First Uranium soars on tailings news

Allan Seccombe | Fri, 26 Feb 2010 10:24

[miningmx.com] -- SHARES in First Uranium shot up 40% on Friday on news that it had received a positive decision on its tailings deposition site application, but the group warned its finances were seriously compromised and it was looking for a strategic investor.

A crisis was triggered in First Uranium by the withdrawal of the environmental authorisation (EA) for the new tailings storage facility at its dump re-treatment unit Mine Waste Solutions (MWS).

First Uranium lodged an amended EA application in early October to clear up any "possible discrepencies" regarding its project and property descriptions, including the siting of its new tailings storage facility near the town of Stilfontein in the North West province.

The North West Provincial Government`s Department of Agriculture, Conservation, Environment and Rural Development has now issued a positive decision on the amendment application, First Uranium said.

"Now that we have the environmental authorisation re-instated we can concentrate on the process of securing the necessary financing for the construction of this tailings storage facility at MWS and our plans for ramping up our production at both operations," said Gordon Miller, First Uranium's CEO.

First Uranium's shares, which are illiquid on the JSE, traded up 40% to R12.57 each in this volumes.

Junior gold group, Simmer & Jack, which owns 37% of First Uranium, rose 15% to 150 cents on the JSE.

First Uranium has a loss-making underground mine at Ezulwini and MWS. Ezulwini lost $36.7m in the nine months to end-December, which was only partially offset by a gross profit of $26.9m made by MWS.

"Although the MWS environmental authorisation has been reinstated, it is important to reiterate previously disclosed information that the withdrawal of the EA impacted the Company's access to additional funding and has severely compromised the Company's financial condition," Miller said.

First Uranium has been speaking to "several" potential strategic investors, but the investment proposals they submitted were unacceptable.

The most logical strategic investor would be the newly formed Rand Uranium, which is 40% owned by Harmony Gold and headed by John Munro, the former Gold Fields' executive. Rand Uranium operates the Cooke gold and uranium mines and has a massive tailings retreatment project in the piepline.

Munro has spoken of consolidation and growth in the sector and with Ezulwini being relatively close to the Cooke operations this would be a sensible starting point.

Miller said First Uranium has set up a special committee of its board directors and this team is still pursuing talks with potential investors and "other potential strategic transactions".

"Despite these efforts, which are ongoing, no assurance can be given that the Company will be successful in concluding an acceptable transaction," Miller said.

If First Uranium is unable to meet a construction completion date of 1 June this year for its third gold plant module at MWS it may trigger a $42m liability in terms of a contract struck between First Uranium and Canadian gold royalty company Gold Wheaton.

Gold Wheaton had contracted to buy 25% of the gold output from MWS at favourable prices, after paying $75m upfront as a capital injection into First Uranium in March 2009.

“Gold Wheaton is extremely pleased that this issue has been successfully resolved. We believe that with appropriate funding, the previously planned reduction in MWS gold production can now be reversed and that the second gold plant will continue to operate at full capacity until the TSF is able to accept tailings.” said David Cohen, CEO and Chairman of Gold Wheaton.