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UUU - Uranium One Inc - Annual Consolidated Financial Statements for the
year ended December 31, 2010
Uranium One Inc
(Incorporated in Canada)
(Registration number: 15096422420)
Share code on the JSE: UUU & ISIN: CA91701P1053
Share code on the TSX: UUU & ISIN: CA91701P1053
Annual Consolidated Financial Statements for the year ended December 31,
2010
Management`s Responsibility for Financial Reporting
The consolidated financial statements have been prepared by management, in
accordance with Canadian generally accepted accounting principles, who, when
necessary, have made informed judgments and estimates of the outcome of
events and transactions. Management acknowledges its responsibility for the
fairness, integrity and objectivity of all information in the consolidated
financial statements.
As a means of fulfilling its responsibility, management relies on the
company`s system of internal control. This system has been established to
ensure, within reasonable limits, that the assets are safeguarded,
transactions are properly recorded and are executed in accordance with
management`s authorization and that the accounting records provide a solid
foundation from which to prepare the consolidated financial statements.
Any system of internal control has inherent limitations, therefore even
those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation.
The Board of Directors carries out its responsibility for the consolidated
financial statements principally through its Audit Committee, consisting
solely of non-management independent directors. This committee meets
periodically, reviews the scope of the external audit, the adequacy of the
system of internal control and the appropriateness of the financial
reporting and then makes its recommendations to the Board of Directors.
Based on those recommendations, the Board of Directors approves the
consolidated financial statements.
The consolidated financial statements have been audited by the Company`s
independent auditors, Deloitte & Touche LLP. The Independent Auditor`s
Report to the Shareholders of Uranium One Inc., outlines the scope of their
examination and opinion on the consolidated financial statements.
Chris Sattler Graham du Preez
Chief Executive Officer Chief Financial Officer
March 7, 2011
Independent Auditor`s Report
To the Shareholders of Uranium One Inc.
We have audited the accompanying consolidated financial statements of
Uranium One Inc., which comprise the consolidated balance sheets as at
December 31, 2010 and 2009, and the consolidated statements of operations,
changes in equity, comprehensive income (loss), accumulated other
comprehensive income (loss) and cash flows for the years then ended, and a
summary of significant accounting policies and other explanatory
information.
Management`s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with Canadian generally
accepted accounting principles, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditor`s responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor`s judgment, including the
assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity`s
preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity`s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Uranium One Inc. as at December
31, 2010 and 2009 and the results of its operations and its cash flows for
the years then ended in accordance with Canadian generally accepted
accounting principles.
"Deloitte & Touche LLP"
Chartered Accountants
March 7, 2011
Vancouver, Canada
Uranium One Inc.
Consolidated Balance Sheets
As at December 31, 2010 and 2009
(in United States dollars)
Dec 31, Dec 31,
2010 2009
Notes $`000 $`000
ASSETS
Current assets
Cash and cash equivalents 4 315,766 148,465
Restricted cash 15 8,577 -
Accounts and other receivables 5 103,444 42,405
Inventories 6 91,000 71,634
Other assets 9 13,625 24,472
532,412 286,976
Non-current assets
Mineral interests, plant and 8 2,729,919 1,748,284
equipment
Loans to joint ventures 7.2 28,722 29,250
Other assets 9 78,004 33,137
Assets held for sale - 51,460
2,836,645 1,862,131
Total assets 3,369,057 2,149,107
LIABILITIES
Current liabilities
Accounts payable and accrued 10 82,838 65,908
liabilities
Income taxes payable 13,814 1,633
Current portion of convertible 12 151,402 -
debentures
Current portion of long term debt 11 - 63,579
Current portion of joint venture 7.1 60,131 5,000
debt
Other liabilities 15 25,275 132,043
333,460 268,163
Non-current liabilities
Convertible debentures 12 206,298 140,862
Asset retirement obligations 13 26,229 16,100
Future income tax liabilities 14 377,264 180,687
Joint venture debt 7.1 86,150 47,574
Other liabilities 15 3,165 1,877
Assets held for sale - 12,944
699,106 400,044
SHAREHOLDERS` EQUITY
Share capital 16 5,325,426 3,823,297
Contributed surplus 17 114,861 133,478
Equity component of convertible 90,491 46,480
debentures
Accumulated other comprehensive 29,988 16,392
income
Deficit (3,224,275) (2,538,747)
2,336,491 1,480,900
Total shareholders` equity and 3,369,057 2,149,107
liabilities
Basis of presentation and principles of consolidation (note 2.1) &
contingencies (note 27)
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements
Approved on behalf of the board of directors
Ian Telfer Andrew Adams
Chairman of the board Chairman of the audit committee
Uranium One Inc.
Consolidated Statements of Operations
For the years ended December 31, 2010 and 2009
(in United States dollars)
Year ended
Dec 31, 2010 Dec 31,
2009
Notes $`000 $`000
Revenues 326,850 151,992
Operating expenses (92,019) (51,021)
Depreciation and depletion (97,383) (46,383)
Earnings from mine operations 137,448 54,588
General and administrative 18 (53,010) (37,903)
Exploration expense (5,449) (8,830)
Impairment of mineral interests, 8.1 (116,667) (265,456)
plant and equipment
Care and maintenance (2,905) (15,386)
Operating loss (40,583) (272,987)
Interest and other 19 (41,957) (9,145)
(Loss) / gain on available for sale 9 (10,603) 193
securities
Foreign exchange (loss) / gain 20 (13,131) 59,027
Corporate development expenses (8,906) -
Other (690) (630)
Loss from continuing operations before income (115,870) (223,542)
taxes
Current income tax expense 14 (49,298) (20,915)
Future income tax (expense) / 14 (24,534) 206,379
recovery
Loss from continuing operations (189,702) (38,078)
Earnings from discontinued - 1,991
operations
Net loss (189,702) (36,087)
Loss per share from continuing
operations
Basic and diluted $(0.31) $(0.08)
Earnings per share from
discontinued operations
Basic and diluted - $0.00
Net loss per share
Basic and diluted $(0.31) $(0.08)
Weighted average number of shares
(in thousands)
Basic and diluted 22 611,562 475,583
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements
Uranium One Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2010 and 2009
(in United States dollars)
Share capital Contributed Equity component
$`000 surplus of convertible
$`000 debentures
$`000
Balance as at 3,522,824 131,602 46,480
January 1, 2009
Net loss for the - - -
year
Stock options and - 7,502 -
restricted shares
vested
Exercise of stock 6,856 (5,626) -
options and
restricted shares
Issuance of 388 - -
contingent shares
Unrealized gain - - -
recognized on
translation of self-
sustaining foreign
operations
Realized loss on - - -
sale of Gold One(1)
Realized loss on - - -
sale of Uranium One
Africa
Acquisition of 293,229 - -
Karatau (note 3.4)
Fair value - - -
adjustments on
available for sale
securities
Balance as at 3,823,297 133,478 46,480
December 31, 2009
Net loss for the - - -
year
Special cash - - -
dividend
Stock options and - 13,902 -
restricted shares
vested
Exercise of stock 67,829 (32,519) -
options and
restricted shares
Unrealized gain - - -
recognized on
translation of self-
sustaining foreign
operations
Unrealized fair - - -
value adjustments
on available for
sale securities
Realized fair value - - -
adjustments on
available for sale
securities
JUMI Debentures - - 125,692
issued (note 12)
JUMI Debentures - - (125,692)
redeemed (note 12)
2010 Debentures - - 44,014
(note 12)
ARMZ private 602,708 - -
placement
Acquisition of 831,578 - -
Akbastau and
Zarechnoye
Conversion of 2010 14 - (3)
Debentures (note
12)
Balance as at 5,325,426 114,861 90,491
December 31, 2010
Table Continues:...
Accumulated Deficit Total
other $`000 $`000
comprehen-
sive income /
(loss)
$`000
Balance as at (247,708) (2,502,660) 950,538
January 1, 2009
Net loss for the - (36,087) (36,087)
year
Stock options and - - 7,502
restricted shares
vested
Exercise of stock - - 1,230
options and
restricted shares
Issuance of - - 388
contingent shares
Unrealized gain 16,391 - 16,391
recognized on
translation of self-
sustaining foreign
operations
Realized loss on 13,074 - 13,074
sale of Gold One(1)
Realized loss on 234,533 - 234,533
sale of Uranium One
Africa
Acquisition of - - 293,229
Karatau (note 3.4)
Fair value 102 - 102
adjustments on
available for sale
securities
Balance as at 16,392 (2,538,747) 1,480,900
December 31, 2009
Net loss for the - (189,702) (189,702)
year
Special cash - (492,864) (492,864)
dividend
Stock options and - - 13,902
restricted shares
vested
Exercise of stock - - 35,310
options and
restricted shares
Unrealized gain 13,713 - 13,713
recognized on
translation of self-
sustaining foreign
operations
Unrealized fair (10,720) - (10,720)
value adjustments
on available for
sale securities
Realized fair value 10,603 - 10,603
adjustments on
available for sale
securities
JUMI Debentures - - 125,692
issued (note 12)
JUMI Debentures - (2,962) (128,654)
redeemed (note 12)
2010 Debentures - - 44,014
(note 12)
ARMZ private - - 602,708
placement
Acquisition of - - 831,578
Akbastau and
Zarechnoye
Conversion of 2010 - - 11
Debentures (note
12)
Balance as at 29,988 (3,224,275) 2,336,491
December 31, 2010
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements
(1) Gold One International Limited (formerly Aflease Gold)
Uranium One Inc.
Consolidated Statements of Comprehensive Income / (Loss)
For the years ended December 31, 2010 and 2009
(in United States dollars)
Dec 31, 2010 Dec 31, 2009
$`000 $`000
Unrealized gain recognized on translation of 13,713 16,391
self-sustaining foreign operations
Realized foreign exchange loss on sale of - 13,074
Gold One
Realized foreign exchange loss on sale of - 234,533
Uranium One Africa
Unrealized fair value adjustments on (10,720) (91)
available for sale securities
Realized fair value adjustments on available 10,603 193
for sale securities
Other comprehensive income for the year 13,596 264,100
Net loss (189,702) (36,087)
Comprehensive (loss) / income (176,106) 228,013
Consolidated Statements of Accumulated Other Comprehensive Income / (Loss)
As at December 31, 2010 and 2009
(in United States dollars)
Dec 31, 2010 Dec 31, 2009
$`000 $`000
Accumulated other comprehensive income / 16,392 (247,708)
(loss) at January 1
Other comprehensive income for the year 13,596 264,100
29,988 16,392
Deficit (3,224,275) (2,538,747)
Accumulated other comprehensive income and (3,194,287) (2,522,355)
deficit
Components of accumulated other
comprehensive income / (loss) at the end of
the year:
Unrealized foreign exchange adjustment - 30,003 16,290
continuing operations
Available for sale marketable securities and (15) 102
investments
29,988 16,392
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements
Uranium One Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2010 and 2009
(in United States dollars)
Year ended
Dec 31, Dec 31,
2010 2009
Notes $`000 $`000
Net loss from continuing operations (189,702) (38,078)
Items not affecting cash:
- Fair value adjustment included in revenue 15 (10,611) (7,227)
- Loss on sale of fixed assets 3,835 -
- Depreciation and depletion 97,383 46,383
- Impairment of mineral interest plant and 8.1 116,667 265,456
equipment
- Loss / (gain) on sale of available for 10,603 (193)
sale securities
- Stock option and restricted share expense 18 13,902 7,502
- Interest accrued on loans and debentures 15,911 3,728
- Gain on redemption of debenture 12 (1,160) -
- Unrealized foreign exchange loss / (gain) 20 9,748 (55,950)
- Future income tax expense / (recovery) 14 24,534 (206,379)
- Revaluation of financial instruments 1,445 -
- Other (197) 497
Movement in non-cash working capital 21 (45,969) (9,658)
Cash flows from operating activities 46,389 6,081
Acquisition of mineral interests, plant and 25 (108,421) (65,621)
equipment
Advance cash payments for other assets (45,412) (3,629)
Acquisition of Karatau, net of acquisition - (8,228)
costs
Acquisition of Akbastau and Zarechnoye 18,705 -
Acquisition of Christensen Ranch and (28,869) (8,750)
Irigaray
Cash received in acquisition of SKZ-U LLP - 1,290
Cash advance for sulphuric acid plant - (5,385)
investment
Proceeds on sale of Uranium One Africa Ltd 3.5 37,300 -
Proceeds on sale of Gold One Ltd - 20,972
(Acquisition) / disposal of available for (1,259) 487
sale securities
Karatau promissory note and contingent (111,773) -
payment
Cash proceeds from joint ventures 1,226 8,167
Proceeds on sale of mineral interests, 3,600 7,304
plant and equipment
Restricted cash (8,577) -
Other (979) 1,093
Cash flows used in investing activities (244,459) (52,300)
Common shares issued, net of issue costs 35,310 1,230
ARMZ private placement net of issue costs 602,708 -
Loans received by joint ventures 34,146 12,000
Advances received 11,155 -
Debentures issued, net of issue costs 498,626 -
Debentures redeemed (269,394) -
Special dividend on common shares (492,864) -
Repayment of credit facility 11 (65,000) -
Cash flows from financing activities 354,687 13,230
Effects of exchange rate changes on cash 10,684 5,229
and cash equivalents
Net increase / (decrease) in cash and cash 167,301 (27,760)
equivalents
Cash and cash equivalents at the beginning of the 148,465 176,225
year
Cash and cash equivalents at the end of 315,766 148,465
the year
Supplemental cash flow information (note 21)
The accompanying notes form an integral part of these Annual Consolidated
Financial Statements
Uranium One Inc.
Notes to the Consolidated Financial Statements
as at December 31, 2010 and 2009
(in United States dollars)
NATURE OF OPERATIONS
Uranium One Inc. ("Uranium One"), its subsidiaries and joint ventures
(collectively, the "Corporation") is a Canadian Corporation engaged through
subsidiaries and joint ventures in the mining and production of uranium, and
in the acquisition, exploration and development of properties for the
production of uranium in Kazakhstan, the United States, Australia and
Canada.
The Corporation holds a 70% interest in the Betpak Dala joint venture, which
owns the Akdala and South Inkai uranium mines in Kazakhstan, a 50% interest
in the Karatau joint venture, which owns the Karatau uranium mine in
Kazakhstan, a 50% interest in the Akbastau joint venture, which owns the
Akbastau uranium mine in Kazakhstan, a 49.67% interest in the Zarechnoye
joint venture, which owns the Zarechnoye uranium mine in Kazakhstan, and a
30% interest in the Kyzylkum joint venture, which owns the Kharasan Project
in Kazakhstan. In the United States, the Corporation owns projects in the
Powder River and Great Divide basins in Wyoming. The Corporation owns a 51%
interest in the Honeymoon Uranium Project in Australia. The Corporation
owns, either directly or through joint ventures, a large portfolio of
uranium exploration properties in the western United States, South
Australia, and Canada.
On April 14, 2010, the Corporation sold its South African development and
exploration assets.
2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of presentation and principles of consolidation
The consolidated financial statements of the Corporation have been prepared
in accordance with Canadian generally accepted accounting principles
("Canadian GAAP").
The consolidated financial statements include the accounts of Uranium One,
its subsidiaries and the proportionate share of its interests in joint
ventures. All intercompany balances and transactions have been eliminated.
The following are the Corporation`s principal mineral properties as at
December 31, 2010:
Operating mine:
Entity Mineral Locati Ownershi Status
property/Operati on p
on
Betpak Dala Akdala Uranium Kazakh 70% Proportionately
LLP Mine stan consolidated
Betpak Dala South Inkai Kazakh 70% Proportionately
LLP Uranium Mine stan consolidated
Karatau LLP Karatau Uranium Kazakh 50% Proportionately
Mine(1) stan consolidated
Akbastau LLP Akbastau Uranium Kazakh 50% Proportionately
Mine(2) stan consolidated
Zarechnoye LLP Zarechnoye Kazakh 49.67% Proportionately
Uranium Mine(2) stan consolidated
Advanced development projects:
Entity Mineral Location Ownership Status
property/Operation
Kyzylkum Kharasan Uranium Kazakhstan 30% Proportionately
LLP Project consolidated
Uranium United States United 100% Consolidated
One development States
Americas, projects
Inc.
The Corporation is also developing the following mineral properties:
Entity Mineral Location Ownership Status
property/Operation
Honeymoon Honeymoon Project Australia 51% Proportionately
Uranium consolidated
Project
Joint
Venture
The Corporation owns a 19% interest in the SKZ-U joint venture, which is
constructing a sulphuric acid plant in Kazakhstan (note 7.1).
(1) The joint venture interest in the Karatau Uranium Mine was acquired on
December 21, 2009. Refer to note 3.4
(2) The joint venture interests in the Akbastau and Zarechnoye Uranium
Mines were acquired on December 27, 2010. Refer to note 3.1
2.2 Adoption of new standards
Financial instruments - recognition and measurement
During 2009, the Corporation adopted the amendments made by the CICA to
Handbook Section 3855 - "Financial Instruments - Recognition and
Measurement" ("Section 3855"). Section 3855 was amended to provide
additional guidance concerning the assessment of embedded derivatives upon
reclassification of a financial asset out of the held-for-trading category,
amend the definition of loans and receivables, amend the categories of
financial assets into which debt instruments are required or permitted to be
classified, amend the impairment guidance for held-to-maturity debt
instruments and require reversal of impairment losses on available-for-sale
debt instruments when conditions have changed. The additional guidance on
assessment of embedded derivatives is applicable for reclassifications made
on or after July 1, 2009. All other amendments are applicable as of January
1, 2009. The adoption of these amendments did not result in a material
impact on the Corporation`s consolidated financial statements.
Business combinations
CICA Section 1582 - "Business Combinations", which replaces CICA Section
1581 - "Business Combinations", establishes standards for the accounting for
a business combination. It is the Canadian GAAP equivalent to International
Financial Reporting Standard ("IFRS") 3, "Business Combinations". This
standard is effective for the Corporation`s business combinations with
acquisition dates on or after January 1, 2011. Early adoption is permitted
and the Corporation adopted this standard effective January 1, 2010. The
adoption of this standard required the Corporation to use the closing share
price on the close of the transaction to calculate the value of
consideration, compared to the share price on announcement date. Transaction
costs are now expensed as incurred. The acquisition of the Akbastau Uranium
Mine, Zarechnoye Uranium Mine and Christensen Ranch and Irigaray were
accounted under the rules of the new standard (refer note 3).
Consolidated financial statements and non-controlling interests
CICA Section 1601 - "Consolidated Financial Statements" ("Section 1601") and
Section 1602 - "Non-controlling Interests" ("Section 1602") replaces CICA
Handbook Section 1600 - "Consolidated Financial Statements". Sections 1601
and 1602 establish standards for preparation of consolidated financial
statements and the accounting for non-controlling interests in financial
statements that are equivalent to the standards under IFRS. These standards
are effective for the Corporation for interim and annual financial
statements beginning on January 1, 2011. Early adoption is permitted and
the Corporation adopted these standards effective January 1, 2010. The
adoption of these standards did not result in a material impact on the
Corporation`s consolidated financial statements.
2.3 Measurement and reporting currency
Items included in the financial statements of each entity in the Corporation
are measured using the currency that best reflects the economic substance of
the underlying events and circumstances relevant to that entity (the
"functional currency").
The Corporation`s reporting currency is the United States dollar. Uranium
One, its subsidiaries and joint ventures operate in Kazakhstan, the United
States, Australia, and Canada.
The financial statements of the entities that are determined to be
integrated foreign operations have been translated into United States
dollars by translating foreign currency denominated monetary assets and
liabilities, which includes future income tax, at rates of exchange in
effect at the balance sheet date. Non-monetary items are translated at
historical exchange rates and revenues and expenses at average rates of
exchange during the period. Exchange gains and losses arising on
translation are included in the consolidated statements of operations.
The financial statements of the entities that are determined to be self-
sustaining foreign operations have been translated into United States
dollars by translating all assets and liabilities, which includes future
income tax, at rates of exchange in effect at the balance sheet date.
Revenues and expenses are translated at average exchange rates for the
period. All resulting exchange differences are included in accumulated
other comprehensive income / (loss) on the consolidated balance sheet.
2.4 Inventories
Inventories of solutions and uranium concentrates are valued at the lower of
average production cost or net realizable value. Production costs include
the cost of raw materials, direct labour, mine-site related overhead
expenses and depreciation and depletion of mineral interests.
Materials and supplies are valued on the weighted average basis and recorded
at the lower of average cost or replacement cost.
2.5 Mineral interests, plant and equipment
Mineral interests, plant and equipment are recorded at cost less accumulated
depreciation and depletion.
Mineral interests, plant and equipment includes capitalized expenditures
related to the development of mineral properties and related plant and
equipment. Capitalized costs and plant and equipment are depreciated and
depleted using either a unit-of-production method, over the estimated
economic life of the mine to which they relate, or using the straight-line
method over their estimated useful lives.
The costs associated with mineral interests are separately allocated to
reserves, resources and exploration potential, and include acquired
interests in production, development and exploration stage properties
representing the fair value at the time they were acquired. The value
allocated to reserves is depreciated on a unit-of-production method over the
estimated recoverable proven and probable reserves at the mine. The reserve
value is noted as depletable mineral properties for operations in commercial
production. The resource value represents the property interests that are
believed to potentially contain economic mineralized material such as
inferred material; measured, indicated, and inferred resources with
insufficient drill spacing to qualify as proven and probable reserves; and
inferred resources in close proximity to proven and probable reserves.
Resource value and exploration potential value are classified as non-
depletable mineral interests. At least annually or when otherwise
appropriate, value from the non-depletable category for operating mines will
be transferred to the depletable category as a result of an analysis of the
conversion of resources or exploration potential into reserves. Costs
related to property acquisitions are capitalized until the viability of the
mineral property is determined. When it is determined that a property is
not economically viable the capitalized costs are written down. Exploration
expenditures on properties not advanced enough to identify their development
potential are charged to operations as incurred.
Mining expenditures incurred either to develop new ore bodies or to develop
mine areas in advance of current production are capitalized. Commercial
production is deemed to have commenced when management determines that the
completion of operational commissioning of major mine and plant components
is completed, operating results are being achieved consistently for a period
of time and that there are indicators that these operating results will be
continued. Mine development costs incurred to sustain current production
are capitalized.
Upon sale or abandonment of any mineral interest, plant and equipment, the
cost and related accumulated depreciation or accumulated depletion, are
written off and any gains or losses thereon are included in the consolidated
statement of operations.
2.6 Impairment of long-lived assets
The Corporation reviews the carrying values of its mineral interests, plant
and equipment when changes in circumstances indicate that those carrying
values may not be recoverable. Estimated future net cash flows are
calculated using estimated recoverable reserves, estimated future commodity
prices and the expected future operating and capital costs. An impairment
loss is recognized when the carrying value of an asset held for use exceeds
the sum of undiscounted future net cash flows. An impairment loss is
measured as the amount by which the asset`s carrying amount exceeds its fair
value.
2.7 Asset retirement obligations
The Corporation recognizes liabilities for statutory, contractual or legal
obligations associated with the retirement of mineral property, plant and
equipment, when those obligations result from the acquisition, construction,
development or normal operation of the assets. Initially, the net present
value of the liability for an asset retirement obligation is recognized in
the period incurred. The net present value of the liability is added to the
carrying amount of the associated asset and amortized over the asset`s
useful life. The liability is accreted over time through periodic charges
to earnings and is reduced by actual costs of reclamation. Subsequent to
the initial measurement, the asset retirement obligation is adjusted at the
end of each year to reflect changes in the estimated future cash flows
underlying the obligation.
2.8 Revenue recognition
Revenue from uranium sales is recognized when: (i) persuasive evidence of an
arrangement exists; (ii) the risks and rewards of ownership pass to the
purchaser, including delivery of the product; (iii) the selling price is
fixed or determinable, and (iv) collectability is reasonably assured.
In a uranium supply arrangement, the Corporation is contractually obligated
to provide uranium concentrates to its customers. Uranium that was produced
by the Corporation is delivered to conversion facilities ("Converters")
where the Converter will credit the Corporation`s account for the volume of
accepted uranium. Based on delivery terms in a sales contract with its
customer, the Corporation instructs the Converter to transfer title of a
contractually specified quantity of uranium to the customer`s account at the
Converter. At this point, the Corporation invoices the customer and
recognizes revenue for the uranium supply. The Corporation does not
recognize revenue in circumstances where it delivers borrowed material into
contracts.
Interest income is recognized on a time proportion basis, taking account of
the principal outstanding and the effective interest rate over the period to
maturity, when it is determined that such income will accrue to the
Corporation.
2.9 Future income and mining taxes
The Corporation uses the liability method of accounting for income and
mining taxes. Under the liability method, future tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and for tax losses and other
deductions carried forward. For business acquisitions, the liability method
results in a gross up of mining interests to reflect the recognition of the
future tax liabilities for the tax effect of such differences.
Future tax assets and liabilities are measured using substantively enacted
tax rates expected to apply when the asset is realized or the liability
settled. A reduction in respect of the benefit of a future tax asset (a
valuation allowance) is recorded against any future tax asset if it is not
more likely than not to be realized. The effect on future tax assets and
liabilities of a change in tax rates is recognized in the statement of
operations in the period in which the change is substantively enacted.
2.10 Stock based compensation
The Corporation uses the fair value method of accounting for all stock based
compensation awards ("Awards"). Under this method, the Corporation
determines the fair value of the compensation expense for all Awards on the
date of grant using an option pricing model. The fair value of the Awards
is expensed over the vesting period of the Awards.
Upon exercise of the Awards, the related amount of stock based compensation
previously expensed is transferred from contributed surplus and together
with consideration received, is recorded as share capital.
The Corporation`s stock based compensation plans consist of the following:
Options
Under Uranium One`s Stock Option Plan, options granted are non-assignable
and may be granted for a term not exceeding ten years. The plan is
administered by the Board of Directors, which determines individual
eligibility under the plan, the number of shares reserved underlying the
options granted to each individual (not exceeding 5% of issued and
outstanding shares to any insider and not exceeding 1% of the issued and
outstanding shares to any non-employee director on a non-diluted basis) and
any vesting period which, pursuant to the stock option plan is one-third on
the first anniversary of the grant date, one-third on the second anniversary
of the grant date and the remainder on the third anniversary of the grant
date. The maximum number of shares of Uranium One that are issuable pursuant
to the plan is limited to 7.2% of issued and outstanding shares.
Restricted shares
Under the Uranium One Restricted Share Plan, restricted share rights are
granted to eligible employees, contractors and directors. Each restricted
share right is exercisable for one common share of Uranium One at the end of
the restricted period for no additional consideration. The vesting period
for restricted shares that are currently issued is either two-thirds on the
first anniversary of the grant date and the remainder on the second
anniversary of the grant date, or total vesting on the third anniversary of
the grant date. The aggregate maximum number of shares available for
issuance under the restricted share plan is capped at three million. The
number of shares for issuance to non-employee directors may not exceed 0.5%
of the total number of common shares outstanding on a non-diluted basis.
2.11 Earnings / loss per share
Earnings / loss per share calculations are based on the weighted average
number of common shares and common share equivalents issued and outstanding
during the year. The calculation of diluted earnings per share assumes that
outstanding options and warrants that are dilutive to earnings per share are
exercised and the proceeds are used to repurchase shares of Uranium One at
the average market price of the shares for the period. The effect is to
increase the number of shares used to calculate diluted earnings per share.
Dilution from convertible securities is calculated based on the number of
shares to be issued after taking into account the reduction of the related
after tax interest expense. The impact of outstanding share options,
warrants and convertible debentures are excluded from the diluted share
calculation for loss per share amounts, because it is anti-dilutive.
2.12 Financial instruments
The Corporation`s financial instruments primarily consist of cash, short-
term money market investments, marketable securities, accounts receivable,
accounts payable, loans to joint ventures, draw downs against credit
facilities, long term debt and convertible debentures. The fair value of
the financial instruments approximates their carrying values, except for
the fair values of marketable securities that have been estimated by
reference to quoted market prices for actual or similar instruments where
available and disclosed accordingly.
Comprehensive income comprises the Corporation`s net income and other
comprehensive income. Comprehensive income represents changes in
shareholders` equity during a period arising from non-owner sources and, for
the Corporation, other comprehensive income includes currency translation
adjustments on its net investment in self-sustaining foreign operations, and
unrealized gains and losses on available-for-sale securities.
Financial assets and financial liabilities are recognized on the balance
sheet when the Corporation has become party to the contractual provisions of
the instruments. Financial instruments are initially measured at fair
value, which includes transaction costs, except for financial instruments
classified as held for sale, where the transaction cost is expensed through
the statement of operations. Subsequent to initial recognition these
instruments are measured as set out below:
Investments
Purchases and sales of marketable investments are recognized on the trade
date at fair value, which is the date that the Corporation commits to
purchase or sell the asset. After initial recognition, the investments are
classified as available for sale investments carried at fair value, with the
fair value adjustments accounted for in other comprehensive income. When
available for sale investments are sold, the cumulative market rate
adjustment previously recorded in other comprehensive income is recognized
in the consolidated statement of operations.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank balances, deposits
held at call and certificates of deposits, money market instruments,
including cashable guaranteed investment certificates, bearer deposit notes
and commercial paper with a remaining maturity of three months or less at
date of purchase, and are carried at fair value.
Financial assets
Financial assets that are classified as available for sale securities are
recognized at fair value on the trade date, which is the date that the
Corporation commits to purchase or sell the asset. After initial
recognition, the assets are carried at fair value, with the fair value
adjustments accounted for in other comprehensive income.
Accounts receivable
Accounts receivable are carried at amortized cost unless a provision has
been recorded for uncollectability of these receivables. A provision for
impairment of accounts receivable is established when there is objective
evidence that the Corporation will not be able to collect all amounts due
according to the original terms of receivables.
Impairment and uncollectability of financial assets
An assessment is made at each balance sheet date to determine whether there
is objective evidence that a financial asset or group of financial assets
may be impaired. If such evidence exists, the estimated recoverable amount
of the asset is determined and an impairment loss is recognized for the
difference between the recoverable amount and the carrying amount as
follows: the carrying amount of the asset is reduced to its discounted
estimated recoverable amount, either directly or through the use of an
allowance account and the resulting loss is recognized in the consolidated
statement of operations.
For investments included under financial instruments, if there is an other
than temporary decline in the value of the investment, such reduction is
included in the consolidated statement of operations.
Financial liabilities
After initial recognition, financial liabilities, other than held for
trading liabilities, are subsequently measured at amortized cost using the
effective interest rate method. Amortized cost is calculated by taking into
account any transaction costs and any discount or premium on settlement.
Financial liabilities that are classified as held for trading are recognized
at fair value on the trade date, which is the date that the Corporation
commits to the contract. After initial recognition, the liabilities are
carried at fair market value, with the fair value adjustments accounted for
in the consolidated statement of operations.
Accounts payable
Liabilities for trade and other payables which are normally settled on 30 to
90 day terms are carried at fair value.
Debt
Debt payable is recognized initially at the proceeds received, net of
transaction costs incurred. Debt payable is subsequently measured at
amortized cost using the effective interest rate method. Any difference
between proceeds (net of transaction costs) and the redemption value is
recognized in the consolidated statement of operations, as interest expense,
over the period of the loan.
Offset
Where a legally enforceable right of offset exists for recognized financial
assets and financial liabilities, and there is an intention to settle the
liability and realize the asset simultaneously, or settle on a net basis,
all related financial effects are offset.
Compound instruments
The component parts of compound instruments are classified separately as
financial liabilities and equity in accordance with the substance of the
contractual agreement. At the date of issue, the fair value of the
liability component is estimated using the prevailing market interest rate
for similar non-convertible instruments. This amount is recorded as a
liability on an amortized cost basis until extinguished upon conversion or
at the instrument`s maturity date. The equity component is determined by
deducting the amount of the liability component from the face value of the
compound instrument as a whole. This is recognized and included in equity,
net of income tax effects, and is not subsequently remeasured.
Embedded derivatives
Derivatives may be embedded in other financial instruments (the "host
instrument"). Embedded derivatives are treated as separate derivatives when
their economic characteristics and risks are not clearly and closely related
to those of the host instrument, the terms of the embedded derivative are
the same as those of a stand-alone derivative, and the combined contract is
not held for trading or designated at fair value. These embedded
derivatives are measured at fair value with subsequent changes recognized in
gains or losses on derivatives within interest and other in the consolidated
statement of operations.
2.13 Equity instruments
Equity instruments issued by Uranium One are recorded at the proceeds
received, net of direct issue costs.
2.14 Use of estimates
The preparation of financial statements in conformity with Canadian GAAP
requires the Corporation`s management to make estimates and assumptions
about future events that affect the amounts reported in the consolidated
financial statements and related notes to the consolidated financial
statements. Actual results may differ from those estimates.
Significant estimates used in the preparation of these consolidated
financial statements include, but are not limited to, the recoverability of
accounts receivable and investments, the proven and probable reserves,
resources and exploration potential of mineral interests and the related
depletion and depreciation, the estimated net realizable value of
inventories, impairment of mineral interests, plant and equipment,
determination of fair values of financial instruments, the fair value for
stock-based compensation, the valuation of investments, the provision for
income taxes and composition of income tax assets and liabilities, the
expected economic lives of and the estimated future operating results and
net cash flows from mining interests, the anticipated costs of reclamation
and closure cost obligations, and the fair value of assets and liabilities
acquired in business combinations and asset acquisitions.
2.15 Variable interest entities
Variable interest entities ("VIE`s") as defined by the Accounting Standards
Board in Accounting Guideline ("AcG") 15, "Consolidation of Variable
Interest Entities" are entities in which equity investors do not have
characteristics of a "controlling financial interest" or there is not
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support. VIE`s are subject to
consolidation by the primary beneficiary who will absorb the majority of the
entity`s expected losses and/or expected residual returns. The Corporation
has determined that none of its equity investments, contracts or other
holdings qualify as VIE`s.
2.16 Reclassification of prior year comparative figures
Joint venture debt has been reclassified from other liabilities and is now
presented separately on the consolidated balance sheet and notes. Other
minor prior year comparatives have been reclassified for consistency with
current year presentation. These reclassifications had no effect on the
reported consolidated statements of operations.
2.17 International Financial Reporting Standards (IFRS)
In February 2008, the Canadian Accounting Standards Board confirmed that
publicly accountable enterprises will be required to adopt IFRS for fiscal
years beginning on or after January 1, 2011. Accordingly, the conversion to
IFRS will be applicable to the Corporation`s reporting in the first quarter
of 2011, with restatement of comparative information presented.
3 ACQUISITIONS AND DISPOSALS
3.1 Acquisition of the Akbastau Uranium Mine and Zarechnoye Uranium Mine
The Corporation announced on June 8, 2010, the signing of a definitive
purchase and subscription agreement to acquire a 50% joint venture interest
in the Akbastau Uranium Mine ("Akbastau") and a 49.67% joint venture
interest in the Zarechnoye Uranium Mine ("Zarechnoye") in Kazakhstan from
JSC Atomredmetzoloto ("ARMZ"), the Russian state-owned uranium mining
company. JSC NAC Kazatomprom ("Kazatomprom"), the Kazakh-state owned
uranium mining company, owns 50% and 49.67% joint venture interests in
Akbastau and Zarechnoye, respectively. The remainder of the interest in
Zarechnoye is held by a Kyrgyz company.
Pursuant to the transaction, ARMZ agreed to contribute its interests in
the Akbastau and Zarechnoye joint ventures and a cash investment of $610
million in return for 356 million common shares of the Corporation.
Following closing, the Corporation undertook to pay a special cash dividend
of $1.06 per share to shareholders other than ARMZ. On July 30, 2010, Japan
Uranium Management Inc. ("JUMI") undertook to exercise, under the terms of
its convertible debenture, its right to repurchase which was triggered by
the transaction with ARMZ.
On July 15, 2010 the Independent Committee and the Board of Directors
of Uranium One recommended the transaction to shareholders, who approved the
transaction on August 31, 2010, and announced the completion of legal due
diligence reviews by both parties.
On November 26, 2010 Uranium One completed the initial closing of its
transaction with ARMZ, comprising the issuance of 178 million new common
shares of Uranium One to ARMZ in return for $610 million in cash. The Board
of Directors declared a special dividend of $1.06 per share payable on
December 20, 2010, to all shareholders of record (other than ARMZ) at the
close of business on December 10, 2010.
On December 27, 2010 Uranium One completed the final closing of its
transaction with ARMZ, comprising the issuance of a further 178 million new
common shares of Uranium One to ARMZ in return for ARMZ`s 50% interest in
Akbastau and 49.67% interest in Zarechnoye, $40 million in receivables from
ARMZ and $11.6 million in cash on acquisition to compensate for an
unfavorable contract entered into by Zarechnoye prior to the acquisition.
The JUMI debenture was redeemed after the closing of the transaction for
C$275.8 million, including 101% of the outstanding principal amount and
C$4.0 million of accrued interest.
ARMZ currently holds 492 million common shares representing 51.4% of the
outstanding common shares of Uranium One. ARMZ has agreed to a standstill
of 18 months from closing during which it may not, without prior consent,
dispose of or acquire any additional Uranium One shares, except pursuant to
agreed anti-dilution rights, which will permit ARMZ to maintain not less
than a 51% interest in Uranium One and to certain other exceptions.
The value of Uranium One shares issued was calculated using the closing
share price as at December 27, 2010. The acquisition is accounted for as a
business combination and the aggregate fair values of assets acquired and
liabilities assumed were as follows on acquisition date:
Akbastau Zarechnoye Total
$`000 $`000 $`000
Purchase price:
178 million shares issued
for acquisition of the 645,983 185,595 831,578
interest in the joint
ventures
Acquired receivables (40,000) (11,600) (51,600)
605,983 173,995 779,978
Net assets acquired:
Cash and cash equivalents 4,796 2,309 7,105
Inventory 11,676 10,514 22,190
Other current assets 2,814 2,186 5,000
Mineral interests, plant 731,005 251,162 982,167
and equipment
Other non-current assets 11,845 5,921 17,766
Accounts payable and (20,352) (3,157) (23,509)
accrued liabilities
Current portion of joint (14,769) (10,658) (25,427)
venture debt
Other current liabilities (552) (13,967) (14,519)
Future income tax (117,330) (35,468) (152,798)
liabilities
Joint venture debt - (33,835) (33,835)
Other non-current (3,150) (1,012) (4,162)
liabilities
605,983 173,995 779,978
Had this business combination been effected on January 1, 2010, the
Corporation`s revenue would increase by $74.3 million and the net loss would
decrease by $25.6 million (unaudited).
3.2 Option agreement to acquire Mantra Resources Ltd
The Corporation and ARMZ jointly announced on December 15, 2010 the signing
of a definitive agreement to acquire all of the issued shares of Mantra
Resources Limited ("Mantra") pursuant to an Australian Scheme of
Arrangement. Mantra`s core asset is the Mkuju River Project in Tanzania
which is nearing the completion of a definitive feasibility study.
Pursuant to the agreement with ARMZ, Uranium One has a call option to
acquire Mantra from ARMZ, exercisable at any point within 12 months of
closing (subject to extension) of the acquisition of Mantra by ARMZ. The
agreement also provides ARMZ with a put option to sell Mantra to Uranium One
at the end of the term.
The purchase price to be paid will be equal to ARMZ`s acquisition cost of
Mantra, including any additional expenditures contributed by ARMZ to Mantra
or its properties and interest thereon at a rate of 2.65% per annum.
The exercise of the put or call option will constitute a related party
transaction under applicable Canadian securities legislation. Accordingly,
the exercise of the put and call options is subject to Uranium One minority
shareholder approval, as well as to required regulatory approvals.
3.3 Acquisition of Christensen Ranch and Irigaray
The Corporation entered into a definitive agreement on August 7, 2009 to
acquire 100% of the MALCO Joint Venture ("MALCO") from wholly-owned
subsidiaries of AREVA and ElectricitE de France for $35.3 million in cash.
The assets of MALCO include the licensed and permitted Irigaray In-situ
Recovery ("ISR") central processing plant, the Christensen Ranch satellite
ISR facility and associated U3O8 resources located in the Powder River Basin
of Wyoming. The Corporation also assumed MALCO`s reclamation liabilities in
respect of uranium properties in Texas.
Pursuant to the acquisition agreement, the Corporation placed a deposit of
$8.8 million in escrow to be applied against the purchase price. The
acquisition closed on January 25, 2010. The Corporation accounted for the
acquisition as a business combination.
The Corporation agreed to pay a portion of operating costs and all of the
Texas reclamation costs incurred from the execution date of August 7, 2009
to the closing date of January 25, 2010 which amounted to $2.6 million.
Transaction costs incurred in connection with the acquisition were $0.5
million, which were expensed as incurred.
The aggregate fair values of assets acquired and liabilities assumed were as
follows on acquisition date:
$`000
Purchase price:
Cash 35,315
Operating and remediation costs 2,619
37,934
Net assets acquired:
Cash and cash equivalents 315
Accounts and other receivables 2,005
Mineral interests, plant and 56,364
equipment
Accounts payable and accrued (34)
liabilities
Asset retirement obligations (7,320)
Future income tax liabilities (13,396)
37,934
Had this business combination been effected on January 1, 2010, the
Corporation`s net loss would not be affected (unaudited).
3.4 Acquisition of the Karatau Uranium Mine
Uranium One acquired on December 21, 2009, a 50% joint venture interest in
the Karatau Uranium Mine ("Karatau") in Kazakhstan from ARMZ. The other 50%
joint venture interest in Karatau is held by Kazatomprom.
The purchase price was paid by way of the issuance of 117 million common
shares of Uranium One and a promissory note of $90 million. The promissory
note was repaid on January 18, 2010. The purchase agreement also provides
for contingent payments to ARMZ of up to $60 million, payable in three equal
tranches over the period between 2010 and 2012 subject to certain, post-
closing tax related adjustments. The first payment of $20 million was made
during January 2010 and the second during January 2011. Due to uncertainty
regarding the payment of the remaining $20 million, it was not recognized as
a liability on acquisition.
The value of the Uranium One shares issued was calculated using the weighted
average share price of Uranium One shares two days before, the day of, and
two days after the date of the announcement of the arrangement.
The purchase price allocation was finalized during the year.
The aggregate fair values of assets acquired and liabilities assumed were as
follows on acquisition date:
$`000
Purchase price:
Promissory note 90,000
Common shares 293,229
Contingent payment 20,000
Acquisition costs 8,751
411,980
Net assets acquired:
Cash and cash equivalents 523
Inventory 26,761
Other current assets 3,102
Mineral interests, plant and 536,032
equipment
Other non-current assets 2,218
Accounts payable and accrued (28,889)
liabilities
Other current liabilities (45,051)
Future income tax liabilities (79,850)
Other non-current liabilities (2,866)
411,980
3.5 Disposal of Uranium One Africa Ltd
The Corporation completed the sale of Uranium One Africa during April 2010,
and received cash proceeds of $37.3 million. The net carrying value of the
investment of $38.5 million as at December 31, 2009 was further impaired to
the proceeds of $37.3 million, resulting in an impairment of $1.2 million in
the three months ended March 31, 2010.
4 CASH AND CASH EQUIVALENTS
Dec 31, Dec 31,
2010 2009
$`000 $`000
Cash 255,629 44,362
Money market instruments, including 60,137 104,103
cashable guaranteed investment
certificates, bearer deposit notes
and commercial paper
315,766 148,465
Cash and cash equivalents do not include any asset backed commercial paper.
5 ACCOUNTS AND OTHER RECEIVABLES
Dec 31, Dec 31,
2010 2009
$`000 $`000
Trade receivables 80,258 25,825
Value added tax and general sales 8,248 9,004
tax
Prepayments and advances 6,715 4,747
Other receivables 8,223 2,829
103,444 42,405
6 INVENTORIES
Dec 31, Dec 31,
2010 2009
$`000 $`000
Finished uranium concentrates 62,842 41,055
Solutions and concentrates in 18,541 24,871
process
Product inventory 81,383 65,926
Materials and supplies 9,617 5,708
91,000 71,634
All operating expenses and depreciation and depletion are processed to
inventory and expensed when the product is sold. The Corporation expensed
$189.4 million of inventory as cost of sales during 2010 (2009: $97.4
million).
Finished uranium concentrates includes a fair value adjustment of $9.7
million (2009: $8.9 million) that was processed on acquisition of Akbastau
and Zarechnoye during 2010 and the acquisition of Karatau during 2009, to
increase the carrying value to fair market value. $9.2 million was released
to the consolidated statement of operations as non-cash depreciation and
depletion for sales made up to December 31, 2010.
7 JOINT VENTURES
7.1 Proportionate interests in joint ventures
The Corporation owns the following interests in joint ventures:
Akbastau 50%
Betpak Dala 70%
Karatau 50%
Zarechnoye 49.67%
Kyzylkum 30%
SKZ-U LLP 19%
Honeymoon 51%
Australia Exploration 50%
The Corporation acquired a 19% joint control interest in SKZ-U LLP ("SKZ-U")
during 2009 to ensure long term sulphuric acid supply to Kyzylkum and other
projects in the region. The SKZ-U joint venture was established to
construct a sulphuric acid plant near Kharasan at Zhanakorgan.
The Corporation acquired a 50% joint control interest in Akbastau and a
49.67% joint interest in Zarechnoye during 2010 (note 3.1).
The Corporation`s proportionate share of the assets and liabilities of the
joint ventures are as follows:
As at December 31, Akbastau
2010 Betpak Karatau Zarechno
Dala ye
$`000 $`000 $`000 $`000
Cash 4,788 37,164 1,267 2,305
Other current assets 14,080 101,273 45,494 13,341
Mineral interests,
plant and equipment 734,804 626,177 518,828 250,562
Other assets 1,105 3,080 4,021 5,931
Current liabilities (20,867) (9,050) (8,860) (3,392)
Current portion of
joint venture debt (14,742) - (18,750) (10,639)
Other liabilities (1) (54) (1,487) (24,282) (12,538)
(2) (3) (4) (5)
Joint venture debt - - - (33,776)
Future income tax
liabilities (116,581) (69,012) (94,734) (35,392)
Asset retirement
obligation (2,535) (8,406) (3,006) (2,190)
Net assets 599,998 679,739 419,978 174,212
Table Contuniues:...
As at December 31, Honeymoon & Total
2010 Kyzylkum & Australia
SKZ-U exploration
$`000 $`000 $`000
Cash 7,998 9,923 63,445
Other current assets 943 641 175,772
Mineral interests,
plant and equipment 218,109 12,625 2,361,105
Other assets 9,171 43 23,351
Current liabilities (5,409) (6,839) (54,417)
Current portion of
joint venture debt (16,000) - (60,131)
Other liabilities (1) (495) (35) (38,891)
(2) (3) (4) (5)
Joint venture debt (52,374) - (86,150)
Future income tax
liabilities (15,941) - (331,660)
Asset retirement
obligation (1,133) (1,732) (19,002)
Net assets 144,869 14,626 2,033,422
In addition to the $19.1 million loan (note 7.2) from the Corporation,
Kyzylkum negotiated unsecured bank loan facilities totaling $160 million in
prior periods. One facility, in the amount of $70 million, was obtained
from the Japan Bank for International Cooperation ("JBIC") and the other
facility, in the amount of $90 million, was obtained from Citibank. $60.2
million was outstanding on the JBIC facility and $77.4 million was
outstanding on the Citibank facility as at December 31, 2010. During the
period, Kyzylkum also negotiated a secured loan totaling $42.2 million from
Kazatomprom of which $41.5 million was outstanding as at December 31, 2010.
The proceeds were used to repay $17.5 million to the Corporation, $4.0
million to JBIC and $6.3 million to Citibank. The Corporation`s share of
these facilities is $53.7 million.
Karatau negotiated and drew down on a secured short term bank loan totaling
$10 million with Citibank during 2009. During the year ended December 31,
2010, Karatau negotiated additional secured bank loans from Citibank in the
amount of $6.5 million, Halyk Bank in the amount of $11 million and
UniCredit Bank in the amount of $40 million. The Halyk Bank and Citibank
facilities were drawn down in full and $10 million was outstanding against
the UniCredit Bank facility as at December 31, 2010. The Corporation issued
a guarantee to UniCredit Bank to secure the $40 million facility. At
December 31, 2010, the Corporation`s share of these loans is $18.8 million.
In addition to the $18 million loan (note 7.2) from the Corporation, SKZ-U
received unsecured loans from Sumitomo Mitsui Banking Corporation, Mizuho
Corporate Bank and JBIC in the amounts of $17.4 million, $15 million and
$44.9 million respectively. At December 31, 2010, the Corporation`s share
of these loans is $14.7 million.
At December 31, 2010, Akbastau had loans outstanding of $10 million, $3.4
million and $16 million from Alpha Bank, GRK and Effective Energy,
respectively. Uranium One acquired (note 3.1) a proportionate share of
Akbastau`s loans outstanding totaling $14.7 million.
At December 31, 2010, Zarechnoye had loans outstanding of $28 million, $60
million and $1.4 million from Eurasia Development Bank, Effective Energy and
Citibank, respectively. Uranium One acquired (note 3.1) a proportionate
share of Zarechnoye`s loans outstanding totaling $44.4 million.
As at Betpak Honeymoon & Total
December Dala Karatau Kyzylkum Australia
31, 2009 & SKZ-U exploration
$`000 $`000 $`000 $`000 $`000
Cash 3,062 160 1,283 5,163 9,668
Other 77,871 18,930 279 1,388 98,468
current
assets
Mineral 658,509 510,494 208,830 78,039 1,455,872
interests,
plant and
equipment
Other 1,479 1,924 7,407 - 10,810
assets
Current (8,494) (27,020) (4,072) (2,575) (42,161)
liabilitie
s
Current - (5,000) - - (5,000)
portion of
joint
venture
debt
Other (1,479) (11,687) (1,207) (34) (14,407)
liabilitie
s (1)
Joint - - (47,574) - (47,574)
venture
debt
Future (55,844) (74,637) (12,223) (4,074) (146,778)
income tax
liabilitie
s
Asset (8,170) (2,847) (1,356) (705) (13,078)
retirement
obligation
Net assets 666,934 410,317 151,367 77,202 1,305,820
In addition to the $35 million loan (note 7.2) from the Corporation,
Kyzylkum negotiated unsecured bank loan facilities totaling $160 million in
prior periods. One facility, in the amount of $70 million, was obtained
from the Japan Bank for International Cooperation ("JBIC") and the other
facility, in the amount of $90 million, was obtained from Citibank. These
facilities were fully drawn down as at December 31, 2009, and the
Corporation`s share of these facilities is $48 million.
Karatau negotiated a secured short term bank loan totaling $10 million with
Citibank and the Corporation`s share of this loan is $5 million
The Corporation`s proportionate share of revenue, expenses, net earnings /
(loss) and cash flows for the years ended December 31, 2010 and 2009 are as
follows:
Year ended December 31, 2010
Honeymoo Total
Akbas Betpak Karata Zarechno Kyzylkum n &
tau Dala u ye & SKZ-U Australi
a
explorat
ion
$`000 $`000 $`000 $`000 $`000 $`000 $`000
Revenue - 205,613 105,43 6,287 - - 317,330
0
Expenses and - (118,93 (65,84 (6,285) (789) (115,228 (307,07
other income 2) 2) ) 6)
Foreign (1,10 (4,325) (423) (319) 195 - (5,979)
exchange 7)
(loss) /
gain
(Loss) / (1,10 82,356 39,165 (317) (594) (115,228 4,275
earnings 7) )
before
income taxes
Current - (21,812 (15,69 - - - (37,508
income tax ) 6) )
expense
Future - (12,667 (14,61 534 (3,532) 4,398 (25,877
income tax ) 0) )
(expense) /
recovery
(Loss) / (1,10 47,877 8,859 217 (4,126) (110,830 (59,110
earnings 7) ) )
Cash flows - 60,338 9,047 - - - 69,385
from
operating
activities
Cash flows - (26,236 (21,69 - (19,700) (27,430) (95,056
used in ) 0) )
investing
activities
Cash flows - - 13,750 - 26,415 32,190 72,355
from
financing
activities
Net increase - 34,102 1,107 - 6,715 4,760 46,684
in cash
Year ended
December 31,
2009
Betpak Honeymoon & Total
Dala Karatau Kyzylkum & Australia
SKZ-U exploration
$`000 $`000 $`000 $`000 $`000
Revenue 138,473 10,710 - - 149,183
Expenses and (86,394) (10,684) (450) (769) (98,297)
other income
Foreign 59,153 (358) 11,553 - 70,348
exchange
gain /
(loss)
Earnings / 111,232 (332) 11,103 (769) 121,234
(loss)
before
income taxes
Current (16,567) (1,228) (1) - (17,796)
income tax
expense
Future 164,561 (103) 46,403 (36) 210,825
income tax
recovery /
(expense)
Earnings / 259,226 (1,663) 57,505 (805) 314,263
(loss)
Cash flows 21,487 499 - - 21,986
from
operating
activities
Cash flows (19,150) (339) (16,194) (24,281) (59,964)
used in
investing
activities
Cash flows - - 17,385 29,444 46,829
from
financing
activities
Net 2,337 160 1,191 5,163 8,851
increase in
cash
7.2 Loans to joint ventures
Dec 31, Dec 31,
2010 2009
$`000 $`000
Long term portion
Kyzylkum 13,873 25,698
SKZ-U 14,849 3,552
Total 28,722 29,250
Kyzylkum loan
The Corporation made loans to Kyzylkum pursuant to its obligation to provide
project financing for construction and commissioning of the Kharasan Project
in the amount of $80 million. The loans bear interest at LIBOR plus 1.5%
per annum, with interest payable on a semi-annual basis, commencing within
two years of initial funding.
Dec 31, Dec 31,
2010 2009
$`000 $`000
Balance at January 1 35,000 46,666
Interest capitalized 3,132 -
Repaid during the year (19,066) (11,666)
19,066 35,000
Interest accrued 753 1,711
Balance at December 31 19,819 36,711
Less: elimination of (5,946) (11,013)
proportionate share - 30%
13,873 25,698
Less: current portion - -
Long term portion 13,873 25,698
The loans to Kyzylkum are unsecured.
Kyzylkum repaid 50% of the outstanding loan during 2010.
SKZ-U loan
The Corporation made loans to SKZ-U pursuant to its obligation to provide
project financing for construction of a sulphuric acid plant in the amount
of $31 million. The loans bear interest at LIBOR plus 6.0% per annum, with
interest payable on a semi-annual basis, commencing in 2013.
Dec 31, Dec 31,
2010 2009
$`000 $`000
Balance at January 1 4,291 -
Repaid during the period (4,291) -
Additions during the period 17,995 4,291
17,995 4,291
Interest accrued 337 94
Balance at the end of the period 18,332 4,385
Less: elimination of (3,483) (833)
proportionate share - 19%
14,849 3,552
Less: current portion - -
Long term portion 14,849 3,552
The loans to SKZ-U are unsecured.
8 MINERAL INTERESTS, PLANT AND EQUIPMENT
December 31, 2010 Accumulate Net
d carrying
Cost amortizati Amount
on
$`000 $`000 $`000
Mineral interests 2,435, (145,406) 2,290,363
769
Plant and equipment 539,05 (99,497) 439,556
3
2,974, (244,903) 2,729,919
822
December 31, 2009 Accumulated Net
carrying
Cost amortization Amount
$`000 $`000 $`000
Mineral interests 1,485,968 (82,852) 1,403,116
Plant and 385,621 (40,453) 345,168
equipment
1,871,589 (123,305) 1,748,284
A summary by property of the net book value is as follows:
December Mineral interests
31, 2010
Non- Plant and Total
depletabl equipment
e
Depleta Total
ble
Country $`000 $`000 $`000 $`000 $`000
Akbastau Kazakhs 110,758 585,216 695,974 38,830 734,804
Mine tan
Akdala Mine Kazakhs 62,876 74,358 137,234 25,337 162,571
tan
South Inkai Kazakhs 90,820 269,817 360,637 102,586 463,223
Mine tan
Karatau Kazakhs 55,229 390,567 445,796 73,032 518,828
Mine tan
Zarechnoye Kazakhs 52,004 159,567 211,571 38,991 250,562
Mine tan
Kharasan Kazakhs - 140,078 140,078 78,031 218,109
Project tan
United United - 139,174 139,174 64,126 203,300
States States
development
projects
United United - 116,327 116,327 489 116,816
States States
exploration
projects
United United - 39,107 39,107 826 39,933
States States
conventiona
l mining
projects
Honeymoon Austral - 2,916 2,916 9,709 12,625
Project ia
Corporate - 1,549 1,549 7,599 9,148
and other
Total 371,687 1,918,676 2,290,363 439,556 2,729,919
December Mineral interests
31, 2009
Non- Plant Total
and
equipmen
t
Depleta depleta Total
ble ble
Country $`000 $`000 $`000 $`000 $`000
Akdala Mine Kazakhstan 77,199 74,358 151,557 28,149 179,706
South Inkai Kazakhstan 194,753 181,068 375,821 102,598 478,419
Mine
Karatau Kazakhstan 141,052 312,575 453,627 56,867 510,494
Mine
Kharasan Kazakhstan - 140,078 140,078 68,752 208,830
Project
United United - 94,653 94,653 26,873 121,526
States States
development
projects
United United - 114,905 114,905 493 115,398
States States
exploration
projects
United United - 38,896 38,896 1,014 39,910
States States
conventiona
l mining
projects
Honeymoon Australia - 31,830 31,830 46,209 78,039
Project
Corporate - 1,749 1,749 14,213 15,962
and other
Total 413,004 990,112 1,403,116 345,168 1,748,284
8.1 Impairment of mineral interests, plant and equipment
December 31, 2010 Impairment Future Net
income tax impairment
adjustment
$`000 $`000 $`000
Honeymoon project 113,538 3,712 109,826
Dominion Project 1,216 - 1,216
(note 3.5)
Corporate assets 1,913 - 1,913
Total 116,667 3,712 112,955
December 31, 2009 Impairment Future Net
and income tax impairment
closure adjustment
costs
$`000 $`000 $`000
United States 789 268 521
exploration projects
Corporate and other 136 - 136
Mineral interests, 925 268 657
plant and equipment
Dominion Project 246,525 - 246,525
Assets held for sale 246,525 - 246,525
Texas assets 14,767 (5,422) 20,189
Other assets 3,239 1,070 2,169
Disposals during the 18,006 (4,352) 22,358
year
Total 265,456 (4,084) 269,540
9 OTHER ASSETS
Dec 31, Dec 31,
2010 2009
$`000 $`000
Current
Borrowed uranium concentrates 12,500 8,900
Future income tax assets 820 1,070
Deposit for acquisition of - 8,750
Christensen Ranch and Irigaray (note
3.3)
Deferred business development - 5,174
expenditure
Other 305 578
13,625 24,472
Non-current
Asset retirement fund 37,809 13,500
Acquired receivable, net of Karatau 20,000 -
contingent payment (notes 3.1 and
3.4)
Advances for plant and equipment 16,030 7,487
Long term inventory 1,482 1,244
Future income tax assets 515 -
Available for sale securities 319 9,287
Other 1,849 1,619
78,004 33,137
Asset retirement fund
The Corporation contributed $18.3 million to its asset retirement fund as
part security for the additional asset retirement obligations acquired as
part of the acquisition of Christensen Ranch and Irigaray (note 3.3). The
Corporation also contributed $4.0 million to the asset retirement funds
required as part of continued development of its US development assets.
Additionally, the joint ventures made contributions to their asset
retirement funds during the year and the proportionate share of these
contributions was $2.0 million during 2010.
Uranium concentrates loans
The Corporation entered into a uranium concentrates borrowing agreement to
mitigate the risk of delivery delays, enabling the Corporation to meet its
contractual obligations in terms of current uranium sales contracts. The
asset represents the borrowed uranium concentrates, which are held at a
conversion facility in the Corporation`s account. The asset is recorded at
its fair value. The corresponding financial liability of $12.5 million,
which was classified as held for trading, is also carried at fair value and
is included in uranium concentrates loans in current liabilities (note 15).
Available for sale securities
The Corporation holds available for sale securities with a cost of $0.3
million and a fair value of $0.3 million. Unrealized losses of fifteen
thousand dollars are included in accumulated other comprehensive income. A
loss of $10.6 million was recognized during the year relating to the sale of
available for sale securities.
10 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Dec 31, Dec 31,
2010 2009
$`000 $`000
Trade payables 30,643 22,325
Accruals 22,541 18,661
Advances received 20,505 19,938
Commodity and other taxes payable 7,932 4,378
Other 1,217 606
82,838 65,908
11 LONG TERM DEBT
Dec 31, Dec 31,
2010 2009
$`000 $`000
Opening balance 63,579 61,275
Amortized financing fees 1,507 2,371
Interest paid (806) (1,210)
Interest accrued 720 1,143
Repaid (65,000) -
Closing balance - 63,579
Current portion - 63,579
Long term portion - -
- 63,579
On June 27, 2008, the Corporation established a $100 million bank debt
senior secured revolving credit facility (the "facility"). Under the terms
of the facility, the Corporation had the ability to borrow up to $100
million from the lead lenders, Bank of Montreal and The Bank of Nova Scotia
(the "Banks"). The Corporation repaid the outstanding amount of $65 million
in June 2010.
Financing fees relate to upfront costs and other costs incurred associated
with establishing the credit facility, and are expensed over the term of the
facility.
12 CONVERTIBLE DEBENTURES
2006 Debentures
The Corporation has outstanding convertible unsecured subordinated
debentures maturing December 31, 2011 (the "2006 Debentures") with a face
value of C$155.3 million ($152.4 million). The 2006 Debentures were
originally issued at C$1,000 per debenture and bear interest at an annual
rate of 4.25%, payable semi-annually in arrears on June 30 and December 31
of each year. The conversion price was initially C$20 per share, which was
equivalent to 50 common shares for each C$1,000 principal amount of
debentures.
On December 13, 2010, after the record date for a special cash dividend
(note 3.1), the Corporation adjusted the conversion price for the 2006
Debentures from C$20.00 to C$15.76 per common share in accordance with
section 6.1.4 of the trust indenture that governs the 2006 Debentures.
2010 Debentures
On March 12, 2010 the Corporation issued convertible unsecured subordinated
debentures for gross proceeds of C$260 million ($253.3 million), including
C$10 million taken up under an underwriters` over-allotment option. The
2010 Debentures have a March 13, 2015 maturity date, with interest payable
at a rate of 5.0% per annum, payable semi-annually from the date of receipt
of all necessary Kazakh approvals for the conversion of the 2010 Debentures,
or at a rate of 7.5% per annum, payable semi-annually before the receipt of
the necessary Kazakh approvals. The 2010 Debentures were initially
convertible into common shares of the Corporation at a rate of 250 common
shares per C$1,000 principal and had a conversion price of C$4.00 per common
share.
On October 12, 2010 the Corporation delivered a legal opinion to the
indenture trustee, certifying that all necessary Kazakh approvals have been
obtained for the conversion of the 2010 Debentures and the interest rate on
the Debentures was consequently reset from 7.5% to 5%.
On December 13, 2010, due to the payment of a special cash dividend (note
3.1), the Corporation adjusted the conversion price for the 2010 Debentures
from C$4.00 to C$3.15 per common share in accordance with section 6.1.6 of
the trust indenture that governs the 2010 Debentures.
JUMI Debentures
On January 14, 2010, the Corporation issued to Japan Uranium Management Inc.
("JUMI") a C$269.1 million ($258.1 million ) aggregate principal amount 3%
convertible unsecured subordinated debenture maturing ten years from the
date of issue (the "JUMI Debentures"). Pursuant to the terms of the JUMI
Debentures, the Corporation must offer to re-purchase the JUMI Debentures
for 101% of the outstanding principal amount plus accrued interest upon a
"change of control". The transaction with ARMZ (note 3.1) constituted a
"change of control" and on July 30, 2010, the Corporation made such a re-
purchase offer to JUMI, which JUMI accepted, after which the debentures were
redeemed on December 29, 2010.
The debentures contain both a liability component and an equity component,
being the holders` conversion right, which is presented separately on the
consolidated balance sheet as illustrated in the table below. The
Corporation has allocated the fair value of the debentures to the individual
liability and equity components by establishing the liability component and
then allocating the balance remaining, after subtracting the fair value of
the liability from the issue price, to the equity component. The fair value
of the liability component was determined by discounting the stream of
future payments of interest and principal amounts at the estimated
prevailing market rate for a debt instrument of comparable maturity and
credit quality but excluding any conversion privilege by the holder. A rate
of 10.38% was used for the 2010 Debentures and 11.33% for the JUMI
Debentures.
The table below provides a breakdown of the equity and liability allocation
on initial recognition of the JUMI Debentures and 2010 Debentures:
JUMI 2010
Debentures Debentures
$`000 $`000
Liability 131,378 207,203
Transaction costs (1,050) (10,357)
Net liability 130,328 196,846
Equity 126,727 46,068
Transaction costs (1,035) (2,054)
Net equity 125,692 44,014
Net proceeds 256,020 240,860
The table below indicates the movement in the liability:
December 31, 2010
JUMI 2010 2006 Total
Debentures Debentures Debentures
$`000 $`000 $`000 $`000
Opening balance as - - 140,862 140,862
at Jan 1, 2010
Issued 131,378 207,203 - 338,581
Interest accrued 14,539 18,272 9,918 42,729
Coupon payment (7,551) (13,981) (6,443) (27,975)
Transaction costs (1,050) (10,357) - (11,407)
Conversion - (11) - (11)
Redemption (141,900) - - (141,900)
Foreign exchange 4,584 5,172 7,065 16,821
movement
Liability as at the - 206,298 151,402 357,700
end of the period
Current portion - - 151,402 151,402
Long term portion - 206,298 - 206,298
- 206,298 151,402 357,700
December 31, 2009
2006 Total
Debentures
$`000 $`000
Opening balance as 118,042 118,042
at Jan 1, 2009
Interest incurred 8,739 8,739
Coupon payment (6,049) (6,049)
Foreign exchange 20,130 20,130
movement
Liability as at the 140,862 140,862
end of the period
The payment on redemption of the JUMI debentures was allocated as follows:
JUMI
Debentures
$`000
Liability carrying value on 141,900
redemption
Payment allocated to (140,740)
liability
Gain on redemption recognized 1,160
in profit and loss
Equity carrying value on 125,692
redemption
Payment allocated to equity (128,654)
Loss on redemption recognized (2,962)
in equity
13 ASSET RETIREMENT OBLIGATIONS
Dec 31, Dec 31,
2010 2009
$`000 $`000
Opening balance 16,100 12,999
Accretion expense 957 1,291
Settled (3,587) (959)
Incurred 461 6,555
Acquired through business 12,091 2,841
combinations
Reallocated to assets held for sale - (7,211)
Foreign exchange movement 207 584
Closing balance 26,229 16,100
Dec 31, Dec 31,
2010 2009
Undiscounted and uninflated amount of 36,192 23,801
estimated cash flows ($`000)
Payable in years 2 - 43 8 - 44
Inflation rate 2.69% - 2.69% -
5% 7.00%
Discount rate 6% - 11% 8.40% -
12.52%
Security of $37.8 million (2009: $13.5 million) for reclamation obligations
has been provided in the form required by the relevant country`s authorities
(note 9).
14 INCOME TAXES
Dec 31, Dec 31,
2010 2009
$`000 $`000
Current income tax expense 49,298 20,915
Future income tax expense / 24,534 (206,379)
(recovery)
73,832 (185,464)
Reconciliation between the average effective tax rate and the applicable
statutory tax rate.
Dec 31, Dec 31,
2010 2009
$`000 $`000
Loss before income taxes (115,870) (223,542)
Canadian federal and provincial 28.50% 30.00%
income tax rates
Expected income tax recovery (33,023) (67,063)
Permanent differences, including 9,323 (9,606)
share based compensation and foreign
exchange
Effect of tax rate changes 39,052 (202,201)
Disposal of assets 143,967 -
Change in valuation allowance (149,997) 92,798
Differences in tax rates in foreign (10,759) (478)
jurisdictions
Expiration and restriction of losses 57,134 -
Withholding taxes 11,553 -
Other 6,582 1,086
73,832 (185,464)
Future income tax
The significant components of the Corporation`s future income tax assets and
liabilities are as follows:
Dec 31, Dec 31,
2010 2009
$`000 $`000
Future income tax assets
Mineral interests, plant & equipment 26,901 137,003
Other 43,005 85,642
Tax losses 77,904 90,090
Future income tax assets before 147,810 312,735
valuation allowance
Valuation allowance (107,844) (256,403)
Future income tax assets, net of 39,966 56,332
valuation allowance
Future income tax liabilities
Mineral interests, plant & equipment 415,895 235,949
Future income tax liabilities 415,895 235,949
Net current portion of future income 820 1,070
tax assets
Net non current portion of future 515 -
income tax assets
Net non current portion of future (377,264) (180,687)
income tax liabilities
Net future income tax liability (375,929) (179,617)
Tax loss carry-forwards
Canada and provincial tax jurisdictions
At December 31, 2010, the Corporation had Canadian federal and provincial
net operating loss carry-forwards totaling $129.5 million with a tax value
of $32.7 million that expire from 2011 through 2030. A valuation allowance
of $32.7 million has been applied against the future tax asset representing
these losses.
United States federal and state tax jurisdictions
At December 31, 2010, the Corporation had United States federal and state
net operating loss carry-forwards totaling $77.8 million with a tax value of
$27.6 million that expire from 2021 through 2030. A valuation allowance of
$7.5 million has been applied against the future tax asset representing
these losses.
Kazakhstan tax jurisdictions
At December 31, 2010, the Corporation had Kazakhstan net operating loss
carry-forwards totaling $29.3 million with a tax value of $5.8 million that
expire from 2011 through 2013. A valuation allowance of $5.8 million has
been applied against the future tax asset representing these losses.
Australia tax jurisdictions
At December 31, 2010, the Corporation had Australian net operating loss
carry-forwards totaling $33.1 million with a tax value of $9.9 million with
no expiry. A valuation allowance of $9.9 million has been applied against
the future tax asset representing these losses.
15 OTHER LIABILITIES
Dec 31, Dec 31,
2010 2009
$`000 $`000
Current
Promissory note - 90,211
Contingent payment (note 3.4) - 20,000
Unfavorable contracts 11,354 11,655
Uranium concentrates loan 12,500 8,900
Other 1,421 1,277
25,275 132,043
Non-current
Due to the Republic of Kazakhstan 2,734 1,696
Other 431 181
3,165 1,877
Uranium concentrates loan
On September 22, 2008, the Corporation entered into a loan agreement to
borrow 200,000 pounds of U3O8 to be repaid on September 30, 2010. In July
2010, the maturity of the loan was extended to September 30, 2011. Under
the loan agreement, loan fees of 3.5% per annum are payable based on the
value of the borrowed U3O8. The loan was classified as a financial liability
held for trading and is recorded at fair value. The Corporation deposited
$8.6 million as cash collateral for the letter of credit that was issued as
a guarantee for the loan during the period and this is presented as
restricted cash on the consolidated balance sheets.
Unfavourable contract
The Corporation acquired an unfavorable contract as part of the Zarechnoye
acquisition during 2010, which is carried at fair value on acquisition date
(note 3.1). The Corporation also acquired an unfavorable contract as part of
the Karatau acquisition during 2009, which is carried at fair value (note
3.4).
The Corporation realized $10.6 million of the fair value in revenue during
2010 for deliveries into the unfavorable contracts. A fair value adjustment
of $1.3 million was recorded in the statement of operations for the change
in the uranium price during 2010.
Promissory note
During 2009, the Corporation issued a $90 million promissory note as part of
the consideration for the purchase of Karatau (note 3.4). The promissory
note was due not later than 12 months from closing and was repaid on January
18, 2010.
16 SHARE CAPITAL
Number of Value of
Issued and outstanding common shares shares
shares
$`000
Common shares on January 1, 2009 469,612,956 3,522,824
Exercise of stock options 600,184 6,599
Exercise of restricted shares 44,836 257
Contingent shares issued 165,600 388
Karatau acquisition share issued 117,000,000 293,229
Common shares on December 31, 2009 587,423,576 3,823,297
Exercise of stock options 13,073,222 65,494
Exercise of restricted shares 429,159 2,335
ARMZ private placement (note 3.1) 178,127,165 602,708
Acquisition of Akbastau and 178,127,164 831,578
Zarechnoye (note 3.1) 3,750 14
Conversion of 2010 Debenture
Issued and outstanding common 957,184,036 5,325,426
shares at December 31, 2010
17 CONTRIBUTED SURPLUS
The following table details the movement of contributed surplus during the
year:
Restrict
ed
Warrant shares Options Total
s
$`000 $`000 $`000 $`000
As at January 1, 13,912 1,606 116,084 131,602
2009
Stock options - - 7,027 7,027
issued and vested
Stock options - - (5,369) (5,369)
exercised
Restricted shares - 475 - 475
issued and vested
Restricted shares - (257) - (257)
exercised
As at December 31, 13,912 1,824 117,742 133,478
2009
Stock options - - 13,391 13,391
issued and vested
Stock options - - (30,184) (30,184)
exercised
Restricted shares - 511 - 511
issued and vested
Restricted shares - (2,335) - (2,335)
exercised
As at December 31, 13,912 - 100,949 114,861
2010
Assumptions
The fair value of stock options and restricted shares used to calculate the
compensation expense was estimated using the Black-Scholes option pricing
model with the following assumptions:
December December
31, 2010 31, 2009
Risk free interest rate 2.06% - 1.7% -
2.79% 2.82%
Expected dividend yield 0% 0%
Expected volatility of the 70% - 94% 98% -
Uranium One`s share price 115%
Expected life 5 years 5 years
Warrants
The Corporation has no outstanding warrants at December 31, 2010 (2009:
nil).
Stock options
The following is a summary of options granted under the stock-based
compensation plan:
Weighted
Number of average
options exercise
price
Cdn $
Outstanding options as at 15,858,517 7.82
January 1, 2009
Granted options 6,292,351 2.23
Exercised options (600,184) 2.25
Forfeitures of stock options (2,986,524) 6.89
Outstanding options as at 18,564,160 6.26
December 31, 2009
Granted options 10,526,100 3.89
Exercised options (13,073,222) 2.73
Forfeitures of stock options (2,335,962) 8.18
Outstanding options as at 13,681,076 7.49
December 31, 2010
The stock option compensation expense for the year ended December 31, 2010
was $13.4 million, which includes the expense recognized for the accelerated
vesting of options due to the change of control triggered by the ARMZ
transaction (note 3.1). The stock option compensation expense for the year
ended December 31, 2009 was $7.0 million. As at December 31, 2010, the
aggregate unexpensed fair value of unvested stock options granted was $16.5
million. The fair value of options granted during the year was $25.8
million ($2.45 per option) (2009: $8.2 million, $1.31 per option).
The following table summarizes stock options outstanding at December 31,
2010:
Options outstanding Options exercisable
Range of Number Weighte Weight Number Weighte Weighte
exercise outstanding d ed exercisabl d d
prices as at average averag e as at average average
December remaini e December remaini exercis
31, ng life exerci 31, ng life e price
2010 se 2010
price
Cdn $ (years) Cdn $ (years) Cdn $
0.78 to 6,166 3.21 2.22 6,166 3.21 2.22
2.74
2.75 to 6,496,632 4.97 4.66 469,032 4.74 3.95
4.76
4.77 to 1,563,455 1.98 7.28 1,563,455 1.98 7.28
7.79
7.80 to 3,012,950 4.71 8.43 3,012,950 4.71 8.43
9.90
9.91 to 1,448,908 1.60 12.12 1,448,908 1.60 12.12
12.93
12.94 to 441,715 1.47 13.93 441,715 1.47 13.93
15.63
15.64 to 711,250 1.33 16.51 711,250 1.33 16.51
16.59
13,681,076 3.91 7.49 7,653,476 3.06 9.68
Restricted share rights
The following is a summary of Uranium One`s restricted shares issued under
the Restricted Share Plan:
Number of
restricted
shares
Balance at January 1, 2009 623,495
Exercised during the year (44,836)
Expired (127,500)
Balance at December 31, 2009 451,159
Exercised during the year (429,159)
Expired (22,000)
Balance at December 31, 2010 -
The restricted share rights expense for the year ended December 31, 2010 was
$0.5 million which includes the expense recognized for the accelerated
vesting of restricted share rights due to the change of control, triggered
by the ARMZ transaction (note 3.1). The restricted share rights expense for
the year ended December 31, 2009 was $0.5 million. As at December 31, 2010
the aggregate unexpensed fair value of unvested restricted share rights
granted amounted to $Nil (2009: $0.6 million). No restricted shares were
granted during 2010 or 2009.
Contingently issuable shares
Under the terms of the acquisition agreement for the Kyzylkum JV interest,
Uranium One is obligated to issue 6,964,200 common shares of Uranium One
upon commencement of commercial production from Kyzylkum.
The Corporation assumed all of the obligations of Uranium One Americas, Inc.
and its subsidiaries arising under certain option and joint venture
agreements with third parties. At December 31, 2010 Uranium One has
reserved a total of 57,200 common shares for issuance pursuant to the
assumed obligations under contingent share rights agreements. No contingent
shares were issued during the period and no contingent share rights have
lapsed during the period.
18 GENERAL AND ADMINISTRATIVE
Year ended
Dec 31, Dec 31,
2010 2009
$`000 $`000
General and administrative 33,588 30,401
Restructuring cost 5,520 -
Stock option and restricted share 13,902 7,502
expense
53,010 37,903
19 INTEREST AND OTHER
Year ended
Dec 31, Dec 31,
2010 2009
$`000 $`000
Interest income 6,096 4,885
Interest paid (3,806) (1,155)
Convertible debenture interest (42,729) (8,739)
(note 12)
Gain on redemption of debenture 1,160 -
(note 12)
Credit facility charges (1,924) (3,720)
Interest and costs incurred on (306) (351)
uranium concentrates loan
Costs incurred in relation to (448) (65)
letters of credit
(41,957) (9,145)
20 FOREIGN EXCHANGE (LOSS) / GAIN
A summary of the foreign exchange (loss) / gain by item is as follows:
Year ended
Dec 31, Dec 31,
2010 2009
$`000 $`000
Unrealized foreign exchange (loss) (823) 63,771
/ gain on future income tax
liabilities
Unrealized foreign exchange loss on (8,925) (7,821)
other items
Realized foreign exchange (loss) / (3,383) 3,077
gain on cash and other items
(13,131) 59,027
The National bank of Kazakhstan announced on February 4, 2009 that it has
ceased to maintain the Kazakhstan tenge ("tenge") within the previous range
of 117-123 tenge to the US dollar and suggested the rate be set within a
range of 145-155 tenge to the US dollar. The tenge closed at 148.36 tenge
to the US dollar on December 31, 2009. The resulting devaluation affected
the translated values of monetary assets and liabilities, resulting in a
$63.8 million gain on future income tax liabilities in 2009.
21 CASH FLOW INFORMATION
Year ended
Dec 31, Dec 31,
2010 2009
$`000 $`000
Changes in non-cash working capital
excluding business combinations:
(Increase) / decrease accounts and (47,773) 6,613
other receivables
Decrease in prepaid expenses and 2,086 10,379
other
Increase in inventories (2,538) (9,486)
Decrease in accounts payable and (9,369) (7,949)
accrued liabilities
Increase / (decrease) in income taxes 11,625 (9,215)
payable
(45,969) (9,658)
Supplemental cash flow information
Cash interest paid 32,816 8,399
Cash tax paid 37,114 30,310
22 BASIC AND DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
Year ended
Dec 31, Dec 31,
2010 2009
Basic weighted-average number of 611,562 475,583
shares outstanding (`000)
Effect of dilutive securities:
-convertible debentures - -
-restricted shares - -
-stock options - -
-warrants - -
Diluted weighted-average number of 611,562 475,583
shares outstanding
For the years ended December 31, 2010 and 2009, all convertible debentures,
stock options, warrants and restricted shares were not included in the
dilutive weighted average number of shares outstanding as they were anti-
dilutive.
23 CAPITAL DISCLOSURES
The Corporation`s objectives when managing capital are to:
(i) Maintain a flexible capital structure which optimizes the cost of
capital at acceptable risk;
(ii) Continue the development and exploration of its mineral properties; and
(iii) Support any expansion plans.
In the management of capital, the Corporation includes shareholders` equity,
long term debt, joint venture debt, convertible debentures, cash and the
current portion of loans to joint ventures.
The Corporation manages its capital structure and makes adjustments to it
when the economic and risk conditions of the underlying assets require
change. In order to maintain or adjust the capital structure, the
Corporation may issue new shares, issue new debt, and/or issue new debt to
replace existing debt with different characteristics. The Corporation has
in place a planning and budgeting process to help determine the funds
required to ensure the Corporation has the appropriate liquidity to meet its
operating and growth objectives.
The Corporation monitors the following ratios in this respect: total debt to
total capitalization and net debt to total capitalization.
For years ended
Dec 31, Dec 31,
2010 2009
$`000 $`000
Total liabilities (excluding future 655,302 487,520
income tax liabilities)
Net liabilities (total liabilities less 227,515 296,650
cash, restricted cash and receivables)
Total capitalization (total 2,336,491 1,480,900
shareholders` equity)
Total liabilities as a percentage of 28% 33%
shareholders` equity
Net liabilities as a percentage of 10% 20%
shareholders` equity
24 FINANCIAL INSTRUMENTS
As at December 31, 2010: (in $`000)
Convertible 2010 2006
debentures Debenture Debenture
Liability component 206,298 151,402
Equity component 44,014 46,480
250,312 197,882
Fair value of 439,312 153,279
convertible
debentures
As at December 31, 2009: (in $`000)
Convertible 2006
debentures Debenture
Liability component 140,862
Equity component 46,480
187,342
Fair value of 131,668
convertible
debentures
The Corporation`s activities expose it to a variety of financial risks,
including the effects of changes in debt and prices of equity instruments
held, foreign currency exchange rates, interest rates, and commodity prices.
The Corporation continuously monitors its exposure to risk. The risk
management carried out by the Corporation is approved by the Board of
Directors. The following section describes the type of significant risks
that the Corporation is exposed to and its objectives and policies for
managing those risk exposures.
(i) Designation and valuation of financial instruments
The following table summarizes the designation and fair value hierarchy
under which the Corporation`s financial instruments are valued, other than
trade and other receivables and payables.
Level 1 of the fair value hierarchy includes unadjusted quoted prices in
active markets for identical assets or liabilities;
Level 2 of the hierarchy includes inputs that are observable for the asset
or liability, either directly or indirectly; and
Level 3 includes inputs for the asset or liability that are not based on
observable market data. The Corporation does not have any financial
instruments included in Level 3.
As at December 31, 2010
Cash and Loans and Available Total
cash receivables for sale
equivalents securities
Designation Notes $`000 $`000 $`000 $`000
of
financial
assets
Cash and 4 315,766 - - 315,766
cash
equivalents
Restricted 15 - 8,577 - 8,577
cash
Loans to 7.2 - 28,722 - 28,722
joint
ventures
Available 9 - - 319 319
for sale
securities
Asset 9 - 37,809 - 37,809
retirement
fund
Acquired 9 - 20,000 - 20,000
receivables
Total 315,766 95,108 319 411,193
As at December 31, 2009
Cash and Loans and Available Total
cash receivables for sale
equivalents securities
Designation Notes $`000 $`000 $`000 $`000
of
financial
assets
Cash and 4 148,465 - - 148,465
cash
equivalents
Loans to 7.2 - 29,250 - 29,250
joint
ventures
Available 9 - - 9,287 9,287
for sale
securities
Asset 9 - 13,500 - 13,500
retirement
fund
Total 148,465 42,750 9,287 200,502
As at December 31, 2010
Held at Financial
fair liabilities
value at Total
through amortized
profit cost
and
loss
Designation of Notes $`000 $`000 $`000
financial
liabilities
Joint venture debt 7.1 - 146,281 146,281
Convertible 12 - 357,700 357,700
debenture
Uranium concentrates 15 12,500 - 12,500
loan
Unfavorable 15 - 11,354 11,354
contracts
Due to the Republic 15 - 2,734 2,734
of Kazakhstan
Other 15 - 1,852 1,852
Total 12,500 519,921 532,421
As at December 31, 2009
Held at Financial
fair liabilities
value at Total
through amortized
profit cost
and
loss
Designation of Notes $`000 $`000 $`000
financial
liabilities
Long term debt 11 - 63,579 63,579
Joint venture debt 7.1 - 52,574 52,574
Convertible 12 - 140,862 140,862
debenture
Uranium concentrates 15 8,900 - 8,900
loan
Promissory note 15 - 90,211 90,211
Contingent payment 15 - 20,000 20,000
Unfavorable 15 - 11,655 11,655
contracts
Due to the Republic 15 - 1,696 1,696
of Kazakhstan
Other 15 - 1,458 1,458
Total 8,900 382,035 390,935
As at December 31, 2010
Fair value hierarchy Total Level 1 Level 2 Level 3
of financial assets
and liabilities
measured at fair value
$`000 $`000 $`000 $`000
Available for sale 319 319 - -
securities
Uranium concentrates (12,500) - (12,500) -
loan
Total (12,181) 319 (12,500) -
As at December 31, 2009
Fair value hierarchy of Total Level 1 Level 2 Level 3
financial assets and
liabilities measured at
fair value
$`000 $`000 $`000 $`000
Available for sale 8,740 - 8,740 -
securities - UEC shares
Available for sale 547 547 - -
securities - other
Uranium concentrates (8,900) - (8,900) -
loan
Total 387 547 (160) -
(ii) Foreign exchange risk
The foreign exchange risk relates to the risk that the value of financial
commitments, recognized assets or liabilities will fluctuate due to changes
in foreign currency rates.
The Corporation is primarily exposed to foreign currency risk through the
following assets and liabilities denominated in currencies other than US
dollars:
Financial assets and liabilities Non-financial
assets
and
liabilities
Cash Accounts Account Conver Minera Future
and receivabl s tible l income
cash e payable debent intere tax
equival and ures sts liabil
ents accrued plant ities
liabili and
ties equipm
ent
(1)
Decembe
r 31,
2010
$`000 $`000 $`000 $`000 $`000 $`000
Canadia 5,015 2,281 13,938 357,70 - -
n 0
dollar
Austral 16,637 1,633 9,054 - 12,625 -
ian
dollar
Kazakhs 29,708 74,462 21,771 - - 331,66
tan 0
tenge
Euro 1,124 - 216 - - -
52,484 78,376 44,979 357,70 12,625 331,66
0 0
(1) Only includes mineral interests, plant and equipment of self-sustaining
operations.
Financial assets and liabilities Non-financial
assets and
liabilities
Decembe Cash Accounts Accoun Converti Mineral Future
r 31, and receivabl ts ble interest income
2009 cash e payabl debentur plant tax
equival e and es and liabil
ents accrue equipmen ities
d t
liabil (1)
ities
$`000
$`000 $`000 $`000 $`000 $`000
Canadia 170 2,539 6,186 140,862 - -
n
dollar
Austral 22,071 1,571 4,369 - 78,039 4,074
ian
dollar
Kazakhs 3,496 28,981 37,761 - - 142,70
tan 4
tenge
Euro 41 - 9 - - -
South 674 - - - - -
African
rand
26,452 33,091 48,325 140,862 78,039 146,77
8
(1) Only includes mineral interests, plant and equipment of self-sustaining
operations.
The following table shows the effect on earnings and other comprehensive
income after tax as at December 31, 2010 of a 10% appreciation or
depreciation in the foreign currencies against the US dollar on the above-
mentioned financial and non-financial assets and liabilities of the
Corporation.
Other
comprehensive Net
income Earnings
A 10% appreciation in all (1,431) (17,095)
foreign currencies against the
US dollar, with all other
variables held constant.
A 10% depreciation in exchange rates would have the exact opposite effect on
other comprehensive income and net earnings.
(iii) Credit risk
Credit risk is primarily associated with trade receivables, and to a lesser
extent, cash equivalents, restricted cash, loans to joint ventures,
available for sales securities and asset retirement funds.
The Corporation closely monitors its financial assets and does not have any
significant concentration of credit risk. The Corporation sells its products
exclusively to organizations with strong credit ratings. Cash and cash
equivalents are held through large international financial institutions.
Cash and cash equivalents are comprised of financial instruments issued by
international financial institutions and companies with high investment-
grade ratings. These investments mature at various dates.
The Corporation`s maximum exposure to credit risk at the balance sheet date
is as follows:
Dec 31, Dec 31,
2010 2009
Notes $`000 $`000
Accounts receivable 5 103,444 42,405
Cash and cash equivalents 4 315,766 148,465
Restricted cash 15 8,577 -
Loans to joint ventures 7.2 28,722 29,250
Available for sale securities 9 319 9,287
Asset retirement fund 9 37,809 13,500
Acquired receivables 9 20,000 -
514,637 242,907
(iv) Liquidity risk
The Corporation has a cash forecast and budgeting process in place to assist
with the determination of funds required to support the Corporation`s
operating requirements on an ongoing basis and its expansion plans. The
Corporation manages liquidity risk through the management of its capital
structure and financial leverage as outlined in note 23.
The following table summarizes the contractual maturities of the
Corporation`s significant financial liabilities and capital commitments,
including contractual obligations:
Less 1 to 3 4 to 5 After 5
than
1 year years Years years Total
Lease 1,533 2,547 1,348 1,124 6,552
obligations
Joint venture 60,131 59,056 18,834 8,260 146,281
debt
Kyzylkum 24,000 12,000 9,000 - 45,000
funding
Capital 16,128 900 - - 17,028
commitments
Asset - 927 6,360 18,942 26,229
retirement
obligations
Accounts 82,838 - - - 82,838
payable and
accrued
liabilities
Uranium 12,500 - - - 12,500
concentrates
loan (note 15)
Convertible 155,168 - 259,934 - 415,102
debentures
Other 463 925 925 1,284 3,597
352,761 76,355 296,401 29,610 755,127
The convertible debentures are redeemable in cash or shares, and may not
result in a cash outflow. The uranium concentrates loan requires settlement
with uranium concentrates, and may not result in a cash outflow.
The Corporation has interests in joint ventures, and is responsible for
partial funding of these joint ventures pursuant to the terms of the joint
venture agreements. The Corporation does not bear direct liquidity risk for
liquidity of these joint ventures, except for the risk relating to the
repayment to loans made to the joint ventures. The Corporation can only
utilize cash generated by the joint ventures when the joint ventures pay
dividends.
On January 19, 2009, in connection with the construction of a sulphuric acid
plant by SKZ-U, in which the Corporation subsequently acquired a 19% joint
venture interest, the Corporation provided a guarantee to a third party in
respect of 19% of the construction cost of the plant, limited to a maximum
amount of $7.6 million (Euro 5.5 million).
The Corporation is exposed to liquidity risk from fluctuating commodity
prices when the 200,000 pounds of uranium concentrates received as part of a
uranium loan transaction are utilized against contracts. As the market
value of the liability to deliver the uranium concentrates fluctuates based
on commodity prices, so will the market value of the uranium concentrates
held by the Corporation. The effect that market fluctuations in the uranium
price have on the asset and liability will offset, except in circumstances
where the borrowed uranium has been utilized to make a delivery into a
contract. In these circumstances, the Corporation will recognize a net fair
market value adjustment.
A 10% change in commodity prices, should the Corporation be exposed, would
impact the Corporation`s liquidity risk due to the uranium concentrates loan
(note 15), as follows:
Dec 31, Dec 31,
2010 2009
$`000 $`000
A 10% appreciation in commodity
prices, with all other variables held
constant:
- current - -
- maximum exposure 1,250 890
A 10% depreciation in the commodity price would have the exact opposite
effect on net earnings.
(v) Interest rate risk
The Corporation is exposed to interest rate risk on its outstanding
borrowings and short-term investments. The outstanding interest-bearing
borrowings as at December 31, 2010 are the loan facilities obtained by
Akbastau, Karatau, Kyzylkum, SKZ-U and Zarechnoye (note 7.1) which bear
interest at floating rates, and the convertible debentures, with fixed
interest rates.
A 100 basis point change in the interest rate would impact the Corporation`s
net earnings as follows:
Dec 31, Dec 31,
2010 2009
$`000 $`000
A 100 basis point appreciation in
interest rates, with all other
variables
held constant 1,336 1,659
A 100 basis point depreciation in the interest rate would have the exact
opposite effect on net earnings.
(vi) Commodity price risk
The Corporation is exposed to price risk with respect to commodity prices.
The Corporation does not hedge its exposure to price risk, other than having
market related pricing structures in the long-term sales contracts which the
Corporation has entered into. Increases in uranium prices would have a
positive impact on profitability given that the majority of the
Corporation`s sales contracts are priced based on market values for uranium.
25 SEGMENTED INFORMATION
The Corporation`s reportable operating segments are summarized in the table
below:
For the year ended December 31, 2010: (in $`000)
Country Revenues Operating Depreciat
expenses ion and
depletion
$`000 $`000 $`000
Akbastau Mine Kazakhstan - - -
Akdala Mine Kazakhstan 93,870 (23,663) (19,682)
South Inkai Mine Kazakhstan 121,263 (46,072) (30,356)
Karatau Mine Kazakhstan 105,430 (19,939) (43,405)
Zarechnoye Mine Kazakhstan 6,287 (2,345) (3,940)
Kharasan Project Kazakhstan - - -
United States United - - -
development States
projects
United States United - - -
exploration States
projects
United States United - - -
conventional States
mining projects
Honeymoon Project Australia - - -
Corporate and - - -
other
Total 326,850 (92,019) (97,383)
Table continues:...
Exploration Net Capital
expense earnings/ expenditure
(loss) from
continuing
operations
$`000 $`000 $`000
Akbastau Mine - (1,107) -
Akdala Mine - 33,853 2,875
South Inkai Mine - 17,586 20,543
Karatau Mine - 8,859 14,505
Zarechnoye Mine - 217 -
Kharasan Project - (4,126) 9,042
United States - 294 26,941
development
projects
United States (3,931) (2,687) -
exploration
projects
United States - (1,221) 18
conventional
mining projects
Honeymoon Project (1,312) (110,830) 33,673
Corporate and (206) (130,540) 824
other
Total (5,449) (189,702) 108,421
For the year ended December 31, 2009: (in $`000)
Country Revenues Operatin Deprecia
g tion and
expenses depletio
n
$`000 $`000 $`000
Akdala Mine Kazakhsta 74,085 (19,113) (16,699)
n
South Inkai Mine Kazakhsta 67,197 (28,778) (22,131)
n
Karatau Mine Kazakhsta 10,710 (3,130) (7,553)
n
Kharasan Project Kazakhsta - - -
n
United States United - - -
development projects States
United States United - - -
exploration projects States
United States United - - -
conventional mining States
projects
Honeymoon Project Australia - - -
Corporate and other - - -
Total 151,992 (51,021) (46,383)
Table continues:...
Exploration Net Capital
expense earnings/ expenditure
(loss) from
continuing
operations
$`000 $`000 $`000
Akdala Mine - 47,228 2,345
South Inkai Mine - 183,440 17,165
Karatau Mine - (1,663) -
Kharasan Project - 55,960 8,158
United States - (8,651) 11,780
development projects
United States (6,749) (23,205) -
exploration projects
United States - (923) 84
conventional mining
projects
Honeymoon Project (880) (798) 25,447
Corporate and other (1,201) (289,466) 642
Total (8,830) (38,078) 65,621
As at December 31, 2010: (in $`000)
Mineral Future
interest
plant and Total income Total
tax
Country equipment assets liabili liabiliti
ties es
$`000 $`000 $`000 $`000
Akbastau Mine Kazakhs 734,804 754,777 116,581 154,779
tan
Akdala Mine Kazakhs 162,571 209,093 20,001 26,559
tan
South Inkai Kazakhs 463,223 530,477 49,011 60,324
Mine tan
Karatau Mine Kazakhs 518,828 569,610 94,734 149,632
tan
Zarechnoye Kazakhs 250,562 272,139 35,392 97,927
Mine tan
Kharasan Kazakhs 218,109 236,221 15,941 91,352
Project tan
United States United 203,300 225,261 - 4,201
development States
projects
United States United 116,816 117,761 35,415 35,449
exploration States
projects
United States United 39,933 48,164 10,189 13,547
conventional States
mining
projects
Honeymoon Austral 12,625 23,232 - 8,606
Project ia
Corporate and 9,148 382,322 - 390,190
other
Total 2,729,919 3,369,057 377,264 1,032,566
As at December 31, 2009: (in $`000)
Mineral Future
interest
plant and Total income Total
tax
Country Equipment assets liabiliti Liabilities
es
$`000 $`000 $`000 $`000
Akdala Mine Kazakhstan 179,706 214,121 18,231 24,004
South Inkai Kazakhstan 478,419 522,574 37,613 49,017
Mine
Karatau Mine Kazakhstan 510,494 531,508 74,637 141,192
Kharasan Kazakhstan 208,830 217,800 12,223 66,433
Project
United States United 121,526 122,040 - 154
development States
projects
United States United 115,398 116,148 28,711 28,742
exploration States
projects
United States United 39,910 47,324 5,198 8,226
conventional States
mining
projects
Honeymoon Australia 78,039 85,380 4,074 7,389
Project
Corporate and 15,962 240,752 - 330,106
other
Total (1) 1,748,284 2,097,647 180,687 655,263
Excludes assets held for sale and discontinued operations
26 RELATED PARTY TRANSACTIONS
Transactions with related parties
Party Relationship Dec 31,
2010
$`000
Joint venture Effective Subsidiary of 37,802
loans Energy parent company
Other assets ARMZ Parent company 20,000
The Corporation has sales contracts and off-take agreements with related
parties. These transactions have market related terms and pricing, except
for a Zarechnoye contract acquired as part of the ARMZ transaction. The
Corporation received $11.6 million in cash on acquisition to compensate for
the unfavourable contract.
27 CONTINGENCIES
Due to the size, complexity and nature of the Corporation`s operations,
various legal and tax matters arise in the ordinary course of business. The
Corporation accrues for such items when a liability is both probable and the
amount can be reasonably estimated. In the opinion of management, these
matters will not have a material effect on the consolidated financial
statements of the Corporation.
Betpak Dala acquisition
As part of the original acquisition of the interest in Betpak Dala on
November 7, 2005, it was agreed that the Corporation is liable for a bonus
payment payable in cash based on uranium reserves discovered on the South
Inkai property in excess of 74,000 tonnes. The payment is based on the
Corporation`s share of U3O8 in excess of 74,000 tonnes times the average
spot price of U3O8 times 6.25%. This payment is to be calculated at the end
of 2011 and each year thereafter, and paid 60 days after the end of the year
in which a payment is due. No payment was due at December 31, 2010
(December 31, 2009 - $Nil).
As security for the bonus payment, the Corporation has pledged its
participatory interest in Betpak Dala (including the shares of a subsidiary)
and its share of uranium products produced by Betpak Dala.
Kyzylkum acquisition
As part of the original acquisition of the interest in Kyzylkum on November
7, 2005, it was agreed that the Corporation is liable for a bonus payment,
which is due upon commencement of commercial production. The seller
initially had an option, exercisable until October 31, 2006, to elect to
receive this bonus payment as a cash payment of $24 million or receive
15,476,000 shares of UrAsia Energy. The seller elected under the terms of
the arrangement, to receive 15,476,000 shares of UrAsia Energy upon
commencement of commercial production. The 15,476,000-bonus payment shares
of UrAsia Energy have been converted to 6,964,200 Uranium One shares as part
of the UrAsia Energy acquisition. The fair value of the contingently
issuable shares has not been included as part of the purchase price for
Kyzylkum as commencement of commercial production could not be reasonably
determined.
An additional bonus payment of 30% of 12.5% (being an effective 3.75%) of
the weighted average spot price of U3O8 will be paid on incremental reserves
in excess of 55,000 tonnes of U3O8 discovered during each fiscal year with
payment beginning within 60 days of the end of the 2008 calendar year. No
payment was due at December 31, 2010 (December 31, 2009 - $nil).
Karatau acquisition
Contingencies relating to the Karatau acquisition are described in note 3.4.
Uranium One Americas, Inc. (previously Energy Metals Corporation)
acquisition
Contingencies relates to the Uranium One Americas, Inc (previously Energy
Metals Corporation) are described in note 17.
Sponsor
Nedbank Capital
Date: 08/03/2011 14:00:01 Supplied by www.sharenet.co.za
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