Uranium One Announces Results for Q3 2008
Trading Symbols: UUU - Toronto Stock Exchange, JSE Limited (Johannesburg
Stock Exchange)
VANCOUVER, Nov. 14 /CNW/ - Uranium One Inc. ("Uranium One") today
reported operational and financial results for the third quarter of 2008. The
Company also provided updated guidance for its operation and development
projects.
The financial statements, as well as the accompanying management's
discussion and analysis, are available for review at www.uranium1.com and
should be read in conjunction with this news release.
All figures are in US dollars unless otherwise indicated.
Highlights:
- Attributable sales of 848,100 pounds of U(3)O(8) for Q3 2008, which
was 24% higher than attributable sales of 685,600 pounds of U(3)O(8)
in Q2 2008
- Average realized sales price during Q3 2008 of $67 per pound,
generating revenue of $56.7 million
- Earnings from mine operations for Q3 2008 were $36.6 million, an
increase of 11% from $32.9 million in Q2 2008
- Production(1) for Q3 2008 was 704,600 pounds of U(3)O(8), a decrease
of 8% from 767,100 pounds of U(3)O(8) in Q2 2008 and an increase of
31% from 538,400 pounds of U(3)O(8) in Q3 2007
- Joint ventures established with Mitsui & Co., Ltd. for the Company's
Australian assets, including the Honeymoon project, subject to
certain regulatory approvals which are expected to be received before
the end of the year
- Write down of mineral interests, plant and equipment of $2.8 billion,
offset by a reduction in future income tax liabilities of
$0.8 billion, resulting in a net impairment of $2.0 billion
- Steve Magnuson succeeded Dave Hodgson as Chief Operating Officer. Mr.
Magnuson is a professional engineer with 30 years mining experience,
primarily in uranium in situ recovery (ISR) operations. Most
recently, he was Vice President of Operations for a U.S. subsidiary
of Cameco Corporation, with responsibility for ISR operations in
Wyoming and Nebraska as well as the Inkai Joint Venture in
Kazakhstan. Mr. Hodgson will remain a member of the board of
directors of Uranium One.
Recent disruptions in global credit and financial markets have resulted
in a deteriorating economic climate, which led to the asset impairments
outlined above.
In response to these conditions, Uranium One has taken a number of steps
to reduce or defer previously planned capital and corporate expenditures,
including placing the Dominion Project on care and maintenance, deferring
project start-up at Hobson, obtaining a partner to fund the development of
Honeymoon and implementing significant reductions in exploration expenditure
and corporate costs across all operations. The Company will continue to
re-evaluate expenditure to ensure liquidity objectives are met.
Jean Nortier, President and CEO of Uranium One commented:
"Uranium One has responded to the current challenging economic conditions
by re-evaluating our project portfolio and focusing on our low cost assets in
Kazakhstan, while continuing to develop our key projects in other
jurisdictions. Our cash resources on hand are sufficient to continue to
develop our priority projects."
Outlook
Uranium One's attributable production estimate for 2008 has been revised
to 2.8 million pounds of U(3)O(8) from 3.1 million pounds of U(3)O(8) as a
result of the decision to place Dominion on care and maintenance, lower than
expected production from South Inkai due to reduced sulphuric acid deliveries
and a later than expected start-up of pilot production at Kharasan.
Total attributable production for 2009 is estimated at 3.5 million
pounds, comprising 1.8 million pounds from Akdala, 1.5 million pounds from
South Inkai and 0.2 million pounds from Kharasan. Total attributable
production for 2010 is estimated at 5.6 million pounds.
The Corporation expects the average cash cost per pound of U(3)O(8)
sold(2) at Akdala during 2009 to be approximately $15 per pound. The cash cost
per pound of U(3)O(8) sold at South Inkai during 2009 is expected to average
$28 per pound, decreasing to approximately $20 per pound by the end of the
year.
Uranium One's total contracts for sales of U(3)O(8) amount to 26 million
pounds, of which 80% have weighted average floor prices, subject to
escalation, of approximately $45 per pound.
During 2009, Uranium One expects to incur capital expenditures of $21
million for the development of assets in Wyoming and $6 million toward the
costs of constructing a sulphuric acid plant in Kazakhstan. Care and
maintenance costs at Dominion are expected to be $12 million for 2009.
Capital expenditures by Betpak Dala and Kyzylkum are funded through the
joint ventures' working capital or third party debt facilities. Subject to
closing of the joint venture transactions, Uranium One's Australian joint
ventures, which include the Honeymoon project, will be funded from the cash
commitment of approximately $82 million (A$104 million) from Mitsui in 2009.
General and administrative costs, excluding non-cash items, are expected
to be approximately $28 million for 2009. Exploration expenditure for 2009 is
expected to be $12 million.
The first dividend from the Corporation's Betpak Dala joint venture is
expected to be received in Q4 2008, with regular dividend payments from Betpak
Dala expected from 2009 onwards.
Directors
Subsequent to the quarter end, Messrs. William Sheriff and William Lupien
resigned as directors of Uranium One. The Corporation wishes to express its
appreciation for their service to Uranium One.
Third Quarter Financial Review
During Q3 2008 the Company sold 848,100 pounds of U(3)O(8) at an average
realized price of $67 per pound resulting in revenue of $56.7 million,
compared to sales of 685,600 pounds of U(3)O(8) and revenue of $49.4 million
during Q2 2008.
The average cash cost per pound of U(3)O(8) sold was $14 per pound during
Q3 2008, unchanged from Q2 2008.
Earnings from mine operations during Q3 2008 were $36.6 million, an
increase of 11% over Q2 2008 earnings from mine operations of $32.9 million.
The Company wrote down mineral interests, plant and equipment by $2.8
billion in Q3 2008, consisting of $1.8 billion on Dominion, $0.7 billion on
United States exploration properties, $0.2 billion on Honeymoon and Australian
exploration, and $0.1 billion on Hobson, La Palangana and the Shootaring
Canyon mill.
The net loss from continuing operations for Q3 2008 was $2.0 billion, or
$4.30 per basic and diluted share, compared to a net loss from continuing
operations in Q2 2008 of $68.2 million, or $0.15 per basic and diluted share.
Adjusted net earnings(2) for Q3 2008 were $4.3 million, or $0.01 per
basic and diluted share compared to an adjusted net loss during Q3 2007 of
$15.0 million, or $0.04 per basic and diluted share.
Consolidated cash and cash equivalents were $98.9 million as at September
30, 2008 compared to $133.2 million at June 30, 2008. Subsequent to the end of
the third quarter, the Company drew $65 million under its credit facility as
an additional internal cash reserve.
Operations Review
Akdala Uranium Mine (70%), Kazakhstan
In line with the production plan for 2008, Akdala produced 689,300 pounds
of U(3)O(8), of which 482,400 pounds is attributable to Uranium One. The
average cash operating cost per pound of U(3)O(8) sold was $14 during the
quarter. Two new production blocks were acidified and commissioned by the end
Q3 2008 and the well installation program for 2008 was completed with 29 wells
installed during the quarter.
The full year production estimate for Akdala attributable to Uranium One
remains 1.8 million pounds U(3)O(8) for 2008 and is expected to be unchanged
at 1.8 million pounds for 2009.
Projects Review
South Inkai Uranium Project (70%), Kazakhstan
Pre-commercial U(3)O(8) production from South Inkai during Q3 2008
totalled 209,100 pounds, of which 146,400 pounds is attributable to Uranium
One. Pre-commercial production was lower during Q3 2008 compared to Q2 2008
due to lower than anticipated sulphuric acid deliveries resulting from ongoing
transportation and logistics constraints in Kazakhstan.
These constraints are also expected to impact production levels in Q4
2008 and the first half of 2009. Pre-commercial production for 2008 is now
expected to be 1,095,000 pounds of U(3)O(8), of which 766,500 pounds of
U(3)O(8) will be attributable to the Corporation. Production from South Inkai
during 2009 is estimated to be 2.1 million pounds of U(3)O(8), of which 1.5
million pounds of U(3)O(8) will be attributable to the Corporation.
Formal government approvals for industrial production at South Inkai
continue to be expected before year end, which will allow the commencement of
ramp-up to full production capacity of 5.2 million pounds of U(3)O(8) per
year.
Kharasan Uranium Project (30%), Kazakhstan
During the third quarter, pilot mining commenced at Kharasan with
production fluids from the first test production block and some of the wells
in the second production block being delivered to the processing plant.
Acidification of an additional two production blocks commenced during the
quarter.
The ion exchange and desorption circuits were completed and became
operational during the third quarter. A precipitation and filtration circuit
is expected to be completed during Q4 2008.
Due to the slower than anticipated ramp-up of pilot production at
Kharasan, as well as shortages of sulphuric acid which have caused delays in
acidifying new production blocks, the Corporation now expects pre-commercial
production to be 26,000 pounds of U(3)O(8) during 2008, of which 7,800 pounds
will be attributable to Uranium One. Production from Kharasan in 2009 is
estimated to be 650,000 pounds of U(3)O(8), of which 195,000 pounds of
U(3)O(8) will be attributable to the Corporation.
The Kyzylkum joint venture will make an interim application for
permission to move to industrial production based on the results of an ISR
operation in close proximity to Kharasan. It is anticipated that this
application process will commence before the end of 2008 and the application
should be completed during 2009. Uranium One now expects Kharasan to achieve
industrial production in 2010.
United States Projects
The Corporation is continuing to advance through the permitting process
for the Moore Ranch, Antelope and JAB projects.
At Moore Ranch in the Powder River Basin of Wyoming, the NRC and WDEQ
technical reviews of the Corporation's application to build and operate an in
situ uranium recovery facility are continuing. Uranium One continues to expect
to receive the necessary licences and permits during 2009, with production
from Moore Ranch anticipated to commence during 2010.
Delineation drilling and environmental data collection for permitting
purposes is ongoing at the Ludeman, Allemand-Ross and Peterson projects in the
Powder River Basin of Wyoming.
In the Great Divide Basin of Wyoming, the Company's principal properties
are the Antelope and JAB projects. During Q3 2008, the Corporation submitted
applications to the NRC and the WDEQ for the licence and permits to construct
and operate an ISR facility for Antelope and JAB.
A drill program recommenced at the Antelope project during Q3 2008 with
115 holes drilled so far and a further 100 holes planned for the remainder of
2008.
In Texas, Uranium One will continue to advance its permit applications
for the La Palangana project, while proceeding to identify, explore and
acquire additional development areas to provide feedstock for the Hobson
facility. Pending receipt of all necessary permits and the identification of
additional development areas, the Corporation has decided to defer further
capital expenditure and related expenses for La Palangana.
Dominion Uranium Project (100%), South Africa
In accordance with the requirements of applicable South African
legislation, Uranium One has initiated consultations with the National Union
of Mineworkers and employees. The Company is exploring strategic alternatives
available to it regarding Dominion, including a sale or other disposition of
its interest in the project and, absent any improvement in project economics,
the potential closure of the project.
The costs associated with the suspension of operations are expected to be
approximately $32 million, with care and maintenance costs of approximately
$12 million per year thereafter.
Conference Call Details
Uranium One will be hosting a conference call and webcast to discuss the
third 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
1-416-915-5761 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 21288394. A replay of
the webcast will be available through a link on our website at
www.uranium1.com
About Uranium One
Uranium One is one of the world's largest publicly traded uranium
producers with a globally diversified portfolio of assets located in
Kazakhstan, the United States, South Africa and Australia.
(1) Consists 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.
Cautionary Statement
No stock exchange, securities commission or other regulatory authority
has approved or disapproved the information contained herein.
Forward-looking statements: This press release contains certain
forward-looking statements. Forward-looking statements include but are not
limited to those with respect to the price of uranium and gold, the estimation
of mineral resources and reserves, the realization of mineral reserve
estimates, the timing and amount of estimated future production, costs of
production, capital expenditures, costs and timing of the development of new
deposits, success of exploration activities, permitting time lines, currency
fluctuations, requirements for additional capital, government regulation of
mining operations, environmental risks, unanticipated reclamation expenses,
title disputes or claims and limitations on insurance coverage and the timing
and possible outcome of pending litigation. In certain cases, forward-looking
statements can be identified by the use of words such as "plans", "expects" or
"does not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate", or "believes"
or variations of such words and phrases, or state that certain actions, events
or results "may", "could", "would", "might" or "will" be taken, occur or be
achieved. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Uranium One to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. Such risks and uncertainties include, among
others, the actual results of current exploration activities, conclusions of
economic evaluations, changes in project parameters as plans continue to be
refined, possible variations in grade and ore densities or recovery rates,
failure of plant, equipment or processes to operate as anticipated, accidents,
labour disputes or other risks of the mining industry, delays in obtaining
government approvals or financing or in completion of development or
construction activities, risks relating to the integration of acquisitions, to
international operations, to prices of uranium and gold as well as those
factors referred to in the section entitled "Risk Factors" in Uranium One's
Annual Information Form for the year ended December 31, 2007, which is
available on SEDAR at www.sedar.com, and which should be reviewed in
conjunction with this document. Although Uranium One has attempted to identify
important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements, there may be
other factors that cause actions, events or results not to be as anticipated,
estimated or intended. There can be no assurance that forward-looking
statements will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements. Uranium One expressly disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except in accordance with applicable
securities laws.
For further information about Uranium One, please visit uranium1.com.
%SEDAR: 00005203E
For further information: Jean Nortier, Chief Executive Officer, Tel: (604)
601-5642; Chris Sattler, Senior Vice President, Corporate Development and
Investor Relations, Tel: (416) 350-3657
.
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