FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For February 27, 2004
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: February 27, 2004 By: /s/ Ron F. Hochstein
---------------------------
Ron F. Hochstein, President
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
1 2004 First Quarter Report
Exhibit 1
REPORT TO SHAREHOLDERS
1ST QUARTER 2004
(U.S. DOLLARS)
Since the beginning of the first quarter of fiscal 2004 uranium prices have
increased from $12.20 per pound U(3)O(8), on September 30, 2003 to over $16.00
per pound by the end of February, 2004. Market analysts have attributed this
increase in uranium price to moderate increases in demand together with the
impact of Russia attempting to terminate a long term contract for the supply of
high enriched uranium ("HEU") material with Globe Nuclear Services and Supply
GNSS, Limited ("GNSS") in November, 2003. Because GNSS was the largest seller of
this HEU feed to U.S. utilities, spot market prices have escalated.
With the increase in uranium prices, International Uranium Corporation ("IUC" or
the "Company") returned to its roots with an increased focus on uranium
exploration. In the first quarter, the Company acquired interests in two uranium
exploration properties, the Moore Lake and Lazy Edward Bay properties, in the
southeastern sector of the Athabasca Basin region of northern Saskatchewan,
Canada, from JNR Resources Inc. ("JNR"). The Company and JNR have also formed a
strategic alliance for the acquisition or staking of new properties in the area.
Under this alliance, the Company can earn a 75% interest in a property by paying
the initial staking costs and the first $500,000 of exploration funding. The
Athabasca Basin region hosts the world's richest uranium reserves. The Company's
exploration properties are located near to Cameco Corporation's McArthur river
uranium mine, the world's largest uranium mine with annual capacity of 18
million pounds U(3)O(8). This region fuels well over 10% of the United States'
electrical power needs and accounts for approximately one-third of the world's
uranium production.
In the first quarter, the Company initiated a drilling program on the Moore Lake
property and is currently awaiting analytical results. The drilling program was
restarted in 2004 after a three week Christmas break, and is planned to continue
throughout 2004, together with a geophysical program which includes 30
kilometers of linecutting, gravity and electromagnetic programs. In addition to
the exploration on Moore Lake, the Company and its partner, JNR, will be
initiating an airborne electromagnetic survey on their Pendleton Lake property,
and other areas the two companies have staked under their strategic alliance.
In addition to its exploration program with JNR, the Company signed a letter of
intent in January 2004 to earn up to a 75% interest in the Crawford Lake uranium
project from Phelps Dodge Corporation of Canada, Limited, which is subject to
signing of formal agreements and regulatory approval. Crawford Lake is a 12,979
hectare uranium property located in the heart of the Athabasca Basin. An
exploration program on this property is being formulated for the later part of
fiscal 2004 and early 2005. The Company is continuing to evaluate other
opportunities in the Athabasca Basin.
The Company is also evaluating the possibility of recommencing its uranium
exploration program in Mongolia, as a result of the recent increases in the
price of uranium and improved market fundamentals. On its Mongolian base and
precious metals exploration program, the Company completed a 3,100 meter
drilling program on its Shiveen Gol target in its Tsagaan Tolgoi property area
in Western Mongolia. Although the drilling program did not intercept any ore
grade mineralization, thick intersections of low-grade mineralization, as well
as thin intercepts of high-grade copper and silver mineralization, were
encountered. The Company will continue to maintain this program at similar
funding levels as last year but will aggressively evaluate opportunities to sell
a portion or all of its Mongolian gold and precious metal exploration
properties.
In the U.S., the Company continues to focus on developing its alternate feed
business as a feed source for the Company's White Mesa Mill (the "Mill"). During
the quarter, the Mill received approximately 3,300 tons of material from the
Linde site. In addition to the Linde material, the Company continues to receive
deliveries of alternate feed materials from another uranium producer. While the
Company does not receive a processing fee for this particular alternate feed
material, it will produce uranium from these materials, which can then be sold.
As of the end of the first quarter of fiscal 2004, there were approximately
6,150 tons of this material at the Mill, which contains approximately 425,000
lbs of uranium. The Company is currently evaluating the feasibility of
processing these materials during fiscal 2004. On its Urizon alternate feed
program with Nuclear Fuel Services, Inc. ("NFS"), NFS and the Company are
currently investigating the potential for alternative commercial opportunities
to move the program forward without government funding.
With respect to the Company's U.S. uranium properties, further increases in both
uranium and vanadium prices above current levels would be required in order for
the Company to consider recommencing its U.S. mining activities, which have a
higher cost of production.
During the quarter, the Company recorded a net loss of $1,165,555 ($0.02 per
share), as compared to net income of $2,265,692 ($0.03 per share) for the first
quarter of fiscal 2003. This difference is primarily due to the fact that the
Mill was processing alternate feed materials during the first quarter of fiscal
2003, which generated operating profits. The Mill is currently on stand-by.
During the quarter, the Company was successful in raising gross proceeds of Cdn
$12.25 million through two equity financings. This significantly improved the
Company's cash and short-term investments, which as of the end of the first
quarter of fiscal 2004 were $12,780,667.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis of the financial condition and results of
operations for the Company for the period ended December 31, 2003 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 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 these 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 Mill. In addition, the Company sells uranium recovered from
these operations, as well as vanadium and other metals that can be produced as a
co-product with uranium. The Company owns several uranium and uranium/vanadium
mines in the U.S. that have been shut down pending further improvements in
commodity prices. In addition, the Company is engaged in precious and base
metals exploration in Mongolia.
Due to deteriorating commodity prices at the time and other factors, the Company
ceased its uranium mining and exploration activities in 1999/2000, and shut down
all of its mines and its Mongolian uranium joint venture indefinitely, pending
significant improvements in commodity prices. During that time period, 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.
As a result of the recent 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 during the first quarter of fiscal 2004.
While the Company is currently evaluating the possibility of recommencing its
uranium exploration program in Mongolia, further increases in both uranium and
vanadium prices above current levels would be required in order for the Company
to consider recommencing its U.S. mining activities, which have a higher cost of
production.
In addition to its exploration programs, the Company intends to continue to
devote significant resources to the development of the alternate feed,
uranium-bearing waste recycling business. The Company expects that the
development of the business of recycling 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, and the alternate feed business
has helped to
2
offset Mill and mine standby costs, 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 major 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, a 50/50 joint venture company.
REVENUES
Revenues for the first quarter of fiscal 2004 consisted of process milling fees
generated under the Company's alternate feed processing agreements and fees from
engineering services. Revenues for the first quarter of fiscal 2004 were
$390,624 as compared to $4,274,107 for the first quarter of fiscal 2003. The
decrease of $3,883,483 was due to the completion of the alternate feed mill run,
which began during the third quarter of fiscal 2002, and was completed on May
23, 2003. Revenue from engineering services is for services the Company is
providing, on a cost plus basis to a related company, which is reclaiming a mine
site in the U.S. Alternate feed processing activities during the first quarter
of fiscal 2004 consisted primarily of receipt, sampling and analysis of Linde
material.
The Company receives a recycling fee for a majority of the alternate feed
materials once they are delivered to the Mill. Fees are recorded as deferred
revenue until the material is processed at which time they are recorded as
revenue. In addition to the recycling fees, the Company will retain any uranium
recovered from these materials, which can be sold in subsequent periods.
The Company continues to hold approximately 424,000 pounds of vanadium, as black
flake, and approximately 144,000 pounds of vanadium, as vanadium pregnant
liquor. Over the past six months, vanadium prices have improved and are
currently trading in the range of $3.00 to $3.75 per pound V(2)O(5). The Company
will continue to evaluate opportunities to sell its inventory.
In addition to FUSRAP (Formerly Utilized Sites Remedial Action Program) material
from the Linde site, the Company continues to receive deliveries of alternate
feed materials from another uranium producer under a long-term arrangement.
While the Company will not receive a processing fee for this particular
alternate feed material, it will produce uranium from these materials, which
will then be sold. As of December 31, 2003, there were approximately 6,150 tons
of these materials at the Mill, containing approximately 425,000 lbs of uranium.
Revenues from these materials will be recognized as recovered uranium is sold.
Materials received from other uranium producers or private industry sources tend
to be relatively high in uranium content but relatively small in volume as
compared to FUSRAP materials.
COST OF PRODUCTS AND SERVICES SOLD
Process milling expenditures for the first quarter of fiscal 2004 of $32,802
represent expenditures incurred receiving alternate feed materials. These
expenditures decreased by $1,655,167 as compared to processing milling
expenditures of $1,687,969 during the first quarter of fiscal 2003. The decrease
is due to non-operation of the mill since May 23, 2003. During the first quarter
of fiscal 2004, the Company received 3,329 tons of alternate feed material from
the Linde site as compared to the first quarter of fiscal 2003 during which the
Company received 3,632 tons of Linde material. As of December 31, 2003,
approximately 39,000 tons of material remained in stockpile waiting to be
processed during the next mill run. The timing of the next mill run will depend
on a number of factors such as uranium price and the amount of material
available to be processed.
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 has been accumulated to justify an efficient mill run.
During the
3
first quarter of fiscal 2004 the Mill did not process any alternate feed
material, resulting in Mill stand-by expenditures of $549,809, compared to the
first quarter of fiscal 2003, in which the Mill was actively processing
alternate feed material. As a result, there were no Mill stand-by expenditures
in the first quarter of fiscal 2003.
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 first quarter
of fiscal 2004 were $924,889 as compared to selling, general and administrative
expenses of $585,909 for the first quarter of fiscal 2003. The increase of
$338,980 was primarily due to the additional costs the Company incurred in
conjunction with the engineering services that the Company is providing. In
addition to the engineering services costs, the increase is also the result of a
combination of increased audit fees, legal fees associated with the acquisition
of the Canadian uranium exploration properties, and costs associated with
downsizing the Denver office.
EXPLORATION
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. Total gross
program expenditures, including capitalized exploration expenditures, for the
first quarter of fiscal 2004 were $160,583.
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 geological concern, as to 15%. The joint
venture holds 5 exploration licenses totaling 1 million hectares. This in-situ
leach uranium project remained on stand-by during the first quarter fiscal 2004.
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 is being funded 100% by
the Company. As of December 31, 2003, the Company controlled 65 exploration
licenses totaling 1.62 million hectares. 43 of these licenses are held 100% by
the Company and 22 licenses are under a purchase option. In the first quarter of
fiscal 2004, three exploration licenses were released at the cost of $37,162.
Total gross program expenditures, including capitalized exploration
expenditures, for the first quarter of fiscal 2004 of $408,777 increased by
$242,484 as compared to $166,293 in the first quarter fiscal 2003. The increase
was due to the drilling program carried out on specific targets in western
Mongolia.
OTHER INCOME AND EXPENSE
Net interest and other income was $257,626 for the first quarter of fiscal 2004
as compared to $205,884 for the first quarter of fiscal 2003. The increase of
$51,742 was primarily the result of an increase of $141,225 in foreign exchange
gains on Canadian dollars offset by a decrease of $60,044 in income from
equipment sales.
4
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2003, the Company had cash and short-term investments of
$12,780,667 and working capital of $14,765,684 as compared to cash and
short-term investments of $4,729,039 and working capital of $7,294,884 at
September 30, 2003. The increase of $7,470,800 in working capital was primarily
due to the receipt of net proceeds from private placements for 6.7 million
common shares at a price of Cdn $1.50 per share and 2 million flow through
common shares at a price of Cdn $1.10 per share.
Net cash used in operating activities was $34,709 for the first three months of
fiscal 2004 and consisted primarily of the net loss from continuing operations
of $1,165,555, adjusted for non-cash items of depreciation of $116,675, offset
by a decrease in trade and other receivables of $868,399, and decreases in
accounts payable and accrued liabilities of $408,968. The decrease in trade and
other receivables was primarily due to the collection of amounts due from
alternate feed material receipts and amounts due from the Urizon Joint Venture.
The decrease in accounts payable and accrued liabilities reflects the payment of
standard operating expenses during the quarter.
Net cash used in investment activities was $809,593 for the three months ended
December 31, 2003 and consisted primarily of capitalized exploration
expenditures in Mongolia and Canada of $527,035. Restricted investments
increased by $100,053 as a result of interest income during the quarter, and the
Company invested $152,360 in JNR Resources, Inc. during the quarter.
Net cash provided by financing activities for the three months ended December
31, 2004 totaled $8,743,570 and consisted primarily of proceeds from the
issuance of 8.7 million common shares.
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.
The most critical accounting principles upon which the Company's financial
status depends are those requiring estimates of the timing and amount of future
reclamation obligations and the recoverability of its capitalized mineral
property expenditures.
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
Set out below are the Company's principal contractual obligations in the
following categories:
Less than 1 to 3 3 to 5 More than
(expressed in thousands of dollars) 1 Year Years Years 5 Years
-----------------------------------------------------------------------------------------------------
Operating lease obligations $109 $291 $92 $99
=====================================================================================================
In addition, the Company has a reclamation obligation of $12,503,129, 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 at any time, the Company
currently has no intention of placing the Mill into reclamation in the
foreseeable future.
5
ENVIRONMENTAL RESPONSIBILITIES
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 the U.S. Nuclear Regulatory Commission. The Mill and mine
reclamation estimates at December 31, 2003 are $12,503,129, 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. For fiscal 2004 and 2003, the amount of these restricted investments
collateralizing the Company's reclamation obligations was $12,207,000 and
$12,106,947 respectively. The increase of $100,053 was due to interest income
from these investments.
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 the processing of 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 has shutdown all
of its uranium and uranium/vanadium mines and its Mongolian Gurvan-Saihan Joint
Venture. 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.
Although uranium prices have increased to over $16.00 per pound U(3)O(8) by the
end of February 2004, and vanadium is currently trading in the range of $3.00 to
$3.75 per pound V(2)O(5), prices are still too low to justify the operation of
the Company's U.S. mines given their higher cost of production. However, with
these higher uranium prices, the Company is evaluating the possibility of
recommencing development of its Gurvan-Saihan Joint Venture. In addition, the
Company has acquired additional uranium exploration properties in Canada in
fiscal 2004 and has commenced an aggressive exploration program on certain of
those properties.
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
6
materials. 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 2004
With the recent increases in uranium price and the improvement in uranium market
fundamentals, the Company will be putting more focus on acquisition and
development of world-class uranium projects, including its Canadian exploration
properties, while also continuing to aggressively pursue additional alternate
feed material for the White Mesa Mill.
Revenues for fiscal 2004 will depend on the timing and length of the next mill
run and the decision by management to sell uranium and vanadium from
inventories. Currently, the Company is performing confirmatory test work for a
potential mill run later in the year, in which three alternate feed materials,
which have uranium grades ranging from 2% to 10%, would be processed. In
addition to these materials, the Company anticipates continuing to receive
alternate feed materials from the Linde FUSRAP site throughout the year;
however, volumes will be reduced during the second quarter due to project budget
constraints. In addition to the Linde material, the Company will be receiving
approximately 5,000 tons of material from a commercial generator during fiscal
2004. With respect to the Urizon project, the Company and its joint venture
partner, Nuclear Fuel Services, Inc., are investigating alternative commercial
arrangements, and re-evaluating the feasibility of the project, as a result of
the Department of Energy's recent decision not to fund the program at this time.
With higher uranium prices, the Company is evaluating restarting activity in
Mongolia on its Gurvan-Saihan Joint Venture. With respect to the U.S.
uranium/vanadium mines, however, the Company intends to maintain those assets on
stand-by pending further increases in uranium and vanadium prices, at which time
the Company would study the feasibility of re-opening some of these mine sites.
In Canada, the Company's exploration program on its Moore Lake project, with JNR
Resources Inc., will continue in 2004 with additional drilling and focused
geophysical programs. In addition to the Moore Lake property, the Company will
expand its exploration program to other properties held 100% by the Company or
joint ventured with other companies, and will continue to joint venture or
acquire additional properties in the Athabasca Basin.
The Company will continue to pursue its precious and base metals program in
Mongolia on a limited basis, with the goal of identifying potential joint
venture partners to provide additional funding for the exploration programs, or
of potentially selling the properties.
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 NRC'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
7
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 development, 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) and other operating and development risks.
8
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNITED STATES DOLLARS)
DECEMBER 31, 2003 SEPTEMBER 30, 2003
(UNAUDITED) (AUDITED)
---------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 11,538,347 $ 3,639,079
Short-term investments 1,242,320 1,089,960
Trade and other receivables 412,956 833,038
Inventories 1,762,051 1,761,368
Prepaid expenses and other 255,870 382,488
Due from Urizon Joint Venture 2,835 451,152
------------ ------------
15,214,379 8,157,085
Plant and equipment, net 2,933,354 2,825,238
Mineral properties 2,266,855 1,776,982
Intangible asset 750,000 750,000
Restricted investments (Note 2) 12,207,000 12,106,947
------------ ------------
$ 33,371,588 $ 25,616,252
============ ============
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities $ 437,750 847,729
Notes payable 10,945 14,472
------------ ------------
448,695 862,201
Notes payable, net of current portion 51,052 51,052
Reclamation obligations (Note 3) 12,503,129 12,320,983
Deferred revenue 2,343,044 2,158,938
Other long-term liability 99,593 98,582
------------ ------------
15,445,513 15,491,756
------------ ------------
SHAREHOLDERS' EQUITY
Share capital (Note 4)
Issued and outstanding (77,670,066 and 68,970,066 shares) 46,682,630 37,935,533
Value assigned to stock options (Note 5) 220,037 -
Deficit (28,976,592) (27,811,037)
------------ ------------
17,926,075 10,124,496
------------ ------------
$ 33,371,588 $ 25,616,252
============ ============
ON BEHALF OF THE BOARD
"Ron F. Hochstein" "Lukas H. Lundin"
Ron F. Hochstein, Director Lukas H. Lundin, Director
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(UNITED STATES DOLLARS)(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31
2003 2002
---------------------------
OPERATIONS
Revenue
Process milling $ 31,452 $ 4,274,107
Engineering services 359,172 -
------------ ------------
Total revenue 390,624 4,274,107
------------ ------------
Costs and expenses
Process milling expenditures 32,802 1,687,969
Mill stand-by expenditures 549,809 -
Selling, general and administrative 924,889 585,909
Stock based compensation (Note 5) 220,037 -
Exploration general 42,325 10,877
Change in market value of other asset - (79,000)
Write-down of mineral properties 37,162 -
Depreciation 6,781 8,544
------------ ------------
1,813,805 2,214,299
------------ ------------
Income (loss) before the undernoted items (1,423,181) 2,059,808
Other income
Gain (loss) on sale of land and equipment 12,500 72,544
Net interest and other income 245,126 133,340
------------ ------------
NET INCOME (LOSS) FOR THE PERIOD (1,165,555) 2,265,692
============ ============
Basic and diluted income (loss) per share $ (0.02) $ 0.03
============ ============
Basic weighted average number of shares outstanding 71,151,385 65,652,998
============ ============
DEFICIT
Deficit, beginning of period (27,811,037) (33,344,189)
Net income (loss) for the period (1,165,555) 2,265,692
------------ ------------
DEFICIT, END OF PERIOD $(28,976,592) $(31,078,497)
============ ============
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNITED STATES DOLLARS)(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31
2003 2002
---------------------------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net (loss) income for the period $ (1,165,555) $ 2,265,692
Items not affecting cash
Depreciation 116,675 196,703
Gain on sale of equipment (12,500) (72,319)
Gain on disposition of other asset - (79,000)
Write-down of mineral properties 37,162 -
Changes in non-cash working capital items
Decrease (increase) in trade and other receivables 868,399 (1,018,763)
Increase in inventories (683) (186,997)
Decrease in other current assets 126,618 97,428
Decrease in other accounts payable and accrued liabilities (408,968) (372,753)
Increase (decrease) in deferred revenue 184,106 (2,756,481)
Stock based compensation 220,037 -
------------ ------------
NET CASH (USED IN) OPERATIONS (34,709) (1,926,490)
------------ ------------
INVESTING ACTIVITIES
Purchase of plant and equipment (42,645) (16,973)
Mineral properties (527,035) (155,416)
Purchase of intangible asset - (750,000)
Proceeds from sale of surplus equipment 12,500 77,300
Purchase of short-term investments (152,360) -
Increase in restricted investments (100,053) (118,824)
------------ ------------
NET CASH (USED IN) INVESTMENT ACTIVITIES (809,593) (963,913)
------------ ------------
FINANCING ACTIVITIES
Decrease in notes payable (3,527) (3,134)
Settlement of other asset - (280,000)
Issuance of common shares 8,747,097 -
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 8,743,570 (283,134)
------------ ------------
Increase (decrease) in cash and cash equivalents 7,899,268 (3,173,537)
Cash and cash equivalents, beginning of period 3,639,079 6,710,782
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,538,347 $ 3,537,245
============ ============
Notes to Financial Statements
Per audit committee suggestions show US $ amount in note 7
Exchange rate as at December 31, 2003
1 US $ = 1.29460 Canadian $
1 Canadia $ = 0.77244 US $
Canadian Rate US $
4,400,000 0.77244 3,398,736
850,000 0.77244 656,574
500,000 0.77244 386,220
2,500,000 0.77244 1,931,100
250,000 0.77244 193,110
150,000 0.77244 115,866
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 and its subsidiaries 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 2003 annual report.
These unaudited interim consolidated financial statements follow the
same accounting policies as the most recent audited annual consolidated
financial statement 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
2003 annual report.
2. Restricted Investments
Amounts represent cash and fixed income securities the Company has
placed on deposit to secure its reclamation and performance bonds (Note
3).
December 31, 2003 September 30, 2003
---------------------------------------
Cash and cash equivalents $ 3,292,349 $ 2,177,688
Fixed income securities 8,914,651 9,929,259
------------------ -----------
$ 12,207,000 $12,106,947
================== ===========
3. 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 December 31, 2003, $12,503,129 was accrued for
reclamation costs, and this amount also includes the bond posted in
favor of the United States Nuclear Regulatory Commission and the
applicable state regulatory agencies as partial security for these
liabilities. 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.
4. Share Capital
a. Authorized - unlimited number of common shares.
b. Issued and outstanding
Shares
December 31, 2003 September 30, 2003
--------------------------------------
Beginning of period 68,970,066 65,735,066
Employee stock options exercised - 3,235,000
Private placements 8,700,000 -
------------------------------
End of period 77,670,066 68,970,066
==============================
Amount
December 31, 2003 September 30, 2003
--------------------------------------
Beginning of period $37,935,533 $37,466,609
Employee stock options exercised - 468,924
Private placements 8,747,097
------------------------------
End of period $46,682,630 $37,935,533
==============================
During the first quarter, the Company completed a private placement for
2 million flow through common shares at a price of Cdn $1.10 per share
and a subsequent private placement for 6.7 million common shares at a
price of Cdn $1.50 per share.
5. 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 December 31, 2004 were
as follows:
Options Outstanding and Exercisable
Average Remaining Weighted Average
Number Outstanding Contractual Life (Years) Exercise Price Per Share
--------------------------------------------------------------------------------------------
300,000 1.25 Cdn $0.30
250,000 2.03 Cdn $0.31
120,000 0.72 Cdn $0.37
1,875,000 2.80 Cdn $1.01
---------------------------------------------------------------------------------------------
2,545,000 1.70 Cdn $0.49
=============================================================================================
Outstanding options expire on June 2004, October 2005 and November 26,
2006.
Effective October 1, 2002, the Company adopted the new accounting
standard for stock based compensation. For income statement purposes
the Company has elected to only expense stock-based compensation for
non-employees, but not directors, officers and employees of the
Company. In the first quarter of fiscal 2004, the Company expensed
stock based compensation for non-employees in the amount of $220,037,
which has been credited to value assigned to stock options. The
compensation expense for the non-employees and the fair values of
options included in pro-forma amounts below, have been estimated using
an option-pricing model. Assumptions used in the pricing model are as
follows:
Dividend yield 0%
Average risk free interest rate 3.49%
Expected volatility 65%
Expected life of options 3 years
Had the Company followed the fair value method of accounting, the
Company would have recorded a compensation expense of $648,530 in
respect of its employee and director stock options. Pro forma
earnings information determined under the fair value method of
accounting for stock options is as follows:
1st Quarter Ended
December 31, 2003
-----------------
Net loss as reported ($1,165,555)
Compensation expense ($ 648,530)
Pro forma ($1,814,085)
Basic and diluted loss per share:
As reported ($ 0.02)
Pro forma ($ 0.03)
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 December 31, 2003 was
71,151,385.
Changes in the subjective input assumptions can materially affect the
fair value estimate, and therefore the existing models do not
necessarily provide a reliable single measure of the fair value of the
Company's stock options.
6. Segmented Information
a. Geographic information
Three Months Ending
December 31, 2003 December 31, 2002
-------------------------------------------
Revenue
United States $ 390,624 $4,274,107
-------------------------------------------
$ 390,624 $4,274,107
===========================================
Net Income (loss)
Canada ($ 235,622) ($ 75,711)
United States (844,405) 2,360,643
Mongolia (85,528) (19,240)
-------------------------------------------
($1,165,555) $2,265,692
===========================================
December 31, 2003 September 30, 2003
Total assets
Canada $ 9,464,742 $ 465,510
United States 21,697,560 23,047,594
Mongolia 2,209,286 2,103,148
-------------------------------------------
$33,371,588 $25,616,252
===========================================
7. Contingency
The Company has received a demand and threat of pursuit of litigation
in respect of alleged preferential payments by a former customer, in
the amount of $1,292,157. 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 is now performing the contract with the
Company. There is a dispute between Shaw and the bankrupt company with
respect to the release of a number of alleged preferential claims
arising out of contracts assigned to Shaw under this sale, including
the alleged preferential claim against the Company. Shaw has taken the
position that these claims are non-meritorious. The Company also
disputes this claim and is working with Shaw to bring this matter to a
resolution.
8. Commitments and subsequent events
During the first quarter of fiscal 2004, the Company entered into an
option to acquire a 75% interest in the Moore Lake project, a uranium
exploration project in the southeastern sector of the Athabasca Basin
of northern Saskatchewan. The Moore Lake project is being optioned from
JNR Resources Inc. IUC has an option to earn up to a 75% interest in
the property through aggregate expenditures and investments of Cdn $4.4
million (US$3.4 million) over a period of 4 years. The first year
expenditure requirement is Cdn $850,000 (US$657,000). In addition, IUC
has an option to acquire a 75% interest in the Lazy Edward Bay uranium
property, located west of Moore Lake, through expenditures of Cdn
$500,000 (US$386,000) over a period of two years.
On January 8, 2004, the Company signed a letter of intent to acquire a
75% interest in the Crawford lake uranium exploration project from
Phelps Dodge Corporation of Canada Limited. The property is located in
the Athabasca Basin of northern Saskatchewan. Upon completion of the
formal agreement and receipt of regulatory approvals, the Company will
be able to earn up to a 75% interest in the property through
expenditure of Cdn $2.5 million (US$1.9 million) over a four year
period. The first year expenditure requirement is Cdn $250,000
(US$193,000) of which Cdn $150,000 (US$116,000) is a firm commitment.
The exchange rate as at December 31, 2003 has been used in this note (1
Canadian dollar equals 0.77 US dollars)