Mine Waste Solutions MWS

Mine Waste Solutions is a gold and uranium tailings recovery operation located in the western portion of the Witwatersrand Basin, approximately 160 kilometres from Johannesburg. Mine Waste Solutions consists of 14 tailings deposits from three gold and uranium mines that operated for 50 years of which the Buffelsfontein No.2 and No.4 tailings dams are currently being mined. These tailings represent in excess of 349 million tonnes of mineral resources including inferred resources, of which 323 million are mineable reserves estimated to contain 55 million pounds of uranium and 2.9 million ounces of gold. The tailings dams are spread over an area that stretches approximately 13.5 kilometres north-south and 14 kilometres east-west and cover an area of approximately 1,100 hectares. The tailings dams are mined hydraulically with high-pressure water cannons. An agreement to acquire the tailings dams from Buffelsfontein Gold Mine was entered into on December 20, 2006. When the Corporation’s wholly-owned subsidiary, First Uranium (Proprietary) Limited (FUSA) acquired Mine Waste Solutions (Proprietary) Limited, and its wholly-owned operating subsidiary Chemwes (Proprietary) Limited (Chemwes) in June 2007, it acquired an existing operating gold tailings reprocessing facility, adjacent to Buffelsfontein Gold Mine. The Corporation changed its plans for the Buffelsfontein Tailings Recovery Project such that the historical and future tailings from the Buffelsfontein Gold Mine would be transported to the Mine Waste Solutions site and processed through the existing gold plant, and subject to their commissioning, through the planned uranium recovery plant and additional gold recovery facilities.

On December 1, 2008 First Uranium signed a definitive agreement with GW, whereby GW acquired the right to receive 25% of the life-of-mine gold production from Mine Waste Solutions (the Mine Waste Solutions Gold Stream Transaction). Under the terms of the Mine Waste Solutions Gold Stream Transaction, GW paid Mine Waste Solutions $125 million upfront. In addition GW will make an ongoing payment equal to the lesser of $400 per ounce (the Fixed Price) (subject to an annual inflation adjustment of 1%, starting in the fourth year following receipt of the first payment) and the prevailing spot price per ounce at the time the gold is delivered by Mine Waste Solutions under the contract.

At the start of Q4 FY 2010, the construction of the third gold plant module was progressing ahead of schedule and scheduled for completion in May 2010, however, the Corporation had to suspend construction of the third gold plant module due to the withdrawal of the EA for the Tailings Storage Facility on January 18, 2010. The withdrawal of the EA compromised to a large extent the Corporation’s financing efforts and triggered the need for a company-wide programme to conserve capital. As a result of suspending construction and the subsequent actions to reduce the Corporation’s capital commitments related to the third gold plant module, First Uranium was placed in a position where it could no longer complete construction of the third gold plant module by June 1, 2010 (the date by which the construction was to be complete pursuant to the terms of the Mine Waste Solutions Gold Stream Transaction).

Subsequent to extensive discussions with the North West Provincial Government’s Department of Agriculture, Conservation, Environment and Rural Development, the EA was reinstated in February 2010; however, the uncertainties and delays precipitated by the withdrawal of the EA and the resultant financial pressure placed on the Corporation caused the Corporation to revise the Mine Waste Solutions business plan and to update the technical report for Mine Waste Solutions, which was filed on SEDAR on March 12, 2010. Construction of the first two uranium plant modules was substantially concluded during January 2010, however, in terms of the revised business plan, First Uranium has decided to delay the commissioning of the two uranium plant modules until after the successful commissioning of the third gold plant module so as to manage the projected corporate peak funding risk. Under the revised business plan and associated technical report, it was anticipated that the Mine Waste Solutions No.5 tailings dam (the current tailings deposition facility) would provide sufficient tailings deposition capacity for one gold plant module until the end of Q3 FY 2012. However, with the recapitalisation of the Corporation (including the re-structuring of the GW completion test under the Mine Waste Solution Gold Stream Transaction), and the updated report on the structural integrity of Mine Waste Solutions No.5 tailings dam, First Uranium has decided to continue utilizing two gold plant modules with two-stream deposition, albeit at reduced throughput of 975 ktpm until the end May 2011. Post year end, a new order water user license was issued by the Department of Water Affairs (DWA) making it possible to continue with the construction of the TSF which is planned for beneficial occupation by May 2011.

During FY 2010, First Uranium performed and concluded test work to finalize heat and oxygen control elements within the pressure leach process. The outcome of the test work was integrated into the historical Capital Budget Estimate (CBE) of the pressure leach process and the revised CBE was finalized during Q4 FY 2010. The test work highlighted a significant requirement for oxygen. A market survey indicated that supply could not be easily secured, which will necessitate the requirement for an oxygen plant, consequently the CBE has increased from $34 million to $61 million. The increase in capital is balanced by a significant reduction in operating cost as oxygen will not be purchased from a third party supplier. As with the decision to defer the commissioning of the uranium plant, the pressure leach capital programme has been re-scheduled to commence from January 2012 in order to mitigate peak funding risks.

Outlook

In the short term Mine Waste Solutions plans to operate two gold plant modules with two-stream depositions, albeit at reduced throughput of 975 ktpm, until the end of May 2011. Under the two-stream deposition plan, the previously communicated one-stream production run rate increases by 56% from approximately 11,500 ounces per month to approximately 18,000 ounces per month and should contribute significantly towards mitigating corporate peak funding risk. On the expected completion of the third gold module and TSF by May 2011, Mine Waste Solutions will commence with the GW technical completion test which must be satisfied prior to September 1, 2011 in order to avoid paying any further penalties to GW. Subsequent to the achievement of the GW completion test, Mine Waste Solutions will commission the first two modules of the uranium plant.