First Uranium's goal is to become a significant, independent South African uranium and gold producer by bringing the Ezulwini and Buffelsfontein projects to production, and by continuing to identify additional uranium deposits in Southern Africa for acquisition. First Uraniums strategy to achieve this goal is as follows:
- develop Ezulwini and Buffelsfontein uranium and gold projects by effectively progressing each through specific milestones, including increasing and upgrading categories of mineral resources and commencing construction activities, in order that mining and processing operations may commence at Ezulwini and Buffelsfontein in the near-term and thereafter possibly be expanded;
- seek favourable sales offtake arrangements with third parties in respect of the yellowcake to be produced by the Ezulwini and Buffelsfontein projects;
- continue to seek acquisition, joint venture and/or development opportunities relating to strategically located uranium targets in Southern Africa, including uranium and gold tailings mounds; and capitalize on Simmer & Jacks recent history of operating in South Africa, including its management and technical experience, its black empowerment credentials and its positive relationships with government officials and service providers in South Africa.
Business Strengths
First Uranium believes it is well poised to successfully implement its corporate strategy because of its unique strengths.
These strengths include:- Near-Term Production Mining Projects: First Uranium believes that its existing uranium and gold projects at Ezulwini and Buffelsfontein can be placed into production in the near-term. The Ezulwini Project is expected to produce gold in the second quarter of 2007 which will be processed by means of a toll treatment arrangement with a nearby processing plant. The first gold to be milled at Ezulwini is expected by the end of the second quarter of 2008 with the first uranium anticipated by late 2008. The first uranium and gold from the Buffelsfontein Project are expected by mid-2008.
- Existing Infrastructure and Historical Mining Experience: First Uranium will benefit from existing infrastructure and previous mining development at both of its Ezulwini and Buffelsfontein projects. The proposed Ezulwini Project will involve the re-commissioning of a previously operating mine for which the mine shafts and much of the necessary infrastructure are already in place. The proposed Buffelsfontein Project will involve the processing of tailings and will not involve the same level of construction or operational risk related to an underground mine. Management believes the historical development at both of these projects demonstrates the viability of the resource base and ultimately reduces the risk in the development of these projects as compared to an undeveloped greenfield project. In addition, the existing infrastructure lowers the required capital expenditure for the initial development of the Ezulwini and Buffelsfontein projects.
- Strategic Commodity Mix and Growth Potential: The Ezulwini and Buffelsfontein projects involve significant exposure to both uranium and gold. This has the potential of insulating the projects from negative market price swings in respect of either of these resources. First Uranium will have the potential to adjust its mining plan for the Ezulwini Project towards a more profitable uranium and gold mix in response to commodity price changes. First Uranium will also have the flexibility to invest in the modular expansion of its Ezulwini and Buffelsfontein facilities in order to respond to the commodity market environment. In addition, management believes the development of two uranium plants close to other potentially economically viable resources as well as the potential for modular plant expansion could provide First Uranium with an opportunity to increase production by processing material from third parties and/or acquiring neighbouring resources.
- Low Cost Producer: Management believes that First Uraniums net uranium processing costs at the Ezulwini and Buffelsfontein projects will be comparatively low, in part due to gold credits resulting from the processing of gold at the projects. For example, at a long term real gold price of US$[500] and a ZAR/US$ exchange rate of [7.4], the effective cash cost to produce one lb of uranium is [-US$]. Conversely, at a long term uranium price of US$40 and a ZAR/US$ exchange rate of [7.4], gold is produced at a cash cost US$. [Note: Revise to show co-product and by-product scenarios
- Long Life Mineral Resources: At current market prices for uranium and gold, the estimated mineral resources at Ezulwini and Buffelsfontein are sufficient to support gold and uranium processing plants operating at optimal levels and to sustain medium to long-term mine operations. Based on the existing mine plan for the Ezulwini Project of 20 years, only approximately 20% of the projects resource will be utilized over the term of the plan. The Buffelsfontein Project is estimated to have sufficient resources to support a 16 year life of mine plan.
- Exposure to Current Uranium Prices: As First Uranium is not subject to any historical uranium off-take
agreements at prices lower than current uranium spot market prices, it has considerable flexibility in
negotiating marketing and off-take arrangements for its uranium at todays historically high uranium prices
and on favourable contract terms.
- Management and Board Experience: First Uraniums management team has considerable operational
experience in South Africa and is supported by an experienced technical and mining operations team, some
of whom have prior operating experience with the Ezulwini mine. In addition, First Uraniums board of
directors has a strong mix of operational, financial and management experience in South Africa.
- Strategic Relationship: Following the closing of the Offering, Simmer & Jack will be the majority shareholder of First Uranium. First Uranium believes that it will benefit from this close relationship, not only from the management expertise that will be provided by the officers and directors of Simmer & Jack who will be involved with First Uranium, but also from Simmer & Jacks black empowerment credentials and its extensive contacts in, and knowledge of the political, economic and cultural aspects of, South Africa. In particular, First Uranium believes that the Corporate Opportunity Agreement with Simmer & Jack will lead to further uranium exploration and development opportunities and provide First Uranium with a considerable strategic advantage over many of its potential competitors
