First Uranium announces financial results for the three and twelve months ended March 31, 2011
For the Management Discussion & Analysis and Financial Statements please refer to the Company's website at www.firsturanium.com.
TORONTO AND JOHANNESBURG, June 6, 2011 /PRNewswire/ - First Uranium Corporation (TSX:FIU), (JSE:FUM) (ISIN:CA33744R1029) ("First Uranium" or "the Company") today announced total gold sales for its financial year ended March 31, 2011 ("FY 2011") of 142,630 ounces of gold, which is a significant increase over the 91,657 ounces sold at the end of March 31, 2010 ("FY 2010").
FINANCIAL YEAR ENDED MARCH 31, 2011
The Company's consolidated revenue of $172 million for FY 2011, an increase of 86% from $93 million in revenue for FY 2010, resulted in the Company reflecting a $20 million gross profit margin from operations in FY 2011 compared to a loss of $18 million in FY 2010. Remembering that First Uranium remains in a capital development and growth phase, the consolidated pre-tax loss for the year was $76 million, which is a 19% improvement over the pre-tax loss of $94 million in FY 2010.
During FY 2011, Mine Waste Solutions ("MWS"), which is a large tailings retreatment operation that is currently extracting gold from 15 tailings dams, produced and sold 82,941 (FY 2010: 62,019) ounces of gold generating $93 million (FY 2010: $61 million) in revenue at an average Cash Cost* of $483 (FY 2010: $392) per ounce of gold sold. The 34% increase in gold sold for FY 2011 from FY 2010 was mainly attributable to the additional production from the second gold plant module, along with the 8% improvement in gold recoveries. The 13.4 million tonnes processed in FY 2011 was 21% higher compared to FY 2010. The 65% overall increase in costs, year-on-year, was mainly driven by the increase in production in Q2 2010, combined with the impact of the stronger South African Rand in FY 2011.
The Ezulwini Mine, which is an underground gold and uranium producer that is currently in a production build-up phase, produced and sold 59,689 (FY 2010: 29,638) ounces of gold generating $78 million (FY 2010: $31 million) in revenue at an average Cash Cost* of $1,691 (FY 2010: $2,600) per ounce of gold. The 150% increase in revenue reflects the overall increase in throughput, grade and gold price over the comparative periods. Although costs increased by 31% year-on-year, the costs did not increase in direct correlation to the revenue increases, due to the mine's fixed operating costs being spread over higher production than the comparative periods, resulting in the decrease in Cash Cost* compared to FY 2010. Consequently the mine's gross losses in FY 2011 decreased by 47% compared to FY 2010. Only 20,500 pounds of uranium was sold in FY 2011, as a result of a failure of two Ion Exchange ("IX") columns in the uranium plant in August 2010, which resulted in the manufacturing of two new columns and a $1.5 million impairment of the two failed columns. The uranium plant has since been successfully re-commissioned.
During FY 2011, First Uranium utilized $48 million (FY 2010: $49 million) of its cash resources to fund its operating activities. The Company spent $103 million (FY 2010: $215 million) on capital projects in FY 2011 comprising mainly the construction and successful commissioning of MWS's third gold plant module, including adjoining infrastructure ("Phase 2") and its new tailings storage facility ("TSF"). As at March 31, 2011, the Company's remaining cash and cash equivalents amounted to $50 million.
On April 26, 2010, First Uranium raised $142 million in net proceeds through a private placement offering of Cdn$150 million in secured convertible notes due March 31, 2013.
On March 1, 2011, the Company concluded a public offering of 46 million common shares at a price of Cdn$1.00 per share. The agents to the offering exercised in full their over-allotment option to acquire an additional 6 million common shares at the same price, resulting in First Uranium selling an aggregate of 52 million common shares for total gross proceeds of $53 million.
Deon van der Mescht commented, "This capital raising was concluded shortly before the devastating series of earthquakes and the accompanying tsunami that hit the Japanese island of Honshu during March 2011. The unfolding events at the Fukushima nuclear plant continue and the impact on physical uranium demand had a destructive effect on most uranium stocks. While there has been a level of recovery for most uranium operators, we remain under pressure. This is ironic when one considers that First Uranium is largely a gold producer, having only recently recommenced uranium production at the Ezulwini Mine".
First Uranium's total gold sales from its two operations for the year ended March 31, 2012 are forecast to be in the range of 215,000 to 250,000 ounces, whilst anticipated uranium sales are forecast to be in the range of 250,000 to 300,000 pounds. The uranium plant at MWS is largely complete. Commissioning of this plant will involve significant upfront working capital investment in in-process inventory. Management is considering a temporary deferral in the commissioning of the uranium plant in light of currently depressed uranium prices and its objectives of focusing cash resources towards the maturity of the 4.25% convertible debentures in June 2012 and the ramp up of the Ezulwini Mine.
FOURTH QUARTER ENDED MARCH 31, 2011
The consolidated revenue from First Uranium's two operations for the three months ended March 31, 2011 ("Q4 2011") was $43 million, compared to $29 million for the three months ended March 31, 2010 ("Q4 2010"), which is a 49% improvement quarter-on-quarter. Gross profits from the operations were $6 million for Q4 2011 (Q4 2010: loss of $8 million), while the consolidated pre-tax loss for Q4 2011 of $18 million improved by 41% compared to the pre-tax loss in the comparative period (Q4 2010: $31 million).
During Q4 2011, the Company utilized $19 million (Q4 2010: cash inflow of $0.004 million) of cash resources in its operating activities and spent $12 million (Q4 2010: $18 million) on capital projects, mainly at MWS. The cash profits generated by the mining operations during Q4 2011 were not yet sufficient to cover the cash costs related to all of its mining costs as well as other costs for various corporate activities. The limited cash outflow along with $20.6 million in value added tax and income tax refunds received by the Company towards the end of Q4 2010, resulted in the small cash inflow from operating activities in Q4 2010.
Mine Waste Solutions
MWS successfully commissioned the final phase of its gold expansion program (Phase 2 and the new TSF) one month ahead of schedule and also exceeded its operating guidance for the fifth successive quarter. The earlier commissioning of the final phase of the expansion program allowed MWS to operate all three gold plant modules at full capacity as of May 1, 2011.
First Uranium President and CEO, Deon van der Mescht, commented, "This past year has marked the achievement of many key milestones at MWS. We have advanced significantly over the last eight months to the extent that the commissioning of Phase 2 commenced on April 1, 2011, while MWS's new TSF was commissioned during May 2011, with deposition of tailings material onto the new TSF commencing on April 5, 2011."
By mid-April 2011 the rate of deposition onto the new TSF increased from an average of 1.2 million tons per month (mtpm) to 1.8 mtpm. Deposition of material onto the previously used tailings storage facility (MWS #5 tailings dam) was subsequently stopped and that dam is now in the process of being decommissioned.
During Q4 2011, MWS produced and sold 22,150 (Q4 2010: 18,505) ounces of gold, generating $26 million in revenue (Q4 2010: $16 million) at an average Cash Cost* of $471 (Q4 2010: $402) per ounce of gold. The 61% increase in revenues is the result of a 20% increase in ounces of gold sold together with higher gold selling prices compared to Q4 2010. The 20% increase in gold sold is mainly attributable to higher tonnage throughput quarter-on-quarter. The increase in Q4 2011 costs compared to the previous quarter was driven by a combination of higher tonnage throughput, higher labour and power costs as well as the impact of costs in US dollar terms resulting from the significantly stronger South African Rand in Q4 2011.
Pursuant to the terms of the MWS Gold Stream Transaction with a company that is now known as Franco-Nevada (Barbados) Corporation ("FN"), formally Gold Wheaton (Barbados) Corporation, MWS must satisfy certain technical completion tests upon the successful completion of construction of Phase 2 by September 1, 2011. The technical completion test requires MWS to achieve consistent production over three consecutive months where the tonnage processed is within 85% of the 1.933 million tonnes of tailings per month in respect of the project ("Steady State"). In addition, MWS must 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, either during the Steady State production period or within the 90 period after achieving Steady State production. The testing process commenced in May 2011 and is scheduled for completion by August 2011. Management remains confident that these targets will be achieved.
At MWS, production levels are expected to continue increasing and management expects the annualized gold production of 110,000 to 125,000 ounces and annualized uranium sales of 140,000 to 170,000 pounds.
Ezulwini Mine
During Q4 2011, the Ezulwini Mine produced and sold 11,393 (Q4 2010: 10,898) ounces of gold, generating $16 million (Q4 2010: $12 million) in revenue at a Cash Cost* of $2,178 (Q4 2010: $2,276) per ounce of gold. Revenue increased by 33%, reflecting the overall increase in throughput and gold price over the comparative periods. The average Cash Cost* decreased by 4% as a result of the mine's fixed operating costs being spread over higher production in Q4 2011 compared to Q4 2010.
Gold production for Q4 2011 was severely constrained by the impact of the shaft maintenance program that commenced towards the end of Q3 2011. The Ezulwini Mine's shaft hoisting capacity was restricted due to lateral pressures being placed on the shaft sidewall, creating pinch points along the hanging tower structure. The Company immediately implemented a program to moil (clear) the pinch points, which resulted in the hoisting capacity of the mine being temporarily constrained.
During the shaft maintenance programme, Room and Pillar mining, a mining method that requires less logistical support, was initiated. The strategy proved successful, in that approximately 30% of production was derived from the Room and Pillar sections prior to a tragic fatality on March 12, 2011 with subsequent loss in production from requisite safety stoppages.
The successful completion of the moiling program at the end of April 2011 has unconstrained the hoisting capacity of the shaft, particularly with respect to the man and material handling capacity. The winding speeds of the man and material conveyances were reduced to between 2.5 and 4.0 meters per second during December 2010 due to the pinch points which reduced the amount of material that could be conveyed down the shaft per day as well as having a negative impact on the travelling time of the underground workforce to their working places. The winding speeds of the man and material conveyances have been increased to 7 meters per second as of the beginning of May 2011 which has increased the material handling capacity of the shaft by at least 23% as well as reducing the travelling time of the underground workforce resulting in a minimum of an additional 45 minutes spent at the "rock face" per shift. The hoisting capacity of the shaft is currently 97,000 tons per month and capable of meeting the current production requirements. The remaining engineering work in the shaft can comfortably be concluded in parallel with the mine ramp-up requirements.
During Q4 2011, the Ezulwini Mine replaced the two new IX columns that failed in August 2010; consequently no uranium was produced during the last quarter. The uranium plant was successfully re-commissioned in March 2011 at a cost of $1.5 million, enabling the Company to return to uranium production. During the shutdown period, several elements of the plant were upgraded and re-designed to improve performance and recovery rates. At the end of Q4 2011, the mine had 31,000 pounds of uranium in stock which was calcined from ammonium diurinate that had been produced at the mine before the failure of the IX columns. The uranium was shipped and sold during April 2011.
Deon van der Mescht added, "Following the two fatal accidents that occurred over the financial year, and the subsequent Section 54 suspension notices served on the mine, as well as the various other events which impacted production in the last quarter, Ezulwini is now showing progressive improvement in its fundamentals with underground mining development and metres advanced returning to planned levels. In particular, the increase in winding speeds in key conveyances has impacted positively on production volumes in the month of May 2011 with record throughput levels of 62,992 tonnes achieved. The increased speed of key conveyances is expected to continue to impact positively on the ramp up of Ezulwini Mine."
While production levels at Ezulwini for Q1 2012 are expected to be lower than the planned quarterly average production for FY 2012, management still expects annualized gold production of 105,000 to 125,000 ounces and annualized uranium sales of 110,000 to 130,000 pounds.
Deon van der Mescht concluded, "Ezulwini may have encountered some challenges over the last few months, however these challenges are now better understood, manageable and considered to be short-term. Fundamentally the long-term value of the operation remains as was confirmed by an independent technical review completed in January 2011. At MWS, we can look forward to a new chapter in the year ahead with the conclusion of the technical completion test anticipated in Q2 2012. I am convinced that an already impressive project will graduate to its full potential".
*Cash Costs are costs directly related to the physical activities of producing gold and uranium and include mining, processing and other plant costs; third-party refining and smelting costs; marketing expense, on-site general and administrative costs; royalties; on-mine drilling expenditures that are related to production and other direct costs. Sales of by-product metals such as uranium and silver are deducted from the above in computing cash costs. Cash costs exclude depreciation, depletion and amortization, corporate general and administrative expense, exploration, interest, and pre-feasibility costs and accruals for mine reclamation. Cash costs are calculated and presented using the "Gold Institute Production Cost Standard" applied consistently for all periods presented. The Gold Institute was a non-profit industry association comprised of leading gold producers, refiners, bullion suppliers and manufacturers. This institute has now been incorporated into the National Mining Association. The guidance was first issued in 1996 and revised in November 1999. Total cash costs per ounce is a non-GAAP measurement and investors are cautioned not to place undue reliance on it and are advised to read all GAAP accounting disclosures presented in the Company's Financial Statements.
Conference Call
First Uranium will conduct a conference call with investors to discuss the information in this news release at 08:30a.m local Toronto time and 2:30pm local Johannesburg time on Monday, June 6, 2011.
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 Corporation
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.
Non-GAAP Measures
The Company believes that in addition to conventional measures prepared in accordance with Canadian GAAP, the Company and certain investors and analysts use certain other non-GAAP financial measures to evaluate the Company's performance including its ability to generate cash flow and profits from its operations. The Company has included certain non-GAAP measures in this document. Non-GAAP measures do not have any standardized meaning prescribed under Canadian GAAP, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP. Readers are advised to read all GAAP accounting disclosures presented in the Company's financial statements for more detail.
SOURCE First Uranium Corporation
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