First Uranium announces successful completion of the Mine Waste Solutions Technical Completion Test and financial results for the three months ended June 30, 2011.

News provided by

Aug 30, 2011, 09:30 ET

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 /PRNewswire/ - 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.

www.firsturanium.com

SOURCE First Uranium Corporation