Google Übersetzer
Trading Symbols: UUU - Toronto Stock Exchange, JSE Limited (Johannesburg
Stock Exchange)
TORONTO and JOHANNESBURG, South Africa, March 31 /CNW/ - Uranium One Inc. ("Uranium One") today reported financial results for the year ending December 31, 2007. All figures are in US dollars unless otherwise indicated.
Q4 2007 Highlights:
- Revenues of $61.0 million from the sale of 689,200 pounds U(3)O(8),
representing an average realized price of $89 per pound U(3)O(8)
- Earnings from mine operations of $46.5 million
- Attributable production from Akdala of 435,400 pounds U(3)O(8)
- Cash cost per pound sold from Akdala was approximately $11 per
pound(1)
The net loss for the quarter ending December 31, 2007 was $2.2 million, or
$0.01 per share.
2007 Full-Year Highlights:
- Revenues of $134.0 million from the sale of 1,608,700 pounds
U(3)O(8), representing an average realized price of $83 per pound
U(3)O(8)
- Earnings from mine operations of $101.8 million
- Attributable production from Akdala of 1,827,200 pounds U(3)O(8)
- Cash cost per pound sold from Akdala was approximately $11 per
pound(1)
- Pre-commercial production from Dominion totalled 171,300 pounds
U(3)O(8)
- Attributable pre-commercial production from South Inkai was 39,600
pounds U(3)O(8)
The net loss for the year ending December 31, 2007 was $17.6 million, or $0.05 per share.
Jean Nortier, Interim CEO of Uranium One commented:
"During 2007, Akdala Uranium Mine remained a steady, low cost operation for the Company. Also during the year, Uranium One started producing uranium from two advanced development projects - Dominion in South Africa and South Inkai in Kazakhstan. South Inkai is currently exceeding our production expectations and Dominion is performing in line with our revised production forecast. During 2008, we expect additional assets within our diversified pipeline of projects to come online as we work towards commencing production at the Kharasan Uranium Project in Kazakhstan and at the Hobson ISR Facility in the United States."
Conference Call Details
Uranium One will be hosting a conference call and webcast to discuss the 2007 results today starting at 10:00 a.m. (Toronto time). Participants may join the call by dialling toll free 1-800-595-8550 or 1-416-644-3422 for calls from outside Canada and the United States. A live webcast of the call will be available through CNW Group's website at: www.newswire.ca/webcast
A recording of the conference call will be available for replay for one week beginning at approximately 1:00 p.m. on March 31, 2008 by dialling toll free 1-877-289-8525 or 1-416-640-1917 for calls outside Canada and the United States. The pass code for the replay is 21266689. A replay of the webcast will be available on our website at www.uranium1.com
About Uranium One
Uranium One Inc. is a Canadian-based uranium producing company with a primary listing on the Toronto Stock Exchange and a secondary listing on the JSE Limited (the Johannesburg stock exchange). The Corporation owns a 70% interest in the producing Akdala Uranium Mine and a 70% interest in the South Inkai Uranium Project in Kazakhstan. Uranium One also owns the Dominion Uranium Project in South Africa and a 30% interest in the Kharasan Uranium Project in Kazakhstan. In the United States, the Corporation owns projects in the Powder River and Great Divide Basins in Wyoming, the Hobson ISR Uranium Processing Facility in Texas and the Shootaring Mill in Utah. The Corporation also owns the Honeymoon Uranium Project in Australia. Uranium One is engaged in uranium exploration activities in the United States, the Athabasca Basin of Saskatchewan, South Africa and Australia.
(1) Uranium One has included non-GAAP performance measures: sales per
pound U(3)O(8) and cash cost per pound of U(3)O(8) sold. The Corporation
reports total cash costs on a sales basis. In the uranium mining
industry, these are common performance measures but do not have any
standardized meaning, and are non-GAAP measures. The Corporation believes
that, in addition to conventional measures prepared in accordance with
GAAP, the Corporation and certain investors use this information to
evaluate the Corporation's performance and ability to generate cash flow.
Accordingly, it 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 GAAP.
Cautionary Statement
No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.
Forward-looking statements: This press release contains certain forward- looking statements. Forward-looking statements include but are not limited to those with respect to the price of uranium and gold, the estimation of mineral resources and reserves, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage and the timing and possible outcome of pending litigation. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Uranium One to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, possible variations in grade and ore densities or recovery rates, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes or other risks of the mining industry, delays in obtaining government approvals or financing or in completion of development or construction activities, risks relating to the integration of acquisitions, to international operations, to prices of uranium and gold as well as those factors referred to in the section entitled "Risk factors" in Uranium One's Annual Information Form for the year ended December 31, 2007,which is available on SEDAR at www.sedar.com, and which should be reviewed in conjunction with this document. Although Uranium One has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as 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. Uranium One expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.
For further information about Uranium One, please visit www.uranium1.com
Uranium One Inc.
Management's Discussion and Analysis
Set out below is a review of the activities, results of operations and financial condition of Uranium One Inc. (formerly sxr Uranium One Inc.) ("Uranium One") and its subsidiaries (collectively, the "Corporation") for the year ended December 31, 2007, together with certain trends and factors that are expected to impact its 2008 financial year. Information herein is presented as of March 31, 2008 and should be read in conjunction with the audited consolidated financial statements of the Corporation for the year ended December 31, 2007 and the notes thereto, the December 31, 2006 audited consolidated financial statements, and the related annual Management's Discussion and Analysis of the Corporation's predecessor companies, sxr Uranium One Inc. and UrAsia Energy Ltd. ("UrAsia Energy") and the July 31, 2006 audited consolidated financial statements, and the related annual Management's Discussion and Analysis of UrAsia Energy, on file with the Canadian provincial securities regulatory authorities (referred to herein as the "consolidated financial statements"). The Corporation's consolidated financial statements and the financial data set out below have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). All amounts are in US dollars and tabular amounts are in thousands, except where otherwise indicated. Canadian dollars are referred to herein as C$. South African rand are referred to herein as ZAR.
Uranium One completed a business combination with UrAsia Energy on April 20, 2007. The transaction was treated as a reverse take-over under GAAP, with UrAsia Energy identified as the acquirer and Uranium One as the acquiree. For periods subsequent to the acquisition date, the comparative figures are those contained in the financial statements of UrAsia Energy. During 2006, UrAsia Energy changed its fiscal year end from July 31 to December 31. Accordingly, the comparative figures used herein are those for the five months ended December 31, 2006 and the year ended July 31, 2006. References herein to "the December 2006 Period", "the July 2006 Year" and "the 2007 financial year" refer to the five months ended December 31, 2006, the year ended July 2006 and the year ended December 31, 2007, respectively.
The common shares of Uranium One are listed on the Toronto and Johannesburg stock exchanges ("TSX" and "JSE" respectively). Uranium One's convertible unsecured subordinated debentures due December 31, 2011 are also listed on the TSX. The shares of Uranium One's majority-owned subsidiary, Aflease Gold Limited ("Aflease Gold"), are listed on the JSE and its convertible bonds due December 2012 are listed on the Open Market of the Frankfurt Stock Exchange.
Additional information about the Corporation and its business and operations can be found in its continuous disclosure documents. These documents are available under the Corporation's profile at www.sedar.com.
This Management's Discussion and Analysis includes certain forward- looking statements. Please refer to "Forward-Looking Statements".
Key statistics
-------------------------------------------------------------------------
Full
Q4 2007 year 2007
-------------------------------------------------------------------------
Attributable production (lbs of U(3)O(8))(1) 435,400 1,827,200
-------------------------------------------------------------------------
Attributable sales (lbs of U(3)O(8))(1) 689,200 1,608,700
-------------------------------------------------------------------------
Average sales price achieved ($ per lbs
of U(3)O(8))(2) $89 $83
-------------------------------------------------------------------------
Average cash cost of production sold ($ per
lbs of U(3)O(8))(2) $11 $11
-------------------------------------------------------------------------
Revenue ($ millions) $61.0 $134.0
-------------------------------------------------------------------------
Earnings from mine operations ($ millions) $46.5 $101.8
-------------------------------------------------------------------------
Net loss ($ millions) $2.2 $17.6
-------------------------------------------------------------------------
Loss per share - basic and diluted ($ per share) $0.01 $0.05
-------------------------------------------------------------------------
(1) Attributable production and sales are from assets that are in
commercial production - currently only Akdala
(2) The Corporation has included non-GAAP performance measures: sales per
pound of U(3)O(8) and cost per pound of U(3)O(8) sold. The
Corporation reports total cash costs on a sales basis. In the uranium
mining industry, these are common performance measures but do not
have any standardized meaning, and are non-GAAP measures. The
Corporation believes that, in addition to conventional measures
prepared in accordance with GAAP, the Corporation and certain
investors use this information to evaluate the Corporation's
performance and ability to generate cash flow. Accordingly, it 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 GAAP.
Highlights
Operations
- Akdala continues to produce at expected rates of throughput and
grade. 100% production for the year was 2,610,300 pounds of
U(3)O(8).
- National shortage of sulphuric acid supply has not affected
production at Akdala.
Projects
- At the South Inkai Project in Kazakhstan, pre-commercial production
of U(3)O(8) has commenced and the completion of the production
complex is on track for mid-year 2008. The industrial production
license is expected to be awarded in the first half of 2009.
- At South Inkai, pre-commercial production totalled 56,500 pounds of
U(3)O(8) (39,600 pounds of U(3)O(8) attributable) in 2007. Pre-
commercial production for the year 2008 to date, on a 100% basis,
was approximately 26,000 pounds of U(3)O(8) in January 2008, 52,000
pounds of U(3)O(8) in February 2008 and is currently at 3,900 -
5,200 lbs of U(3)O(8) per day.
- Acidification of the first wellfield at the Kharasan Project in
Kazakhstan commenced in March 2008. Construction work at Kharasan is
expected to be completed by the end of 2008. The industrial
production licence is expected to be awarded in the first half of
2009.
- The shortage of sulphuric acid has not constrained the ramp-up of
production levels at the South Inkai Project and the Kharasan
Project.
- At the Dominion Project in South Africa, pre-commercial production
of U(3)O(8) has commenced. The pressure leach circuit of the plant
was commissioned in December 2007 and underground mine development
is ongoing.
- Pre-commercial production from Dominion totalled 171,300 pounds of
U(3)O(8) in 2007. In line with the revised production plan, Dominion
has produced approximately 12,000 pounds of U(3)O(8) in January 2008
and 18,000 pounds of U(3)O(8) in February 2008.
- Refurbishment of the Hobson ISR Uranium Processing Facility in
Texas, USA is well underway and resource delineation and exploration
is continuing at the Corporation's La Palangana Project, which will
provide feed for the Hobson Facility.
- The U.S. Nuclear Regulatory Commission has completed its acceptance
review of Uranium One's permit application to build and operate an
in situ uranium recovery facility at the Moore Ranch Project in the
Powder River Basin, Wyoming, USA. The technical review by the U.S.
Nuclear Regulatory Commission is now underway. A feasibility study
for the Moore Ranch Project has been completed and is now being
reviewed externally.
Corporate
- In line with the Corporation's increased focus on its development
projects, Jean Nortier was appointed as Interim Chief Executive
Officer and David Hodgson was appointed as Acting Chief Operating
Officer of the Corporation in February 2008.
- On March 27, 2008, the Corporation entered into an agreement to sell
a portion of its shareholding in Aflease Gold for $40 million and
granted an option to sell its remaining shareholding for additional
proceeds of approximately $49 million.
Outlook
- The Corporation is focused on achieving commercial production from
its projects on schedule, controlling costs at its operations and
remaining a reliable supplier of U(3)O(8) to the nuclear fuel
industry.
- The Corporation seeks to dispose of its non-core assets.
- The Corporation's attributable production in 2008 is expected to be
approximately 3.1 million pounds of U(3)O(8) including 1.8 million
pounds from Akdala and 1.3 million pounds of pre-commercial
production from development projects.
- The Corporation's attributable production (including pre-commercial
production) in 2009 is expected to be approximately 6.8 million
pounds of U(3)O(8).
- The Corporation expects to incur capital expenditures of
$200 million on fully owned development projects for 2008.
- The Corporation does not expect to be required to contribute towards
additional capital expenditure of $70 million by joint ventures in
2008 (of which the Corporation's pro-rata share is $32 million).
- General and administrative expenses, excluding stock based
compensation, are expected to be $45 million for 2008.
- Akdala's average cash production cost per pound of U(3)O(8) sold is
expected to be approximately $12 in 2008.
Overview
Uranium One is a Canadian uranium corporation engaged through subsidiaries and joint ventures in the mining and production of uranium, and in the acquisition, exploration and development of properties for the production of uranium, in Kazakhstan, South Africa, the United States, Australia and Canada. The Corporation is in the process of disposing of its 67% interest in Aflease Gold, which is engaged in the development of the Modder East Gold Project in South Africa.
Uranium One owns a 70% interest in both the producing Akdala Uranium Mine and the South Inkai Uranium Project and it is developing the Kharasan Project in Kazakhstan, in which it owns a 30% interest. The Corporation also owns the Dominion Uranium Project in South Africa. In the United States, the Corporation owns projects in the Powder River and Great Divide Basins in Wyoming, the Hobson ISR Uranium Processing Facility and La Palangana ISR Project in Texas and the Shootaring Mill in Utah. The Corporation also owns the Honeymoon Uranium Project in Australia. The Corporation owns, either directly or through joint ventures, a large portfolio of uranium exploration properties in South Africa, the western United States, South Australia, and the Athabasca Basin of Saskatchewan in Canada.
The following mineral properties and operations of the Corporation referred to in the Corporation's 2007 annual financial statements are discussed in more detail in the Management's Discussion and Analysis below:
The following are the Corporation's principal mineral properties and operations:
-------------------------------------------------------------------------
Operating
mine Project Location Status Ownership
-------------------------------------------------------------------------
Betpak Dala Akdala Uranium Kazakhstan Producing 70% J.V. interest
LLP Mine
-------------------------------------------------------------------------
Advanced
development
projects Project Location Status Ownership
-------------------------------------------------------------------------
Betpak Dala South Inkai Kazakhstan Commission- 70% J.V. interest
LLP Uranium Project ing(2)
Kyzylkum LLP Kharasan Kazakhstan Development 30% J.V. interest
Uranium Project
Uranium One Dominion Uranium South Commission- 100% interest(1)
Africa Project Africa ing(2)
Limited
-------------------------------------------------------------------------
The Corporation is also developing the following mineral properties:
-------------------------------------------------------------------------
Development
projects Project Location Status Ownership
-------------------------------------------------------------------------
South Texas Hobson Facility USA Development 99% interest
Mining and La
Venture Palangana
Project, Texas
Energy Powder River USA Development 100% interest
Metals Basin, Wyoming
Corp (US) Projects (Incl.
Moore Ranch,
Peterson,
Ludeman,
Allemand-Ross,
and Barge)
Energy Great Divide USA Development 100% interest
Metals Basin, Wyoming
Corp (US) Projects (Incl.
JAB and
Antelope)
Uranium One Shootaring Mill, USA Development 100% interest
USA Inc. Utah
Uranium One Honeymoon Australia Development 100% interest
Australia Uranium Project
(Proprietary)
Ltd.
Aflease Modder East South Development 67% interest
Gold Gold Project Africa
Limited(3)
-------------------------------------------------------------------------
Note 1: Uranium One's 100% interest is subject to a definitive purchase
and sale agreement of an undivided 26% interest in the Dominion Uranium
Project to its Black Economic Empowerment partner Micawber 397
(Proprietary) Limited ("Micawber 397"). The Micawber 397 transaction will
be accounted for in the Corporation's financial statements when the risks
and rewards of the transaction are deemed to have passed to Micawber 397.
Note 2: The Dominion Uranium Project and the South Inkai Uranium Project
are in the commissioning stage: production has commenced but the mines
have not yet achieved a commercial production level. Commercial
production is achieved when a pre-defined operating level, based on the
design of the plant, is maintained.
Note 3: The Corporation is in the process of disposing of its investment
in Aflease Gold.
Corporate Development
Business Combination of Uranium One and UrAsia Energy Ltd.
On April 20, 2007 Uranium One completed the acquisition of all of the outstanding common shares of UrAsia Energy. Upon the completion of the transaction, Uranium One was held approximately 60% by former UrAsia Energy shareholders and approximately 40% by former Uranium One shareholders. Accordingly, the business combination has been accounted for as a reverse takeover under GAAP with UrAsia Energy being identified as the acquirer and Uranium One as the acquiree.
As a result of this transaction, the Corporation's assets include Uranium One's Dominion Uranium Project and the Honeymoon Uranium Project and UrAsia Energy's assets in Kazakhstan, comprising a 70% interest in the Akdala Uranium Mine and South Inkai Uranium Project and a 30% interest in the Kharasan Uranium Project.
The total cost of the acquisition of $1.8 billion represents the value of the common shares of Uranium One issued in exchange for shares of UrAsia Energy of $1.7 billion, the fair value of options, warrants and restricted shares outstanding at the announcement date of $62 million, the fair value of the equity component of convertible debentures of $46 million and acquisition costs of $19 million. Assets acquired consist primarily of mineral interests and plant and equipment with a fair value of $2.5 billion, which includes the related future income tax effect.
Acquisition of U.S. Energy Assets
On April 30, 2007, Uranium One completed the purchase from U.S. Energy Corporation ("U.S. Energy") of the Shootaring Canyon Uranium Mill in Utah, as well as a land package comprising uranium exploration properties and a database of geological information for consideration equal to 6,607,605 Uranium One common shares valued at $99.4 million, a cash payment of $6.5 million and transaction costs of $2.6 million.
The transaction was accounted for as an asset purchase and the cost of each item of property, plant and equipment acquired as part of the group of assets acquired was determined by allocating the price paid for the group of assets to each item based on its relative fair value at the time of the acquisition.
The purchase agreement also provided for the assignment of U.S. Energy's right to receive $4.1 million in cash and 1.5 million common shares of Uranium Power Corp. ("UPC") after closing under a purchase and related joint venture agreement between U.S. Energy and UPC relating to certain of the purchased properties. The Corporation received these outstanding payments during Q4 2007 and UPC therefore completed the earn-in process for the assets under the joint venture agreement.
Acquisition of Energy Metals Corporation
On August 10, 2007 Uranium One completed the acquisition of all of the outstanding common shares of Energy Metals Corporation ("EMC"). The transaction resulted in the addition of a large portfolio of uranium exploration properties located throughout the western United States, including the Powder River and Great Divide Basin properties in Wyoming, and the Hobson ISR Uranium Processing Facility in Texas. The Hobson Facility is currently being refurbished.
The transaction was accounted for as an asset purchase and the cost of each item of property, plant and equipment acquired as part of the group of assets acquired was determined by allocating the price paid for the group of assets to each item based on its relative fair value at the time of acquisition.
The total cost of the acquisition of $1.1 billion represents the value of the common shares of Uranium One issued in exchange for shares of EMC of $1.0 billion, the fair value of options in EMC outstanding at the acquisition date of $35.3 million and acquisition costs of $9.3 million. Assets acquired consist primarily of mineral interests with a fair value of $1.4 billion, which includes the related future income tax effect.
Sale of shareholding in Aflease Gold
During Q1 2008, in line with the Corporation's strategy to dispose of its non-core assets, the board of directors approved a plan to pursue the sale of the Corporation's shareholding in Aflease Gold and the Corporation entered into negotiations regarding the sale of Aflease Gold.
Consequently the Corporation entered into an agreement on March 27, 2008, pursuant to which it agreed to sell 152,195,122 shares in Aflease Gold, held by the Corporation's wholly owned subsidiary, Uranium One Africa Limited ("Uranium One Africa"), for consideration of approximately $40 million (ZAR320 million). The transaction is expected to close during April 2008, subject to approval by the South African Reserve Bank.
An option has been granted to the purchaser to acquire Uranium One Africa's remaining shareholding of 186,816,558 shares in Aflease Gold at a consideration of approximately $49 million (ZAR393 million) on or before May 8, 2008. Once the option is exercised, the purchase and sale of the shares in Aflease Gold will be required to comply with the provisions of the Securities Regulation Code of the Securities Regulation Panel of South Africa relating to a compulsory offer to the other shareholders of Aflease Gold and, within 150 days, to obtain approval from the South African Reserve Bank and the satisfaction of merger approval requirements of the South African Competition Act, 89 of 1998.
It is expected that the Corporation will reflect a loss of approximately $90 million in Q1 2008 pursuant to this transaction.
Proposed sale of non-core assets
The Corporation remains focused on operating and developing its core uranium assets and has identified several non-core assets that do not fit into its long-term growth strategy.
In line with this focus, the Corporation intends to divest several of its non-core assets and expects to finalize a number of transactions during 2008.
Review of Operations
Akdala Uranium Mine
Akdala is an operating acid in situ recovery ("ISR") uranium mine located in the Suzak region of South Kazakhstan. The Betpak Dala Joint Venture Limited Liability Partnership, a Kazakhstan registered limited liability partnership ("Betpak Dala"), owns a 100% interest in the Akdala Mine. Uranium One owns a 70% joint venture interest in Betpak Dala. The remaining 30% is owned by JSC NAC Kazatomprom ("Kazatomprom"), a Kazakhstani state-owned company responsible for the mining, importing and exporting of uranium in Kazakhstan.
The production rate at the Akdala Mine is 2,600,000 pounds of triuranium octoxide ("U(3)O(8)") (1,000 tonnes uranium ("U")) per year.
In Kazakhstan, in situ recovery involves circulating ground water fortified with acid through the ore by means of a grid of injection and production wells and processing the water pumped from the production wells to recover uranium in a processing plant before returning the leach solution to the injection wells.
Production:
Akdala produced 2,610,300 pounds of U(3)O(8) (1,004 tonnes U) of which 1,827,200 pounds of U(3)O(8) (703 tonnes U) is attributable to the Corporation during 2007. As Akdala is operating in steady state at licenced capacity, production expected for 2008 is in line with production achieved in 2007.
Operations:
The following is a summary of the operational statistics (100%) for Akdala during 2007:
-------------------------------------------------------------------------
Total
wells Average no
completed of Concentra
(including production Average -tion Production
Drill rigs production wells in flow rate in solution (lbs of
on site(1) wells) operation (m(3)/hour) (mg U/l) U(3)O(8))
-------------------------------------------------------------------------
Q1 2007 3 27 145 893 131.2 697,100
-------------------------------------------------------------------------
Q2 2007 6 54 129 1,034 112.5 646,000
-------------------------------------------------------------------------
Q3 2007 7 93 139 1,066 108.2 645,100
-------------------------------------------------------------------------
Q4 2007 6 90 138 1,047 98.2 622,100
-------------------------------------------------------------------------
(1) As at end of quarter
Flow rate, concentration and the number of operating wells are carefully
monitored and managed to produce the required amount of U(3)O(8), in
accordance with Akdala's licence.
Financial information:
The following table shows the attributable production, sales and
production cost trends for Akdala over the prior eight quarterly periods.
-------------------------------------------------------------------------
(all figures are the 3 months ended
Corporation's Dec 31 Sept 30 June 30 Mar 31
attributable share) 2007 2007 2007 2007
-------------------------------------------------------------------------
Production of U(3)O(8) in lbs 435,400 451,600 452,200 488,000
-------------------------------------------------------------------------
Sales of U(3)O(8) in lbs 689,200 70,000 244,300 605,200
-------------------------------------------------------------------------
Inventory U(3)O(8) in lbs 748,900 1,007,000 636,800 436,500
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales ($000's) 61,010 8,019 23,265 41,730
-------------------------------------------------------------------------
Sales $/lb of U(3)O(8) sold 89 115 95 69
-------------------------------------------------------------------------
Operating expenses ($000's) 7,521 660 2,058 7,043
-------------------------------------------------------------------------
Operating expenses $/lb of
U(3)O(8) sold 11 9 8 12
-------------------------------------------------------------------------
Depletion and depreciation
($000's) 6,972 1,067 2,024 4,859
-------------------------------------------------------------------------
Depletion and depreciation
$/lb of U(3)O(8) sold 10 15 8 8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2 months
(all figures are the ended 3 months ended
Corporation's Dec 31 Oct 31 Jul 31 Apr 30
attributable share) 2006 2006 2006 2006
-------------------------------------------------------------------------
Production of U(3)O(8) in lbs 426,500 513,100 478,300 388,800
-------------------------------------------------------------------------
Sales of U(3)O(8) in lbs 880,700 99,300 70,100 380,300
-------------------------------------------------------------------------
Inventory U(3)O(8) in lbs 565,400 1,026,900 637,000 251,900
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales ($000's) 46,256 4,193 2,922 14,383
-------------------------------------------------------------------------
Sales $/lb of U(3)O(8) sold 53 42 42 38
-------------------------------------------------------------------------
Operating expenses ($000's) 7,872 1,417 1,630 3,863
-------------------------------------------------------------------------
Operating expenses $/lb of
U(3)O(8) sold 9 14 23 10
-------------------------------------------------------------------------
Depletion and depreciation
($000's) 7,240 1,209 3,294 976
-------------------------------------------------------------------------
Depletion and depreciation
$/lb of U(3)O(8) sold 8 12 47 3
-------------------------------------------------------------------------
Uranium revenues are recorded upon delivery of product to utilities and intermediaries and do not occur evenly throughout the year. Timing of deliveries is usually at the contracted discretion of customers within a quarter or similar time period. Changes in revenues, net earnings/loss and cash flow are therefore affected primarily by fluctuations in contracted delivery of product from quarter to quarter as well as by changes in the price of uranium.
Operating expenses are directly related to the quantity of U(3)O(8) sold and are lower in periods when the quantity of U(3)O(8) sold is lower. There is a corresponding build-up of inventory in periods when the quantity of U(3)O(8) sold is lower. During Q4 2007, revenue from sales was $61.0 million from 689,200 pounds of U(3)O(8) sold and cash production costs were $7.5 million or approximately $11 per pound of U(3)O(8) sold. During Q4 2006, sales were $46.3 million from 880,700 pounds of U(3)O(8) sold and cash production costs were $7.9 million or $9 per pound of U(3)O(8) sold. The average depletion per pound of U(3)O(8) sold in Q4 2007 was $10 per pound of U(3)O(8) sold, compared to $8 per pound of U(3)O(8) sold in Q4 2006.
Review of Development Projects
South Inkai Uranium Project
South Inkai is an ISR uranium project located in the Suzak region of South Kazakhstan. Betpak Dala owns a 100% interest in the South Inkai Project. Accordingly, Uranium One owns a 70% indirect interest in the project.
The design capacity of the South Inkai Project is 5,200,000 pounds of U(3)O(8) (2,000 tonnes U) per year. It is expected that the annualized rate of production will reach this level in 2011.
Pre-commercial production:
Pre-commercial production from South Inkai in 2007 was 56,500 pounds of U(3)O(8) (22 tonnes U) of which 39,600 pounds of U(3)O(8) (15 tonnes U) is attributable to the Corporation during the year. South Inkai is not currently permitted to produce more than 780,000 pounds of U(3)O(8) (300 tonnes U) per year under the existing pilot production licence and the Corporation expects pre-commercial production from South Inkai to be 714,000 pounds of U(3)O(8) (275 tonnes U) of which 500,000 pounds of U(3)O(8) (192 tonnes U) would be attributable to the Corporation during 2008.
Operations:
The following is a summary of the operational statistics (100%) for South Inkai during 2007:
-------------------------------------------------------------------------
Total wells Average
completed no of Concentra-
Drill (including production Average tion in Production
rigs production wells in flow rate solution (lbs of
on site(1) wells) operation (m(3)/hour) (mg U/l) U(3)O(8))
-------------------------------------------------------------------------
Q1 2007 5 38 - - - -
-------------------------------------------------------------------------
Q2 2007 5 78 - - - -
-------------------------------------------------------------------------
Q3 2007 6 113 - - - -
-------------------------------------------------------------------------
Q4 2007 6 92 30 106 122.7 56,500
-------------------------------------------------------------------------
(1) As at end of quarter
South Inkai has produced approximately 26,000 pounds of U3O8 in January 2008, 52,000 pounds of U3O8 in February 2008 and is currently producing at 3,900 - 5,200 lbs of U3O8 per day.
Industrial production licence:
In Kazakhstan, a sub-soil use permit granted by the Ministry of Mineral & Energy Resources ("MEMR") is required by a company to mine a deposit. These permits typically allow for up to a 4-year period of exploration, with two 2- year extensions, and for 25 years of production. The license is normally extended to the extent that additional resources are available for recovery. There is usually a two-phase development of a deposit with a requirement to commence production initially at a pilot production level. For uranium this is normally a nominal amount of 300 tonnes U per year of production and lasts 12- 18 months or longer. The objective of this phase is to operate at this level to demonstrate that the approach being used for extraction is achieving acceptable results, specifically in terms of recovery. Upon being able to demonstrate acceptable performance with the reserve and subject to the completion of sufficient drilling to convert Russian resources into Russian reserves and the approval of these reserves by the State Committee for Resources, a company may apply for an industrial production licence.
An industrial production licence (often also referred to as a "commercial" production licence) is required by a company to mine any mineral in Kazakhstan at a commercial or full production rate.
In the case of South Inkai, the subsoil use permit specifies a pilot production level of 300 tonnes U per year, with industrial production levels of 600 tonnes U per year. The Corporation expects that the industrial production licence will be obtained in the first half of 2009. Betpak Dala is applying to amend the subsoil use permit and to extend the industrial production levels to 2,000 tonnes per year.
A delineation drilling program to convert a sufficient amount of material from the Russian C2 category to the Russian C1 category was completed on schedule in December 2007. A total of 413 exploration holes were drilled for this purpose and a presentation is being prepared for submission as part of the industrial production licence application.
The well fields required for the pilot test program to prove the productivity of the well fields were completed successfully during 2007.
Construction:
Uranium processing facilities being constructed at South Inkai are of a similar design to those at the Akdala Mine. Construction of the production complex is on schedule and final completion of the production complex is expected by the second half of 2008.
Production well drilling and piping has been completed for the first three production blocks and production flow has commenced from the first two blocks.
To date, total expenditure incurred by Betpak Dala relating to the construction project at South Inkai is $36.5 million and further capital expenditure to complete the project to design capacity is expected to be $8 million.
Kharasan Uranium Project
Kharasan is an ISR uranium development project located in the Suzak region of South Kazakhstan. Kyzylkum LLP ("Kyzylkum"), a Kazakhstan registered limited liability partnership, owns a 100% interest in the Kharasan Project. Uranium One owns a 30% joint venture interest in Kyzylkum and the remaining interests in Kyzylkum are owned as to 30% by Kazatomprom and as to 40% by Energy Asia (BVI) Ltd., which is owned by a consortium of Japanese utilities and a trading company.
The design capacity of Kharasan is 5,200,000 pounds of U(3)O(8) (2,000 tonnes U) per year. It is expected that the annualized rate of production will reach this level in 2011.
Pre commercial production:
Acidification of the first well field at Kharasan commenced in March 2008. Kharasan has not yet obtained its industrial production licence and it expects to produce 715,000 pounds of U3O8 (275 tonnes U) of which 220,000 pounds of U3O8 (85 tonnes U) will be attributable to the Corporation during 2008 under the existing pilot production licence.
Operations:
The following is a summary of the operational statistics (100%) for Kharasan during 2007:
-------------------------------------------------------------------------
Total wells Average
completed no of Concentra-
Drill (including production Average tion in Production
rigs production wells in flow rate solution (lbs of
on site(1) wells) operation (m(3)/hour) (mg U/l) U(3)O(8))
-------------------------------------------------------------------------
Q1 2007 5 - - - - -
-------------------------------------------------------------------------
Q2 2007 6 14 - - - -
-------------------------------------------------------------------------
Q3 2007 7 33 - - - -
-------------------------------------------------------------------------
Q4 2007 10 47 - - - -
-------------------------------------------------------------------------
(1) As at end of quarter
Drilling operations were slowed down in December due to extreme cold temperatures as some of the drill rigs experienced problems with freezing. In addition to the procurement of winterization covers for the affected rigs, there will be a focus in Q1 2008 on training personnel on operational techniques in freezing temperatures.
Industrial production licence:
A delineation drilling program to convert a sufficient amount of material from the Russian C2 category to the Russian C1 category is ongoing and 78 drill holes were completed in 2007.
During 2007, 19 of the required 26 production wells were completed for the pilot test program to prove the productivity of the well fields.
The Corporation expects to receive an industrial production licence for Kharasan in the first half of 2009.
Construction:
Access to the project site was restricted early in 2007 due to the flooding of the Syr Darya River, and construction activities had to be accelerated in the second half of 2007 to get the construction program back on schedule. Good progress has been made in this regard and the estimated percentage of completion of the process plant was 65% at the end of December 2007, with the main circuit components installed. The main focus will now be on the completion of the piping and the enclosure of the plant. The portions of the plant required for pilot production will be completed during 2008.
To date, total expenditure incurred by Kyzylkum relating to the construction project at Kharasan is $35.0 million and further capital expenditure to complete the project to design capacity is expected to be $15 million.
Infrastructure development:
Construction of the paved road and the bridge over the Syr Darya River were completed in October 2007. The railroad switching station and Phase 1 of the railroad transhipment base are expected to be completed in Q2 2008. Completion of the transhipment base for shipment of U(3)O(8) is required as it is not permitted to ship U(3)O(8) through villages on alternate routes to other shipping points.
Total expenditure incurred by Kyzylkum relating to infrastructure development at Kharasan is $39.0 million and further capital expenditure to complete the required infrastructure is expected to be $40 million.
Negotiations are well advanced with an adjacent uranium ISR development joint venture to share in the development cost of the local infrastructure required to support the operations (road, bridge, rail and marshalling facilities). Once finalized, this will result in a return of capital to Kyzylkum of approximately 40% of infrastructure amounts expended to date.
Project Finance Facility:
In addition to the $80 million loan from the Corporation, Kyzylkum negotiated unsecured bank loan facilities totalling $100 million. One facility in the amount of $70 million was obtained from the Japan Bank for International Cooperation and the other facility, in the amount of $30 million, was obtained from Citibank. Draw downs of $60 million against the facility were received in 2007. The $80 million loan from the Corporation (capital of $66.7 outstanding as at March 31, 2008) has to be repaid in full before repayments can be made on these facilities. The Corporation's proportionate share of these facilities will amount to $30 million when fully drawn down. The loan facilities have floating interest rates of LIBOR plus 0.25% and 0.35%, respectively.
Sulphuric acid supply constraints in Kazakhstan
Kazakhstan is experiencing a temporary shortage in the supply of sulphuric acid. This has been caused by a number of factors including the delayed commissioning of a sulphuric acid plant at Balkash, which will contribute to the sulphuric acid supply when operating. The Corporation has identified a potential source of sulphuric acid in Russia, and while it has been actively pursuing this source the Corporation believes that it may not be necessary to purchase this additional acid at this time, as current and expected acid allocations are sufficient for its operations in Kazakhstan. The Betpak Dala Joint Venture is currently receiving allotments of sulphuric acid which are sufficient to operate the Akdala Uranium Mine at an annualized rate of production of 1,000 tonnes U per year and the South Inkai Uranium Project at an annualized rate of production in excess of 300 tonnes U per year. At the Kyzylkum Joint Venture, sulphuric acid deliveries have arrived at the Kharasan Uranium Project and acidification of the first well field commenced in March 2008. With the expected start up of the Balkash acid plant in the second half of 2008, the Corporation expects an increase in acid supply in Kazakhstan.
Longer term U(3)O(8) production forecasts Akdala, South Inkai and Kharasan assume that the temporary shortage of sulphuric acid is alleviated in the latter half of 2008.
To address long term supply constraints, the Corporation is establishing a joint venture with Kazatomprom and other affected parties to build a sulphuric acid plant at Zhanakorgan, which is close to Kharasan. Progress on the project includes the selection of a well established reliable technology and a suitable contractor for construction of the plant. The contractor will be supported by local Kazakhstan contractors where necessary and sulphur will be sourced from the oil and gas fields in western Kazakhstan. The Corporation's ownership percentage in the joint venture is expected to be 19%. A final estimate of the total construction cost of the plant is being prepared and construction of the plant is expected to be completed in 2011.
Dominion Uranium Project
The Dominion Uranium Project is a conventional shallow underground mining operation, situated in the North West Province of South Africa, approximately 150 kilometres west-southwest of Johannesburg.
The design throughput capacity of the processing plant is 200,000 tonnes of material per month. The initial feasibility study considered a life of mine of 11 years.
Pre-commercial production:
In 2007, pre-commercial production from the Dominion Uranium Project was 171,300 pounds of U(3)O(8). Pre-commercial production in 2008 is estimated to be 590,000 pounds of U(3)O(8). Sales of this material, produced during the commissioning period, will be used to partially fund the development activities.
In line with the revised production plan, Dominion has produced approximately 12,000 pounds of U(3)O(8) in January 2008 and 18,000 pounds of U(3)O(8) in February 2008.
Mine Development:
Mining operations for 2007 can be summarized as follows:
-------------------------------------------------------------------------
Underground Underground Underground ore
development achieved tonnes mined blasted grade(1)
-------------------------------------------------------------------------
(metres) (tonnes) (kg U(3)O(8)/tonne)
-------------------------------------------------------------------------
Q1 2007 2,187 36,200 0.261
-------------------------------------------------------------------------
Q2 2007 3,197 64,500 0.304
-------------------------------------------------------------------------
Q3 2007 3,662 84,300 0.406
-------------------------------------------------------------------------
Q4 2007 3,130 86,800 0.358
-------------------------------------------------------------------------
(1) Blasted grade includes all in-stope mining dilution and on reef
development.
Underground mine development was slower than expected in 2007. Underground development has been adversely affected by a number of factors, including disruption in electrical power supply and equipment breakdowns. Additional trackless equipment has been ordered to ensure planned development is achieved. The grade of the material treated was lower than forecast due to a number of reasons including higher than expected leaching of near-surface uranium resources, higher than expected mining dilution and lower than expected grade for the surface tailings materials currently being processed through the plant.
At the Rietkuil section where mining has occurred at depths well below the weathered zone, close-spaced sampling conducted during mining operations have allowed for a quantitative reconciliation between in-situ grades currently being mined and grades from the resource estimation based on historic underground sampling data and exploration drilling. The forecast in- situ grades based on the exploration models approximate those being mined.
At the Dominion section an increase in the anticipated leached zone from 20 metres below surface to approximately 40 metres below surface resulted in grades within this zone being lower than anticipated. Although insufficient sampling below the leached area has been completed to undertake quantitative reconciliations to the existing resource models, increased sample grades below the leached zone have been intersected with the latest mine development where the majority of the 2008 forecast production is scheduled.
During February 2008 the in-situ grade of the areas mined was approximately 500g/t U(3)O(8). Stoping dilution and on reef development resulted in a delivered grade to the plant of approximately 330 g/t U(3)O(8). Higher grade areas planned to be mined towards the end of the year, an increased ratio of stoping to on-reef development and a program to minimize dilution are anticipated to result in improved delivered grades to the plant by the end of the year.
Electro-hydraulic drill rigs were implemented to facilitate quicker capital development.
Since November 2007, Dominion has been subject to electrical load shedding arising from the current South African electrical power crisis. Diesel generators have been ordered to ensure back-up power for underground operations is available during periods of load shedding. Installation of the generators are expected to commence in Q2 2008.
As a consequence of the business combination between Uranium One and UrAsia, the Dominion Uranium Project is carried at fair value as at April 20, 2007, plus development costs since the transaction date. The mine development cost from April 20, 2007 up to December 31, 2007, amounted to $20.6 million.
Metallurgical Plant:
The plant is operating in line with recovery expectations, but below throughput design capacity. Current throughput is approximately 27,000 tonnes per month from underground and 63,000 tonnes per month from surface tailings material. Total plant recoveries are approximately 64% at present. Based on current head grades and residues the estimated U(3)O(8) recovery of underground material is 76% and recovery of surface tailing material is 54%. Overall plant recoveries are expected to increase with time as the lower grade surface material is displaced by higher grade and quantities of underground ore. Once the surface tailings material has been entirely replaced with underground ore, recoveries are expected to increase in line with feasibility study test work.
The commissioning of the pressure leach circuit at the plant was completed in December 2007 and production of ammonium diuranate commenced in May 2007. Currently U(3)O(8) is being produced on a continuous basis. Underground ore and surface tailings material are currently being processed through one autoclave, and the other autoclave is on standby. An additional 40 tonne per hour boiler is scheduled to be commissioned in Q3 2008, to allow both autoclaves to be operated together at design capacity and also to facilitate expansion.
The plant development cost from April 20, 2007 up to the completion of the plant in Q4 2007, amounted to $55.4 million.
Hobson and La Palangana
The Hobson Facility is an ISR uranium processing facility located about one mile south of the town of Hobson in Karnes County, Texas.
In the United States, in situ recovery involves circulating ground water fortified with carbonate and oxygen through the ore by means of a grid of injection and production wells and processing the water pumped from the production wells to recover uranium in a processing plant before returning the leach solution to the injection wells.
The mill is currently being refurbished to a capacity of approximately 1,000,000 pounds of U(3)O(8) per year. Pre-commercial production from Hobson and La Palangana in 2008 is estimated to be 35,000 pounds of U(3)O(8).
The refurbishment and construction activity at the Hobson Facility remains on schedule for completion in Q2 2008. The schedule for initial production of U(3)O(8) is directly tied to the licencing and development of the La Palangana Uranium Project, and is expected to take place by the end of 2008.
The La Palangana Uranium Project is an ISR uranium deposit located in close proximity to the Hobson Facility. Uranium bearing resins from the La Palangana satellite ion exchange plant will be shipped to the Hobson Facility for further processing into U(3)O(8). The Corporation is continuing with a drilling program that commenced prior to acquisition of the property, to develop an area of the deposit to commence production and to conduct exploration drilling on other areas of the property.
The Corporation has applied for all permits necessary to conduct ISR operations at the La Palangana site from the Texas Commission on Environmental Quality ("TCEQ"). All applications are progressing through the regulatory process.
A public meeting on the La Palangana Area Permit was held in January 2008 and was well received. The draft Area Permit to approve mining operations at La Palangana is expected to be issued in Q2 2008. Final approvals of the RML, Area Permit, and disposal well permit are anticipated to be received in Q3 2008. Hobson is already permitted for commercial operations. The Corporation submitted an application to renew the licence for another 10 year period in December 2006. That application was submitted on time and operations can therefore continue while licence renewal is underway. A new air permit for Hobson was approved early in 2008.
Powder River Basin, Wyoming
The Powder River Basin in Wyoming hosts several of the Corporation's uranium projects. The most advanced project in the Powder River Basin is the Moore Ranch Project. Moore Ranch has a NI 43-101 compliant measured resource suitable for in situ recovery. On October 3, the Corporation submitted an application to the U.S. Nuclear Regulatory Commission ("NRC") for a licence to construct and operate an in situ uranium recovery facility at Moore Ranch, the first application of its kind received by the NRC since 1988. The application contains plans for uranium extraction ramping up to a rate of a nominal 1,000,000 pounds of U(3)O(8) per year from the Moore Ranch well fields beginning in 2010, with construction of a central processing plant with capacity of 2,000,000 pounds of U(3)O(8) per year eventually expandable to 4,000,000 pounds of U(3)O(8) per year. If installed, the excess plant capacity would be used to process uranium bearing resins from other properties owned by the Corporation in the Powder River and/or Great Divide Basins. Construction of the full central plant may not immediately be necessary due to a toll-processing agreement with a subsidiary of Cameco Corporation, executed on August 21, 2007.
The NRC has completed its acceptance review of Uranium One's licence application to build and operate an in situ uranium recovery facility at the Moore Ranch Project. The NRC's technical review of the application is currently in progress and the Corporation expects to receive the permit during 2009. A feasibility study for the Moore Ranch Project has recently been completed and is now being reviewed externally.
Other Powder River Basin properties where delineation drilling and environmental data collection for permitting purposes is ongoing include the Ludeman, Allemand-Ross and Peterson projects.
Great Divide Basin, Wyoming
The Corporation's principal properties in the Great Divide Basin in Wyoming are the JAB and Antelope projects. JAB has a NI 43-101 compliant measured and indicated resource suitable for in situ recovery.
An extensive delineation drilling program comprising 261 holes was concluded at JAB during 2007 and the Corporation anticipates submitting an application to the NRC for a licence to construct and operate an in situ uranium recovery facility for JAB in Q2 2008. Environmental baseline data collection and additional hydrologic testing of the aquifer were completed in Q1 2008 at JAB and the data collected will be analyzed in Q2 2008.
Environmental baseline data was also collected from the Antelope property during 2007 for the preparation of an application to the NRC for a licence to construct and operate an in situ uranium recovery facility. Hydrologic testing at Antelope is scheduled for the middle of 2008. Submission of the application to the NRC for Antelope is scheduled for Q2 2008. Further delineation drilling will occur at Antelope during 2008.
Shootaring Mill and Associated Uranium Properties
On April 30, 2007, Uranium One completed the purchase of the Shootaring Mill in Utah, an acid leach facility with 750 tons per day throughput capacity.
In addition to the mill, a land package comprising approximately 38,000 acres of uranium exploration properties in Utah, Wyoming, Arizona and Colorado and a database of geological information were acquired.
A mill assessment by an independent firm was completed in Q4 2007, however refurbishment cannot begin until the application to change the licence to operational status has been accepted.
Exploration on properties acquired in the EMC transaction is focused on proving code compliant resources through upgrading these assets in drilling and associated exploration programs designed for these properties. A feasibility study has been initiated on the Shootaring Mill including the feasibility of mining two of the most suitable underground uranium assets with conventional mining techniques.
Honeymoon Uranium Project
The Honeymoon ISR Uranium Project is located in the north-eastern section of the State of South Australia, approximately 75 kilometres northwest of Broken Hill.
The Honeymoon Project has a design capacity of 880,000 pounds of U(3)O(8) per year, with an expected mine life of six years. The Corporation does not expect any production from Honeymoon during 2008.
The redesign of the Honeymoon Project and the new plant layout, including a reversion to mixer settler technology, was finalized in Q4 2007.
The Corporation received full approval for its mining operations at Honeymoon in January 2008. The South Australian Government approved the Corporation's mining and rehabilitation program and the Environmental Protection Agency has given its approval to the mine's radioactive waste management plan and radiation management plan.
The revised cost estimate for the construction of Honeymoon is $76.0 million, of which $19.6 million has been spent up to December 31, 2007.
Production is expected to commence in 2009.
Exploration Projects
The Corporation is exploring its other properties and has current exploration programs in progress on its properties in South Africa, the western United States, Canada and Australia.
Selected Financial Information
The Corporation's consolidated financial statements and the financial data set out below have been prepared in accordance with GAAP. Uranium One and its operating subsidiaries use the United States dollar, the South African rand, the Australian dollar and the Canadian dollar as measurement currencies.
(US dollars in thousands except per share amounts)
5 Months Year
Year ended ended ended
December 31, December 31, July 31,
2007 2006 2006
$ $ $
-----------------------------------
Revenue 134,024 50,449 23,507
Net (loss) / earnings (17,609) 19,684 (48,939)
Cash flows from / (to) operating
activities 22,069 (11,375) (1,437)
(Loss) / earnings per share (0.05) 0.09 (0.27)
Adjusted net earnings / (loss)(1) 1,118 (5,052) (6,337)
Product inventory carrying value 15,220 10,826 10,760
Total assets 5,612,898 971,618 951,025
Long term financial liabilities 1,838,401 341,964 368,490
Average realized uranium price per
lb of U(3)O(8) 83 51 29
Average U(3)O(8) spot price per lb 99 60 38
lbs of lbs of lbs of
U(3)O(8) U(3)O(8) U(3)O(8)
Attributable sales volume 1,608,700 980,000 811,700
Attributable production volume 1,827,200 939,600 1,192,800
Attributable inventory 748,900 565,400 637,000
(1) Adjusted net earnings / loss is a non-GAAP measure used to provide
investors with additional information about the Corporation's
performance. Accordingly, it should be considered as supplemental in
nature and should not be considered in isolation or as a substitute
for measured performance prepared in accordance with GAAP. Refer
below for a reconciliation of adjusted net earnings to reported net
earnings.
Non-GAAP measures
Adjusted net earnings / loss
The Corporation has included a non-GAAP performance measure, adjusted net earnings, throughout this document. The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Corporation's performance and ability to generate cash flow. Accordingly, it 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 GAAP. The following table provides a reconciliation of adjusted net earnings to the financial statements:
(US dollars in thousands)
5 Months
Year ended ended Year ended
December 31, December 31, July 31,
2007 2006 2006
$ $ $
--------------------------------------
Net (loss) / earnings (17,609) 19,684 (48,939)
Unrealized foreign exchange
loss / (gain) on future income
tax liabilities 18,727 (24,736) 42,602
--------------------------------------
Adjusted net earnings / (loss) 1,118 (5,052) (6,337)
--------------------------------------
--------------------------------------
Sales per pound of U(3)O(8) and cost per pound of U(3)O(8) sold
The Corporation has included non-GAAP performance measures throughout this document: sales per pound of U(3)O(8) and cost per pound of U(3)O(8) sold. The Corporation reports total cash costs on a sales basis. In the uranium mining industry, these are common performance measures but do not have any standardized meaning, and are non-GAAP measures. The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, the Corporation and certain investors use this information to evaluate the Corporation's performance and ability to generate cash flow. Accordingly, it 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 GAAP. As in previous periods, sales per pound of U(3)O(8) and cost per pound of U(3)O(8) sold is calculated by dividing the Revenues and Operating expenses per the Statement of Operations in the Consolidated Financial Statements by the pounds of U(3)O(8) sold in the period.
Results of Operations and Discussion of Financial Position
Summary of Quarterly Results
-------------------------------------------------------------------------
Dec 31 Sept 30 June 30 Mar 31
2007 2007 2007 2007
-------------------------------------------
$(000's) $(000's) $(000's) $(000's)
-------------------------------------------------------------------------
Revenue from uranium sales 61,010 8,019 23,265 41,730
-------------------------------------------------------------------------
Net (loss) / income
for period (2,239) (17,257) (13,694) 7,971
-------------------------------------------------------------------------
Basic and diluted (loss) /
earnings per share(1) (0.01) (0.04) (0.04) 0.04
-------------------------------------------------------------------------
Total assets 5,612,898 5,710,605 4,247,176 999,950
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Dec 31 Oct 31 Jul 31 Apr 30
2006(2) 2006 2006 2006
-------------------------------------------
$(000's) $(000's) $(000's) $(000's)
-------------------------------------------------------------------------
Revenue from uranium sales 46,256 4,193 2,922 14,383
-------------------------------------------------------------------------
Net (loss) / income
for period (6,228) 25,912 (32,165) (12,068)
-------------------------------------------------------------------------
Basic and diluted (loss) /
earnings per share(1) (0.03) 0.12 (0.15) (0.06)
-------------------------------------------------------------------------
Total assets 971,618 949,530 951,025 810,086
-------------------------------------------------------------------------
Notes:
1. The basic and diluted earnings / loss per share is computed
separately for each quarter presented and therefore may not sum to
the year ended December 31, 2007 or the 5 months ended December 31,
2006.
2. The December 31, 2006 quarter consists of a 2 month period.
Results of Operations
Uranium sales, inventory and operating costs
Sales attributable to the Corporation during 2007 amounted to approximately 1.6 million pounds of U(3)O(8). The Corporation's attributed share of revenue from those sales amounted to $134.0 million. Earnings from mining operations were $101.8 million after the deduction of operating expenses of $17.3 million and depreciation and depletion charges of $14.9 million. During 2007 attributable inventory increased by 183,500 pounds of U(3)O(8) as more U(3)O(8) was produced than sold during the year.
Attributable sales in the December 2006 Period amounted to approximately 1.0 million pounds of U(3)O(8). The related revenue from those sales amounted to $50.4 million. Earnings from mining operations were $32.7 million after the deduction of operating expenses of $9.3 million and depletion costs of $8.4 million. Attributable sales in the July 2006 Year amounted to approximately 0.8 million pounds of U(3)O(8). The related revenue from those sales amounted to $23.5 million. Earnings from mining operations were $8.9 million after the deduction of operating expenses of $9.5 million and depletion costs of $5.1 million.
The average unit price received for sales in 2007 was $83 per pound of U(3)O(8). The average price obtained in the December 2006 Period was $51 per pound of U(3)O(8) and $29 per pound of U(3)O(8) in the July 2006 Year. The spot price of uranium at December 31, 2007 was $90 per pound of U(3)O(8), compared to a spot price of $72 per pound of U(3)O(8) at December 31, 2006 and $47 per pound of U(3)O(8) at July 31, 2006.
General and administration costs
General and administrative costs for 2007 are not comparable to previous periods, due to the significant changes in the Corporation in the current financial year, most notably, the transaction between Uranium One and UrAsia Energy in Q2 2007 and the acquisition of EMC during Q3 2007. The expenses for the December 2006 Period and the July 2006 Year therefore represent the expenses for UrAsia Energy only, while the expense in 2007 relates to the combined operations of Uranium One, UrAsia Energy and EMC.
General and administration expenses, including stock-based compensation expenses of $37.7 million, amounted to $74.3 million for 2007, compared to $24.8 million for the December 2006 Period and $14.9 million for the July 2006 Year, including stock-based compensation of $22.2 million and $9.4 million, respectively. Higher administrative costs largely relate to the substantial increase in size of operations resulting from acquisition activities and growth. Change of control payments were also made to certain former officers of the companies acquired. In addition to the growth in the combined administration activity internationally, integration activities required considerably greater travel and accommodation than normal, and salaries and wages increased as a result of an increase in the number of employees. The expense for 2007 includes salaries of $14.7 million, travel expenses of $3.1 million, consulting fees of $2.3 million and legal fees of $2.0 million.
Stock-based compensation expenses are calculated using the Black Scholes option pricing model. The price at which the options were issued, as well as the remaining term of the options, affects the fair value of the options and therefore the expense incurred. In both the Uranium One / UrAsia Energy transaction and the EMC transaction, the market price of Uranium One's shares on date of acquisition was, in most instances, higher than the exercise price of the unvested options acquired. This, combined with the volatility of Uranium One's share price around the time of the transactions, attributed materially to high fair values attributed to these options. As most of these options were issued some time before the dates of the acquisitions, their vesting periods from the date of the transactions are also relatively short. The stock based compensation expense is recorded using a graded vesting schedule and the expense is therefore heavily weighted towards the earlier part of the vesting period. The combined effect of these factors was that the stock-based compensation expense incurred during 2007 was abnormally high.
Exploration
Exploration expenditure in 2007 of $19.2 million related to exploration programs being undertaken on the Corporation's licence areas in the United States, South Africa, Canada, Australia and the Kyrgyz Republic. Exploration expenditures for the December 2006 Period of $2.9 million and the July 2006 Year of $2.6 million, which are included in the Corporate and other segment of the consolidated financial statements, related to properties in the Kyrgyz Republic only.
Interest income and expense
Interest income amounted to $13.0 million for 2007, compared to $3.7 million for the December 2006 Period and $4.4 million for the July 2006 Year. In addition to the interest earned on loans to joint ventures, interest is earned on funds held on deposit by the Corporation. Additional interest income is attributable to an increase in cash and short term investments acquired in the business combination between Uranium One and UrAsia and the acquisition of EMC.
The interest expense for 2007 includes interest accrued on the convertible debentures, the interest expense on the short term loans from Nedcor Securities and interest on other long term debt. There was no interest expense incurred for the December 2006 Period and the July 2006 Year.
Dilution gain
Dilution gains or losses occur when the percentage of equity held in Aflease Gold by Uranium One Africa decrease. Such decreases occur when shares in Aflease Gold are issued to shareholders other than Uranium One Africa. From April 20, 2007, when the Corporation's interest on Aflease Gold was 67.61%, issuances of shares to outside shareholders resulted in a dilution gain of $5.3 million. As a result of the acquisition of EMC during Q3 2007, the Corporation acquired an additional 2.38% interest in Aflease Gold, as EMC held 12.5 million shares of Aflease Gold. The Corporation's interest in Aflease Gold was 67.07% at December 31, 2007. As the interest in Aflease Gold was acquired during the 2007 year, there were no dilution gains in previous periods.
Foreign exchange gain / loss
The net foreign exchange loss during 2007 amounted to $13.0 million and consisted of a $18.7 million loss consisting primarily of an unrealized exchange loss arising from translation of the future income tax liability in respect of the Corporation's investment in Kazakhstan which increased as result of a strengthening of the Kazakhstan tenge against the US dollar during the year and an unrealized loss of $7.5 million on other items, offset by a realized gain of $13.2 million. For the December 2006 Period, a foreign exchange gain of $23.5 million was recorded and for the July 2006 Year, the loss was $41.1 million.
Income taxes
Current income tax expense for 2007 was $41.3 million and represents taxes paid and payable in Kazakhstan on profits from the Corporation's Akdala Uranium Mine. For the December 2006 Period a $16.0 million tax expense was recorded for the Akdala Uranium Mine and $5.3 million was recorded for the July 2006 Year.
The future income tax recovery during 2007 of $17.6 million arises from a reduction in the future income tax liability related to the acquisition of assets through the purchase of participating interests in the joint ventures in Kazakhstan, as well as an increase in future income tax assets due to temporary differences and tax loss carry forwards. In the December 2006 Period, a recovery of future income taxes of $4.0 million was recorded, being a reduction in future income tax liability, compared to $1.9 million for the July 2006 Year.
Non-controlling interest
Non-controlling interest relates to Uranium One Africa's 67% ownership of its subsidiary company, Aflease Gold.
Net loss for the period
The net loss for 2007 amounted to $17.6 million or $0.05 per share, compared to net income of $19.7 million or $0.09 per share (basic and diluted) for the December 2006 Period and a net loss of $48.9 million or $0.27 per share for the July 2006 Year.
Financial Condition
On December 31, 2007, the Corporation had cash and cash equivalents of $252.2 million, compared to $61.8 million at December 31, 2006. The increase in 2007 is mainly due to the addition of $291.1 million from Uranium One, in in cash and cash equivalents when the assets of Uranium One and UrAsia Energy were combined, an increase in $86.0 million in cash and cash equivalents included in the assets acquired from EMC and the proceeds from a convertible bond offering by Aflease Gold of $87.4 million. Major outflows during the year include the capital expenditure on the Corporation's development properties of $279.4 million and the repayment of the Nedcor Securities short term loans in the amount of $53.1 million. Cash and cash equivalents do not include any asset backed commercial paper.
Inventories increased by $8.9 million over the $12.0 million held at December 31, 2006, due to the build-up of uranium concentrates and solutions and concentrates in process, as well as an increase in material and supplies. As at December 31, 2007 the Corporation had attributable inventory of 0.7 million pounds of U(3)O(8) of which approximately 0.5 million pounds is saleable product. All of the saleable product on hand as at December 31, 2007, is committed for delivery under existing sales contracts subsequent to year end. Shipping times for finished product can be up to four months, depending on the distance between the mine site and conversion facility, where sales are concluded through transfer of legal title and ownership.
A summary of attributable inventory carried at year end are as follows:
-------------------------------------------------------------------------
Thousands of
Category Location pounds of U(3)O(8)
-------------------------------------------------------------------------
In process Mine site 28.0
-------------------------------------------------------------------------
In process External processing facilities 150.2
-------------------------------------------------------------------------
In transit In transit 67.0
-------------------------------------------------------------------------
Finished product ready
to be shipped External processing facilities 350.5
-------------------------------------------------------------------------
Finished product at
conversion facility Conversion facilities 153.2
-------------------------------------------------------------------------
Total inventory 748.9
-------------------------------------------------------------------------
Loans receivable from Betpak Dala of $62.6 million plus interest of $0.9 million were repaid during the 2007 financial year. Short term loans advanced to Betpak Dala of $17.0 million were repaid in full by February 9, 2008.
The Corporation advanced $32 million to Kyzylkum during the period for development of the Kharasan Uranium Project, completing its commitment to provide $80 million of project financing. Scheduled repayments on this loan, of $6.7 million plus interest were received from Kyzylkum during the 2007 financial year. Further repayments of $6.7 million were received for the period up to March 31, 2008 resulting in an outstanding loan of $66.7 million.
Mineral interests, plant and equipment increased, when compared to the balance sheet at December 31, 2006, due to the UrAsia/Uranium One business combination and the addition of $2.5 billion in Uranium One mineral interests, plant and equipment to UrAsia Energy's assets. The acquisition of EMC in Q3 2007 resulted in a further increase in mineral interests of $1.4 billion. Other increases of $104.3 million from the acquisition of the Shootaring Mill and exploration properties from U.S. Energy and additions to plant and equipment of $279.4 million occurred during the year.
The increase in current liabilities from December 31, 2006 can be attributed to an increase in accounts payable and accrued liabilities resulting from increased costs due to growth and to the costs of the business combination and an increase in taxes payable in Kazakhstan due to the profits from the Akdala Uranium Mine.
Long term liabilities increased by $1.5 billion from December 31, 2006. Of this amount, $136.5 million results from the business combination and the recording of convertible debentures that were issued by Uranium One in December 2006. Asset retirement obligations increased by $12.2 million. The amount outstanding on the convertible bond issued by Aflease Gold during 2007 amounted to $90.6 million. The Corporation's proportionate share of the Kyzylkum third party loan facility arranged during 2007 was $18.2 million. Future income tax liabilities increased by $1.2 billion as a result of assets acquired in business combinations during the year. These future income tax liabilities are not accruals for actual taxes payable but arise due to a temporary taxable difference resulting from the increase in the carrying value of an asset to fair value without a corresponding adjustment to the tax basis of the asset. These future income tax credits will be credited to the Statement of Operations as a recovery against current income taxes in the periods that the associated asset is depleted.
Shareholders' equity increased by $3.1 billion from December 31, 2006. The largest component of the increase was share capital which increased by $2.9 billion from December 31, 2006. The increase consists inter alia of $1.7 billion from shares issued for the acquisition of all of the shares of UrAsia Energy; $1.0 billion from shares issued for the acquisition of all of the shares of EMC; $99.4 million from shares issued for the acquisition of the U.S. Energy assets; and $57.0 million for the exercise of options, warrants and restricted shares.
Other contributions to the increases in shareholders' equity were the increase in contributed surplus of $103.1 million. Increases in contributed surplus were a result of stock-based compensation of which $62.0 million related to the fair value of options, restricted shares and warrants acquired in the business combination with UrAsia Energy; $35.3 million related to the fair value of options acquired in the business combination with EMC; stock- based compensation expense of $37.7 million recorded for the period and a reduction of $31.9 million for warrants, options and restricted shares exercised. Other increases in shareholder's equity are comprised of the equity component of the convertible debentures acquired from Uranium One of $46.5 million and $52.0 million in accumulated other comprehensive income mainly from foreign currency translation of foreign operations.
Shareholders' equity was reduced by the net loss of $17.6 million ($0.05 per share) for the 2007 financial year.
Liquidity and Capital Resources
At December 31, 2007 the Corporation had working capital of $316.5 million. Included in this amount are cash and cash equivalents of $252.2 million, which includes the proportionate share of the Corporation's cash and cash equivalents at its joint venture operations in Kazakhstan and cash held by Aflease Gold. The interest earned on these cash balances will be applied to existing commitments in respect of the Corporation's development projects and other current commitments. The cash held by Aflease Gold will be applied to the business of Aflease Gold.
As described elsewhere in this document, the Corporation has entered into an agreement to sell a portion of its stake in Aflease Gold for approximately $40 million, with an option to sell the balance of its shareholding for approximately $49 million. The proceeds from the sale will be used to fund capital expenditure on the Corporation's development projects.
The Corporation anticipates that it has sufficient liquidity and capital resources to meet the Corporation's approved development plans and corporate costs for at least the next twelve months. Please refer to "Commitments and Contingencies".
The Corporation earns revenue from the sale of uranium from the operating Akdala Uranium Mine in Kazakhstan. Additional sales revenue will be earned from uranium sales when the South Inkai and Kharasan Uranium Projects in Kazakhstan, the Dominion Uranium Project in South Africa, the Hobson ISR facility and the Honeymoon Uranium Project in Australia reach commercial production.
Uranium is sold under forward long-term delivery contracts. All such contracted deliveries are planned to be filled from the Corporation's mining operations. The ability to deliver contracted product is therefore dependent upon the continued operation of the mining operations as planned.
The Corporation has entered into market related sales contracts with price mechanisms that reference the spot price in effect near the time of delivery. In addition, the Corporation has negotiated floor price protection in most of its sales contracts.
Committed sales under contracts total 2.55 million pounds U(3)O(8) (attributable) in 2008. This is comprised of 600,000 pounds from Dominion and 1,950,000 pounds (attributable) from Betpak Dala.
Should Uranium One be required to provide funds to support the development of any of the Corporation's projects, prospective sources of additional funding include debt financing, the sale of non-core assets, the proceeds from the exercise of stock options and warrants and equity financing. Uranium One's ability to raise capital is highly dependent on the commercial viability of its projects and the underlying prices of uranium.
Other risk factors, for instance, the Corporation's ability to develop its projects into commercially viable mines, international uranium industry competition, public acceptance of nuclear power and governmental regulation, can also adversely affect Uranium One's ability to raise additional funding. There is no assurance that additional sources of funding, if required, will be forthcoming. Please refer to "Risks and Uncertainties".
Contractual Obligations
Payments due by period
Less
Contractual than 1 to 3 4 to 5 After
obligations ($'000) Total 1 year years years 5 years
------------------------------------------------------------------------
Lease obligations
- Short term 350 350 - - -
- Long term 6,650 2,141 2,004 1,026 1,479
------------------------------------------------------------------------
Total 7,000 2,491 2,004 1,026 1,479
Long term debt 18,431 431 4,200 13,800 -
Capital commitments 118,436 118,436 - - -
Asset retirement obligation 14,676 - - - 14,676
------------------------------------------------------------------------
Total contractual
obligations 158,543 121,358 6,204 14,826 16,155
Commitments and Contingencies
Acquisition of the Shootaring Mill
Further payments due under the purchase agreement for the Shootaring Mill and related uranium exploration properties are:
- $27.5 million depending on the achievement of certain production targets; and - the payment of a royalty to U.S. Energy of 5% of the gross proceeds from the sale of commodities produced at the Mill, to a maximum amount of $12.5 million.
Acquisition of interest in Betpak Dala
A bonus payment is payable in cash based on uranium reserves discovered on the South Inkai property in excess of 66,000 tonnes. The payment is based on the Corporation's share of pounds of U(3)O(8) in excess of 66,000 tonnes times the average spot price of U(3)O(8) times 6.25%. This payment is initially to be calculated at the end of 2011 and each year thereafter, and paid 60 days after the end of the year in which a payment is due. As security for the bonus payments, the Corporation pledged its participatory interest in Betpak Dala (including the shares of a subsidiary) and its share of uranium products produced by Betpak Dala.
Acquisition of interest in Kyzylkum
A bonus payment is due upon commencement of commercial production. The seller elected, under the terms of the arrangement, to receive 6,964,200 shares of Uranium One upon commencement of commercial production. An additional bonus payment of 30% of 12.5% (being an effective 3.75%) of the weighted average spot price of U(3)O(8) will be paid on incremental reserves in excess of 55,000 tonnes of U(3)O(8) discovered during each fiscal year end, with payments beginning within 60 days of the end of the 2008 calendar year.
Acquisition of EMC
The Corporation has assumed all of the obligations of EMC and its subsidiaries arising under certain option and joint venture agreements with third parties. Uranium One has reserved a total of 1,925,100 common shares of Uranium One for issuance pursuant to the assumed obligations under the Contingent Share Rights Agreements.
Off-balance Sheet Arrangements
The Corporation has no off-balance sheet arrangements.
Outstanding Share Data
As of March 31, 2008, there were issued and outstanding 467,641,548 common shares and common share purchase warrants for 150,000 Series D warrants exercisable at C$6.95 per warrant and 2,431,619 warrants exercisable to acquire common shares at C$3.55 per common share. Each warrant is exercisable for one common share of Uranium One. In addition (as discussed under "Commitments and Contingencies"), a warrant was issued in connection with the acquisition of the Corporation's interest in Kyzylkum entitling the holder to acquire 6,964,200 shares in Uranium One for no additional consideration upon commencement of commercial production from the Kharasan Uranium Project.
As of March 31, 2008, there were 20,293,052 stock options outstanding under Uranium One's stock option plan at exercise prices ranging from C$1.09 to C$16.87 and 295,532 restricted shares outstanding.
Uranium One has 155,250 convertible debentures outstanding, each convertible to 50 common shares of Uranium One, representing 7,762,500 common shares.
Dividends
There have been no dividend payments on the common shares of Uranium One. Holders of common shares are entitled to receive dividends if, as and when declared by the Board of Directors. There are no restrictions on Uranium One's ability to pay dividends except as set out under its governing statute.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and reported amounts of revenues and expenditures during the reporting period. Note 2 to the Corporation's consolidated financial statements for the year ended December 31, 2007 describes all of the Corporation's significant accounting policies.
New / Changes in Accounting Policies
The Corporation's accounting policies have been consistently followed except that the Corporation has adopted the following CICA standards effective January 1, 2007, none of which had a material impact on the Corporation's consolidated financial statements:
(a) Sections 3855 - Financial Instruments - Recognition and Measurement
Section 3855 requires that all financial assets except those
classified as held to maturity, and derivative financial instruments,
must be measured at fair value. All financial liabilities must be
measured at fair value when they are classified as held for trading;
otherwise, they are measured at cost. Investments classified as
available for sale are reported at fair market value (or mark to
market) based on quoted market prices with unrealized gains or losses
excluded from earnings and reported as other comprehensive income or
loss. Investments subject to significant influence are reported at
cost and are not adjusted to fair market value.
(b) Section 3861 - Financial Instruments - Disclosure and Presentation
Section 3861 establishes standards for the presentation of financial
instruments and non-financial derivatives, and identifies the
information that should be disclosed about them. The purpose of the
section is to enhance financial statement users' understanding of the
significance of financial instruments to an entity's financial
position, performance and cash flows.
(c) Section 3865 - Hedges
This standard is applicable when a company chooses to designate a
hedging relationship for accounting purposes. It builds on the
existing AcG-13 "Hedging Relationships" and Section 1650 "Foreign
Currency Translation", by specifying how hedge accounting is applied
and what disclosures are necessary when certain financial derivative
instruments do not meet the requirements for hedge accounting. The
Corporation did not have any accounting hedges upon adoption and as
at December 31, 2007.
(d) Section 1530 - Comprehensive Income
Comprehensive income is the change in the Corporation's assets that
result from transactions, events and circumstances from sources other
than the Corporation's shareholders and includes items that would not
normally be included in net earnings such as unrealized gains or
losses on available-for-sale investments. Other comprehensive income
includes the holding gains and losses such as changes in currency
adjustment relating to self-sustaining foreign operations; and the
effective portion of gains or losses on derivatives designated as
cash flow hedges or hedges or the net investment in self-sustaining
foreign operations.
The Corporation has added two new statements to the consolidated
financial statements entitled "Consolidated Statements of Changes in
Equity" and "Consolidated Statements of Comprehensive Income".
The Corporation reclassified currency translation adjustments on its
net investment in self-sustaining foreign operations to other
comprehensive income.
(e) Section 3251 - Equity
This new standard was adopted in combination with the adoption of the
financial instrument standards in 2007. It establishes standards for
the presentation of equity and changes in equity during the reporting
period.
(f) Section 1506 - Accounting Changes
Section 1506: Accounting Changes, effective for fiscal years
beginning on or after January 1, 2007 establishes standards and new
disclosure requirements for the reporting of changes in accounting
policies and estimates and the reporting of error corrections. CICA
1506 clarifies that a change in accounting policy can be made only if
it is a requirement under GAAP or if it provides reliable and more
relevant financial statement information. Voluntary changes in
accounting policies require retrospective application of prior period
financial statements, unless the retrospective effects of the changes
are impracticable to determine, in which case the retrospective
application may be limited to the assets and liabilities of the
earliest period practicable, with a corresponding adjustment made to
opening retained earnings.
Effective January 1, 2008, the Corporation will adopt the following CICA
standards, none of which is expected to have a material impact on the
Corporation's consolidated financial statements:
(a) Section 3031 - Inventories
The new Section 3031 on inventories replaces Section 3030 and
converges with the International Accounting Standard Board's
recently amended standard IAS 2, Inventories. The standard introduces
significant changes to the measurement and disclosure of inventory.
Changes apply to interim and annual financial statements relating to
fiscal years beginning on or after January 1, 2008. The main
differences between the new section and Section 3030 include
measurement of inventories at the lower of cost and net realizable
value, with guidance on the determination of cost, including
allocation of overhead expenses and other costs to inventory. The new
section also requires consistent use of either first in, first out
(FIFO) or weighted average cost formula to measure the cost of other
inventories and the reversal of previous write downs to net
realizable when there is a subsequent increase in the value of
inventories. Inventory policies, carrying amounts, amounts recognized
as an expense, write downs and the reversals of write downs are
required to be disclosed.
(b) Section 3862 - Financial Instruments - Disclosures and Section 3863 -
Financial Instruments - Presentation
These sections apply to interim and annual financial statements
relating to fiscal years beginning on or after October 1, 2007.
Section 3862 establishes standards for disclosures about financial
instruments and non-financial derivatives. The main features of this
Section are requirements for an entity to disclose the significance
of financial instruments for its financial position and performance,
revised from those of Section 3861. The requirements for disclosures
about fair value are revised, but not substantially different, from
those of Section 3861. The revised requirements for the disclosure of
qualitative and quantitative information about exposure to risks
arising from financial instruments are more extensive than those of
Section 3861. The qualitative disclosures describe management's
objectives, policies and processes for managing such risks. The
quantitative disclosures provide information about the extent to
which the entity is exposed to credit risk, liquidity risk and market
risk (i.e., currency risk, interest rate risk, and other price risk).
Section 3863 carries forward, unchanged from Section 3861, standards
for presentation of financial instruments and non-financial
derivatives.
(c) Section 1535 - Capital Disclosures
The new requirements are effective for interim and annual financial
statements relating to fiscal years beginning on or after October 1,
2007. This section will require the Corporation to disclose
qualitative information about its objectives, policies and processes
for managing capital and quantitative data about what the Corporation
regards as capital. It will also be a requirement to disclose whether
the Corporation has complied with any externally imposed capital
requirements and, if not, the consequences of such non-compliance.
Risks and uncertainties
The Corporation's operations and results are subject to various risks and uncertainties. These include, but are not limited to, the following: exploration and mining involves operational risks and hazards; mineral resources and mineral reserves are estimates only; there is no certainty that further exploration will result in new economically viable mining operations or yield new reserves to replace and expand current reserves; Uranium One cannot give any assurance that the South Inkai Uranium Project, Kharasan Uranium Project, Dominion Uranium Project and Honeymoon Uranium Project will become operating mines; or when the Shootaring Mill, the Hobson Uranium ISR Processing Facility or the La Palangana Uranium Project will become fully operational; mineral rights and tenures may not be granted or renewed on satisfactory terms and may be revoked, altered or challenged by third parties; limited supply of desirable mineral lands for acquisition; risks and problems associated with integrating acquisitions; competition in marketing uranium and gold; in the case of uranium, competition from other sources of energy and public acceptance of nuclear energy; volatility and sensitivity to uranium and gold prices; the capital requirements to complete the Corporation's current projects and expand its operations are substantial; currency fluctuations; the Corporation's operations and activities are subject to environmental risks; government regulation may adversely affect the Corporation; the risks of obtaining and maintaining necessary licences and permits; risks associated with foreign operations including, in relation to Kazakhstan, the risk that the sulphuric acid shortage continues for an extended period of time and in relation to South Africa, economic, social and political issues such as employment creation, black economic empowerment and land redistribution, crime, corruption, poverty and HIV/AIDS; the Corporation is dependent on key personnel; and potential conflicts of interest.
In November 2007, the parliament of Kazakhstan enacted legislation, giving the government the right in certain circumstances to re-negotiate previously concluded subsoil use contracts. Together with its joint venture partner, Kazatomprom, the Corporation has been reviewing the potential impact and application of this legislation. Based on these discussions, the Corporation understands that the legislation is not directed at the uranium mining industry in Kazakhstan.
Uranium One's risk factors are discussed in detail in its Annual Information Form for the year ended December 31, 2007, which is available on SEDAR at www.sedar.com, and should be reviewed in conjunction with this document.
Stock Option and Restricted Share Plans
A significant contributing factor to Uranium One's future success is its ability to attract and retain qualified and competent personnel. To accomplish this, Uranium One adopted a stock option plan and a restricted share plan to advance its interests by encouraging directors, officers and employees to have equity participation in Uranium One.
Under the stock option plan, options granted are non-assignable and may be granted for a term not exceeding ten years. The aggregate maximum number of common shares available for issuance under the stock option plan may not exceed 7.2% of the common shares outstanding from time to time on a non- diluted basis and the aggregate maximum number of common shares available for issuance to non-employee directors under the plan may not exceed 1.0% of the total number of common shares outstanding on a non-diluted basis.
Under the restricted share plan, restricted share rights exercisable for common shares of Uranium One at the end of a restricted period, for no additional consideration, are granted by the Board of Directors in its discretion to eligible directors, officers and employees. The aggregate maximum number of common shares available for issuance under the restricted share plan is capped at three million. The number of shares available for issuance to non-employee directors may not exceed 0.5% of the total number of common shares outstanding on a non-diluted basis.
During 2007 stock options and restricted share rights activity was as follows:
- Pursuant to the business combination agreement with UrAsia Energy options that were outstanding in UrAsia Energy at April 20, 2007 were exchanged for an equal number of options in Uranium One multiplied by 0.45; at an exercise price equal to the exercise price of the options of UrAsia Energy divided by 0.45; accordingly 9,763,498 options of Uranium One were granted to UrAsia Energy option holders at prices ranging from C$1.25 to C$15.63 per share, with expiry dates ranging from April 20, 2008 to March 30, 2017. - Pursuant to the business combination agreement with Uranium One, options that were outstanding in EMC at August 10, 2007 were exchanged for an equal number of options in Uranium One multiplied by 1.15, at an exercise price equal to the exercise price of the options of EMC divided by 1.15. Accordingly, on closing of the EMC acquisition 8,362,546 options of Uranium One were granted to EMC option holders at prices ranging from C$1.15 to C$13.57 per share, with expiry dates ranging from November 30, 2009 to July 1, 2012. - During 2007 1,867,817 options were granted to directors and employees at a prices ranging from C$8.51 to C$15.59 per share, with expiry dates ranging from April 26, 2012 to December 24, 2012. - 4,228,640 options were exercised during 2007 and 351,187 were forfeit. - 20,000 restricted shares were granted during 2007 at a deemed price of $14.10 per share; - 125,977 restricted shares were exercised.
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported on a timely basis to senior management, including Uranium One's President and Interim Chief Executive Officer and Chief Financial Officer, so that appropriate decisions can be made regarding public disclosure. As at the end of the period covered by this management's discussion and analysis, management evaluated the effectiveness of the Corporation's disclosure controls and procedures as required by Canadian securities laws.
Based on that evaluation, the President and Interim Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this management's discussion and analysis, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in Uranium One's annual filings and interim filings (as such terms are defined under Multilateral Instrument 52- 109 - Certification of Disclosure in Issuers' Annual and Interim Filings) and other reports filed or submitted under Canadian securities laws is recorded, processed, summarized and reported within the time periods specified by those laws, and that material information is accumulated and communicated to management including the President and Interim Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.
Internal Controls and Procedures
The Corporation evaluated the design of its internal controls and procedures over financial reporting as defined under Multilateral Instrument 52-109 for the year ended December 31, 2007. Based on this evaluation, the President and Interim Chief Executive Officer and Chief Financial Officer have concluded that the design of these internal controls and procedures over financial reporting was effective.
There have been no material changes in the Corporation's internal control over financial reporting during the Corporation's year ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.
Outlook
During 2008, the Corporation is focused on achieving commercial production from its projects on schedule, controlling costs at its operations, remaining a reliable supplier of U(3)O(8) to the nuclear fuel industry and maintaining production of U(3)O(8) from Akdala. Accordingly, the Corporation's attributable production estimate is 3.1 million pounds of U(3)O(8) (including 1.8 million pounds of U(3)O(8) from Akdala and 1.3 million pounds of pre-commercial production from development projects) and 6.8 million pounds of U(3)O(8) (including pre-commercial production) for 2008 and 2009 respectively.
The Corporation will continuously be considering opportunities to unlock value from its non-core assets.
The cash cost per pound of U(3)O(8) sold from Akdala is expected to be approximately $12 per pound of U(3)O(8) sold in 2008.
The Corporation expects to incur capital expenditure of $200 million on fully owned development projects for 2008 and does not expect to be required to contribute towards additional capital expenditure of $70 million by joint ventures in 2008 (of which the Corporation's pro-rata share is $32 million). General and administrative expenses, excluding stock based compensation, are expected to be $45 million for 2008.
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements. Forward- looking statements include but are not limited to those with respect to the price of uranium and gold, the estimation of mineral resources and reserves, the realization of mineral reserve estimates, the timing and amount of estimated future production, the timing of uranium processing facilities being fully operational, costs of production, capital expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage and the timing and possible outcome of pending litigation. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward- looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, possible variations in grade and ore densities or recovery rates, failure of plant, equipment or processes to operate as anticipated, possible continued shortages of sulphuric acid in Kazakhstan, accidents, labour disputes or other risks of the mining industry, delays in obtaining government approvals or financing or in completion of development or construction activities, risks relating to the integration of acquisitions, to international operations, to prices of uranium and gold as well as those factors referred to in the section entitled "Risk factors" in Uranium One's Annual Information Form for the year ended December 31, 2007 which is available on SEDAR at www.sedar.com, and which should be reviewed in conjunction with this document. Although Uranium One has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as 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. Uranium One expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.
Readers are advised to refer to independent technical reports for detailed information on the Corporation's material properties. Those technical reports, which are available at www.sedar.com under Uranium One's profile, and also under UrAsia Energy's profile, provide the date of each resource or reserve estimate, details of the key assumptions, methods and parameters used in the estimates, details of quality and grade or quality of each resource or reserve and a general discussion of the extent to which the estimate may be materially affected by any known environmental, permitting, legal, taxation, socio-political, marketing, or other relevant issues. The technical reports also provide information with respect to data verification in the estimation.
This document and the Corporation's other publicly filed documents use the terms "measured", "indicated" and "inferred" resources as defined in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects. United States investors are advised that while these terms are recognized and required by Canadian regulations, the SEC does not recognize them. Investors are cautioned not to assume that all or any part of the mineral deposits in these categories will ever be converted into reserves. In addition, "inferred resources" have a great amount of uncertainty as to their existence and economic and legal feasibility and it cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Investors are cautioned not to assume that all or any part of an inferred resource exists or is economically or legally mineable. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
Historical estimates referred to herein and in the Corporation's other publicly filed documents, as Russian C1 and C2 resources are derived from Kazatomprom documents, an entity of the Government of Kazakhstan. Although Russian C1 and C2 Resources do not meet Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards on Mineral Resource and Reserve definitions, they are considered relevant because of previous pilot plant production, but should not be relied upon. The CIM resource definition which most closely resembles C1 resources is that of Inferred Resources. However, there is less confidence attributed to a C1 resource since a C1 resource is estimated on the basis of a lower drill density than an inferred resource. Scientific and technical information contained herein has been reviewed on behalf of the Corporation by Mr. M.H.G. Heyns, Pr.Sci.Nat. (SACNASP), MSAIMM, MGSSA, Senior Vice President Technical Services of the Corporation, a qualified persons for the purposes of NI 43-101. Neither the Corporation nor Mr. Heyns have not done sufficient work to classify the historical estimates as current mineral resources or mineral reserves. The Corporation does not intend to treat such historical estimates of mineral resources and mineral reserves as a current estimate and the historical estimates should not be relied upon.
Annual Consolidated Financial Statements
for the year ended December 31, 2007
Uranium One Inc.
Consolidated Balance Sheets
as at December 31, 2007 and 2006 and July 31, 2006
(in United States dollars)
Dec 31, Dec 31, Jul 31,
2007 2006 2006
Notes $'000 $'000 $'000
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 5 252,219 61,838 128,328
Restricted cash - 500 2,500
Accounts and other receivables 6 72,635 49,186 11,350
Current portion of loans to joint
ventures 7.2 32,867 13,488 4,440
Inventories 8 20,994 12,044 11,940
Other assets 18,056 - -
-------------------------------------------------------------------------
396,771 137,056 158,558
-------------------------------------------------------------------------
Non-current assets
Mineral interests, plant and
equipment 9 5,112,907 768,887 762,547
Loans to joint ventures 7.2 24,359 39,850 21,000
Available for sale securities 10 21,257 - -
Other assets 11 57,604 25,825 8,920
-------------------------------------------------------------------------
5,216,127 834,562 792,467
-------------------------------------------------------------------------
Total assets 5,612,898 971,618 951,025
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued
liabilities 12 75,882 12,947 6,095
Income taxes payable 4,402 1,018 3,080
-------------------------------------------------------------------------
80,284 13,965 9,175
-------------------------------------------------------------------------
Non-current liabilities
Convertible debentures 13 136,548 - -
Aflease Gold convertible bonds 14 90,551 - -
Asset retirement obligations 15 15,011 2,856 1,953
Future income tax liabilities 16 1,576,262 337,642 365,491
Long term debt 7.1 18,205 - -
Other long term payables 1,824 1,466 1,046
-------------------------------------------------------------------------
1,838,401 341,964 368,490
-------------------------------------------------------------------------
Non-controlling interest 11,308 - -
SHAREHOLDERS' EQUITY
Share capital 17 3,496,884 613,607 612,941
Contributed surplus 18 134,387 31,286 9,307
Equity component of convertible
debentures 3.1 46,480 - -
Deficit (46,813) (29,204) (48,888)
Accumulated other comprehensive
income 51,967 - -
-------------------------------------------------------------------------
3,682,905 615,689 573,360
-------------------------------------------------------------------------
Total shareholders' equity and
liabilities 5,612,898 971,618 951,025
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basis of presentation and principles of consolidation (note 2.1)
Commitments and contingencies (note 4 & 22)
Subsequent event (note 25)
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements.
Approved on behalf of the board of directors
Ian Telfer Andrew Adams
Chariman of the board Chairman of the audit committee
Uranium One Inc.
Consolidated Statements of Operations
For the year ended December 31, 2007, 5 months ended December 31, 2006
and year ended July 31, 2006
(in United States dollars)
Year 5 months Year
ended ended ended
Dec 31, Dec 31, Jul 31,
2007 2006 2006
Notes $'000 $'000 $'000
-------------------------------------------------------------------------
Revenues 134,024 50,449 23,507
Operating expenses (17,282) (9,289) (9,548)
Depreciation and depletion (14,922) (8,449) (5,107)
-------------------------------------------------------------------------
Earnings from mine operations 101,820 32,711 8,852
General and administrative(1) (74,272) (24,799) (14,863)
Exploration expense (19,178) (2,914) (2,648)
Other 1,129 (552) (169)
-------------------------------------------------------------------------
Operating earnings/(loss) 9,499 4,446 (8,828)
Interest and other income 13,031 3,742 4,408
Interest expense (12,536) - -
Dilution gain on investment in
Aflease Gold 5,339 - -
Foreign exchange (loss)/gain 19 (13,022) 23,507 (41,120)
-------------------------------------------------------------------------
Earnings/(loss) before income taxes
and non-controlling interest 2,311 31,695 (45,540)
Current income tax expense 16 (41,346) (15,984) (5,304)
Future income tax recovery 16 17,621 3,973 1,905
-------------------------------------------------------------------------
(Loss)/earnings before non-
controlling interest (21,414) 19,684 (48,939)
Non-controlling interest 3,805 - -
-------------------------------------------------------------------------
Net (loss)/earnings (17,609) 19,684 (48,939)
-------------------------------------------------------------------------
(1) - Stock option and restricted
share expense (non-cash) included
in general and administrative 18 37,660 22,162 9,370
(Loss)/earnings per share
Basic (0.05) 0.09 (0.27)
Diluted (0.05) 0.09 (0.27)
Weighted average number of shares
(in thousands)
Basic 21 360,656 215,999 182,808
Diluted 21 360,656 217,975 182,808
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements.
Uranium One Inc.
Consolidated Statements of Changes in Equity
For the year ended December 31, 2007, 5 months ended December 31, 2006
and year ended July 31, 2006
(in United States dollars)
Equity Accumulated
component of other
Contributed convertible comprehensive
Share capital surplus debenture income
-------------------------------------------------------------------------
Balance as at
August 1, 2005 4,094 - - -
Net loss for the
period - - - -
Share options issued
and vested - 9,370 - -
Acquisition of Signature 271 153 - -
Acquisition of
Kyzylkum 37,500 - - -
Exercise of warrants 673 - - -
Exercise of stock
options and
restricted shares 579 (216) - -
Shares issued for
private placements 569,824 - - -
-------------------------------------------------------------------------
Balance as at
July 31, 2006 612,941 9,307 - -
Net earnings for
the period - - - -
Share options issued
and vested - 22,162 - -
Exercise of warrants 48 - - -
Exercise of stock
options and
restricted shares 618 (183) - -
-------------------------------------------------------------------------
Balance as at
December 31, 2006 613,607 31,286 - -
Net loss for the
period - - - -
Share options and
restricted shares
vested - 37,660 - -
Exercise of warrants 2,115 (1,035) - -
Exercise of stock
options and
restricted shares 54,912 (30,873) - -
Uranium One Inc/
UrAsia Energy Ltd
business
combination 1,709,647 62,042 46,480 -
U.S. Energy Corp
asset purchase
consideration 99,401 - - -
Energy Metals
Corporation asset
purchase 1,013,215 35,307 - -
Unrealized gains
recognized on
translation of
self-sustaining
foreign operations - - - 51,779
Shares issued for
services rendered 3,987 - - -
Gain on available
for sale securities,
net of tax benefit
(note 10) - - - 188
-------------------------------------------------------------------------
Balance as at
December 31, 2007 3,496,884 134,387 46,480 51,967
-------------------------------------------------------------------------
Deficit Total
---------------------------------------------
Balance as at
August 1, 2005 51 4,145
Net loss for the
period (48,939) (48,939)
Share options issued
and vested - 9,370
Acquisition of Signature - 424
Acquisition of
Kyzylkum - 37,500
Exercise of warrants - 673
Exercise of stock
options and
restricted shares - 363
Shares issued for
private placements - 569,824
---------------------------------------------
Balance as at
July 31, 2006 (48,888) 573,360
Net earnings for
the period 19,684 19,684
Share options issued
and vested - 22,162
Exercise of warrants - 48
Exercise of stock
options and
restricted shares - 435
---------------------------------------------
Balance as at
December 31, 2006 (29,204) 615,689
Net loss for the
period (17,609) (17,609)
Share options and
restricted shares
issued and vested - 37,660
Exercise of warrants - 1,080
Exercise of stock
options and
restricted shares - 24,039
Uranium One Inc/
UrAsia Energy Ltd
business
combination - 1,818,169
U.S. Energy Corp
asset purchase
consideration - 99,401
Energy Metals
Corporation asset
purchase - 1,048,522
Unrealized gains
recognized on
translation of
self-sustaining
foreign operations - 51,779
Shares issued for
services rendered - 3,987
Gain on available
for sale securities,
net of tax benefit
(note 10) - 188
---------------------------------------------
Balance as at
December 31, 2007 (46,813) 3,682,905
---------------------------------------------
Consolidated Statement of Comprehensive Income
For the year ended December 31, 2007
(in United States dollars)
2007
Note $'000
-------------------------------------------------------------------------
Net loss (17,609)
Unrealized gains recognized on translation of
self-sustaining foreign operations 51,779
Gain on available for sale securities, net of
tax benefit 10 188
-------------------------------------------------------------------------
Comprehensive income 34,358
-------------------------------------------------------------------------
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements.
Uranium One Inc.
Consolidated Statements of Cash Flows
For the year ended December 31, 2007, 5 months ended December 31, 2006
and year ended July 31, 2006
Year 5 months Year
ended ended ended
Dec 31, Dec 31, Jul 31,
2007 2006 2006
Notes $'000 $'000 $'000
-------------------------------------------------------------------------
Net (loss)/earnings (17,609) 19,684 (48,939)
Items not affecting cash:
- Depreciation and depletion 14,922 8,449 5,107
- Accretion of asset retirement
obligation 15 1,000 - -
- Stock option expense 18 37,660 22,162 9,370
- Interest accrued on loans and
debentures 4,585 - -
- Unrealized foreign exchange
(gain)/loss 26,196 (22,622) 42,662
- Fair value adjustment on
Aflease Gold convertible bonds 14 3,106 - -
- Future income tax recovery (17,621) (3,973) (1,905)
- Non-controlling interest (1,179) - -
- Other 935 - 120
Movement in non-cash working
capital 20 (29,926) (35,075) (7,852)
-------------------------------------------------------------------------
Cash flows from/(to) operating
activities 22,069 (11,375) (1,437)
-------------------------------------------------------------------------
Acquisition of Uranium One Inc.,
net of acquisition costs 3.1 271,670 - -
Acquisition of Energy Metals
Corporation, net of acquisition
costs 4.2 76,706 - -
Acquisition of interest in
Betpak Dala - - (356,224)
Acquisition of interest in Kyzylkum - - (38,925)
Acquisition of Signature - - 465
Acquisition of mineral interests,
plant and equipment (279,370) (13,509) (12,319)
Advance cash payment for other
assets (2,606) (16,054) (8,675)
Joint venture earn in payments
received 1,600 - -
Restricted cash 500 2,000 (2,500)
Cash advances to joint ventures 7 (27,500) (27,150) (25,440)
Cash proceeds from joint ventures 7 23,447 - -
-------------------------------------------------------------------------
Cash flows from from/(to) investing
activities 64,447 (54,713) (443,618)
-------------------------------------------------------------------------
Common shares issued, net of issue
costs 25,119 483 570,859
Convertible bond issued by subsidiary 87,445 - -
Shares issued by subsidiary to non-
controlling shareholders 2,061 - -
Loans received by Kyzylkum, net of
acquisition costs 7.1 17,769 7 -
Short term loan repaid 20 (53,131) - -
Other - - (106)
-------------------------------------------------------------------------
Cash flows from financing activities 79,263 490 570,753
-------------------------------------------------------------------------
Effects of exchange rate changes on
cash and cash equivalents 24,602 (885) -
-------------------------------------------------------------------------
Net increase/(decrease) in cash and
cash equivalents 190,381 (66,483) 125,698
Cash and cash equivalents at the
beginning of the period 61,838 128,328 2,630
-------------------------------------------------------------------------
Cash and cash equivalents at the end
of the period 5 252,219 61,845 128,328
-------------------------------------------------------------------------
Supplemental cash flow information (note 20)
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements.
Uranium One Inc.
Notes to the Consolidated Financial Statements
as at December 31, 2007 and 2006 and July 31, 2006
1 Nature of operations
Uranium One Inc. ("Uranium One" or "the Corporation") is a Canadian
uranium corporation engaged through subsidiaries and joint ventures
in the mining and production of uranium, and in the acquisition,
exploration and development of properties for the production of
uranium, in Kazakhstan, South Africa, the United States, Australia
and Canada. Uranium One also owns a 67% interest in Aflease Gold
Limited ("Aflease Gold"), which is engaged in the development of the
Modder East Gold Project in South Africa.
Uranium One owns a 70% interest in both the producing Akdala Uranium
Mine and the South Inkai Uranium Project and it is developing the
Kharasan Project in Kazakhstan, in which it owns a 30% interest. The
Corporation also owns the Dominion Uranium Project in South Africa.
In the United States, the Corporation owns projects in the Powder
River and Great Divide Basins in Wyoming, the Hobson ISR Uranium
Processing Facility and La Palangana ISR Project in Texas and the
Shootaring Mill in Utah. The Corporation also owns the Honeymoon
Uranium Project in Australia. The Corporation owns a large portfolio
of uranium exploration properties in South Africa, the western United
States, South Australia, and the Athabasca Basin of Saskatchewan in
Canada.
2 Significant accounting policies
2.1 Basis of presentation and principles of consolidation
The consolidated financial statements of Uranium One and its
subsidiaries (collectively, the "Corporation") have been
prepared by Uranium One in accordance with Canadian generally
accepted accounting principles ("Canadian GAAP").
The consolidated financial statements include the accounts of
the Corporation and all of its subsidiaries and the
proportionate share of its interests in joint ventures. All
intercompany balances and transactions have been eliminated.
Uranium One acquired all of the issued and outstanding shares of
UrAsia Energy Limited ("UrAsia Energy") on April 20, 2007
(note 3.1). UrAsia Energy shareholders received 0.45 Uranium One
common shares for each UrAsia Energy common share. For
accounting purposes, the transaction is treated as a reverse
takeover whereby UrAsia Energy is considered the acquiring
company as the shareholders of UrAsia Energy acquired a majority
shareholding in Uranium One. The comparative consolidated
balance sheet as at December 31, 2006 and July 31, 2006 and the
consolidated statements of operations, changes in equity and
cash flows for the period ended December 31, 2006 and year ended
July 31, 2006 are those of UrAsia Energy. The results of
operations of Uranium One have been included from
April 20, 2007.
The following are the Corporation's principal mineral properties
and operations as at December 31, 2007.
Operating mine:
Mineral property/
Entity Operation Location Ownership Status
-------------------------------------------------------------------------
Betpak Dala LLP Akdala Uranium Kazakhstan 70% Proportionately
Mine(1) consolidated
Advanced development projects:
Mineral property/
Entity Operation Location Ownership Status
-------------------------------------------------------------------------
Betpak Dala LLP South Inkai Kazakhstan 70% Proportionately
Uranium consolidated
Project(1)
Kyzylkum LLP Kharasan Uranium Kazakhstan 30% Proportionately
Project(1) consolidated
Uranium One Dominion Uranium South Africa 100% Consolidated
Africa Limited Project(2)(5)
The Corporation is also developing the following mineral properties:
Mineral property/
Entity Operation Location Ownership Status
-------------------------------------------------------------------------
Energy Metals US development United States
Corp US projects
South Texas Hobson Facility United States 99% Consolidated
Mining Venture and La Palangana
Project(6)
Uranium One Shootaring United States 100% Consolidated
USA Inc Canyon
Uranium Mill(4)
Uranium One Honeymoon Australia 100% Consolidated
Australia Uranium
(Proprietary) Project(2)
Limited
Pitchstone Pitchstone Joint Canada 50% Proportionately
Joint Venture Venture(2) consolidated
Aflease Gold Modder East Gold South Africa 67% Consolidated
Limited Project(3)
(1) - Legacy UrAsia Energy assets
(2) - Legacy Uranium One assets
(3) - Legacy Uranium One assets. The Modder East Gold Project is owned
by Aflease Gold, a subsidiary of Uranium One (note 25)
(4) - Purchased from U.S. Energy Corp (note 4.1)
(5) - Refer to note 24 for the contingent sale of an interest in the
Dominion Uranium Project
(6) - Legacy Energy Metals Corporation assets (note 4.2)
2.2 Change in accounting policies
On January 1, 2007, the Corporation adopted the following
accounting standards:
Section 1530 - Comprehensive Income
Section 3251 - Equity
Section 3855 - Financial Instruments - Recognition and
measurement
Section 3861 - Financial Instruments - Disclosure and
presentation
Section 3865 - Hedges
These standards address the classification, recognition and
measurement of financial instruments in the financial
statements, the inclusion of other comprehesive income ("OCI"),
and establish the standards for hedge accounting. In addition,
these standards provide guidance for reporting items in other
comprehensive income, which is included on the Consolidated
Balance Sheets as accumulated other comprehensive income or
loss, a separate component of Shareholders' Equity.
The Corporation did not record any adjustments as a result of
adopting these new standards, other than reclassifying currency
translation adjustments on its net investment in self-sustaining
foreign operations to other comprehensive income.
2.3 Measurement and reporting currency
Items included in the financial statements of each entity in the
Corporation are measured using the currency that best reflects
the economic substance of the underlying events and
circumstances relevant to that entity (the "functional
currency").
The Corporation's reporting currency is the United States
dollar. Uranium One, its subsidiaries and joint ventures operate
in Kazakhstan, South Africa, Australia, the United States,
Canada, and the Kyrgyz Republic.
The financial statements of the entities that are determined to
be integrated foreign operations have been translated into
United States dollars by translating foreign currency
denominated monetary assets and liabilities, which includes
future income tax, at rates of exchange in effect at the balance
sheet date. Non-monetary items are translated at historical
exchange rates and revenues and expenses at average rates of
exchange during the period. Exchange gains and losses arising on
translation are included in the consolidated statements of
operations.
The financial statements of the entities that are determined to
be self-sustaining foreign operations have been translated into
United States dollars by translating all assets and liabilities,
which includes future income tax, at rates of exchange in effect
at the balance sheet date. Revenues and expenses are translated
at average exchange rates for the period. All resulting exchange
differences are included in accumulated other comprehensive
income on the balance sheet.
2.4 Inventories
Inventories of solutions and uranium concentrates are valued at
the lower of average production cost or net realizable value.
Production costs include the cost of raw materials, direct
labour, mine-site related overhead expenses and depreciation and
depletion of mining interests.
The related direct production costs associated with in-process
gold are deferred and charged to costs as the contained gold is
recovered. In-process metals are identified and measured from
the ore stockpiles up to and including the on-site refining
plant.
Materials and supplies are valued on the weighted average basis
and recorded at the lower of average cost or replacement cost.
2.5 Mineral interests, plant and equipment
Mineral interests, plant and equipment are recorded at cost less
accumulated depreciation and depletion.
Mineral interests represent capitalized expenditures related to
the development of mineral properties and related plant and
equipment. Capitalized costs and plant and equipment are
depreciated and depleted using either a unit-of-production
method, over the estimated economic life of the mine to which
they relate, or using the straight-line method over their
estimated useful lives.
The costs associated with mineral interests are separately
allocated to reserves, resources and exploration potential, and
include acquired interests in production, development and
exploration stage properties representing the fair value at the
time they were acquired. The value allocated to reserves is
depreciated on a unit-of-production method over the estimated
recoverable proven and probable reserves at the mine. The
reserve value is noted as depletable mineral properties for
operations in commercial production in note 9. The resource
value represents the property interests that are believed to
potentially contain economic mineralized material such as
inferred material; measured, indicated, and inferred resources
with insufficient drill spacing to qualify as proven and
probable reserves; and inferred resources in close proximity to
proven and probable reserves.
Resource value and exploration potential value is noted as non-
depletable mineral properties for operations in commercial
production in note 9. At least annually or when otherwise
appropriate, value from the non-depletable category will be
transferred to the depletable category as a result of an
analysis of the conversion of resources or exploration potential
into reserves. Costs related to property acquisitions are
capitalized until the viability of the mineral property is
determined. Resource value and exploration potential for
development projects not in commercial production is noted as
non-depletable mineral properties. When it is determined that a
property is not economically viable the capitalized costs are
impaired. Exploration expenditures on properties not advanced
enough to identify their development potential are charged to
operations as incurred.
Mining expenditures incurred either to develop new ore bodies or
to develop mine areas in advance of current production are
capitalized. Commercial production is deemed to have commenced
when management determines that the completion of operational
commissioning of major mine and plant components is completed,
operating results are being achieved consistently for a period
of time and that there are indicators that these operating
results will be continued. Mine development costs incurred to
sustain current production are included in production costs.
Upon sale or abandonment of any mineral interest, plant and
equipment, the cost and related accumulated depreciation or
accumulated depletion, are written off and any gains or losses
thereon are included in the statement of operations.
2.6 Impairment of long-lived assets
The Corporation reviews the carrying values of its property,
plant and equipment when changes in circumstances indicate that
those carrying values may not be recoverable. Estimated future
net cash flows are calculated using estimated recoverable
reserves, estimated future commodity prices and the expected
future operating and capital costs. An impairment loss is
recognized when the carrying value of an asset held for use
exceeds the sum of undiscounted future net cash flows. An
impairment loss is measured as the amount by which the asset's
carrying amount exceeds its fair value.
2.7 Asset retirement obligations
The Corporation recognizes liabilities for statutory,
contractual or legal obligations associated with the retirement
of mineral property, plant and equipment, when those obligations
result from the acquisition, construction, development or normal
operation of the assets. Initially, the net present value of the
liability for an asset retirement obligation is recognized in
the period incurred. The net present value of the liability is
added to the carrying amount of the associated asset and
amortized over the asset's useful life. The liability is
accreted over time through periodic charges to earnings and is
reduced by actual costs of reclamation. Subsequent to the
initial measurement, the asset retirement obligation is adjusted
at the end of each year to reflect the passage of time and
changes in the estimated future cash flows underlying the
obligation.
2.8 Revenue recognition
Revenue from uranium sales is recognized, net of value added
tax, when: (i) persuasive evidence of an arrangement exists;
(ii) the risks and rewards of ownership pass to the purchaser
including delivery of the product; (iii) the selling price is
fixed or determinable, and (iv) collectibility is reasonably
assured.
Interest income is recognized on a time proportion basis, taking
account of the principal outstanding and the effective rate over
the period to maturity, when it is determined that such income
will accrue to the Corporation.
2.9 Future income and mining taxes
The Corporation uses the liability method of accounting for
income and mining taxes. Under the liability method, future tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases and for tax losses and other
deductions carried forward. For business acquisitions, the
liability method results in a gross up of mining interests to
reflect the recognition of the future tax liabilities for the
tax effect of such differences.
Future tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply when the asset
is realized or the liability settled. A reduction in respect of
the benefit of a future tax asset (a valuation allowance) is
recorded against any future tax asset if it is not likely to be
realized. The effect on future tax assets and liabilities of a
change in tax rates is recognized in the statement of operations
in the period in which the change is substantively enacted.
2.10 Stock based compensation
The Corporation's stock-based compensation plans are described
in note 18.
The Corporation uses the fair value method of accounting for all
stock option awards. Under this method, the Corporation
determines the fair value of the compensation expense for all
stock options on the date of grant using an option pricing
model. The fair value of the options is expensed over the
vesting period of the options.
Upon exercise of the stock option, consideration received and
the related amount of stock based compensation, is transferred
from contributed surplus and recorded as share capital.
2.11 Earnings/loss per share
Earnings/loss per share calculations are based on the weighted
average number of common shares and common share equivalents
issued and outstanding during the year. Diluted earnings per
share are calculated using the treasury method which assumes
that outstanding stock options and warrants with an average
market price that exceeds the average exercise prices of the
options and warrants for the year are exercised, and the assumed
proceeds are used to repurchase shares of Uranium One at the
average market price of the common shares for the period. The
impact of outstanding share options and warrants are excluded
from the diluted share calculation for loss per share amounts,
because it is anti-dilutive. Dilution from convertible
securitities is calculated based on the number of shares to be
issued after taking into account the reduction of the related
after tax interest expense.
2.12 Financial instruments
The Corporation's financial instruments comprise primarily cash
and cash equivalents, restricted cash, accounts receivable, and
accounts payable. The fair value of these financial instruments
approximate their carrying values, due primarily to their
immediate or short-term maturity. Fair values of other financial
instruments have been estimated by reference to quoted market
prices for actual or similar instruments where available and
disclosed accordingly.
Comprehensive income comprises the Corporation's net income and
other comprehensive income. Comprehensive income represents
changes in shareholders' equity during a period arising from
non-owner sources and, for the Corporation, other comprehensive
income includes currency translation adjustments on its net
investment in self-sustaining foreign operations, and unrealized
gains and losses on available-for-sale securities.
Financial assets and financial liabilities are recognized on the
balance sheet when the Corporation has become party to the
contractual provisions of the instruments. Financial instruments
are initially measured at cost, which includes transaction
costs. Subsequent to initial recognition these instruments are
measured as set out below:
Investments
Purchases and sales of marketable investments are recognized on
the trade date at market value, which is the date that the
Corporation commits to purchase or sell the asset. After initial
recognition, the investments are classified as available for
sale investments carried at market value, with the market value
adjustments accounted for in other comprehensive income.
The Corporation accounts for its other investments using the
cost basis of accounting whereby investments are initially
recorded at cost and earnings from such investments are
recognized only to the extent received or receivable. The
carrying value of other investments is reduced to the estimated
market value, if there is an other than temporary decline in the
value of the investment; such reduction is included in the
consolidated statement of operations.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank
balances, deposits held at call and certificates of deposits,
money market instruments, including cashable guaranteed
investment certificates, bearer deposit notes and commercial
paper with a remaining maturity of three months or less at date
of purchase, and are carried at fair value.
Accounts receivable
Accounts receivable are carried at original invoice amount
unless a provision has been recorded for impairment of these
receivables. A provision for impairment of accounts receivable
is established when there is objective evidence that the
Corporation will not be able to collect all amounts due
according to the original terms of receivables.
Impairment and uncollectability of financial assets
An assessment is made at each balance sheet date to determine
whether there is objective evidence that a financial asset or
group of financial assets may be impaired. If such evidence
exists, the estimated recoverable amount of the asset is
determined and an impairment loss is recognized for the
difference between the recoverable amount and the carrying
amount as follows: the carrying amount of the asset is reduced
to its discounted estimated recoverable amount, either directly
or through the use of an allowance account and the resulting
loss is recognized in the consolidated statement of operations
for the period.
Financial liabilities
After initial recognition, financial liabilities other than
trading liabilities are subsequently measured at amortized cost
using the effective interest rate method. Amortized cost is
calculated by taking into account any transaction costs and any
discount or premium on settlement.
Accounts payable
Liabilities for trade and other payables which are normally
settled on 30 to 90 day terms are carried at cost.
Loans payable
Loans payable are recognized initially at the proceeds received,
net of transaction costs incurred. Loans payable are
subsequently stated at amortized cost using the effective yield
method; any difference between proceeds (net of transaction
costs) and the redemption value is recognized in the income
statement over the period of the loan.
Offset
Where a legally enforceable right of offset exists for
recognized financial assets and financial liabilities, and there
is an intention to settle the liability and realize the asset
simultaneously, or settle on a net basis, all related financial
effects are offset.
Embedded derivatives
Derivatives may be embedded in other financial instruments (the
"host instrument"). Embedded derivatives are treated as separate
derivatives when their economic characteristics and risks are
not clearly and closely related to those of the host instrument,
the terms of the embedded derivative are the same as those of a
stand-alone derivative, and the combined contract is not held
for trading or designated at fair value. These embedded
derivatives are measured at fair value with subsequent changes
recognized in gains or losses on derivatives within interest and
other on the consolidated statements of operations.
Compound instruments
The component parts of compound instruments are classified
separately as financial liabilities and equity in accordance
with the substance of the contractual agreement. At the date of
issue, the fair value of the liability component is estimated
using the prevailing market interest rate for similar non-
convertible instruments. This amount is recorded as a liability
on an amortized cost basis until extinguished upon conversion or
at the instrument's maturity date. The equity component is
determined by deducting the amount of the liability component
from the face value of the compound instrument as a whole. This
is recognized and included in equity, net of income tax effects,
and is not subsequently remeasured.
2.13 Equity instruments
Equity instruments issued by Uranium One are recorded at the
proceeds received, net of direct issue costs.
2.14 Use of estimates
The preparation of financial statements in conformity with
Canadian GAAP requires the Corporation's management to make
estimates and assumptions about future events that affect the
amounts reported in the consolidated financial statements and
related notes to the financial statements. Actual results may
differ from those estimates.
Significant estimates used in the preparation of these
consolidated financial statements include, but are not limited
to, the recoverability of accounts receivable and investments,
the proven and probable reserves and resources and the related
depletion and amortization, the estimated net realizable value
of inventories, the accounting for stock-based compensation, the
valuation of investments, the provision for income taxes and
composition of income tax assets and liabilities, the expected
economic lives of and the estimated future operating results and
net cash flows from mining interests, the anticipated costs of
reclamation and closure cost obligations, and the fair value of
assets and liabilities acquired in business combinations and
asset acquisitions.
2.15 Non-controlling interests
Non-controlling interests exist with respect to less than
wholly-owned subsidiaries of the Corporation and represent the
outside interest's share of the carrying values of the
subsidiaries. When the subsidiary company issues its own shares
to outside party's, a dilution gain or loss arises as a result
of the difference between the Corporation's share of the
proceeds and the carrying value of the underlying equity.
2.16 Variable interest entities
Variable interest entities ("VIE's") as defined by the
Accounting Standards Board in Accounting Guideline ("AcG") 15,
"Consolidation of Variable Interest Entities" are entities in
which equity investors do not have characteristics of a
"controlling financial interest" or there is not sufficient
equity at risk for the entity to finance its activities without
additional subordinated financial support. VIE's are subject to
consolidation by the primary beneficiary who will absorb the
majority of the entities expected losses and/or expected
residual returns. The Corporation has determined that none of
its equity investments qualify as VIE's.
2.17 Recent accounting pronouncements - effective January 1, 2008
In March 2007, the CICA issued Section 3862 Financial
Instruments - Disclosures and Section 3863 Financial Instruments
- Presentation which will replace section 3861 - Financial
Instruments - Disclosure and Presentation. These new sections
revise and enhance current disclosure requirements for financial
instruments, and place an increased emphasis on disclosure about
risk, including both qualitative and quantitative information
about the risk exposures arising from financial instruments.
Section 1535 Capital Disclosures identifies disclosure
requirements about the Corporation's objectives, policies, and
processes for managing capital, as well as quantitative
information about capital.
Section 3031 Inventories, will replace Section 3030, and
provides standards for the measurement and disclosure of
inventories. The new standard provides more extensive guidance
on the determination of cost, including allocation of overhead,
requirements for impairment testing and expands the existing
disclosure requirements. The adoption of this standard is not
expected to have a material impact on the Corporation's
consolidated financial position and results of operations.
3 Business combinations
3.1 UrAsia Energy acquisition
On February 11, 2007, Uranium One entered into a definitive
arrangement agreement whereby Uranium One agreed to acquire all
of the outstanding common shares of UrAsia Energy. Under the
agreement, each UrAsia Energy share was exchanged for 0.45
Uranium One common shares. Each UrAsia Energy warrant and stock
option, which previously gave the holder the right to acquire
common shares of UrAsia Energy was exchanged for a warrant or
stock option which gives the holder the right to acquire common
shares of Uranium One on the same basis as the shareholders of
UrAsia Energy, with all other terms of such warrants and options
(such as term and expiry) remaining unchanged.
The shareholders of UrAsia Energy approved the arrangement at a
Special Meeting held on April 5, 2007, with the transaction
closing on April 20, 2007. Upon completion of the transaction,
Uranium One was held approximately 60% by former UrAsia Energy
shareholders and approximately 40% by former Uranium One
shareholders. Accordingly, this business combination is
accounted for as a reverse takeover under Canadian GAAP with
UrAsia Energy being identified as the acquirer and Uranium One
as the acquiree.
The cost of acquisition includes the fair value of the deemed
issuance of the following instruments: 307.0 million UrAsia
Energy common shares at $5.57 per share, plus 6.1 million share
purchase warrants with an average exercise price of $1.57 per
share and a fair value of $26.4 million, plus 12.0 million stock
options, of which 8.0 million are exercisable at the date of
acquisition, with an average exercise price of $2.66 per share
and a fair value of the vested portion of $34.8 million, plus
0.8 million restricted shares with a fair value of $0.9 million,
plus the fair value of the equity component of the Uranium One
convertible debenture of $46.5 million plus UrAsia Energy's
transaction costs of $19.4 million, providing a total purchase
price of $1,837.6 million.
The value of the deemed issuance of UrAsia Energy shares was
calculated using the weighted average share price of UrAsia
Energy shares two days before, the day of, and two days after
the date of the announcement of the arrangement. The following
weighted average assumptions were used for the Black scholes
option pricing model for the fair value of the stock options,
warrants, restricted shares and equity component of the
convertible debenture:
Risk-free interest rate 4.17%
Expected volatility of the share price 61%
Expected life 3.79 years
Dividend rate Nil
The aggregate fair values of assets acquired and liabilities
assumed were as follows on acquisition date:
$'000
----------------------------------------------------------------
Purchase price:
Common shares (note 17) 1,709,647
Options, warrants and restricted shares 62,042
Equity component of convertible debentures 46,480
Acquisition costs 19,418
----------------------------------------------------------------
1,837,587
----------------------------------------------------------------
Net assets acquired:
Cash and cash equivalents 291,088
Other current assets 33,442
Mineral interests, plant and equipment 2,459,355
Other assets 13,502
Accounts payable and accrued liabilities (57,223)
Short term loans (54,130)
Asset retirement obligations (4,602)
Convertible debentures (118,450)
Future income tax liabilities (713,732)
Non-controlling interest (11,663)
----------------------------------------------------------------
1,837,587
----------------------------------------------------------------
3.2 Betpak Dala acquisition
On November 7, 2005, the Corporation acquired a 70% joint
venture interest in Betpak Dala LLP ("Betpak") which has 100%
interests in the Akdala Mine and the South Inkai Project, both
of which are located in the Republic of Kazakhstan. In
consideration for its interest, the Corporation paid a total of
$350 million. The remaining 30% interest in Betpak is held by
JSC NAC Kazatomprom ("Kazatomprom").
Under the terms of the agreement, a bonus payable in cash or
shares, capped at $36.4 million, was due based on the uranium
reserves discovered on the Akdala and South Inkai properties and
surrounding areas during the 12 month period ended November 7,
2006, in excess of the existing uranium reserves and resources.
As at November 7, 2006, no additional uranium reserves and
resources were discovered on the Akdala and South Inkai
properties. No payment was due at December 31, 2007 (July 31,
2006 - $Nil, December 31, 2006 - $Nil).
A further bonus payment is payable in cash based on uranium
reserves discovered on the South Inkai property in excess of
66,000 tonnes. The payment is based on the Corporation's share
of U(3)O(8) in excess of 66,000 tonnes times the average spot
price of U(3)O(8) times 6.25%. This payment is to be calculated
at the end of 2011 and each year thereafter, and paid 60 days
after the end of the year in which a payment is due. No payment
was due at December 31, 2007 (July 31, 2006 - $Nil,
December 31, 2006 - $Nil).
As security for the bonus payment, the Corporation has pledged
its participatory interest in Betpak (including the shares of a
subsidiary) and its share of uranium products produced by
Betpak.
The allocation of the purchase price is summarized in the table
below:
$'000
----------------------------------------------------------------
Purchase price:
Cash 350,000
Acquisition costs 7,690
----------------------------------------------------------------
357,690
----------------------------------------------------------------
Net assets acquired:
Cash 1,981
Mineral interests, plant and equipment 614,494
Other net assets 683
Future income taxes (259,468)
----------------------------------------------------------------
357,690
----------------------------------------------------------------
For the purpose of these consolidated financial statements, the
purchase consideration has been allocated to the fair value of
assets acquired and liabilities assumed.
3.3 Kyzylkum Acquisition
On November 7, 2005, the Corporation acquired a 30% joint
venture interest in Kyzylkum LLP ("Kyzylkum") which has a 100%
interest in the Kharassan Project, located in the south central
area of the Republic of Kazakhstan. In consideration for its
interest, the Corporation paid a total of $75 million, including
$37.5 million in cash with the balance consisting of the
issuance of 24,181,250 common shares.
A bonus payment is due upon commencement of commercial
production. The seller initially had an option, exercisable
until October 31, 2006, to elect to receive this bonus payment
as a cash payment of $24 million or receive 15,476,000 shares of
UrAsia Energy. The seller elected under the terms of the
arrangement, to receive 15,476,000 shares of UrAsia Energy upon
commencement of commercial production. The 15,476,000 bonus
payment shares of UrAsia Energy has been converted to 6,964,200
Uranium One shares as part of the UrAsia Energy acquistion
(Note 3.1). The fair value of the contingently issuable shares
has not been included as part of the purchase price for Kyzylkum
as commencement of commercial production could not be reasonably
determined.
An additional bonus payment of 30% of 12.5% (being an effective
3.75%) of the weighted average spot price of U(3)O(8) will be
paid on incremental reserves in excess of 55,000 tonnes of
U(3)O(8) discovered during each fiscal year with payment
beginning within 60 days of the end of the 2008 calendar year.
No payment was due at December 31, 2007 (July 31, 2006 - $Nil,
December 31, 2006 - $Nil).
The Corporation is responsible for arranging project financing
of $80 million for the construction and commissioning of a mine
in respect of the Kharassan Project. As security for this
obligation and the obligation to make the bonus payments
referred to above, the Corporation has granted a security
interest over the shares of a subsidiary holding the
Corporation's interest in Kharassan.
The allocation of the purchase price is summarized in the table
below:
$'000
----------------------------------------------------------------
Purchase price:
Cash 37,500
24,181,250 common shares 37,500
Acquisition costs 1,509
----------------------------------------------------------------
76,509
----------------------------------------------------------------
Net assets acquired:
Cash 84
Mineral interests, plant and equipment 141,487
Other net assets 13
Future income taxes (65,075)
----------------------------------------------------------------
76,509
----------------------------------------------------------------
3.4 Signature acquisition
In September 2005, Signature Resources Ltd ("Signature") signed
a binding letter of agreement with UrAsia Energy Holdings Ltd
("UrAsia BVI"), a subsidiary of UrAsia Energy, pursuant to which
Signature agreed to acquire all of the issued and outstanding
shares of UrAsia BVI in consideration for the issuance of common
shares of Signature. Pursuant to the terms of the agreement,
Signature consolidated its common shares on a one for two basis
and issued one post-consolidation share of Signature for each
issued and outstanding ordinary share of UrAsia BVI.
As the shareholders of UrAsia BVI acquired control of Signature
following the UrAsia Acquisition, this transaction was a reverse
takeover and has been accounted for as an acquisition of
Signature by UrAsia BVI. The purchase price has been determined
by reference to the fair value of the net assets acquired from
Signature.
The allocation of the purchase price is summarized in the table
below:
$'000
----------------------------------------------------------------
Purchase price:
5,935,621 common shares 271
Stock options and warrants of Signature 153
----------------------------------------------------------------
424
----------------------------------------------------------------
Net assets acquired:
Cash 465
Non-cash working capital deficiency (41)
----------------------------------------------------------------
424
4 Asset purchases
4.1 US Energy
On April 30, 2007, Uranium One completed the purchase, from U.S.
Energy Corporation ("U.S. Energy"), of the Shootaring Canyon
Uranium Mill in Utah, as well as a land package comprising
uranium exploration properties in Utah, Wyoming, Arizona and
Colorado and a substantial database of geological information
for consideration equal to 6,607,605 Uranium One common shares
valued at $99.4 million, a cash payment of $6.5 million, and
transaction costs of $2.6 million including $750,000 paid in
cash by Uranium One on the execution of an exclusivity agreement
with the vendor. The purchase agreement provides for further
payments by Uranium One of $27.5 million dependent on the
achievement of certain production targets. U.S. Energy will
receive a royalty equal to 5% of the gross proceeds from the
sale of commodities produced at the Shootaring Canyon Mill, to a
maximum amount of $12.5 million.
The transaction was accounted for as an asset purchase and the
cost of each item of property, plant and equipment acquired as
part the group of assets acquired was determined by allocating
the price paid for the group of assets to each item based on its
relative fair value at the time of acquisition. The summarized
result of the allocation is indicated in the table below:
Purchase price: $'000
6.6 million common shares of Uranium One 99,401
Cash payment 6,515
Acquisition costs, including exclusivity fee 2,603
----------------------------------------------------------------
108,519
----------------------------------------------------------------
Allocation of purchase price to assets:
Shootaring Canyon Mill 39,107
Exploration properties and geological information 65,183
Stockpiles 7,772
Asset retirment obligation (3,543)
----------------------------------------------------------------
108,519
----------------------------------------------------------------
Pursuant to the asset purchase agreement, the reclamation bonds
and guarantees given by U.S. Energy in connection with the
acquired assets were substituted by Uranium One surety bonds
with the appropriate Governmental Entity to provide coverage for
the reclamation obligations of the acquired assets. The bond
payments of $9.3 million are included in other assets as part of
the asset retirement fund. The asset retirement obligation was
assessed and accounted for on acquisition date (Refer note 15).
4.2 Energy Metals Corporation
On June 3, 2007, Uranium One and Energy Metals Corporation
("EMC") entered into a definitive agreement whereby Uranium One
agreed to acquire all of the issued and outstanding common
shares and options to purchase common shares of EMC. The
agreement was approved by the shareholders of EMC on July 31,
2007 and the acquisition was completed on August 10, 2007. Under
the agreement, Uranium One exchanged 1.15 common shares of
Uranium One for each common share of EMC. A total of
100,444,543 Uranium One common shares were issued in exchange
for 87,343,081 EMC common shares.
The cost of the acquisition includes the fair value of the
issuance of 100,444,543 Uranium One common shares at $10.09 per
share, plus 8,382,546 stock options of Uranium One, of which
5,380,458 were exercisable at the date of acquisition,
with an average exercise price of $8.14 per share and a fair
value of the vested portion of $35.3 million plus Uranium One's
transaction costs of $9.3 million for a total purchase price of
$1,057.8 million.
The value of the Uranium One common shares issued was calculated
using the share price of Uranium One's shares on the date of
acquisition. The following weighted average assumptions were
used for the Black-Scholes option pricing model for the fair
value of the stock options:
Risk-free interest rate 4.57%
Expected volatility of the share price 60%
Expected life 3.07 years
Dividend rate Nil
The transaction was accounted for as an asset purchase and the
cost of each item of property, plant and equipment acquired as
part of the group of assets acquired was determined by
allocating the price paid for the group of assets to each item
based on its relative fair value at the time of acquisition. The
summarized results of the allocation is indicated in the table
below:
$'000
----------------------------------------------------------------
Purchase price:
100.4 million shares of Uranium One 1,013,215
Options of Uranium One 35,307
Acquisition costs 9,311
----------------------------------------------------------------
1,057,833
----------------------------------------------------------------
Net assets acquired:
Cash and cash equivalents 86,017
Marketable securities 6,909
Other current assets 12,497
Mineral interests, plant and equipment 1,441,077
Other non-current assets 23,662
Accounts payable and accrued liabilities (5,627)
Asset retirement obligations (2,281)
Future income tax liability (504,421)
----------------------------------------------------------------
1,057,833
----------------------------------------------------------------
5 Cash and cash equivalents
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
-----------------------------
Cash 240,160 21,624 61,028
Money market instruments, including
cashable guaranteed investment
certificates, bearer deposit notes and
commercial paper 12,059 40,214 67,300
---------------------------------------------------------------------
252,219 61,838 128,328
---------------------------------------------------------------------
Cash and cash equivalents do not include any asset backed commercial
paper.
6 Accounts and other receivables
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
-----------------------------
Trade receivables 55,595 47,798 10,173
Value added tax and general sales tax 9,528 51 -
Prepayments and advances 5,558 894 1,177
Deposits and guarantees 3,220 - -
Other receivables 1,954 443 -
---------------------------------------------------------------------
75,855 49,186 11,350
Less: non current deposits and
guarantees included in other assets
(note 11) 3,220 - -
---------------------------------------------------------------------
72,635 49,186 11,350
---------------------------------------------------------------------
7 Joint ventures
7.1 Proportionate interests in joint ventures
A number of the exploration properties in the western United
States acquired from U.S. Energy in April 2007, were under an
option agreement with Uranium Power Corp ("UPC") at the time of
purchase. The Corporation acquired the right to the outstanding
payments under this agreement together with the exploration
properties. During the fourth quarter of 2007, UPC made the
final payments pursuant to the option agreement and therefore
satisfied the earn in requirements and the Corporation and UPC
formed a 50:50 joint venture to explore and develop these
properties.
The Corporation owns the following interests in joint ventures:
----------------------------------------------------------------
Betpak Dala 70%
Kyzylkum 30%
Joint Venture with UPC 50%
Pitchstone 50%
The Corporation's proportionate share of assets and liabilities
are as follows:
As at Joint
December 31, Betpak Venture Pitch-
2007 Dala Kyzylkum with UPC stone Total
$'000 $'000 $'000 $'000 $'000
----------------------------------------------------------------
Cash 1,643 3,659 224 77 5,603
Other current
assets 73,039 291 5 68 73,403
Mineral interests,
plant and
equipment 680,046 182,740 50,422 20,191 933,399
Other assets 4,070 4,771 1,093 - 9,934
Current
liabilities (19,395) (900) 72 - (20,223)
Long term
debt(1) - (18,205) - - (18,205)
Other (1,567) (135) - - (1,702)
Future income
taxes (280,075) (72,486) - (5,831) (358,392)
Asset retirement
obligation (3,377) - - - (3,377)
----------------------------------------------------------------
Net assets 454,384 99,735 51,816 14,505 620,440
----------------------------------------------------------------
(1) In addition to the $73.3 million loan (note 7.2) from the
Corporation, Kyzylkum negotiated unsecured bank loan
facilities totalling $100 million. One facility in the
amount of $70 million was obtained from the Japan Bank for
International Cooperation and the other facility in the
amount of $30 million was obtained from Citibank. A total
of $60 million has been drawn down from the facility during
the year. The loan facilities will be repayable after full
repayment of the loan from the Corporation. The
Corporation's proportionate share of these facilities will
amount to $30 million when fully drawn down. The loan
facilities have floating interest rates of LIBOR plus 0.25%
and 0.35%, respectively.
As at December 31, 2006 Betpak Dala Kyzylkum Total
$'000 $'000 $'000
----------------------------------------------------------------
Cash 5,321 3,055 8,376
Other current assets 56,424 2,357 58,781
Mineral interests, plant and
equipment 617,740 150,739 768,479
Other assets 10,732 1,679 12,411
Current liabilities (3,717) (154) (3,871)
Other (1,466) - (1,466)
Future income taxes (268,938) (68,662) (337,600)
Asset retirement obligation (2,856) - (2,856)
----------------------------------------------------------------
Net assets 413,240 89,014 502,254
----------------------------------------------------------------
As at July 31, 2006 Betpak Dala Kyzylkum Total
$'000 $'000 $'000
----------------------------------------------------------------
Cash 5,388 6,907 12,295
Other current assets 19,373 16 19,389
Mineral interests, plant and
equipment 618,019 143,874 761,893
Other assets 780 - 780
Current liabilities (6,710) (160) (6,870)
Other (1,046) - (1,046)
Future income taxes (291,803) (73,643) (365,446)
Asset retirement obligation (1,953) - (1,953)
----------------------------------------------------------------
Net assets 342,048 76,994 419,042
----------------------------------------------------------------
The Corporation's proportionate share of revenue, expenses, net
income and cash flows for the year ended December 31, 2007, five
months ended December 31, 2006 and year ended July 31, 2006 are
as follows:
Year ended Joint
December 31, Betpak Venture Pitch-
2007 Dala Kyzylkum with UPC stone Total
$'000 $'000 $'000 $'000 $'000
----------------------------------------------------------------
Revenue 134,024 - - - 134,024
Expenses (29,664) (962) (177) (1,938) (32,741)
Foreign exchange
loss (5,774) (432) - - (6,206)
----------------------------------------------------------------
Income/(loss)
before income
taxes 98,586 (1,394) (177) (1,938) 95,077
Provision for
income taxes (38,656) - - - (38,656)
----------------------------------------------------------------
Net income/
(loss) 59,930 (1,394) (177) (1,938) 56,421
----------------------------------------------------------------
Cash flows from/
(to) operating
activities 77,544 (12) (885) (2,507) 74,140
Cash flows to
investing
activities (47,711) (23,736) (128) - (71,575)
Cash flows
(to)/from
financing
activities (33,736) 24,120 1,238 2,583 (5,795)
----------------------------------------------------------------
Net increase/
(decrease) in
cash (3,903) 372 225 76 (3,230)
----------------------------------------------------------------
Five months ended
December 31, Betpak
2006 Dala Kyzylkum Total
$'000 $'000 $'000
----------------------------------------------------------------
Revenue 50,449 - 50,449
Expenses (17,276) - (17,276)
Foreign
exchange
gain 19,337 4,426 23,763
----------------------------------------------------------------
Earnings before
income taxes 52,510 4,426 56,936
(Provision for)
/ recovery of
income taxes (12,117) 106 (12,011)
----------------------------------------------------------------
Net income 40,393 4,532 44,925
----------------------------------------------------------------
Cash flows
from to
operating
activities (18,215) (180) (18,395)
Cash flows
from
investing
activities 33,950 5,400 39,350
Cash flows to
financing
activities (15,792) (8,472) (24,264)
----------------------------------------------------------------
Net decrease
in cash (57) (3,252) (3,309)
----------------------------------------------------------------
Year ended
July 31,
2006 Betpak Dala Kyzylkum Total
$'000 $'000 $'000
----------------------------------------------------------------
Revenue 23,507 - 23,507
(Expenses) /
other
income (13,181) 12 (13,169)
Foreign
exchange loss (32,933) (8,326) (41,259)
----------------------------------------------------------------
Loss before
income taxes (22,607) (8,314) (30,921)
Provision for
income taxes (3,290) (106) (3,396)
----------------------------------------------------------------
Net loss (25,897) (8,420) (34,317)
----------------------------------------------------------------
Cash flows
from operating
activities 6,637 307 6,944
Cash flows from
investing
activities 9,870 9,020 18,890
Cash flows to
financing
activities (13,095) (2,503) (15,598)
----------------------------------------------------------------
Net decrease in
cash 3,412 6,824 10,236
----------------------------------------------------------------
7.2 Loans to Joint Ventures
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
----------------------------------------------------------------
Current portion
Betpak Dala 5,175 12,736 4,394
Kyzylkum 27,692 752 46
----------------------------------------------------------------
32,867 13,488 4,440
----------------------------------------------------------------
----------------------------------------------------------------
Long term portion
Betpak Dala - 6,250 -
Kyzylkum 24,359 33,600 21,000
----------------------------------------------------------------
24,359 39,850 21,000
----------------------------------------------------------------
----------------------------------------------------------------
Total 57,226 53,338 25,440
----------------------------------------------------------------
Subsequent to year end, Kyzylkum has repaid $6.7 million of the
outstanding loan, and Betpak Dala has repaid the entire
outstanding amount.
Betpak Dala loan Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
----------------------------------------------------------------
Loan advanced in December 2005.
The loan bears interest at LIBOR
plus 1.5% per annum, with principal
and interest amounts payable
before May 31, 2007. - 14,100 14,100
Loans advanced from July to
November 2006:
Pursuant to its commitment to provide
project financing for construction
and commissioning of the South Inkai
Project, the loans bear interest at
LIBOR plus 1.5% per annum - 48,500
Loans advanced in November and
December 2007:
The loans bear interest at LIBOR plus
6.5% per annum, and is payable
before February 9, 2008 17,000 - -
----------------------------------------------------------------
17,000 62,600 14,100
Interest accrued 249 688 548
----------------------------------------------------------------
17,249 63,288 14,648
Less elimination of proportionate
share - 70% (12,074) (44,302) (10,254)
----------------------------------------------------------------
5,175 18,986 4,394
Less current portion (5,175) (12,736) (4,394)
----------------------------------------------------------------
Long term portion - 6,250 -
----------------------------------------------------------------
The loans to Betpak Dala are
unsecured
Kyzylkum loan Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
----------------------------------------------------------------
The Corporation made loans to
Kyzylkum pursuant to its obligation
to provide project financing for
construction and commissioning of
the Kharasan Project in the amount
of $80 million on or before
December 31, 2007. The loans bears
interest at LIBOR plus 1.5% per
annum, with interest payable on a
semi-annual basis, commencing
within 2 years of funding. 80,000 48,000 30,000
Repaid to date (6,667)
----------------------------------------------------------------
73,333 48,000 30,000
Interest accrued 1,025 1,074 65
----------------------------------------------------------------
74,358 49,074 30,065
Less elimination of proportionate
share - 30% (22,307) (14,722) (9,019)
----------------------------------------------------------------
52,051 34,352 21,046
Less current portion (27,692) (752) (46)
----------------------------------------------------------------
Long term portion 24,359 33,600 21,000
----------------------------------------------------------------
The loans to Kyzylkum are unsecured.
8 Inventories
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
---------------------------------------------------------------------
Finished uranium concentrates 10,093 5,791 8,672
Solutions and concentrates in process 5,128 5,035 2,088
Materials and supplies 5,773 1,218 1,180
Stockpiles 7,772 - -
---------------------------------------------------------------------
28,766 12,044 11,940
Less: non-current inventory included in
other assets (note 11) 7,772 - -
---------------------------------------------------------------------
20,994 12,044 11,940
---------------------------------------------------------------------
9 Mineral interests, plant and equipment
December 31,
2007 Net
Accumulated carrying
Cost amortization amount
$'000 $'000 $'000
---------------------------------------------------------------------
Mineral interests 4,561,160 (32,771) 4,528,389
Plant and equipment 591,893 (7,375) 584,518
--------------------------------------------------------------------
5,153,053 (40,146) 5,112,907
---------------------------------------------------------------------
December 31,
2006 Net
Accumulated carrying
Cost amortization amount
$'000 $'000 $'000
---------------------------------------------------------------------
Mineral interests 761,627 (17,539) 744,088
Plant and equipment 25,348 (549) 24,799
---------------------------------------------------------------------
786,975 (18,088) 768,887
---------------------------------------------------------------------
July 31, 2006 Net
Accumulated carrying
Cost amortization amount
$'000 $'000 $'000
---------------------------------------------------------------------
Mineral interests 754,605 (9,656) 744,949
Plant and equipment 18,182 (584) 17,598
---------------------------------------------------------------------
772,787 (10,240) 762,547
---------------------------------------------------------------------
A summary by property of the net book value is as follows:
Total
Mineral interests Plant and December
--------------------------- equipment 31, 2007
Non-
Deple- deple-
table table Total
Country $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala
Uranium Kazakh-
Mine stan 111,302 74,358 185,660 15,906 201,566
South Inkai
Uranium Kazakh-
Project stan - 422,631 422,631 31,388 454,019
Kharasan
Uranium Kazakh-
Project stan - 146,538 146,538 29,376 175,914
Dominion
Uranium South
Project Africa - 1,756,018 1,756,018 350,146 2,106,164
United
States
development United
projects States - 278,654 278,654 7,184 285,838
United
States
exploration United
projects States - 1,073,130 1,073,130 1,285 1,074,415
Hobson
Facility
and La
Palangana United
Project States - 56,869 56,869 33,503 90,372
Shootaring
Canyon United
Mill States - 50,009 50,009 47,614 97,623
Honeymoon
Uranium
Project Australia - 276,087 276,087 23,951 300,038
Modder East
Gold South
Project Africa - 261,332 261,332 24,400 285,732
Pitchstone
exploration Canada - 21,216 21,216 - 21,216
Corporate
and other - 245 245 19,765 20,010
-------------------------------------------------------------------------
Total 111,302 4,417,087 4,528,389 584,518 5,112,907
-------------------------------------------------------------------------
Total
Mineral interests Plant and December
--------------------------- equipment 31, 2006
Non-
Deple- deple-
table table Total
Country $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala
Uranium Kazakh-
Mine stan 118,755 74,358 193,113 16,294 209,407
South Inkai
Uranium Kazakh-
Project stan - 404,125 404,125 3,312 407,437
Kharasan
Uranium Kazakh-
Project stan - 146,717 146,717 4,020 150,737
Corporate
and other - 133 133 1,173 1,306
-------------------------------------------------------------------------
Total 118,755 625,333 744,088 24,799 768,887
-------------------------------------------------------------------------
Total
Mineral interests Plant and July 31,
--------------------------- equipment 2006
Non-
Deple- deple-
table table Total
$'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala
Uranium Kazakh-
Mine stan 126,638 74,358 200,996 16,831 217,827
South Inkai
Uranium Kazakh-
Project stan - 400,193 400,193 - 400,193
Kharasan
Uranium Kazakh-
Project stan - 143,627 143,627 247 143,874
Corporate
and other - 133 133 520 653
-------------------------------------------------------------------------
Total 126,638 618,311 744,949 17,598 762,547
-------------------------------------------------------------------------
10 Available for sale securities
Dec 31, Dec 31, Jul 31,
2007 2006 2006
Market Market Market
value value value
$'000 $'000 $'000
---------------------------------------------------------------------
Available for sale securities 21,257 - -
---------------------------------------------------------------------
Movement in available for sale securities Dec 31, 2007
$'000
---------------------------------------------------------------------
Balance as at July 31, 2006 and December 31, 2006 -
Received as part of a joint venture earn in payment 1,268
Purchased as part of the EMC acquisition (refer note 4.2) 20,391
Purchased during the period 278
Impairment of available for sale securities included in
the statement of operations (932)
Foreign exchange movement 64
Fair value adjustment included in other comprehensive
income 188
---------------------------------------------------------------------
Balance as at December 31, 2007 21,257
---------------------------------------------------------------------
The Corporation has recognized a future income tax liablity of
$0.1 million that relates to the cumulative mark-to-market gains on
the available for sale securities. The tax estimate is based on the
assumption that if the securities were sold at their December 31,
2007 fair market value, the capital gains would be calculated at the
appropriate tax rate of the jurisdiction in which the security is
held.
By holding these long-term investments the Corporation is inherently
exposed to various risk factors including currency risk, market price
risk and liquidity risk.
11 Other assets
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
---------------------------------------------------------------------
Advances for plant and equipment 12,643 23,085 8,710
Long term deposits (note 6) 3,220 - -
Long term inventory (note 8) 7,772 - -
Asset retirement fund (note 15) 20,316 - -
Advances for future services 10,629 - -
Reclamation Bond payment on behalf of
UPC joint venture 1,094 - -
Other 1,930 2,740 210
---------------------------------------------------------------------
57,604 25,825 8,920
---------------------------------------------------------------------
12 Accounts payable and accrued liabilities
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
---------------------------------------------------------------------
Trade payables 30,161 6,471 5,007
Accruals 24,714 260 1,088
Commodity and other taxes payable 11,280 - -
Other 9,727 6,216 -
---------------------------------------------------------------------
75,882 12,947 6,095
---------------------------------------------------------------------
13 Convertible debentures
On April 20, 2007, the Corporation acquired Uranium One who had an
outstanding debt offering of Cdn $155.3 ($133.2 million) convertible
unsecured subordinated debentures maturing December 31, 2011 (the
"debentures"). The debentures were issued at Cdn $1,000 per debenture
and the underwriters' fees amounted to Cdn $30 per debenture, which
resulted in the net proceeds to the Corporation of Cdn $970 per
debenture. The debentures bear interest at an annual rate of 4.25%,
payable semi-annually in arrears on June 30 and December 31 of each
year, commencing June 30, 2007. The June 30, 2007 interest payment
represents accrued interest from the closing of the offering to June
30, 2007. The conversion price was set at Cdn $20 per share, which is
equivalent to 50 common shares for each Cdn $1,000 principal amount
of debentures. The debt and equity component were valued on April
20, 2007, and were included as part of the purchase price for the
Uranium One / UrAsia Energy business combination (note 3.1). The
table below indicates the breakdown of the liability:
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
---------------------------------------------------------------------
Liability component on date of
business combination (note 3.1) 118,450 - -
Interest incurred 11,641 - -
Coupon payment (6,564) - -
Foreign exchange movement 13,021 - -
---------------------------------------------------------------------
Liability as at the end of the period 136,548 - -
---------------------------------------------------------------------
14 Aflease Gold convertible bonds
On December 13, 2007, Aflease Gold issued 600 convertible bonds ("the
bonds"), denominated in South African rand ("ZAR"), maturing 5 years
from the issue date at a redemption value of 109.6% of the nominal
value. The bonds were issued at a nominal value of ZAR1 million
($0.15 million) per bond and bear interest at an annual rate of 8.5%.
The effective yield to maturity is 10%. The holders of the bonds have
the option to convert the bonds into ordinary shares of Aflease Gold
at any time up to, and including, the maturity date, at a fixed
conversion rate of 266,058 shares per bond. In the event that the
Modder East Gold Project has not commenced continuous production by
March 31, 2010, the conversion rate will be recalculated using a
formula based on Aflease Gold's share price at that date.
Aflease Gold or the holders of the bonds can enforce early settlement
of the bonds under certain circumstances. Aflease Gold is not
permitted to raise any additional financing secured by the Modder
East Gold Project while any of the bonds remain outstanding.
The convertible bonds are presented in the balance sheet as
designated at fair value through operations as follows:
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
---------------------------------------------------------------------
Face value of
convertible bonds issued 87,445 - -
Fair value adjustment
through operations 3,106 - -
---------------------------------------------------------------------
Liability as at the end of the period 90,551 - -
---------------------------------------------------------------------
Financial risk factors and critical judgement applied by management
The bonds are designated at fair value and therefore the carrying
amount will approximate the fair value of the financial liability.
The fair value of the convertible bonds has been estimated using the
following assumptions:
Inception Year end
date 2007
---------------------------------------------------------------------
Binomial Binomial
Methodology used pricing pricing
Maturity date: matures Dec 13, Dec 13,
over a period of 5 years 2012 2012
Risk free interest rate: South African
zero coupon bond curves 9.86% 9.86%
Expected dividend yield 0.00% 0.00%
Expected volatility of the Aflease Gold's
share price: exponentially weighted moving
average methodology (lambda (equal sign) 99%) 48.80% 49.30%
Credit spread: Johannesburg
Interbank Rate (JIBAR) plus 5.00% 5.00%
Aflease Gold's spot share price R 2.58 R 2.95
Conversion price R 4.12 R 4.12
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
---------------------------------------------------------------------
Payable in 133,960 - -
- 2007 -
- 2008 7,486
- 2009 7,486
- 2010 7,486
- 2011 7,486
- 2012 104,016
- Thereafter -
15 Asset retirement obligations
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
---------------------------------------------------------------------
Opening balance 2,856 1,953 1,875
Acquisition of Uranium One (note 3.1) 4,602 - -
Acquisition of U.S. Energy
assets (note 4.1) 3,543 - -
Acquisition of EMC assets (note 4.2) 2,281 - -
Reclamation revision of estimates 423 299 -
Accretion expense 1,000 604 78
Foreign exchange movement 306 - -
---------------------------------------------------------------------
Closing balance 15,011 2,856 1,953
---------------------------------------------------------------------
Dec 31, Dec 31, Jul 31,
2007 2006 2006
---------------------------------------------------------------------
Undiscounted and uninflated amount
of estimated cash flows ($'000) 28,074 4,284 5,355
---------------------------------------------------------------------
Payable in years 4 - 27 4 - 18 5 - 19
Inflation rate 2.30% - 8.60% 7.00% 7.00%
Discount rate 7.39% - 14.75% 12.00% 5.00%
---------------------------------------------------------------------
Security of $20.3 million for reclamation obligations has been
provided in the form required by the relevant country's authorities
(note 11).
16 Income taxes
Dec 31, Dec 31, Jul 31,
2007 2006 2006
US$'000 US$'000 US$'000
---------------------------------------------------------------------
Current income tax expense 41,346 15,984 5,304
Future income tax recovery (17,621) (3,973) (1,905)
---------------------------------------------------------------------
23,725 12,011 3,399
---------------------------------------------------------------------
Reconciliation between the average effective tax rate and the
applicable statutory tax rate
Dec 31, Dec 31, Jul 31,
Income tax rate reconciliation 2007 2006 2006
% % %
---------------------------------------------------------------------
Earnings / (Loss) before income taxes 2,311 31,695 (45,540)
Canadian federal and
provincial income tax rates 34.12% 34.12% 34.12%
---------------------------------------------------------------------
Expected income tax expense / (recovery) 788 10,814 (15,534)
Permanent differences, including share
based compensation and foreign
exchange 6,644 (3,018) 13,054
Effect of tax rate changes 2,954 4,481 2,947
Change in valuation allowance 9,121 (495) 1,823
Differences in tax rates in foreign
jurisdictions 4,546 1,229 1,860
Other (328) (1,000) (751)
---------------------------------------------------------------------
23,725 12,011 3,399
---------------------------------------------------------------------
Tax loss carry forwards
Canada and provincial tax jurisdictions
At December 31, 2007, the Corporation had Canadian federal and
provincial net operating loss carry-fowards totaling $21.5 million
that expire from 2016 through 2027. A valuation allowance of
$6.0 million has been applied against the future tax asset
representing these losses.
United States federal and state tax jurisdictions
At December 31, 2007, the Corporation had United States federal and
state net operating loss carry-forwards totaling $44.4 million that
expire from 2008 through 2027. A valuation allowance of $2.8 million
has been applied against the future tax asset representing these
losses.
South Africa tax jurisdictions
At December 31, 2007, the Corporation had South Africa net operating
loss carry-forwards totaling $105.4 million with no expiry. A
valuation allowance of $nil million has been applied against future
tax asset representing these losses.
Kazakhstan tax jurisdictions
At December 31, 2007, the Corporation had Kazakhstan net operating
loss carry-forwards totaling $2.3 million that expire from 2008
through 2010. A valuation allowance of $1.0 million has been applied
against the future tax asset representing these losses.
Future income tax
The significant components of the Corporation's future income tax
assets and liabilities are as follows:
Dec 31, Dec 31, Jul 31,
2007 2006 2006
US$'000 US$'000 US$'000
---------------------------------------------------------------------
Future income tax assets
Mineral interests, plant & equipment 30,803 1,157 295
Other 31,249 2,910 2,228
Non-capital losses 58,134 503 1,691
---------------------------------------------------------------------
Future income tax assets
before valuation allowance 120,186 4,570 4,214
Valuation allowance (20,166) (3,509) (4,004)
---------------------------------------------------------------------
Future income tax assets,
net of valuation allowance 100,020 1,061 210
---------------------------------------------------------------------
---------------------------------------------------------------------
Future income tax liabilities
Mineral interests, plant & equipment 1,657,663 337,642 365,491
Other 18,619 -
---------------------------------------------------------------------
1,676,282 337,642 365,491
Less current portion - - -
---------------------------------------------------------------------
Future income tax liabilities 1,676,282 337,642 365,491
---------------------------------------------------------------------
---------------------------------------------------------------------
Total 1,576,262 336,581 365,281
---------------------------------------------------------------------
17 Share capital
Value of
Number of shares
Issued and outstanding common shares Note shares $'000
---------------------------------------------------------------------
UrAsia Energy - movement from
August 1, 2005 to April 20, 2007
Balance of common shares
at August 1, 2005 70,400,000 4,094
Shares issued for private placements 375,436,250 569,824
Acquisition of Signature 5,935,621 271
Acquisition of Kyzylkum 24,181,250 37,500
Exercise of warrants 3,219,750 673
Exercise of stock options 550,000 579
---------------------------------------------------------------------
Common shares on July 31, 2006 479,722,871 612,941
Exercise of warrants 268,000 48
Exercise of stock options 249,833 618
---------------------------------------------------------------------
Common shares on December 31, 2006 480,240,704 613,607
Exercise of warrants 481,000 82
Exercise of stock options 1,866,807 7,601
---------------------------------------------------------------------
Common shares on April 20, 2007 482,588,511 621,290
---------------------------------------------------------------------
Conversion of UrAsia Energy shares to
Uranium One shares at a ratio of 0.45 3.1 217,164,830 621,290
Shares of Uranium One owned by Uranium
One shareholders at acquisition 138,129,435 1,709,647
Exercise of warrants 150,000 2,033
Exercise of stock options
and restricted shares 4,354,617 47,311
U.S. Energy asset purchase consideration 4.1 6,607,605 99,401
EMC asset purchase consideration 4.2 100,444,543 1,013,215
Shares issued for services rendered 322,393 3,987
---------------------------------------------------------------------
Balance of issued and outstanding
common shares at December 31, 2007 467,173,423 3,496,884
---------------------------------------------------------------------
18 Contributed surplus
The following table details the movements of contributed surplus
during the period:
Restr-
Note Warr- icted Options TOTAL
ants shares
$'000 $'000 $'000 $'000
---------------------------------------------------------------------
As at August 1, 2005 - - - -
Issued on acquisition
of Signature 3.4 - - 153 153
Share options
issued and vested - - 9,370 9,370
Share options exercised - - (216) (216)
---------------------------------------------------------------------
As at July 31, 2006 - - 9,307 9,307
Share options
issued and vested - - 22,162 22,162
Share options exercised - - (183) (183)
---------------------------------------------------------------------
As at December 31, 2006 - - 31,286 31,286
Issued on Uranium One /
UrAsia Energy business
combination 3.1 26,407 853 34,782 62,042
Issued on EMC
asset acquisition 4.2 - - 35,307 35,307
Share options
issued and vested - - 33,734 33,734
Share options exercised - - (29,213) (29,213)
Restricted shares vested - 3,926 - 3,926
Restricted shares exercised - (1,660) - (1,660)
Warrants exercised (1,035) - - (1,035)
---------------------------------------------------------------------
As at December 31, 2007 25,372 3,119 105,896 134,387
---------------------------------------------------------------------
Assumptions
The fair value of stock options and restricted shares used to
calculate the compensation expense was estimated using the Black
scholes option pricing model with the following assumptions:
Dec 31, Dec 31, Jul 31,
2007 2006 2006
---------------------------------------------------------------------
Risk free interest rate 4.38% 3.80% 4.00%
Expected dividend yield 0% 0% 0%
Expected volatility of the
Uranium One's share price 61% 46% 38%
Expected life 5 years 10 years 10 years
Options
Under Uranium One's Option plan, options granted are non-assignable
and may be granted for a term not exceeding ten years. The plan is
administered by the Board of Directors, which determines individual
eligibility under the plan, number of shares reserved underlying the
options granted to each individual (not exceeding 5% of issued and
outstanding shares to any insider and not exceeding 1% of the issued
and outstanding shares to any non-employee director on a non-diluted
basis) and any vesting period which, pursuant to the stock option
plan was previously one-third on the grant date, one-third on the
first anniversary of the grant date and the remainder on the second
anniversary of the grant date. On December 8, 2006 the Board of
Directors decided to adopt an amended vesting schedule such that any
options granted on and after December 8, 2006, would vest as to one-
third on the first anniversary of the grant date, one-third on the
second anniversary of the grant date and one-third on the third
anniversary of the grant date. The maximum number of shares of
Uranium One that are issuable pursuant to the plan is limited to 7.2%
of issued and outstanding shares.
The following is a summary of Uranium One's options granted under its
stock-based compensation plan:
Weighted
average
exercise
Number of price
options Cdn $
---------------------------------------------------------------------
Balance as at August 1, 2005 - -
Stock options granted on Signature acquisition 500,000 0.53
Granted 11,855,000 2.16
Exercised (550,000) 0.76
Forfeiture of share options
up to July 31, 2006 (20,000) 1.80
---------------------------------------------------------------------
Outstanding options as at July 31, 2006 11,785,000 2.16
Granted 10,190,000 3.74
Exercised (249,833) 1.95
Forfeiture or expiry of share options (66,667) 3.00
---------------------------------------------------------------------
Outstanding options at December 31, 2006 21,658,500 2.90
Granted up to April 20, 2007 1,935,000 5.99
Exercised up to April 20, 2007 (1,866,807) 2.11
Forfeiture of share options
up to April 20, 2007 (30,000) 1.80
---------------------------------------------------------------------
Outstanding options as at April 20, 2007 21,696,693 5.86
Converted UrAsia Energy share options
on date of business combination 9,763,498 7.33
Existing Uranium One share options
on April 20, 2007 5,390,754 6.67
EMC replacement options 8,382,546 8.14
Granted subsequent to April 20, 2007 1,867,817 15.27
Exercised subsequent to April 20, 2007 (4,228,640) 5.14
Forfeiture of share options
subsequent to April 20, 2007 (351,187) 13.14
---------------------------------------------------------------------
Outstanding options as at December 31, 2007 20,824,788 8.55
---------------------------------------------------------------------
The stock option compensation expense for the year ended December 31,
2007 was $33.7 million, $22.2 million for the 5 months December 31,
2006 and $9.4 million for the year ended July 31, 2006. As at
December 31, 2007, the aggregate unexpended fair value of unvested
stock options granted amounted to $18.6 million. The fair value of
options granted during the year amounts to $18.0 million.
The following table summarizes certain information about Uranium
One's stock options outstanding at December 31, 2007:
Options outstanding
-----------------------------------------
Number Weighted Weighted
outstanding average average
as at remaining exercise
Range of Exercise Prices Dec 31, 2007 life price
Cdn $ (years) Cdn $
---------------------------------------------------------------------
1.09 to 2.74 1,585,746 2.40 2.39
3.03 to 4.81 3,339,250 3.37 4.02
5 to 7.79 3,646,640 5.48 6.68
8.26 to 9.9 5,676,745 4.53 8.42
10.4 to 11.91 740,750 5.38 11.61
12.02 to 13.7 3,528,100 4.13 12.25
14.12 to 16.87 2,307,557 5.88 15.94
---------------------------------------------------------------------
20,824,788 4.52 8.55
---------------------------------------------------------------------
Options exercisable
-----------------------------------------
Number Weighted Weighted
exercisable average average
as at remaining exercise
Range of Exercise Prices Dec 31, 2007 life price
Cdn $ (years) Cdn $
---------------------------------------------------------------------
1.09 to 2.74 1,585,747 2.40 2.39
3.03 to 4.81 3,336,179 3.37 4.02
5 to 7.79 3,028,550 5.48 6.57
8.26 to 9.9 5,523,746 4.53 8.41
10.4 to 11.91 365,000 5.38 11.55
12.02 to 13.7 1,791,320 4.13 12.15
14.12 to 16.87 588,280 5.88 15.69
---------------------------------------------------------------------
16,218,822 4.52 7.32
---------------------------------------------------------------------
Restricted shares
Under the Uranium One Restricted Share Plan, restricted share rights
are granted to eligible employees, contractors and directors. Each
restricted share right is exercisable for one common share of
Uranium One at the end of the restricted period for no additional
consideration. The vesting period is generally two-thirds on the
first anniversary of the grant date and the remainder on the second
anniversary of the grant date. The aggregate maximum number of shares
available for issuance under the restricted share plan was initially
capped at one million and subsequently increased to 3 million at
Uranium One's annual and special meeting held on June 7, 2007. The
number of shares for issuance to non-employee directors may not
exceed 0.5% of the total number of common shares outstanding on a
non-diluted basis.
The following is a summary of Uranium One's restricted shares issued
under the Restricted Share Plan:
Number of restricted shares
Dec 31, Dec 31, Jul 31,
Note 2007 2006 2006
---------------------------------------------------------------------
Restricted shares issued
on business combination 3.1 404,231 - -
Granted 20,000 - -
Exercised during the period (125,977) - -
Expired (2,722) - -
---------------------------------------------------------------------
Total restricted shares
outstanding at the end
of the period 295,532 - -
---------------------------------------------------------------------
Of the outstanding number of Restricted share rights, the grant date
was July 1, 2007 for 20,000 Restricted share rights, December 8, 2006
for 50,440 Restricted share rights, and June 7, 2006 for 225,092
Restricted share rights. Restricted share rights will not expire
while the participant is in the employ of the Corporation.
The Restricted share rights expense for the year ended December 31,
2007 was $4.0 million, $Nil for the 5 months ended December 31, 2006
and $Nil for the year ended July 31, 2006. As at December 31, 2007
the aggregate unexpensed fair value of unvested restricted share
rights granted amounted to $805,506.
Warrants Number of warrants Allocated value
---------------------------------------------------------
Dec 31, Dec 31, Jul 31, Dec 31, Dec 31, Jul 31,
2007 2006 2006 2007 2006 2006
$'000 $'000 $'000
-------------------------------------------- ------------------- --------
Issued on
business
combination
(note 3.1) 2,731,619 - - 26,407 - -
Exercised during
the period (150,000) - - (1,035) - -
-------------------------------------------- ------------------- --------
At the end
of the period 2,581,619 - - 25,372 - -
-------------------------------------------- ------------------- --------
Number of warrants Average exercise price
---------------------------------------------------------
Warrants Dec 31, Dec 31, Jul 31, Dec 31, Dec 31, Jul 31,
comprise: 2007 2006 2006 2007 2006 2006
-------------------------------------------------------------------------
2008 Warrants 2,431,619 - - 3.55 - -
Series D
Warrants 150,000 - - 6.95 - -
-------------------------------------------------------------------------
Total 2,581,619 - - 3.75 - -
-------------------------------------------------------------------------
Series D warrants represent 150,000 warrants that expire on January
4, 2008. The 2008 warrants expire on September 24, 2008.
Contingently issuable shares
Under the terms of the acquisition agreement for the Kyzylkum JV
interest, Uranium One is obligated to issue 6,964,200 common shares
of Uranium One upon commencement of commercial production from
Kyzylkum (Note 3.3).
The Corporation has assumed all of the obligations of EMC and its
subsidiaries arising under certain option and joint venture
agreements with third parties. Uranium One has reserved a total of
1,925,100 common shares of Uranium One for issuance pursuant to the
assumed obligations under the Contingent Share Rights Agreements.
19 Foreign exchange (losses) / gains
A summary of the foreign exchange (loss) / gain by item is as
follows:
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
---------------------------------------------------------------------
Unrealized foreign exchange (loss) /
gain on future income tax liability (18,727) 24,736 (42,602)
Unrealized foreign exchange
loss on other items (7,469) (2,114) (20)
Realized foreign exchange
gain on other items 13,174 885 1,502
---------------------------------------------------------------------
(13,022) 23,507 (41,120)
---------------------------------------------------------------------
20 Cash flow information
Dec 31, Dec 31, Jul 31,
2007 2006 2006
$'000 $'000 $'000
--------------------------------
Changes in non-cash working capital
excluding business combinations:
- Increase in accounts and other
receivables (3,706) (39,816) (4,743)
- Prepaid expenses and other (8,396) 309 1,012
- Increase in inventories (3,442) (475) (3,042)
- Increase / (decrease) in accounts
payable and accrued liabilities (17,750) 7,019 (4,159)
- Increase / (decrease) in income
taxes payable 3,368 (2,112) 3,080
--------------------------------
(29,926) (35,075) (7,852)
--------------------------------
Significant non-cash
investing activities
EMC asset purchase 1,048,522 - -
- common shares 1,013,215 - -
- options 35,307 - -
Uranium One business combination 1,818,169 - -
- common shares 1,709,647 - -
- options, warrants and
restricted share rights 62,042 - -
- equity component of
convertible debentures 46,480 - -
U.S. Energy asset purchase 99,401 - -
Shares issued for services rendered 3,987 - -
Supplemental cash flow information
Cash interest paid 6,564 - 45
Cash taxation paid 13,636 13,530 6,136
Short term loans
The February 2005 Nedcor Securities loan represented draw-downs on a
facility provided by Nedcor Securities, secured by the investment
held by Uranium One's wholly owned subsidiary, Uranium One Africa
Limited, in Randgold and Exploration Company Limited shares.
The August 2006 Nedcor Securities loan represented draw-downs on a
facility provided by Nedcor Securities, secured by Uranium One
Africa's investment in Aflease Gold shares.
Both loans were repaid during the year for a total cash consideration
of $55.2 million including accrued interest of $2.10 million, with
the security over the investments being released upon repayment.
21 Basic and diluted weighted-average number of shares outstanding
Dec 31, Dec 31, Jul 31,
2007 2006 2006
---------------------------------------------------------------------
Basic weighted-average number
of shares outstanding ('000) 360,656 215,999 182,808
Effect of dilutive securities:
- stock options - 1,706 -
- warrants - 270 -
---------------------------------------------------------------------
Diluted weighted-average
number of shares outstanding 360,656 217,975 182,808
---------------------------------------------------------------------
For the year ended December 31, 2007, convertible debentures, stock
options, warrants and restricted shares were not included in the
dilutive weighted average number of shares outstanding as they were
anti-dilutive. For the year ended July 31, 2006, stock options and
warrants were not included as they were anti-dilutive.
22 Contractual obligations
Dec 31,
2007
---------------------------------------------------------------------
Capital commitments 118,436
Other 40,107
---------------------------------------------------------------------
Total contractual obligations 158,543
---------------------------------------------------------------------
Payable in
- 2008 121,358
- 2009 1,129
- 2010 5,075
- 2011 10,550
- 2012 4,276
---------------------------------------------------------------------
142,388
- thereafter 16,155
---------------------------------------------------------------------
158,543
---------------------------------------------------------------------
The capital commitments relates to capital expenditure on the
Corporation's development projects.
23 Segmented information
The Corporation's reportable operating segments are summarized in the
table below:
For the year ended December 31, 2007: (in $'000)
Depreciation
Operating and
Country Revenue expenses depletion
---------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 134,024 (17,282) (14,922)
South Inkai
Uranium Project Kazakhstan - - -
Kharasan Uranium
Project Kazakhstan - - -
Dominion Uranium
Project South Africa - - -
US Development
projects United States - - -
US Exploration
projects United States - - -
Hobson facility
and La Palangana
Project United States - - -
Shootaring
Canyon Mill United States - - -
Honeymoon Uranium
Project and
exploration Australia - - -
Modder East
Gold Project South Africa - - -
Pitchstone
exploration Canada - - -
Corporate and other - - -
---------------------------------------------------------------------
Total 134,024 (17,282) (14,922)
---------------------------------------------------------------------
Net Capital
Exploration earnings/ expend-
expenditure (loss) iture
--------------------------------------------------------
Akdala Uranium Mine - 56,305 9,108
South Inkai
Uranium Project - 110 39,243
Kharasan Uranium
Project - (1,410) 21,135
Dominion Uranium
Project (1,913) (1,225) 137,954
US Development
projects - - 5,907
US Exploration
projects (5,077) (5,079) 248
Hobson facility
and La Palangana
Project (1,608) (2,764) 14,674
Shootaring
Canyon Mill (32) (63) 2,966
Honeymoon Uranium
Project and
exploration (1,987) (1,745) 21,349
Modder East
Gold Project (1,675) (9,261) 13,377
Pitchstone
exploration (1,938) (1,938) -
Corporate and other (4,948) (50,539) 13,409
--------------------------------------------------------
Total (19,178) (17,609) 279,370
--------------------------------------------------------
For the five months ended December 31, 2006: (in $'000)
Depreciation
Operating and
Country Revenue expenses depletion
---------------------------------------------------------------------
Akdala Uranium Mine
and South Inkai
Uranium Project Kazakhstan 50,449 (9,289) (8,416)
Kharasan Uranium
Project Kazakhstan - - -
Corporate and other - - (33)
---------------------------------------------------------------------
Total 50,449 (9,289) (8,449)
---------------------------------------------------------------------
Net Capital
Exploration earnings/ expend-
expenditure (loss) iture
--------------------------------------------------------
Akdala Uranium Mine
and South Inkai
Uranium Project - 44,628 6,689
Kharasan Uranium
Project - 106 6,793
Corporate and other (2,914) (25,050) 27
--------------------------------------------------------
Total (2,914) 19,684 13,509
--------------------------------------------------------
For the year ended July 31, 2006: (in $'000)
Depreciation
Operating and
Country Revenue expenses depletion
---------------------------------------------------------------------
Akdala Uranium Mine
and South Inkai
Uranium Project Kazakhstan 23,507 (9,548) (5,030)
Kharasan Uranium
Project Kazakhstan - - -
Corporate and other - - (77)
---------------------------------------------------------------------
Total 23,507 (9,548) (5,107)
---------------------------------------------------------------------
Net Capital
Exploration earnings/ expend-
expenditure (loss) iture
--------------------------------------------------------
Akdala Uranium Mine
and South Inkai
Uranium Project - (35,316) 9,588
Kharasan Uranium
Project - 12 2,409
Corporate and other (2,648) (13,635) 322
--------------------------------------------------------
Total (2,648) (48,939) 12,319
--------------------------------------------------------
As at December 31, 2007: (in $'000)
Mineral
interest, Total
plant and Total liab-
Country equipment assets ilities
---------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 201,566 266,240 94,710
South Inkai
Uranium Project Kazakhstan 454,019 457,510 207,461
Kharasan Uranium
Project Kazakhstan 175,914 184,283 92,422
Dominion Uranium
Project South Africa 2,106,164 2,111,565 598,102
US Development
projects United States 285,838 285,838 1,637
US Exploration
projects United States 1,074,415 1,079,794 115,368
Hobson facility
and La Palangana
Project United States 90,372 91,879 24,730
Shootaring
Canyon Mill United States 97,623 112,894 2,573
Honeymoon Uranium
Project and
exploration Australia 300,038 300,043 86,613
Modder East
Gold Project South Africa 285,732 381,776 178,275
Pitchstone
exploration Canada 21,216 21,360 5,831
Corporate and other 20,010 319,716 510,963
---------------------------------------------------------------------
Total 5,112,907 5,612,898 1,918,685
---------------------------------------------------------------------
As at December 31, 2006: (in $'000)
Mineral
interest, Total
plant and Total liab-
Country equipment assets ilities
---------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 209,407 285,654 89,317
South Inkai
Uranium Project Kazakhstan 407,437 407,437 194,236
Kharasan Uranium
Project Kazakhstan 150,737 156,267 68,816
Corporate and other 1,306 122,260 3,560
---------------------------------------------------------------------
Total 768,887 971,618 355,929
---------------------------------------------------------------------
As at July 31, 2006: (in $'000)
Mineral
interest, Total
plant and Total liab-
Country equipment assets ilities
---------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 217,827 243,367 93,545
South Inkai
Uranium Project Kazakhstan 400,193 400,193 208,326
Kharasan Uranium
Project Kazakhstan 143,874 150,798 73,803
Corporate and other 653 156,667 1,989
---------------------------------------------------------------------
Total 762,547 951,025 377,663
---------------------------------------------------------------------
24 Contingent sale of an interest in the Dominion Uranium Project
On June 7, 2005, Uranium One Africa and Micawber 397 (Proprietary)
Limited ("Micawber 397"), a company owned by historically
disadvantaged South Africans, entered into a definitive purchase and
sale agreement, a management and skills transfer agreement and a
joint venture agreement.
Pursuant to these agreements, Uranium One Africa agreed to sell to
Micawber 397 an undivided 26% interest in the Dominion Uranium
Project for cash consideration equal to 26% of the net present value
of the Dominion assets at the date when Micawber elects to pay at
least 20% of the purchase price. This election must occur within
three years after receipt of Micawber 397 of their first profit
distribution from the joint venture. After the first payment,
Micawber is obliged to pay at least 20% of the purchase price during
each subsequent three year period, so that the purchase price is paid
in full within twelve years of the date of the first payment.
The parties agreed to contribute their interests in the assets to a
joint venture to be managed by Uranium One Africa, and to fund the
development and operation of those assets in accordance with their
respective joint venture interests. Uranium One agreed to lend to
Micawber 397 the funds required to contribute their share under the
joint venture agreement. The aggregate amount of that loan, plus
accrued interest, is repayable from Micawber 397's share of joint
venture profits.
The Micawber transaction was approved by Uranium One Africa's
shareholders in September 2005, following which the South African
Department of Minerals and Energy granted a "new order" mining right
to the Corporation for the Dominion Uranium Project in October 2006.
The Micawber 397 transaction will be accounted for in Uranium One's
consolidated financial statements when the risks and rewards of the
transaction are deemed to have passed to Micawber 397. Management has
determined that this event will occur on the day that Micawber 397
elects to pay at least 20% of the purchase price, prompting the
determination of the purchase price. As at December 31, 2007,
Micawber 397 has not paid any part of the purchase price.
25 Subsequent event
Partial sale of shareholding in Aflease Gold
During Q1 2008, in line with the Corporation's strategy to dispose of
its non-core assets, the board of directors approved a plan to pursue
the sale of the Corporation's shareholding in Aflease Gold and the
Corporation entered into negotiations regarding the sale of Aflease
Gold.
Consequently the Corporation entered into an agreement on March 27,
2008, pursuant to which it agreed to sell 152,195,122 shares in
Aflease Gold, held by the Corporation's wholly owned subsidiary,
Uranium One Africa Limited ("Uranium One Africa"), for consideration
of approximately $40 million (ZAR320 million). The transaction is
expected to close during April 2008, subject to approval by the South
African Reserve Bank.
An option has been granted to the purchaser to acquire Uranium One
Africa's remaining shareholding of 186,816,558 shares in Aflease Gold
at a consideration of no less than approximately $49 million (ZAR393
million) on or before May 8, 2008. Once the option is exercised, the
purchase and sale of the shares in Aflease Gold will be required to
comply with the provisions of the Securities Regulation Code of the
Securities Regulation Panel of South Africa relating to a compulsory
offer to the other shareholders of Aflease Gold and, within 150 days,
to obtain approval from the South African Reserve Bank and the
satisfaction of merger approval requirements of South African
Competition Act, 89 of 1998.
It is expected that the Corporation will reflect a loss of
approximately $90 million in Q1 2008 pursuant to this transaction.
%SEDAR: 00005203E