Start of the endgame at First Uranium

André Janse van Vuuren | Wed, 15 Feb 2012 14:23

[miningmx.com] -- GOLD One International and AngloGold Ashanti would be the likely beneficiaries of a corporate meltdown at First Uranium, as the struggling gold and uranium junior said on Wednesday it was in talks to sell its core operations.

In a quarterly report for the period to end-December, First Uranium said it has received proposals from third parties for its key assets – the Mine Waste Solutions (MWS) surface operations in the vicinity of Stilfontein and the Ezulwini underground mine close to Randfontein.

The sale of these assets, First Uranium said, would enable the company to service two series of convertible notes totalling C$172m and C$150m respectively, of which the $150m would be due in June. These amounts dwarf First Uranium’s current market capitalisation of $45m on the TSX (JSE: R370m), and its cash holdings of US$10.6m.

“If the company is successful in entering into definitive agreements with these third parties … the proceeds would enable it to meet its outstanding obligations,” read the report.

“The company’s ability to continue as a going concern is dependent upon its ability to bring these proposed transactions to fruition.

“Until definitive agreements are completed and all conditions precedent there under are fulfilled, there will still be significant doubt as to the ability of [First Uranium] as they become due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern.”

AngloGold Ashanti might now finish what it started in July last year when it bought a 20% stake in First Uranium, with many analysts and industry players believing its interest would be limited to MWS as it would offer many synergies for AngloGold’s Vaal Reef assets.

As for Ezulwini, it is surrounded by Gold One International’s Rand Uranium operations and Gold Fields’ West Rand assets. In an investor presentation, Gold One CEO Neal Froneman in January punted Rand Uranium as a vehicle for regional consolidation, whereafter the company and Gold Fields announced the possibility of a surface operations joint venture. Ezulwini, incidentally, separates the surface areas of Gold Fields’ South Deep mine and Rand Uranium’s Cooke 3 shaft.

Apart from adding resource and infrastructure to Rand Uranium’s underground operations, Gold One would also be able to utilise Ezulwini’s gold processing plant, should it become the owner. It currently uses Harmony’s Doornkop plant to process ore.

PERMITTING

Typical of the problems that First Uranium had to deal with in recent times – apart from cash flow and operational woes – the company said on Wednesday it received a pre-directive from the Department of Environmental Affairs (DEA) over concerns with MWS’s reclamation project and the environmental impact thereof.

MWS had until February 24 to implement remedies or face “greater regulatory compliance measures”, the statement read.

The Federation for a Sustainable Environment (FSE) has also given First Uranium notice that it intends to appeal the ruling by the Water Tribunal over MWS’s water use licence. The FSE’s CEO, Mariette Liefferink, told Miningmx earlier in February the organisation would be keen on AngloGold and Gold Fields getting involved with First Uranium’s assets as both companies had “very transparent and thorough environmental policies”.