Q3 2011 PRODUCTION HIGHLIGHTS
MINE WASTE SOLUTIONS
- Higher gold sales reported
- Expected gold output at MWS on track for 72,000
ounces for fiscal year 2011
- MWS continues to deliver on planned production
with plant and tailings expansion projects on-track for completion in May 2011 and on schedule for the re-structured
Gold Wheaton Completion Test
EZULWINI MINE
- Highest-ever quarterly gold sales
- Expected gold output for fiscal 2011 at
Ezulwini Mine downgraded from 80,000 ounces to 70,000 ounces as a result
of important maintenance work with respect to Ezulwini Mine's shaft
system undertaken during December 2010, with
further adjustments to the shaft system planned for completion in April 2011
- Progress in respect of the design, manufacture
and installation of the two columns in the Ion Exchange section of the
uranium plant at Ezulwini Mine on track for commissioning by the
end of March 2011
TORONTO AND JOHANNESBURG,
Jan. 27 /CNW/ - First Uranium Corporation
(TSX:FIU, JSE:FUM) (ISIN:CA33744R1029) ("First Uranium" or
"the Company") today announced that during the three months ended December 31, 2010 ("Q3 2011"), 21,040 ounces
of gold were sold from production from the Mine Waste Solutions' tailings
recovery project ("MWS") in South Africa,
and 19,477 ounces of gold were sold from production from the Ezulwini Mine.
This represents quarter-on-quarter increases in gold sales of 12% and 29%,
respectively.
In the same quarter last year, MWS sold
21,099 ounces of gold while Ezulwini Mine sold 8,315 ounces.
MWS had a particularly good production quarter,
notwithstanding heavy rainfalls that caused intermittent flooding at its
Phase 1a and Phase 1b pump stations. The third pump station, which is being
constructed as part of the Phase 2 capital expenditure program is on track
for completion by May 2011 to coincide with the
completion of the Phase 2 gold circuit and the new tailings storage facility
("TSF").
Despite production stoppages, including
a fatal accident on November 16, 2010, which
resulted in a shut-down of four days in all of the underground workings, the Ezulwini
Mine reported its highest-ever quarterly gold production. This largely
reflects the positive impact of the upgrade to the backfill plant completed
during September 2010, as well as the enhanced logistics
management that resulted in increased face availability and an improved rate
of shaft hoisting increasing the tonnage hoisted.
No uranium was produced at the Ezulwini
Mine in Q3 2011 as a result of the repairs currently taking place in two
columns of the Ion Exchange ("IX") section of the uranium plant, as
disclosed by the Company in a news release dated August
31, 2010. It is expected that re-commissioning will occur by the
end of March 2011.
In January 2011,
the Ezulwini Mine's management finalised an updated life of mine model which
provides an update on its mine plan, along with updated guidance on cash flow
to execute on capital programs and milestones to achieve its business plan.
R. Dennis Bergen, P.Eng and Wayne Valliant P.Geo of Scott Wilson
Roscoe Postle Associates ("SWRPA") Inc., each of whom is a
"qualified person" under NI 43-101 and is independent of First
Uranium, have completed an independent review of management's life of mine
model and mineral resource estimate and are finalizing the NI 43-101
compliant updated technical report for the Ezulwini Mine. A summary of
the project economics per the updated life of mine model compared to the
economics of the indicative life of mine plan that was issued by management
in July 2010 is provided later in this news
release.
"I am pleased that the updated
technical information confirms the Ezulwini mineral resource estimate and
mine plans and that these plans are largely in line with the implementation
and ramp-up initiatives currently in place" said Deon van der Mescht,
President and CEO. "Management remains firmly committed to executing
these plans."
First Uranium's revenue increased to $51.3 million in the third quarter ended December 31, 2010 (Q2 2011: $38.3
million) and gross profits from the operations increased to $7.6 million (Q2 2011: $0.1
million). The Company's consolidated pre-tax loss for the quarter of $19.1 million (Q2 2011: $27.1
million) was lower than the second quarter. Cash utilized in the
Company's operating activities amounted to $3.7 million
(Q2 2011: $10.3 million) while $32.3 million (Q2 2011: $23.8
million) was spent on capital projects at the operations comprising
mainly the MWS Phase 2 and TSF capital projects. As at December
31, 2010, current assets were $53.4 million
and included cash and cash equivalents of $30.0 million.
The foregoing financial information has
not yet been reviewed by the Company's auditors or signed off by the Audit
Committee. The Company plans to release its unaudited interim financial
statements and related Management's Discussion and Analysis for Q3 2011 in
the first week of February 2011. In January 2011
the Company changed its auditors from Pricewaterhouse Coopers LLP which is
based in Toronto to Pricewaterhouse Coopers
Inc. which is based in Johannesburg, to align
the external audit function with the move of most of the Company's head
office function to South Africa and proximity
to the Company's operations.
The Company's production and financial
results for the quarter were negatively impacted primarily because of lost
production time at the Ezulwini Mine resulting from the fall of ground in November 2010 and the shaft maintenance program, which
is currently underway and explained in more detail under the Ezulwini Mine
section below. The Company's fourth quarter results may also be negatively
impacted by the latter. The Company's current cash resources may be
insufficient to address its medium-term working capital needs. Accordingly,
the Company has retained RBC Capital Markets as its financial advisor to
review all funding alternatives.
The following table summarizes the
production from each operation during Q3 2011. Production from the previous
three quarters has been included for comparison purposes.
Quarterly Production Results
|
|
2011 YTD
|
Q3 2011
|
Q2 2011
|
Q1 2011
|
2010 YTD
|
Q3 2010
|
|
MWS
|
|
|
|
|
|
|
|
Tonnes of ore reclaimed
(000s)
|
9,796
|
3,521
|
3,170
|
3,105
|
7,839
|
3,528
|
|
Average gold head grade (g/t)
|
0.35
|
0.34
|
0.35
|
0.36
|
0.38
|
0.34
|
|
Gold
plant recovery (%)
|
55%
|
55%
|
52%
|
56%
|
49%
|
58%
|
|
Gold
sold (oz)
|
60,791
|
21,040
|
18,743
|
21,008
|
43,514
|
21,099
|
|
Ezulwini
Mine
|
|
|
|
|
|
|
|
Tonnes
of ore milled
|
441,983
|
162,166
|
146,854
|
132,963
|
295,570
|
108,503
|
|
Average
gold recovery grade (g/t)
|
3.24
|
3.3
|
3.1
|
3.3
|
2.32
|
2.8
|
|
Gold
sold (oz)
|
48,296
|
19,477
|
15,066
|
13,753
|
18,740
|
8,315
|
|
Uranium
produced (lbs)
|
31,408
|
-
|
31,408
|
-
|
23,761
|
23,761
|
|
Abbreviation
|
Period
|
Abbreviation
|
Period
|
|
Q1
2010
|
April 1, 2009 - June 30, 2009
|
Q1
2011
|
April 1, 2010 - June 30, 2010
|
|
Q2
2010
|
July 1, 2009 - September 30, 2009
|
Q2
2011
|
July 1, 2010 - September 30, 2010
|
|
Q3
2010
|
October 1, 2009 - December 31, 2009
|
Q3
2011
|
October 1, 2010 - December 31, 2010
|
|
Q4
2010
|
January 1, 2010 - March 31, 2010
|
Q4
2011
|
January 1, 2011 - March 31, 2011
|
|
2010
YTD
|
April 1, 2009 - December 31, 2009
|
2011
YTD
|
April 1, 2010 - December 31, 2010
|
|
FY
2010
|
April 1, 2009 - March 31, 2010
|
FY
2011
|
April 1, 2010 - March 31, 2011
|
Operations Overview
Mine Waste Solutions
MWS experienced an excellent quarter and
continues to deliver into its plan. This represents the fourth successive
quarter that MWS has either achieved or exceeded its targeted production
levels. MWS remains on-track to increase its throughput from 1,200,000 tpm to
1,800,000 tpm by September 2011.
The remaining capital program comprising
the third gold plant module (Phase Two) and the new TSF, including adjoining
infrastructure, are on track for completion by May 2011,
which should ensure that the re-structured Gold Wheaton completion test will
be satisfied prior to September 1, 2011. As at December 31, 2010, $113 million
(ZAR831 million) of the $147 million (ZAR980
million) allocated for the completion of the Phase Two expansion program has
been spent, while $28 million (ZAR216 million) of
the $45 million (ZAR295 million) allocated for
the new TSF has been spent.
Ezulwini Mine
The Ezulwini Mine experienced its
highest-ever production quarter with a 29% increase in gold sold in Q3 2011.
This reflects the positive impact of the upgrade to the backfill plant
completed during September 2010, which has
allowed for improved gold sales and, more importantly, safer extraction of
pillars adjacent to mined-out voids.
During December
2010, the shaft hoisting capacity was restricted due to lateral
pressures being placed onto the shaft sidewall, which in turn created pinch
points along the hanging tower structure. The Company has therefore undertaken
a work program to moil (clear) the pinch points limiting movement of the
hanging tower, which resulted in the hoisting capacity of the mine being
restricted during the December 2010 and January 2011 period.
The initial moiling program was
successfully concluded between December 23, 2010
and January 2, 2011 and the normal hoisting
program resumed. Additional shaft inspections were undertaken shortly
thereafter and it was noted that further tight spots between the shaft
sidewalls and hanging tower occurred as the tower realigned itself. As a
precautionary safety measure, management halted the shaft for additional
rehabilitation work, losing four production shifts in the process. As of January 7, 2011, the shaft had returned to normal
operating conditions.
A work program to conduct further
moiling around the shaft's hanging tower is underway and precautions are in
place to ensure that any further effect on production is minimized. The
moiling program may have intermittent impacts on production until the end of April 2011.
Improvements to hoisting procedures have
increased hoisting efficiency (rate through the shaft), providing the ability
to meet planned production rates with fewer shifts.
As a result of the four shifts lost in January 2011, and the possibility of further production
disruptions until April 2011, management has
downgraded the gold forecast from the Ezulwini Mine for Q4 2011 resulting in
a reduction in the FY 2011 gold forecast, from 80,000 ounces to between
69,000 and 70,000 ounces of gold.
The total ounces of gold sold for Q3
2011 include 996 ounces which were drawn from the plant leach tanks to enable
the annual maintenance on the leach tanks.
The Ezulwini Mine's uranium plant is on
schedule for re-commissioning by the end of March 2011.
Updated Project Economics for the Mine
There is no material difference between
the July 2010 life of mine plan and management's
updated life of mine model. The results of the independent review
performed by Dennis Bergen and Wayne Valiant of
SWRPA on management's updated life of mine model are summarized below:
Table 1 - Updated project economics for
the Ezulwini Mine
|
Life
of mine - average operating costs
|
July
2010
|
January
2011
(Old
Price Deck)
|
January
2011
(New Price Deck)
|
|
|
|
|
|
|
Operating
cost per tonne milled ($/tonne)
|
75
|
79
|
84.2
|
|
Gold
cash ($/ounce) - co-product
|
486
|
482
|
516
|
|
Uranium
cash cost ($/Lb) - co-product
|
31
|
31
|
32
|
|
Projected
capital expenditure ($ million)
|
363
|
385
|
405
|
|
Average
annual life of mine production:
|
|
|
|
|
Gold
(ounces)
|
263,631
|
279,000
|
279,000
|
|
Uranium
(pounds)
|
717,000
|
743,000
|
743,000
|
|
|
|
|
|
|
NPV
($ million)
|
586
|
612
|
773
|
Notes:
- In the January 2011 life of mine
model the gold unit cost was calculated with uranium as a by-product as
uranium is only expected to represent approximately 14% of the revenue
over the life of mine. The cost per ounce of gold is estimated to
be $440 after taking the uranium by-product
credit of $161/oz gold.
- NPV is calculated using a real discount rate of 8%.
|
|
|
FY2011
|
FY2012
|
FY2013
|
FY2014
|
FY2015
|
FY2016
|
LoM
|
|
Updated
LoM
|
Spot
Gold
($/oz)
|
1,400
|
1,300
|
1,200
|
1,100
|
1,000
|
1,000
|
1,020
|
|
Uranium
($/lb)
|
65
|
65
|
65
|
65
|
60
|
60
|
60.24
|
|
ZAR
/ US$
|
6.90
|
7.50
|
8.10
|
8.50
|
9.10
|
9.10
|
8.93
|
|
July
2010
Life of Mine
Model
|
Spot
Gold
($/oz)
|
1,168
|
1,062
|
1,003
|
1,004
|
971
|
867
|
867
|
|
Uranium
($/lb)
|
45
|
62
|
58
|
57
|
55
|
55
|
55
|
|
ZAR
/ US$
|
8.00
|
8.45
|
8.83
|
8.93
|
9.33
|
9.64
|
9.64
|
The economic analysis contained in this
news release is based, in part, on inferred resources and is preliminary in
nature. Inferred resources are considered too geologically speculative
to have mining and economic considerations applied to them and to be
categorized as Mineral Reserves. There is no certainty that the
interpretations and conclusions of this Preliminary Assessment, or reserve
development, production and economic forecasts on which this Preliminary
Assessment is based, will be realized.
OUTLOOK
Mine Waste Solutions: As a result of MWS exceeding its plan
for the nine months ending December 2010 by
approximately 6,500 ounces, guidance for FY 2011 has been upgraded from
72,000 ounces to between 78,500 ounces and 80,000 ounces. This is a 9%
improvement on the production plan for the nine months ending December 2010 which was achieved at an average Cash
Cost* of $488/oz.
Ezulwini Mine: The work program around the hanging
tower is expected to be completed by the end of April
2011. As a result of the shaft work program, FY 2011 gold forecast has
been downgraded from 80,000 ounces to between 69,000 ounces and 70,000
ounces. The IX columns in the uranium plant are planned for commissioning
during the end of Q4 2011, allowing the resumption of uranium production.
Uranium production in FY 2012 is expected to be between 120,000 pounds and
140,000 pounds at cash costs of approximately $53/lb.
Conference Call
First Uranium will conduct a conference
call with investors to discuss the information in this news release at 9 a.m
local Toronto time and 4 p.m local Johannesburg time on Thursday 27
January, 2011.
The conference call will be available
simultaneously to all interested analysts, investors and media.
Callers may dial +27 11 535 3600 from
all international locations or 0800 200 648 (South
Africa).
A telephone replay of the conference
call will be available for 3 days. To access the replay, callers may dial +27
11 305 2030. Access to the replay will require the code/ account number
16696 followed by #.
Technical Disclosure
All technical disclosure in this news
release relating to the January 2011 update (new
price deck) of the technical information on the Ezulwini Mine has been
prepared in accordance with National Instrument ("NI") 43-101 by R.
Dennis Bergen, P.Eng and Wayne
Valliant, P.Geo of Scott Wilson Roscoe Postle
Associates ("SWRPA") Inc., each of whom is a "qualified
person" under NI 43-101 and is independent of First Uranium.
*"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 Corporation's Financial Statements.
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 throughout 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.
About First Uranium Corporation
First Uranium Corporation (TSX:FIU, JSE:FUM)
is focused on its goal of becoming a low-cost producer of uranium and gold
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
including, without limitation, statements regarding the timing and amount of
estimated future production,
the processing and development plans, operating and capital cost estimates,
resource estimates, metal prices, exchange rates, discount rates, the timing
and receipt of required permits, the ability to satisfy the Gold Wheaton
Completion Test and future plans and objectives of First Uranium are
forward-looking statements (or forward-looking information) that involve
various estimates, assumptions, risks and uncertainties. For more
details on these estimates, assumptions, risks and uncertainties, see the
Company's most recent Annual Information Form ("AIF") and
Management's Discussion and Analysis ("MD&A") on file with the
Canadian provincial securities regulatory authorities on SEDAR at www.sedar.com.
No assurance can be given that a financing transaction will be concluded.
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. For details on the Gold Wheaton
Completion Test see the AIF and MD&A.