First Uranium Shareholder Article
First Uranium: The Challenge of ‘Herding Cats’
In 2007 First Uranium Corporation (tse.fiu) traded at $12.00/share. Today, the company is trading at 0.15/share and undergoing negotiations to complete what has been described as a ‘distressed sale of assets.’ First Uranium management entered into these negotiations on the premise that the corporation would be unable to address future debts of Cdn $150m due June 2012 and Cdn $164m due June 2013. However, according to a group of respected investment firms, the deals First Uranium management entered into are being done too cheaply. The investor group of Sprott Asset Management Inc. Stratton, Patto Corporate Services Ltd. and Olma, have objected to the asset sale, arguing that the sale of Mine Waste Solutions to Anglo-Gold Ashanti for Cdn $335m and Ezulwini Mininig Co. to Gold One for Cdn$70m are not fair valuations. The group of investors have sent a letter detailing that the net value of Mine Waste Solutions is currently Cdn $700m while the infrastructure of Ezulwini Mining Co. alone is worth Cdn $150m. According to a Gold One media release, Ezulwini has had “capital intensive projects totaling US$ 400 million substantially completed which include shaft refurbishment and new gold and uranium plant.” Gold One would seem to be positioned to receive Cdn $150m in infrastructure + gold and uranium resources totaling substantially more, for Cdn $70m.
In December 2011 RBC reported that Mine Waste Solutions had a net asset value of Cdn $443.4m and Ezulwini to have a net asset value of Cdn $276.4m, for a total net asset value of Cdn $719m. Three months later in March 2012, a First Uranium report stated that RBC had delivered oral opinions that the asset sale of Mine Waste Solutions for Cdn $335m to AshantiGold, and the sale of Ezulwini to Gold One for Cdn $70m was “…fair from a financial point of view.” Analysis of RBC valuations seem to indicate between December 2011 and March 2012 the net asset value of Mine Waste Solutions and Ezulwini fell Cdn $314m.
Both deals will be voted on separately, the sale of Mine Waste Solutions to AngloGold Ashanti requires 50.1 percent or more, while the sale of Ezulwini to Gold One requires 66.7 percent. However, while AngloGold Ashanti, along with Franco Nevada Corp. and Village Main Reef Ltd. own 33% of First Uranium, they will be excluded from the vote due to their status as related parties to the asset sale. The large investor group of Sprott Asset Management Inc. Stratton, Patto Corporate Services Ltd. and Olma, are seemingly now in the driver seat of the Ezulwini deal, combined, the investor group who are objecting to the current terms of the asset sale own 17% of First Uranium. Nicholas Betsky, head of equities at Olma, was quoted as saying “we are planning to vote ‘no’ and we think enough shareholders will join us.” This confidence may stem from grass-roots support which is beginning to surface among smaller investors, a group who have organized on popular investor forum stockhouse.com have expressed the intention to vote no, they reportedly own shares totaling over 4 million, and this number is only growing, with new shareholders adding their objections to the deal daily.
Village Main Reef is positioned to benefit from the asset sale, CEO, Bernard Swanepoel, was quoted as saying, “I think it must be a really interesting challenge to try and herd cats because those of us who are well secured feel sort of nothing for the others…” While I have never heard of a saying that refers to herding cats, there is a popular comparable phrase that comes to mind, herding sheep. Given the large shareholder objections over the current conditions of the asset sale, and the shareholder’s position of power concerning the asset sale vote, perhaps Swanepoel was premature in dubbing the shareholder’s cats…
First Uranium’s saga continues to unfold, how it ends, will largely depend on how shareholders react to the alleged discounted asset sale of Mine Waste Solutions and Ezulwini Mining Co. Under the current conditions of the asset sale, the market is currently valuing First Uranium Corporation at 0.15/share.
This article was written by a shareholder group of First Uranium Corporation.
Contact at: firsturaniumshareholders@gmail.com