First Uranium gets through key test


[] — FIRST Uranium Corp., the Toronto and JSE-listed gold and uranium producer, hailed the successful testing of its gold plant at its Mine Waste Solutions (MWS) business unit as “a defining moment’ in the history of the company, the risk profile of which had now been “improved substantially’.

Shares in First Uranium gained 3% on the JSE following the news of the successful testing at MWS and were last trading at R3.30/share.

MWS was required to achieve consistent production over three consecutive months with monthly tonnage exceeding 1.64 million tonnes in tailings, equal to 85% of steady-state production. The plant was also required to meet certain grade and recovery criteria for 14 consecutive days within a 90-day period.

Said Deon van der Mescht, CEO of First Uranium: “The test was successfully concluded on August 24 and was subsequently confirmed by Franco-Nevada on August 29. The successful completion is a defining moment for what is already a world class project and improves the risk profile of the company substantially.’

Critically, failing to have met the conditions of the stress test at MWS would have set First Uranium up for major financial penalties in terms of a $175m gold supply investment by Gold Wheaton in First Uranium. Wheaton Gold was subsequently taken over by Franco-Nevada which inherited the First Uranium investment.

If the completion test was not achieved by the September deadline, the company would be liable to pay interest of $1.5m per month until December. If the target was still not met by that time, MWS would incur a $30m penalty.

Yet there’s still obstacles for First Uranium to mount. It lowered its year-on-year quarterly pre-tax losses in the first quarter of its 2012 financial year to $39.8m, but said the uranium plant at MWS would continue to absorb working capital. The commissioning of the plant turned on an improvement in the uranium market which First Uranium described as “volatile’.

The ramp up profile of First Uranium’s other major asset, the Ezulwini underground mine, was progressing slower than planned owing to a change in mining method. Gold output from Ezulwini had also been lowered.

However, Van der Mescht said mining of the so-called “massive’ orebody at Ezulwini remained on the company’s radar. This is the orebody which Gold Fields mines at its South Deep operation.