinary shares to Aflease at 96 South African cents ($0.16) per share. Sub
Nigel subsequently changed its name to Aflease Gold Limited. Through this
transaction, Aflease now owns 79.09% of Aflease Gold.
For accounting purposes, the transaction is considered a reverse takeover
whereby New Kleinfontein is considered the acquiring company as the
shareholders of Aflease acquired more than 50% of the issued and outstanding
shares of Sub Nigel. The results of operations of Sub Nigel were included with
effect from January 11, 2006. The consolidated balance sheet at March 31, 2006
represents the financial position of the entire Group.
Comparatives
The Ontario Securities Commission, as principal regulator of the Corporation,
issued a decision document dated May 4, 2006, pursuant to the Mutual Reliance
Review System for exemptive relief applications, granting the Corporation an
exemption from providing comparative financial information for the three months
ended March 31, 2006 as prior-period information has not been prepared on a
basis consistent with this period.
2 Property, plant and equipment
Mar 31, Dec 31,
2006 2005
Accumula Accumulate
ted d
Cost amortiza Net Cost amortizati Net
tion on
US$"000 US$"000 US$"000 US$"000 US$"000 US$"000
Mine 50,918 (3,898) 47,020 38,014 (3,676) 34,338
development
costs and
mine plant
facilities
Undeveloped 142,428 - 142,428 122,639 - 122,639
properties
Motor 525 (334) 191 433 (316) 117
vehicles
Office 598 (417) 181 544 (383) 161
equipment
194,469 (4,649) 189,820 161,630 (4,375) 157,255
Owned assets 189,741 156,890
Leased 79 365
assets
Total net 189,820 157,255
carrying
amount as at
the end of
the period
Mineral properties Undeveloped properties
Undeveloped Mar 31, Dec 31, Mar 31, 2006 Dec 31,
properties 2006 2005 2005
comprise:
US$"000 US$"000 US$"000 US$"000
New Kleinfontein - - 17,187 15,807
Sub-Nigel 343 - 17,612 -
Spaarwater - - 424 -
Honeymoon, 6,030 6,016 28,319 28,670
Australia
Goulds Dam, - - 24,900 24,921
Australia
Billeroo / - - 43,170 43,170
Karkarook,
Australia
Athabasca, Canada 1,240 1,281 1,417 1,427
Loan guarantees, - - 1,786 1,347
Native title and
project generation
7,613 7,297 134,815 115,342
Native title claims
The Corporation"s interests in the Honeymoon and Goulds Dam properties are
subject to two Native Title claims. Agreements have been secured with both
groups, whereby the Corporation pays annual administration fees to each
claimant group.
3 Short term loan
Mar 31, 2006 Dec 31, 2005
US$"000 US$"000
Nedcor Securities loan 6,374 993
6,374 993
The Nedcor Securities loan represents draw-downs on a facility availed by
Nedcor Securities on the back of Aflease"s investment in Randgold shares. This
loan attracts interest in South African at a flat rate of ZAR 7.75% per annum.
The loan has no fixed repayment terms.
4 Share capital
Number of shares Value of shares
Ordinary Shares Mar 31, 2006 Dec 31, 2005 Mar 31, Dec 31,
2006 2005
US$"000 US$"000
Opening balance of 89,103,814 336,451,321 216,123 80,736
common shares in issue
Common shares issued in 22,380,831 50,325,405 139,613 35,508
public or private
offering
Shares issued in - 21,535,107 - 9,312
settlement of
Eastbourne Capital loan
(refer note 10)
Cancelled during the - - - -
year
Exercise of stock 320,098 998,288 555 634
options
Share issue costs (6) (6,220)
Closing balance of 111,804,743 409,310,121 356,285 119,970
issued and outstanding
shares (December 8,
2005)
Conversion of Aflease 368,379,109 119,970
shares to sxr Uranium
One Inc. shares at a
ratio of 0.9
Share consolidation: 1 73,675,822 119,970
share for every 5
shares held
Acquisition of Southern 15,427,992 95,976
Cross Resources Inc.
Warrants issued after 177
December 8, 2005
Closing balance of 111,804,743 89,103,814 356,285 216,123
issued and outstanding
shares
5 Contributed surplus
The following table details the movements of contributed surplus during the
year:
Warrant Options TOTAL TOTAL
s
Mar 31, Dec 31, 2005
2006
US$"000 US$"000 US$"000 US$"000
At the beginning of the year 1,813 9,554 11,367 2,790
Share options expensed - 3,201 3,201 7,240
Share options exercised - (555) (555) (259)
Warrants issued to BMO Nesbitt - - - 1,773
Warrants exercised - - - (177)
At the end of the period 1,813 12,200 14,013 11,367
Options
The fair value of stock options used to calculate compensation expense has been
estimated using the binomial option pricing model with the following
assumptions:
Mar 31, 2006 Dec 31, 2005
Risk free interest rate 4.07% - 4.38% 3.70% - 4.12%
Expected dividend yield 0% 0%
Expected volatility of the Company"s 48.9 - 50.5% 61%
share price
Average expected life of option - 4.66 years 3.88 years
for options with 5 years to expiry
Average expected life of option - 0.56 years 0.95 years
for options with 1 year to expiry
Changes in the subjective input 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 Company"s stock options.
The following is a summary of the Corporation"s options granted under its stock-
based compensation plan:
Weighted Average
Number of options Exercise Price
Mar 31, 2006 Dec 31, 2005 Mar 31, Dec 31,
2006 2005
US $ US$
At the beginning of 5,268,610 13,139,178 2.74 0.47
the year
Granted during the 1,747,542 12,759,147 6.73 0.46
year
Exercised during the (320,099) (997,130) 1.73 0.40
year
Forfeiture of share (77,136) (784,847) 2.58 0.36
options
6,618,917 24,116,348 3.79 0.47
Replacement options 4,340,943
issued to Aflease at
a conversion rate of
0.18
Southern Cross 927,667
options converted at
a rate of 0.20
Outstanding options 6,618,917 5,268,610 3.79 2.74
as at the end of the
period
The stock option compensation expense for the quarter ended March 31, 2006 was
$3.2 million. As at March 31, 2006 the aggregate unexpensed fair value of
unvested stock options granted amounted to $7.5 million (December 31, 2005:
$6.4 million).
The following table summarizes certain information about the Corporations stock
options outstanding at March 31, 2006:
Options outstanding Options exercisable
Range of
Exercise Prices
US$
Number Weighted Weighted Number Weighted
outstanding as average average exercisable average
at remaining exercise as at exercise price
Mar 31, 2006 life price Mar 31, US$
(years) US$ 2006
1.15 to 1.73 2,101,973 4.59 1.46 1,183,507 1.45
2.19 to 2.68 309,481 4.56 2.31 203,775 2.30
3.15 to 3.98 1,614,548 4.01 3.57 1,205,227 3.58
4.05 to 4.32 631,658 3.85 4.16 384,575 4.19
5.06 to 7.26 1,961,257 4.63 6.58 746,873 6.41
6,618,917 4.39 3.79 3,723,957 3.46
Warrants
Number of warrants Allocated value Average exercise
price
Mar 31, 2006 Dec 31, Mar 31, Dec 31, Mar 31, Dec 31,
2005 2006 2005 2006 2005
US$"000 US$"000 US$ US$
At the 5,976,319 3,876,319 1,990 217 2.73
beginning of
the year
Issued to - 1,800,000 - 1,773 - 5.39
BMO Nesbitt
Warrants - 300,000 - - - 5.96
acquired
At the end 5,976,319 5,976,319 1,990 1,990
of the year
The fair value of the Eastbourne warrants was valued, for Canadian GAAP
purposes, at $0.2 million on December 31, 2004. The warrants have a term of 3
years from the date of issue and expire on September 23, 2008.
The fair value of the BMO warrants was valued at $1.8 million on December 30,
2005 using the binomial option pricing model with the following assumptions:
United States zero coupon rates of between 4.39% and 4.83%, expected dividend
yield of nil, expected 90 day volatility of 51.5% and expected warrants term of
1.18 years
The expiry date of the these warrants is the later of (i) March 5, 2007 and
(ii) the expiry of 12 months from the date on which ordinary SXR shares become
listed on Toronto Stock Exchange ("TSX").
Warrants acquired represent those acquired from Southern Cross through the
reverse take-over. These warrants expire on September 17, 2007 and the
beneficiary is Pitchstone Exploration Ltd.
6 Income taxes
Mar 31, 2006
US$"000
South African taxation - current -
Future income taxes 1,022
Future taxes of $1 million were provided on the profit of $7.1 million on
disposal by Aflease of its investment in New Kleinfontein, which constitutes a
capital gain.
A fair value increment in mining assets of $17.7 million arose on the fair
valuation of the assets of Sub Nigel that formed part of the reverse take-over
of Sub Nigel by New Kleinfontein. In compliance with accounting practice, a
future tax liability of $5.1 million was recognized on this revaluation.
A fair value increment in mining assets of $17.3 million arose on the fair
valuation of assets that formed part of the acquisition of Sub Nigel by
Aflease. In compliance with accounting practice, a future tax liability of $5
million was recognized on this revaluation.
7 Basic loss per share and fully diluted loss per share
Mar 31, 2006
Basic and fully diluted loss per share:
The calculation of basic and fully diluted
basic loss per share is based on net loss of
the year of ($"000) (1,910)
and a weighted average number of shares
outstanding of 99,934,468
The effect of warrants and employee stock options is not included in computing
the diluted per share amounts since, in the context of reported losses for the
period, such effect would be anti-dilutive.
8 Reverse take-over of Sub Nigel
In the current financial year the merger between Sub Nigel and New Kleinfontein
was accomplished through the issue of Sub Nigel shares to Aflease in payment
for all of the issued and outstanding ordinary shares of New Kleinfontein and
all amounts due by New Kleinfontein to Aflease on loan account, as detailed in
note 1.
Except for the cash taken over, this transaction has been excluded from the
cash flow statement as it did not result in an exchange of cash.
The aggregate fair values of assets acquired and liabilities assumed on the
purchase of Sub Nigel were as follows:
US$"000
Property, plant and equipment 778
Undeveloped properties - Sub Nigel 17,717
Loan account 1,518
Receivables and prepayments 66
Inventory 9
Cash 1,933
Cost closure obligation ( 35)
Trade and other payables (1,069)
Future taxation liability (5,138)
Value of business combination 15,779
Fair value of New Kleinfontein 37,451
Cash taken over 1,933
Shares consideration (53,230)
Net cash flow 1,933
The terms of the purchase price were agreed between the parties in terms of an
agreement of acquisition dated August 23, 2005. The effective date of the
reverse take-over was January 10, 2006.
The transaction was accounted for in three parts, as follows:
- The disposal, by Aflease, of all of the issued and outstanding ordinary
shares of New Kleinfontein and all amounts due by New Kleinfontein to Aflease
on loan account. This resulted in a gain of $7.0 million.
- The reverse take-over, by New Kleinfontein, of Sub Nigel.
- The acquisition, by Aflease, of a majority of the issued and outstanding
ordinary shares of Sub Nigel. Changes in the percentage shareholding from
79.92% on January 10, 2006 to 79.09% on March 31, 2006 resulted in a further
profit of $1.1 million.
9 Segmented information
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. The Corporation is managed according to
the same segments.
For the quarter ended March 31, 2006:
Total Total Total Mar 31, 2006
South Australia Canada US$"000
Africa
US$"000 US$"000 US$"000 US$"000
Gold Sales 1,021 - - 1,021
Cost of Sales (3,211) (159) ( 3) (3,373)
Gross loss (2,190) (159) ( 3) (2,352)
Sundry income 111 3 - 114
General and (530) (242) (773) (1,545)
administrative
expenditure
Share options expensed - - (3,201) (3,201)
Exploration expenditure (1,684) (913) - (2,597)
Other net (49) - - (49)
income/(costs)
Operating loss (4,342) (1,311) (3,977) (9,630)
Interest received 187 78 511 776
Interest paid (340) - - (340)
Profit on disposal of 8,135 - - 8,135
investments
Non-controlling 171 - - 171
interest in earnings of
subsidiary
Profit/(Loss) before 3,811 (1,233) (3,466) (888)
income taxes
Provision for income (1,022) - - (1,022)
taxes
Net profit/(loss) 2,789 (1,233) (3,466) (1,910)
Total assets 56,009 68,222 213,035 337,266
Total liabilities (38,858) ( 567) (22,995) (62,420)
Other segment items
Capital expenditure 12,470 28 467 12,965
Amortization and 153 72 3 228
depreciation
As at December 31, 2005:
Total Total Total Total
South Australi Canada Dec 31, 2005
Africa a US$"000 US$"000
US$"000 US$"000
Total assets 34,189 69,700 75,036 178,925
Total liabilities (20,178) (1,040) (23,082) (44,300)
Date: 16/05/2006 08:07:43 AM Produced by the JSE SENS Department
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