Uranium One Announces Q1 2014 Production of 3.1 Million Pounds; Average Total Cash Cost of $13 per Pound Sold and Attributable Sales of 3.3 Million Pounds

TORONTO, May 13, 2014 /CNW/ - Uranium One Inc. ("Uranium One" or the "Corporation") today reported revenues of $69.5 million in Q1 2014 at an average total cash cost per pound sold of produced material(2) of $13 based on attributable sales of 3.3 million pounds at an average realized sales price(2) of $36 per pound.  Attributable production for Q1 2014 was 3.1 million pounds.

Q1 2014 Highlights

Operational

  • Total attributable production during Q1 2014 was 3.1 million pounds, compared to the total attributable production of 3.1 million pounds during Q1 2013.
  • The average total cash cost per pound sold of produced material(2) was $13 per pound during Q1 2014 compared to $17 per pound for Q1 2013.

Financial

  • Attributable sales volumes of produced material for Q1 2014 were 3.3 million pounds sold from the Corporation's operations and joint ventures compared to 1.4 million pounds sold during Q1 2013.
  • Headline revenue was $69.5 million in Q1 2014, compared to $22.8 million in Q1 2013.
  • Attributable revenues(2) (which includes revenues from its interests in joint ventures and the Corporation's headline revenues), amounted to $118.0 million in Q1 2014, compared to $62.6 million in Q1 2013.
  • The average realized sales price of produced material(2) during Q1 2014 was $36 per pound, compared to $45 per pound in Q1 2013. The average spot price in Q1 2014 was $35 per pound compared to $43 per pound in Q1 2013.
  • Gross profit was $4.9 million during Q1 2014, compared to gross profit of $1.9 million in Q1 2013.
  • Attributable gross profit(2) (which includes the Corporation's share of gross profit from joint ventures), totaled $40.2 million in Q1 2014, a 105.1% increase compared to $19.6 million in Q1 2013, primarily due to an increase of 135.7% in the sales volume and a decrease of 24% in the average total cash cost per pound sold(2).
  • The net loss for Q1 2014 was $34.2 million or $0.04 per share, compared to net losses of $9.5 million or $0.01 per share for Q1 2013.
  • The adjusted net loss(2) for Q1 2014 was $22.9 million or $0.02 per share(2), compared to adjusted net loss(2) of $11.2 million or $0.01 per share(2) for Q1 2013.

Corporate

  • As previously announced, on January 2, 2014, the Corporation completed the repurchase of C$227.5 million aggregate principal amount of its outstanding 5.0% convertible unsecured subordinated debentures due March 13, 2015 ("2010 Debentures"), representing 87.49% of the outstanding aggregate principal amount of the 2010 Debentures. The repurchase was completed pursuant to an offer to repurchase the 2010 Debentures which commenced on November 15, 2013, as required by the indenture governing the 2010 Debentures as a result of the completion of the previously disclosed acquisition of all of the publicly held common shares of the Corporation not already owned by a subsidiary of JSC Atomredmetzoloto ("ARMZ") on October 18, 2013 (the "Going Private Transaction"). The repurchased 2010 Debentures have been cancelled.
  • On February 11, 2014, the Kazakhstan Tenge was devalued to US$ 1.00 = KZT 185.00, a devaluation of 19% from the previous target rate of US$1.00 = KZT 150.00. The Tenge devaluation resulted in a foreign exchange translation loss of $249.9 million recorded in the Corporation's foreign currency translation reserve and investments in joint ventures.
  • The United States, European Union and Canada have recently issued orders or adopted regulations imposing sanctions in the form of visa restrictions and asset freezes on the property of certain designated persons considered to be responsible for the events in Ukraine.  To date, the US, EU and Canada have under the foregoing orders and regulations designated a number of Russian and Ukrainian nationals, and the US and Canada have designated a number of corporate entities.  The Corporation's operations have not been impacted by the foregoing orders or regulations or any designations made thereunder and the Corporation continues to carry on business as usual.
  • On March 26, 2014, the Special Inter-District Economic Court for the City of Astana (Republic of Kazakhstan) issued an order having the effect of invalidating the original transfers in 2004 and 2005 from Kazatomprom to the Corporation's Betpak Dala and Kyzylkum joint ventures of the subsoil use contracts for the Akdala, South Inkai and Kharasan fields. The order has been appealed by the joint ventures and is subject to a stay while the appeal is being heard.  The Corporation and its shareholders are currently in discussions with Kazatomprom with a view to obtaining new subsoil use rights in the event that the order becomes effective. Kazatomprom, Betpak Dala and Kyzylkum are putting in place temporary arrangements designed to ensure that, notwithstanding the court order, Betpak Dala and Kyzylkum carry on normal business operations and the rate of return to the Corporation from existing operations is unaffected during this period.  The Corporation's principal shareholder, Uranium One Holding N.V., and Kazatomprom have signed protocols to this effect and are taking the steps necessary to ensure that scheduled production and deliveries to customers are not affected.
  • Subsequent to March 31, 2014, the Corporation elected to cancel its existing undrawn revolving credit facility. The facility will terminate effective May 14, 2014.

Outlook

  • Total attributable production for 2014 is expected to be 12.4 million pounds.
  • During 2014, the average total cash cost per pound sold of produced material(2) is expected to be approximately $18 per pound.
  • The Corporation expects attributable sales of produced material to be approximately 12.4 million pounds in 2014.
  • The Corporation expects to incur attributable capital expenditures in 2014 of $65 million for wellfield development and $8 million for plant and equipment, totalling $73 million for its assets in Kazakhstan and the United States.
  • Expected total attributable production, average total cash cost per pound sold of produced material(2), attributable sales of produced material and attributable capital expenditures for 2014 are subject to adjustment in the event the appeal of Betpak Dala and Kyzylkum from the March 26, 2014 court order is dismissed and the Ministry of Industry and New Technologies re-registers the Akdala, South Inkai and Kharasan subsoil use contracts in the name of Kazatomprom. Depending on the timing of the issuance of new subsoil use rights, such adjustments may be material.
  • In 2014, general and administrative expenses, excluding non-cash items, are expected to be approximately $32 million and exploration expenses are expected to be $1 million.

Q1 2014 Operations and Projects

During the first quarter of 2014, Uranium One achieved attributable production of 3.1 million pounds, compared to total attributable production of 3.1 million pounds in Q1 2013.

Operational results for Uranium One's assets during the first quarter of 2014 were:

Asset

 Q1 2014 Attributable

 Production

 (lbs U3O8)

 Q1 2014 Total Cash Costs

 (per lb sold U3O8)

Akdala

474,000

$12

South Inkai

886,300

$16

Karatau

646,900

$9

Akbastau

450,200

$11

Zarechnoye

287,700

$20

Kharasan

166,800

N/A

Willow Creek  

174,000

N/A

Total

3,085,900

$13

 

Q1 2014 Financial Review

Headline revenue was $69.5 million in Q1 2014, compared to $22.8 million in Q1 2013. Attributable revenues(2) (which includes revenues from its interests in joint ventures and the Corporation's headline revenues), amounted to $118.0 million in Q1 2014, compared to $62.6 million in Q1 2013. The average realized sales price of produced material(2) during Q1 2014 was $36 per pound, compared to $45 per pound in Q1 2013. The average spot price in Q1 2014 was $35 per pound compared to $43 per pound in Q1 2013.

The average total cash cost per pound sold of produced material(2) was $13 per pound during Q1 2014 compared to $17 per pound for Q1 2013.

Gross profit was $4.9 million during Q1 2014, compared to gross profit of $1.9 million in Q1 2013. Attributable gross profit(2) (which includes the Corporation's share of gross profit from joint ventures), totaled $40.2 million in Q1 2014, a 105.1% increase compared to $19.6 million in Q1 2013, primarily due to an increase of 135.7% in the sales volume and a decrease of 24% in the average total cash cost per pound sold.

The net loss for Q1 2014 was $34.2 million or $0.04 per share, compared to net losses of $9.5 million or $0.01 per share for Q1 2013.

The adjusted net loss(2) for Q1 2014 was $22.9 million or $0.02 per share(2), compared to an adjusted net loss(2) of $11.2 million or $0.01 per share(2) for Q1 2013.

On March 31, 2014, the Corporation had cash and cash equivalents, including restricted cash, of $201.9 million, compared to $440.6 million at December 31, 2013.

The following table provides a summary of key financial results:

FINANCIAL



Q1 2014

Q1 2013

Attributable production (lbs) (1)



3,085,900

3,018,000

Attributable sales (lbs) (1) – Produced material



3,265,700

1,381,300






Average realized sales price ($ per lb) (2) – Produced material



36

45

Average total cash cost per pound sold ($ per lb)(2) – Produced material



13

17

Revenues ($ millions) – as reported on consolidated income statement



69.5

22.8

Attributable revenues ($ millions)(2)



118.0

62.6

Gross profit ($ millions) – as reported on consolidated income statement



4.9

1.9

Attributable gross profit ($ millions)(2)



40.2

19.6

Net loss  ($ millions)



(34.2)

(9.5)

Net loss per share – basic and diluted ($ per share)



(0.04)

(0.01)






Adjusted net loss ($ millions)(2)



(22.9)

(11.2)

Adjusted net loss per share – basic ($ per share)(2)



(0.02)

(0.01)

(1)

Attributable production and attributable sales are from assets owned and joint ventures in commercial

production during the period.

(2)

The Corporation has included the following non-GAAP performance measures: average realized sales

price per pound of produced material, average total cash cost per pound sold of produced material,

attributable revenues, attributable gross profit, adjusted net earnings (loss) and adjusted net earnings

(loss) per share. See the section on "Non-GAAP Measures".



Non-GAAP Measures

The Corporation has included the following non-GAAP performance measures throughout this news release: attributable revenues, attributable gross profit, average realized sales price per pound – produced material, average total cash cost per pound sold – produced material, adjusted net earnings (loss) and adjusted net earnings (loss) per share. In the uranium mining industry, these are common performance measures but do not have any standardized meaning, and are non-GAAP measures.

I) Adjusted net loss

Adjusted net loss and adjusted net loss per share do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures reported by other companies. The Corporation believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Corporation's performance and ability to generate cash flow. This is provided as additional information and should not be considered in isolation, or as a substitute for, measures of performance prepared in accordance with IFRS.

Adjusted net loss is calculated by adding back restructuring costs, impairments, cost of suspension of operations, gains/losses from the sale of assets, foreign exchange gains/losses, non-hedge derivative gains and losses and the effect of the tax rate adjustment on deferred tax liabilities to net earnings. Corporate development expenditure relates to one-off project costs. These items are added back due to their inherent volatility and/or infrequent occurrence.

The following table provides a reconciliation of adjusted net loss to net loss reported for the periods presented:

(US DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)



3 MONTHS ENDED



MAR 31, 2014

$ MILLIONS

MAR 31, 2013

$ MILLIONS

Net loss – as reported




(34.2)

(9.5)

Corporate development expenditure




0.6

5.1

Restructuring costs




-

2.1

Foreign exchange (gains)




(31.7)

(8.9)

Non-hedge derivative losses, net of tax




42.4

-

Adjusted net loss 




(22.9)

(11.2)







Adjusted net loss per share – basic ($) and diluted




(0.02)

(0.01)







Weighted average number of shares (millions) – basic and diluted




957.2

957.2







II) Attributable Revenues and Attributable Gross Profit

The Corporation monitors and evaluates performance of its business by using these additional non-GAAP measures, which are consistent with the results that would be reported under proportionate consolidation accounting.

The Corporation believes that, in addition to conventional measures prepared in accordance with IFRS, the Corporation and certain investors use this information to evaluate the Corporation's performance and ability to generate cash flow. This is provided as additional information and should not be considered in isolation, or as a substitute for measures of performance prepared in accordance with IFRS. 

Attributable Revenues:

Attributable revenues are determined as shown in note 13 of the condensed consolidated interim financial statements for the period ended March 31, 2014. This note discloses segmented information which incorporates the revenues of the Corporation under proportionate consolidation. The following table provides a reconciliation of attributable revenues to the revenues reported for the periods presented:

(US DOLLARS IN MILLIONS)



3 MONTHS ENDED



MAR 31, 2014

$ MILLIONS

MAR 31, 2013

$ MILLIONS

Revenues – as reported




69.5

22.8

Attributable revenues from joint ventures




108.8

57.4

Intercompany purchases from joint ventures




(60.3)

(17.6)

Attributable revenues




118.0

62.6







Attributable Gross Profit:

Attributable gross profit is disclosed in the table of uranium sales, inventory and operating costs on pages 22 and 23 of the Management's Discussion and Analysis. The following table provides a reconciliation of attributable gross profit to the gross profit reported for the periods presented:

(US DOLLARS IN MILLIONS)



3 MONTHS ENDED



MAR 31, 2014

$ MILLIONS

MAR 31, 2013

$ MILLIONS

Gross profit – as reported




4.9

1.9

Attributable revenues from joint ventures




108.8

57.4

Attributable operating expenses from joint ventures




(42.0)

(21.5)

Attributable depreciation from joint ventures




(31.5)

(18.2)

Attributable gross profit




40.2

19.6







III) Average realized sales price per pound of produced material and average total cash cost per pound sold of produced material

The Corporation has included the following non-GAAP performance measures throughout this news release: average realized sales price per pound of produced material and average total cash cost per pound sold of produced material. 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 IFRS, the Corporation and certain investors use this information to evaluate the Corporation's performance and ability to generate cash flow. This is provided as additional information and should not be considered in isolation, or as a substitute for, measures of performance prepared in accordance with IFRS.

As in previous periods, average realized sales price per pound of produced material and average total cash cost per pound sold of produced material are calculated as follows:

a)     

Average realized sales price per pound of produced material: Attributable revenues minus revenues in the "Corporate and other" segment(3) divided by attributable sales pounds of produced material.



b)     

Average total cash cost per pound sold of produced material: Operating expenses of produced material(3) divided by attributable sales pounds of produced material(3).



(3)

See tables on pages 22 and 23 of the Management's Discussion and Analysis.



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 U.S. dollars unless otherwise indicated.  All references to pounds sold or pounds produced are to pounds of U3O8.

About Uranium One

Uranium One is one of the world's largest uranium producers with a globally diversified portfolio of assets located in Kazakhstan, the United States, Australia and Tanzania. ROSATOM State Atomic Energy Corporation, through its affiliates, owns 100% of the outstanding common shares of Uranium One.

Cautionary Statements

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

Scientific and technical information contained herein has been reviewed on behalf of the Corporation by Mr. M.H.G. Heyns, Pr.Sci.Nat. (SACNASP), MSAIMM, MGSSA, Senior Vice President New Business and Technical Services of the Corporation, a qualified person for the purposes of NI 43-101.

Investors are advised to refer to independent technical reports containing detailed information with respect to the material properties of Uranium One. These technical reports are available under the profile of Uranium One Inc. at www.sedar.com. Those technical reports provide the date of each resource or reserve estimate, details of the key assumptions, methods and parameters used in the estimates, details of quantity and grade or quality of each resource or reserve and a general discussion of the extent to which the estimate may be materially affected by any known environmental, permitting, legal, taxation, socio-political, marketing, or other relevant issues. The technical reports also provide information with respect to data verification in the estimation.

Forward-looking statements and risk factors: This news release contains certain forward-looking statements. Forward-looking statements include but are not limited to those with respect to the outcome of the appeals of the court order, the probability of a successful appeal of that order, the possibility of concluding and the terms of any new subsoil use contracts which may be entered into with Kazatomprom if the order is not reversed,  the price of uranium, the estimation of mineral resources and mineral reserves, the realization of mineral reserve estimates, the timing and amount of estimated future production, the timing of uranium processing facilities being fully operational,  costs of production, capital expenditures, market conditions, corporate plans, objectives and goals,  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, the timing and potential effects of proposed transactions, title disputes or claims, 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 reversal of the court order on appeal, the obtaining of new subsoil use rights if the order is not reversed, the future steady state production and cash costs of Uranium One, 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, availability of sulphuric acid in Kazakhstan, possible changes to the tax code in Kazakhstan,  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 completion of transactions, integration of acquisitions and the realization of synergies relating thereto, to international operations, to prices of uranium 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, 2013, which is available under Uranium One's profile on SEDAR at www.sedar.com, and which should be reviewed in conjunction with this document. There can be no assurance as to whether or on what terms new subsoil use rights might be obtained, and, given the nature of the proceedings, Uranium One cannot assess the probability of a reversal of the order on appeal.  If the order is not reversed in full or new subsoil use rights are not granted or alternative arrangements implemented (or are granted or implemented on less favourable terms), or binding agreements with Kazatomprom are not concluded, the effect on Uranium One may be material.  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 www.uranium1.com

SOURCE Uranium One Inc.

For further information: Chris Sattler, Chief Executive Officer, Tel: +1 647 788 8500; Anton Jivov, Vice President, Corporate Affairs, Tel: +1 647 788 8461