Trading Symbols: UUU - Toronto Stock Exchange, JSE Limited (Johannesburg
Stock Exchange)
TORONTO, ON and JOHANNESBURG, South Africa, May 14 /CNW/ - Uranium One Inc. ("Uranium One") today reported unaudited financial results for the three months ended March 31, 2008. All figures are in US dollars unless otherwise indicated.
Highlights: - The Corporation produced on an attributable basis 618,900 pounds U(3)O(8), an increase of 27% over Q1 2007 - Revenues of $22.5 million from the sale of 283,300 pounds U(3)O(8), representing an average realized price of $79 per pound U(3)O(8) - For sale inventory increased by 137,600 pounds U(3)O(8) - Earnings from mine operations of $16.3 million - Cash cost per pound sold from Akdala of $12 per pound(1) - Partial sale of Aflease Gold shares closed in April for proceeds of $41 million
Jean Nortier, Interim CEO of Uranium One commented:
"During the first quarter of 2008, Akdala Uranium Mine remained a steady, low cost operation for the Company and South Inkai continued to exceed our production expectations. At our Dominion Project in South Africa we continued to make progress with new mining areas becoming available, which will pave the way for improved grades and higher production of underground ore as the year progresses. We are looking forward to initial production from our Kharasan project in Kazakhstan."
Financial Review
During Q1 2008 the Company sold 283,300 pounds of U(3)O(8) at an average realized price of $79 per pound resulting in revenue from uranium sales of $22.5 million, compared to Q1 2007 sales of 605,200 pounds of U(3)O(8) at an average realized price of $69 per pound resulting in revenue of $41.7 million. Lower sales volumes in Q1 2008 compared to Q1 2007 were partially offset by a higher realized U(3)O(8) price. During Q1 2008 for sale inventory increased by 137,600 pounds U(3)O(8) as more U(3)O(8) was produced than sold during the quarter.
Earnings from mine operations during the first quarter of 2008 were $16.3 million, compared to $29.8 million in the first quarter of 2007. The lower earnings from mine operations during the first quarter of 2008 compared to the first quarter of 2007 are due to lower sales volumes during Q1 2008.
The net loss from continuing operations for Q1 2008 was $10.3 million, or $0.02 per basic and diluted share compared to net income from continuing operations for Q1 2007 of $8.0 million, or $0.04 per basic and diluted share.
Cash flow from operating activities for Q1 2008 was $43.3 million compared to $51.4 million during the same period one year ago.
Consolidated cash and cash equivalents were $160.2 million as at March 31, 2008 compared to $159.6 million at December 31, 2007.
Net loss for Q1 2008 was $114.9 million, or $0.24 per basic and diluted share.
Operations Review
Akdala Uranium Mine (70%), Kazakhstan
In line with the production plan for 2008, Akdala produced 616,400 pounds of U(3)O(8) (237 tonnes U) of which 431,500 pounds of U(3)O(8) (166 tonnes U) was attributable to Uranium One during Q1 2008. The average cash operating cost per pound of U(3)O(8) sold was $12 during Q1 2008. The construction of a precipitation and filtration circuit was completed in Q1 2008 and the commissioning process of the circuit commenced during the quarter. It is expected that the circuit will be fully operational during Q2 2008. The filtration and precipitation circuit will enable Akdala to produce yellowcake on site, reducing its dependency on external processing facilities, decreasing transport lead times and reducing costs.
Projects Review
South Inkai Uranium Project (70%), Kazakhstan
Pre-commercial production from South Inkai in Q1 2008 was 206,400 pounds of U(3)O(8) (79 tonnes U) of which 144,500 pounds of U(3)O(8) (55 tonnes U) is attributable to the Corporation. South Inkai produced approximately 156,000 pounds of U(3)O(8) in April 2008 and is currently producing at a rate of approximately 5,200 pounds of U(3)O(8) per day. 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. An Industrial Production Licence for South Inkai is expected to be received in the first half of 2009.
Kharasan Uranium Project (30%), Kazakhstan
Acidification of the first well field at Kharasan commenced in March 2008. The delineation program to convert a sufficient amount of resources from the Russian C2 category to the Russian C1 category is ongoing and 20 drill holes were completed in Q1 2008. During Q1 2008, 30 of the required 44 wells for the pilot test program to prove the productivity of the well fields were completed. The portion of the plant required for pilot production is expected to be completed in 2008 and was 90% complete as at March 31, 2008. The Corporation expects to receive an Industrial Production Licence for Kharasan in the first half of 2009.
Dominion Uranium Project (100%), South Africa
During Q1 2008 pre-commercial production from the Dominion Uranium Project was less than expected at 42,900 pounds of U(3)O(8) and 1,200 ounces of gold. During April 2008, the blasted grade, based on underground face sampling, improved from the Q1 2008 average value of 0.361 kg/tonne to 0.555 kg/tonne. With new mining areas becoming available, the in-situ grades currently mined have increased as anticipated. This has resulted in an increase in the blasted grades realized. The current focus is to achieve a mill feed grade that is in line with the blasted grade.
The uranium plant is operating in line with recovery expectations. Throughput for Q1 2008 was approximately 69,000 tonnes from underground and 170,000 tonnes from surface tailings material. Total plant recoveries are estimated to be 67% at present. Based on current head grades and residues, the estimated U(3)O(8) recovery from underground material is 77% and that from surface tailing material is 49%.
Hobson and La Palangana (99%), United States
The processing plant is currently being refurbished to a capacity of approximately 1,000,000 pounds of U(3)O(8) per year. 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 La Palangana Uranium Project, and is expected to take place by the end of 2008.
Wyoming ISR Projects (100%), United States
The NRC's technical review of the application to build and operate an in situ uranium recovery facility at the Moore Ranch Project in the Powder River Basin is currently in progress and Uranium One expects to receive the permit during 2009. 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.
An extensive delineation drilling program was concluded at our JAB property in the Great Divide Basin during 2007 and the Company 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. Uranium One also expects to submit an application to the NRC for a licence to construct and operate an in situ uranium recovery facility for the Antelope property in the Great Divide Basin during Q2 2008.
Honeymoon Uranium Project (100%), Australia
The Corporation remains focused on operating and developing its core uranium properties in Kazakhstan, South Africa and the United States, where approximately 93% of the Corporation's assets are located. The Corporation has decided to suspend development activities at Honeymoon to allow for evaluation of corporate development opportunities for the Project.
This news release should be read in conjunction with Uranium One's first quarter 2008 Management Discussion and Analysis filed with SEDAR and available on our website, www.uranium1.com, in the "Investors" section under "Quarterly Reports".
Conference Call Details
Uranium One will be hosting a conference call and webcast to discuss the first quarter 2008 results May 15 starting at 10:00 a.m. (Eastern Standard time). Participants may join the call by dialling toll free 1-800-588-4490 or 1-416-915-5762 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 May 15, 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 21271605. 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 70% of the operating Akdala Uranium Mine in Kazakhstan and is also developing the South Inkai and Kharasan Uranium Projects in Kazakhstan. Uranium One owns the Dominion Uranium Project in South Africa, as well as the Honeymoon Uranium Project in South Australia. In the United States, Uranium One has extensive property holdings in Wyoming, Texas, Utah and New Mexico, including the Shootaring Canyon Mill and the Hobson ISR facility. Uranium One is also 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. ("Uranium One") and its subsidiaries (collectively, the "Corporation") for the three months ended March 31, 2008, together with certain trends and factors that are expected to impact the rest of its 2008 financial year. Information herein is presented as of May 13, 2008 and should be read in conjunction with the interim consolidated financial statements of the Corporation for the three months ended March 31, 2008 and the notes thereto, 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 Limited ("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. Consequently, the comparative figures used herein are those for the three months ended March 31, 2007 of UrAsia Energy. References herein to "Q1 2007" and "Q1 2008" refer to the three months ended March 31, 2007 and the three months ended March 31, 2008, 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.
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
Q1 2008 Q1 2007
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Attributable production (lbs of U(3)O(8))(1) 431,500 488,000
Attributable sales (lbs of U(3)O(8))(1) 283,300 605,200
Average sales price achieved ($ per lb
of U(3)O(8))(2) 79 69
Average cash cost of production sold ($ per lb
of U(3)O(8))(2) 12 12
Revenues ($ millions) 22.5 41.7
Earnings from mine operations ($ millions) 16.3 29.8
Net (loss)/earnings from continuing operations
($ millions) (10.3) 8.0
(Loss)/earnings per share from continuing
operations - basic and diluted ($ per share) (0.02) 0.04
Net loss from discontinued operations ($ millions) (104.6) -
Loss per share from discontinued operations -
basic and diluted ($ per share) (0.22) -
(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. The additional
information provided herein should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with GAAP. See Non-GAAP Measures.
Highlights
Operations
- Production from Akdala continued at expected rates of throughput and
grade with total production for the quarter of 616,400 pounds of
U(3)O(8).
Projects
- At South Inkai, the completion of the production complex remains on
track for mid-year 2008 and pre-commercial production for Q1 2008
totalled 206,400 pounds of U(3)O(8) (144,500 pounds of U(3)O(8)
attributable). South Inkai produced approximately 156,000 pounds of
U(3)O(8) in April 2008 and is currently producing approximately
5,200 pounds of U(3)O(8) per day.
- Acidification of the first wellfield at the Kharasan Project in
Kazakhstan commenced in March 2008. Although construction work at
Kharasan in Q1 2008 was slower than planned, construction is
expected to be completed by the end of 2008.
- Pre-commercial production from Dominion totalled 42,900 pounds of
U(3)O(8) in Q1 2008. The average blasted grade improved from
0.361 kg/tonne in Q1 2008 to 0.555 kg/tonne in April 2008.
- Pre-commercial production from Dominion in April 2008 was
approximately 20,400 pounds of U(3)O(8).
- Total plant recoveries at Dominion are approximately 67% at present
with an estimated U(3)O(8) recovery rate of approximately 77% from
underground material and approximately 49% from surface tailing
material.
- Refurbishing, development and permitting activities on Hobson and
La Palangana remain on schedule for the commencement of
pre-commercial production in Q4 2008.
Corporate
- On April 8, 2008, the Corporation sold a portion of its shareholding
in Aflease Gold for $41 million. In connection with this sale, an
impairment loss of $103.5 million, net of tax, was recognized in
Q1 2008 pursuant to the Corporation's total shareholding in Aflease
Gold.
- The Corporation remains focused on operating and developing its core
uranium properties in Kazakhstan, South Africa and the United
States, where approximately 93% of the Corporation's assets are
located. The Corporation has decided to suspend development
activities at Honeymoon to allow for evaluation of corporate
development opportunities for the project. The Corporation's
production guidance for 2009 had previously included 600,000 pounds
of U(3)O(8) expected to be produced from Honeymoon.
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 remaining 38% 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 which is being commissioned. The Kharasan Project in Kazakhstan, in which the Corporation owns a 30% interest, is being developed by the Kyzylkum Joint Venture. The Corporation also owns the Dominion Uranium Project in South Africa. In the United States, the Corporation owns the Hobson Uranium Processing Facility and La Palangana Project in Texas, projects in the Powder River and Great Divide Basins in Wyoming 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 Q1 2008 interim financial statements are discussed in more detail below.
The following are the Corporation's principal mineral properties and operations:
Operating mine
Entity Project Location Status Ownership
-------------------------------------------------------------------------
Betpak Dala Akdala Kazakhstan Producing 70% J.V. interest
LLP Uranium
Mine
Advanced development projects
Entity Project Location Status Ownership
-------------------------------------------------------------------------
Betpak Dala South Inkai Kazakhstan Commissioning(2) 70% J.V. interest
LLP Uranium
Project
Kyzylkum LLP Kharasan Kazakhstan Development 30% J.V. interest
Uranium
Project
Uranium One Dominion South Commissioning(2) 100% interest(1)
Africa Uranium Africa
Limited Project
The Corporation is also developing the following mineral properties:
Entity Project Location Status Ownership
-------------------------------------------------------------------------
South Texas Hobson USA Development 99% interest
Mining Facility
Venture and La
Palangana
Project,
Texas
-------------------------------------------------------------------------
Energy Powder River USA Development 100% interest
Metals Basin,
Corp (US) Wyoming
Projects
(Incl.
Moore Ranch,
Peterson,
Ludeman,
Allemand-Ross,
and Barge)
-------------------------------------------------------------------------
Energy Great Divide USA Development 100% interest
Metals Basin,
Corp (US) Wyoming
Projects
(Incl. JAB
and Antelope)
-------------------------------------------------------------------------
Uranium One Shootaring USA Development 100% interest
USA Inc. Mill, Utah
-------------------------------------------------------------------------
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 commercial
production. Commercial production is achieved when a
pre-defined operating level, based on the design of the plant,
is maintained.
Corporate Development
Sale of shareholding in Aflease Gold
The Corporation entered into an agreement (the "Aflease Gold 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 $41 million. The transaction closed on April 8, 2008.
The Aflease Gold agreement also provided the purchaser with an option to acquire Uranium One Africa's remaining shareholding in Aflease Gold and this option lapsed on May 8, 2008. The Corporation and the purchaser are continuing discussions regarding a potential transaction for the remainder of the Corporation's Aflease Gold shares.
Aflease Gold has been treated as a discontinued operation in the Q1 2008 interim consolidated financial statements and an impairment loss, relating to the Corporation's total shareholding in Aflease Gold, has been recognized as the carrying value of Aflease Gold exceeded the expected proceeds from the sale of the Corporation's total shareholding. Upon disposal of its entire shareholding in Aflease Gold, Uranium One Africa is expected to realize a gain of approximately $49.9 million and a consequent capital gains tax liability of $10.3 million, which will be offset against Uranium One Africa's tax loss carry forwards. The pre-tax gain of Uranium One Africa is applied against the fair value allocated to Aflease Gold as a consequence of the Uranium One/UrAsia Energy Limited business combination in 2007, and results in a consolidated impairment of $103.5 million, net of future income tax recoveries of $56.8 million.
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.
Pursuant to the terms of its industrial production licence, the permitted production rate at the Akdala Mine is 2,600,000 pounds of U(3)O(8) (1,000 tonnes uranium ("U")) per year.
Production:
In line with the production plan for 2008, Akdala produced 616,400 pounds of U(3)O(8) (237 tonnes U) during Q1 2008 of which 431,500 pounds of U(3)O(8) (166 tonnes U) is attributable to the Corporation. 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 over the last four quarters:
Total wells Average
completed no of Concentration
(including production Average in Production
production wells in flow rate solution (lbs of
wells) operation (m(3)/hour) (mg U/l) U(3)O(8))
-------------------------------------------------------------------------
Q2 2007 54 129 1,034 112.5 646,000
Q3 2007 93 139 1,066 108.2 645,100
Q4 2007 90 138 1,047 98.2 622,100
Q1 2008 70 162 1,152 96.9 616,400
Flow rate, concentration and the number of operating wells are carefully monitored and managed to produce the targeted amount of U(3)O(8), in accordance with Akdala's licence.
The construction of the precipitation and filtration circuit was completed in Q1 2008 and the commissioning process commenced during the quarter. It is expected that the circuit will be fully operational during Q2 2008. The filtration and precipitation circuit will enable Akdala to produce yellowcake on site, reducing its dependency on external processing facilities, decreasing transport lead times and reducing costs.
Financial information:
The following table shows the attributable production, sales and production cost trends for Akdala over the prior eight quarterly periods:
3 months ended
---------------------------------------------
(All figures are
the Corporation's March 31 Dec 31 Sept 30 June 30
attributable share) 2008 2007 2007 2007
-------------------------------------------------------------------------
Production of U(3)O(8) in lbs 431,500 435,400 451,600 452,200
Sales of U(3)O(8) in lbs 283,300 689,200 70,000 244,300
Inventory U(3)O(8) in lbs 886,500 748,900 1,007,000 636,800
Revenues ($000's) 22,517 61,010 8,019 23,265
Sales ($/lb of U(3)O(8) sold) 79 89 115 95
Operating expenses ($000's) 3,292 7,521 660 2,058
Operating expenses
($/lb of U(3)O(8) sold) 12 11 9 8
Depreciation and depletion
($000's) 2,931 6,972 1,067 2,024
Depreciation and depletion
($/lb of U(3)O(8) sold) 10 10 15 8
3 months 2 months 3 months ended
ended ended
---------------------------------------------
(All figures are
the Corporation's Mar 31 Dec 31 Oct 31 Jul 31
attributable share) 2007 2006 2006 2006
-------------------------------------------------------------------------
Production of U(3)O(8) in lbs 488,000 426,500 513,100 478,300
Sales of U(3)O(8) in lbs 605,200 880,700 99,300 70,100
Inventory U(3)O(8) in lbs 436,500 565,400 1,026,900 637,000
Revenues ($000's) 41,730 46,256 4,193 2,922
Sales ($/lb of U(3)O(8) sold) 69 53 42 42
Operating expenses ($000's) 7,043 7,872 1,417 1,630
Operating expenses
($/lb of U(3)O(8) sold) 12 9 14 23
Depreciation and depletion
($000's) 4,859 7,240 1,209 3,294
Depreciation and depletion
($/lb of U(3)O(8) sold) 8 8 12 47
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.
Review of Development Projects
South Inkai Uranium Project
South Inkai is an ISR uranium development project located in the Suzak region of South Kazakhstan. Betpak Dala owns a 100% interest in the South Inkai Project. Accordingly, the Corporation 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 Q1 2008 was 206,400 pounds of U(3)O(8) (79 tonnes U) of which 144,500 pounds of U(3)O(8) (55 tonnes U) is attributable to the Corporation. South Inkai is currently not 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) during 2008 of which 500,000 pounds of U(3)O(8) (192 tonnes U) would be attributable to the Corporation.
Operations:
The following is a summary of the operational statistics (100%) for South Inkai over the last four quarters:
Total wells Average
completed no of Concentration
(including production Average in Production
production wells in flow rate solution (lbs of
wells) operation (m(3)/hour) (mg U/l) U(3)O(8))
-------------------------------------------------------------------------
Q2 2007 78 - - - -
Q3 2007 113 - - - -
Q4 2007 92 30 106.0 122.7 56,500
Q1 2008 53 24 163.5 229.0 206,400
Four additional drill rigs were imported during Q1 2008 and can be deployed at South Inkai once customs clearance is obtained. If deployed, these rigs can be operational by Q3 2008.
South Inkai produced approximately 156,000 pounds of U(3)O(8) in April 2008 and is currently producing at a rate of approximately 5,200 pounds of U(3)O(8) per day.
Industrial production licence:
South Inkai's 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, at which point the Corporation expects to sell the U(3)O(8) produced up to that point. Betpak Dala is applying to amend the subsoil use permit to allow the industrial production levels to be increased to 2,000 tonnes per year.
Construction:
Uranium processing facilities being constructed at South Inkai are of a similar design to those at the Akdala Mine, which is expected to facilitate a fast and smooth commissioning process. Construction of the production complex is on schedule and final completion of the production complex is expected by the second half of 2008.
To date, total expenditure incurred by Betpak Dala relating to the construction project at South Inkai is $51.1 million and further capital expenditure to complete the project to design capacity is expected to be $12.8 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 U(3)O(8) (275 tonnes U) under the existing pilot production licence during 2008, of which 220,000 pounds of U(3)O(8) (85 tonnes U) will be attributable to the Corporation.
Operations:
The following is a summary of the operational statistics (100%) for Kharasan over the last four quarters:
Total
wells Average
completed no of Concentration
Drill (including production Average in Production
rigs on production wells in flow rate solution (lbs of
site(1) wells) operation (m(3)/hour) (mg/l) U(3)O(8))
-------------------------------------------------------------------------
Q2 2007 6 14 - - - -
Q3 2007 7 33 - - - -
Q4 2007 10 47 - - - -
Q1 2008 10 30 - - - -
(1) As at end of quarter
Measures implemented during Q1 2008 to improve operating conditions in freezing temperatures during the winter are expected to result in improved drilling efficiencies during future operations in winter conditions.
Industrial production licence:
A delineation drilling program to convert a sufficient amount of resources from the Russian C2 category to the Russian C1 category is ongoing and 20 drill holes were completed in Q1 2008.
For Q1 2008, 30 of the required 44 wells for the pilot test program to prove the productivity of the well fields, had been completed.
The Corporation expects to receive an industrial production licence for Kharasan in the first half of 2009.
Construction:
The construction of the industrial complex was slower than planned during Q1 2008, due to the unusually cold winter conditions and related underperformance by contractors. As a result, the estimated percentage of completion of the process plant was 75% at the end of March 2008. The current focus is on the completion of the sections of the pumping station required for pilot production and the completion of the remaining piping. The portions of the plant required for pilot production are planned for completion during 2008 and were 90% complete as at March 31, 2008.
To date, total expenditure incurred by Kyzylkum relating to the construction of the industrial complex at Kharasan is $38.2 million and further capital expenditure to complete the project to design capacity of 2,000 tonnes per year is expected to be $14 million.
Infrastructure development:
The construction of a railroad switching station and Phase 1 of the railroad transhipment base are progressing according to schedule and are expected to be completed in Q2 2008.
Total expenditure incurred by Kyzylkum to date relating to infrastructure development at Kharasan amounts to $44.4 million with further capital expenditure to complete the required infrastructure expected to be $16 million. However, 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 both 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. To date $80 million has been drawn against these facilities. The $80 million loan from the Corporation (principal of $66.7 outstanding as at March 31, 2008) has to be repaid in full before repayments can be made on the Japan Bank for International Cooperation and Citibank 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
Although Kazakhstan is experiencing a temporary shortage in the supply of sulphuric acid, current and future acid allocations are expected to be sufficient for the Corporation's operations in Kazakhstan.
Longer term U(3)O(8) production forecasts for Akdala, South Inkai and Kharasan assume that the temporary shortage of sulphuric acid is alleviated at the end 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 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 Q1 2008, pre-commercial production from the Dominion Uranium Project was 42,900 pounds of U(3)O(8) and 1,200 ounces of gold. Pre-commercial production for 2008 is estimated to be 590,000 pounds of U(3)O(8). Sales of material, produced during the commissioning period will be used to partially fund the development activities.
Pre-commercial production from Dominion in April 2008 was approximately 20,400 pounds of U(3)O(8).
Mine development:
Mining operations for over the last four quarters can be summarized as follows:
Underground
development Underground Underground ore
achieved tonnes mined blasted grade(1)
(metres) (tonnes) (kg U(3)O(8)/tonne)
-------------------------------------------------------------------------
Q2 2007 3,197 64,500 0.304
Q3 2007 3,662 84,300 0.406
Q4 2007 3,130 86,800 0.358
Q1 2008 3,649 94,200 0.361
(1) Underground blasted grade includes all in-stope mining dilution and
on reef development.
During April 2008, the blasted grade, based on underground face sampling, improved from the Q1 2008 average value of 0.361 kg/tonne to 0.555 kg/tonne.
With new raise lines becoming available, the in-situ grades currently mined have increased as anticipated. This has resulted in an increase in the blasted grades realized. The current focus is to achieve a mill feed grade that is in line with the blasted grade. Action plans to achieve this include an increased skilled underground geological department (from 3 to 9) to closely monitor and control mining dilution and train mining personnel and the strict application and continuous monitoring of grade cut-offs.
The mine development cost from April 20, 2007 up to March 31, 2008, amounted to $30.3 million, of which $9.7 was spent in Q1 2008.
Metallurgical plant:
The uranium plant is operating in line with recovery expectations, but below throughput design capacity. Throughput for Q1 2008 was approximately 69,000 tonnes from underground and 170,000 tonnes from surface tailings material. Total plant recoveries are approximately 67% at present. Based on current head grades and residues, the estimated U(3)O(8) recovery is approximately 77% from underground material and approximately 49% from surface tailing material. Overall plant recoveries are expected to increase with time as the lower grade surface tailings material is displaced by higher grade and quantities of underground ore. In addition, once the surface tailings material has been entirely replaced with underground ore, recoveries are expected to increase in line with feasibility study test work.
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.
The processing plant 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 Palangana Uranium Project, and is expected to take place by the end of 2008.
The Palangana Uranium Project is an ISR uranium deposit located in close proximity to the Hobson Facility. Uranium bearing resins from the 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 Palangana site from the Texas Commission on Environmental Quality. All applications are progressing through the regulatory process.
A public meeting on the Palangana Area Permit was held in January 2008 and was well received. The draft Area Permit to approve mining operations at La Palangana was issued in Q2 2008. Final approvals of the Area Permit, permit for the first production area at La Palangana and disposal well permit are anticipated to be received in Q3 2008, with the approval of the Radioactive Materials License ("RML") expected in Q4 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, 2007, 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 the Corporation having a toll-processing agreement with a subsidiary of Cameco Corporation.
The NRC's technical review of the application to build and operate an in situ uranium recovery facility at the Moore Ranch Project is currently in progress and the Corporation expects to receive the permit during 2009.
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 expects to submit 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 was completed in Q1 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
A feasibility study on the Shootaring mill was initiated in Q1 2008 and an application for the RML was submitted. The integrity of the equipment on site was thoroughly assessed, the generator engines were restarted and essential facilities were reinstated.
The feasibility study is progressing and includes metallurgical test work, design of the tailings facilities and comprehensive mine design of the Velvet and Frank M mines. The feasibility study is expected to be completed in Q2 2008.
Exploration on other properties acquired in the EMC transaction is focused on proving code compliant resources through upgrading these assets with drilling and associated exploration programs designed for these properties.
Honeymoon Uranium Project
The Corporation remains focused on operating and developing its core uranium properties in Kazakhstan, South Africa and the United States, where approximately 93% of the Corporation's assets are located. The Corporation has decided to suspend development activities at Honeymoon to allow for evaluation of corporate development opportunities for the project. The Corporation's production guidance for 2009 had previously included 600,000 pounds of U(3)O(8) expected to be produced from Honeymoon.
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.
Summary of Quarterly Results
Mar 31 Dec 31 Sept 30 June 30
2008 2007 2007 2007
$(000's) $(000's) $(000's) $(000's)
-------------------------------------------------------------------------
Revenues 22,517 61,010 8,019 23,265
Net (loss)/earnings from
continuing operations (10,315) 5,371 (17,257) (13,694)
Basic and diluted
(loss)/earnings per share
from continuing
operations(1) (0.02) 0.01 (0.04) (0.04)
Net loss from discontinued
operations (104,555) - - -
Basic and diluted loss per
share from discontinued
operations (0.22) - - -
-------------------------------------------------------------------------
Total assets 5,052,346 5,612,897 5,710,605 4,247,176
-------------------------------------------------------------------------
Mar 31 Dec 31 Oct 31 Jul 31
2007 2006(2) 2006 2006
$(000's) $(000's) $(000's) $(000's)
-------------------------------------------------------------------------
Revenues 41,730 46,256 4,193 2,922
Net (loss)/earnings from
continuing operations 7,971 (6,228) 25,912 (32,165)
Basic and diluted
(loss)/earnings per share
from continuing
operations(1) 0.04 (0.03) 0.12 (0.15)
Net loss from discontinued
operations - - - -
Basic and diluted loss per
share from discontinued
operations - - - -
-------------------------------------------------------------------------
Total assets 999,950 971,618 949,530 951,025
-------------------------------------------------------------------------
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.
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:
3 Months 3 Months
ended ended
March 31, March 31,
2008 2007
(US dollars in thousands) $ $
-------------------------------------------------------------------------
Net (loss)/earnings from continuing operations (10,315) 7,971
Unrealized foreign exchange (gain)/loss on
future income tax liabilities (1,138) 8,601
-------------------------------------------------------------------------
Adjusted net (loss)/earnings (11,453) 16,572
-------------------------------------------------------------------------
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 found in 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
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.
3 Months 3 Months
ended ended
March 31, March 31,
(US dollars in thousands except per share 2008 2007
and per lb amounts) $ $
-------------------------------------------------------------------------
Revenue 22,517 41,730
Net (loss)/earnings from continuing operations (10,315) 7,971
Net loss from discontinued operations (104,555) -
Cash flows from operating activities 39,457 51,418
(Loss)/earnings per share from continuing operations (0.02) 0.04
Loss earnings per share from discontinued operations (0.22) -
Adjusted net (loss)/earnings(1) (11,453) 16,572
Product inventory carrying value 24,019 15,824
Total assets 5,052,346 999,950
Long term financial liabilities 1,672,749 348,923
Average realized uranium price per lb of U(3)O(8) 79 69
Average U(3)O(8) spot price per lb 74 85
lbs of lbs of
U(3)O(8) U(3)O(8)
-------------------------------------------------------------------------
Attributable sales volume 283,300 605,200
Attributable production volume 431,500 488,000
Attributable inventory 886,500 436,500
(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
above for a reconciliation of adjusted net earnings to reported net
earnings.
Results of Operations
Uranium sales, inventory and operating costs
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.
In line with existing contracts, sales attributable to the Corporation during Q1 2008 amounted to 283,300 pounds of U(3)O(8), compared to 605,200 pounds of U(3)O(8) in Q1 2007. The Corporation's attributed share of revenue from sales in Q1 2008 amounted to $22.5 million, compared to $41.7 million in Q1 2007, with the lower sales volume partially offset by a $10 per pound increase in the average realized uranium price per pound of U(3)O(8) compared to Q1 2007.
The average realized price per pound of U(3)O(8) sold in Q1 2008 was $79, compared to an average spot price per pound of U(3)O(8) of $74 in the quarter and the average realized price per pound of U(3)O(8) sold in Q1 2007 was $69, compared to an average spot price per pound of U(3)O(8) of $85 in Q1 2007. The closing spot price per pound of U(3)O(8) was $71 and $95 as at March 31, 2008 and 2007, respectively.
Earnings from mining operations were $16.3 million in Q1 2008 after the deduction of operating expenses of $3.3 million ($12 per pound of U(3)O(8) sold) and depreciation and depletion charges of $2.9 million ($10 per pound of U(3)O(8) sold). During Q1 2008 attributable inventory increased by 137,600 pounds of U(3)O(8) as more U(3)O(8) was produced than sold during the quarter.
In Q1 2007, earnings from mining operations were $29.8 million after the deduction of operating expenses of $7.0 million ($12 per pound of U(3)O(8) sold) and depletion costs of $4.9 million ($8 per pound of U(3)O(8) sold).
General and administrative costs
General and administrative costs for Q1 2008 are not comparable to Q1 2007, due to the significant changes in the Corporation since Q1 2007, most notably, the transaction between Uranium One and UrAsia Energy in Q2 2007 and the acquisition of EMC during Q3 2007. The expense for Q1 2007 therefore represents the expenses for UrAsia Energy only, while the expense in Q1 2008 relates to the combined operations of Uranium One, UrAsia Energy and EMC.
General and administrative expenses, including stock-based compensation expenses of $6.1 million, amounted to $15.3 million for Q1 2008, compared to $4.7 million for Q1 2007, including stock-based compensation of $3.4 million. Higher administrative costs largely relate to the substantial increase in size of operations resulting from acquisition activities and growth. The expense for Q1 2008 includes salaries of $5.2 million and consulting fees of $1.1 million.
Exploration
Exploration expenditure in Q1 2008 of $1.7 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 expenditure for Q1 2007 of $1.5 million, related to properties in the Kyrgyz Republic only.
Interest income and expense
Interest income amounted to $2.8 million for Q1 2008, compared to $2.2 million for Q1 2007. 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 Q1 2008 includes interest accrued on the convertible debentures and interest on other long term debt. There was no interest expense incurred for Q1 2007.
Foreign exchange gain/loss
The net foreign exchange loss during Q1 2008 amounted to $2.6 million and consisted of a realized loss of $4.8 million, offset by a $1.1 million unrealized exchange gain arising from translation of the future income tax liability in respect of the Corporation's investment in Kazakhstan, which decreased as result of a weakening of the Kazakhstan tenge against the US dollar during the quarter, and an unrealized gain on other items of $1.1 million. For Q1 2007, a foreign exchange loss of $7.4 million was recorded.
Income taxes
Current income tax expense for Q1 2008 was $6.5 million and represents taxes paid and payable in Kazakhstan on profits from the Corporation's Akdala Uranium Mine. For Q1 2007 a $12.5 million income tax expense was recorded for the Akdala Uranium Mine.
The future income tax recovery during Q1 2008 of $0.9 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 Q1 2007, a recovery of future income taxes of $2.2 million was recorded, being a reduction in future income tax liability.
Net loss from discontinued operations and non-controlling interest
Aflease Gold was classified as a discontinued operation in Q1 2008 and all items related to Aflease Gold in the Statement of Operations were separated from normal operations. The net loss from discontinued operations of $104.6 million includes an impairment charge, net of tax, of $103.5 million as more particularly described under "Corporate Development".
Net loss for the period
The net loss for Q1 2008 amounted to $114.9 million or $0.24 per share, compared to net income of $8.0 million or $0.04 per share (basic and diluted) for Q1 2007.
Financial Condition
On March 31, 2008, the Corporation had cash and cash equivalents of $160.2 million, compared to $159.6 million at December 31, 2007. Due to the fact that Aflease Gold was treated as a discontinued operation in Q1 2008, cash held by Aflease Gold was included in the Current assets of discontinued operations line on the Consolidated Balance Sheets for both March 31, 2008 and December 31, 2007.
Inventories increased to $27.4 million from the $20.9 million held at December 31, 2007, 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 March 31, 2008 the Corporation had attributable inventory of 0.9 million pounds of U(3)O(8) of which approximately 0.7 million pounds is held in the form of saleable product. All of the saleable product on hand as at March 31, 2008, is committed for delivery under existing sales contracts subsequent to quarter 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 the end of Q1 2008 are as follows:
Thousands of pounds
Category Location of U(3)O(8)
-------------------------------------------------------------------------
In process Mine site 22.4
In process External processing 140.4
facilities
In transit In transit -
Finished product External processing 559.7
ready to be shipped facilities
Finished product at Conversion facilities 164.0
conversion facility
-------------------------------------------------------------------------
Total inventory 886.5
-------------------------------------------------------------------------
Short term loans advanced to Betpak Dala, of which $17.0 million was outstanding at December 31, 2007, were repaid in full by February 9, 2008.
Scheduled repayments on the loan to Kyzylkum, of $6.7 million plus interest, were received from Kyzylkum during Q1 2008 resulting in an outstanding loan balance of $66.7 million as at March 31, 2008.
A decrease in the reporting values of mineral interests, plant and equipment due to a 20% weakening of the South African rand against the US dollar during Q1 2008, were offset by additions of $54.0 million.
The non-current assets of Alfease Gold were disclosed separately as non- current assets of discontinued operations. The decrease in value thereof from $286.6 million to $86.3 million between December 31, 2007 and March 31, 2008 is mainly attributable to an impairment of $160.3 million recognized due to the difference in the carrying value of Aflease Gold and the expected proceeds from the sale of Uranium One Africa's shareholding in Aflease Gold.
The decrease in current liabilities from December 31, 2007 can mainly be attributed to a decrease in taxes payable in Kazakhstan on the profits from the Akdala Uranium Mine.
Long term liabilities decreased by $177.0 million from December 31, 2007, mainly due to a decrease in future income tax liabilities of $92.6 million which mainly results from fluctuations in foreign exchange rates and a future income tax recovery arising on the impairment of Aflease Gold of $56.8 million.
Changes in Shareholders' equity consist mainly of the net loss for Q1 2008 of $114.9 million and an unrealized foreign translation loss on the translation of continuing self-sustaining foreign operations, mainly in South Africa, of $230.0 million and the unrealized translation loss on the translation of Aflease Gold of $29.4 million. The total accumulated translation loss on Aflease Gold was taken into account in the impairment calculation for Q1 2008.
Liquidity and Capital Resources
At March 31, 2008 the Corporation had working capital of $248.0 million. Included in this amount are cash and cash equivalents of $160.2 million, which includes the proportionate share of the Corporation's cash and cash equivalents at its joint venture operations in Kazakhstan, but excludes 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 previously discussed, the Corporation has sold a portion of its shareholding in Aflease Gold for approximately $41 million. The proceeds from the sale will be applied to the funding of capital expenditures 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.
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.
For the remaining three quarters of 2008, committed sales under contract represent 84% of expected production and in 2009, committed sales under contract account for 43% of expected production.
Should Uranium One be required to provide additional 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
The exclusion of Aflease Gold's contractual obligations contributed towards significant changes to contractual obligations from December 31, 2007 and revised figures as at March 31, 2008 are as follows:
Payments due by period Contractual obligations Less than 1 to 3 4 to 5 After 5 ($'000) Total 1 year years years years ------------------------------------------------------------------------- Lease obligations - Short term 1,224 1,224 - - - - Long term 6,839 964 3,155 883 1,837 ------------------------------------------------------------------------- Total 8,063 2,188 3,155 883 1,837 Short term debt 431 431 - - - Capital commitments 43,385 19,477 16,839 7,069 - Asset retirement obligation 27,081 - - - 27,081 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total contractual obligations 78,960 22,096 19,994 7,952 28,918 -------------------------------------------------------------------------
Commitments and Contingencies
There were no significant changes to the Corporation's commitments and contingencies since December 31, 2007.
Off-balance Sheet Arrangements
The Corporation has no off-balance sheet arrangements.
Outstanding Share Data
As of May 13, 2008, there were issued and outstanding 467,069,133 common shares and common share purchase warrants for 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, 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 May 13, 2008, there were 19,828,519 stock options outstanding under Uranium One's stock option plan at exercise prices ranging from C$1.09 to C$16.87 and 904,532 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 GAAP 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, 2008, none of which had 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 value 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 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, sustainable power supply, 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
During Q1 2008 stock options and restricted share rights activity was as
follows:
- 84,252 options were granted to directors and employees at a prices
ranging from C$5.06 to C$8.93 per share, with expiry dates ranging
from January 1, 2013 to March 3, 2013.
- 318,125 options were exercised and 310,463 were forfeit.
- No restricted shares were granted or exercised during the quarter and
none lapsed.
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's management, with the participation of its Interim Chief Executive Officer and Chief Financial Officer, are responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of the Chief Financial Officer, the Corporation's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
There have been no material changes in the Corporation's internal control over financial reporting during the quarter ended March 31, 2008 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 for 2008 is 3.1 million pounds of U(3)O(8), comprising 1.8 million pounds of U(3)O(8) from Akdala and 1.3 million pounds of pre-commercial production from development projects. The Corporation's attributable production estimate for 2009 is 6.2 million pounds of U(3)O(8) (including pre-commercial production).
The Corporation will continue to consider 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 $175 million on fully owned development projects for the remaining three quarters of 2008 and does not expect to be required to contribute towards additional capital expenditure by joint ventures in 2008. General and administrative expenses, excluding stock based compensation, are expected to be approximately $36 million for the remaining three quarters of 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 person for the purposes of NI 43-101. Neither the Corporation nor Mr. Heyns have 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.
Interim Consolidated Financial Statements
for the period ended March 31, 2008
(Unaudited)
Consolidated Balance Sheets - Unaudited
As at March 31, 2008 and December 31, 2007 Mar 31, Dec 31,
(in United States dollars) 2008 2007
Notes $'000 $'000
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 160,226 159,592
Accounts and other receivables 4 32,255 70,318
Current portion of loans to joint
ventures 5.2 19,555 32,867
Inventories 6 27,438 20,952
Other assets 1,013 18,056
Current assets of discontinued operations 3 71,015 94,986
-------------------------------------------------------------------------
311,502 396,771
-------------------------------------------------------------------------
Non-current assets
Mineral interests, plant and equipment 7 4,506,618 4,774,982
Loans to joint ventures 5.2 27,895 24,359
Available for sale securities 8 16,598 21,257
Other assets 9 51,109 56,543
Assets held for sale 10 52,371 52,371
Non-current assets of discontinued
operations 3 86,253 286,614
-------------------------------------------------------------------------
4,740,844 5,216,126
-------------------------------------------------------------------------
Total assets 5,052,346 5,612,897
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 11 51,527 70,802
Income taxes payable 10,205 4,237
Current liabilities of discontinued
liabilities 3 1,730 5,245
-------------------------------------------------------------------------
63,462 80,284
-------------------------------------------------------------------------
Non-current liabilities
Convertible debentures 135,156 136,548
Asset retirement obligations 9,991 13,926
Future income tax liabilities 1,383,621 1,476,241
Long term debt 5.1 23,954 18,205
Other long term payables 1,815 1,824
Assets held for sale 10 19,819 19,819
Non-current liabilities of discontinued
operations 3 98,393 183,145
-------------------------------------------------------------------------
1,672,749 1,849,708
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 12 3,501,700 3,496,884
Contributed surplus 13 137,913 134,387
Equity component of convertible
debentures 46,480 46,480
Deficit (161,683) (46,813)
Accumulated other comprehensive
(loss)/income (208,275) 51,967
-------------------------------------------------------------------------
3,316,135 3,682,905
-------------------------------------------------------------------------
Total shareholders' equity and
liabilities 5,052,346 5,612,897
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basis of presentation and principles of consolidation (note 2.1)
The accompanying notes form an integral part of these Interim
Consolidated Financial Statements.
Consolidated Statements of Operations - Unaudited
For the three month periods ended March 31, 2008 and 2007
(in United States dollars) Three months ended
Mar 31, Mar 31,
2008 2007
Notes $'000 $'000
-------------------------------------------------------------------------
Revenues 22,517 41,730
Operating expenses (3,292) (7,043)
Depreciation and depletion (2,931) (4,859)
-------------------------------------------------------------------------
Earnings from mine operations 16,294 29,828
General and administrative (1) (15,281) (4,681)
Exploration expense (1,680) (1,459)
-------------------------------------------------------------------------
Operating (loss)/earnings (667) 23,688
Interest income 2,760 2,203
Interest expense (3,771) -
Foreign exchange loss 14 (2,626) (7,431)
Other (480) (161)
-------------------------------------------------------------------------
(Loss)/earnings from continuing
operations before income taxes (4,784) 18,299
Current income tax expense (6,459) (12,528)
Future income tax recovery 928 2,200
-------------------------------------------------------------------------
(Loss)/earnings from continuing operations (10,315) 7,971
Loss from discontinued operations and
provision for impairment 3 (104,555) -
-------------------------------------------------------------------------
Net (loss)/earnings (114,870) 7,971
-------------------------------------------------------------------------
(1) - Stock option and restricted share
expense (non-cash) included in
general and administrative 13 6,114 3,377
(Loss)/earnings per share from continuing
operations
Basic (0.02) 0.04
Diluted (0.02) 0.04
Loss per share from discontinued operations
Basic (0.22) -
Diluted (0.22) -
Net (Loss)/earnings per share
Basic (0.24) 0.04
Diluted (0.24) 0.04
Weighted average number of shares (in
thousands)
Basic 16 467,451 216,327
Diluted 16 467,451 221,687
The accompanying notes form an integral part of these Interim
Consolidated Financial Statements.
Consolidated Statements of Changes in Equity - Unaudited
For the three month period ended March 31, 2008 and the year ended
December 31, 2007
(in United States dollars)
Equity
component of
Share Contributed convertible
capital surplus debenture
-------------------------------------------------------------------------
Balance as at December 31, 2006 613,607 31,286 -
Net loss for the period - - -
Stock 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 - - -
Unrealized gain recognized on
translation of self-sustaining
foreign discontinued operations
(note 3) - - -
Shares issued for services rendered 3,987 - -
Gain on available for sale
securities, net of tax (note 8) - - -
-------------------------------------------------------------------------
Balance as at December 31, 2007 3,496,884 134,387 46,480
-------------------------------------------------------------------------
Net loss for the period - - -
Stock options and restricted
shares vested - 6,199 -
Exercise of warrants 2,105 (1,062)
Exercise of stock options and
restricted shares 2,711 (1,611) -
Unrealized loss recognized on
translation of self-sustaining
foreign operations - - -
Unrealized loss recognized on
translation of self-sustaining
foreign discontinued operations
(note 3) - - -
Loss on available for sale
securities, net of tax (note 8) - - -
-------------------------------------------------------------------------
Balance as at March 31, 2008 3,501,700 137,913 46,480
-------------------------------------------------------------------------
Accumulated
other
comprehensive
income Deficit Total
-------------------------------------------------------------------------
Balance as at December 31, 2006 - (29,204) 615,689
Net loss for the period - (17,609) (17,609)
Stock options and restricted shares
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 47,536 - 47,536
Unrealized gain recognized on
translation of self-sustaining
foreign discontinued operations
(note 3) 4,243 - 4,243
Shares issued for services rendered - - 3,987
Gain on available for sale
securities, net of tax (note 8) 188 - 188
-------------------------------------------------------------------------
Balance as at December 31, 2007 51,967 (46,813) 3,682,905
-------------------------------------------------------------------------
Net loss for the period - (114,870) (114,870)
Stock options and restricted
shares vested - - 6,199
Exercise of warrants - - 1,043
Exercise of stock options and
restricted shares - - 1,100
Unrealized loss recognized on
translation of self-sustaining
foreign operations (229,958) - (229,958)
Unrealized loss recognized on
translation of self-sustaining
foreign discontinued operations
(note 3) (29,411) - (29,411)
Loss on available for sale
securities, net of tax (note 8) (873) - (873)
-------------------------------------------------------------------------
Balance as at March 31, 2008 (208,275) (161,683) 3,316,135
-------------------------------------------------------------------------
The accompanying notes form an integral part of these Interim
Consolidated Financial Statements.
Consolidated Statement of Comprehensive (Loss)/Income - Unaudited
For the three month periods ended March 31, 2008 and 2007
(in United States dollars) Mar 31, Mar 31,
2008 2007
Note $'000 $'000
-------------------------------------------------------------------------
Net (loss)/earnings (114,870) 7,971
Unrealized losses recognized on
translation of self-sustaining
foreign operations (229,958) -
Unrealized loss recognized on
translation of self-sustaining
foreign discontinued operations 3 (29,411)
Loss on available for sale securities,
net of tax 8 (873) -
-------------------------------------------------------------------------
Comprehensive (loss)/income (375,112) 7,971
-------------------------------------------------------------------------
The accompanying notes form an integral part of these Interim
Consolidated Financial Statements.
Consolidated Statements of Cash Flows - Unaudited
For the three month periods ended
March 31, 2008 and 2007
(in United States dollars) Three months ended
Mar 31, Mar 31,
2008 2007
Notes $'000 $'000
-------------------------------------------------------------------------
Net (loss)/earnings from continuing
operations (10,315) 7,971
Items not affecting cash:
- Depreciation and depletion 2,931 4,859
- Stock option and restricted share
expense 13 6,114 3,377
- Interest accrued on loans and debentures 3,691 -
- Unrealized foreign exchange (gain)/loss (2,213) 7,217
- Future income tax recovery (928) (2,200)
- Other 1,031 -
Movement in non-cash working capital 15 39,146 30,194
-------------------------------------------------------------------------
Cash flows from operating activities 39,457 51,418
-------------------------------------------------------------------------
Acquisition of mineral interests, plant
and equipment (54,017) (16,693)
Advance cash payment for other assets (802) (4,313)
Joint venture earn in payments received 2,377 -
Cash advances to joint ventures 5 (3,900) (7,000)
Cash proceeds from joint ventures 5 13,667 18,780
-------------------------------------------------------------------------
Cash flows to investing activities (42,675) (9,226)
-------------------------------------------------------------------------
Common shares issued, net of issue costs 2,143 507
Loans received by Kyzylkum, net of
acquisition costs 5.1 6,000 -
-------------------------------------------------------------------------
Cash flows from financing activities 8,143 507
-------------------------------------------------------------------------
Effects of exchange rate changes on
cash and cash equivalents (4,291) 214
-------------------------------------------------------------------------
Net increase in cash and cash equivalents 634 42,913
Cash and cash equivalents at the beginning
of the period 159,592 61,838
-------------------------------------------------------------------------
Cash and cash equivalents at the end of
the period 15 160,226 104,751
-------------------------------------------------------------------------
Supplemental cash flow information (note 15)
The accompanying notes form an integral part of these Interim
Consolidated Financial Statements.
Uranium One Inc.
Notes to the Interim Consolidated Financial Statements - Unaudited
as at March 31, 2008 and December 31, 2007
1 Nature of operations
Uranium One Inc. ("Uranium One") and its subsidiaries ("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. The
Corporation is in the process of disposing of its remaining 38% 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 which is being commissioned. The
Kharasan Project in Kazakhstan, in which the Corporation owns a 30%
interest, is being developed by the Kyzylkum Joint Venture. The
Corporation also owns the Dominion Uranium Project in South Africa. In
the United States, the Corporation owns the Hobson Uranium Processing
Facility and La Palangana Project in Texas, projects in the Powder River
and Great Divide Basins in Wyoming 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.
2 Significant accounting policies
2.1 Basis of presentation and principles of consolidation
These interim unaudited consolidated financial statements have
been prepared in accordance with Canadian generally accepted
accounting principles for interim financial information and
they follow the same accounting policies and methods of
application as the audited consolidated financial statements of
the Corporation for the year ended December 31, 2007, except as
discussed in note 2.2. These interim unaudited consolidated
financial statements do not include all the information and
note disclosure required by the generally accepted accounting
principles for annual financial statements and therefore should
be read in conjunction with the most recent annual audited
consolidated financial statements.
The consolidated balance sheet, statement of operations and
certain comparative figures have been restated for discontinued
operations (Note 3).
The consolidated financial statements include the accounts of
Uranium One and all of its subsidiaries and the proportionate
share of its interests in joint ventures. All intercompany
balances and transactions have been eliminated.
The following are the Corporation's principal mineral
properties and operations as at March 31, 2008:
Operating mine:
Mineral
property/
Entity Operation Location Ownership Status
-------------------------------------------------------------------------
Betpak Dala LLP Akdala Uranium Kazakhstan 70% Proportionately
Mine consolidated
Advanced development projects:
Mineral
property/
Entity Operation Location Ownership Status
-------------------------------------------------------------------------
Betpak Dala LLP South Inkai Kazakhstan 70% Proportionately
Uranium Project consolidated
Kyzylkum LLP Kharasan Kazakhstan 30% Proportionately
Uranium Project consolidated
Uranium One Africa Dominion South Africa 100% Consolidated
Limited Uranium Project
The Corporation is also developing the following mineral properties:
Mineral
property/
Entity Operation Location Ownership Status
-------------------------------------------------------------------------
South Texas Mining Hobson Facility United States 99% Consolidated
Venture and La
Palangana
Project
Energy Metals US development United States 100% Consolidated
Corp US projects
Uranium One USA Shootaring United States 100% Consolidated
Inc Canyon Uranium
Mill
2.2 Adoption of new standards
Effective January 1, 2008, the Corporation adopted new accounting
standards for Capital Disclosures (CICA Handbook Section 1535),
Inventories (CICA Handbook Section 3031), and Financial
Instruments - Disclosure and Presentation (CICA Handbook Sections
3862 and 3863).
Under Section 1535, the Corporation discloses its objectives,
policies and procedures for managing capital, any summary
quantitative data about what the Corporation manages as capital,
whether the Corporation has complied with any externally imposed
capital requirements and, if the Corporation has not complied
with them, any consequences of non-compliance with these capital
requirements.
The new Sections 3862 and 3863 replace Section 3861 Financial
Instruments - Disclosure and Presentation. Disclosure
requirements are revised and enhanced, while presentation
requirements remain essentially unchanged. The new disclosure
requirements expand discussion around the significance of
financial instruments for the Corporation's financial position
and performance, the nature and extent of risks arising from
financial instruments to which the entity is exposed during the
period and at the balance sheet date and how the entity manages
those risks.
Section 3031 establishes standards for the measurement and
disclosure of inventories and provides a Canadian equivalent to
International Accounting Standard IAS 2 - Inventories. The main
recommendations of the new Section 3031 are:
- Measurement of inventories at the lower of cost and net
realizable value, with guidance on the determination of cost,
including allocation of overheads and other costs to inventory.
- Specific identification of cost of inventories of items that
are not ordinarily interchangeable, and goods or services
produced and segregated for specific projects.
- Consistent use (by type of inventory with similar nature and
use) of either first-in, first-out (FIFO) or weighted average
cost formula to measure the cost of other inventories.
- Reversal of previous write-downs to net realizable value when
there is a subsequent increase in the value of inventories.
The adoption of Section 3031 on January 1, 2008, did not have a
material impact on the Corporation's financial position or
operating results.
3 Discontinued operations
On March 27, 2008 the Corporation entered into an agreement to sell
its shareholding in Aflease Gold. On April 8, 2008 the Corporation
sold 152,195,122 shares for approximately $41 million
(ZAR320 million) equating to 43% of the Corporation's investment in
Aflease Gold, decreasing the Corporation's ownership to 38% of the
common shares of Aflease Gold. An option granted to the purchaser to
acquire Uranium One Africa's remaining shareholding in Aflease Gold
lapsed on May 8, 2008. The Corporation and the purchaser are
continuing discussions with regards to a potential transaction in the
remainder of the Corporation's Aflease Gold shares. The Board of
Directors have approved the sale of the remaining portion of Uranium
One Africa's shareholding. The assets and liabilities have been
classified as discontinued operations at their carrying value, which
is the fair value less transaction costs, based on the terms of the
purchase and option agreements. The fair value of the 152,195,122
shares sold was determined based on the market price on the
Johannesburg stock exchange ("JSE"). The fair value of the remaining
shareholding was determined using the weighted average market price
on the JSE. The impairment, net of future income taxation recovery,
amounts to $103.5 million.
The investment in Aflease Gold was reported as the Modder East Gold
Project for segment reporting purposes in previous periods.
Selected financial information of the discontinued operations
included in the Consolidated Statements of Operations and the
Consolidated Statement of Cash Flows are as follows:
Three month
period ended
Mar 31, Mar 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Net loss from discontinued operations
Revenue - -
Loss from discontinued operations (1,172) -
Interest and other expenses (433) -
Impairment (net of tax recovery -
$56.8 million) (103,479) -
Non-controlling interest 529 -
---------------------------------------------------------------------
(104,555) -
---------------------------------------------------------------------
Cash flows of discontinued operations
Cash flows to operating activities (6,941) -
Cash flows to investing activities (5,351) -
Effects of exchange rate changes on cash and
cash equivalents (13,741) -
---------------------------------------------------------------------
(26,033) -
---------------------------------------------------------------------
The major classes of assets and liabilities of the discontinued
operations in the Consolidated Balance sheets are as follows:
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Assets
Cash 66,590 92,623
Accounts receivable, prepaids and other 4,390 2,321
Inventory 35 42
---------------------------------------------------------------------
Current assets of discontinued operations 71,015 94,986
---------------------------------------------------------------------
Mining interests, plant and equipment 85,430 285,553
Other assets 823 1,061
---------------------------------------------------------------------
Non-current assets of discontinued operations 86,253 286,614
---------------------------------------------------------------------
Total assets of discontinued operations 157,268 381,600
---------------------------------------------------------------------
Liabilities
Accounts payable, accrued liabilities and other 1,591 5,080
Income taxes payable 139 165
---------------------------------------------------------------------
Current liabilities of discontinued operations 1,730 5,245
---------------------------------------------------------------------
Future income and mining taxes 10,269 80,201
Convertible bonds 76,380 90,551
Other long term liabilities 921 1,085
Non-controlling interest 10,823 11,308
---------------------------------------------------------------------
Non-current liabilities of discontinued
operations 98,393 183,145
---------------------------------------------------------------------
Total liabilities of discontinued operations 100,123 188,390
---------------------------------------------------------------------
4 Accounts and other receivables
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Trade receivables 16,778 55,520
Value added tax and general sales tax 7,593 7,446
Prepayments and advances 6,190 5,558
Deposits and guarantees 2,838 3,220
Other receivables 1,694 1,794
---------------------------------------------------------------------
35,093 73,538
Less: non current deposits and guarantees
included in other assets (note 9) 2,838 3,220
---------------------------------------------------------------------
32,255 70,318
---------------------------------------------------------------------
5 Joint ventures
5.1 Proportionate interests in joint ventures
The Corporation owns the following interests in joint ventures:
---------------------------------------------------------------------
Betpak Dala 70%
Kyzylkum 30%
Joint Venture with Uranium Power Corporation ("UPC") 50%
Pitchstone 50%
The Corporation's proportionate share of assets and liabilities are
as follows:
As at March 31, 2008 Joint
Betpak Venture
Dala Kyzylkum with UPC Pitchstone Total
$'000 $'000 $'000 $'000 $'000
---------------------------------------------------------------------
Cash 12,153 3,310 (7) (44) 15,412
Other current assets 43,360 650 5 74 44,089
Mineral interests,
plant and equipment 663,795 180,405 50,400 20,036 914,636
Other assets 3,747 3,941 1,154 - 8,842
Current liabilities (19,451) (1,276) 1 - (20,726)
Long term debt(1) - (23,954) - - (23,954)
Other (1,565) (139) - - (1,704)
Future income taxes (276,677) (72,252) - (5,607) (354,536)
Asset retirement
obligation (1,177) (72) - - (1,249)
---------------------------------------------------------------------
Net assets 424,185 90,613 51,553 14,459 580,810
---------------------------------------------------------------------
(1) In addition to the $66.7 million loan (note 5.2) 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 $20 million has been drawn down from
these facilities during the three month period ended March 31,
2008 and $60 million for the year ended December 31, 2007. 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 Joint
31, 2007 Betpak Venture
Dala Kyzylkum with UPC Pitchstone 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 - (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
---------------------------------------------------------------------
The Corporation's proportionate share of revenue, expenses, net
income and cash flows for the three month periods ended March 31,
2008 and 2007 are as follows:
Three month period Joint
ended March 31, 2008 Betpak Venture
Dala Kyzylkum with UPC Pitchstone Total
$'000 $'000 $'000 $'000 $'000
---------------------------------------------------------------------
Revenue 22,517 - - - 22,517
Expenses (4,949) (46) (221) (736) (5,952)
Foreign exchange loss (118) (7) - - (125)
---------------------------------------------------------------------
Income/(loss) before
income taxes 17,450 (53) (221) (736) 16,440
Provision for income
taxes (6,342) (33) - - (6,375)
---------------------------------------------------------------------
Net income/(loss) 11,108 (86) (221) (736) 10,065
---------------------------------------------------------------------
Cash flows from/(to)
operating
activities 34,818 (308) (265) (657) 33,588
Cash flows to
investing
activities (12,398) (4,148) (60) - (16,606)
Cash flows (to)/from
financing
activities (11,909) 4,126 86 540 (7,157)
---------------------------------------------------------------------
Net increase/
(decrease) in cash 10,511 (330) (239) (117) 9,825
---------------------------------------------------------------------
Three month period Betpak
ended March 31, 2007 Dala Kyzylkum Total
$'000 $'000 $'000
---------------------------------------------------------------------
Revenue 41,730 - 41,730
Expenses (11,611) - (11,611)
Foreign exchange
loss (6,139) (1,394) (7,533)
---------------------------------------------------------------------
Income/(loss) before
income taxes 23,980 (1,394) 22,586
Provision for income
taxes (10,659) - (10,659)
---------------------------------------------------------------------
Net income/(loss) 13,321 (1,394) 11,927
---------------------------------------------------------------------
Cash flows from
operating
activities 59,510 288 59,798
Cash flows to
investing
activities (56,189) (750) (56,939)
---------------------------------------------------------------------
Net increase/
(decrease)
in cash 3,321 (462) 2,859
---------------------------------------------------------------------
5.2 Loans to Joint Ventures
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Current portion
Betpak Dala - 5,175
Kyzylkum 19,555 27,692
---------------------------------------------------------------------
19,555 32,867
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Long term portion
Betpak Dala - -
Kyzylkum 27,895 24,359
---------------------------------------------------------------------
27,895 24,359
---------------------------------------------------------------------
---------------------------------------------------------------------
Total 47,450 57,226
---------------------------------------------------------------------
During the 3 months ended March 31, 2008, Betpak Dala repaid the
principal amount of $5 million to the Corporation, together with
$0.2 million of accrued interest.
Kyzylkum loan
Mar 31, Dec 31,
2008 2007
$'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 bear interest
at LIBOR plus 1.5% per annum, with interest
payable on a semi-annual basis, commencing
within two years of funding. 73,333 80,000
Repaid during three month period (6,667) (6,667)
---------------------------------------------------------------------
66,666 73,333
Interest accrued 1,120 1,025
---------------------------------------------------------------------
67,786 74,358
Less elimination of proportionate share - 30% (20,336) (22,307)
---------------------------------------------------------------------
47,450 52,051
Less current portion (19,555) (27,692)
---------------------------------------------------------------------
Long term portion 27,895 24,359
---------------------------------------------------------------------
The loans to Kyzylkum are unsecured.
6 Inventories
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Finished uranium concentrates 15,309 10,093
Solutions and concentrates in process 8,710 5,731
---------------------------------------------------------------------
Product inventory 24,019 15,824
Materials and supplies 3,419 5,128
Stockpiles 7,772 7,772
---------------------------------------------------------------------
35,210 28,724
Less: non-current inventory included in
other assets (note 9) 7,772 7,772
---------------------------------------------------------------------
27,438 20,952
---------------------------------------------------------------------
7 Mineral interests, plant and equipment
March 31,
2008 Net
Accumulated carrying
Cost amortization amount
$'000 $'000 $'000
---------------------------------------------------------------------
Mineral interests 3,961,054 (36,493) 3,924,561
Plant and equipment 592,205 (10,148) 582,057
---------------------------------------------------------------------
4,553,259 (46,641) 4,506,618
---------------------------------------------------------------------
December 31, 2007
Net
Accumulated carrying
Cost amortization amount
$'000 $'000 $'000
---------------------------------------------------------------------
Mineral interests 4,247,457 (32,771) 4,214,686
Plant and equipment 566,612 (6,316) 560,296
---------------------------------------------------------------------
4,814,069 (39,087) 4,774,982
---------------------------------------------------------------------
A summary by property of the net book value is as follows:
Mineral interests
--------------------------------------
March 31, 2008 Non-
Depletable depletable Total
Country $'000 $'000 $'000
---------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 108,284 74,358 182,642
South Inkai Uranium
Project Kazakhstan - 403,779 403,779
Kharasan Uranium
Project Kazakhstan - 146,081 146,081
Dominion Uranium South
Project Africa - 1,479,053 1,479,053
United States United
development projects States - 279,422 279,422
United States United
exploration projects States - 1,019,400 1,019,400
Hobson Facility and La United
Palangana Project States - 56,869 56,869
Shootaring Canyon Mill United
States - 50,361 50,361
Honeymoon Uranium
Project Australia - 286,502 286,502
Pitchstone exploration Canada - 20,210 20,210
Corporate and other - 243 243
---------------------------------------------------------------------
Total 108,284 3,816,278 3,924,562
---------------------------------------------------------------------
Plant and Total
equipment
March 31, 2008
Country $'000 $'000
--------------------------------------------------------
Akdala Uranium Mine Kazakhstan 16,698 199,340
South Inkai Uranium
Project Kazakhstan 60,676 464,455
Kharasan Uranium
Project Kazakhstan 34,324 180,405
Dominion Uranium South
Project Africa 318,019 1,797,072
United States United
development projects States 7,546 286,968
United States United
exploration projects States 2,435 1,021,835
Hobson Facility and La United
Palangana Project States 36,891 93,760
Shootaring Canyon Mill United
States 49,379 99,740
Honeymoon Uranium
Project Australia 31,277 317,779
Pitchstone exploration Canada - 20,210
Corporate and other 24,811 25,054
--------------------------------------------------------
Total 582,056 4,506,618
--------------------------------------------------------
Mineral interests
--------------------------------------
December 31, 2007 Non-
Depletable depletable Total
Country $'000 $'000 $'000
---------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 111,302 - 74,358 185,660
South Inkai Uranium
Project Kazakhstan - 422,631 422,631
Kharasan Uranium
Project Kazakhstan - 146,538 146,538
Dominion Uranium South
Project Africa - 1,756,018 1,756,018
United States United
development projects States - 278,654 278,654
United States United
exploration projects States - 1,020,759 1,020,759
Hobson Facility and La United
Palangana Project States - 56,869 56,869
Shootaring Canyon Mill United
States - 50,009 50,009
Honeymoon Uranium
Project Australia - 276,087 276,087
Pitchstone exploration Canada - 21,216 21,216
Corporate and other - 245 245
---------------------------------------------------------------------
Total 111,302 4,103,384 4,214,686
Plant and Total
equipment
December 31, 2007
Country $'000 $'000
--------------------------------------------------------
Akdala Uranium Mine Kazakhstan 15,906 201,566
South Inkai Uranium
Project Kazakhstan 31,388 454,019
Kharasan Uranium
Project Kazakhstan 29,376 175,914
Dominion Uranium South
Project Africa 350,146 2,106,164
United States United
development projects States 7,184 285,838
United States United
exploration projects States 1,285 1,022,044
Hobson Facility and La United
Palangana Project States 33,503 90,372
Shootaring Canyon Mill United
States 47,614 97,623
Honeymoon Uranium
Project Australia 23,951 300,038
Pitchstone exploration Canada - 21,216
Corporate and other 19,943 20,188
--------------------------------------------------------
Total 560,296 4,774,982
--------------------------------------------------------
8 Available for sale securities
Mar 31, Dec 31,
2008 2007
Market Market
value value
$'000 $'000
---------------------------------------------------------------------
Available for sale securities 16,598 21,257
---------------------------------------------------------------------
Movement in available for sale securities
$'000
---------------------------------------------------------------------
Balance as at January 1, 2007 -
Received as part of a joint venture earn-in payment 1,268
Purchased as part of the EMC acquisition 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
Received as part of a joint venture earn-in payment 436
Disposed during the period (3,477)
Impairment of available for sale securities included in
the statement of operations (657)
Foreign exchange movement (88)
Fair value adjustment included in other comprehensive income (873)
---------------------------------------------------------------------
Balance as at March 31, 2008 16,598
---------------------------------------------------------------------
During the period the Corporation disposed of available for sale
securities with a fair market value of $3.5 million at December 31,
2007. The securities had a cost basis of $3.1 million and fair value
losses included in other comprehensive income of $0.3 million.
Proceeds on the sale of these securities was $2.4 million which
resulted in a loss on sale of securities of $0.7 million.
By holding these long-term investments the Corporation is inherently
exposed to various risk factors including currency risk, market price
risk and liquidity risk (note 18).
9 Other assets
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Advances for plant and equipment 8,535 12,643
Long term deposits and guarantees (note 4) 2,838 3,220
Long term inventory (note 6) 7,772 7,772
Asset retirement fund 19,430 20,316
Advances for future services 10,222 10,629
Reclamation bond payment on behalf of UPC
joint venture 1,033 1,094
Other 1,279 869
---------------------------------------------------------------------
51,109 56,543
---------------------------------------------------------------------
10 Assets held for sale
In March 2008 the Corporation decided to sell the Aurora property,
owned 100% through Quincy Energy Corporation and consolidated into
these financial statements. The Corporation classified this asset as
non-core and formal approval to sell the asset was granted by the
Board in the first quarter of 2008. The property is carried at its
fair value. The asset was previously presented as part of the US
exploration projects segment.
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Mineral interests 52,371 52,371
Future income tax liabilities 19,819 19,819
---------------------------------------------------------------------
11 Accounts payable and accrued liabilities
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Trade payables 30,333 25,334
Accruals 19,279 24,461
Commodity and other taxes payable 278 11,280
Other 1,637 9,727
---------------------------------------------------------------------
51,527 70,802
---------------------------------------------------------------------
12 Share capital
Value of
Number of shares
Issued and outstanding common shares shares $'000
---------------------------------------------------------------------
Common shares on January 1, 2007 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 0.45 217,164,830 621,290
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 6,607,605 99,401
EMC asset purchase consideration 100,444,543 1,013,215
Shares issued for services rendered 322,393 3,987
---------------------------------------------------------------------
Common shares on December 31, 2007 467,173,423 3,496,884
Exercise of warrants 150,000 2,105
Exercise of stock options 318,125 2,711
---------------------------------------------------------------------
Balance of issued and outstanding common
shares at March 31, 2008 467,641,548 3,501,700
---------------------------------------------------------------------
13 Contributed surplus
The following table details the movements of contributed surplus
during the period:
Restricted
Warrants shares Options TOTAL
$'000 $'000 $'000 $'000
---------------------------------------------------------------------
As at January 1, 2007 - - 31,286 31,286
Issued on Uranium
One/UrAsia Energy business
combination 26,407 853 34,782 62,042
Issued on EMC asset
acquisition - - 35,307 35,307
Stock options issued and
vested - - 33,734 33,734
Stock 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
Stock options issued and
vested - - 5,840 5,840
Stock options exercised - - (1,611) (1,611)
Restricted shares vested - 359 - 359
Warrants exercised (1,062) - - (1,062)
---------------------------------------------------------------------
As at March 31, 2008 24,310 3,478 110,125 137,913
---------------------------------------------------------------------
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:
Mar 31, Mar 31,
2008 2007
---------------------------------------------------------------------
Risk free interest rate 3.15% 3.81% - 4.11%
Expected dividend yield 0% 0%
Expected volatility of the Uranium One's
share price 66% 60%
Expected life 5 years 5 years
Options
Under Uranium One's Stock 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
Number of exercise
options price
Cdn $
---------------------------------------------------------------------
Outstanding options at January 1, 2007 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
Forfeitures of stock 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 stock options on
date of business combination 9,763,498 7.33
Existing Uranium One stock 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
Forfeitures of stock options subsequent to
April 20, 2007 (351,187) 13.14
---------------------------------------------------------------------
Outstanding options as at December 31, 2007 20,824,788 8.55
Granted options 84,252 5.41
Exercised options (318,125) 3.46
Forfeitures of stock options (310,463) 10.47
---------------------------------------------------------------------
Outstanding options as at March 31, 2008 20,280,452 8.58
---------------------------------------------------------------------
The stock option compensation expense for the period ended March 31,
2008 was $5.8 million and for the period ended March 31, 2007 was
$3.4 million. As at March 31, 2008, the aggregate unexpensed fair
value of unvested stock options granted amounted to $12.4 million.
The fair value of options granted during the period amounts to
$0.2 million.
The following table summarizes certain information about Uranium
One's stock options outstanding at March 31, 2008:
Options outstanding
-----------------------------------------
Number Weighted Weighted
outstanding average average
as at remaining exercise
Range of Exercise Prices Mar 31, 2008 life price
Cdn $ (years) Cdn $
---------------------------------------------------------------------
1.09 to 2.74 1,427,621 2.20 2.36
3.03 to 4.81 3,107,375 3.16 4.00
5.00 to 7.79 3,672,852 4.99 6.60
8.26 to 9.90 5,651,663 4.39 8.42
10.40 to 11.91 3,926,025 4.60 12.05
12.02 to 13.70 1,020,266 5.58 14.32
14.12 to 16.87 1,474,650 3.76 16.58
---------------------------------------------------------------------
20,280,452 4.28 8.58
---------------------------------------------------------------------
Options exercisable
-----------------------------------------
Number Weighted Weighted
exercisable average average
as at remaining exercise
Range of Exercise Prices Mar 31, 2008 life price
Cdn $ (years) Cdn $
---------------------------------------------------------------------
1.09 to 2.74 1,427,621 2.20 2.36
3.03 to 4.81 3,105,535 3.16 4.00
5 to 7.79 3,427,292 4.99 6.65
8.26 to 9.9 5,496,201 4.39 8.41
10.4 to 11.91 2,499,580 4.60 12.03
12.02 to 13.7 407,002 5.58 14.92
14.12 to 16.87 276,850 3.76 16.76
---------------------------------------------------------------------
16,640,081 4.28 7.55
---------------------------------------------------------------------
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 three 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
Mar 31, Dec 31,
2008 2007
---------------------------------------------------------------------
Balance at beginning of the period 295,532 404,231
Granted - 20,000
Exercised during the period - (125,977)
Expired - (2,722)
---------------------------------------------------------------------
Balance at the end of the period 295,532 295,532
---------------------------------------------------------------------
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 employed by the Corporation.
The Restricted share rights expense for the period ended March 31,
2008 was $359,362 and for the period ended March 31, 2007 was $Nil.
As at March 31, 2008 the aggregate unexpensed fair value of unvested
restricted share rights granted amounted to $444,324.
Warrants Number of warrants Allocated value
--------------------------------------------
Mar 31, Dec 31, Mar 31, Dec 31,
2008 2007 2008 2007
$'000 $'000
---------------------------------------------------------------------
Balance at beginning
of the period 2,581,619 2,731,619 25,372 26,407
Exercised during the
period (150,000) (150,000) (1,062) (1,035)
---------------------------------------------------------------------
Balance at the end of
the period 2,431,619 2,581,619 24,310 25,372
---------------------------------------------------------------------
Average
Number of warrants exercise price
--------------------------------------------
Mar 31, Dec 31, Mar 31, Dec 31,
Warrants comprise: 2008 2007 2008 2007
---------------------------------------------------------------------
2008 Warrants 2,431,619 2,431,619 3.55 3.55
Series D Warrants - 150,000 - 6.95
---------------------------------------------------------------------
Total 2,431,619 2,581,619 3.55 3.75
---------------------------------------------------------------------
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
Kharasan.
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.
14 Foreign exchange (losses)/gains
A summary of the foreign exchange loss by item is as follows:
Mar 31, Mar 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Unrealized foreign exchange gain/(loss)
gain on future income tax liability 1,138 (8,601)
Unrealized foreign exchange gain on
other items 1,075 1,384
Realized foreign exchange loss on other items (4,839) (214)
---------------------------------------------------------------------
(2,626) (7,431)
---------------------------------------------------------------------
15 Cash flow information
Mar 31, Mar 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Changes in non-cash working capital excluding
business combinations:
- Decrease in accounts and other receivables 35,451 20,507
- (Increase) / decrease in accrued interest
receivable on loans to joint ventures (67) 349
- Decrease / (increase) in prepaid expenses
and other 17,917 (198)
- (Increase) / decrease in inventories (5,970) 1,501
- (Decrease) / increase in accounts payable
and accrued liabilities (14,166) 2,143
- Increase in income taxes payable 5,981 5,892
---------------------------------------------------------------------
39,146 30,194
---------------------------------------------------------------------
Supplemental cash flow information
Cash interest paid - -
Cash taxation paid 7,998 5,830
16 Basic and diluted weighted-average number of shares outstanding
Mar 31, Mar 31,
2008 2007
---------------------------------------------------------------------
Basic weighted-average number of shares
outstanding ('000) 467,451 216,327
Effect of dilutive securities:
- stock options - 5,270
- warrants - 90
---------------------------------------------------------------------
Diluted weighted-average number of shares
outstanding 467,451 221,687
---------------------------------------------------------------------
For the period ended March 31, 2008, 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.
17 Capital disclosures
The Corporation's objectives when managing capital are to:
(i) Maintain a flexible capital structure which optimizes the cost
of capital at acceptable risk;
(ii) Continue the development and exploration of its mineral
properties; and
(iii) Support any expansion plans.
In the management of capital, the Corporation includes shareholders'
equity, long term debt, cash and the current portion of loans to
joint ventures.
The Corporation manages its capital structure and makes adjustments
to it when the economic and risk conditions of the underlying assets
require change. In order to maintain or adjust the capital structure,
the Corporation may issue new shares, issue new debt, and/or issue
new debt to replace existing debt with different characteristics. The
Corporation has in place a rigorous planning and budgeting process to
help determine the funds required to ensure the Corporation has the
appropriate liquidity to meet its operating and growth objectives.
The Corporation monitors the following ratios in this respect: total
debt to total capitalization and net debt to total capitalization.
For periods ended Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Total debt (excluding future income tax
liabilities) 352,590 460,265
Net debt (total debt less cash, receivables,
and current portion of loans to joint
ventures) 140,554 197,488
Total capitalisation (total shareholders'
equity) 3,316,135 3,682,905
Total debt ratio 11% 12%
Net debt ratio 4% 5%
18 Financial instruments
The Corporation's financial instruments primarily consist of cash,
short-term money market investments, marketable securities, accounts
receivable, accounts payable and convertible debentures. For cash,
short-term money market investments, and current accounts receivable
and payable, carrying value is considered to be a reasonable
approximation of fair value due to the short term nature of these
investments. The fair value of the convertible debentures represents
the quoted market value.
Convertible debentures Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Liability component 135,156 136,548
Equity component 46,480 46,480
---------------------------------------------------------------------
181,636 183,028
---------------------------------------------------------------------
Fair value 128,816 145,888
---------------------------------------------------------------------
The Corporation's activities expose it to a variety of financial
risks, including the effects of changes in debt and equity market
prices, foreign currency exchange rates and interest rates. The
global nature of the Corporation's business exposes the reported
financial results and cashflows of operating segments to risks
arising from fluctuations in exchange rates.
The Corporation continuously monitors its exposure to risk. The risk
management carried out by the Corporation is approved by the board of
directors. The following describes the type of risks that the
Corporation is exposed to and its objectives and policies for
managing those risk exposures.
(i) Foreign exchange risk
The foreign exchange risk relates to the risk that the value of
financial commitments, recognized assets or liabilities will
fluctuate due to changes in foreign currency rates.
The most significant impact of foreign exchange on the
Corporation's net earnings and other comprehensive income is
the translation of foreign operations into US dollars. The
effect of translating the financial statements of the entities
that are determined to be integrated foreign operations are
included in the consolidated statements of operations, and the
effect of translating the financial statements of entities that
are determined to be self-sustaining are included in other
comprehensive income.
The Corporation also has foreign exchange risk arising from:
- borrowings denominated in foreign currencies; and
- firm commitments or highly probable forecasted
transactions for receipts and payments settled in foreign
currencies or with prices dependent on foreign currencies.
The Corporation does not hedge its exposure to foreign currency
exchange risk.
The Corporation is primarily exposed to foreign currency risk
through the following assets and liabilities denominated in
currencies other than US dollars:
Financial assets and liabilities
---------------------------------------------------
Accounts
Cash payable
March 31, 2008 and cash Accounts and accrued Convertible
equivalents receivable liabilities debentures
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Canadian dollar 32,823 3,466 15,673 135,156
South African rand 601 16,458 19,600 -
Kazakhstan tenge 15,823 6,909 3,708 -
Australian dollar 19,992 551 7,101 -
-------------------------------------------------------------------------
69,239 27,384 46,082 135,156
-------------------------------------------------------------------------
Non-financial assets
and liabilities
-------------------------
Mineral
interest Future
March 31, 2008 plant and income tax
equipment(1) liabilities
$'000 $'000
-----------------------------------------------
Canadian dollar 20,210 5,607
South African rand 1,797,072 474,495
Kazakhstan tenge - 348,929
Australian dollar 317,779 72,361
-----------------------------------------------
2,135,061 901,392
-----------------------------------------------
Financial assets and liabilities
---------------------------------------------------
Accounts
Cash payable
December 31, 2007 and cash Accounts and accrued Convertible
equivalents receivable liabilities debentures
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Canadian dollar 78,938 3,683 10,357 136,548
South African rand 1,330 9,606 33,168 -
Kazakhstan tenge 2,787 3,128 16,411 -
Australian dollar 24,966 558 5,540 -
-------------------------------------------------------------------------
108,021 16,975 65,476 136,548
-------------------------------------------------------------------------
Non-financial assets
and liabilities
-------------------------
Mineral
interest Future
March 31, 2008 plant and income tax
equipment(1) liabilities
$'000 $'000
-----------------------------------------------
Canadian dollar 21,216 5,831
South African rand 2,106,164 567,577
Kazakhstan tenge - 351,207
Australian dollar 300,038 69,039
-----------------------------------------------
2,427,418 993,654
-----------------------------------------------
(1) - Only includes mineral interests, plant and equipment of self
sustaining operations.
The following table shows the effect on profit and other
comprehensive income after tax as at March 31, 2008 of a 10 percent
appreciation or depreciation in the foreign currencies against the US
dollar on the abovementioned financial and non-financial assets and
liabilities of the Corporation.
Other
comprehensive Net
income earnings
---------------------------------------------------------------------
10% appreciation in exchange rates, with
all other variables held constant 175,266 (37,603)
A 10% depreciation in exchange rates would have the exact opposite
effect on other comprehensive income and net earnings.
(ii) Credit risk
Credit risk is primarily associated with trade receivables, however,
it also arises on cash equivalents.
The Corporation closely monitors its financial assets and does not
have any significant concentration of credit risk. The Corporation
sells its products exclusively to organizations with strong credit
ratings. Cash and cash equivalents are held through large
international financial institutions. Cash and cash equivalents are
comprised of financial instruments issued by Canadian banks and
companies with high investment-grade ratings. These investments
mature at various dates over the current operating period.
The Corporation's maximum exposure to credit risk at the balance
sheet date is as follows:
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
Short-term money market instruments 44,763 12,059
Accounts receivable 35,093 73,538
Marketable securities 16,598 21,257
96,454 106,854
(iii) Liquidity risk
The Corporation has a cash forecast and budgeting process in place to
assist with the determination of funds required to support the
Corporation's operating requirements on an ongoing basis and its
expansion plans. The Corporation manages liquidity risk through
the management of its capital structure and financial leverage as
outlined in note 17.
The following table summarizes the contractual maturities of the
Corporation's financial liabilities
Less than 1 to 3 4 to 5 After 5
1 year years years years Total
---------------------------------------------------------------------
Lease obligations 1,206 3,629 1,216 2,011 8,062
Capital commitments 19,477 16,839 7,069 - 43,385
Asset retirement
obligations - - - 27,081 27,081
Accounts payable
and accrued
liabilities 51,527 - - - 51,527
Convertible
debentures - 155,200 - - 155,200
---------------------------------------------------------------------
72,210 175,668 8,285 29,092 285,255
---------------------------------------------------------------------
The convertible debenture is convertible in cash or shares, and may
not result in a cash outflow.
The Corporation has interests in Joint Ventures, and is responsible
for partial funding of these Joint Ventures pursuant to the terms of
the Joint Venture agreements. The Corporation does not bear direct
liquidity risk for liquidity of these joint ventures.
(iv) Interest rate risk
The Corporation is exposed to interest rate risk on its outstanding
borrowings and short-term investments. The only outstanding
interest-bearing borrowings as at March 31, 2008 is the loan facility
obtained by Kyzylkum (refer note 5.1) which bears interest at
floating rates, and the convertible debentures, with a fixed interest
rate.
A 100 basis points movement in the interest rate would impact the
Corporation's net earnings as follows:
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
10% appreciation in interest rates, with all
other variables held constant 50 44
A 10% depreciation in the interest rate would have the exact
opposite effect on net earnings.
(v) Commodity price risk
The Corporation is exposed to price risk with respect to commodity
prices. The Corporation does not hedge its exposure to price risk,
other than the pricing structures in the long term sales contracts
which the Corporation has entered into. Increases in uranium prices
would have a positive impact on profitability given that the majority
of the Corporation's sales contracts are priced based on market
values for uranium.
A 10% change in commodity prices would impact the Corporation's net
earnings as follows:
Mar 31, Dec 31,
2008 2007
$'000 $'000
---------------------------------------------------------------------
10% appreciation in commodity prices, with all
other variables held constant 2,252 4,173
A 10% depreciation in the commodity price would have the exact
opposite effect on net earnings.
19 Segmented information
The Corporation's reportable operating segments are summarized in the
table below:
For the three month period ended March 31, 2008: (in $'000)
Deprec-
iation Explor-
and ation Net Capital
Reve- Operating deple- expend- earnings expend-
Country nue expenses tion iture /(loss) iture
-------------------------------------------------------------------------
Akdala
Uranium
Mine Kazakhstan 22,517 (3,292) (2,931) - 9,177 2,319
South Inkai
Uranium
Project Kazakhstan - - - - 340 7,529
Kharasan
Uranium
Project Kazakhstan - - - - 183 5,038
Dominion
Uranium South
Project Africa - - - (52) (447) 23,639
US Development United
projects States - - - - (20) 2,624
US Exploration United
projects States - - - (369) 95 223
Hobson facility
and La
Palangana United
Project States - - - - (105) 3,496
Shootaring United
Canyon Mill States - - - - (57) 1,490
Honeymoon
Uranium
Project and
exploration Australia - - - (277) (714) 6,383
Pitchstone
exploration Canada - - - (736) (736) -
Corporate and
other - - - (246) (18,031) 1,276
-------------------------------------------------------------------------
Total 22,517 (3,292) (2,931) (1,680) (10,315) 54,017
-------------------------------------------------------------------------
For the three month period ended March 31, 2007: (in $'000)
Deprec-
iation Explor-
and ation Net Capital
Reve- Operating deple- expend- earnings expend-
Country nue expenses tion iture /(loss) iture
-------------------------------------------------------------------------
Akdala
Uranium
Mine Kazakhstan 41,730 (7,043) (4,835) - 13,392 9,121
South
Inkai
Uranium
Project Kazakhstan - - - - - 7,572
Kharasan
Uranium
Project Kazakhstan - - - - (1,394) -
Corporate
and other - - (24) (1,459) (4,027) -
-------------------------------------------------------------------------
Total 41,730 (7,043) (4,859) (1,459) 7,971 16,693
-------------------------------------------------------------------------
As at March 31, 2008:
(in $'000)
-------------------------------------------------------------------------
Future
Mineral income
interest, tax Total
plant and Total liabil- liabil-
Country equipment assets ities ities
-------------------------------------------------------------------------
Akdala Uranium
Mine Kazakhstan 199,340 223,197 72,286 86,385
South Inkai
Uranium Project Kazakhstan 464,455 468,718 204,391 211,662
Kharasan Uranium
Project Kazakhstan 180,405 187,934 72,252 97,649
Dominion Uranium South
Project Africa 1,797,072 1,818,799 474,495 497,839
US Development United
projects States 286,968 286,968 90,532 91,757
US Exploration United
projects States 1,021,835 1,027,027 349,885 351,261
Hobson facility
and La
Palangana United
Project States 93,760 95,467 19,834 21,686
Shootaring
Canyon United
Mill States 99,740 114,760 18,613 21,570
Honeymoon
Uranium Project
and exploration Australia 317,779 318,596 72,361 79,589
Pitchstone
exploration Canada 20,210 20,240 5,607 5,698
Corporate and
other 25,054 281,001 3,365 151,173
-------------------------------------------------------------------------
Total 4,506,618 4,842,707 1,383,621 1,616,269
-------------------------------------------------------------------------
As at December 31, 2007: (in $'000)
-------------------------------------------------------------------------
Future
Mineral income
interest, tax Total
plant and Total liabil- liabil-
Country equipment assets ities ities
-------------------------------------------------------------------------
Akdala Uranium
Mine Kazakhstan 201,566 266,240 73,623 94,710
South Inkai
Uranium Project Kazakhstan 454,019 457,510 205,053 207,461
Kharasan Uranium
Project Kazakhstan 175,914 184,283 72,486 92,422
Dominion Uranium South
Project Africa 2,106,164 2,111,565 567,577 598,102
US Development United
projects States 285,838 285,838 90,517 92,187
US Exploration United
projects States 1,022,044 1,027,423 350,410 354,391
Hobson facility
and La
Palangana United
Project States 90,372 91,879 19,729 22,639
Shootaring United
Canyon Mill States 97,623 112,894 18,613 21,186
Honeymoon
Uranium Project
and exploration Australia 300,038 300,043 69,040 86,613
Pitchstone
exploration Canada 21,216 21,360 5,831 5,831
Corporate and
other 20,188 319,891 3,362 146,241
-------------------------------------------------------------------------
Total 4,774,982 5,178,926 1,476,241 1,721,783
-------------------------------------------------------------------------
%SEDAR: 00005203E