First Uranium tightens belt in financial storm
16 February 2010
Funding is becoming a critical issue for Toronto-based First Uranium after slower than anticipated mine production and changing uncertainties over environmental authorization at its South African sites led to year-to-date losses for the company.
The company has announced losses of $14.4 million for the quarter ended 31 December 2009, and losses of $66.1 million for the 2010 financial year-to-date, covering the nine months to the end of 2009. Despite continued improvements in production relative to the same period of the previous year, and the first shipment of uranium for conversion, the company nevertheless is facing "significant challenges in its need to fund its current and future financial commitments," according to First Uranium president and CEO Gordon Miller.
The need to raise capital to fund both operating losses at the Ezulwini mine and the remaining capital expenditure program at its Mine Waste Solutions (MWS) operation to recover resources from old mine tailings at the Buffelsfontein mine became increasingly critical during the latter part of 2009 and into 2010. According to the company's Q3 results announcement, it had been actively exploring financing options and had been preparing to recommend "one of several well-advanced financing options" for approval by its board in January. However, a provincial government decision to withdraw environmental authorization (EA) for a new tailings storage facility at MWS in January meant that the financing project had to be put on hold.
Ambiguous reauthorization
On 10 February, First Uranium was notified that the EA had been reinstated. However, the company says, the notice of reinstatement contained "conflicting and ambiguous references" and until these are resolved, no further progress can be made. "If these discussions are not successful and the EA is not reinstated with reference to the correct tailings site, the EA may be of limited or no value to the company," First Uranium notes. Indeed, the company also warns that there is no guarantee that the EA will be successfully reinstated.
Ezulwini production slow
Another major factor contributing to First Uranium's financial condition has been slower than expected gold and uranium production from the Ezulwini mine, which became fully operational in 2009. The first 23,760 pounds of uranium from the mine were shipped to an overseas converter on 10 February, but has not yet been sold, and according to the company the mine has yet to build up sufficient production to generate positive operating cash flow. Although development plans are back on schedule after a six-month push on underground mine development, the challenges of training and building up the efficiency of the mining crews has meant that production build-up has been slower than expected, the company says.
Assuming that it will take up to a year to resolve the permitting issue and that development projects at MWS will not restart in the meantime, First Uranium estimates that, based on its current revised and restructured mine plans, it will need to find an extra $50 million in cash. If the permitting issue were to be resolved and MWS capital projects were to resume within the next three months, the sum would go up to $100 million.
Researched and written
by World Nuclear News