First Uranium Update on Environmental Authorization

Company Commences a Project Restructuring at MWS, Revises Ezulwini Mine Plan and Undertakes Strategic Review

TORONTO and JOHANNESBURG, Feb. 2 /CNW/ - First Uranium Corporation (TSX:FIU, JSE:FUM) (ISIN:CA33744R1029) ("First Uranium" or "the Company") today announced that the Company has been engaged in intensive discussions at the most senior levels with officials of the North West Provincial government, including the Department of Agriculture, Conservation, Environment and Rural Development ("NWDACE") regarding its decision to withdraw the Company's environmental authorization ("EA") for the new Tailings Storage Facility ("TSF"). The TSF was designed to accommodate future tailings deposition at the Mine Waste Solutions ("MWS") tailings recovery project in South Africa. While the EA has not yet been reinstated, based on these recent discussions, the Company is cautiously optimistic that the EA will be reinstated.

Gordon Miller, President and CEO of First Uranium, commented, "As a result of the circumstances that have been precipitated by the unexpected withdrawal of the environmental authorization for our future tailings deposition site at MWS, management's key priorities are to resolve this authorization issue as quickly as possible, seek strategic alternatives for financing and the immediate restructuring of our operations."

Strategic Review, Project Restructuring and Capital Limitations

The announcement of the withdrawal of the EA has not only delayed construction of the TSF, it has also disrupted certain well-advanced corporate financing opportunities, which, along with the slower than expected production buildup at the Ezulwini Mine, would, if alternative financing is not obtained, severely compromise the Company's financial position. The Company is now reviewing strategic alternatives, and is engaged in discussions with respect to alternative financing opportunities.

Notwithstanding progress at its operations discussed below, the continuing discussions regarding the EA and the continuing financing discussions, the Company has taken action to delay future development expenditures, particularly at its MWS tailings recovery operation as part of a company-wide program to conserve capital.

The construction of the first uranium plant module will be concluded by the end of February 2010, at which time commissioning will commence. The plant is expected to commence production of ammonium diuranate ("yellowcake") during the second half of calendar year 2010. While the construction of the third gold plant was progressing ahead of schedule and due for completion in May 2010, as a result of the apparent withdrawal of the environmental authorization for the TSF, construction and commissioning of the third gold plant have been suspended.

Production at MWS will be scaled back from two gold plants to one at the end of March 2010. The reduced production will enable the Company to maximize the availability of its current deposition capacity until the permitting issue has been resolved, but will also result in lower revenues and increase the amount of financing required by the Company.

Under the revised construction schedule the MWS No. 5 Dam will provide sufficient tailings deposition capacity for the one gold plant until the end of December 2011. Subject to re-instatement of the EA and the receipt of additional capital in the near term, the project will be able to continue along its originally planned production trajectory of 35,000 ounces per quarter.

In addition, the Ezulwini Mine development plan is ahead of schedule, however, the mine production forecast has been revised in response to slower than expected mine production ramp up to date and the capital constraints.

    
    MWS: Quarterly Tailings Recovery and Production Forecast
    -------------------------------------------------------------------------
                             Q1 2010   Q2 2010   Q3 2010   Q3 2010   Q4 2010
                              Actual    Actual  Forecast    Actual  Forecast
    -------------------------------------------------------------------------
    Tonnes of ore
     reclaimed (000s)          1,835     2,476     3,880     3,528     2,789
    -------------------------------------------------------------------------
    Average gold head
     grade (g/t)                0.42      0.39      0.39      0.36      0.34
    -------------------------------------------------------------------------
    Gold plant recovery (%)      44%       44%       51%       53%       52%
    -------------------------------------------------------------------------
    Gold reclaimed (oz)       11,007    13,422    25,019    21,891    15,844
    -------------------------------------------------------------------------
    Note: The increase in gold recoveries is possible through the
    introduction of gold concentrates into the uranium plant where exposure
    of material to an acidic environment liberates additional gold that
    would otherwise not be available for cyanidation.
    -------------------------------------------------------------------------
    

At MWS, the Q3 2010 gold produced was less than forecast as the grade reconciliation in the Buffelsfontein No. 4 Dam was slightly below expectations and operations were interrupted by heavy rain storms during the quarter.

The annualized production rate presented below assumes a protracted permitting process during which MWS runs at an average reduced throughput of 600,000 tonnes per month until January 2012. The ability to secure the EA, as well as funding, sooner will allow acceleration of the annualized gold production rate to 140,000 ounces per annum and uranium production to 960,000 pounds per annum as originally planned. From the point at which the EA and funding are secured, MWS will require a six-month window to conclude the necessary construction activities to realize the increased production rate.

    
    MWS: Annual Production Forecast
    -------------------------------------------------------------------------
                                                           FY 2011   FY 2012
    -------------------------------------------------------------------------
         Gold
    -------------------------------------------------------------------------
    Production (oz)                                         57,000    64,000
    -------------------------------------------------------------------------
    Estimated cost ($/oz)                                      459       490
    -------------------------------------------------------------------------
        Uranium
    -------------------------------------------------------------------------
    Production (lb)                                        270,000   560,000
    -------------------------------------------------------------------------
    Estimated cost ($/lb)                                       43        36
    -------------------------------------------------------------------------
    Note:
    1.   Gold "Cash Costs" are costs directly related to the physical
         activities of producing gold and include mining, processing and
         other plant costs; third-party refining and smelting costs;
         marketing expense, on-site general and administrative costs;
         royalties; on-mine drilling expenditures that are related to
         production and other direct costs. Sales of by-product metals are
         deducted from the above in computing cash costs. Cash costs exclude
         depreciation, depletion and amortization, corporate general and
         administrative expense, exploration, interest, and pre-feasibility
         costs and accruals for mine reclamation. Cash costs are calculated
         and presented using the "Gold Institute Production Cost Standard"
         applied consistently for all periods presented. The Gold Institute
         was a non-profit industry association comprised of leading gold
         producers, refiners, bullion suppliers and manufacturers. This
         institute has now been incorporated into the National Mining
         Association. The guidance was first issued in 1996 and revised in
         November 1999. Total cash costs per ounce is a non-GAAP measurement
         and investors are cautioned not to place undue reliance on it and
         are advised to read all GAAP accounting disclosures presented in
         the Corporation's audited consolidated financial statements for
         FY 2009 and accompanying footnotes thereto.
    2.   Uranium "Cash Costs" calculations take into account the incremental
         ounces of gold recovered when the ore is run through the atmospheric
         leach tanks of the uranium plant.
    -------------------------------------------------------------------------
    

OUTLOOK - EZULWINI MINE

Production build up at the Ezulwini mine is progressing more slowly than originally anticipated due to the challenges of training and building up the efficiency of the mining crews with the result that the mine has yet to generate positive operating cash flow. Based on the performance to date and the Company's current cash position, the Ezulwini mine plan has been revised as reflected below.

    
    Ezulwini Mine: Quarterly Underground Production Forecast
    -------------------------------------------------------------------------
                             Q1 2010   Q2 2010   Q3 2010   Q3 2010   Q4 2010
                              Actual    Actual  Forecast    Actual  Forecast
    -------------------------------------------------------------------------
    Upper Elsburg Mining
     Activity
    -------------------------------------------------------------------------
    Cumulative metres of
     mining face available       369       605       749     1,672     1,817
    -------------------------------------------------------------------------
    Blasted face grade -
     gold (g/t)                 4.66      7.79      6.43      7.42      7.33
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Middle Elsburg Mining Activity
    -------------------------------------------------------------------------
    Cumulative metres of
     mining face available       408       754     1,131     1,024     1,311
    -------------------------------------------------------------------------
    Blasted face grade -
     gold (g/t)                 2.95      3.13      3.06      3.20      3.28
    -------------------------------------------------------------------------
    Blasted face grade -
     uranium (g/t)               480       439       552       557       560
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Facelength ("FL") Buildup
    -------------------------------------------------------------------------
    Gold (kg/m of FL blasted)     15        28        75        81        91
    -------------------------------------------------------------------------
    Uranium (kg/m of
     FL blasted)               1,077     1,377     3,328     2,862     3,690
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Mill Production (combined)
    -------------------------------------------------------------------------
    Tonnes of ore milled (000s)   92        95       145       117       137
    -------------------------------------------------------------------------
    Notes:
    1.   Face-length buildup is a metric to indicate the content of gold and
         uranium produced for a horizontal metre of blasted face length.
    2.   The current mining rate is not expected to immediately fill the
         uranium and gold plants that have production capacities of 100,000
         tonnes per month and 200,000 tonnes per month, respectively.
    3.   A minimum three-month delay is expected between uranium production
         and sales, allowing time for calcining, shipment and conversion.
    4.   The anticipated increase in stope grades has been determined on the
         basis of current in situ sampling of reef development and sampling
         of new stopes that are being opened up.
    5.   The forecast face length represents the amount of face length
         available for mining, not necessarily what will be mined.
    -------------------------------------------------------------------------


    Ezulwini Mine: Annual Production Forecast:
    -------------------------------------------------------------------------
                                                 FY 2011   FY 2012   FY 2013
    -------------------------------------------------------------------------
          Gold
    -------------------------------------------------------------------------
    Production (oz)                              133,000   194,000   265,000
    -------------------------------------------------------------------------
    Estimated by-product cash costs ($/oz)           909       672       634
    -------------------------------------------------------------------------
         Uranium
    -------------------------------------------------------------------------
    Production (lb)                              207,000   312,000   390,000
    -------------------------------------------------------------------------
    Estimated by-product cash costs ($/lb)            46        40        41
    -------------------------------------------------------------------------
    Notes:
    1.   "Cash Costs" are costs directly related to the physical activities
         of producing gold and include mining, processing and other plant
         costs; third-party refining and smelting costs; marketing expense,
         on-site general and administrative costs; royalties; on-mine
         drilling expenditures that are related to production and other
         direct costs. Sales of by-product metals are deducted from the
         above in computing cash costs. Cash costs exclude depreciation,
         depletion and amortization, corporate general and administrative
         expense, exploration, interest, and pre-feasibility costs and
         accruals for mine reclamation. Cash costs are calculated and
         presented using the "Gold Institute Production Cost Standard"
         applied consistently for all periods presented. The Gold Institute
         was a non-profit industry association comprised of leading gold
         producers, refiners, bullion suppliers and manufacturers. This
         institute has now been incorporated into the National Mining
         Association. The guidance was first issued in 1996 and revised in
         November 1999. Total cash costs per ounce is a non-GAAP measurement
         and investors are cautioned not to place undue reliance on it and
         are advised to read all GAAP accounting disclosures presented in
         the Corporation's audited consolidated financial statements for
         FY 2009 and accompanying footnotes thereto.
    2.   The face-length buildup is a metric to indicate the content of gold
         and uranium produced for a horizontal metre of blasted face length.
         The cash costs are shown on co-product basis, where costs are
         allocated to each metal on the basis of the revenue contribution
         from each metal.
    -------------------------------------------------------------------------
    

Q3 2010 PRODUCTION UPDATE

During the quarter ended December 31, 2009 ("Q3 2010"), the Company produced 10,054 ounces of gold from the Ezulwini Mine, a 26% percent increase compared to the previous quarter, and 21,891 ounces of gold from the Mine Waste Solutions tailings recovery project ("MWS"), a 63% increase compared to the previous quarter. During the quarter, the Company also continued to optimize its uranium production at the Ezulwini Mine and has shipped its first container of 23,760 pounds of uranium in the form of "yellowcake" (ammonium diuranate) for processing in the United States.

    
    Quarterly Production Results
    -------------------------------------------------------------------------
                             Q3 2009   Q4 2009   Q1 2010   Q2 2010   Q3 2010
    -------------------------------------------------------------------------
    Ezulwini
    -------------------------------------------------------------------------
    Total tonnes of
     ore milled               80,079   108,622    92,468    94,599   108,503
    -------------------------------------------------------------------------
    Gold produced (oz)         6,411     4,267     3,791     7,952    10,054
    -------------------------------------------------------------------------
    Gold sold (oz)             6,411     4,267     3,379     7,047     8,213
    -------------------------------------------------------------------------
    Uranium shipped to
     converter (lb)                -         -         -         -    23,760
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    MWS
    -------------------------------------------------------------------------
    Tonnes of ore
     reclaimed (000s)          1,798     1,693     1,835     2,476     3,528
    -------------------------------------------------------------------------
    Average gold head
     grade (g/t)                0.42      0.41      0.42      0.39      0.36
    -------------------------------------------------------------------------
    Gold plant recovery (%)      50%       47%       44%       44%       53%
    -------------------------------------------------------------------------
    Gold reclaimed (oz)       12,235    10,513    11,007    13,422    21,891
    -------------------------------------------------------------------------
    Gold sold (oz)            12,581    10,417    10,676    11,739    21,091
    -------------------------------------------------------------------------

    In Q4 2010, MWS expects to:
    -  commence commissioning of one flotation circuit and the uranium plant.
       The remaining two flotation circuits, the third gold plant and the TSF
       will be completed upon reinstatement of the EA and the receipt of
       funding;
    -  terminate the EPCM contract and dismiss all construction personnel
       from the project; and
    -  focus production on one of the existing gold plants for an estimated
       quarterly production of 15,844 ounces of gold.

    In Q4 2010, the Ezulwini Mine expects to:
    -  open up over 400 metres (net of mining activity) for a total of over
       3.1 kilometers of available mining face underground at the Ezulwini
       Mine; and
    -  record our first sale of uranium.
    

Technical Disclosure

All technical disclosure in this news release relating to MWS has been prepared in accordance with National Instrument 43-101 ("NI 43-101) by Jim Fisher who is a Chartered Engineer and is a "qualified person" under NI 43-101.

All technical disclosure in this news release relating to the Ezulwini Mine has been prepared in accordance with NI 43-101 by R. Dennis Bergen, P.Eng., Associate Principal Mining Engineer, with Scott Wilson Roscoe Postle Associates Inc. ("Scott Wilson RPA") who is a "qualified person" under NI 43-101 and is independent of First Uranium.

About First Uranium Corporation

First Uranium Corporation (TSX:FIU, JSE:FUM) is focused on its goal of becoming a significant low-cost producer of uranium and gold through the expansion of the underground development to feed the new uranium and gold plants at the Ezulwini Mine and through the expansion of the plant capacity of the Mine Waste Solutions tailings recovery facility, both operations situated in South Africa. First Uranium also plans to grow production by pursuing value-enhancing acquisition and joint venture opportunities in South Africa and elsewhere.

Cautionary Language Regarding Forward-Looking Information

This news release contains and refers to forward-looking information based on current expectations. All other statements other than statements of historical fact included in this release including, without limitation, statements regarding the timing and receipt of required permits, the timing and availability of financing on acceptable terms, the timing and amount of estimated future production, processing and development plans and future plans and objectives of First Uranium are forward-looking statements (or forward-looking information) that involve various estimates, assumptions, risks and uncertainties. For more details on these estimates, assumptions, risks and uncertainties, see the Company's most recent Annual Information Form on file with the Canadian provincial securities regulatory authorities on SEDAR at www.sedar.com. These forward-looking statements are made as of the date hereof and there can be no assurance that such statements will prove to be accurate, such statements are subject to significant risks and uncertainties, and 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 that are included herein, except in accordance with applicable securities laws.

SOURCE First Uranium Corporation

For further information: For further information: Bob Tait, Vice President, Investor Relations at bob@firsturanium.ca, (416) 342-5639 (office) or (416) 558-3858 (mobile), 1240-155 University Avenue, Toronto, ON, M5H 3B7

Organization Profile

First Uranium Corporation

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890