First Uranium announces successful completion of the Mine Waste Solutions Technical Completion Test and financial results for the three months ended June 30, 2011.
TORONTO AND JOHANNESBURG, Aug. 30, 2011 /CNW/ --
For the Management Discussion & Analysis and Financial Statements please
refer to the Company's website at www.firsturanium.com.
TORONTO AND JOHANNESBURG, Aug. 30, 2011 /CNW/ - First Uranium Corporation (TSX:FIU) (JSE:FUM) (ISIN:CA33744R1029)
('First Uranium' or 'the Company') today announced the successful
completion of the Mine Waste Solutions ('MWS') Technical Completion
Test and its financial and operating results for the three months ended
June 30, 2011.
Gold sales for the three months ended June 30, 2011 ('Q1 2012') amounted
to 34,439 ounces, which is 1% lower than the 34,761 ounces sold for the
three months ended June 30, 2010 ('Q1 2011') and 3% higher than the
33,543 ounces sold during the three months ended March 31, 2011 ('Q4
2011'). The Company also sold 31,407 pounds of uranium in Q1 2012
compared to 20,500 pounds in Q1 2011. No uranium was sold in Q4 2011.
Total proceeds* (refer to note at end) from gold and uranium sold by the
Company's two operations increased to $42.3 million in Q1 2012 (Q1
2011: $34.2 million; Q4 2011: $36.7 million), which is a 24% and 15%
increase, respectively, compared to Q1 2011 and Q4 2011.
First Uranium is pleased to announce the successful conclusion of the
MWS Technical Completion Test, as defined in the MWS Gold Purchase
Agreement. The Technical Completion Test required MWS to achieve
consistent production over three consecutive months, where the tonnage
processed and or re-processed through the project is within 85% of the
1.933 million tonnes of tailings per month in respect of the project.
In addition, MWS had to satisfy certain key criteria with respect to
tonnes of material processed, average feed grade to the plant and gold
recovery for a minimum, continuous, period of 14 days.
First Uranium Chief Executive Officer, Deon van der Mescht said, 'The
test was successfully concluded at 22:00 on Wednesday, August 24, 2011
and was subsequently confirmed by Franco-Nevada on Monday, August 29,
2011. The successful completion is a defining moment for what is
already a world class project and improves the risk profile of the
Company substantially.'
Financial and Operating Results
Mine Waste Solutions ('MWS') generated $26.6 million (Q1 2011: $21.4 million; Q4 2011: $25.1
million) in proceeds from 21,546 ounces of gold sold (Q1 2011: 21,008
ounces; Q4 2011: 22,150 ounces) at a Cash Cost** (refer to note at end) of $663 per ounce (Q1 2011: $454 per ounce; Q4 2011: $435 per ounce).
The 24% increase in gold proceeds compared to this time last year was
as a result of the 21% higher average gold selling prices received over
the comparative period, along with the 3% increase in gold ounces sold.
The respective 46% and 52% increases in Cash Costs compared to Q1 2011
and Q4 2011 is largely driven by the additional infrastructure costs of
the recently-commissioned third gold stream, which is yet to be fully
optimized. Other factors that led to an increase in costs were higher
labour and power charges.
The commissioning of the third gold plant expansion at MWS commenced on
April 1, 2011 and, together with the commissioning of the life-of-mine
Tailings Storage Facility ('TSF') on April 5, 2011, resulted in the
operations processing capacity increasing from an average of 1.2
million tonnes per month ('mtpm') to 1.8 mtpm. MWS reported a 58% and
35% higher tonnage throughput compared to Q1 2011 and Q4 2011,
respectively. This was despite minor commissioning constraints and the
introduction of new resources into the mining mix. The third gold
circuit modifications are largely complete and management is pursuing
further enhancements to improve performance.
The commissioning of these projects concludes the final gold expansion
phase at MWS and enabled the operation to start the first phase of the
(Franco-Nevada) technical completion test at the end of April 2011,
despite a temporary suspension to the MWS operation after South
Africa's National Nuclear Regulator issued a directive for MWS to
suspend operations. The suspension was lifted on 29 July 2011 and the
Company then proceeded with the second phase of the completion test,
which was successfully completed on August 24, 2011.
The Ezulwini Mine generated $13.8 million (Q1 2011: $11.9 million Q4 2011: $11.6 million)
in proceeds from 12,893 ounces of gold sold (Q1 2011: 13,753 ounces: Q4
2011: 11,393 ounces) at a Cash Cost of $2,344 per ounce (Q1 2011:
$1,467 per ounce: Q4 2011: $2,227 per ounce). The 24% increase in
tonnage throughput for Q1 2011 compared to Q1 2010 was largely offset
by a 15% decrease in the average gold recovery grade, which resulted in
the gold ounces sold decreasing by 6%.
The Ezulwini Mine's costs increased by 53% compared to Q1 2011 and 27%
from Q4 2011, primarily as a result of higher labour, power, stores and
material charges. Power costs increased as a result of the annual
increase in electricity rates in South Africa as well as an increase in
usage due to the mine's increased shaft and plant activity. Stores and
material costs reflect the higher tonnage profile.
Following the recent successful re-commissioning of the uranium plant,
the Ezulwini Mine sold 31,407 pounds of uranium (Q1 2011: 20,500
pounds) during the quarter generating $1.9 million in revenue (Q1 2010:
$0.8 million). Deon van der Mescht, commented, 'The Ezulwini Mine's
uranium plant has been operating above planned targets with recoveries
in excess of 80%, which is 5% higher than design. The re-designed Ion
Exchange columns have been inspected and we are pleased that they are
operating to design parameters'.
In late July, the Company successfully commissioned a pilot float plant
that has been established to confirm the validity of laboratory scale
test work on the commercial viability of the treatment of external
third party uranium bearing material. Additional confirmatory work is
required before the Company will be able to determine whether it is
able to leverage the opportunity of spare capacity at the Ezulwini
Mine's uranium plant.
While the Ezulwini Mine's shaft maintenance program has progressed well,
with completion of the first phase of the program achieved, gold
production was constrained by the earlier impact of this program and a
fatal accident that occurred in March 2011. Key phases of the
maintenance program have now been successfully concluded and the shaft
is now operating continuously at the requisite man and material
hoisting speeds. This has enabled the mine to migrate back to
conventional mining methods and, while this has proven to be more
difficult than anticipated, it has now largely been concluded and
delivery into the ramp-up is improving month-on-month.
The Company's higher production costs, primarily as a result of the issues at the
Ezulwini Mine, exceeded the increase in proceeds from gold and uranium
sold by the operations, resulting in a loss of $14.9 million, compared
to the loss Q4 2011 of $7.0 million, and a profit of $11.4 million in
Q1 2011.
First Uranium's consolidated pre-tax loss for Q1 2012 of $39.8 million
improved compared to the loss in the comparative period (Q1 2011: $73.5
million; Q4 2011: $79.5 million).
Cash utilized in the Company's operating activities amounted to $5.9
million for Q1 2012 (Q1 2011: $11.0 million; Q4 2011: $9.7 million),
and First Uranium spent $15.9 million in Q1 2012 (Q1 2011: $33.6
million; Q4 2011: $12.8 million) on capital project, which included the
completion of MWS' third gold module ('Phase 2') and the new TSF and
adjoining infrastructure.
As at June 30, 2011, current assets were $51.4 million (March 31, 2011:
$73.4 million) and included cash and cash equivalents of $26.8 million
(March 31, 2011: $49.6 million).
Outlook
MWS
As previously reported, and while construction is largely complete, the
uranium plant at MWS will still require significant working capital
investment and consequently commissioning of this plant would be
contingent upon a strengthening spot uranium market and the rate of the
ramp-up program at the Ezulwini Mine. The spot uranium market remains
volatile in the short term and as the Ezulwini Mine's ramp-up profile
is progressing slower than planned, management has taken the decision
to the defer the commissioning of MWS' uranium plant to June 2012.
At MWS, management expects annualized gold production to be between
105,000 and 115,000 ounces of gold.
Ezulwini Mine
The Ezulwini Mine continues to grow its production levels, albeit at a
slower than planned rate. The decision to migrate from Room and Pillar
mining back to more conventional mining methods has impeded the
relative growth in production and consequently the ramp-up program
remains management's pre-dominant focus.
Management has also started assessing the mining of the so-called
'massive' ore body, which is the same body being mined by Gold Fields
Limited's South Deep operation that neighbours the Ezulwini Mine. The
'massives' ore body remains very attractive and as development improves
the Company's understanding of the ore body, the opportunity to
continue to introduce more drifts into the mining mix will increase.
Due to the geological complexity of the Upper Elsburg section of the
Ezulwini Mine and the lack of pre-development of that section,
forecasting of production has proven to be unreliable. Taking this into
consideration, management has revised its outlook on gold production to
between 70,000 and 80,000 ounces of gold for FY 2012 (the previous
production outlook was between 105,000 and 125,000 ounces of gold). The
FY 2012 forecast for uranium sales remains between 110,000 and 130,000
pounds.
Conclusion
First Uranium's production and financial results for Q1 2012 had a
negative impact on the expected cash position and together with
management's decision to revise its outlook on the Ezulwini Mine's gold
production, has had a negative impact on the Company's cash flow
projection. However, the significant strengthening of the gold price in
ZAR terms has had a substantial positive impact on management's most
recent cash forecast.
As disclosed in the Company's press release of July 12, 2011, following
the announcement by Village Main Reef Limited that it intends to sell
its 26 percent interest in First Uranium, the Board of First Uranium
empowered a Special Committee to monitor developments and undertake a
strategic review of the Company and its capital structure and to advise
on any strategic alternatives that may be in the interests of First
Uranium and its stakeholders. The strategic review includes assessing
available alternatives for the settlement of the 4.25% senior unsecured
convertible debentures that mature in June 2012 (the Debentures) and
alternatives to improve the Company's Black Economic Empowerment
('BEE') credentials following the disposal by Village Main Reef of
19.79% of its 25.5% shareholding in First Uranium to AngloGold Ashanti
Limited on July 22, 2011.
On August 29, 2011, the Company announced that it has entered into an
agreement with Vulisango Holdings (Proprietary) Limited, a BEE company,
for the provision of certain services, including, assistance to the
Company in complying with the Mineral and Petroleum Resources
Development Act.
NOTES:
Until March 31, 2011, First Uranium prepared its annual and interim
consolidated financial statements in accordance with Canadian GAAP as
set out in the Handbook of the Canadian Institute of Chartered
Accountants (CICA Handbook). In calendar 2010, the CICA Handbook was
revised to incorporate International Financial Reporting Standards
('IFRS'), and require publicly accountable enterprises to apply such
standards effective for financial years beginning on or after January
1, 2011. Accordingly, the Company has commenced reporting on this basis
in its interim consolidated financial statements for the three months
ended June 30, 2011 (the 'Financial Statements').
*Proceeds are non-IFRS measurements and investors are cautioned not to place undue reliance on it and are
advised to read all IFRS accounting disclosures presented in the
Company's Financial Statements.
**Cash Costs are costs directly related to the physical activities of producing gold
and uranium and include mining, processing and other plant costs;
third-party refining and smelting costs; marketing expense, on-site
general and administrative costs; royalties; on-mine drilling
expenditures that are related to production and other direct costs.
Sales of by-product metals such as uranium and silver are deducted from
the above in computing cash costs. Cash costs exclude depreciation,
depletion and amortization, corporate general and administrative
expense, exploration, interest, and pre-feasibility costs and accruals
for mine reclamation. Cash costs are calculated and presented using the
'Gold Institute Production Cost Standard' applied consistently for all
periods presented. The Gold Institute was a non-profit industry
association comprised of leading gold producers, refiners, bullion
suppliers and manufacturers. This institute has now been incorporated
into the National Mining Association. The guidance was first issued in
1996 and revised in November 1999. Total cash costs per ounce is a non-IFRS measurement and investors are cautioned not to place undue reliance on it and are
advised to read all IFRS accounting disclosures presented in the
Company's Financial Statements.
Non-IFRS Measures
The Company believes that in addition to conventional measures prepared
in accordance with IFRS, the Company and certain investors and analysts
use certain other non-IFRS financial measures to evaluate the Company's
performance including its ability to generate cash flow and profits
from its operations. The Company has included certain non-IFRS measures
in this document. Non-IFRS measures do not have any standardized
meaning prescribed under IFRS, and therefore they may not be comparable
to similar measures employed by other companies. The data is intended
to provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with IFRS. Readers are advised to read all IFRS accounting
disclosures presented in the Company's Financial Statements for more
detail.
Conference Call
First Uranium will conduct a conference call with investors to discuss
the information in this news release on Tuesday, August 30, 2011 at
10:00 (Toronto time) and 16:00 (South African time).
Conference Call Numbers:
Canada & USA Toll Free Dial In: 1-800-319-4610
South Africa Toll Free Dial In: 0800-981-705
Other International Locations Dial In: 1-604-638-5340
Callers should dial in 5 - 10 min prior to the scheduled start time and
simply ask to join the First Uranium call.
Conference Call Replay Numbers:
Canada & USA Toll Free: 1-800-319-6413
Outside Canada & USA Call: 1-604-638-9010
Code: 2128, followed by the # sign
Duration: Available for 30 days
About First Uranium
First Uranium Corporation (TSX:FIU, JSE:FUM) is focused on its goal of
becoming a low-cost producer of gold and uranium through the expansion
of the underground development to feed the new uranium and gold plants
at the Ezulwini mine and through the expansion of the plant capacity of
the Mine Waste Solutions (MWS) tailings recovery facility, both
operations situated in South Africa. First Uranium also plans to grow
production by pursuing value-enhancing acquisition and joint venture
opportunities in South Africa and elsewhere.
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,
including without limitation, the outcome of the appeal of the Water
Use License by FSE. 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. Accordingly,
readers should not place undue reliance on forward-looking statements
that are included herein, except in accordance with applicable
securities laws.
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Julian Gwillim, julian@aprio.co.za, or Gail Strauss, gailstrauss@mweb.co.za