First Uranium flexes muscles through gold transaction with Gold Wheaton

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First Uranium says its announced transaction with Gold Wheaton will provide it with the funds for a sulphuric acid plant, or, future growth.

Author: Tessa Kruger
Posted: Wednesday , 05 Nov 2008

JOHANNESBURG -

First Uranium (TSX:FIU, JSE:FUM) says its planned gold transaction with Gold Wheaton Corporation will give it greater flexibility and the required cash to buy a sulphuric acid plant - if this plan goes ahead.

Company spokesperson Bob Tait said today First Uranium saw the planned transaction with Gold Wheaton as a great opportunity to raise capital for the acid plant it wanted to procure for its uranium and gold production from Ezulwini underground mine and Mine Waste Solutions (MWS) tailings recovery operation.

First Uranium has taken the initiative to sell 25% of gold production at its MWS tailings recovery operation to Gold Wheaton for $125m in light of companies' inability to raise capital in current markets. MWS is expected to produce 2.1m ounces over its life.

Tait said the company had deferred its decision on the construction of a sulphuric acid plant as the cost of sulphuric acid was "softening out", but if First Uranium went ahead with building a plant of either 600t or 300t a day then it would require the extra capital.

First Uranium has not set a date for this decision yet, but would wait for prices to "settle out", said Tait. Supply of sulphuric acid was currently sufficient and came at reasonable prices.

Tait gave the assurance that First Uranium, still in a closed period for a week, had sufficient capital to complete its current projects, Ezulwini mine and Buffelsfontein tailings operation. If the company decided not to go ahead with the sulphuric acid plant it would have funding for future growth "beyond these two projects".

First Uranium had $102m on its balance sheet at the end of the last June quarter and will give an update on this position as well as production at Buffelsfontein next week.

Under the terms of the planned transaction announced with Gold Wheaton Corporation, First Uranium will receive a first payment of $50m on or before 28 November 2008, and the balance of $75m on or before 27 February 2009. It is also due an ongoing payment of the lesser of $400/ounce and the prevailing spot price, "in the fourth year after the first payment".

First Uranium said earlier a sulphuric acid plant would cost about $124m. The company had planned to purchase it off shelf and install it to lower costs.