FIU will need at least 100 million here is theEmail I got from Mr. Tait. The very last paragraph is very important...
Thank you for your note and your investment in First Uranium.
I will answer your questions using disclosure from our Management’s Discussion and Analysis (MD&A) documents for our quarters ending June 2009, September 2009 and December 2009..
In our disclosure for the quarter ended June 30, 2009, as shown in the following paragraph, I agree with you that we did write that we believed that our expected cash flow and cash on hand would be sufficient to complete the current capital projects at both operations. Our cash resources, however, we’re only $123 million, not $180 million as you indicated in your e-mail. We also cautioned readers that changes may be required in the coming twelve months.
Management believes that cash resources of $123.0 million available at June 30, 2009 and the cash forecasted to be generated from the sale of gold and uranium at both of its operations, together with the Facility from Simmer & Jack, will provide sufficient funding to complete the current capital projects at the two operations. Economic and industry conditions over the past twelve months have required several adjustments to the Corporation’s capital expenditure programs and changes may be required in the coming year.
Three months later, in our disclosure for the quarter ended September 30, 2009, we disclosed an update on the ‘To be spent’ capital comparing where we were in our capital program on September 30 with June 30. The current Capital Projects amount ‘to be spent’ at the Ezulwini Mine did not change much during that quarter (from $26 million to $23 million
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In our disclosure for the quarter ended September 30, 2009, at MWS the reduction in the ‘To be spent’ was only $46 million ($240 million less $194 million), where the spent amount increased by $66 million ($233 million less $$167 million). The reason for this was explained underneath the table of ‘Cash flows for the six months..’ where we wrote ‘The higher cash consumption from operating activities in 2010 YTD was primarily attributable to the increased mine activities, but as yet limited production at the Ezulwini Mine’. In other words, although production was improving at the Ezulwini Mine it was below expectations and not contributing as much to cash flow as planned.
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Financial Condition
The Corporation’s financial condition has been severely impacted by the following recent events.
The Ezulwini Mine became fully operational early in calendar year 2009. As the year progressed, it became apparent that the mine was not building up gold and uranium production from underground nearly as fast as planned. The Corporation’s requirement to raise capital to fund both the Ezulwini Mine’s operating losses and the remaining capital expenditure program at Mine Waste Solutions (“MWS”) became increasingly critical during the latter part of Q3 2010 and into Q4 2010. The Corporation was actively engaged in exploring additional financing options and in January 2010 management was preparing to recommend one of several well-advanced financing options to the Board for their approval
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Outlook
Liquidity
In an effort to limit its funding requirements, the Corporation has revised the Ezulwini Mine plan and the production schedule at MWS and also curtailed future development expenditures as part of a company-wide program to conserve capital. Management’s key priorities now are to resolve the permitting issue as quickly as possible, consider strategic alternatives for financing and the immediate restructuring of the operations. The Corporation has been actively engaged in discussions with respect to alternative financing arrangements and is assessing various financing alternatives, however, the terms of these alternatives are likely to be more onerous than the previous financing options.
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Also in the disclosure for the quarter ended December 30, 2009, we wrote what we were doing estimate that we need either $50 million on the ‘go slow’ plan or $100 million if we choose an accelerated plan to complete our third gold plant module and tailing deposition site. So we do not need $150 million as you assumed. The Corporation has been actively assessing various financing alternatives, however, as of yet we not provide any assurance that a transaction will be consummated within the short time frame required to fund the Corporation’s immediate cash requirements, which is why there is a substantial discount of the share price.