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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For May 16, 2005
International Uranium Corporation
(Translation of registrant's name into English)
Independence Plaza, Suite 950, 1050 Seventeenth Street, Denver, CO 80265
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- ________________.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
International Uranium Corporation
(Registrant)
Date: May 16, 2005 By: /s/ Ron F. Hochstein
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Ron F. Hochstein, President
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EXHIBIT INDEX
Exhibit Number Description
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1 Second Quarter Report for period ending March 31, 2005
REPORT TO SHAREHOLDERS
2nd QUARTER 2005
(U.S. DOLLARS)
Through the first six months of fiscal 2005 spot and long term uranium prices
continued to increase to new 20 year highs. As of May 9, 2005 the spot uranium
price was $29.00 per pound, a 45% increase over the spot uranium price as of
September 30, 2004. The term price also increased $6.00 from $23.00 to $29.00
per pound during that time period. The first quarter of 2005 has seen a
significant increase in spot market volume, with over 9.7 million pounds
U(3)O(8) equivalent having been transacted. This volume represents over half of
the volume during all of 2004, and is the highest quarterly volume since the
third quarter of 1997. The most significant market development in the past six
months has been the arrival of hedge funds into the uranium market, which has
created a new dynamic in the market. The latest entrant into the market, Uranium
Participation Corp., entered the spot market for 3.0 million pounds during the
month of April, 2005. Market analysts continue to forecast improvement in the
spot and long term market conditions for uranium producers, as utilities
evaluate increased price and supply risk as a result of these new entrants into
the market.
During the second quarter, International Uranium Corporation ("IUC" or the
"Company") had a significant amount of activity on several fronts, with two
drilling programs underway in the Athabasca Basin in Saskatchewan, the start of
a large drilling program in Mongolia and the commencement of a new mill run at
the Company's White Mesa Mill in the United States. For the first six months of
fiscal 2005, the Company recorded a net loss of $337,609 ($0.00 per share) as
compared to a net loss of $1,621,013 ($0.02 per share) on revenues of $2,035,262
for the first six months of fiscal 2004. The income generated during the first
six months of fiscal 2005 was primarily due to a gain of $2,893,377 from the
sale of short term investments and foreign exchange gains of $541,015. The
Company continues to have a strong cash position of $15,537,542.
In mid-January, the Company began its third drilling season on the Moore Lake
project in the Athabasca Basin region of northern Saskatchewan, Canada. This
winter program was initially intended to include approximately 15,000 meters of
drilling on the Moore Lake project. However, due to poor ice and snow
conditions, the Company and its joint venture partner, JNR Resources Inc. were
only able to complete 31 drill holes totaling approximately 10,500 meters of
drilling. The drilling program was largely focused on regional conductors on the
Moore Lake project, rather than the main Maverick Zone. On the main Maverick
Zone, a 23.3 km 3-D seismic program was completed, which will aid JNR and the
Company in developing future drill programs on the Maverick Zone, particularly
in the south west corridor of the zone. Data from the drilling program is still
coming in and being evaluated. Three drill rigs remain on site for the upcoming
summer program, which is currently in the planning stages.
With respect to the Company's 100% owned Key Lake South project, the Company
completed 99 km of linecutting, 124 km of EM geophysics, which identified a
number of conductors. The conductors were followed up with 760 meters of
drilling during the first quarter of 2005. Some targets were not drilled during
this last program, again due to poor winter conditions. These targets will
likely be drilled in the winter of 2006. Analytical results from the drill
program are still outstanding.
As of April 30, 2005 the Company owns, has under option or is joint ventured
with other parties on a total of 540,000 hectares in the Athabasca Basin,
primarily located along the eastern edge of the Basin. The Company is in the
process of opening an office in Saskatoon which will be focused on the
development and oversight of the Company's exploration programs in Saskatchewan.
On March 21, 2005, the Company's White Mesa uranium mill began processing
alternate feed materials. The last Mill campaign was from June 2002 to May 2003.
The Mill is currently processing one of three alternate feed streams which
together contain over 550,000 pounds of U(3)O(8). All three streams will be
processed over the next 9 to 12 months, after which the Mill will process two
additional streams of alternate feed materials. Total uranium production from
these alternate feed streams is estimated at approximately 500,000 pounds of
U(3)O(8). The Mill personnel are approaching four years without a lost time
accident, which is a tremendous accomplishment. The Mill currently employs 28
workers who are made up of Company employees and employees from White Mesa Inc.
White Mesa Inc. is a native, woman owned small business that provides contract
services to the Mill. A portion of the profits from White Mesa Inc. go to
community development projects in White Mesa, a local native community.
The Company is evaluating its U.S. mining properties with the objective of
making a production decision mid third quarter of fiscal 2005, and is actively
pursuing acquisition opportunities in the U.S. To that end, the Company was
successful in a competitive bid for a state lease in southeastern Utah in the
second quarter of fiscal 2005. The state property is adjoined by a number of
privately held unpatented mining claims, which have also been acquired by the
Company, that together comprise the Tony M Mine. The Tony M Mine saw limited
production in the early 1980's following extensive underground development,
which included driving of dual declines over 10,000 feet to the extremities of
the planned mine and developing in excess of 17 miles of mine workings to
prepare the mine for full production. The Tony M Mine adjoins the Company's
existing Bullfrog exploration property, and acquisition of the Tony M Mine
facilitates direct access to the Bullfrog deposit. The consolidated
mineralization of the Tony M Mine and the Bullfrog claims are approximately 24
million lbs of uranium. The consolidated properties are now referred to as the
"Henry Mountains Complex." Mine permitting on the Henry Mountains Complex is
progressing with the selection of a technical consultant to augment the
Company's staff with the permitting process.
In mid April, 2005, the Company started its 2005 uranium exploration program in
Mongolia. The program includes autogamma surveys, geological field programs and
over 30,000 meters of drilling. The drill program will test a number of drill
targets on the Gurvan-Saihan Joint Venture properties and on the 100% owned IUC
properties. On April 5, 2005, IUC announced that it acquired an option to earn a
65% interest in Erdene Gold Corp.'s ("Erdene's") portfolio of uranium licenses
and applications, through expenditures of Cdn $6.0 million over four years. In
connection with this option, the Company has agreed to purchase 1.0 million
shares of Erdene at a price of Cdn $1.00 per share. Erdene is a mineral
exploration company focused on Mongolia with over 20 precious and base metal
projects. IUC, utilizing Erdene's field teams, commenced its exploration program
on the Erdene uranium properties in mid-April, beginning with the evaluation of
prospects identified during previous exploration work, supported by more recent
radiometric and geochemical surveys. It is anticipated that this initial
exploration program will lead to drill target definition by mid-2005. With the
addition of the Erdene properties, the Company controls over 3.6 million
hectares of uranium properties in Mongolia.
In addition to the Company's uranium exploration program in Mongolia, the
Company's 57% owned subsidiary, Fortress Minerals Corp. ("Fortress"), is
pursuing an aggressive precious and base metals exploration program in Mongolia.
Drilling is currently underway on Fortress' Teltiin Gol porphyry copper gold
project, which is located 250 km north west of Ulaanbaatar adjacent to the
trans-Siberian Mongolia railway. The Teltiin Gol district has been the site of
historical exploration activity by Czech and Mongolian geological expeditions,
which culminated in twelve short drill holes (total 1,236 meters), one of which
intersected 9 meters of 0.7% copper (hole lost at 11 meters). As is customary
with data collected from this era (early 1980's), no gold sampling results were
reported. Scattered core left behind from this drill campaign was sampled by
Fortress and returned values of up to 1.28 g/t gold (average 0.52 g/t gold from
7 samples).
Fortress is also preparing to drill its Oyuut Uul epithermal gold project
following the completion of the Teltiin Gol project, as well as commence
regional exploration at its Huvsgol project area. As of March 31, 2005, Fortress
had a total of 69 exploration licenses covering over 4.6 million hectares.
During the first quarter of 2005, Fortress acquired an option to earn an 80%
interest in Phelps Dodge Exploration Company's ("PDEC's") subsidiary, PD Russia,
Inc. ("PDRI"). PDRI holds a 100% indirect interest in the Svetloye gold project
located in the Khabarovsk Region of eastern Russia. The Svetloye project has
high grade gold mineralization outcropping at surface, and an aggressive drill
program is scheduled for 2005 by Fortress. In addition to the Svetloye project,
Fortress has also completed an agreement with PDEC on a regional-wide Mongolian
alliance, in which PDEC can earn up to a 70% interest in Fortress's copper,
gold, silver and molybdenum projects in Mongolia, subject to investments by PDEC
in Fortress, and the funding of exploration and development programs on the
properties. PDEC will invest $3.0 million by way of private placement over two
years into Fortress ($1.7 million in Year 1 and $1.3 million in Year 2) at
Cdn$0.80 per share in Year 1 and at market price plus 50% in Year 2.
With respect to the Company's Moab project, the U.S. Department of Energy
("DOE") released a decision in mid-March, 2005 stating that the Moab tailings
will be moved to a site near Crescent Junction, Utah by a combination of rail
and truck transport, pending release of the Final Environmental Impact
Statement, a Record of Decision and funding by Congress. The Company had
submitted a proposal to DOE to relocate the Moab tailings pile to the Company's
White Mesa Mill using slurry pipeline technology, which was evaluated in the
DOE's Environmental Impact Statement. However, even though the DOE has yet to
release the Final Environmental Impact Statement and prepare a Record of
Decision before the project direction is finalized, the Company has decided not
to continue to pursue this project.
These are very exciting times for the Company, with activities underway on
several fronts. Given the strong market fundamentals, the uranium experience
within the Company and the resources available, the Company plans to continue to
expand its uranium exploration activities and to aggressively evaluate potential
acquisition opportunities to add to the Company's portfolio of uranium projects.
ON BEHALF OF THE BOARD
/s/ Ron Hochstein
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Ron Hochstein, President/CEO
May 16, 2005
MANAGEMENT'S DISCUSSION AND ANALYSIS
PREPARED AS OF MAY 16, 2005
(U.S. DOLLARS)
The following discussion and analysis of the financial condition and results of
operations for the Company for the period ended March 31, 2005 should be read in
conjunction with the consolidated financial statements and accompanying notes.
The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in Canada.
OVERVIEW
IUC is incorporated under the Business Corporations Act (Ontario). The Company
is engaged primarily in uranium exploration and mining and is also in the
business of recycling uranium-bearing waste materials, referred to as "alternate
feed materials," for the recovery of uranium, alone or in combination with other
metals, as an environmentally preferable alternative to the direct disposal of
those waste materials. Alternate feed materials are generally ores or residues
from other processing facilities that contain uranium in quantities or forms
that can be recovered at the Company's White Mesa uranium mill (the "Mill"). The
Company sells uranium recovered from conventional production and from alternate
feed processing, as well as vanadium and other metals that can be produced as a
co-product with uranium. In addition, the Company is engaged in precious and
base metals exploration in Mongolia and Russia through its majority owned
subsidiary, Fortress Minerals Corp.
The Company owns several uranium and uranium/vanadium mines in the U.S. that
have been shut down since 1999, due to low commodity prices. From that time
until late 2003, the Company focused its resources primarily on the continuing
development of the alternate feed, uranium-bearing waste recycling business, and
the Company initiated a precious and base metals exploration program in
Mongolia. However, uranium spot prices have risen significantly from $12.50 per
pound U(3)O(8) on September 30, 2003 to $29.00 per pound U(3)O(8) by May 9,
2005. As a result of these increases in uranium prices and improved market
fundamentals, the Company acquired uranium exploration properties in the
Athabasca Basin region of Saskatchewan, Canada, and commenced an exploration
program on certain of those properties in early fiscal 2004. The Company also
resumed exploration for uranium in Mongolia during the fourth quarter of fiscal
2004 and is evaluating re-commencing mining operations in the U.S. The Company
continues to expand its portfolio of uranium properties in the U.S., Canada and
Mongolia through acquisitions.
In addition to its exploration and mining programs, the Company intends to
devote significant resources to the ongoing development of its alternate feed,
uranium-bearing waste recycling business. The Company continues to expect that
the recycling of uranium-bearing materials can continue to help offset Mill and
mine standby costs, and, potentially, result in sustained profitable operations
for the Company. While the Company has had considerable success to date in this
initiative, the Company has not to date developed a sufficient backlog of
alternate feed business to result in sustained profitable operations for the
Company solely from this business. Developing this backlog will continue to be a
focus of the Company.
In the first quarter of fiscal 2003, the Company entered into a joint venture
with Nuclear Fuel Services, Inc. ("NFS") for the pursuit of an alternate feed
program for the Company's Mill. The joint venture is carried out through Urizon
Recovery Systems, LLC ("Urizon"), a 50/50 joint venture company. In April of
2003, NFS submitted an unsolicited proposal to the U.S. Department of Energy
("DOE") to fund the Urizon program. In January 2004, NFS was notified that the
DOE would not fund the program at that time due to other higher priority needs.
The DOE has chosen a contractor who will manage the disposition of the materials
that would be the feedstock for the Urizon program, in conjunction with the
closure of an existing DOE site. The joint venture currently expects that a
decision will be made by the DOE in fiscal 2005 as to how it intends to proceed
on the disposition of the material, and that the joint venture will have an
opportunity to propose the Urizon Program as a suitable disposition option for
this feedstock. The financial results for Urizon are included in the Company's
financial statements on a proportionate consolidation basis.
In June 2004, the Company sold its Mongolian precious and base metals
exploration program to Fortress Minerals Corp. in exchange for cash and a
majority share ownership position in that company. Fortress is a public Canadian
company whose shares are traded on the TSX-Venture Exchange. As of March 31,
2005, the Company held 57.09% of the issued and outstanding shares of Fortress.
The financial results for Fortress are included in the Company's financial
statements on a consolidated basis.
SELECTED QUARTERLY FINANCIAL DATA
($000, except per share amounts) Mar 2005 Dec 2004 Sep 2004 Jun 2004
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Vanadium sales - - - -
Process milling revenue - 4 390 -
Engineering services revenue - - - -
Total revenue - 4 390 -
Net income (loss) 292 (630) 632 (1,198)
Basic and diluted income (loss) per share - (0.01) 0.01 (0.02)
Total assets 44,524 38,318 39,388 33,475
Total long-term liabilities 16,674 16,313 16,296 16,388
($000, except per share amounts) Mar 2004 Dec 2003 Sep 2003 Jun 2003
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Vanadium sales 1,583 - - -
Process milling revenue - 31 42 3,281
Engineering services revenue 62 359 135 -
Total revenue 1,645 390 177 3,281
Net income (loss) (455) (1,166) (404) 1,126
Basic and diluted income (loss) per share (0.01) (0.02) (0.01) 0.02
Total assets 33,104 33,372 25,616 25,366
Total long-term liabilities 15,015 14,997 14,630 13,870
REVENUES
There were essentially no revenues for the second quarter and first six months
as compared to $1,644,638 and $2,035,262 for the comparable periods in fiscal
2004. The decrease in revenue of $1,644,297 and $2,031,292 in fiscal 2005 over
2004 was due to the Company selling its inventory of vanadium black flake during
the second quarter of fiscal 2004. In addition, the Company provided engineering
services, during the first and second quarters of fiscal 2004, on a cost plus
basis to a related company that was reclaiming a mine site in the U.S.
The Company continues to hold an inventory of approximately 65,000 pounds of
vanadium, as vanadium pregnant liquor, and is evaluating opportunities to sell
this inventory.
During the second quarter, the Company continued to receive deliveries of
alternate feed material from the Heritage site. The Company receives a recycling
fee for this type of alternate feed material once it is delivered to the Mill. A
portion of the fees for the Heritage materials, equal to the costs that are
incurred receiving materials, is recognized as revenue, while the remaining
recycling fees are recorded as deferred revenue until the material is processed
at which
time they are recorded as revenue. In addition, the Company will resume receipt
of alternate feed materials from a commercial metals producer in May 2005. The
Company receives a fee on receipt of these materials, representing approximately
22% of the total fees from that producer, which is recorded as revenue, and a
recycling fee, representing the remaining 78% of the fees from that producer,
which is recorded as deferred revenue until the material is processed, at which
time it becomes revenue. In addition to the recycling fees, the Company will
retain any uranium recovered from these materials, which can be sold in
subsequent periods, at which time the revenue from the sales will be recorded.
The Mill began processing its stockpile of high-grade alternate feed materials
on March 21, 2005. The Mill had been on stand-by since May 2003. As of March 31,
2005, there were approximately 7,888 tons of these high-grade materials at the
Mill, containing approximately 557,000 lbs of uranium. The Company does not
receive a recycling fee for these types of material; however, the Company is
able to retain all of the proceeds received from the sale of the uranium
produced. The Company currently does not have commercial forward sales
commitments for the projected uranium production in view of the expected
continued rise in uranium prices. The Company will evaluate the most appropriate
timing for its uranium sales.
COST OF PRODUCTS AND SERVICES SOLD
Process milling expenditures for the first six months of fiscal 2005 were
nominal and represent expenditures incurred receiving alternate feed materials.
These expenditures decreased by $69,485 as compared to process milling
expenditures of $73,455 during the first six months of fiscal 2004. During the
six months ended March 31, 2005, the Company received 598 tons of alternate feed
material as compared to the first six months of fiscal 2004 when the Company
received 3,548 tons of material. The Company anticipates that receipt of
alternate feed materials will be at reduced levels until mid 2005 when a new
alternate feed generator is expected to begin shipments to the Mill. As of March
31, 2005, approximately 45,200 tons of alternate feed materials remained in
stockpile waiting to be processed during the current mill run.
The Mill began processing a high-grade alternate feed material on March 21,
2005. All costs incurred preparing for the Mill processing campaign and the
costs incurred for processing the material have been capitalized as inventories.
These expenditures for the first six months of fiscal 2005 were $469,993.
MILL STAND-BY
Mill stand-by expenses consist primarily of payroll and related expenses for
personnel, parts and supplies, contract services and other overhead expenditures
required to maintain the Mill on stand-by status until a sufficient stockpile of
alternate feed material or other ores have been accumulated to justify an
efficient mill run. Mill stand-by expenses for the second quarter and first six
months of fiscal 2005 of $474,783 and $1,069,953 respectively, decreased
$179,757 and $134,396 as compared to $654,540 and $1,204,349 for the comparable
periods in fiscal 2004. These decreases were due to the fact that the Mill
restarted operations in March 2005.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses consist primarily of payroll and
related expenses for personnel, legal, contract services and other overhead
expenditures. Selling, general and administrative expenses for the second
quarter and first six months of fiscal 2005 were $1,269,891 and $2,074,613 as
compared to $698,935 and $1,630,605 for the comparable periods in fiscal 2004.
The increase of $444,008 for the comparable six month periods was the result of
increases in investor relation expenses and the Company's consolidation of
Fortress' selling, general and administrative expenditures of $606,747. These
increases were partially offset by the decrease in engineering services costs
that the Company provided during the first and second quarters of fiscal 2004.
EXPLORATION AND DEVELOPMENT
Uranium Exploration
In the first quarter of fiscal 2004, the Company acquired interests in uranium
exploration properties in the Athabasca Basin region of Saskatchewan, Canada and
commenced an exploration program on certain of those properties. During the
remainder of fiscal 2004, the Company continued to increase its land position in
the Athabasca Basin region through acquisition and land staking. Total gross
program expenditures, including capitalized exploration expenditures, for the
first six months of fiscal 2005 of $2,783,339 increased by $1,983,110 as
compared to $800,229 spent during the first six months of fiscal 2004.
Expenditures to date have primarily been on the Moore Lake project, where the
Company has an extensive drilling program augmented by geophysical and
geological field programs. IUC has an option to earn up to a 75% interest in the
Moore Lake property from JNR Resources Inc. through aggregate expenditures and
investments of Cdn $4.4 million over a period of 4 years. Expenditures on the
Moore Lake Project were $2,080,202 during the first six months of fiscal 2005.
The remaining expenditures were for geological field programs and land staking
costs and recording fees on a number of other projects in the Athabasca Basin
region.
The Company also has a 70% interest in the Gurvan-Saihan Joint Venture in
Mongolia. The other parties to the joint venture are the Mongolian government as
to 15% and Geologorazvedka, a Russian government entity, as to 15%. With
continued upward pressure on world uranium prices throughout fiscal 2004, the
joint venture recommenced its uranium exploration program in Mongolia.
Additional exploration licenses were acquired by the joint venture in areas
known to be prospective based on past joint venture reconnaissance. In addition,
the Company formed a new Mongolia business entity in fiscal 2004 to conduct
uranium exploration, 100% for the Company's account, in frontier areas in
Mongolia. The 2005 program will include about 30,000 meters of drilling. In
addition, radiometric spectrometric surveys will be conducted to identify
anomalies for further detailed exploration work. Total gross program
expenditures for the joint venture and for the Company's own account, including
capitalized exploration expenditures, for the first six months of 2005 of
$200,294 increased by $119,510 as compared to $80,784 spent during the first six
months of fiscal 2004. Activities through the second quarter of fiscal 2005
included qualification and selection of contractors, acquisition of technical
computing and support equipment, and mobilization of specialists to prepare for
resumption of fieldwork in the third quarter.
During the second quarter of fiscal 2005 the Company signed a Memorandum of
Agreement with Erdene Gold Inc. ("Erdene") to acquire a 65% interest in Erdene's
uranium properties in Mongolia in consideration for expenditures of Cdn $6
million over a period of 4 years. In addition, IUC will purchase, by way of
private placement, 1 million common shares of Erdene at a price of Cdn $1.00 per
share.
Uranium Development
The Company was successful in a competitive bid for a state lease in
southeastern Utah in the second quarter of fiscal 2005. The state property is
adjoined by a number of privately held unpatented mining claims, which have also
been acquired by the Company, that together comprise the Tony M Mine. The Tony M
Mine adjoins the Company's existing Bullfrog exploration property, which
together are now referred to as the "Henry Mountains Complex." The Company has
announced initiation of permitting for mining of the Henry Mountains Complex.
The bid for the Utah State lease included an initial cash bonus payment of $1
million; in addition the state will receive annual advance minimum royalties and
rentals. The private claims were acquired for $200,000 in cash payments and
250,000 shares of Company stock, subject to regulatory approval.
Precious and Base Metals Exploration
During the second quarter of fiscal 2002, the Company initiated a precious and
base metals exploration effort in Mongolia. This program was funded 100% by the
Company until the second quarter of 2004. During the second quarter of fiscal
2004, the Company entered into an agreement with Fortress for the sale of 100%
of the exploration
licenses held by the Company, in consideration for cash and a majority equity
interest in Fortress. The Company maintains a position on the Board of Directors
of Fortress but no longer manages the Mongolian precious and base metals
exploration program.
As of March 31, 2005, Fortress held 69 exploration licenses constituting its
mineral properties. The licenses cover 11 different exploration properties in
several different parts of Mongolia. In addition, Fortress has 3 purchase option
agreements covering 3 licenses for which no exploration work has started. Total
gross program expenditures, including capitalized exploration expenditures, for
the first six months of fiscal 2005 were $449,338 which decreased by $247,048 as
compared to $696,386 during the first six months of fiscal 2004. The exploration
expenses incurred during the first six months of fiscal 2005 were offset by
Fortress' decision to not pursue its option on the Shiveen Gol property and
consequently all costs related to the property, totaling $1,869,790, were
written off as of March 31, 2005.
During the first quarter of 2005, Fortress acquired an option to earn an 80%
interest in Phelps Dodge Exploration Company's ("PDEC's") subsidiary, PD Russia,
Inc. ("PDRI"). PDRI holds a 100% indirect interest in the Svetloye gold project
located in the Khabarovsk Region of eastern Russia. The Svetloye project has
high grade gold mineralization outcropping at surface, and an aggressive drill
program is scheduled for 2005 by Fortress. In addition to the Svetloye project,
Fortress has also completed an agreement with PDEC on a regional-wide Mongolian
alliance, in which PDEC can earn up to a 70% interest in Fortress's copper,
gold, silver and molybdenum projects in Mongolia, subject to investments by PDEC
in Fortress, and the funding of exploration and development programs on the
properties. PDEC will invest $3.0 million by way of private placement over two
years into Fortress ($1.7 million in Year 1 and $1.3 million in Year 2) at
Cdn$0.80 per share in Year 1 and at market price plus 50% in Year 2.
MINORITY INTEREST
The minority interest share of Fortress' loss for the first six months of fiscal
2005 was $850,520. On June 23, 2004 the Company completed the sale of its
Mongolian base and precious metals exploration properties held by its Bermuda
subsidiary to Fortress and began recording the minority interests' share of the
losses. The Company had expended $3,088,201 on these properties through June 23,
2004. In consideration for transferring these properties to Fortress, the
Company received 28 million common shares of Fortress' capital stock, which gave
the Company a 63.14% interest in Fortress, and cash of $656,580 for
reimbursement of costs incurred on the properties from the time of agreement to
the transfer date. No gain or loss was recognized on the transaction. On
September 1, 2004, Fortress completed a private placement of 4,987,500 common
shares at Cdn $0.40 per share. The Company purchased 732,500 of the common
shares, which resulted in the Company owning a 58.24% interest in Fortress as of
September 30, 2004. The Company's percentage ownership in Fortress decreased
from 63.14% to 58.24% as a result of this private placement and the Company
recorded a gain on dilution of $548,549. During the first six months of fiscal
2005, 998,035 common shares of Fortress were issued pursuant to the exercise of
warrants and stock options. A gain on dilution of $71,468 was recorded as a
result of the Company's percentage ownership in Fortress decreasing from 58.24%
to 57.09%.
OTHER INCOME AND EXPENSE
Net interest and other income (excluding loss on dilution and minority interest)
for the second quarter and first six months of fiscal 2005 was $3,019,572 and
$3,767,480 respectively, as compared to $40,242 and $297,868 for the second
quarter and first six months of fiscal 2005. The increase of $3,469,612 during
the comparable six-month periods was primarily the result of an increase in
income from the sale of short-term investments of $2,913,474 and an increase in
foreign exchange gains of $512,650. During the second quarter of fiscal 2005,
the Company recognized a recovery of future income tax of $363,199 as a result
of the renunciation of expenditures to flow-through shareholders.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2005, the Company had cash and short-term investments of
$15,537,542 and working capital of $16,893,622 as compared to cash and
short-term investments of $12,044,955 and working capital of $15,467,462 at
September 30, 2004. The increase of $1,426,160 in working capital was in part
due to the receipt of net proceeds from a private placement for 1 million flow
through common shares at a price of Cdn $7.00 per share and proceeds from the
sale of short-term investments, offset by increased exploration expenditures
during the six months ended March 31, 2005 and the acquisition of the Tony M
Mine.
Net cash used in operating activities was $846,568 for the first six months of
fiscal 2005 and consisted primarily of the net loss from continuing operations
of $337,609, adjusted for non-cash items of depreciation and amortization of
$239,165, write-down of mineral properties by Fortress of $1,869,790, and gain
on sale of short-term investments of $2,893,377. In addition, accounts
receivable decreased by $1,141,257 reflecting collection of alternate feed
material receipts.
Net cash used in investment activities was $1,498,025 for the first six months
of fiscal 2005 and consisted primarily of capitalized exploration expenditures
of $4,464,239 offset by proceeds from sale of short-term investments of
$3,983,337. Restricted investments increased by $194,618 as a result of interest
income, and the Company invested $292,780 in marketable securities.
Net cash provided by financing activities for the six months ended March 31,
2005 totaled $5,837,180 and consisted primarily of proceeds from the issuance of
1 million flow through common shares by the Company.
OUTSTANDING SHARE DATA
As of March 31 and May 9, 2005, the total number of common shares outstanding
was 81,065,066 and the number of stock options outstanding was 1,680,000.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company's consolidated financial statements in conformity
with accounting principles in Canada and the United States requires management
to make estimates and assumptions regarding future events. These estimates and
assumptions affect the reported amounts of certain assets and liabilities, and
disclosure of contingent liabilities.
Significant areas requiring the use of management estimates include the
determination of impairment of intangibles and plant and equipment and mineral
property interests, reclamation obligations, rates for depreciation and
amortization, and variables used in determining stock based compensation. These
estimates are based on management's best judgment. Factors that could affect
these estimates include: changes in the price of uranium and other market
conditions, risks inherent in mineral exploration and development, changes in
reclamation requirements and other laws, changes in government policy and
changes in foreign exchange rates.
On an ongoing basis, management re-evaluates its estimates and assumptions.
However actual amounts could differ from those based on such estimates and
assumptions.
CONTRACTUAL OBLIGATIONS
The Company has a reclamation obligation of $12,934,880, the timing of which
will depend upon the Company's business objectives. While this reclamation
obligation was valued on the assumption that the Company must be able
to fund reclamation of the White Mesa Mill and U.S. mining operations at any
time, the Company currently has no intention of placing the Mill or U.S. mines
into reclamation in the foreseeable future.
The Company also has operating lease obligations of $105,000 for fiscal 2005 and
$240,000 over the following two fiscal years.
ENVIRONMENTAL RESPONSIBILITY
Each year, the Company reviews the anticipated costs of decommissioning and
reclaiming its Mill and mine sites as part of its environmental planning
process. The Company also formally reviews the Mill's reclamation estimate
annually with applicable regulatory authorities. The Mill and mine reclamation
estimates at March 31, 2005 are $12,934,880, which are currently expected to be
sufficient to cover the projected future costs for reclamation of the Mill and
mine operations. However, there can be no assurance that the ultimate cost of
such reclamation obligations will not exceed the estimated liability contained
in the Company's financial statements.
The Company has posted bonds as security for these liabilities and has deposited
cash, cash equivalents, and fixed income securities as collateral against these
bonds. At March 31, 2005, the amount of these restricted investments
collateralizing the Company's reclamation obligations was $12,681,684.
As mentioned in previous reports, the Company had detected some chloroform
contamination at the Mill site that appeared to have resulted from the operation
of a temporary laboratory facility that was located at the site prior to and
during the construction of the Mill facility, and from septic drain fields that
were used for laboratory and sanitary wastes prior to construction of the Mill's
tailings cells. In April 2003, the Company commenced an interim remedial program
of pumping the chloroform-contaminated water from the groundwater to the Mill's
tailings cells. This will enable the Company to begin clean up of the
contaminated areas and to take a further step towards resolution of this
outstanding issue. Although the investigations to date indicate that this
contamination appears to be contained in a manageable area, the scope and costs
of remediation have not yet been determined and could be significant.
RESEARCH AND DEVELOPMENT
The Company does not have a research and development program per se. Process
development efforts expended in connection with processing alternate feeds are
included as a cost of processing. Process development efforts expended in the
evaluation of potential alternate feed materials that are not ultimately
processed at the Mill are included in Mill overhead costs. The Company does not
rely on patents or technological licenses in any significant way in the conduct
of its business.
TREND INFORMATION
During the period 1997 through 2000, the Company saw a deterioration in both
uranium and vanadium prices, from $11.00 per pound of U(3)O(8) and $4.10 per
pound of V(2)O(5) in October 1997 to $7.40 per pound of U(3)O(8) and $1.70 per
pound of V(2)O(5) at the end of September, 2000. As a result of these decreases
in commodity prices, the Company decided to cease its uranium and
uranium/vanadium mining and exploration activities in 1999, and shutdown all of
its uranium and uranium/vanadium mines and its Mongolian Gurvan-Saihan Joint
Venture, pending improvements in commodity prices. Also as a result of these
market events, the Company decided to marshal its resources and to concentrate
its operations primarily on the continuing development of the alternate feed,
uranium-bearing waste recycling business. Since then, commodity prices have
improved dramatically. During fiscal 2004, uranium prices increased 65%, from
$12.20 per pound on October 1, 2003, to $20.00 per pound by September 30, 2004.
As of May 9, 2005, the uranium spot price had increased to $29.00 per pound. The
uranium market fundamentals are strong and most analysts do not forecast any
weakening of the uranium prices over the next 3 to 5 years. Vanadium prices have
also increased dramatically throughout the past 18 months and are currently
trading in the range of $24.00 to $26.50 per pound V(2)O(5). These are
unprecedented price levels for vanadium and it is not believed that the market
can sustain them for an extended period of time. Historical vanadium prices
range from $1.20 to $6.00 per pound V(2)O(5). As a result of the increase in
uranium price, the Company acquired and staked uranium exploration properties in
Canada in fiscal 2004 and has commenced an aggressive exploration program on
certain of those properties, as well as restarted its uranium exploration
program in Mongolia. In the U.S., the Company has begun processing a high-grade
alternate feed material and is currently evaluating re-commencing certain
uranium mining activities in the U.S. In addition, the Company continues to
evaluate opportunities to expand and was successful in a competitive bid for the
Tony M Mine in southeastern Utah during the second quarter of fiscal 2005.
Although the Mill's tailings system currently has capacity to process all of the
alternate feed materials under contract with the Company, this capacity is
expected to run out within the next one to three years, depending on the level
of success of the Company in entering into contracts for the processing of
additional feed materials or if the Company decides to recommence U.S. mining
operations. In order to provide additional tailings capacity, the Company will
have to repair existing tailings Cell No. 4A, at an estimated cost of $1.5-$3.0
million. In addition, if Cell No. 4A is put into use, the reclamation obligation
for the Mill would increase by approximately $1.0 million, which would require
an increase in the Mill's reclamation bond by that amount. The repair of Cell
No. 4A will provide the Company with approximately 2 million tons of additional
tailings capacity, which should be ample capacity for the foreseeable future.
OUTLOOK FOR 2005
The Company will be expanding its uranium exploration programs in both Canada
and Mongolia in 2005. In Canada, the Company along with its joint venture
partner, JNR Resources Inc. completed a winter drilling program, as well as
ground geophysics and a 3D seismic program at the Moore Lake project. In
addition to the program at Moore Lake, the Company also completed a winter
geophysical and drilling program at its 100% owned Key Lake South project.
During the summer, the Company will continue to expand its Moore Lake project
exploration program and will initiate additional programs on its 100% staked
land, as well as on the Phelps-Dodge and JNR option properties. In Mongolia, the
Company is planning a 35,000-meter drill program and gamma surveys for the
summer of 2005, which will investigate a number of targets on its current land
position and on the recently optioned Erdene properties. The Company will
continue to evaluate other potential exploration projects, as well as more
advanced project acquisitions.
At the beginning of fiscal 2005, the uranium spot price was $20.00 per pound and
the long-term price was $23.00 per pound. As of May 9, 2005, the spot price had
increased to $29.00 per pound and the long-term price had increased $6.00 per
pound to $29.00 per pound. A number of market projections predict a continued
increase in both spot and long-term uranium prices; however, these projections
indicate that the rate of increase will likely be lower than that seen in 2004.
With the forecasted continued improvement in commodity prices, the Company has
been studying the viability of restarting certain U.S. mining operations. These
operations are higher cost than the current uranium producers due to the lower
grade of the ore bodies. Assuming that the price continues to rise, and given
that a majority of the U.S. mines are fully permitted and can be put back into
production within a four to six month period, the Company is encouraged that a
production decision will be made in 2005.
In addition to the potential restart of the U.S. mining operations, the Company
restarted the White Mesa Mill late in the second quarter of fiscal 2005 to
process alternate feed materials that contains over 575,000 pounds of uranium.
The processing of these materials is anticipated to take about fourteen months
to complete. With respect to the Urizon project, the Company and its joint
venture partner, Nuclear Fuel Services, Inc., are awaiting a decision by the
U.S. Department of Energy on the path forward for the handling of the Urizon
feed stock.
RISKS AND UNCERTAINTIES
Exploration for and development of mineral properties involves significant
financial risks, which even a combination of careful evaluation, experience and
knowledge may not eliminate. While discovery of an ore body may result in
substantial rewards, few properties, which are explored, are ultimately
developed into producing mines. Major expenditures may be required to establish
reserves by drilling, constructing mining and process facilities at a site,
developing metallurgical processes and extracting uranium and other metals from
ore. It is impossible to ensure that the current exploration programs of the
Company will result in profitable commercial mining operations.
Under the United States Nuclear Regulatory Commission's Alternate Feed Guidance,
the Mill is required to obtain a specific license amendment allowing for the
processing of each new alternate feed material. Various third parties have
challenged certain of the Mill's license amendments, although none of such
challenges have been successful to date. The Company intends to continue to
defend its positions and the validity of its license amendments and proposed
license amendments. If the Company does not ultimately prevail in any such
actions and any appeals therefrom, the Company's ability to process certain
types of alternate feeds, in certain circumstances, may be adversely affected,
which could have a significant impact on the Company.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in the foregoing Management's Discussion and
Analysis and elsewhere in this Report to Shareholders constitute forward-looking
statements. Such forward-looking statements involve a number of known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
the statements were made, and readers are advised to consider such
forward-looking statements in light of the risks set forth below.
Risk factors that could affect the Company's future results include, but are not
limited to, risks inherent in mineral exploration and mining activities and
other operating and development risks, competition, environmental regulations,
reliance on alternate feed income, the ability to develop the alternate feed
business, changes to reclamation requirements, dependence on a limited number of
customers, volatility and sensitivity to market prices for uranium and vanadium,
the impact of changes in foreign currencies' exchange rates, political risk
arising from operating in Mongolia, changes in government regulation and
policies including trade laws and policies, demand for nuclear power,
replacement of reserves and production, receipt of permits and approvals from
governmental authorities (including amendments for each alternate feed
transaction).
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNITED STATES DOLLARS)
MARCH 31, 2005
(UNAUDITED) SEPTEMBER 30, 2004
------------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 15,537,542 $ 12,044,955
Short-term investments - 1,089,960
Trade and other receivables 424,533 1,630,591
Inventories 1,671,792 1,189,391
Prepaid expenses and other 406,027 408,038
------------------ ------------------
18,039,894 16,362,935
Plant and equipment, net 3,195,617 2,786,570
Mineral properties (Note 3) 8,765,712 6,171,263
Marketable securities (Note 4) 1,185,001 892,221
Intangible assets, net 656,250 687,500
Restricted investments (Note 5) 12,681,684 12,487,066
------------------ ------------------
$ 44,524,158 $ 39,387,555
================== ==================
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities $ 1,130,263 $ 879,994
Notes payable 16,009 15,479
------------------ ------------------
1,146,272 895,473
Notes payable, net of current portion 27,433 35,573
Reclamation obligations (Note 6) 12,934,880 12,603,595
Deferred revenue 3,612,440 3,556,592
Future income tax liability 1,070,897 -
Other long-term liability 99,593 99,593
Minority interest 958,714 1,664,247
------------------ ------------------
19,850,229 18,855,073
------------------ ------------------
SHAREHOLDERS' EQUITY
Share capital (Note 7)
Issued and outstanding (81,065,066 and 79,635,066) 54,506,705 50,305,480
Value assigned to stock options (Note 8) 1,276,204 224,718
Deficit (31,108,980) (29,997,716)
------------------ ------------------
24,673,929 20,532,482
------------------ ------------------
$ 44,524,158 $ 39,387,555
================== ==================
Contingency (Note 10)
ON BEHALF OF THE BOARD
/s/ Ron F. Hochstein /s/ William A. Rand
--------------------------- ---------------------------
Ron F. Hochstein, Director William A. Rand, Director
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(UNITED STATES DOLLARS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31 SIX MONTHS ENDED MARCH 31
2005 2004 2005 2004
------------ ------------ ------------ ------------
OPERATIONS
Revenue
Vanadium sales $ - $ 1,582,628 $ - $ 1,582,628
Process milling 341 - 3,970 31,452
Engineering services - 62,010 - 421,182
------------ ------------ ------------ ------------
Total revenue 341 1,644,638 3,970 2,035,262
------------ ------------ ------------ ------------
Costs and expenses
Vanadium cost of sales - 696,905 - 696,905
Process milling expenditures 341 40,653 3,970 73,455
Mill stand-by expenditures 474,783 654,540 1,069,953 1,204,349
Selling, general and administrative 1,269,891 698,935 2,074,613 1,630,605
Stock based compensation 277,831 - 277,831 220,037
Exploration general 52,676 49,305 98,089 91,630
Write-down of mineral properties 1,869,790 - 1,869,790 37,162
------------ ------------ ------------ ------------
3,945,312 2,140,338 5,394,246 3,954,143
------------ ------------ ------------ ------------
Loss before the under noted items (3,944,971) (495,700) (5,390,276) (1,918,881)
Gain on sale of land and equipment 42,200 27,600 87,238 40,100
Gain (loss) on sale of short-term investments 2,893,377 (16,027) 2,893,377 (20,097)
Foreign exchange gain (loss) (1,528) (112,734) 541,015 28,365
Net interest and other income 150,324 141,403 310,651 249,500
Bad debt expense (64,801) - (64,801) -
Dilution gain 61,222 - 71,468 -
Minority interest 793,372 - 850,520 -
------------ ------------ ------------ ------------
Loss for the period before taxes (70,805) (455,458) (700,808) (1,621,013)
Recovery of future income tax asset 363,199 - 363,199 -
------------ ------------ ------------ ------------
Net income (loss) for the period 292,394 (455,458) (337,609) (1,621,013)
============ ============ ============ ============
Basic and diluted loss per share (Note 8) $ - $ (0.01) $ - $ (0.02)
============ ============ ============ ============
Basic weighted average number of
shares outstanding 80,236,622 77,805,622 79,960,812 74,477,758
DEFICIT
Deficit as previously reported (31,401,374) (28,976,592) (29,997,716) (27,811,037)
Change in policy on stock based compensation
(Note 2) - - (773,655) -
------------ ------------ ------------ ------------
Deficit restated, beginning of period (31,401,374) (28,976,592) (30,771,371) (27,811,037)
Net loss for the period 292,394 (455,458) (337,609) (1,621,013)
------------ ------------ ------------ ------------
DEFICIT, END OF PERIOD $(31,108,980) $(29,432,050) $(31,108,980) $(29,432,050)
============ ============ ============ ============
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNITED STATES DOLLARS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31 SIX MONTHS ENDED MARCH 31
2005 2004 2005 2004
------------ ------------ ------------ ------------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net income (loss) for the period $ 292,394 $ (455,458) $ (337,609) $ (1,621,013)
Items not affecting cash
Depreciation 90,471 112,877 207,915 229,552
Amortization 15,625 - 31,250 -
Gain on sale of equipment (42,200) (28,114) (87,238) (40,614)
Gain on sale of short-term investments (2,893,377) - (2,893,377) -
Bad debt expense 64,801 - 64,801
Dilution gain (61,222) - (71,468) -
Minority interest (783,620) - (843,533) -
Write-down of mineral properties 1,869,790 - 1,869,790 37,162
Stock based compensation 277,831 - 277,831 220,037
Recovery of future income tax asset (363,199) - (363,199)
Changes in non-cash working capital items
(Increase) decrease in trade and other receivables (222,704) (1,351,992) 1,141,257 (483,593)
(Increase) decrease in inventories (408,786) 637,704 (482,401) 637,021
(Increase) decrease in other current assets (97,903) 5,863 2,011 132,481
Increase (decrease) in other accounts payable and
accrued liabilities 767,509 120,400 250,269 (288,568)
Increase in reclamation obligations 331,285 - 331,285 -
Increase in deferred revenue 33,739 14,174 55,848 198,280
------------ ------------ ------------ ------------
NET CASH USED IN OPERATIONS (1,129,566) (944,546) (846,568) (979,255)
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Purchase of properties, plant and equipment (558,371) (29,076) (622,234) (71,721)
Mineral property expenditures (3,133,870) (1,005,628) (4,464,239) (1,532,663)
Proceeds from sale of short-term investments 3,983,337 - 3,983,337 -
Proceeds from sale of surplus equipment 47,471 28,114 92,509 40,614
Purchase of marketable securities (169,865) (570,865) (292,780) (723,225)
Increase in restricted investments (81,065) (81,060) (194,618) (181,113)
------------ ------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTMENT ACTIVITIES 87,637 (1,658,515) (1,498,025) (2,468,108)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Decrease in notes payable (3,836) (2,752) (7,609) (6,279)
Issuance of common shares 5,374,953 - 5,374,953 8,747,097
Exercise of stock options 162,541 51,715 260,368 51,715
Exercise of options and warrants of Fortress 177,396 - 209,468 -
------------ ------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,711,054 48,963 5,837,180 8,792,533
------------ ------------ ------------ ------------
Increase (decrease) in cash and cash equivalents 4,669,125 (2,554,098) 3,492,587 5,345,170
Cash and cash equivalents, beginning of period 10,868,417 11,538,347 12,044,955 3,639,079
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,537,542 $ 8,984,249 $ 15,537,542 $ 8,984,249
============ ============ ============ ============
INTERNATIONAL URANIUM CORPORATION
Notes to Consolidated Financial Statements
(United States Dollars) (Unaudited)
1. Basis of Preparation of Financial Statements
These unaudited interim consolidated financial statements of the Company,
its wholly owned subsidiaries, and it's majority owned subsidiary Fortress
Minerals Corp., and on a proportionate consolidation basis, Urizon Recovery
Systems, LLC, have been prepared in accordance with accounting principles
generally accepted in Canada on a basis consistent with the consolidated
financial statements of the Company included in its 2004 annual report.
These unaudited interim consolidated financial statements follow the same
accounting policies as the most recent audited annual consolidated
financial statements of the Company. They do not contain all of the
information required by generally accepted accounting principles for annual
financial statements and therefore should be read in conjunction with the
consolidated financial statements included in the Company's 2004 annual
report.
2. Change in Accounting Policy
The Canadian Institute of Chartered Accountants ("CICA") has issued new
recommendations relative to Handbook section 3870, "Stock-based
compensation and other stock-based payments", which is effective for fiscal
years beginning on or after January 1, 2004. The recommendation requires
recognition of an expense arising from stock options granted to both
employees and non-employees, in an amount equal to the fair value of the
options granted. The fair value of options granted is established at the
date of grant using an option-pricing model, and the compensation expense,
equal to the option's fair value, is then recorded over the option's
vesting periods. The Company has applied this standard for employee stock
options, effective October 1, 2004, retroactively without restatement by a
charge to opening retained earnings of $773,655.
3. Mineral Properties
a. Mongolian precious and base metals properties
The Company's Mongolian precious and base metals properties were
transferred to Fortress Minerals Corp. in June 2004 in exchange for cash
and a controlling interest in Fortress. Amounts capitalized by project,
which include costs related to acquisition of land interests, recording
fees, geological field programs, geochemical surveys, ground geophysical
programs, drilling and lab analysis, are shown below:
2004 2005 2005
Net Expenditures Write-offs Net
---------------------------------------------------------------------
Shiveen Gol $1,777,890 $ 91,900 $(1,869,790) $ -
Tsagaan Tologoi 597,781 83,811 - 681,592
Erdenet 750,171 103,009 - 853,180
Huvsgol 339,464 190,291 - 529,755
Gants Modot 118,325 4,022 - 122,347
Davaa 31,764 2,851 - 34,615
Burkheer Khar 110,445 (15,097) - 95,348
Ulzit 83,169 (11,449) - 71,720
-------------------------------------------------------------------
$3,809,009 $449,338 $(1,869,790) $2,388,557
===================================================================
b. Canadian uranium properties
In the first quarter of fiscal 2004, the Company acquired interests in and
staked uranium exploration properties in the Athabasca Basin region of
Saskatchewan, Canada and commenced exploration on certain properties.
Amounts capitalized by project, which include costs related to acquisition
of land interests, staking costs, recording fees, geological field
programs, airborne and ground geophysical programs, drilling and lab
analysis, are shown below:
2004 2005 2005
Net Expenditures Net
-------------------------------------------------------------------
Moore Lake $1,779,393 $2,067,358 $3,846,751
Lazy Edward Bay 27,884 25,092 52,976
Pendelton Lake 88,179 104 88,283
South Cigar Lake 69,391 7,498 76,889
Bell Bay - 18,336 18,336
Kelic Lake - 29,269 29,269
South Virgin - 30,880 30,880
Crawford Lake 54 - 54
Brown Lake - 424 424
Ford Lake 3,157 - 3,157
Perpete Lake 1,409 - 1,409
Key Lake South 78,350 180,601 258,951
Johnstone Lake 9,826 438 10,264
Other Exploration Costs 251,535 422,815 674,350
-------------------------------------------------------------------
$2,309,178 $2,782,815 $5,091,993
===================================================================
c. United States uranium properties
In the second quarter of fiscal 2005, the Company added two key properties
adjoining it's existing Bullfrog mining claims in Garfield County in
southeastern Utah. The combination of these new properties with the
Company's Bullfrog mining claims will collectively be referred to as the
Henry Mountains Complex.
2004 2005 2005
Net Expenditures Net
-------------------------------------------------------------
Henry Mountains Complex $ - $1,129,357 $1,129,357
=============================================================
d. Mongolian uranium properties
Mongolian mineral properties are currently made up of the Company's
interest in the Gurvan-Saihan Joint Venture ("GSJV") as well as properties
held, solely for the account of the Company, through its subsidiary
International Uranium Mongolia, XXK. Amounts capitalized by project, which
include costs related to licensing of land interests, review of geological
data and satellite imagery, and geological field programs, are shown below:
2004 2005 2005
Net Expenditures Net
-------------------------------------------------------------
GSJV Properties $ - $ 764 $ 764
Huh Tologoi 8,583 - 8,583
Deren 385 338 723
Ikh Hongor Uul 1,588 - 1,588
Navtgar 6,000 - 6,000
Oshinuur 13,972 16,922 30,894
Ulaan Toiron 162 24,003 24,165
Dorgont - 7,472 7,472
Tsagaan Ovoo - 8,536 8,536
Bayankhongor - 16,401 16,401
Gobiguulin - 9,340 9,340
Other Exploration Costs 22,386 18,952 41,338
-------------------------------------------------------------
$53,076 $102,728 $155,804
=============================================================
4. Marketable Securities
The Company has invested $723,226 in shares of JNR Resources Inc., $168,995
in shares of Standard Uranium Inc. (formerly Goodfellow Resources Ltd.),
and $292,780 in shares of Santoy Resources Ltd., for a total investment of
$1,185,001. As of March 31, 2005, the market value of these securities
exceeded the cost by $3,431,649.
5. Restricted Investments
Amounts represent cash and fixed income securities the Company has placed
on deposit to secure its reclamation and performance bonds (Note 6).
March 31, 2005 September 30, 2004
------------------------------------------------------
Cash and cash equivalents $ 1,507,465 $ 1,883,073
Fixed income securities 11,174,219 10,603,993
------------------------------------------------------
$12,681,684 $12,487,066
======================================================
6. Provisions for Reclamation
Estimated future decommissioning and reclamation costs of the Mill and U.S.
mining properties are based principally on legal and regulatory
requirements. At March 31, 2005, $12,934,880 was accrued for reclamation
costs, and this amount also includes the reclamation liabilities secured by
bonds posted in favor of the State of Utah and the applicable state
regulatory agencies. The Company has deposited cash and fixed income
securities on account of these obligations.
Elements of uncertainty in estimating reclamation and decommissioning costs
include potential changes in regulatory requirements, decommissioning and
reclamation alternatives and the scope of reclamation activities. Actual
costs will differ from those estimated and such differences may be
material.
7. Share Capital
a. Authorized - unlimited number of common shares.
b. Issued and outstanding
Shares
March 31, 2005 September 30, 2004
---------------------------------------------------------
Beginning of period 79,635,066 68,970,066
Stock options exercised 430,000 715,000
Private placements 1,000,000 9,950,000
---------------------------------------------------------
End of period 81,065,066 79,635,066
=========================================================
Amount
March 31, 2005 September 30, 2004
---------------------------------------------------------
Beginning of period $50,305,480 $37,935,533
Stock options exercised 260,369 546,111
Private placements 5,374,952 12,408,969
Renounced flow through share
expenditures (1,434,096) (585,133)
---------------------------------------------------------
End of period $54,506,705 $50,305,480
=========================================================
Net income or loss per share was calculated on the basis of the weighted
average number of shares outstanding for the year. The weighted average
number of shares outstanding at March 31, 2005 was 79,960,812.
8. Stock Options
The Company has adopted a stock option plan under which the Board of
Directors may from time to time grant to directors, officers, key employees
and consultants of the Company options to purchase shares of the Company's
common stock. These options are intended to advance the interests of the
Company by providing eligible persons with the opportunity, through share
options, to acquire an increased proprietary interest in the Company.
Options granted under the share option plan have an exercise price equal to
the fair market value of such shares on the date of grant. All outstanding
options granted to date vest immediately and expire three years from the
date of the grant of the option.
Stock options outstanding and exercisable as of March 31, 2005 were as
follows:
Options Outstanding and Exercisable
----------------------------------------------------------------------------------------------------
Average Remaining Contractual Weighted Average
Number Outstanding Life (Years) Exercise Price Per Share
----------------------------------------------------------------------------------------------------
250,000 0.53 Cdn $0.31
1,260,000 1.66 Cdn $1.01
170,000 2.78 Cdn $4.27
----------------------------------------------------------------------------------------------------
1,680,000 1.42 Cdn $1.24
=====================================================================================================
Outstanding options expire between October 2005 and January 2008.
9. Segmented Information
Geographic information
Six Months Ending
March 31, 2005 March 31, 2004
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Revenue
United States $ 3,970 $ 2,035,262
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$ 3,970 $ 2,035,262
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Net loss
Canada $ (61,153) $ (452,461)
United States 1,301,315 (1,059,720)
Mongolia (1,577,771) (108,832)
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$ (337,609) $(1,621,013)
===================================================
At March 31,
2005 At September 30, 2004
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Total assets
Canada $17,670,674 $13,288,701
United States 23,475,540 20,769,794
Mongolia 3,377,944 5,329,060
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$44,524,158 $39,387,555
===================================================
10. Contingency
In the first quarter of fiscal 2004, the Company received a demand and
threat of pursuit of litigation in respect of alleged preferential payments
by a former customer, in the amount of approximately $1.2 million, that
were paid pursuant to certain contracts with the Company. The former
customer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code
in January 2002. That company subsequently sold substantially all of its
assets to The Shaw Group, Inc. ("Shaw"), who was believed to have assumed
the contracts in question and has subsequently performed the contracts with
the Company. In May 2004 the Company received a formal Complaint in the
bankruptcy proceeding seeking the recovery of approximately $1.7 million as
an alleged preferential payment. The Company has answered the complaint,
disputing the claim, asserting, among other defenses that there is no
liability on account that the Company's contract was assumed and assigned
to Shaw and as a result there is no preference liability. In December 2004,
the Company sought summary judgment in its favor, which was denied by the
Court. In May 2005 the Company filed a second motion for summary judgement,
which has not yet been ruled on by the Court. If this matter goes to trial,
the Company expects that the trial will take place later in 2005 or in
2006.