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.
