[miningmx.com] — FIRST Uranium will have to raise an unspecified amount of extra funds within the next few months to meet working capital requirements.
This is because the company’s current cash resources of about $30m will not be enough to cover medium-term working capital needs, following further production problems at the Ezulwini mine near Randfontein.
That unpleasant piece of news took the shine off what was a reasonable set of December quarterly results, during which Ezulwini achieved its highest-ever quarterly gold output.
First Uranium CEO Deon van der Mescht said the funding problem was the result of lower-than-expected gold production from Ezulwini during the December quarter. This was because of a fall-of-ground incident, as well as technical problems with the shaft infrastructure.
The technical problems restricted the hoisting capacity of the shaft during December 2010 and January this year, but the need for further work on the shaft “may have intermittent impacts on production until the end of April 2011′.
As a result, management has dropped Ezulwini’s gold output forecast for the year to end-March from 80,000 ounces to between 69,000oz and 70,000oz.
Van der Mescht declined to put an estimate on the amount of money that was needed, saying that was still to be determined. However, he confirmed the shortfall was directly linked to lower gold production.
He said RBC Capital Markets had been retained as financial adviser “to review all funding alternatives’, but added it was unlikely that First Uranium would be able to borrow the money.
The last time First Uranium raised funds was in April 2010, when it pulled in $150m. But it did so only with major support from Simmer and Jack Mines, which contributed about $62m.
First Uranium also twisted the arm of royalty company Gold Wheaton to stump up about $20m.
Gold Wheaton has a gold purchase agreement in place with First Uranium over production from its MWS plant, after injecting $75m into the company in 2009.
Neither company is likely to welcome another request for additional funds – particularly Simmers which has its own financial problems to deal with.
Gold Wheaton’s patience has already been tried by the previous delays at MWS, as a result of which it agreed to postpone a technical completion test at the MWS plant from June 2010 to September this year.
If that test is not passed, First Uranium faces the prospect of paying $42m in penalties to Gold Wheaton.
Van der Mescht said the remaining capital programme at MWS was on track for completion by May “which should ensure that the restructured Gold Wheaton completion test will be satisfied prior to September 1 2011′.
He described the shaft problems at Ezulwini as “a temporary setback’, adding “we are confident that the fundamentals and the building blocks of the business are sound”.
