Gordon Miller, First Uranium’s president and chief executive officer commented, “Significant to our future success was the progress made regarding necessary permits and approvals related to our MWS operation. In July 2009, we received formal approval from South Africa’s North West Province Department of Agriculture, Conservation and Environment for the new tailings deposition site, thus enabling MWS to proceed on schedule with construction of this tailings facility for completion in Q1 2011. In addition, the Department of Mining and Minerals granted MWS a ‘new order’ mining right, which signals their approval of our Environmental Management Plan and our Social and Labour Plan, thus establishing a firm foundation for the future of this operation.”
“In turn, the Ezulwini Mine has recently completed its currently-identified capital projects and is accelerating underground development to drive increases in the production of uranium and gold. Ezulwini is expected to turn cash positive in Q3 2010,” continued Miller.
During Q1 2010, First Uranium achieved the following milestones:
Treated a total of 1.8 million tonnes of tailings through the MWS gold plant at an average recovered grade of 0.18 grams of gold per tonne of ore, producing a total of 11,007 ounces of gold at a Cash Cost of $338 per ounce (as defined in the notes to the Consolidated Results of Operations table on the next page);
Milled 92,468 tonnes of ore from the Ezulwini Mine at an average recovered grade of 1.28 grams of gold per tonne of ore, producing 3,791 ounces of gold;
Dispatched the first batch of ammonium diuranate (yellowcake) from the Ezulwini Mine to a third party calcining facility;
Completed final commissioning of the first of two streams of the Ezulwini Mine’s 100,000 tonne per month uranium plant;
Entered into a strategic supplier contract with Petronex (Pty) Ltd for the guaranteed supply of sulphuric acid to MWS for a 36-month period;
Entered into a letter of intent to supply Eskom with uranium for their Koeberg nuclear power station beginning 2011 to 2017. The agreement to be finalized in September 2009, will be based upon a portion of the supply delivered at the uranium spot price and the remainder based on an escalated price; and
Completed a bought deal financing (the “Bought Deal”) on June 1, 2009 and raised gross proceeds of Cdn$106.8 million from 15,250,000 common shares at a price per share of CAD7.
Financial considerations with respect to the completion of capital projects
Future expansion will be subject to capital availability. Having access to capital and maintaining the flexibility to react to negative, unforeseen events are clearly prudent objectives in these uncertain markets. As at June 30, 2009, the remaining capital required to complete the current projects at Ezulwini and MWS was $266 million, of which $232 million is planned to be spent in the next twelve months. To support its financial position while completing planned capital projects over the next twelve months, and to enhance financial flexibility, the Corporation has recently finalized a one-year term credit facility of ZAR160 million (about $20 million) (Facility) with Simmer & Jack and is in negotiations with a South African bank to establish additional access to longer-term debt capital.
The company believes that the cash resources of $123.0 million at June 30, 2009 and the cash forecasted to be generated from the sale of gold and uranium from both its operations, together with the Facility, will provide sufficient funding to complete the current capital projects at the two operations. Should management in future determine that the funding is not sufficient, it will at that time look to a potential new South African project financing facility, if it is available, or reprioritize development and expansion activities to reduce potential funding requirements.
Operational Overview
Ezulwini Mine
During the quarter the Ezulwini Mine continued significant underground work to access the underground ore bodies. At the end of Q1 2010, the workable face length in the Upper Elsburg (UE) gold-only ore body was 369 metres at a grade of 4.66 grams per tonne. The workable face length for the Middle Elsburg co-product gold and uranium ore body was 408 metres at a gold grade of 2.95 grams per tonne and a uranium grade of 0.049 grams per tonne.
The de-stress cuts, which are designed to reduce pressure on the load-bearing shaft pillar of the UE ore body and to open up mining of the high-grade ore in the shaft pillar, have proceeded as planned. The current mine plan includes the processing of low-grade ore from the de-stress cuts through the gold plant until the cuts have been completed at the end of September 2009. At that time, gold grades from the UE ore body are expected to significantly improve.
In July 2009, the mine dispatched its first batch of yellowcake from the recently commissioned uranium plant to the local calcining facility. Once a sufficient quantity of yellowcake has been calcined , the uranium will be shipped from South Africa to a conversion facility, after which the Company will sell the uranium to a nuclear power utility, a minimum of three months after leaving the Company’s uranium plant. The Ezulwini Mine gold plant is working to design specifications.
MWS
The commissioning of the second gold plant module (Phase 1B) is proceeding well and the second reclamation station that will feed ore to the new plant module has been commissioned. Commissioning of the Phase 1B uranium plant modules is expected in Q3 2010.
The plans for construction and commissioning of the third gold plant module and the third stream of the uranium flotation plant at MWS have been finalized, the long-lead items have been ordered, major supplier contracts have been entered into and construction is underway and is expected to be operational by the end of June 2010.
Management is concluding test work to finalize heat and oxygen control elements within the pressure leach process. The outcome of the test work will be integrated into the cost budget estimate (“CBE”) of the pressure leach process. The CBE is expected to be completed by the end of Q2 2010. Construction is dependent upon having sufficient financial resources to proceed and is expected to take from nine to twelve months.
Outlook
Miller commented: “Our primary focus at the Ezulwini Mine is to develop more working areas in both ore bodies, which we measure by the length of active mining rock face, grade and facelength buildup. Our success in underground development will result in more ore available for hoisting to surface and, in turn, drive production through the uranium and gold plants. At Mine Waste Solutions, our priorities are to commission the remaining Phase 1B gold and uranium plants by December 2009 and the Phase 2 gold plant module and the third stream of the uranium flotation plant by the end of June 2010.”
Ezulwini Mine
Outlook
The key elements that will drive gold and uranium production and operating results at the Ezulwini Mine are:
Favourable prices for gold and uranium;
The successful sale of uranium to nuclear power utilities;
The de-stress cuts required to open up mining of the high-grade ore in the shaft pillar of the UE ore body, which is scheduled for completion in Q3 2010; and
The creation of workable face length, with grades of gold and uranium that correlate well within planned grades.
Underground, the development of mining faces at economical grades of uranium and gold are the key to the success as the plant depends upon a consistent high-grade supply of ore from the Ezulwini Mine.
