Trading Symbols: UUU - Toronto Stock Exchange, JSE Limited (Johannesburg Stock Exchange)
VANCOUVER, BC and JOHANNESBURG, South Africa, Aug. 13 /CNW/ - Uranium One Inc. ("Uranium One") today reported that Jean Nortier has been appointed President and Chief Executive Officer, as well as a director of the Company. Uranium One also announced another record production quarter of 767,100 pounds of U(3)O(8) for the second quarter of 2008, quarterly earnings from mine operations of $32.9 million and substantial progress at its US Operations. The Company also confirmed its 2008 production target of 3.1 million pounds U(3)O(8).
All figures are in US dollars unless otherwise indicated.
Highlights:
- Record production(1) in Q2 2008 of 767,100 pounds of U(3)O(8), an
increase of 24% from 618,900 pounds of U(3)O(8) in Q1 2008 and 42%
from 539,100 pounds of U(3)O(8) in Q4 2007
- Attributable sales of 685,600 pounds of U(3)O(8) for Q2 2008, which
was 142% more than attributable sales of 283,300 pounds of U(3)O(8)
in Q1 2008 and 70% more than the average quarterly sales of 402,200
pounds of U(3)O(8) per quarter during 2007
- Earnings from mine operations of $32.9 million in Q2 2008 increased
102% from $16.3 million in Q1 2008 and 72% from $19.2 million in
Q2 2007
- Production guidance for 2008 remains unchanged at 3.1 million pounds
U(3)O(8), comprising 1.8 million pounds from Akdala and 1.3 million
pounds of pre-commercial production from South Inkai, Dominion and
Kharasan
- Sulphuric acid constraints in Kazakhstan eased during the quarter
with the commissioning of the Balkhash sulphuric acid plant in June
2008
- Measured resources in the United States increased by 80% from
10.7 million pounds of U(3)O(8) to 19.2 million pounds of U(3)O(8)
- Moore Ranch feasibility study completed with an after-tax NPV of
$81 million. Life of mine average cash operating costs before taxes
in 2008 terms, are expected to be $14 per pound of U(3)O(8) and total
cash costs are expected to be $26 per pound of U(3)O(8), including
state taxes and royalties
- $100 million senior secured revolving credit facility concluded in
June
- Realized cash proceeds of $66.7 million from the sale of non-core
assets
- Appointment of Eben Swanepoel as Senior Vice President, Africa &
Europe, succeeding Robert van Niekerk who has been appointed
Executive Vice President, Technical Services
Ian Telfer, Chairman of the Board of Uranium One said:
"On behalf of the Board of Directors of Uranium One, I am pleased that Jean has accepted his appointment as CEO of the Company. Jean's performance as interim CEO and in his previous roles with the Company has been outstanding. Under his leadership, Uranium One has achieved a number of important operational milestones, including another record quarter of production. We have every confidence that Jean and the rest of his team will keep Uranium One firmly on track to becoming one of the world's largest uranium producers."
Jean Nortier, President and CEO of Uranium One commented:
"It is an honour to be leading Uranium One through the challenges and opportunities that lie ahead. I am excited by the excellent management team that Uranium One has attracted, our long life assets, the geographical diversity of our production base and the dynamics of the market in which we operate. It is encouraging that during the second quarter of 2008, Uranium One achieved another record quarter of production totalling 767,100 pounds of U(3)O(8) and that our guidance for 2008 production remains unchanged at 3.1 million pounds. I am also pleased with the pace of development at our US projects, the progress made in disposing of non-core assets and the conclusion of a credit facility."
Management Changes
The Board of Directors of Uranium One has appointed Jean Nortier as President and Chief Executive Officer, as well as a director of the Company. Mr. Nortier has extensive experience with the Uranium One group and has previously acted as Chief Financial Officer, Executive Vice-President Corporate Development and most recently as Interim Chief Executive of the Group.
In addition, Robert van Niekerk has been appointed Executive Vice President, Technical Services. Uranium One's Technical Services Division is based in Denver and has been formed to house Uranium One's technical skills base and will be deployed to oversee project evaluation, feasibility studies, major capital projects, reserve and resource estimations and exploration for Uranium One globally.
Succeeding Mr. van Niekerk, Uranium One has appointed Eben Swanepoel as Senior Vice President, Africa and Europe. Mr. Swanepoel has over 25 years experience in mining operations in southern Africa. From 2005 to 2007, he was General Manager at Tati Nickel Mining Company in Botswana, where he oversaw the successful turn-around of the open pit and trackless underground operations. Prior to that, Mr. Swanepoel served as a Senior Project Manager for Anglo Platinum, where he was responsible for four major trackless, narrow-reef and open pit operations. Mr. Swanepoel holds a Masters of Engineering degree from the University of Witwatersrand.
Financial Review
During Q2 2008 the Company sold 685,600 pounds of U(3)O(8) at an average realized price of $72 per pound resulting in revenue of $49.4 million, compared to sales of 244,200 pounds of U(3)O(8) and revenue of $23.3 million during Q2 2007.
The average cash cost per pound sold(2) was $14 per pound during Q2 2008, compared to $12 per pound sold during Q1 2008. The higher operating expenses during Q2 2008 are primarily due to higher sulphuric acid costs experienced during the quarter. With the recent commissioning of a new sulphuric acid plant in Kazakhstan, the price for sulphuric acid has decreased significantly and the Company does not expect the cost per pound sold at Akdala to increase further during 2008.
Earnings from mine operations during the second quarter of 2008 were $32.9 million, an increase of 102% over first quarter 2008 earnings from mine operations of $16.3 million.
Primarily as a result of impairments recognized on non-core assets held for sale, the net loss from continuing operations for Q2 2008 was $68.2 million, or $0.15 per basic and diluted share, compared to a net loss from continuing operations for Q1 2008 of $10.3 million, or $0.02 per basic and diluted share.
Adjusted net earnings(2) for Q2 2008 were $6.6 million, or $0.01 per basic and diluted share compared to an adjusted net loss during Q1 2008 of $10.3 million, or $0.02 per basic and diluted share.
Consolidated cash and cash equivalents were $133.1 million as at June 30, 2008 compared to $160.2 million at March 31, 2008.
The Company received cash proceeds during Q2 2008 of $66.7 million through the sale of non-core investments and will continue to seek to dispose of other selected non-core investments, including its remaining shareholding in Aflease Gold which has a current market value of approximately $52 million.
Also during the second quarter, Uranium One concluded a senior secured revolving credit facility. Under the terms of the facility, the Company has the ability to borrow up to $100 million from the lead lenders, Bank of Montreal and The Bank of Nova Scotia. The facility has a two year term, and may be extended for a further year with lender consent.
Operations Review
Akdala Uranium Mine (70%), Kazakhstan
In line with the production plan for 2008, Akdala produced 621,800 pounds of U(3)O(8), of which 435,300 pounds is attributable to Uranium One. The average cash operating cost per pound of U(3)O(8) sold was $14 during the quarter. Commissioning of the precipitation and filtration circuit was completed and the circuit is now fully operational. This enables 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 U(3)O(8) production from South Inkai during Q2 2008 continued to exceed expectations and totalled 367,300 pounds, of which 257,100 pounds is attributable to Uranium One. This represents a 78% increase over Q1 2008 pre-commercial U(3)O(8) production levels of 206,400 pounds, of which 144,500 pounds is attributable to Uranium One. Average flow rates, as well as the concentration of uranium in solution, have shown quarter over quarter increases since the start of pilot production in Q4 2007. As a result of the continued out-performance of the ramp-up at South Inkai, Uranium One has increased its attributable U(3)O(8) production guidance for 2008 from 500,000 pounds to 910,000 pounds, assuming receipt of regulatory approval for industrial production, which is expected during the second half of 2008.
Kharasan Uranium Project (30%), Kazakhstan
Development activities are continuing at Kharasan, but have been slower than originally anticipated. Acidification of the first well field at Kharasan commenced in March 2008; however, due to a slower than expected increase in the concentration of uranium in solution, the commencement of pilot production has been delayed. As a result, the Corporation is adjusting is 2008 pre-commercial U(3)O(8) production guidance for Kharasan from 220,000 pounds to 50,000 pounds.
Dominion Uranium Project (100%), South Africa
During Q2 2008 pre-commercial production from the Dominion Uranium Project was 74,700 pounds of U(3)O(8) and 1,800 ounces of gold, compared to 42,900 pounds U(3)O(8) and 1,200 ounces of gold during Q1 2008. Underground development during the second quarter was 3,880 metres, an increase of 6% over the first quarter. The underground ore blasted grade improved to 0.54 kg/tonne during the second quarter, compared to 0.36 kg/tonne in the first quarter. Underground ore processed through the plant totalled 94,300 tonnes during the second quarter, an increase of 37% over the 69,000 tonnes processed during the first quarter. The grade of underground ore delivered to the plant was 0.43 kg/tonne during Q2 2008. Total metallurgical plant recoveries on the blended underground ore and surface tailings material are estimated to be approximately 70% currently, compared to 67% when last reported. Although progress is being made, the ramp-up at Dominion continues to be slower than anticipated and the Corporation now expects pre-commercial U(3)O(8) production to be 320,000 pounds for the year, instead of the 590,000 pounds previously anticipated.
Powder River Basin ISR Projects (100%), United States
In accordance with NI 43-101, a feasibility study for the Moore Ranch project was completed by engineering consulting companies TREC, Inc. and BRS Engineering, Inc. The study has concluded that the Moore Ranch project is technically and economically feasible. Two alternatives were evaluated: a satellite plant option with toll processing of uranium-bearing resins at Power Resources Inc., and a 2 million pound per year central processing plant ("CPP") alternative. Highlights from the feasibility study (CPP alternative) include:
- After-tax NPV at an 8% discount rate of $81 million
- After-tax IRR of 106%
- Life of mine average cash operating costs per pound of $13.70
- Life of mine average total cash costs, including royalties, of
$26.30 per pound
- Start-up capital expenditures, including pre-production costs, of
$33 million
- Probable reserves at Moore Ranch of 4.3 million tons at a grade of
0.054% containing 4.6 million pounds U(3)O(8)
- Steady state production levels of 1 million pounds per year
The economic analysis assumed a price of $64 per pound U(3)O(8). The feasibility study considered production from the Moore Ranch deposit only. The 1 million pound per annum excess capacity in the central ISR processing facility could be used for potential production from additional projects owned by Uranium One in the Powder River Basin, but the additional resources were not considered in the feasibility study.
The NRC and WDEQ technical reviews of the application to build and operate an in situ uranium recovery facility at the Moore Ranch Project are currently in progress and the Corporation expects to receive the licence and permit during 2009. Production from Moore Ranch is anticipated to commence during 2010.
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 ISR Projects (100%), United States
In the first week of July 2008, the Corporation submitted applications to the US federal and state authorities for the licence and permits to construct and operate an in situ uranium recovery facility at the Antelope and JAB projects.
A central processing facility is being planned for construction at the Antelope project, with a satellite facility installed at JAB. The central processing facility is planned to have a capacity of 2 million pounds of U(3)O(8) per year. In addition to processing resin from the satellite plant at JAB, the Antelope central processing facility would have the capacity to accept resins from other Uranium One projects in the Great Divide Basin. Those potential projects include Twin Buttes, Cyclone Rim, West JAB, Stewart Creek, Crooks Creek and Bull Springs.
A drill program is anticipated to recommence at the Antelope project during Q3 2008.
Hobson and La Palangana (99%), United States
The refurbishment of the fully permitted and licenced Hobson facility has now been successfully completed. Due to a longer than expected permitting process for the La Palangana uranium project, pre-commercial production is now expected to commence in 2009 and accordingly pre-commercial production of 35,000 lbs U(3)O(8), previously estimated for late 2008, will not be attained.
This news release should be read in conjunction with Uranium One's second 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 second quarter 2008 results today starting at 10:00 a.m. (Eastern Time). Participants may join the call by dialling toll free 1-800-587-1893 or 1-416-915-5763 for local calls or 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 a two week period beginning at approximately 12:00 p.m. today by dialling toll free 1-877-289-8525 or 1-416-640-1917 for local calls or calls from outside Canada and the United States. The pass code for the replay is 21279862. 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.
(1) Comprised of commercial production from Akdala, as well as
pre-commercial production from South Inkai and Dominion.
(2) The Corporation has included non-GAAP performance measures: sales
price per pound of U(3)O(8), cost per pound of U(3)O(8) sold,
adjusted net earnings/loss and adjusted net earnings/loss per share.
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.
For further information, please contact:
Jean Nortier
Chief Executive Officer
Tel: + 27 82 418 2241
Chris Sattler
Senior Vice President, Corporate Development and Investor Relations
Tel: + 1 416 350 3657
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.
In addition, this press release uses the terms "measured resources", "indicated resources", "inferred resources", "probable reserves" and "proven reserves" as defined in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Mineral Reserves, adopted by CIM Council on August 20, 2000, as may be amended from time to time by the CIM, in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects. A mineral resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. A measured mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough to confirm both geological and grade continuity. An indicated mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough for geological and grade continuity to be reasonably assumed. An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited exploration and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes. Mineral resources are not mineral reserves and there is no assurance that any mineral resources will ultimately be reclassified as proven or probable reserves. Mineral resources which are not mineral reserves do not have demonstrated economic viability. A mineral reserve is the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined. Mineral reserves are sub-divided in order of increasing confidence into probable and proven categories. A probable mineral reserve is the economically mineable part of an indicated mineral resource and, in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A proven mineral reserve is the economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.
For the purposes of National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administration (NI 43-101), Mr. M.H.G. Heyns, Pr.SCI.Nat. (SACNASP), MSAIMM, MGSSA, Senior Vice President of Uranium One Inc., is the qualified person who prepared or supervised the preparation of the information that forms the basis of the scientific and technical disclosure contained in this press release.
Investors are cautioned not to assume that all or any part of the mineral deposits in the measured and indicated resource 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. It cannot be assumed that all or any part of an Inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred mineral resources may not form the basis of feasibility or pre-feasibility studies or economic studies except for preliminary assessments as defined under NI 43-101. Investors are cautioned not to assume that all or any part of an Inferred resource exists or is economically or legally mineable.
For further information about Uranium One, please visit uranium1.com.
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 and six months ended June 30, 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 August 12, 2008 and should be read in conjunction with the interim consolidated financial statements of the Corporation for the three and six months ended June 30, 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 historic figures used herein for periods up to and including March 31, 2007 are those of UrAsia Energy. References herein to "Q2 2007" and "Q2 2008" refer to the three months ended June 30, 2007 and the three months ended June 30, 2008, respectively and references to "H1 2007" and "H1 2008" refer to the six months ended June 30, 2007 and the six months ended June 30, 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 and other information".
HIGHLIGHTS
- Record total production in Q2 2008 of 767,100 pounds of U(3)O(8), an
increase of 24% from 618,900 pounds of U(3)O(8) in Q1 2008 and 42%
from 539,100 pounds of U(3)O(8) in Q4 2007.
- Attributable sales of 685,600 pounds of U(3)O(8) for Q2 2008, which
was 142% more than attributable sales of 283,300 pounds of U(3)O(8)
in Q1 2008 and 70% more than the average quarterly sales of
402,200 pounds of U(3)O(8) per quarter during 2007.
- Earnings from mine operations of $32.9 million in Q2 2008 increased
102% from $16.3 million in Q1 2008 and 72% from $19.2 million in Q2
2007.
- The Corporation's attributable production guidance for 2008 remains
unchanged at 3.1 million pounds of U(3)O(8), comprising 1.8 million
pounds from Akdala and 1.3 million pounds of pre-commercial
production from South Inkai, Dominion and Kharasan.
- Sulphuric acid constraints in Kazakhstan eased during the quarter
with the commissioning of the Balkhash sulphuric acid plant in June.
- Measured resources in the United States increased by 80% from
10.7 million pounds of U(3)O(8) to 19.2 million pounds of U(3)O(8).
- Moore Ranch feasibility study completed with an after-tax NPV of
$81 million. Expected life of mine average cash operating costs
before taxes in 2008 terms, are expected to be $14 per pound of
U(3)O(8) and total cash costs are expected to be $26 per pound of
U(3)O(8), including state taxes and royalties.
- The Corporation concluded a senior secured revolving credit facility
at the end of Q2 2008 for $100 million from Bank of Montreal and The
Bank of Nova Scotia.
- The Corporation realized $66.7 million in cash from the sale of non-
core assets during Q2 2008.
MANAGEMENT CHANGES
- Jean Nortier has been appointed President and Chief Executive Officer
and a Director of the Corporation. Mr. Nortier has extensive
experience with Uranium One Group and has previously acted as Chief
Financial Officer, Executive Vice President Corporate Development and
recently as interim Chief Executive of the Corporation.
- The Corporation is establishing a Technical Services division in
Denver, which will provide technical support to the Corporation's
operations, including areas such as safety, health and environmental,
project management, exploration, resource estimation, reserve
calculation, metallurgy, mining, project evaluation and due
diligences.
- The Corporation has appointed Eben Swanepoel as Senior Vice
President, Africa & Europe succeeding Robert van Niekerk who has been
appointed Executive Vice President, Technical Services. Mr. Swanepoel
has over 25 years in mining experience in Southern Africa, including
as General Manager of Tati Nickel Company in Botswana where he
oversaw the successful turn-around of the open pit and trackless
underground operations.
OPERATIONS
- Production from Akdala continued at expected rates of throughput and
grade with total attributable production in Q2 2008 of 435,300 pounds
of U(3)O(8) at a cash operating cost of $14 per pound of U(3)O(8)
sold.
PROJECTS
- South Inkai continued to exceed targets during Q2 2008, with
attributable pre-commercial production for the quarter of
257,100 pounds of U(3)O(8). Attributable pre-commercial production
from South Inkai in July was 48,000 pounds of U(3)O(8), bringing the
year to date total to 449,600 pounds of U(3)O(8).
- Due to the better than expected ramp-up at South Inkai, attributable
pre-commercial production guidance for 2008 has been raised from
500,000 pounds to 910,000 pounds U(3)O(8), subject to permission to
move to industrial production, now expected in H2 2008.
- Pre-commercial production from Dominion totalled 74,700 pounds of
U(3)O(8) in Q2 2008. Pre-commercial production in July 2008 was
approximately 23,800 pounds of U(3)O(8). The average grade of
underground ore delivered to the plant was 0.43 kg/tonne during the
quarter.
- Construction and refurbishment of the Hobson ISR Facility was
successfully completed during the quarter.
- In July 2008, the Corporation submitted permit applications to the
NRC and WDEQ to construct and operate an in situ recovery facility
with an annual production capacity of 2 million pounds U(3)O(8) at
Antelope and a satellite plant at JAB.
KEY STATISTICS
TOTAL PRODUCTION Q2 2008 Q1 2008 Q4 2007 Q3 2007
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Attributable production from
Akdala (lbs of U(3)O(8)) 435,300 431,500 435,400 451,600
Attributable pre-commercial
production from South Inkai
(lbs of U(3)O(8)) 257,100 144,500 39,500 -
Pre-commercial production from
Dominion (lbs of U(3)O(8)) 74,700 42,900 64,200 86,800
-------------------------------------------------------------------------
Total production 767,100 618,900 539,100 538,400
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FINANCIAL Q2 2008 Q2 2007 H1 2008 H1 2007
-------------------------------------------------------------------------
Attributable production
(lbs of U(3)O(8))(1) 435,300 452,200 866,800 940,200
Attributable sales
(lbs of U(3)O(8))(1) 685,600 244,200 968,900 849,500
Average sales price achieved
($ per lb of U(3)O(8))(2) 72 95 74 77
Average cash cost of
production sold
($ per lb of U(3)O(8))(2) 14 8 13 11
Revenues ($ millions) 49.4 23.3 71.9 65.0
Earnings from mine operations
($ millions) 32.9 19.2 49.2 49.0
Net loss from continuing
operations ($ millions) (68.2) (13.1) (78.5) (5.1)
Loss per share from continuing
operations - basic and
diluted ($ per share) (0.15) (0.04) (0.17) (0.02)
Earnings/(loss) from
discontinued operations
($ millions) 0.3 (0.6) (104.3) (0.6)
Earnings/(loss) per share
from discontinued operations -
basic and diluted
($ per share) 0.00 (0.00) (0.22) (0.00)
Net loss ($ millions) (67.9) (13.7) (182.8) (5.7)
Net loss per share - basic
and diluted ($ per share) (0.15) (0.04) (0.39) (0.02)
Adjusted net earnings/(loss)
($ millions)(2) 6.6 (6.9) (3.7) 9.6
Adjusted net earnings/(loss)
per share - basic and diluted
($ per share)(2) 0.01 (0.02) (0.01) 0.04
Notes:
------
(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
price per pound of U(3)O(8), cost per pound of U(3)O(8) sold,
adjusted net earnings and adjusted net earnings per share. 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".
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 36% 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 Canyon Mill in Utah. The Corporation is evaluating corporate development opportunities for its 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 Q2 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(1) 70% J.V. interest
LLP Uranium
Project
Kyzylkum Kharasan Kazakhstan Development 30% J.V. interest
LLP Uranium
Project
Uranium One Dominion South Commissioning(1) 100% interest(2)
Africa Uranium Africa
Limited Project
Notes:
------
(1) 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.
(2) 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.
The Corporation is also developing the following mineral properties:
Entity Project Location Status Ownership
-------------------------------------------------------------------------
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)
-------------------------------------------------------------------------
South Texas Hobson USA Development 99% interest
Mining Facility and
Venture La Palangana
Project,
Texas
-------------------------------------------------------------------------
Uranium One Honeymoon Australia Development 100% interest
Australia Uranium temporarily
(Proprietary) Project suspended
Ltd.
-------------------------------------------------------------------------
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 subsoil use contract, 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 621,800 pounds of U(3)O(8) (239 tonnes U) during Q2 2008 of which 435,300 pounds of U(3)O(8) (167 tonnes U) is attributable to the Corporation. As Akdala is operating in steady state at licenced capacity, production for 2008 is expected to be similar to 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))
-------------------------------------------------------------------------
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
Q2 2008 89 167 1,359 83.6 621,800
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. A new production block was acidified during Q2 2008 and commissioned in June 2008 to allow for an increase in the average flow rate and subsequent improved concentration in the solution. Acidification of two additional production blocks commenced in July 2008.
The construction of the precipitation and filtration circuit was completed in Q1 2008 and it was commissioned and became fully operational during Q2 2008. The filtration and precipitation circuit enables 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 June 30 March 31 Dec 31 Sept 30
attributable share) 2008 2008 2007 2007
-------------------------------------------------------------------------
Production of U(3)O(8) in lbs 435,300 431,500 435,400 451,600
Sales of U(3)O(8) in lbs 685,600 283,300 689,200 70,000
Inventory U(3)O(8) in lbs 620,500 886,500 748,900 1,007,000
Revenues ($000's) 49,390 22,517 61,010 8,019
Sales ($/lb of U(3)O(8) sold) 72 79 89 115
Operating expenses ($000's) 9,487 3,292 7,521 660
Operating expenses
($/lb of U(3)O(8) sold) 14 12 11 9
Depreciation and depletion
($000's) 6,960 2,931 6,972 1,067
Depreciation and depletion
($/lb of U(3)O(8) sold) 10 10 10 15
2 months 3 months
ended ended
(All figures are --------------------------------------------
the Corporation's June 30 Mar 31 Dec 31 Oct 31
attributable share) 2007 2007 2006 2006
-------------------------------------------------------------------------
Production of U(3)O(8) in lbs 452,200 488,000 426,500 513,100
Sales of U(3)O(8) in lbs 244,300 605,200 880,700 99,300
Inventory U(3)O(8) in lbs 636,800 436,500 565,400 1,026,900
Revenues ($000's) 23,265 41,730 46,256 4,193
Sales ($/lb of U(3)O(8) sold) 95 69 53 42
Operating expenses ($000's) 2,058 7,043 7,872 1,417
Operating expenses
($/lb of U(3)O(8) sold) 8 12 9 14
Depreciation and depletion
($000's) 2,024 4,859 7,240 1,209
Depreciation and depletion
($/lb of U(3)O(8) sold) 8 8 8 12
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. Annual sales of product from a mine, which is normally determined from opening inventory plus a percentage of forecast production for the year, does not always occur evenly throughout the year and could vary significantly from quarter to quarter as illustrated in the table above. It is estimated that attributable sales from Akdala for 2008 will be approximately 2 million pounds of U(3)O(8) and will be met through production and inventories on hand.
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.
The increase in operating expenses per pound sold from $12 in Q1 2008 to $14 in Q2 2008 is mainly due to a significant increase in the cost of sulphuric acid in Q1 and Q2 2008. Since the commencement of operations at the new Kazakhmys Balkhash sulphuric acid plant in June 2008, the cost of sulphuric acid has decreased significantly and the Corporation does not expect the cost per pound of U(3)O(8) sold to increase further in the second half of the year.
REVIEW OF DEVELOPMENT PROJECTS - KAZAKHSTAN 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 continued to exceed expectations and in Q2 2008 was 367,300 pounds of U(3)O(8) (141 tonnes U) of which 257,100 pounds of U(3)O(8) (99 tonnes U) is attributable to the Corporation. The Corporation expects pre-commercial production from South Inkai to be approximately 1,300,000 pounds of U(3)O(8) (500 tonnes U) during 2008 of which 910,000 pounds of U(3)O(8) (350 tonnes U) will be attributable to the Corporation. This level of production is dependent on the granting of permission for South Inkai to move to industrial production in the second half of 2008, as it is currently only permitted pilot production of 780,000 pounds of U(3)O(8) (300 tonnes U) per year.
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))
-------------------------------------------------------------------------
Q3 2007 113 - - - -
Q4 2007 92 30 106.0 122.7 56,500
Q1 2008 53 24 163.5 229.0 206,400
Q2 2008 90 30 253.0 258.2 367,300
Acidification of production blocks, flow rate, concentration and the number of operating wells are carefully monitored and managed to ensure that South Inkai does not exceed permitted levels of production, which is currently 780,000 pounds of U(3)O(8) (300 tonnes U) per year as pilot production.
Pending the amendment of South Inkai's subsoil use contract to increase permitted production from 780,000 pounds of U(3)O(8) per year to 5,200,000 pounds of U(3)O(8) per year and the granting of permission to move to industrial production, production rates were reduced from May 2008 onwards and approximately 68,600 pounds of U(3)O(8) was produced in July 2008.
Industrial production: South Inkai's subsoil use contract specifies a pilot production level of 300 tonnes U per year, with an industrial production level of 600 tonnes U per year. Uranium One has recently been advised that the Kazakhstan Ministry of Energy and Mineral Resources has, subject to the approval of reserves by the State Committee for Geology, approved the amendment to the South Inkai subsoil use contract to increase the permitted industrial production level at South Inkai from 1,560,000 lbs U(3)O(8) (600 tonnes U) per year to 5.2 million lbs U(3)O(8) (2,000 tonnes U) per year. Uranium One's attributable production at full capacity is expected to be 3.6 million lbs U(3)O(8) per year.
The amendment of the subsoil use contract as well as the granting of permission to move to industrial production, previously anticipated in the first half of 2009, is now expected to become effective in the second half of 2008.
Construction: Uranium processing facilities being constructed at South Inkai are of a similar design to those at the Akdala Mine, which is facilitating 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 $56.2 million and further capital expenditure to complete the project to design capacity is expected to be $8 million.
KHARASAN URANIUM PROJECT
Kharasan is an ISR uranium development project located in the Suzak region of South Kazakhstan. Kyzylkum LLP ("Kyzylkum"), a Kazakhstan registered limited liability partnership, owns a 100% interest in the Kharasan Project. Uranium One owns a 30% joint venture interest in Kyzylkum and the remaining interests in Kyzylkum are owned as to 30% by Kazatomprom and as to 40% by Energy Asia (BVI) Ltd., which is owned by a consortium of Japanese utilities and a trading company.
The design capacity of Kharasan is 5,200,000 pounds of U(3)O(8) (2,000 tonnes U) per year. It is expected that the annualized rate of production will reach this level in 2011.
Pre-commercial production: Kharasan now expects to produce approximately 166,700 pounds of U(3)O(8) (64 tonnes U) as pilot production during 2008, of which 50,000 pounds of U(3)O(8) (19 tonnes U) will be attributable to the Corporation. Previously, 2008 production had been estimated at 715,000 pounds of U(3)O(8) (275 tonnes U), with 220,000 pounds of U(3)O(8) (85 tonnes U) attributable to the Corporation.
Although acidification of the first well field at Kharasan commenced in March 2008, the increase in concentration in the solution is slower than expected and commencement of production has been delayed. The longer acidification period, together with delays in wellfield construction and piping contributed to the revision of the expected production for 2008. The Corporation is continuing to assess the factors contributing to the slow increase in concentration.
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))
-------------------------------------------------------------------------
Q3 2007 7 33 - - - -
Q4 2007 10 47 - - - -
Q1 2008 10 30 - - - -
Q2 2008 10 58 - - - -
Note:
-----
(1) As at end of quarter
Industrial production: A delineation drilling program to convert a sufficient amount of resources from the Russian C2 category to the Russian C1 category is ongoing and 35 drill holes were completed in Q2 2008, with a total of 55 drill holes completed for the 6 months ending June 30, 2008. The deployment of additional drill rigs in June 2008 advanced the rate of exploration drilling in Q2 2008.
For Q2 2008, another 58 of the required wells for the pilot test program to prove the productivity of the well fields, had been completed, advancing the total number of wells completed for the year up to June 30, 2008 to 88.
Kyzylkum will make an interim application for permission to move to industrial production based on the 177 exploration holes already drilled as well as the performance of the first wellfield, which serves as the pilot production block for purposes of the application. It is expected that the application process will commence in December 2008 when sufficient information from the pilot production block is available and the application should be completed in Q2 2009.
The Corporation expects to achieve industrial production for Kharasan in the first half of 2009.
Construction: Significant advances in the completion of the industrial complex were made during Q2 2008 in warmer weather conditions. By the end of June 2008 the initial circuit for start up of production was substantially complete and the remainder of the 1,000 tonne circuit planned for 2008 will be completed during the second half of 2008.
To date, total expenditure incurred by Kyzylkum relating to the construction of the industrial complex at Kharasan is $44.4 million. Further capital expenditure to complete the project to design capacity of 2,000 tonnes per year is expected to be $16 million.
Infrastructure development: The construction of a railroad switching station was completed in Q2 2008 and Phase 1 of the railroad transhipment base to meet the requirements for pilot production is progressing on schedule and is expected to be completed in Q3 2008.
Total expenditure incurred by Kyzylkum to date relating to infrastructure development at Kharasan amounts to $51.2 million with further capital expenditure to complete the required infrastructure expected to be $10 million. A consortium agreement was concluded 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). The agreement resulted in a return of $22.6 million in capital to Kyzylkum relating to infrastructure amounts expended to date.
Project finance facility: In addition to the $80 million loan from the Corporation, Kyzylkum negotiated unsecured bank loan facilities in Q2 2007 totalling $100 million. One facility, in the amount of $70 million, was obtained from the Japan Bank for International Cooperation ("JBIC") and the other facility, in the amount of $30 million, was obtained from Citibank. These facilities have been drawn down in full as at June 30, 2008. The $80 million loan from the Corporation (principal of $60 million outstanding as at June 30, 2008) has to be repaid in full before repayments can be made on the Japan Bank for International Cooperation and Citibank facilities. As the Corporation proportionately consolidates its 30% interest in Kyzylkum, the Corporation's share of these facilities amounts to $30 million. The loan facilities have floating interest rates of LIBOR plus 0.25% and 0.35%, respectively.
SULPHURIC ACID SUPPLY IN KAZAKHSTAN
The new Kazakhmys Balkhash sulphuric acid plant located in eastern Kazakhstan was commissioned and commenced acid production in June 2008. This plant, which has an annual capacity of 1.2 million tonnes of sulphuric acid, provides Kazakh uranium producers, including the Corporation's Betpak Dala and Kyzylkum Joint Ventures in Kazakhstan, with a significant additional source of sulphuric acid in the country. While production levels at the Corporation's operations in Kazakhstan have not, to date, been constrained by acid supply, the commissioning of the Balkhash plant is expected to ensure that this will continue to be the case.
To ensure long term supply continuity, the Corporation is establishing a joint venture with Kazatomprom and other affected parties to build a sulphuric acid plant at Zhanakorgan, which is near 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%. The total construction cost of the plant is expected to be approximately $200 million of which 30% is planned to be funded by the joint venture partners during two years of construction and the balance potentially funded through debt financing. Construction of the plant is expected to be completed in 2011.
REVIEW OF DEVELOPMENT PROJECTS - SOUTH AFRICA 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 Q2 2008, pre-commercial production from the Dominion Uranium Project was 74,700 pounds of U(3)O(8) and 1,800 ounces of gold, compared to 42,900 pounds of U(3)O(8) and 1,200 ounces of gold in Q1 2008. Pre-commercial production for 2008 is now estimated to be 320,000 pounds of U(3)O(8), compared to previous estimates of 590,000 pounds of U(3)O(8). Proceeds from sales of material produced during the commissioning period will be offset against capital expenditures.
Pre-commercial production from Dominion in July 2008 was approximately 23,800 pounds of U(3)O(8).
Mine development: Mining operations 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)
-------------------------------------------------------------------------
Q3 2007 3,662 84,300 0.406
Q4 2007 3,130 86,800 0.358
Q1 2008 3,649 94,200 0.361
Q2 2008 3,883 98,500 0.536
Note:
-----
(1) Underground blasted grade includes all in-stope mining dilution and
on reef development. The underground blasted grade is based on
underground sampling.
The grade of underground ore delivered to the plant averaged 0.43 kg per tonne during Q2 2008.
The average blasted grade increased from 0.361 kg/tonne in Q1 2008 to 0.536 kg/tonne in Q2 2008. Blasted grades will continue to increase as: the mining crews gain experience with the reef being mined; current reef development opens up higher grade areas for mining; and cut-off grades are strictly adhered to.
During Q2 2008, the Corporation reached a new two year collective wage agreement covering its unionized workforce at Dominion. The new agreement replaces the 2005 collective agreement, which expired in June 2008. It provides for graduated increases in base salary in line with the Corporation's expectations, as well as certain medical and pension benefits.
The mine development cost for the year to date amounted to $20.6 million, of which $10.9 million was spent in Q2 2008.
Metallurgical plant: Plant recoveries are improving in line with the increased volume of underground material processed. Throughput for Q2 2008 was approximately 94,300 tonnes from underground and 97,500 tonnes from surface tailings material. Total plant recoveries are approximately 70% at present. Based on current head grades and residues, the estimated U(3)O(8) recovery is approximately 78% from underground material and approximately 40% from surface tailing material. Overall plant recoveries are expected to increase over time as the lower grade surface tailings material is displaced by higher grade and increased 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.
To facilitate the expected ramp-up in processing to levels in excess of 100,000 tonnes per month in the plant, a second boiler is being installed and is expected to be commissioned in Q4 2008. Metallurgical test work has indicated that the grade of the surface tailings material being treated can be increased significantly with the introduction of cyclones. A cyclone is a device that separates course and fine particles in material using centrifugal forces. The cyclones are expected to be commissioned in Q4 2008.
Exploration activities: In June 2008, the Corporation received the required Certificate of Registration from the South African National Nuclear Regulator, allowing it to carry out exploration drilling on its prospecting rights between the current Dominion project area and Ottosdal. The Corporation has prospecting rights over approximately 56,600 hectares in the general vicinity of the Dominion Project, including a Dominion reef outcrop of approximately 14 kilometres in the Ottosdal area. A drilling campaign to test the extensions at Ottosdal is scheduled to commence in Q3 2008.
REVIEW OF DEVELOPMENT PROJECTS - UNITED STATES
The Corporation is developing new uranium production centers in the western United States. Renovations are essentially complete at the Hobson Central Processing Plant south of San Antonio, Texas. This fully licensed facility will be able to accept and process uranium bearing resins from remote ISR satellite operations across south Texas. In Wyoming, Uranium One is in the process of licensing two ISR central processing plants in the Powder River Basin (Moore Ranch) and Great Divide Basin (Antelope) to process uranium bearing resins from various Uranium One properties in Wyoming. Renovation and licensing updates are underway as pre-requisites to a restart of the Shootaring Canyon Mill in eastern Utah. This mill could serve as the processing hub for open pit and underground mines scattered across northern Arizona, western Colorado, and Utah.
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.
The Moore Ranch Project is located in the Pumpkin Buttes uranium district in Campbell County, 25 miles east of Edgerton in the Powder River Basin of Wyoming. Moore Ranch has a NI 43-101 compliant measured resource suitable for in situ recovery.
Feasibility study: A Feasibility Study ("Feasibility Study") for the Moore Ranch Project was prepared by engineering consulting companies TREC, Inc., and BRS Engineering, Inc. The Feasibility Study was prepared in accordance with NI 43-101 to evaluate the technical and economic feasibility of the Moore Ranch Project using the most current scientific and engineering information available. In summary, the Feasibility Study demonstrated both the technical and economic feasibility of the Moore Ranch Project. The Feasibility Study also demonstrated that the previously defined in-place measured resources at the Moore Ranch Project can be converted to probable mineral reserves in accordance with NI 43-101 as follows:
Category (June 17, Average Grade
2008)(1,2,3) Tons (%eU(3)O(8)) Pounds U(3)O(8)
-------------------------------------------------------------------------
Measured Resource 5,507,616 0.060 6,566,871
Probable Reserve 4,263,420 0.054 4,596,810
Notes:
------
(1) Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
(2) Mineral resources are inclusive of mineral reserves.
(3) Probable reserve based on 70% recovery of measured resource.
The Feasibility Study only considered reserves from the Moore Ranch
deposit. The Corporation will continue to advance its other projects within
the Powder River Basin with a view to supplementing production from the Moore
Ranch deposit. Salient details of the Feasibility Study including key
assumptions and conclusions are as follows:
- Two alternatives were evaluated: a satellite only option using toll
processing of resins at Power Resources Inc., and a 2,000,000 pound
per year capacity central processing plant ("CPP") option. Based on
the results of the Feasibility Study, the Corporation will be
proceeding with development of a Central Processing Plant.
- The economic analysis was based on the probable reserve of
4,596,810 pounds of U(3)O(8).
- The analysis uses a constant sales price of $64 per pound over the
project life.
- The analysis includes Wyoming sales, ad valorem, and mineral
severance taxes and corporate income tax.
- Pre-tax cash operating cost per pound is $13.70 for the most
favorable alternative (CPP). Total cash costs including royalties and
state taxes are expected to be $26.30 per pound.
- Using a valuation date of January 1, 2008, the potential after-tax
economic performance expressed as a net present value ("NPV") and an
internal rate of return ("IRR") is summarized below:
Discount Rate (%) NPV ($ millions)
---------------------------------------------------------------------
5 $92.7
8 $80.5
10 $73.4
IRR 106%
Permitting: 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. Any excess plant capacity would be used to process uranium bearing resins from other properties owned by the Corporation in the Powder River Basin. The Corporation also submitted an application to the Wyoming Department for Environmental Quality ("WDEQ") for a mining permit in October 2007.
The NRC and WDEQ technical reviews of the application to build and operate an in situ uranium recovery facility at the Moore Ranch Project are currently in progress and the Corporation expects to receive the licence and permit during 2009. Production from Moore Ranch is anticipated to commence during 2010.
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.
Permitting: A central processing facility is planned for construction at the Antelope project, with a satellite facility installed at JAB. The central processing facility is planned to have a capacity of 2 million pounds of U(3)O(8) per year. In addition to processing resin from the satellite plant on JAB, the Antelope central processing facility would have the capacity to accept resins from other Uranium One projects in the Great Divide Basin. Those potential projects include Twin Buttes, Cyclone Rim, West JAB, Stewart Creek, Crooks Creek and Bull Springs.
In the first week of July 2008, the Corporation submitted applications to the NRC and WDEQ for the licence and permits to construct and operate an in situ uranium recovery facility for Antelope and JAB. Two of the four new pending ISR applications now before the NRC and WDEQ are the Corporation's Moore Ranch and JAB/Antelope projects.
Delineation and exploration: An extensive drilling program comprising 261 holes was concluded at JAB during 2007 to supplement the data from approximately 1,600 historic holes. Further delineation drilling will occur at Antelope during Q3 2008. Delineation drilling of the Antelope area, to supplement the data from approximately 4,000 historic holes, was initiated in late 2007, but was ceased in February 2008 due to heavy snow in the Great Divide Basin.
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 refurbishment of the processing plant to a capacity of a nominal 1,000,000 pounds of U(3)O(8) per year of dried natural uranium concentrates was completed in July 2008.
The La Palangana Uranium Project is host to an ISR amenable uranium deposit. The Corporation plans to construct and operate a satellite plant at La Palangana where uranium-rich solutions from alkaline leaching well fields will be recovered in an ion exchange plant, producing uranium-laden resin. Periodically, the resin will be transported to the Hobson Central Processing Facility where it will be stripped of uranium. The barren resin will be recycled and reused at La Palangana. The current mine plan for the first and second production areas off the east side of the Palangana dome is based on the recovery of a nominal 0.7 million pounds U(3)O(8) of proven and probable reserves at La Palangana during 2009 and 2010. The inferred resources of 2.0 million tons at a grade of 0.148% U(3)O(8) containing 5.8 million pounds previously reported by Robert E. Blackstone, P.G. of Blackstone and Associates Geological Consulting (NI43-101 dated November 2005) for the La Palangana dome have not been included in the current mine plan.
Construction at La Palangana: The Corporation is continuing with a drilling program that commenced prior to acquisition of the property, to develop an area of the deposit for commercial production and to conduct exploration drilling on other areas of the property.
Permitting: The Corporation has applied for all permits necessary to conduct ISR operations at the Palangana site from the Texas Commission on Environmental Quality, including the Area Permit, Radioactive Materials Licence ("RML"), Production Area Authorization (for the first production area) and Disposal Well Permit. 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, Production Area Authorization and Disposal Well Permit are anticipated to be received in the second half of 2008, with the approval of the RML now expected in the first half of 2009. Each of these four permits will authorize related construction activities as well as operations of portions of the project. However, actual injection of oxygen bearing waters into the ore body and recovery of natural uranium is authorized only by the RML.
During Q2, monitor wells were installed in the second production area at La Palangana and successful hydrologic testing of the area was completed in July. The baseline sampling of the monitor wells should be completed in Q3 with submission of the application for the second production area scheduled for Q4 2008.
Pre-commercial production: Due to an extended permitting process at La Palangana, pre-commercial production is now expected to commence in 2009 and accordingly the previously estimated pre-commercial production for 2008 of 35,000 pounds of U(3)O(8) will not be achieved.
Refurbishment of the Hobson Facility: Refurbishment of the Hobson Facility was completed at the end of May 2008. The new instrumentation and control systems were installed at the plant. Successful wet testing of the resin processing and elution, precipitation circuits was conducted the first week of June 2008. All pumps and shakers required for the resin transfer are operable. The drying and packaging facility was completed in July 2008.
The Hobson Facility is fully permitted and licenced. With the completion of the refurbishment program, the facility is now ready to accept uranium-loaded resin from La Palangana, or any other facility. The schedule for initial production of U(3)O(8) from the Hobson Facility is directly tied to the licencing and development of the La Palangana Uranium Project.
SHOOTARING CANYON MILL AND ASSOCIATED URANIUM PROPERTIES
The Shootaring Canyon Mill is located in Garfield County, Utah and is in proximity to the Corporation's Frank M, Velvet, Woods and Breccia Pipes properties.
The mill is in good condition and essential utilities were restored during 2008. The mill was assessed for detailed restoration requirements and detailed cost estimates for refurbishment have been completed.
The Corporation is continuing with a drill program to assess the resource potential of additional projects in close proximity to the Shootaring Canyon Mill.
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.
RESERVE AND RESOURCE UPDATE FOR PROJECTS IN THE UNITED STATES
During Q2 2008, updated mineral resource and reserve estimates were completed for a number of the Corporation's development projects in the United States. The updated mineral resource and reserve estimates are shown below.
Table 1 - Updated United States Mineral Resource Estimates
(June 17, 2008)(1,2,3)
Measured Mineral Resources
Project Grade lbs
Tons U(3)O(8) U(3)O(8) Ownership
(000's) (%) (000's) (%)
-------------------------------------------------------------------------
Wyoming
Moore Ranch 5,508 0.060 6,567 100
Peterson 841 0.094 1,624 100
Barge 4,324 0.053 4,590 100
Jab 2,516 0.072 3,616 100
West Jab 361 0.115 830 100
Texas
La Palangana 7 0.158 21 99
Utah
New Velvet 363 0.271 1,966 100
-------------------------------------------------------------------------
Total Measured 13,920 0.069 19,214
-------------------------------------------------------------------------
Indicated Mineral Resources
Project Grade lbs
Tons U(3)O(8) U(3)O(8) Ownership
(000's) (%) (000's) (%)
-------------------------------------------------------------------------
Wyoming
Peterson 229 0.086 393 100
Jab 243 0.076 371 100
Texas
La Palangana 383 0.134 1,027 99
Utah
Old Velvet 62 0.410 509 100
Frank M 1,095 0.101 2,210 100
-------------------------------------------------------------------------
Total Indicated 2,012 0.112 4,510
-------------------------------------------------------------------------
Inferred Mineral Resources
Project Grade lbs
Tons U(3)O(8) U(3)O(8) Ownership
(000's) (%) (000's) (%)
-------------------------------------------------------------------------
Wyoming
Moore Ranch 44 0.102 89 100
Jab 241 0.031 150 100
West Jab 65 0.121 158 100
Texas
La Palangana 1,982 0.148 5,834 99
Utah
New Velvet 174 0.174 604 100
Frank M 42 0.090 75 100
-------------------------------------------------------------------------
Total Inferred 2,548 0.136 6,910
-------------------------------------------------------------------------
Notes:
------
(1) The mineral resource for Moore Ranch, Peterson, Jab, West Jab, Barge,
Frank M and Velvet was estimated by Mr. Douglas Beahm of BRS Inc. and
reported to a grade-thickness (GT) cut-off of 0.25. Velvet is
reported to a grade-thickness (GT) cut-off of 0.25 and 0.50
respectively for the measured and indicated resources.
(2) The measured and indicated mineral resource for La Palangana
(Production Areas 1 and 2) was estimated by Mr. Sean Muller of SRK,
and reported to a grade-thickness (GT) cut-off of 0.5. Mr. Sean
Muller has also estimated 190,076 lbs U(3)O(8) of inferred resource
for the Production Areas 1 and 2, included in the 5.83 million lbs
U(3)O(8) total.
(3) Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
Portions of the Measured and Indicated Resources detailed in Table 1 have been converted into Proven and Probable Reserves, as shown in Table 2, through a process of mine planning and the application of appropriate modifying factors and is reported on the basis of delivery to the plant. The mineral reserves detailed below have been determined using a U(3)O(8) price assumption of US$64/lb in order to determine the economic cut-offs.
Table 2 - United States Mineral Reserve Estimates
(June 17, 2008)(1,2,3,4)
Proven Mineral Reserves
Project Grade lbs
Tons U(3)O(8) U(3)O(8) Ownership
(000's) (%) (000's) (%)
-------------------------------------------------------------------------
Texas
La Palangana 6 0.158 18 99
-------------------------------------------------------------------------
Total Proven 6 0.158 18
-------------------------------------------------------------------------
Probable Mineral Reserves
Project Grade lbs
Tons U(3)O(8) U(3)O(8) Ownership
(000's) (%) (000's) (%)
-------------------------------------------------------------------------
Wyoming
Moore Ranch 4,263 0.054 4,597 100
Texas
La Palangana 263 0.134 710 99
Utah
Velvet 375 0.265 1,988 100
-------------------------------------------------------------------------
Total Probable 4,901 0.074 7,295
-------------------------------------------------------------------------
Notes:
------
(1) The mineral reserve for the Moore Ranch Project and the Velvet
Project was estimated by Mr. Douglas Beahm of BRS Inc.
(2) The mineral reserve for the La Palangana Project was estimated by
Mr. Sean Muller of SRK, and verified by Mr. Al Kuestermeyer under the
guidance and supervision of Dr. Neal Rigby of SRK.
(3) Tons and grade are stated on the basis of delivery to the plant.
(4) Mineral reserves are included in mineral resources.
Uranium resource and reserve estimates generally relied on geophysical log data from rotary drill holes representing radiometric equivalent grade augmented by chemical assays from core holes. For each project, radiometric equilibrium was evaluated and a disequilibrium factor (DEF) determined. With the exception of JAB and La Palangana, for which a positive DEF was applied, no correction for disequilibrium was made. Mineral resource and reserve estimates completed utilized the GT Contour method which is the CIM standard method of evaluation for ISL uranium deposits. The validation of resources and reserves for the La Palangana, Velvet, and Frank M projects, utilized the Inverse Distance method. Please refer to "Forward looking statements and other information" for more information on data verification.
The mineral resource estimates considered only mineralization of intrinsic economic interest and applied typical grade and/or GT cut-off criteria, minimum mining thicknesses, and dilution.
CORPORATE CREDIT FACILITY
The Corporation concluded a senior secured revolving credit facility at the end of Q2 2008.
Under the terms of the facility, the Corporation has the ability to borrow up to $100 million from the lead lenders, Bank of Montreal and The Bank of Nova Scotia (the "Banks"). The facility has a two year term, and may be extended for a further year with lender consent.
Draw downs under the facility can be made with interest rates based on either the US dollar LIBOR rate or the Bank of Montreal base rate for US dollar denominated loans. The margin on LIBOR loans is between 1.25% and 2.00% per annum and between 0.25% and 1.00% per annum on US base rate loans. Undrawn amounts are subject to a commitment fee ranging from 0.40% to 0.50%.
Letters of credit can be issued under the facility at a fee of between 1.25% and 2.00% per annum.
The margin on the base interest rates, the commitment fee and the letter of credit fee is dependent on the ratio of the Corporation's net debt (total debt less certain cash balances) to its earnings before interest, taxes, share based compensation, depreciation and depletion and other non-cash items.
Draw downs under the facility may be used for general corporate purposes, including working capital requirements and funding capital expenditures and acquisitions.
The Corporation incurred costs of $5.7 million in setting up the facility, which was deferred and will be amortized on a straight line basis over the initial period of the loan.
The facility was arranged by BMO Capital Markets and Scotia Capital as joint lead arrangers. Endeavour Financial acted as financial adviser to Uranium One.
URANIUM ONE AUSTRALIA
The Corporation suspended development activities at the Honeymoon Uranium Project and is considering corporate development opportunities for the Australian portfolio of assets. Rothschild has been appointed as its financial advisor to assist and to consider various alternatives. The Corporation is considering a wide range of partnership options and may also consider a separate listing of the Australian portfolio. The evaluation process is ongoing and the Corporation expects to reach a conclusion in the second half of 2008.
SALE OF SHAREHOLDING IN AFLEASE GOLD
On March 27, 2008, the Corporation entered into an agreement to sell its shareholding in Aflease Gold. On April 8, 2008 the Corporation sold 152.2 million Aflease Gold shares for $41.3 million, 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. In the first quarter of 2008, the Corporation's investment in Aflease Gold was written down to its fair value, based on a combination of the contracted sales price and the market price on the JSE. The impairment, net of future income taxation recovery, amounted to $103.5 million.
During June 2008, the Corporation sold an additional 9.1 million Aflease Gold shares for $2.8 million, decreasing the Corporation's shareholding to 36%. The Corporation realized a gain of $0.7 million on the sale of these shares. The tax on these transactions was offset against the assessed tax losses of Uranium One Africa Limited, a wholly owned subsidiary of the Corporation.
The assets and liabilities of Aflease Gold have been classified as discontinued operations for all periods presented in the Corporation's financial statements. As a result of the Corporation's partial disposal of its interest in Aflease Gold, consolidation of Aflease Gold is no longer appropriate. The Corporation has equity accounted for its investment in Aflease Gold for the three months ended June 30, 2008 and its share of Aflease Gold's earnings is recorded in the discontinued operations line in the consolidated statement of operations for the three months ended June 30, 2008. The Corporation's net equity investment in Aflease Gold is recorded as discontinued operations (non-current assets) in the consolidated balance sheet as at June 30, 2008. The Board of Directors has approved the sale of the remaining portion of Uranium One Africa's shareholding in Aflease Gold.
SALE OF NON-CORE ASSETS
During the quarter, Uranium One Africa disposed of its shareholding of 8.6 million shares in Randgold and Exploration Company Limited ("Randgold") for proceeds of approximately $13.0 million. In 2005 Randgold was de-listed by the NASDAQ and suspended by the JSE for failure to file audited financial statements for its 2004 financial year. The Corporation therefore attributed no value to these shares during the business combination between Uranium One and UrAsia Energy on April 20, 2007. Taxes of $1.5 million on the capital gain realized on the sale were offset against loss carry-forwards of Uranium One Africa.
The Corporation sold other available for sale securities for net cash proceeds of $9.6 million during Q2 2008. A loss of $4.4 million was realized on the sale of these securities. Tax of $0.8 million on the capital gain was set off against the Corporation's tax loss carry-forwards.
In March 2008 the Corporation decided to sell non-core properties and as a result certain exploration properties are classified as held for sale as at June 30, 2008. The Corporation has received letters of intent from potential buyers to acquire certain of these properties. These assets held for sale have been written down to their estimated fair value, less selling costs, resulting in an impairment charge of $105.1 million and a future income tax recovery of $23.9 million.
SUMMARY OF QUARTERLY RESULTS
Jun 30 Mar 31 Dec 31 Sept 30
2008 2008 2007 2007
$(000's) $(000's) $(000's) $(000's)
-------------------------------------------------------------------------
Revenues 49,390 22,517 61,010 8,019
Net (loss)/earnings from
continuing operations(3) (68,195) (10,315) 5,880 (16,980)
Basic and diluted (loss)/
earnings per share from
continuing operations(1)(3) (0.15) (0.02) 0.01 (0.04)
Earnings/(loss) from
discontinued operations(3) 274 (104,555) (509) (277)
Basic and diluted loss per
share from discontinued
operations(3) 0.00 (0.22) (0.00) (0.00)
Net (loss)/earnings (67,921) (114,870) 5,371 (17,257)
Basic and diluted loss
per share (0.15) (0.24) 0.01 (0.04)
Total assets 4,970,117 5,052,346 5,612,897 5,710,605
Jun 30 Mar 31 Dec 31 Oct 31
2007 2007 2006(2) 2006
$(000's) $(000's) $(000's) $(000's)
-------------------------------------------------------------------------
Revenues 23,265 41,730 46,256 4,193
Net (loss)/earnings from
continuing operations(3) (13,108) 7,971 (6,228) 25,912
Basic and diluted (loss)/
earnings per share from
continuing operations(1)(3) (0.04) 0.04 (0.03) 0.12
Earnings/(loss) from
discontinued operations(3) (586) - - -
Basic and diluted loss per
share from discontinued
operations(3) (0.00) - - -
Net (loss)/earnings (13,694) 7,971 (6,228) 25,912
Basic and diluted loss
per share (0.04) 0.04 (0.03) 0.12
Total assets 4,247,176 999,950 971,618 949,530
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.
(3) With the classification of Aflease Gold as a discontinued operation
in Q1 2008, the operating results of Aflease Gold for periods up to
Q1 2008 were reclassified from previously reported headings to
earnings/(loss) from discontinued operations. The net impairment on
Aflease Gold of $103.5 million in Q1 2008 is also reported under this
heading.
NON-GAAP MEASURES
ADJUSTED NET EARNINGS/LOSS
The Corporation has included non-GAAP performance measures, adjusted net earnings and adjusted net earnings per share throughout this document. The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Corporation's performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The following table provides a reconciliation of adjusted net earnings to the financial statements:
(US dollars in thousands) 3 Months 3 Months 6 Months 6 Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
Net loss from continuing
operations (68,195) (13,108) (78,508) (5,137)
Unrealized foreign exchange
(gain)/loss on future
income tax liabilities (171) 6,177 (1,309) 14,777
Gain on sale of available for
sale securities
(net of tax of $2,397) (6,205) - (5,070) -
Impairment of assets held for
sale (net of tax of $23,880) 81,209 - 81,209 -
-------------------------------------------------------------------------
Adjusted net earnings/(loss) 6,638 (6,931) (3,678) 9,640
-------------------------------------------------------------------------
Adjusted net earnings/(loss)
per share - basic and
diluted ($) 0.01 (0.02) (0.01) 0.04
Weighted average number of
shares (thousands) -
basic and diluted 468,166 332,956 467,809 275,380
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 are 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.
(US dollars in thousands 3 Months 3 Months 6 Months 6 Months
except per share and per ended ended ended ended
lb amounts) June 30, June 30, June 30, June 30,
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
Revenue 49,390 23,265 71,907 64,995
Loss from continuing
operations(1) (68,195) (13,108) (78,508) (5,137)
Earnings/(loss) from
discontinued operations(1) 274 (586) (104,282) (586)
Net loss (67,921) (13,694) (182,790) (5,723)
Adjusted net earnings/(loss) 6,638 (6,931) (3,678) (9,640)
Cash flows (used in)/from
operating activities (30,363) (17,279) 9,096 34,139
Loss per share from
continuing operations(1) (0.15) (0.04) (0.17) (0.02)
Loss per share from
discontinued operations(1) 0.00 (0.00) (0.22) (0.00)
Loss per share (0.15) (0.04) (0.39) (0.02)
Adjusted net earnings/(loss)
per share 0.01 (0.02) (0.01) 0.04
Product inventory carrying
value(2) 13,092 12,082 13,092 12,082
Total assets 4,970,117 4,247,176 4,970,117 4,247,176
Long term financial
liabilities 1,587,847 1,470,452 1,587,847 1,470,452
Average realized uranium
price per lb of U(3)O(8) 72 95 74 77
Average U(3)O(8) spot
price per lb 61 126 68 105
lbs of lbs of lbs of lbs of
U(3)O(8) U(3)O(8) U(3)O(8) U(3)O(8)
-------------------------------------------------------------------------
Attributable sales volume 685,600 244,300 968,900 849,500
Attributable production volume 435,300 452,200 866,800 940,200
Attributable inventory(3) 620,500 636,800 620,500 636,800
Notes:
------
(1) With the classification of Aflease Gold as a discontinued operation
in Q1 2008, the operating results of Aflease Gold for periods up to
Q1 2008 were reclassified from previously reported headings to
earnings/(loss) from discontinued operations.
(2) Inventory as at June 30, 2008 is attributable to the Akdala Uranium
Mine. Pre-commercial production from the Corporation's development
projects are capitalized to the project as pre-production capital
expenditure.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2008
URANIUM SALES, INVENTORY AND OPERATING COSTS
The spot price of U(3)O(8) reached record levels during Q2 2007 and closed the quarter off at $136 per pound of U(3)O(8). Since then it has steadily retracted, reaching a low of $57 per pound of U(3)O(8) in June and closing at $59 per pound of U(3)O(8) at June 30, 2008. As the majority of the Corporation's sales contracts are related to the spot price of U(3)O(8) at the time of delivery, fluctuations in the spot price of U(3)O(8) have a direct impact on the Corporation's revenue.
In line with existing contracts, sales attributable to the Corporation during Q2 2008 amounted to 685,600 pounds of U(3)O(8), compared to 244,300 pounds of U(3)O(8) in Q2 2007. The Corporation's attributed share of revenue from sales in Q2 2008 amounted to $49.4 million, compared to $23.3 million in Q2 2007, with the higher sales volume partially offset by a 24% decrease in the average realized uranium price per pound of U(3)O(8) compared to Q2 2007.
The average realized price per pound of U(3)O(8) sold in Q2 2008 was $72, compared to an average spot price per pound of U(3)O(8) of $61 in the quarter; the average realized price per pound of U(3)O(8) sold in Q2 2007 was $95, compared to an average spot price per pound of U(3)O(8) of $125 in Q2 2007.
Earnings from mining operations were $32.9 million in Q2 2008 after the deduction of operating expenses of $9.5 million ($14 per pound of U(3)O(8) sold) and depreciation and depletion charges of $7.0 million ($10 per pound of U(3)O(8) sold). During Q2 2008 attributable inventory decreased by 266,000 pounds of U(3)O(8) as more U(3)O(8) was delivered into sales contracts than the production for the quarter.
In Q2 2007, earnings from mining operations were $19.2 million after the deduction of operating expenses of $2.1 million ($8 per pound of U(3)O(8) sold) and depletion costs of $2.0 million ($8 per pound of U(3)O(8) sold).
GENERAL AND ADMINISTRATIVE COSTS
General and administrative expenses, including stock option and restricted share expenses of $4.5 million, amounted to $13.9 million for Q2 2008, compared to $18.0 million for Q2 2007, including stock option and restricted share expenses of $9.6 million. Stock-based compensation was unusually high in Q2 2007, due to the revaluation of options during the business combination between Uranium One and UrAsia Energy. Higher administrative costs are in line with the Corporation's forecasts and largely relate to the substantial increase in size of operations resulting from acquisition activities and growth. The expense for Q2 2008 includes salaries of $4.4 million and consulting fees of $1.0 million.
EXPLORATION
Exploration expenditure relates to exploration programs being undertaken on the Corporation's licence areas in the United States, South Africa, Canada, Australia and the Kyrgyz Republic and amounted to $5.0 million in Q2 2008 compared to $4.4 million in Q2 2007.
INTEREST INCOME AND EXPENSE
Interest income amounted to $3.1 million for Q2 2008, compared to $4.3 million for Q2 2007. In addition to the interest earned on loans to joint ventures, interest is earned on funds held on deposit by the Corporation. The Corporation's consolidated cash balance decreased from $288.0 million at the end of Q2 2007 to $133.1 million at the end of Q2 2008, which together with a decrease in yields on cash invested, contributed to the decrease in interest income.
Interest expense of $3.9 million for Q2 2008 includes interest accrued on the convertible debentures and the Corporation's proportionate share of the interest on the Kyzylkum loan facility. The interest expense of $3.0 million in Q2 2007 reflects the interest accrued on the convertible debentures between April 20, 2007, the date of the business combination between Uranium One and UrAsia Energy, and June 30, 2007.
IMPAIRMENT OF ASSETS HELD FOR SALE
The Corporation carries assets held for sale at fair value. Assets held for sale include Aurora and the Corporation's share in Sheep Mountain. The fair value of these assets was determined to be $15.5 million at June 30, 2008 and an impairment of $81.2 million (net of a future income tax recovery of $23.9 million) was recognized.
GAIN ON SALE OF AVAILABLE FOR SALE SECURITIES
The Corporation's portfolio of available for sale securities consists of listed shares, mostly in junior uranium exploration companies. These securities were acquired in business combinations and as part of proceeds for the sale or joint venturing of non-core assets. The Corporation disposes of these shares in a controlled fashion as and when opportunity arises and realized a gain of $8.6 million on the disposal of available for sale securities, including the Corporation's investment in Randgold during Q2 2008. Taxes of $2.3 million on the profits realized were offset against available tax loss carry forwards.
There were no sales of available for sale securities in Q2 2007.
FOREIGN EXCHANGE GAIN / LOSS
The net foreign exchange gain during Q2 2008 amounted to $2.4 million and consisted of a $0.2 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, a realized gain of $1.0 million and an unrealized gain on other items of $1.3 million. For Q2 2007, a foreign exchange loss of $6.0 million was recorded.
INCOME TAXES
Current income tax expense for Q2 2008 was $17.5 million and represents taxes paid and payable in Kazakhstan on profits from the Corporation's Akdala Uranium Mine of $15.2 million and $2.3 million on the capital gains from the disposal of available for sale securities. For Q2 2007 a $7.8 million income tax expense was recorded for the Akdala Uranium Mine.
The future income tax recovery during Q2 2008 consists of $2.5 million arising 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, a future income tax recovery of $23.9 million on impairments recognized on assets held for sale, as well as an increase in future income tax assets due to temporary differences and tax loss carry forwards. In Q2 2007, a recovery of future income taxes of $2.2 million was recorded, being a reduction in future income tax liability.
EARNINGS FROM DISCONTINUED OPERATIONS
During Q2 2008 an after-tax gain of $0.7 million was realized on the sale of 161.3 million Aflease Gold shares. The tax payable on the gains realized was offset against loss carry-forwards of Uranium One Africa.
The after tax gain realized was offset by the Corporation's estimated share of Aflease Gold's net loss for the quarter of $0.4 million, resulting in earnings from discontinued operations of $0.3 million.
NET LOSS FOR THE PERIOD
The net loss for Q2 2008 amounted to $67.9 million or $0.15 per share (basic and diluted), compared to a net loss of $13.7 million or $0.04 per share (basic and diluted) for Q2 2007.
SIX MONTHS ENDED JUNE 30, 2008 URANIUM SALES, INVENTORY AND OPERATING COSTS
Revenue from uranium sales attributable to the Corporation during the six months ended June 30, 2008 amounted to $71.9 million for approximately 968,900 pounds of U(3)O(8) sold. Mining operations reflected a pre-tax income of $49.2 million after the deduction of operating expenses of $12.8 million and depreciation and depletion charges of $9.9 million. Revenue from attributable uranium sales during the six months ended June 30, 2007 amounted to $65.0 million for approximately 849,200 pounds of U(3)O(8) sold. Mining operations reflected a pre-tax income of $49.0 million after deduction of production and depletion costs totalling $16.0 million.
The average unit price received for sales in the six month period ended June 30, 2008 was $74 per pound of U(3)O(8). The average price obtained in the six months ended June 30, 2007 was $77 per pound of U(3)O(8). The average spot price per pound of U(3)O(8) was $68 for the six months ended June 30, 2008 and $105 for the six months ended June 30, 2007.
Operating expenses for the six month period ended June 30, 2008 were $12.8 million or approximately $13 per pound of U(3)O(8) sold. Operating expenses during the six months ended June 30, 2007 were $9.1 million or $16 per pound of U(3)O(8) sold. The average unit cost of depletion was $10 per pound of U(3)O(8) sold in the six months ended June 30, 2008 compared to $9 per pound for the of U(3)O(8) sold in the six months ended June 30, 2007.
GENERAL AND ADMINISTRATIVE COSTS
General and administration expenses of $29.2 million were recorded for the six months ended June 30, 2008 compared to $22.7 million in the six months ended June 30, 2007. Due to the business combination between Uranium One and UrAsia Energy on April 20, 2007, the comparative period includes expenses for only UrAsia Energy up to April 20, 2007 and for the combined entity thereafter. General and administration costs are in line with expectations.
Stock option and restricted share expense included in general and administration costs of $10.6 million was recorded for the six months ended June 30, 2008 compared to $13.0 million for the six month period ended June 30, 2007.
EXPLORATION
Exploration expenditure relates to exploration programs being undertaken on the Corporation's licence areas in the United States, South Africa, Canada, Australia and the Kyrgyz Republic and amounted to $6.7 million during the six months ended June 30 2008 compared to $5.8 million during the six months ended June 30 2007.
INTEREST INCOME AND EXPENSE
Interest income amounted to $5.9 million for the six months ended June 30, 2008, compared to $5.3 million for the six months ended June 30, 2007. In addition to the interest earned on loans to joint ventures, interest is earned on funds held on deposit by the Corporation.
Interest expenses of $7.7 million for the six months ended June 30, 2008 include interest accrued on the convertible debentures and the Corporation's proportionate share of the interest on the Kyzylkum loan facility. The interest expense of $3.0 million for the six months ended June 30, 2007 reflects the interest accrued on the convertible debentures between April 20, 2007, the date of the business combination between Uranium One and UrAsia Energy, and June 30, 2007.
GAIN ON SALE OF AVAILABLE FOR SALE SECURITIES
A gain of $7.5 million was realized on the disposal of available for sale securities, including the Corporation's investment in Randgold during the six months ended June 30, 2008. Taxes of $2.3 million on the profits realized were offset against available tax loss carry forwards.
There were no sales of available for sale securities during the six months ended June 30, 2007.
FOREIGN EXCHANGE GAIN/LOSS
The net foreign exchange loss for the six months ended June 30, 2008 amounted to $0.2 million and consisted of a realized loss of $3.8 million, offset by an unrealized gain of $2.3 million and a $1.3 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. For the six months ended June 30, 2007, a foreign exchange loss of $13.4 million was recorded.
INCOME TAXES
Current income tax expense for the six months ended June 30, 2008 was $23.9 million and represents taxes paid and payable in Kazakhstan on profits from the Corporation's Akdala Uranium Mine of $21.6 million and $2.3 million on the capital gains from the disposal of available for sale securities. For the six months ended June 30, 2007 a $20.4 million income tax expense was recorded, mainly for the Akdala Uranium Mine.
The future income tax recovery for the six months ended June 30, 2008 of $30.1 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 of $3.6 million, a future income tax recovery of $23.9 million on impairments recognized on assets held for sale, as well as an increase in future income tax assets due to temporary differences and tax loss carry forwards. In the six months ended June 30, 2007, a recovery of future income taxes of $4.4 million was recorded, being a reduction in future income tax liability.
LOSS FROM DISCONTINUED OPERATIONS
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 $104.3 million includes an impairment charge, net of tax, of $103.5 million.
NET LOSS FOR THE PERIOD
The net loss for the six months ended June 30, 2008 amounted to $182.8 million or $0.39 per share, compared to a net loss of $5.7 million or $0.02 per share during the six months ended June 30, 2007.
FINANCIAL CONDITION
On June 30, 2008, the Corporation had cash and cash equivalents of $133.1 million, compared to $159.6 million at December 31, 2007. Due to the fact that Aflease Gold was treated as a discontinued operation from Q1 2008, cash held by Aflease Gold is not included in the consolidated cash balance of the Corporation and cash held by Aflease Gold as at December 31, 2007 was included in the Current assets of discontinued operations line on the Consolidated Balance Sheet for December 31, 2007.
Inventories increased to $23.1 million from the $20.9 million held at December 31, 2007, due to an increase in materials and supplies of $4.9 million, partially offset by the decrease of $2.7 million in finished uranium concentrates and solutions and concentrates. Materials and supplies increased in line with higher inventories of spares used in the maintenance of the Corporation's drill rigs deployed in Kazakhstan. The Corporation intensified its drill rig maintenance program to increase current drill rig performance. As at June 30, 2008 the Corporation had attributable inventory of 620,500 pounds of U(3)O(8) of which approximately 287,000 pounds is held in the form of saleable product. Of the saleable product, 257,300 pounds were in transit to conversion facilities at June 30, 2008. All of the saleable product on hand as at June 30, 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.
Inventory as at June 30, 2008 is attributable to the Akdala Uranium Mine. Pre-commercial production from the Corporation's development projects are not accounted for as inventory. Attributable material produced and on hand from the Corporation's development projects at June 30, 2008 amounted to 434,000 pounds of U(3)O(8) at South Inkai and 142,000 pounds of U(3)O(8) at Dominion.
A summary of Akdala's attributable inventory carried at the end of Q2 2008 is as follows:
Thousands of pounds
Category Location of U(3)O(8)
-------------------------------------------------------------------------
In process Mine site 18.8
In process External processing
facilities 15.2
In transit In transit 257.3
Finished product External processing
ready to be shipped facilities 299.5
Finished product at
conversion facility Conversion facilities 29.7
-------------------------------------------------------------------------
Total inventory 620.5
-------------------------------------------------------------------------
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 $13.3 million plus interest, were received from Kyzylkum up to June 30, 2008 resulting in an outstanding loan balance of $60.8 million as at June 30, 2008.
A decrease in the reporting values of mineral interests, plant and equipment due to a 15% weakening of the South African rand against the US dollar during the six months, were offset by an 8% strengthening of the Australian dollar against the US dollar and cash additions to mineral interests, plant and equipment of $122.4 million.
Due to the Corporation's decision in Q1 2008 to dispose of Aflease Gold, it has been treated as a discontinued operation in comparative periods and its assets and liabilities are therefore presented as follows in December 31, 2007: current assets of $95.0 million; non-current assets of $286.6 million; current liabilities of $5.2 million; and non-current liabilities of $183.1 million, for a net asset value of $193.2 million. The decrease in the December 31, 2007 carrying value to the carrying value of $32.2 million as at June 30, 2008 mainly consist of an impairment of $103.5 million, and the sale of shares with a carrying value of $27.8 million.
Certain properties, with a carrying value of $122.2 million and associated future income tax liability of $25.5 million at December were classified as held for sale in during the period. An impairment of $105.1 million was recognized on these properties in Q2 2008, with an associated future income tax recovery of $23.9 million.
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 (excluding the long term liabilities associated with Aflease Gold) decreased by $78.7 million from December 31, 2007, primarily due to a decrease in future income tax liabilities of $87.0 million which mainly results from fluctuations in foreign exchange rates and a future income tax recovery arising on the impairment of assets held for sale of $23.9 million, partly offset by the increase in the Corporation's proportionate share of the Kyzylkum finance facility.
Kyzyllkum made additional draw downs of $40 million against its JBIC and Citibank facilities during the six months ended June 30, 2008, utilizing the full $100 million available under the facilities. As the Corporation proportionally consolidates its 30% interest in Kyzylkum, an increase in long term debt of $11.7 million over December 31, 2007 was reflected as at June 30, 2008.
Changes in shareholders' equity consist mainly of the net loss for the six months of $182.8 million and a foreign translation loss on the translation of continuing self-sustaining foreign operations, mainly in South Africa, of $180.8 million.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2008 the Corporation had working capital of $193.8 million. Included in this amount are cash and cash equivalents of $133.1 million, which includes the proportionate share of the Corporation's cash and cash equivalents at its joint venture operations in Kazakhstan. 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. Cash held by the Corporation's joint venture operations are applied to the business of the joint ventures and cash flows between the Corporation and the joint ventures normally only occur through loans to the joint ventures and dividends declared by the joint ventures.
In addition to working capital at hand, the Corporation has access to $100 million through a senior secured revolving credit facility concluded with Bank of Montreal and The Bank of Nova Scotia at the end of Q2 2008. The facility has a two year term, and may be extended for a further year with lender consent. The facility can also be used to provide letters of credit issued on behalf of the Corporation, therefore keeping cash available that would otherwise have been tied up as collateral for letters of credit. Draw downs under the facility may be used for general corporate purposes, including working capital requirements and funding capital expenditures and acquisitions. Please refer to "Corporate - Credit Facility".
The Corporation received cash proceeds of $69.1 million through the sale of non-core investments, including a portion of its shareholding in Aflease Gold ($44.1 million), Randgold ($13.0 million) and other available for sale securities ($11.8 million). The Corporation remains committed to dispose of other non-core investments, including its remaining shareholding in Aflease Gold, valued at approximately $52 million at a closing share price at August 8, 2008 of ZAR2.10 per share.
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 its other development projects reach commercial production.
Uranium is sold under forward long-term delivery contracts. 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 two quarters of 2008, committed sales under contract represent 82% of expected production and in 2009, committed sales under contract account for 45% of expected production, without taking any available inventory into account.
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.
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 June, 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 78 78 - - - - Long term 7,291 1,024 3,463 1,265 1,539 ------------------------------------------------------------------------- Total 7,369 1,102 3,463 1,265 1,539 Kyzylkum long term debt 29,770 - 16,700 13,070 - Capital commitments 20,320 19,939 381 - - Asset retirement obligation 16,168 - - - 16,168 ------------------------------------------------------------------------- Total contractual obligations 73,627 21,041 20,544 14,335 17,707 ------------------------------------------------------------------------- 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 August 12, 2008, there were issued and outstanding 468,463,054 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 August 12, 2008, there were 18,377,889 stock options outstanding under Uranium One's stock option plan and the security based compensation plans assumed by the Corporation pursuant to its acquisitions, at exercise prices ranging from C$1.09 to C$16.87 and 763,897 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.
INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
The Canadian Accounting Standards Board will require all public companies to adopt IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Earlier adoption of IFRS relating to fiscal years beginning on or after January 1, 2009 is allowed. Companies will be required to provide IFRS comparative information for the fiscal year immediately preceding the year in which they first adopt IFRS. While IFRS uses a conceptual framework similar to Canadian GAAP, there are significant differences in accounting policy which must be addressed. The Corporation is currently assessing the impact of this pending change on its financial statements as well as the possibility of early adoption of IFRS.
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 Canyon 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 of future sulphuric acid constraints and the risk that the new tax code to be introduced by the Kazakhstan Ministry of Finance by October, 2008 to be effective from January 1, 2009 may adversely affect the Corporation, 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 permits. 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 Q2 2008 stock options and restricted share rights activity was as
follows:
- 2,287,090 options were granted to directors and employees at prices
ranging from C$3.67 to C$4.93 per share, with expiry dates ranging
from April 7, 2013 to June 16, 2013.
- 660,016 options were exercised and 2,524,462 were forfeit.
- 609,000 restricted shares were granted, 95,564 were exercised during
the quarter and 1,020 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 June 30, 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. The Corporation's attributable production estimate for 2008 remains 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 South Inkai, Kharasan and Dominion.
Attributable pre-commercial production guidance for 2008 has been revised by the Corporation as follows: South Inkai from 500,000 pounds of U(3)O(8) to 910,000 pounds of U(3)O(8); Dominion from 590,000 pounds of U(3)O(8) to 320,000 pounds of U(3)O(8); Kharasan from 220,000 pounds of U(3)O(8) to 50,000 pounds of U(3)O(8); and Hobson from 35,000 pounds of U(3)O(8) to zero.
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 not greater than $14 per of U(3)O(8) sold in 2008.
The Corporation expects to incur capital expenditures of $136 million on fully owned development projects for the remaining two 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 $24 million for the remaining two quarters of 2008.
FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION
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 shortages of sulphuric acid in Kazakhstan, possible changes to the tax code 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.
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. Mr Douglas Beahm, PE, PG of BRS Inc, a qualified person for the purpose of NI43-101, is responsible for the scientific and technical information contained herein for Moore Ranch, Petersen, Barge, Jab, West Jab, Velvet and Frank M projects. Mr Douglas, H. Graves, PE, and Mr. Matthew J. Yovich, PE, MSME of TREC Inc. qualified persons for the purpose of NI43-101, are responsible for the scientific and technical information contained herein related to the feasibility study and mineral reserve for Moore Ranch. Dr. Neal Rigby, C Eng, MIMMM, AIME, and Registered SME, and Mr. Sean Muller, CPG, Texas P.Geo and Registered SME of SRK, qualified persons for the purpose of NI43-101, are responsible for the scientific and technical information contained herein related to Production Areas 1 and 2 at La Palangana with the exception of the inferred resources that were reported by Blackstone in 2005. Each of the named qualified persons verified the data for the reserve and resource estimates for which they were responsible. Verification was completed by the development of databases from existing and new drill data which were reviewed and confirmed against original maps, where applicable.
Interim Consolidated Financial Statements
for the three and six months ended June 30, 2008
(Unaudited)
Uranium One Inc.
Interim Consolidated Balance Sheets - Unaudited
As at June 30, 2008 and December 31, 2007
(in United States dollars)
Jun 30, Dec 31,
2008 2007
Notes $'000 $'000
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 133,148 159,592
Accounts and other receivables 4 66,475 70,318
Current portion of loans to joint ventures 5.2 19,244 32,867
Inventories 6 23,092 20,952
Other assets 1,025 18,056
Discontinued operations 3 - 94,986
-------------------------------------------------------------------------
242,984 396,771
-------------------------------------------------------------------------
Non-current assets
Mineral interests, plant and equipment 7 4,596,034 4,827,353
Loans to joint ventures 5.2 23,333 24,359
Available for sale securities 8 2,692 21,257
Other assets 9 55,758 56,543
Assets held for sale 10 17,078 -
Discontinued operations 3 32,238 286,614
-------------------------------------------------------------------------
4,727,133 5,216,126
-------------------------------------------------------------------------
Total assets 4,970,117 5,612,897
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 11 44,633 70,802
Income taxes payable 4,601 4,237
Discontinued operations 3 - 5,245
-------------------------------------------------------------------------
49,234 80,284
-------------------------------------------------------------------------
Non-current liabilities
Convertible debentures 136,990 136,548
Asset retirement obligations 9,824 13,926
Future income tax liabilities 1,407,513 1,496,060
Long term debt 5.1 29,872 18,205
Other long term payables 2,052 1,824
Liabilities relating to assets held for sale 10 1,596 -
Discontinued operations 3 - 183,145
-------------------------------------------------------------------------
1,587,847 1,849,708
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 12 3,507,048 3,496,884
Contributed surplus 13 139,064 134,387
Equity component of convertible debentures 46,480 46,480
Accumulated other comprehensive (loss) / income (129,953) 51,967
Deficit (229,603) (46,813)
-------------------------------------------------------------------------
3,333,036 3,682,905
-------------------------------------------------------------------------
Total shareholders' equity and liabilities 4,970,117 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
Uranium One Inc.
Interim Consolidated Statements of Operations - Unaudited
For the three and six months ended June 30, 2008 and June 30, 2007
(in United States dollars)
Three months ended Six months ended
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
Notes $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Revenues 49,390 23,265 71,907 64,995
Operating expenses (9,487) (2,058) (12,779) (9,101)
Depreciation and
depletion (6,960) (2,016) (9,891) (6,875)
-------------------------------------------------------------------------
Earnings from mine
operations 32,943 19,191 49,237 49,019
General and
administrative(1) (13,948) (18,049) (29,229) (22,730)
Exploration expense (5,035) (4,364) (6,715) (5,823)
-------------------------------------------------------------------------
Operating earnings
/ (loss) 13,960 (3,222) 13,293 20,466
Interest income 3,129 4,324 5,889 5,346
Interest expense (3,940) (2,991) (7,711) (2,991)
Impairment of assets
held for sale 10 (105,089) - (105,089) -
Gain on sale of
available for sale
securities 8 8,602 - 7,467 -
Foreign exchange gain
/ (loss) 14 2,440 (5,980) (186) (13,411)
Other 987 362 1,644 1,382
-------------------------------------------------------------------------
(Loss) / earnings from
continuing operations
before income taxes (79,911) (7,507) (84,693) 10,792
Current income tax
expense (17,452) (7,847) (23,911) (20,375)
Future income tax
recovery 29,168 2,246 30,096 4,446
-------------------------------------------------------------------------
Loss from continuing
operations (68,195) (13,108) (78,508) (5,137)
Earnings / (loss) from
discontinued operations 3 274 (586) (104,282) (586)
-------------------------------------------------------------------------
Net loss (67,921) (13,694) (182,790) (5,723)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Stock option and
restricted share
expense (non-cash)
included in general
and administrative 13 4,483 9,647 10,597 13,024
Loss per share from
continuing operations
Basic and diluted (0.15) (0.04) (0.17) (0.02)
Loss per share from
discontinued
operations
Basic and diluted 0.00 (0.00) (0.22) (0.00)
Net loss per share
Basic and diluted (0.15) (0.04) (0.39) (0.02)
Weighted average number
of shares
(in thousands)
Basic and diluted 16 468,166 332,956 467,809 275,380
The accompanying notes form an integral part of these Interim
Consolidated Financial Statements
Uranium One Inc.
Interim Consolidated Statements of Changes in Equity - Unaudited
For the three and six months ended June 30, 2008 and June 30, 2007
(in United States dollars)
Accu-
Equity mulated
component other comp-
of rehensive
Share Contributed convertible income /
capital surplus debenture (loss)
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Balance as at January 1, 2007 613,607 31,286 - -
Net loss for the year - - - -
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
consideration 1,013,215 35,307 - -
Unrealized gains recognized on
translation of
self-sustaining foreign
operations - - - 47,536
Unrealized gains recognized on
translation of
self-sustaining foreign
discontinued operations - - - 4,243
Shares issued for services
rendered 3,987 - - -
Gain on available for sale
securities, net of tax
(note 8) - - - 188
-------------------------------------------------------------------------
Balance as at December 31,
2007 3,496,884 134,387 46,480 51,967
-------------------------------------------------------------------------
Net loss for the period - - - -
Stock options and restricted
shares vested - 10,597 - -
Exercise of warrants 2,104 (1,062) - -
Exercise of stock options and
restricted shares 8,060 (4,858) - -
Unrealized loss recognized on
translation of
self-sustaining foreign
operations - - - (164,641)
Unrealized loss recognized on
translation of
self-sustaining foreign
discontinued operations - - - (26,070)
Realized loss on sale of
Aflease Gold (note 3) - - - 9,920
Fair value adjustments on
available for sale securities
(note 8) - - - (953)
Realized loss on sale of
available for sale
securities, net of tax
(note 8) - - - (176)
-------------------------------------------------------------------------
Balance as at June 30, 2008 3,507,048 139,064 46,480 (129,953)
-------------------------------------------------------------------------
Deficit Total
$'000 $'000
---------------------------------------------------
Balance as at January 1, 2007 (29,204) 615,689
Net loss for the year (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
consideration - 1,048,522
Unrealized gains recognized on
translation of
self-sustaining foreign
operations - 47,536
Unrealized gains recognized on
translation of
self-sustaining foreign
discontinued operations - 4,243
Shares issued for services
rendered - 3,987
Gain on available for sale
securities, net of tax
(note 8) - 188
---------------------------------------------------
Balance as at December 31,
2007 (46,813) 3,682,905
---------------------------------------------------
Net loss for the period (182,790) (182,790)
Stock options and restricted
shares vested - 10,597
Exercise of warrants - 1,042
Exercise of stock options and
restricted shares - 3,202
Unrealized loss recognized on
translation of
self-sustaining foreign
operations - (164,641)
Unrealized loss recognized on
translation of
self-sustaining foreign
discontinued operations - (26,070)
Realized loss on sale of
Aflease Gold (note 3) - 9,920
Fair value adjustments on
available for sale securities
(note 8) - (953)
Realized loss on sale of
available for sale
securities, net of tax
(note 8) - (176)
---------------------------------------------------
Balance as at June 30, 2008 (229,603) 3,333,036
---------------------------------------------------
The accompanying notes form an integral part of these Interim
Consolidated Financial Statements
Uranium One Inc.
Interim Consolidated Statements of Comprehensive Income / (Loss)
- Unaudited
For the three and six months ended June 30, 2008 and June 30, 2007
(in United States dollars)
Three months ended Six months ended
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
Notes $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Net loss (67,921) (13,694) (182,790) (5,723)
Unrealized gain /
(loss) recognized on
translation of
self-sustaining
foreign operations 64,946 (8,050) (164,640) (8,050)
Unrealized gain /
(loss) recognized on
translation of
self-sustaining
foreign discontinued
operations 3,341 (528) (26,070) (528)
Realized loss on sale
of Aflease Gold 3 9,920 - 9,920 -
Fair value adjustments
on available for sale
securities 8 102 - (953) -
Realized loss / (gain)
on sale of available
for sale securities,
net of tax 8 14 - (176) -
-------------------------------------------------------------------------
Comprehensive income
/ (loss) 10,402 (22,272) (364,709) (14,301)
-------------------------------------------------------------------------
The accompanying notes form an integral part of these Interim
Consolidated Financial Statements
Interim Consolidated Statements of Accumulated Other Comprehensive
(Loss) / Income - Unaudited
As at June 30, 2008 and December 31, 2007
(in United States dollars)
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Accumulated other comprehensive income at January 1 51,967 -
Other comprehensive (loss) / income for the period (181,920) 51,967
-------------------------------------------------------------------------
(129,953) 51,967
-------------------------------------------------------------------------
Components of other comprehensive loss at the end
of the period:
Unrealized foreign exchange adjustment
- continuing operations (117,255) 47,562
Unrealized foreign exchange adjustment
- discontinued operations (11,907) 4,243
Available for sale marketable securities and
investments (791) 162
-------------------------------------------------------------------------
(129,953) 51,967
-------------------------------------------------------------------------
Uranium One Inc.
Interim Consolidated Statements of Cash Flows - Unaudited
For the three and six months ended June 30, 2008 and June 30, 2007
(in United States dollars)
Three months ended Six months ended
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
Notes $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Net loss from
continuing operations (68,195) (13,108) (78,508) (5,137)
Items not affecting
cash:
- Depreciation and
depletion 6,960 2,016 9,891 6,875
- Impairment of
assets held for sale 10 105,089 - 105,089 -
- Stock option and
restricted share
expense 13 4,483 9,647 10,597 13,024
- Interest accrued
on loans and
debentures 3,926 4,720 7,617 4,720
- Unrealized foreign
exchange (gain)
/ loss 14 (1,431) 4,745 (3,644) 11,962
- Future income tax
recovery (29,168) (2,246) (30,096) (4,446)
- Gain on sale of
available for sale
securities (8,602) - (7,467) -
- Other 298 1,470 194 1,819
Movement in non-cash
working capital 15 (43,723) (24,523) (4,577) 5,322
-------------------------------------------------------------------------
Cash flows (used in)
/ from operating
activities (30,363) (17,279) 9,096 34,139
-------------------------------------------------------------------------
Acquisition of Uranium
One Inc., net of
acquisition costs - 271,935 - 271,935
Acquisition of mineral
interests, plant and
equipment (68,420) (66,467) (122,437) (83,160)
Advance cash payments
for other assets - - - (4,313)
Proceeds on sale of
available for sale
securities 8 22,550 - 24,927 -
Cash advances to joint
ventures - (15,400) (3,900) (22,400)
Cash proceeds from
joint ventures 4,667 - 18,334 18,780
Restricted cash - (500) - (500)
Other (151) - (953) -
-------------------------------------------------------------------------
Cash flows from /
(used in) investing
activities (41,354) 189,568 (84,029) 180,342
-------------------------------------------------------------------------
Cash flows from
investing activities
of discontinued
operations 3 43,456 - 43,456 -
-------------------------------------------------------------------------
Common shares issued,
net of issue costs 2,645 17,224 4,788 17,731
Financing fees 9 (5,666) - (5,666) -
Loans received by
Kyzylkum 6,000 - 12,000 -
Coupon interest payment
on convertible
debentures (3,267) (3,201) (3,267) (3,201)
Other - (175) - (175)
-------------------------------------------------------------------------
Cash (used in) / flows
from financing
activities (288) 13,848 7,855 14,355
-------------------------------------------------------------------------
Effects of exchange
rate changes on cash
and cash equivalents 1,471 10,002 (2,822) 10,216
-------------------------------------------------------------------------
Net (decrease)
/ increase in cash and
cash equivalents from
continuing operations (27,078) 196,139 (26,444) 239,052
Cash and cash
equivalents at the
beginning of the
period 160,226 91,893 159,592 48,980
-------------------------------------------------------------------------
Cash and cash
equivalents at the end
of the period 133,148 288,032 133,148 288,032
-------------------------------------------------------------------------
Cash flows of
discontinued operations
Cash flows used in
operating activities - (1,449) (6,941) (1,449)
Cash flows used in
investing activities - (1,564) (5,351) (1,564)
Cash flows from
/ (used in) financing
activities - 338 (13,741) 338
-------------------------------------------------------------------------
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 June 30, 2008 and December 31, 2007
(in United States dollars)
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 36% 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 Canyon Mill in Utah. The Corporation is evaluating
corporate development opportunities for its 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 June 30, 2008:
Operating mine:
Mineral
Entity property/Operation Location Ownership Status
-------------------------------------------------------------------------
Betpak Dala LLP Akdala Uranium Mine Kazakhstan 70% Proportion-
ately con-
solidated
Advanced development projects:
Mineral
Entity property/Operation Location Ownership Status
-------------------------------------------------------------------------
Betpak Dala LLP South Inkai Uranium Kazakhstan 70% Proportion-
Project ately con-
solidated
Kyzylkum LLP Kharasan Uranium Kazakhstan 30% Proportion-
Project ately con-
solidated
Uranium One Dominion Uranium South Africa 100% Consolidated
Africa Ltd Project
The Corporation is also developing the following mineral properties:
Mineral
Entity property/Operation Location Ownership Status
-------------------------------------------------------------------------
South Texas Hobson Facility and United 99% Consolidated
Mining Venture La Palangana States
Project
Energy Metals US development United 100% Consolidated
Corp US projects States
Uranium One Honeymoon Uranium Australia 100% Consolidated
Australia Project
(Proprietary)
Limited
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.
International Financial Reporting Standards (IFRS)
In February 2008, the Canadian Accounting Standards Board
confirmed that publicly accountable enterprises will be required
to adopt IFRS for fiscal years beginning on or after
January 1, 2011, with earlier adoption permitted. Accordingly,
the conversion to IFRS will be applicable to the Corporation's
reporting no later than in the first quarter of 2011, with
restatement of comparative information presented. The conversion
to IFRS will impact the Corporation's accounting policies,
information technology and data systems, internal control over
financial reporting, and disclosure controls and procedures. The
transition may also impact business activities, such as foreign
currency, certain contractual arrangements, debt covenants and
capital requirements. The Corporation is currently evaluating the
future impact of IFRS on its financial statements and will
continue to invest in training and additional resources to ensure
a timely conversion.
3 DISCONTINUED OPERATIONS - AFLEASE GOLD
On March 27, 2008, the Corporation entered into an agreement to sell
its shareholding in Aflease Gold. On April 8, 2008 the Corporation
sold 152.2 million Aflease Gold shares for $41.3 million
(ZAR320 million), 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. In the first quarter of 2008, the
Corporation's investment in Aflease Gold was written down to its fair
value, based on a combination of the contracted sales price and the
market price on the Johannesburg Stock Exchange ("JSE"). The
impairment, net of future income taxation recovery, amounted to
$103.5 million.
During June 2008, the Corporation sold an additional 9.1 million
Aflease Gold shares for $2.8 million (ZAR21.9 million), decreasing
the Corporation's shareholding to 36%. The Corporation realized a
gain of $0.7 million on the sale of these shares. The tax on these
transactions was offset against the assessed tax losses of Uranium
One Africa Limited, a wholly owned subsidiary of the Corporation.
The assets and liabilities of Aflease Gold have been classified as
discontinued operations for all periods presented in these financial
statements. As a result of the Corporation's partial disposal of its
interest in Aflease Gold, consolidation of Aflease Gold is no longer
appropriate. The Corporation has equity accounted for its investment
in Aflease Gold for the three months ended June 30, 2008 and its
share of Aflease Gold's earnings is recorded in the discontinued
operations line in the consolidated statement of operations for the
three months ended June 30, 2008. The Corporation's net equity
investment in Aflease Gold is recorded as discontinued operations
(non-current assets) in the consolidated balance sheet as at
June 30, 2008. The Board of Directors has approved the sale of the
remaining portion of Uranium One Africa's shareholding in
Aflease Gold.
The investment in Aflease Gold was reported as the Modder East Gold
Project for segment reporting purposes in previous periods.
The financial statement effects on the net investment in Aflease Gold
and the statement of operations are illustrated below:
Statement
Balance of
sheet operations
$'000 $'000
-------------------------------------------------------------------------
December 31, 2007 193,210 -
Loss from discontinued operations (1,076) (1,076)
Impairment (103,480) (103,480)
Effect of foreign exchange and other (31,507) -
-------------------------------------------------------------------------
March 31, 2008 57,147 (104,556)
Net carrying value sold during the period (27,837) -
Gain on sale of investment, net of tax - 685
Share of net loss for the period(1) (411) (411)
Effect of foreign exchange 3,339 -
-------------------------------------------------------------------------
June 30, 2008 32,238 (104,282)
-------------------------------------------------------------------------
(1) The Corporation estimated its share of net loss for Aflease Gold
for the three months ended June 30, 2008.
Selected financial information of the discontinued operations
included in the comparative periods of the Consolidated Statement of
Operations are as follows:
Three month Six month
period period
ended ended
Jun 30, Jun 30,
2007 2007
$'000 $'000
-------------------------------------------------------------------------
Net loss from discontinued operations
Revenues - -
Loss from discontinued operations (1,200) (1,200)
Interest and other expenses (111) (111)
Non-controlling interest 725 725
-------------------------------------------------------------------------
(586) (586)
-------------------------------------------------------------------------
The major classes of assets and liabilities of the discontinued
operations are as follows:
Jun 30, Dec 31,
2007 2007
$'000 $'000
-------------------------------------------------------------------------
Assets
Cash and cash equivalents - 92,623
Accounts receivable and other receivables - 2,321
Inventories - 42
-------------------------------------------------------------------------
Current assets of discontinued operations - 94,986
-------------------------------------------------------------------------
Mineral interests, plant and equipment - 285,553
Investment 32,238 -
Other assets - 1,061
-------------------------------------------------------------------------
Non-current assets of discontinued operations 32,238 286,614
-------------------------------------------------------------------------
Total assets of discontinued operations 32,238 381,600
-------------------------------------------------------------------------
Liabilities
Accounts payable, accrued liabilities and other - 5,080
Income taxes payable - 165
-------------------------------------------------------------------------
Current liabilities of discontinued operations - 5,245
-------------------------------------------------------------------------
Future income tax liabilities - 80,201
Convertible debentures - 90,551
Other long term liabilities - 1,085
Non-controlling interest - 11,308
-------------------------------------------------------------------------
Non-current liabilities of discontinued operations - 183,145
-------------------------------------------------------------------------
Total liabilities of discontinued operations - 188,390
-------------------------------------------------------------------------
4 ACCOUNTS AND OTHER RECEIVABLES
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Trade receivables 48,757 55,520
Value added tax and general sales tax 10,442 7,446
Prepayments and advances 6,346 5,558
Deposits and guarantees 3,004 3,220
Other receivables 930 1,794
-------------------------------------------------------------------------
69,479 73,538
Less: non current deposits and guarantees included
in other assets (note 9) 3,004 3,220
-------------------------------------------------------------------------
66,475 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%
The Corporation's proportionate share of the assets and
liabilities of the joint ventures are as follows:
As at June 30, 2008
Betpak
Dala Kyzylkum Total
$'000 $'000 $'000
-------------------------------------------------------------------------
Cash 9,923 7,727 17,650
Other current assets 53,329 677 54,006
Mineral interests, plant and equipment 677,425 190,243 867,668
Other assets 2,557 10,829 13,386
Current liabilities (13,570) (7,955) (21,525)
Long term debt(1) (87) (29,785) (29,872)
Other (1,551) (574) (2,125)
Future income taxes (274,367) (72,216) (346,583)
Asset retirement obligation (1,298) (74) (1,372)
-------------------------------------------------------------------------
Net Assets 452,361 98,872 551,233
-------------------------------------------------------------------------
(1) In addition to the $60 million loan (note 5.2) from the
Corporation, Kyzylkum negotiated unsecured bank loan facilities
totaling $100 million in Q2 2007. 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. $60 million of the facilities has been drawn
down for the year ended December 31, 2007, with the remainder being
drawn down during the current period. These loan facilities will be
repayable after full repayment of the loan from the Corporation. The
Corporation's proportionate share of these facilities amounts to
$30 million. The loan facilities have floating interest rates of
LIBOR plus 0.25% and 0.35%, respectively.
As at December 31, 2007
Betpak
Dala Kyzylkum Total
$'000 $'000 $'000
-------------------------------------------------------------------------
Cash 1,643 3,659 5,302
Other current assets 73,039 291 73,330
Mineral interests, plant and equipment 680,046 182,740 862,786
and equipment
Other assets 4,070 4,771 8,841
Current liabilities (19,395) (900) (20,295)
Long term debt - (18,205) (18,205)
Other long term liabilities (1,567) (135) (1,702)
Future income taxes (280,075) (72,486) (352,561)
Asset retirement obligation (3,377) - (3,377)
-------------------------------------------------------------------------
Net Assets 454,384 99,735 554,119
-------------------------------------------------------------------------
The Corporation's proportionate share of revenue, expenses, net
earnings / (loss) and cash flows for the three and six month
periods ended June 30, 2008 and 2007 are as follows:
Three months ended June 30, 2008
Betpak
Dala Kyzylkum Total
$'000 $'000 $'000
-------------------------------------------------------------------------
Revenue 49,390 - 49,390
Expenses (16,877) 57 (16,820)
Foreign exchange loss (3) (4) (7)
-------------------------------------------------------------------------
Earnings before income taxes 32,510 53 32,563
Current income tax expense (15,230) (11) (15,241)
Future income tax recovery 2,549 - 2,549
-------------------------------------------------------------------------
Earnings 19,829 42 19,871
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows from / (used in)
operating activities 12,076 243 12,319
Cash flows used in investing activities (14,391) (158) (14,549)
Cash flows from financing activities 85 4,008 4,093
-------------------------------------------------------------------------
Net (decrease) / increase in cash (2,230) 4,093 1,863
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six months ended June 30, 2008
Betpak
Dala Kyzylkum Total
$'000 $'000 $'000
-------------------------------------------------------------------------
Revenue 71,907 - 71,907
Expenses (21,826) 11 (21,815)
Foreign exchange loss (121) (11) (132)
-------------------------------------------------------------------------
Earnings before income taxes 49,960 - 49,960
Current income tax expense (21,572) (44) (21,616)
Future income tax recovery 3,649 - 3,649
-------------------------------------------------------------------------
Earnings / (loss) 32,037 (44) 31,993
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows from operating activities 46,893 (65) 46,828
Cash flows used in investing activities (26,789) (4,306) (31,095)
Cash flows (used in) / from financing
activities (11,796) 8,152 (3,644)
-------------------------------------------------------------------------
Net increase in cash 8,308 3,781 12,089
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended June 30, 2007
Betpak
Dala Kyzylkum Total
$'000 $'000 $'000
-------------------------------------------------------------------------
Revenue 23,265 - 23,265
Expenses (4,841) (687) (5,528)
Foreign exchange gain 102 52 154
-------------------------------------------------------------------------
Earnings / (loss) before income taxes 18,526 (635) 17,891
Current income tax expense (7,659) - (7,659)
Future income tax recovery 670 - 670
-------------------------------------------------------------------------
Earnings / (loss) 11,537 (635) 10,902
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows from / (used in) operating
activities 8,928 (470) 8,458
Cash flows used in investing activities (12,831) (2,780) (15,611)
Cash flows from financing activities 155 2,750 2,905
-------------------------------------------------------------------------
Net decrease in cash (3,748) (500) (4,248)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six months ended June 30, 2007
Betpak
Dala Kyzylkum Total
$'000 $'000 $'000
-------------------------------------------------------------------------
Revenue 64,995 - 64,995
Expenses (16,452) (687) (17,139)
Foreign exchange loss (6,037) (1,342) (7,379)
-------------------------------------------------------------------------
Earnings / (loss) before income taxes 42,506 (2,029) 40,477
Current income tax expense (18,318) - (18,318)
Future income tax recovery 1,155 - 1,155
-------------------------------------------------------------------------
Earnings / (loss) 25,343 (2,029) 23,314
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows from / (used in) operating
activities 70,696 (353) 70,343
Cash flows used in investing activities (25,525) (8,565) (34,090)
Cash flows (used in) / from financing
activities (45,733) 9,177 (36,556)
-------------------------------------------------------------------------
Net (decrease) / increase in cash (562) 259 (303)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
5.2 Loans to Joint Ventures
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Current portion
Betpak Dala - 5,175
Kyzylkum 19,244 27,692
-------------------------------------------------------------------------
19,244 32,867
-------------------------------------------------------------------------
Long term portion
Betpak Dala - -
Kyzylkum 23,333 24,359
-------------------------------------------------------------------------
23,333 24,359
-------------------------------------------------------------------------
Total 42,577 57,226
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the three 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
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. 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.
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Balance at January 1 73,333 80,000
Repaid during the period (13,333) (6,667)
-------------------------------------------------------------------------
60,000 73,333
Interest accrued 824 1,025
-------------------------------------------------------------------------
60,824 74,358
Less: elimination of proportionate share - 30% (18,247) (22,307)
-------------------------------------------------------------------------
42,577 52,051
Less: current portion (19,244) (27,692)
-------------------------------------------------------------------------
Long term portion 23,333 24,359
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The loans to Kyzylkum are unsecured.
6 INVENTORIES
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Finished uranium concentrates 12,060 10,093
Solutions and concentrates in process 1,032 5,731
-------------------------------------------------------------------------
Product inventory 13,092 15,824
Materials and supplies 10,000 5,128
Stockpiles 7,772 7,772
-------------------------------------------------------------------------
30,864 28,724
Less: non-current inventory included in other assets
(note 9) 7,772 7,772
-------------------------------------------------------------------------
23,092 20,952
-------------------------------------------------------------------------
-------------------------------------------------------------------------
7 MINERAL INTERESTS, PLANT AND EQUIPMENT
June 30, 2008 Accumu-
lated Net
amortiz- carrying
Cost ation amount
$'000 $'000 $'000
-------------------------------------------------------------------------
Mineral interests 3,971,653 (40,266) 3,931,387
Plant and equipment 674,162 (9,515) 664,647
-------------------------------------------------------------------------
4,645,815 (49,781) 4,596,034
-------------------------------------------------------------------------
-------------------------------------------------------------------------
December 31, 2007 Accumu-
lated Net
amortiz- carrying
Cost ation amount
$'000 $'000 $'000
-------------------------------------------------------------------------
Mineral interests 4,299,828 (32,771) 4,267,057
Plant and equipment 566,612 (6,316) 560,296
-------------------------------------------------------------------------
4,866,440 (39,087) 4,827,353
-------------------------------------------------------------------------
-------------------------------------------------------------------------
A summary by property of the net book value is as follows:
June 30, 2008 Mineral interests
---------------------------------
Non- Plant and
Depletable depletable Total equipment Total
Country $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala Kazak-
Uranium hstan
Mine 105,648 74,358 180,006 18,644 198,650
South Inkai
Uranium Kazak-
Project hstan - 404,470 404,470 74,049 478,519
Kharasan
Uranium Kazak-
Project hstan - 146,768 146,768 40,495 187,263
Dominion
Uranium South
Project Africa - 1,543,590 1,543,590 363,994 1,907,584
United
States
develop-
ment United
projects States - 279,422 279,422 10,198 289,620
United
States
explora-
tion United
projects States - 970,031 970,031 1,443 971,474
Hobson
Facility
and la
Palangana United
project States - 56,869 56,869 41,409 98,278
Shootaring
Canyon United
Mill States - 50,361 50,361 51,323 101,684
Honeymoon
Uranium
Project Australia - 299,628 299,628 37,868 337,496
Corporate
and other - 242 242 25,224 25,466
-------------------------------------------------------------------------
Total 105,648 3,825,739 3,931,387 664,647 4,596,034
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The Corporation has decided to suspend development activities at
Honeymoon to allow for evaluation of corporate development
opportunities for the project.
December 31, 2007 Mineral interests
---------------------------------
Non- Plant and
Depletable depletable Total equipment Total
Country $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala
Uranium Kazak-
Mine hstan 111,302 74,358 185,660 15,906 201,566
South
Inkai
Uranium Kazak-
Project hstan - 422,631 422,631 31,388 454,019
Kharasan
Uranium Kazak-
Project hstan - 146,538 146,538 29,376 175,914
Dominion
Uranium South
Project Africa - 1,756,018 1,756,018 350,146 2,106,164
United
States
develop-
ment United
projects States - 278,654 278,654 7,184 285,838
United
States
explora-
tion United
projects States - 1,073,130 1,073,130 1,285 1,074,415
Hobson
Facility
and la
Palangana United
Project States - 56,869 56,869 33,503 90,372
Shootaring
Canyon United
Mill States - 50,009 50,009 47,614 97,623
Honeymoon
Uranium
Project Australia - 276,087 276,087 23,951 300,038
Corporate
and other - 21,461 21,461 19,943 41,404
-------------------------------------------------------------------------
Total 111,302 4,155,755 4,267,057 560,296 4,827,353
-------------------------------------------------------------------------
-------------------------------------------------------------------------
8 AVAILABLE FOR SALE SECURITIES
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Available for sale securities 2,692 21,257
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$'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)
Increase due to foreign exchange translation 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 470
Disposed during the period (17,425)
Impairment of available for sale securities
included in the statement of operations (657)
Fair value adjustment included in other
comprehensive income (953)
-------------------------------------------------------------------------
Balance as at June 30, 2008 2,692
-------------------------------------------------------------------------
During the three months ended June 30, 2008, the Corporation disposed
of its investment in Randgold and Exploration Company Limited
("Randgold"). The securities had a carrying value of $Nil. No value
was allocated to the investment as part of the purchase price
allocation on April 20, 2007, due to the suspension of Randgold on
the Johannesburg stock exchange. Proceeds on the sale of these
securities amounted to $13.0 million which resulted in a pre-tax gain
on sale of securities of $13.0 million. Capital gains tax of
$1.5 million on the sale was offset against the assessed losses of
Uranium One Africa.
For the three months ended June 30, 2008, the Corporation also
disposed of other available for sale securities with a fair market
value of $14.0 million. The securities had a cost basis of
$14.0 million and fair value losses included in other comprehensive
income of $Nil. Proceeds on the sale of these securities were
$9.6 million which resulted in a pre-tax loss on sale of securities
of $4.4 million. Capital gains tax of $0.9 million was offset against
the Corporation's assessed losses.
For the six months ended June 30, 2008, the Corporation disposed of
available for sale securities with a fair market value of
$17.4 million. The securities had a cost basis of $17.2 million and
fair value losses included in other comprehensive income of
$0.2 million. Proceeds on the sale of these securities were
$11.7 million which resulted in a loss on sale of securities of
$5.5 million. Capital gains tax of $0.9 million was offset against
the Corporation's assessed losses.
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
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Asset retirement fund 20,076 20,316
Advances for future services 10,312 10,629
Long term inventory (note 6) 7,772 7,772
Advances for plant and equipment 6,018 12,643
Prepaid financing fees 5,666 -
Long term deposits and guarantees (note 4) 3,004 3,220
Reclamation bond payment on behalf of
UPC joint venture 1,094 1,094
Other 1,816 869
-------------------------------------------------------------------------
55,758 56,543
-------------------------------------------------------------------------
Prepaid financing fees relate to upfront costs and other costs
incurred associated with establishing a $100 million bank debt senior
secured revolving credit facility (the "facility") during the 3
months ended June 30, 2008. Under the terms of the facility, the
Corporation has the ability to borrow up to $100 million from the
lead lenders, Bank of Montreal and The Bank of Nova Scotia (the
"Banks"). The facility has a two year term, and may be extended for a
further year with lender consent.
Draw downs under the facility can be made at interest rates based on
either the US dollar LIBOR rate or the Bank of Montreal base rate for
US dollar denominated loans. (Refer note 18). Undrawn amounts are
subject to a commitment fee ranging from 0.4% to 0.5% per annum.
Letters of credit can be issued under the facility at a fee of
between 1.25% and 2.00% per annum.
The margins over the base interest rates, the commitment fee and the
letter of credit fee, are dependent on the ratio of the Corporation's
net debt (consisting of total debt less certain cash balances) to its
earnings before interest, taxes, share based compensation,
depreciation and depletion and other non-cash items.
Draw downs under the facility may be used for general corporate
purposes, including working capital requirements and funding capital
expenditures and acquisitions.
On drawdown of the facility, the fees relating to loan origination
costs will be offset against the long term debt and will be amortized
over the term of the facility using the effective interest rate
method.
10 ASSETS HELD FOR SALE
In March 2008 the Corporation decided to sell non-core properties and
as a result certain exploration properties previously included in the
United States Exploration operating segment are classified as held
for sale. The Corporation has received letters of intent from
potential buyers to acquire certain of these properties. These assets
held for sale have been written down to their estimated fair value,
less selling costs, resulting in an impairment charge of
$105.1 million and a future income tax recovery of $23.9 million.
Future
Mineral Income
Interest Tax Net
$'000 $'000 $'000
-------------------------------------------------------------------------
Carrying value as at
December 31, 2008 122,659 25,650 97,009
-------------------------------------------------------------------------
Carrying value on date
of transfer 122,167 (25,476) 96,691
Impairment (105,089) 23,880 (81,209)
-------------------------------------------------------------------------
Carrying value as at
June 30, 2008 17,078 (1,596) 15,482
-------------------------------------------------------------------------
11 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Trade payables 24,369 25,334
Accruals 19,191 24,461
Commodity and other taxes payable 523 11,280
Other 550 9,727
-------------------------------------------------------------------------
44,633 70,802
-------------------------------------------------------------------------
12 SHARE CAPITAL
Issued and outstanding common shares Number of Value of
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 2,104
Exercise of stock options 978,141 6,678
Exercise of restricted shares 95,564 1,382
-------------------------------------------------------------------------
Balance of issued and outstanding
common shares at June 30, 2008 468,397,128 3,507,048
-------------------------------------------------------------------------
13 CONTRIBUTED SURPLUS
The following table details the movement 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 - - 9,793 9,793
Stock options
exercised - - (3,476) (3,476)
Restricted shares
issued and vested - 804 - 804
Restricted shares
exercised - (1,382) - (1,382)
Warrants exercised (1,062) - - (1,062)
-------------------------------------------------------------------------
As at June 30, 2008 24,310 2,541 112,213 139,064
-------------------------------------------------------------------------
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:
June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Risk free interest rate 3.11% 4.38%
Expected dividend yield 0% 0%
Expected volatility of the
Uranium One's share price 69% 61%
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, the number of shares reserved
underlying the options granted to each individual (not exceeding 5%
of issued and outstanding shares to any insider and not exceeding 1%
of the issued and outstanding shares to any non-employee director on
a non-diluted basis) and any vesting period which, pursuant to the
stock option plan was previously one- third on the grant date,
one-third on the first anniversary of the grant date and the
remainder on the second anniversary of the grant date. On
December 8, 2006 the Board of Directors decided to adopt an amended
vesting schedule such that any options granted on and after
December 8, 2006, would vest as to one-third on the first anniversary
of the grant date, one-third on the second anniversary of the grant
date and one-third on the third anniversary of the grant date. The
maximum number of shares of Uranium One that are issuable pursuant to
the plan is limited to 7.2% of issued and outstanding shares.
The following is a summary of Uranium One's options granted under its
stock-based compensation plan:
Weighted
average
exercise
Number of price
options Cdn $
-------------------------------------------------------------------------
Outstanding options as 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 3.29
-------------------------------------------------------------------------
Converted UrAsia Energy stock options
on date of business combination 9,763,498 7.33
Existing Uranium One share options
on April 20, 2007 5,390,754 6.67
EMC replacement options 8,382,546 8.14
Granted subsequent to April 20, 2007 1,867,817 15.27
Exercised subsequent to April 20, 2007 (4,228,640) 5.14
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 2,371,342 3.78
Exercised options (978,141) 3.80
Forfeitures of stock options (2,834,925) 9.76
-------------------------------------------------------------------------
Outstanding options as at June 30, 2008 19,383,064 8.02
-------------------------------------------------------------------------
The stock option compensation expense for the three and six months
ended June 30, 2008 was $4.0 million and $9.8 million respectively
and for the three and six months ended June 30, 2007 it was
$7.0 million and $10.4 million respectively. As at June 30, 2008,
the aggregate unexpensed fair value of unvested stock options granted
amounted to $13.0 million. The fair value of options granted during
the six months amounts to $5.4 million.
The following table summarizes certain information about Uranium
One's stock options outstanding at June 30, 2008:
Options outstanding
--------------------------------------
Number Weighted Weighted
Range of outstanding average average
exercise as at remaining exercise
prices June 30, life price
Cdn $ 2008 (years) Cdn $
-------------------------------------------------------------------------
1.09 to 2.74 1,417,992 2.16 2.36
3.03 to 4.76 4,633,273 3.90 3.85
4.81 to 7.79 3,552,004 4.87 6.57
8.26 to 9.90 3,940,696 4.21 8.46
10.40 to 12.93 3,799,850 4.32 12.06
13.23 to 15.63 849,931 4.80 14.08
15.90 to 16.87 1,189,318 3.98 16.53
-------------------------------------------------------------------------
19,383,064 4.15 8.03
-------------------------------------------------------------------------
Options exercisable
--------------------------------------
Number Weighted Weighted
Range of exercisable average average
exercise as at remaining exercise
prices June 30, life price
Cdn $ 2008 (years) Cdn $
-------------------------------------------------------------------------
1.09 to 2.74 1,417,992 2.16 2.36
3.03 to 4.76 2,452,694 3.90 4.00
4.81 to 7.79 3,421,873 4.87 6.64
8.26 to 9.90 3,823,278 4.21 8.46
10.40 to 12.93 2,503,505 4.32 12.03
13.23 to 15.63 310,127 4.80 14.27
15.90 to 16.87 396,872 3.98 16.55
-------------------------------------------------------------------------
14,326,341 4.15 7.63
-------------------------------------------------------------------------
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
-------------------------------------------------------------------------
Balance at January 1, 2007 404,231
Granted 20,000
Exercised during the period (125,977)
Expired (2,722)
-------------------------------------------------------------------------
Balance at December 31, 2007 295,532
Granted 609,000
Exercised during the period (95,564)
Expired (1,020)
-------------------------------------------------------------------------
Balance at June 30, 2008 807,948
-------------------------------------------------------------------------
The following is a summary of the outstanding restricted share rights:
Number of
restricted shares
--------------------
Jun 30, Dec 31,
2008 2007
-------------------------------------------------------------------------
Grant date
June 7, 2006 129,528 225,092
December 8, 2006 49,420 50,440
July 1, 2007 20,000 20,000
April 7, 2008 578,500 -
April 28, 2008 30,500 -
-------------------------------------------------------------------------
Balance at the end of the period 807,948 295,532
-------------------------------------------------------------------------
Restricted share rights will not expire while the right holder is an
employee of the Corporation.
The restricted share rights expense for the three and six months
ended June 30, 2008 was $0.4 million and $0.8 million respectively
and for both the three and six months ended June 30, 2007 was
$2.6 million. As at June 30, 2008 the aggregate unexpensed fair value
of unvested restricted share rights granted amounted to $2.3 million.
The fair value of restricted shares granted during the six months
amounts to $2.4 million.
Warrants
Allocated
Number of value
warrants $'000
-------------------------------------------------------------------------
Balance at January 1, 2007 2,731,619 26,407
Exercised during the period (150,000) (1,035)
-------------------------------------------------------------------------
Balance at December 31, 2007 2,581,619 25,372
Exercised during the period (150,000) (1,062)
-------------------------------------------------------------------------
Balance at June 30, 2008 2,431,619 24,310
-------------------------------------------------------------------------
Warrants Number of Average exercise
warrants price
-------------------- --------------------
Jun 30, Dec 31, Jun 30, Dec 31,
2008 2007 2008 2007
$'000 $'000
-------------------------------------------------------------------------
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
Kyzylkum.
The Corporation 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 for issuance pursuant to the assumed
obligations under contingent share rights agreements.
14 FOREIGN EXCHANGE GAINS / (LOSSES)
A summary of the foreign exchange loss by item is as follows:
3 months ended 6 months ended
-------------------- --------------------
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Unrealized foreign
exchange gain /
(loss) on future
income tax liability 171 (6,177) 1,309 (14,777)
Unrealized foreign
exchange gain on
other items 1,260 1,432 2,335 2,815
Realized foreign
exchange gain /
(loss) on other
items(1) 1,009 (1,235) (3,830) (1,449)
-------------------------------------------------------------------------
2,440 (5,980) (186) (13,411)
-------------------------------------------------------------------------
(1) A foreign exchange loss amounting to $9.9 million was realized on
the sale of the investment in Aflease Gold (Note 3).
15 CASH FLOW INFORMATION
3 months ended 6 months ended
-------------------- --------------------
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Changes in non-cash
working capital
excluding business
combinations:
(Increase) /
decrease in
accounts and other
receivables (33,650) 2,186 1,801 22,495
(Increase) /
decrease in
prepaid expenses
and other (437) - 17,413 -
Decrease /
(increase) in
inventories 1,594 (9,842) (4,376) (8,341)
Decrease in accounts
payable and accrued
liabilities (8,029) (17,276) (22,195) (15,133)
(Decrease) /
increase in income
taxes payable (3,201) 409 2,780 6,301
-------------------------------------------------------------------------
(43,723) (24,523) (4,577) 5,322
-------------------------------------------------------------------------
Supplemental cash
flow information
Cash interest paid 3,267 3,201 3,267 3,201
Cash taxation paid 20,662 7,338 28,660 13,647
16 BASIC AND DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
3 months ended 6 months ended
-------------------- --------------------
Jun 30, Jun 30, Jun 30, Jun 30,
2008 2007 2008 2007
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Basic weighted-
average number
of shares
outstanding ('000) 468,166 332,956 467,809 275,380
Effect of dilutive
securities:
- stock options - - - -
- warrants - - - -
-------------------------------------------------------------------------
Diluted weighted-
average number of
shares outstanding 468,166 332,956 467,809 275,380
-------------------------------------------------------------------------
For the three and six month periods ended June 30, 2008 and
June 30, 2007, convertible debentures, stock options, warrants and
restricted shares were not included in the dilutive weighted average
number of shares outstanding as they were anti-dilutive.
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
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Total debt (excluding future income
tax liabilities) 229,568 453,751
Net debt (total debt less cash,
receivables, and current portion of
loans to joint ventures) 10,701 190,974
Total capitalization (total
shareholders' equity) 3,333,036 3,682,905
Total debt as a percentage of
shareholders' equity 7% 12%
Net debt as a percentage of
shareholders' equity 0% 5%
18 FINANCIAL INSTRUMENTS
The Corporation's financial instruments primarily consist of cash,
short-term money market investments, marketable securities, accounts
receivable, accounts payable, loans to joint Ventures 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 items. The fair value of the convertible debentures
represents the quoted market value.
Convertible debentures
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Liability component 136,990 136,548
Equity component 46,480 46,480
-------------------------------------------------------------------------
183,470 183,028
-------------------------------------------------------------------------
Fair value 138,173 145,888
-------------------------------------------------------------------------
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 cash flows 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 is also exposed to 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
-------------------------------------------------------------------------
June 30, 2008 Accounts
Cash and payable and
cash Accounts accrued Convertible
equivalents receivable liabilities debentures
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Canadian dollar 93,047 3,058 3,037 136,990
South African rand 19,542 24,165 17,678 -
Kazakhstan tenge 18,897 40,096 17,308 -
Australian dollar 847 872 3,164 -
-------------------------------------------------------------------------
132,333 68,191 41,187 136,990
-------------------------------------------------------------------------
Non-financial assets and liabilities
-------------------------------------------------------------------------
June 30, 2008 Mineral
interest Future
plant and income tax
equipment(1) liabilities
$'000 $'000
-------------------------------------------------------------------------
Canadian dollar - -
South African rand 1,907,584 506,368
Kazakhstan tenge - 346,583
Australian dollar 337,496 75,676
-------------------------------------------------------------------------
2,245,080 928,627
-------------------------------------------------------------------------
Financial assets and liabilities
-------------------------------------------------------------------------
December 31, 2007 Accounts
Cash and payable and
cash Accounts 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
-------------------------------------------------------------------------
December 31, 2007 Mineral
interest Future
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 earnings and other
comprehensive income after tax as at June 30, 2008 of a 10%
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
-------------------------------------------------------------------------
A 10% appreciation in all foreign currencies
against the US dollar, with all other
variables held constant. 191,125 (30,032)
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.
The Corporation's maximum exposure to credit risk at the balance
sheet date is as follows:
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
Short-term money market instruments 46,683 12,059
Accounts receivable 69,479 73,538
Available for sale securities 2,692 21,257
-------------------------------------------------------------------------
118,854 106,854
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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 Corporation has established a credit facility as part of its
liquidity risk management process (note 9). No funds have been
drawn down from the facility. The following table summarizes the
contractual maturities of the Corporation's significant financial
liabilities:
Less than 1 to 3 4 to 5 After 5
1 year years years years Total
-------------------------------------------------------------------------
Lease obligations 1,102 3,463 1,265 1,539 7,369
Kyzylkum Long term debt - 16,700 13,070 - 29,770
Capital commitments 19,939 381 - - 20,320
Asset retirement
obligations - - - 16,168 16,168
Accounts payable and
accrued liabilities 44,633 - - - 44,633
Convertible debentures - 155,200 - - 155,200
-------------------------------------------------------------------------
65,674 175,744 14,335 17,707 273,460
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 June 30, 2008 are
the loan facility obtained by Kyzylkum (note 5.1) which bears
interest at floating rates, and the convertible debentures, with a
fixed interest rate.
Draw downs under the Corporation's credit facility (note 9) can be
made at interest rates based on either the US dollar LIBOR rate or
the Bank of Montreal base rate for US dollar denominated loans.
The margin on LIBOR loans is between 1.25% and 2.00% per annum and
between 0.25% and 1.00% per annum on US base rate loans.
A 100 basis point change in the interest rate would impact the
Corporation's net earnings as follows:
Jun 30, Dec 31,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
A 100 basis point appreciation in interest
rates, with all other variables held constant 119 40
A 100 basis point 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 having market related 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:
Jun 30, Jun 30,
2008 2007
$'000 $'000
-------------------------------------------------------------------------
A 10% appreciation in commodity prices, with all
other variables held constant 7,191 6,500
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 months ended June 30, 2008: (in $'000)
Depreci-
ation Explor-
Operating and ation
Revenues expenses depletion expense
Country $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 49,390 (9,487) (6,960) -
South Inkai Uranium
Project Kazakhstan - - - -
Kharasan Uranium
Project Kazakhstan - - - -
Dominion Uranium South
Project Africa - - - (488)
United States
development United
projects States - - - -
United States
exploration United
projects States - - - (1,445)
Hobson Facility
and La Palangana United
Project States - - - -
Shootaring Canyon United
Mill States - - - (11)
Honeymoon Uranium
Project(1) Australia - - - (1,251)
Corporate and other - - - (1,840)
-------------------------------------------------------------------------
Total 49,390 (9,487) (6,960) (5,035)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net
earnings/
(loss)
from
contin-
uing Capital
operat- expendi-
ions ture
Country $'000 $'000
-----------------------------------------------------
Akdala Uranium Mine Kazakhstan 17,240 3,241
South Inkai Uranium
Project Kazakhstan 819 11,373
Kharasan Uranium
Project Kazakhstan 745 6,962
Dominion Uranium South
Project Africa (1,367) 32,266
United States
development United
projects States (37) 3,019
United States
exploration United
projects States (1,980) -
Hobson Facility
and La Palangana United
Project States 99 4,560
Shootaring Canyon United
Mill States (251) 1,359
Honeymoon Uranium
Project(1) Australia (2,214) 4,797
Corporate and other (81,249) 843
-----------------------------------------------------
Total (68,195) 68,420
-----------------------------------------------------
-----------------------------------------------------
(1) The Corporation suspended development activities at Honeymoon to
allow for evaluation of corporate development opportunities for the
project.
For the six months ended June 30, 2008: (in $'000)
Depreci-
and Explor-
Operating ation ation
Country Revenues expenses depletion expense
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 71,907 (12,779) (9,891) -
South Inkai Uranium
Project Kazakhstan - - - -
Kharasan Uranium
Project Kazakhstan - - - -
Dominion Uranium South
Project Africa - - - (540)
United States
development United
projects States - - - -
United States
exploration United
projects States - - - (1,814)
Hobson Facility
and La Palangana United
Project States - - - -
Shootaring Canyon United
Mill States - - - (11)
Honeymoon Uranium
Project Australia - - - (1,528)
Corporate and other - - - (2,822)
-------------------------------------------------------------------------
Total 71,907 (12,779) (9,891) (6,715)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net
earnings/
(loss)
from
contin-
uing Capital
operat- expendi-
Country ions ture
$'000 $'000
-----------------------------------------------------
Akdala Uranium Mine Kazakhstan 26,417 4,855
South Inkai Uranium
Project Kazakhstan 1,159 15,762
Kharasan Uranium
Project Kazakhstan 928 12,000
Dominion Uranium South
Project Africa (1,814) 55,905
United States
development United
projects States (57) 5,643
United States
exploration United
projects States (1,885) 221
Hobson Facility
and La Palangana United
Project States (6) 11,902
Shootaring Canyon United
Mill States (308) 2,849
Honeymoon Uranium
Project Australia (2,928) 11,180
Corporate and other (100,014) 2,120
-----------------------------------------------------
Total (78,508) 122,437
-----------------------------------------------------
-----------------------------------------------------
For the three months ended June 30, 2007: (in $'000)
Depreci-
ation Explor-
Operating and ation
Country Revenues expenses depletion expense
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 23,265 (2,058) (2,016) -
South Inkai Uranium
Project Kazakhstan - - - -
Kharasan Uranium
Project Kazakhstan - - - -
Dominion Uranium South
Project Africa - - - (353)
United States
exploration United
projects States - - - (2,120)
Shootaring Canyon United
Mill States - - - (8)
Honeymoon Uranium
Project Australia - - - (418)
Corporate and other - - - (1,465)
-------------------------------------------------------------------------
Total 23,265 (2,058) (2,016) (4,364)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net
earnings/
(loss)
from
contin-
uing Capital
operat- expendi-
Country ions ture
$'000 $'000
-----------------------------------------------------
Akdala Uranium Mine Kazakhstan 10,993 2,016
South Inkai Uranium
Project Kazakhstan 126 11,441
Kharasan Uranium
Project Kazakhstan (635) 7,186
Dominion Uranium South
Project Africa 397 39,560
United States
exploration United
projects States (2,310) -
Shootaring Canyon United
Mill States (314) -
Honeymoon Uranium
Project Australia (898) 5,452
Corporate and other (20,467) 812
-----------------------------------------------------
Total (13,108) 66,467
-----------------------------------------------------
-----------------------------------------------------
For the six months ended June 30, 2007: (in $'000)
Depreci-
ation Explor-
Operating and ation
Country Revenues expenses depletion expense
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 64,995 (9,101) (6,875) -
South Inkai Uranium
Project Kazakhstan - - - -
Kharasan Uranium
Project Kazakhstan - - - -
Dominion Uranium South
Project Africa - - - (353)
United States
exploration United
projects States - - - (2,120)
Shootaring Canyon United
Mill States - - - (8)
Honeymoon Uranium
Project Australia - - - (418)
Corporate and other - - - (2,924)
-------------------------------------------------------------------------
Total 64,995 (9,101) (6,875) (5,823)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net
earnings/
(loss)
from
contin-
uing Capital
opera- expendi-
Country tions ture
$'000 $'000
-----------------------------------------------------
Akdala Uranium Mine Kazakhstan 24,062 3,442
South Inkai Uranium
Project Kazakhstan 126 19,013
Kharasan Uranium
Project Kazakhstan (2,029) 7,186
Dominion Uranium South
Project Africa 397 39,560
United States
exploration United
projects States (2,310) -
Shootaring Canyon United
Mill States (314) -
Honeymoon Uranium
Project Australia (898) 5,452
Corporate and other (24,171) 8,507
-----------------------------------------------------
Total (5,137) 83,160
-----------------------------------------------------
-----------------------------------------------------
As at June 30, 2008: (in $'000)
Future
Mineral income
interest tax Total
plant and Total liabili- liabili-
Country equipment assets ties ties
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Akdala Uranium Mine Kazakhstan 198,650 240,170 70,078 79,606
South Inkai Uranium
Project Kazakhstan 478,519 477,199 204,289 210,621
Kharasan Uranium
Project Kazakhstan 187,263 199,313 72,216 110,342
Dominion Uranium South
Project Africa 1,907,584 1,921,358 506,368 528,084
United States
development United
projects States 289,620 289,712 90,506 91,409
United States
exploration United
projects States 971,474 979,350 349,790 351,761
Hobson Facility and
La Palangana United
Project States 98,278 99,778 19,933 21,406
Shootaring Canyon United
Mill States 101,684 116,971 18,613 21,984
Honeymoon Uranium
Project Australia 337,496 338,964 75,676 79,722
Corporate and other 25,466 275,064 44 142,146
-------------------------------------------------------------------------
Total 4,596,034 4,937,879 1,407,513 1,637,081
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at Dec 31, 2007: (in $'000)
Future
Mineral income
interest tax Total
plant and Total liabili- liabili-
Country equipment assets ties ties
$'000 $'000 $'000 $'000
-------------------------------------------------------------------------
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
United States
development United
projects States 285,838 285,838 90,517 92,187
United States
exploration United
projects States 1,074,415 1,079,794 370,229 374,210
Hobson Facility and
La Palangana United
Project States 90,372 91,879 19,729 22,639
Shootaring Canyon United
Mill States 97,623 112,894 18,613 21,186
Honeymoon Uranium
Project Australia 300,038 300,043 69,040 86,613
Corporate and other 41,404 341,251 9,193 152,072
-------------------------------------------------------------------------
Total 4,827,353 5,231,297 1,496,060 1,741,602
-------------------------------------------------------------------------
-------------------------------------------------------------------------