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 July 18, 2006
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: July 18, 2006 By: /s/ Ron F. Hochstein
------------------------------------
Ron F. Hochstein, President and CEO
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
1 First Quarter Report for period ending December 31, 2005
Exhibit 1
(IUC LOGO)
INTERNATIONAL URANIUM CORPORATION
2006 FIRST QUARTER REPORT
THREE-MONTHS ENDED DECEMBER 31, 2005
REPORT TO SHAREHOLDERS
1ST QUARTER 2006
(U.S. DOLLARS)
During the first quarter ended December 31, 2005, International Uranium
Corporation ("IUC" or the "Company") completed two equity financings for gross
proceeds of $43.7 million (Cdn $51.6 million). The first financing was in
October, 2005 in which the Company issued 6.0 million common shares at a price
of Cdn $7.50 per share, and the second was in December, 2005 in which the
Company issued 850,000 flow-through common shares at a price of Cdn $7.75 per
share. These two financings will enable the Company to pursue its expanded
exploration programs in Canada and Mongolia, and recommence mining in the U.S.
once economic conditions meet the Company's criteria.
The uranium price has continued to rise and market activity in 2005 was at
record levels. As of December 31, 2005 the uranium spot price was $36.25 per
pound, an increase of $5.00 since the previous quarter, while the long term
price was also at $36.25 per pound. In 2005, 95 spot transactions were reported
totaling 29.5 million pounds of U(3)O(8), which is exactly a ten million pound,
or 50%, increase in volume over the activity reported in 2004. Much of last
year's activity occurred during the first six months (21.6 million pounds), with
monthly and quarterly records hitting the highs witnessed in the early 1990's.
Activity in the second half of the year (7.9 million pounds) dropped
dramatically, however, back to levels that have been seen over the past several
years. As of February 6, 2006, the spot market price was quoted at $37.50 per
pound, up $1.25 from quarter end, and the long-term price was $37.00 per pound.
Although the spot market has seen some limited activity in the past month and a
half, buyers appear hesitant to commit to purchases at these higher prices,
while sellers show little enthusiasm for dropping prices.
During the quarter, the Company recorded a net income of $130,677 ($0.00 per
share) as compared to a net loss of $708,625 ($0.01 per share) for the first
three months of fiscal 2005. The net income generated during the first quarter
of fiscal 2006 was primarily the result of income from a toll milling agreement
for the processing of uranium ore at the Company's White Mesa Mill.
In the Athabasca Basin region of Northern Saskatchewan, Canada, the Company
carried out a drilling program during the quarter on its Brown and Crawford Lake
projects, which are optioned from Phelps Dodge. This drilling program was
completed in January 2006, and the drill is currently relocating to the
Company's 100% owned Key Lake South project where a 2,100 meter drill program is
planned for the winter of 2006. Results from the Brown and Crawford Lake
drilling are still pending at this time. The Company also completed a number of
airborne geophysical surveys during the quarter, which included both fixed wing
and helicopter borne surveys. With respect to the Moore Lake property, the
Company commenced its winter drilling program in late January, 2006. This
program was delayed about ten days due to warm weather in northern Saskatchewan
which delayed the freezing of the lakes and the construction of winter roads.
The winter program will follow up on promising mineralization identified near
the end of last summer's program in the 525 and 527 Zones. In total, the
drilling program will test targets on eleven separate grids located in the
central and northern parts of the property.
The Company's 2005 exploration program in Mongolia was completed in October
2005, with the onset of winter. During the quarter, the Company reviewed the
2005 exploration results and is now preparing for a 65,000 meter drill program
on a number of targets, which is expected to commence in April 2006.
The Mill continues to operate, processing two alternate feed streams which
together contain over 500,000 pounds of U(3)O(8). These two streams will be
processed over the next 6 months, after which the Mill will process two
additional streams of alternate feed materials, which are also stockpiled at the
Mill. As of December 31, 2005, the Company has recovered approximately 47,000
pounds of uranium as yellowcake from this Mill run, which is being held as
inventory. In addition, the Company has filed a license amendment for another
alternate feed stream which the Company hopes to begin receiving during the
second quarter of fiscal 2006.
The Company's evaluation of its U.S. mining properties is ongoing. During the
quarter, the Company received an exploration permit for the Henry Mountains
Complex. Road access has been reestablished and the portals have been reopened.
This will enable the Company to go underground to evaluate the condition of the
workings and gather data for support of its application for a full mining and
operating permit. The Company is still working towards receiving this permit
within the next 12 to 14 months.
In November 2005 and January 2006, Fortress Minerals Corp. ("Fortress"), a
company in which the Company holds a 42% interest, released some encouraging
trench results from 390 channel samples on its Svetloye project located in
Eastern Russia. On the Elena target, highlights included Trench 11 that returned
130 meters grading 7.12 grams per tonne gold, including 7.3 meters at 56.8 g/t
gold and Trench 13 where samples graded 2.74 grams per tonne gold over a channel
width of 150 meters, including a 90 meter intercept at 4.05 g/t gold. Trench 5
East which returned 50.7 meters running 3.4 grams per tonne gold, including 12
meters at 11.9 g/t gold and Trench 4 where samples graded 14.5 grams per tonne
gold over a channel length of 23.2 meters, including a 15.3 meter intercept at
20.0 g/t gold. In addition, Fortress received partial results from the first
trench excavated at the Tamara Prospect, another of the seven targets identified
to date within the Svetloye Project, which is approximately 1.3 km to the
west-northwest from the Elena target. Samples from this trench (Trench 16)
returned 50.5 meters grading 3.9 g/t gold. Fortress has commenced construction
of a winter road to the Svetloye project in order to mobilize the drills to the
site for a 10,000 meter drill program. In addition to Fortress' program in
Russia, it is also pursuing a precious and base metals exploration program in
Mongolia. In January 2006 Fortress completed a financing in which it issued 4.0
million shares at a price of Cdn $1.25 per share. The Company participated in
this financing to maintain its interest at approximately 42%.
The Company is still very encouraged by the strong long-term fundamentals of the
uranium market. Activities in Saskatchewan, Mongolia and the United States are
continuing in order to develop the existing assets of the Company, and the
Company continues to expand its uranium exploration activities and aggressively
evaluate potential acquisition opportunities to add to its asset portfolio.
ON BEHALF OF THE BOARD,
-------------------------------------
(signed) Ron F. Hochstein,
President & CEO
February 13, 2006
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
INTRODUCTION
This Management's Discussion and Analysis ("MD&A") of International Uranium
Corporation and its subsidiary companies and joint ventures (collectively, the
"Company") for the three months ended December 31, 2005 provides a detailed
analysis of the Company's business and compares its financial results with those
of the same period from the previous year. This MD&A is dated as of February 13,
2006 and should be read in conjunction with the Company's unaudited interim
consolidated financial statements for the three months ended December 31, 2005
and the Company's audited consolidated financial statements and MD&A for the
fiscal year ended September 30, 2005. The financial statements are prepared in
accordance with generally accepted accounting principles in Canada. References
to "2006 Q1" and "2005 Q1" relate to the three months ended December 31, 2005
and 2004, respectively. All references to years such as "2006" or "2005" relate
to the fiscal years ended September 30 of those years.
Other continuous disclosure documents, including the Company's press releases,
quarterly and annual reports and Annual Report on Form 20-F, are available
through its filings with the securities regulatory authorities in Canada at
www.sedar.com and the United States Securities and Exchange Commission at
www.sec.gov.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this MD&A and elsewhere in the Company's 2005
Annual Report 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 and detailed under RISK FACTORS in the Company's Form 20-F.
Risk factors that could affect the Company's future results include, but are not
limited to, risks inherent in mineral exploration, mining and milling activities
and other operating and development risks, competition, environmental
regulations, changes to reclamation requirements, dependence on a limited number
of customers, volatility and sensitivity to market prices for uranium and
vanadium, milling recoveries, ability to attract and retain skilled employees,
the ability to find and retain qualified contractors, 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.
OVERVIEW
International Uranium Corporation is incorporated under the Business
Corporations Act (Ontario). The Company is engaged in uranium exploration in the
Athabasca Basin region of Saskatchewan, Canada and in Mongolia. The Company 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, at the Company's White Mesa Mill (the "Mill")
located near Blanding, Utah. The Company sells uranium recovered at the Mill
from alternate feed processing and conventional mine production, as well as any
vanadium and other metals produced as a co-product. In addition, the Company
owns several uranium and uranium/vanadium mines in the United States that have
been shut down since 1999, due to low commodity prices at the time.
Alternate feed materials, usually classified as waste products by the
processing facilities that generate these materials, contain uranium in
quantities or forms that that can be recovered at the Mill as an environmentally
preferable alternative to direct disposal. The Company continues to devote
resources to the development of the alternate feed business to help offset Mill
and mine standby costs.
From 1999 until late 2003, the Company's resources were focused primarily on
developing its alternate feed materials business and a precious and base metals
exploration program in Mongolia. From 2003 to 2005, uranium spot prices
increased significantly from $12.50 per pound of U(3)O(8) on September 30, 2003
to $36.25 per pound of U(3)O(8) by December 31, 2005. As a result of these
increases and improved market fundamentals, the Company acquired and staked
uranium exploration properties in the Athabasca Basin region of Saskatchewan,
Canada and commenced an exploration program on certain of those properties in
early 2004. The Company also resumed uranium exploration in Mongolia in late
2004.
The Company continues to expand its portfolio of uranium exploration properties
in Canada and Mongolia. In addition, the Company expanded its U.S. mining
portfolio in 2005 with the acquisition of the Tony M mine, as part of
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
the Henry Mountains Complex, and is evaluating the re-commencement of its U.S.
mining operations given increases in the market prices of uranium and vanadium.
During 2003, the Company entered into a joint venture with Nuclear Fuel
Services, Inc. ("NFS") for the pursuit of an alternate feed program for the
Mill. The joint venture is carried out through Urizon Recovery Systems, LLC
("Urizon"), a 50/50 joint venture company. In April 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 and its contractor in 2006 as to how DOE intends to proceed on the
disposition of the material, and that the joint venture will have an opportunity
to propose the Urizon Program to the DOE contractor 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.
During 2004, the Company sold its Mongolian precious and base metals exploration
properties to Fortress Minerals Corp. ("Fortress"), a company incorporated in
Canada and listed for trading on the TSX Venture Exchange. In exchange, the
Company received 28,000,000 common shares of Fortress, representing 63.14% of
the then issued and outstanding common shares of Fortress, and $656,580 in cash
for reimbursement of costs incurred on the exploration properties for the period
from the date of agreement to the actual transfer date. The net book value of
the assets and liabilities transferred was $3,088,201. At December 31, 2005, the
Company held 28,732,500 common shares of Fortress, representing 44.19% of the
issued and outstanding common shares of Fortress, and a share purchase warrant
to acquire an additional 366,250 common shares of Fortress at a price of Cdn
$0.60 per share until expiry on September 1, 2006. Refer to INVESTMENT IN
FORTRESS MINERALS CORP. for further details.
In January 2006, the Company participated in a private placement to purchase an
additional 500,000 common shares of Fortress at a price of Cdn $1.25 per share
for a total cost of Cdn $625,000 ($537,496). Immediately after the private
placement, the Company held 29,232,500 common shares of Fortress, representing a
42.33% ownership interest, and a share purchase warrant to acquire an additional
366,250 common shares of Fortress at a price of Cdn $0.60 per share until expiry
on September 1, 2006.
During 2005, the Company exercised its option to acquire a 75% interest in the
Moore Lake Property located in the Athabasca Basin of Saskatchewan. The Company
and JNR Resources Inc. ("JNR") are formalizing the terms of a 75/25 joint
venture agreement.
In February 2006, the Company exercised share purchase warrants to acquire a
further 900,000 common shares of a publicly-traded company at a cost of Cdn
$432,000 ($376,799). The market value of these securities was Cdn $2,295,000
($2,001,744) on the exercise date.
RESULTS OF OPERATIONS
GENERAL
The Company recorded net income of $130,677 ($0.00 per share) for 2006 Q1
compared with a net loss of $708,625 ($0.01 per share) for 2005 Q1.
Revenues totaled $730,921 for 2006 Q1 compared with $3,629 for 2005 Q1, an
increase of $727,292. Revenues were higher in 2006 Q1 primarily as a result of
$727,768 in process milling revenues. Expenses totaled $1,726,934 for 2006 Q1
compared with $1,448,934 for 2005 Q1, an increase of $278,000 due primarily to
an increase in process milling expenditures offset by a decrease in mill
stand-by expenditures and general and administrative expenses. Other income and
expenses totaled a net $1,126,690 for 2006 Q1 compared with $736,680 for 2005
Q1, an increase of $390,010 due primarily to an increase in net interest and
other income.
REVENUES
Revenues were $730,921 for 2006 Q1 compared with $3,629 for 2005 Q1, an increase
of $727,292. For 2006 Q1, revenues consisted primarily of process milling fees
of $727,768 (2005 Q1: $3,629) generated through a toll milling agreement. During
2006 Q1, the Company completed the first of two stages for the processing of
approximately 500 tons of ore and received a gross process milling fee of
$711,500 in total, less a consulting fee of $199,807, which is included in
process milling expenditures. Subsequent to December 31, 2005, the second, and
final, stage was completed and a further gross process milling fee of $662,499
was invoiced, less a consulting fee of $198,625
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
payable by the Company. Engineering service fees of $3,153 for 2006 Q1 (2005 Q1:
Nil) relate to services provided by the Company, on a cost plus basis, to a
related company reclaiming a mine site in the U.S.
The Company continues to hold approximately 65,000 pounds of vanadium in
inventory, as vanadium pregnant liquor, and is evaluating opportunities to sell
this inventory.
During 2006 Q1, the Company continued receipt of alternate feed materials from a
commercial metals producer. 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.
During 2006 Q1, alternate feed materials received totaled 250 tons (2005 Q1: 257
tons). The Company anticipates that receipt of alternate feed materials will be
at reduced levels until the third quarter of 2006 when a new alternate feed
source is expected to begin shipments to the Mill. At December 31, 2005,
approximately 46,200 tons of alternate feed materials remained in stockpile
waiting to be processed during the current mill run.
The Mill had been on stand-by since May 2003 and began processing its stockpile
of high-grade alternate feed materials on March 21, 2005. During 2005, the Mill
commenced processing 4,170 tons of this material with the uranium to be produced
in the first and second quarter of 2006. As of December 31, 2005, there were
approximately 4,300 tons of these high-grade materials at the Mill to be
processed, containing approximately 521,000 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. As of December 31, 2005, the Company has produced approximately 47,000
pounds of uranium from these materials. In view of the continued rise in
uranium prices expected by the Company, it currently does not have commercial
forward sales commitments for the projected uranium production and will
determine the most appropriate timing for its uranium sales.
PROCESS MILLING AND MILL STAND-BY EXPENDITURES
The Mill began processing high-grade alternate feed material on March 21, 2005.
Prior to this and for all of 2004, the Mill was on stand-by.
Process milling expenditures were $1,010,335 for 2006 Q1 compared with $3,629
for 2005 Q1, an increase of $1,006,706 as a result of the Mill startup and
operation on March 21, 2005. This increase includes the consulting fee of
$199,807 paid by the Company as disclosed above under REVENUES. Mill stand-by
expenditures were Nil for 2006 Q1 compared with $595,170 for 2005 Q1,
representing the expenditures of the Mill prior its startup and operation.
Both process milling and mill stand-by expenditures consist primarily of payroll
and related expenses for personnel, environmental programs, contract services
and other overhead expenditures required to operate the Mill or to maintain the
Mill on stand-by.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $716,599 for 2006 Q1 compared with
$804,722 for 2005 Q1, a decrease of $88,123. This decrease was primarily the
result of the inclusion of $238,498 of general and administrative expenses of
Fortress on a consolidated basis during 2005 Q1. General and administrative
expenses consist primarily of payroll and related expenses for personnel,
contract and professional services and other overhead expenditures.
STOCK-BASED COMPENSATION
Stock-based compensation expense was $146,013 for 2006 Q1, all of which is
included in capitalized mineral property expenditures, compared with Nil for
2005 Q1 as a result of stock options granted to employees of the Company during
2006 Q1. The weighted-average fair value per share under options granted was
$1.83 per share.
During 2005 Q1, the Company adopted amended accounting standards effective
October 1, 2004 requiring a fair value-based method of accounting for stock
options granted to employees, including directors, and to non-employees. This
amendment was adopted on a retroactive basis without restatement of prior
periods resulting in a cumulative adjustment of $773,655 to opening deficit
effective October 1, 2004. Prior to October 1, 2004, the application of the fair
value-method of accounting was limited to stock options granted to
non-employees.
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
OTHER INCOME AND EXPENSES
Other income and expenses totaled a net $1,126,690 for 2006 Q1 compared with
$736,680 for 2005 Q1, an increase of $390,010.
Net interest and other income were $496,814 for 2006 Q1 compared with $160,327
for 2005 Q1, an increase of $336,487 due primarily to an increase of $198,072
in interest income and the recognition of $118,710 in other income relating to
the termination of a joint venture agreement on a certain mineral property in
Utah. Interest income increased significantly as a result of two private
placements completed in 2006 Q1 providing the Company with net cash proceeds of
$42,241,851. Gain on foreign exchange was $599,835 for 2006 Q1 compared with
$542,543 for 2005 Q1, an increase of $57,292 due to the overall strengthening of
the Canadian dollar as compared to the U.S. dollar. As the Company's cash and
cash equivalents are held primarily in Canadian dollars, a continued
strengthening of the Canadian dollar as compared to the U.S. dollar would result
in additional gains on foreign exchange being recognized upon translation to
U.S. dollars for financial reporting purposes.
Dilution gain (loss) was $55,285 for 2006 Q1 compared with ($68,440) for 2005
Q1, an increase of $123,725, while minority interest recovery was Nil for 2006
Q1 compared with $57,212 for 2005 Q1. Dilution gain (loss) represents the
Company's proportionate share of the increase (decrease) in Fortress' net assets
resulting from the issuance of common shares by Fortress over the same period.
Minority interest represents the minority interest's proportionate share of
Fortress' loss for the period since acquisition. As an offset to these
increases, equity in the loss incurred by Fortress was $25,244 for 2006 Q1
compared to Nil for 2005 Q1 reflecting the application of the equity method to
account for the Company's investment in Fortress.
MINERAL PROPERTIES
GENERAL
Capitalized mineral property expenditures were $15,912,103 at December 31, 2005
compared with $13,412,885 at September 30, 2005, an increase of $2,499,218
during 2006 Q1 of which $1,700,969 was incurred in Canada, $172,086 was incurred
in the United States and $626,163 incurred in Mongolia. Capitalized mineral
property expenditures were $7,501,632 at December 31, 2004 compared with
$6,171,263 at September 30, 2004, an increase of $1,330,369 during 2005 Q1 of
which $900,600 was incurred in Canada and $429,769 incurred in Mongolia.
URANIUM EXPLORATION
During 2004, the Company acquired interests in and staked a number of uranium
exploration properties in the Athabasca Basin region of Saskatchewan, Canada and
commenced an exploration program on certain of those properties. The Company
continues to increase its land position in the Athabasca Basin region through
acquisitions and land staking.
Mineral property expenditures to December 31, 2005 were incurred primarily on
the Moore Lake Property, where the Company is undertaking an extensive drilling
program augmented by geophysical and geological field programs. During 2005, the
Company exercised its option to acquire a 75% interest in the Moore Lake
Property from JNR, subject to a 2.5% net smelter return royalty. Pursuant to the
exercise terms under the option agreement, the Company incurred a minimum Cdn
$4,000,000 in exploration expenditures and purchased common shares of JNR for
$317,458 (Cdn $400,000). The Company and JNR are formalizing the terms of a
75/25 joint venture agreement.
Capitalized mineral property expenditures on the Moore Lake Property were
$6,977,343 at December 31, 2005 (December 31, 2004: $2,279,718) compared with
$6,719,079 at September 30, 2005 (September 30, 2004: $1,779,392), an increase
of $258,264 during 2006 Q1 (2005 Q1: $500,326) as a result of drilling and
geological field programs. The remainder of the Canadian-based capitalized
mineral property expenditures relate to other projects in the Athabasca Basin
region, for a total of $4,040,665 at December 31, 2005 (December 31, 2004:
$930,061) compared with $2,597,960 at September 30, 2005 (September 30, 2004:
$529,786), an increase of $1,442,705 during 2006 Q1 (2005 Q1: $400,275) as a
result of land staking costs, airborne geophysical and drilling programs.
The Company 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%. During 2004, with
continued upward pressure on uranium prices, 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.
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
Capitalized mineral property expenditures on the Gurvan Saihan Joint Venture
were $1,425,181 at December 31, 2005 (December 31, 2004: $76,599) compared with
$983,904 at September 30, 2005 (September 30, 2004: $35,198), an increase of
$441,277 during 2006 Q1 (2005 Q1: $41,401) as a result of the acquisition and
maintenance of licenses, drilling, auto gamma surveys and field reconnaissance
programs.
The Company also conducts uranium exploration, 100% for the Company's account,
through a Mongolian subsidiary. Capitalized mineral property expenditures under
this entity were $322,158 at December 31, 2005 (December 31, 2004: $67,348)
compared with $238,596 at September 30, 2005 (September 30, 2004: $17,878), an
increase of $83,562 during 2006 Q1 (2005 Q1: $49,470) as a result of the
acquisition and maintenance of licenses and field reconnaissance programs.
During 2005, the Company entered into an agreement with Erdene Gold Inc.
("Erdene") to acquire a 65% interest in Erdene's Mongolian uranium properties in
consideration for expenditures of Cdn $6 million over a four-year period. In
addition, the Company purchased, by way of private placement, one million common
shares of Erdene at a price of Cdn $1.00 per share. Capitalized mineral property
expenditures on this property were $512,598 at December 31, 2005 (December 31,
2004: Nil) compared with $411,274 at September 30, 2005 (September 30, 2004:
Nil), an increase of $101,324 during 2006 Q1 (2005 Q1: Nil) as a result of the
acquisition and maintenance of licenses, drilling, auto gamma surveys and field
reconnaissance programs.
During 2006 Q1, the Company acquired an option to earn a 51% interest in the
Huard-Kirsch Lakes Property located in the eastern part of the Athabasca Basin,
Saskatchewan. The Company is required to pay Cdn $25,000 in cash and incur Cdn
$1.5 million in exploration expenditures on or before September 21, 2008. During
2006 Q1, the Company and JNR Resources Inc. formed a 60/40 joint venture to
explore a number of claims located in the Bell Lake area of northern
Saskatchewan. These claims are subject to a 2% net smelter returns royalty.
URANIUM DEVELOPMENT
During 2005, the Company was successful in a competitive bid for a state lease
in southeastern Utah. The Company paid an initial cash payment of $1 million and
annual advance minimum royalty and rental payments of $60,013. This property is
adjoined by a number of privately-held, unpatented mining claims acquired by the
Company that together comprise the Tony M Mine. These private claims were
acquired for $200,000 in cash payments and 250,000 common shares of the Company,
of which 147,000 common shares were issued at a value of $906,722. The remainder
of the shares will be issued subject to confirmation of certain title matters.
The Tony M Mine adjoins the Company's existing Bullfrog exploration property,
which together are now referred to as the "Henry Mountains Complex". During
2005, the Company announced initiation of permitting for mining of the Henry
Mountains Complex.
Capitalized mineral property expenditures were $2,634,158 at December 31, 2005
(December 31, 2004: Nil) compared with $2,462,072 at September 30, 2005
(September 30, 2004: Nil), an increase of $172,086 during 2006 Q1 (2005 Q1: Nil)
as a result of development expenditures incurred on the Colorado Plateau.
INVESTMENT IN FORTRESS MINERALS CORP.
On June 23, 2004, the Company sold its Mongolian precious and base metals
exploration properties to Fortress Minerals Corp. ("Fortress"), a company
incorporated in Canada and listed for trading on the TSX Venture Exchange. In
exchange, the Company received 28,000,000 common shares of Fortress,
representing 63.14% of the then issued and outstanding common shares of
Fortress, and $656,580 in cash for reimbursement of costs incurred on the
exploration properties for the period from the date of agreement to the actual
transfer date. The net book value of the assets and liabilities transferred by
the Company was $3,088,201. No gain or loss was recognized on the transaction.
On September 1, 2004, Fortress completed a private placement of 4,987,500 units
at a price of Cdn $0.40 per unit of which the Company purchased 732,500 units
at a total cost of $220,069 (Cdn $293,000). Each unit consisted of one common
share and one-half of one share purchase warrant, each whole warrant entitling
the Company to purchase an additional common share at a price of Cdn $0.50 until
September 1, 2005 and thereafter at a price of Cdn $0.60 until expiry on
September 1, 2006. The Company's percentage ownership in Fortress decreased from
63.14% to 58.24% as a result of this private placement. At September 30, 2004,
the Company had an ownership interest in Fortress of 58.24% and was deemed to
have control. Accordingly, the Company's consolidated balance sheet and results
of operations for 2004 include the accounts of Fortress on a consolidated basis
with recognition of the minority interests' share of net assets and results of
operations.
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
On April 30, 2005, as a result of Fortress issuing additional common shares to
third parties, the Company's ownership interest in Fortress was diluted to
below 50% at which point the Company applied the equity method to account for
its investment in Fortress.
At December 31, 2005 and September 30, 2005, the Company held 28,732,500 common
shares of Fortress, representing 44.19% and 44.39%, respectively, of the then
issued and outstanding common shares of Fortress, and a share purchase warrant
to acquire an additional 366,250 common shares of Fortress at a price of Cdn
$0.60 per share until expiry on September 1, 2006. During 2006 Q1, the Company
continued to apply the equity method to account for the Company's investment in
Fortress.
In January 2006, the Company participated in a private placement to purchase an
additional 500,000 common shares of Fortress at a price of Cdn $1.25 per share
for a total cost of Cdn $625,000 ($537,496). Immediately after the private
placement, the Company held 29,232,500 common shares of Fortress, representing a
42.33% ownership interest, and a share purchase warrant to acquire an additional
366,250 common shares of Fortress at a price of Cdn $0.60 per share until expiry
on September 1, 2006.
SUMMARY OF QUARTERLY FINANCIAL RESULTS
2006 2005 2005 2005
Q1 Q4 Q3 Q2
--------- ----------- -------- --------
Total revenues $ 730,921 $ 80,337 $ 46,509 $ 341
Net income (loss) 130,677 (2,405,150) 449,193 292,394
Basic and diluted earnings (loss) per share 0.00 (0.03) 0.01 0.00
2005 2004 2004 2004
Q1 Q4 Q3 (1) Q2
--------- -------- ----------- ----------
Total revenues $ 3,629 $389,194 $ -- $1,644,638
Net income (loss) (708,625) 632,242 (1,197,908) (455,458)
Basic and diluted earnings (loss) per share (0.01) 0.01 (0.02) (0.01)
(1) In preparing the 2004 consolidated financial statements, the Company
determined that the transfer of mineral properties to Fortress should be
accounted for at book value. In the interim consolidated financial
statements for the 2004 third quarter report, the Company had incorrectly
recorded a loss of $478,839 as a result of this transaction. The summary
table above reflects the corrected net loss for the 2004 third quarter.
Refer to RESULTS OF OPERATIONS above for disclosure of 2006 Q1 changes.
Variations in the results of operations for each of the quarters of 2005 are
primarily the result of changes in expense and other income/expense items.
Results for 2005 Q1 include gain on foreign exchange of $542,543. Results for
2005 Q2 include stock-based compensation of $277,831 and write-down of mineral
property of $1,869,790, offset by gain on sale of short-term investments of
$2,893,377 and minority interest of $793,372. Results for 2005 Q3 include
stock-based compensation of $657,259 and equity in loss in Fortress of $122,087,
offset by dilution gain of $1,860,784. Results for 2005 Q4 include process
milling expenditures of $1,431,516 and equity in loss in Fortress of $556,866.
Variations in the results of operations for the last three quarters of 2004 are
due to a number of factors. Results for 2004 Q2 include vanadium cost of sales
of $696,905 and loss on foreign exchange of $112,734. Results for 2004 Q3
include loss on foreign exchange of $122,831. Results for 2004 Q4 include
dilution gain of $548,549 and minority interest of $94,327.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $43,919,351 at December 31, 2005 compared with
$6,111,119 at September 30, 2005, an increase of $37,808,232 during 2006 Q1.
This increase was due primarily to net cash proceeds of $42,241,851 received
from the issuance of common shares through private placements, offset by mineral
property expenditures of $2,346,205 and net cash used in operating activities of
$1,357,510.
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
Working capital was $43,734,551 at December 31, 2005 compared with $4,244,274 at
September 30, 2005, an increase of $39,490,277 during 2006 Q1. This increase was
due primarily to the $37,808,232 increase in cash and cash equivalents discussed
above.
Net cash used in operating activities was $1,357,510 during 2006 Q1 compared
with net cash provided by operating activities of $285,763 during 2005 Q1, for a
$1,643,273 increase in net cash used in operating activities. Net funds provided
by (used in) operating activities are comprised of net loss for the period,
adjusted for non-cash items and for changes in working capital items.
Significant changes in working capital items during 2006 Q1 include an increase
of $230,262 (2005 Q1: $1,363,961 decrease) in trade and other receivables, an
increase of $855,118 (2005 Q1: $73,615) in inventories and a decrease of
$531,242 (2005 Q1: $517,240) in accounts payable and accrued liabilities. The
increase in trade and other receivables during 2006 Q1 is primarily the result
of an increase of $108,873 in goods and services tax receivable and the
recognition of $118,710 in other income receivable relating to the termination
of a joint venture agreement on certain mineral property in Utah. The increase
in inventories during 2006 Q1 consists of process milling costs of $855,118
relating to the alternate feed material processing.
Net cash used in investment activities was $3,102,513 during 2006 Q1 compared
with $1,585,962 during 2005 Q1, an increase of $1,516,551. This increase was due
primarily to mineral property expenditures of $2,346,205 (2005 Q1: $1,330,369),
the purchase of portfolio investments of $257,069 (2005 Q1: $122,915) and the
purchase of plant and equipment of $376,855 (2005 Q1: $63,863). During 2006 Q1,
restricted investments increased by $122,384 (2005 Q1: $113,853) as a result of
interest income.
Net cash provided by financing activities was $42,268,255 during 2006 Q1
compared with $123,661 during 2005 Q1, an increase of $42,144,594. During 2006
Q1, the Company completed two significant equity financings for total gross
proceeds of Cdn $51,587,500 ($43,702,776). On October 14, 2005, the Company
completed a private placement of 6,000,000 common shares at a price of Cdn $7.50
per share for gross proceeds of Cdn $45,000,000 ($38,010,648). On December 5,
2005, the Company completed a private placement of 850,000 flow-through common
shares at a price of Cdn $7.75 per share for gross proceeds of Cdn $6,587,500
($5,692,128) which funds are restricted to eligible Canadian exploration
expenditures. Net proceeds from these private placement financings totaling
$42,241,851.
In total, these sources and uses of cash resulted in a net cash inflow of
$37,808,232 during 2006 Q1 compared with a net cash outflow of $1,176,538 during
2005 Q1.
The Company's existing cash and cash equivalents balance and, to a lesser
degree, its expected cash flow from its 2006 operations are sufficient to
satisfy its anticipated working capital requirements, capital expenditure
requirements and planned exploration programs for at least the next twelve
months. Additional funding through issuance of common shares may be required to
fund corporate opportunities.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
TRANSACTIONS WITH RELATED PARTIES
During 2006 Q1, the Company incurred legal fees of $23,136 (2005 Q1: $8,619)
with a law firm of which a partner is a director of the Company.
During 2006 Q1, the Company incurred management and administrative service fees
of $46,201 (2005 Q1: $26,288) with a company owned by the Chairman of the
Company which provides investor relations, office premises, secretarial and
other services in Vancouver at a rate of Cdn $18,000 per month plus expenses.
At December 31, 2005, an amount of Nil (September 30, 2005: $70,238) was due to
this company.
During 2006 Q1, the Company provided mine reclamation management and engineering
support services of $3,153 (2005 Q1: Nil) on a cost plus basis to a company with
common directors. At December 31, 2005, an amount of $3,153 (September 30, 2005:
$80,337) was due from this company.
During 2006 Q1, the Company entered into an agreement with Fortress to provide
executive and administrative services and charged an aggregate $21,915 (2005 Q1:
Nil) for such services. At December 31, 2005, an amount of $23,530 (September
30, 2005: $28,696) was due from Fortress relating to this agreement.
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
OUTSTANDING SHARE DATA
At February 13, 2006 and December 31, 2005, there were 88,419,066 common shares
issued and outstanding and stock options outstanding to purchase a total of
1,943,000 common shares, for a total of 90,362,066 common shares on a
fully-diluted basis.
CRITICAL ACCOUNTING ESTIMATES
The Company's significant accounting policies are summarized in Note 2 of the
audited consolidated financial statements of the Company for the fiscal year
ended September 30, 2005. The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting principles
in Canada requires management to make judgments with respect to certain
estimates and assumptions. These estimates and assumptions, based on
management's best judgment, affect the reported amounts of certain assets and
liabilities, including disclosure of contingent liabilities. On an ongoing
basis, management re-evaluates its estimates and assumptions. Actual amounts,
however, could differ significantly from those based on such estimates and
assumptions.
Significant areas critical in understanding the judgments that are involved in
the preparation of the Company's consolidated financial statements and the
uncertainties inherent within them include the determination of impairment of
long-lived assets, assets retirement obligations and stock-based compensation.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company's long-lived assets consist of plant and equipment, mineral
properties and intangible asset. These assets are recorded at cost and, as to
plant and equipment and intangible asset, depreciated on a straight-line basis
over their estimated useful lives of three to fifteen years. Expenditures
relating to mineral properties are capitalized at cost, less recoveries in the
pre-production stage, until such time these properties are put into commercial
production, sold or abandoned. Upon commencement of production, capitalized
mineral property expenditures will be charged to the results of operations over
the estimated life of the mine in accordance with the unit-of-production method.
At the end of each accounting period, the Company reviews the carrying value of
its long-lived assets based on a number of factors. For capitalized mineral
property expenditures, these factors include analysis of exploration results,
permitting considerations and current economics. Should an impairment be
determined, the Company would write-down the recorded value of the long-lived
asset to the results of operations.
ASSET RETIREMENT OBLIGATIONS
The Company's asset retirement obligations consist of estimated future
decommissioning and reclamation costs of the Mill and U.S. mining properties,
and have been determined based on engineering estimates of the costs of
reclamation, in accordance with and reviewed periodically by state regulatory
requirements. In the case of the Mill, the cost estimates are reviewed annually
by the State of Utah Department of Environmental Quality, and adjusted by the
Company to reflect the estimated costs of reclamation.
Applicable regulations require the Company to estimate reclamation costs on an
undiscounted basis under the assumption that the reclamation would be performed
at any time by a third party contractor. Management estimates that, once a
decision is made to commence reclamation activities, substantially all of the
reclamation activities could be completed in approximately 24-30 months. Since
September 30, 2004, the Mill's reclamation estimate and bonding requirement
increased from $10,618,895 to $10,950,180. The reclamation cost estimate for the
Company's mining properties increased by $7,000 from $1,984,700 to $1,991,700.
The mine bonding requirements also increased by $482,502 to $1,499,260 during
2005. Elements of uncertainty in estimating decommissioning and reclamation
costs include potential changes in regulatory requirements, decommissioning and
reclamation alternatives. Actual costs may be significantly different from those
estimated.
The Company has posted bonds (collateralized by cash and cash equivalents and
fixed income securities) in favor of the State of Utah and the applicable state
regulatory agencies in Colorado and Arizona as partial collateral for these
liabilities and has deposited fixed income securities on account of these
obligations.
STOCK-BASED COMPENSATION
Effective October 1, 2004, the Company retroactively adopted, without
restatement, the amended standards of CICA Handbook Section 3870: Stock-Based
Compensation and Other Stock-Based Payments ("Section 3870") which established
standards for the recognition, measurement and disclosure of stock-based
compensation and other
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
stock-based payments made in exchange for goods and services. Section 3870
requires a fair value-based method of accounting for stock options granted to
employees, including directors, and to non-employees.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model. This model requires the calculation of
certain variables, including the volatility of the Company's stock price,
requiring various estimates and assumptions be made by management. Actual
results may be significantly different from those calculated using this model.
Prior to October 1, 2004, the application of the fair value-method of accounting
was limited to stock options granted to non-employees. The intrinsic value-based
method of accounting was applied to stock options granted to employees which did
not result in additional stock-based compensation expense as the exercise price
was equal to the market price on the grant date. Pro forma disclosure of net
income (loss) and earnings (loss) per share had the fair value-method been
applied to stock options granted to employees is required.
The Company adopted the amendments to Section 3870 on a retroactive basis
without restatement of prior periods. As a result, a cumulative adjustment of
$773,655 to opening deficit effective October 1, 2004 has been reported
separately on the consolidated statements of deficit. This adjustment represents
the fair value of stock options granted to employees of $737,904 during 2004 and
$35,751 during 2003.
CHANGES IN ACCOUNTING POLICIES
In January 2005, the CICA issued the following new accounting standards,
effective October 1, 2006:
a) CICA Handbook Section 1530: "Comprehensive Income" establishes standards
for reporting comprehensive income, defined as a change in value of net
assets that is not due to owner activities, by introducing a new
requirement to temporarily present certain gains and losses outside of net
income. The adoption of this new standard by the Company is not expected to
have a material impact;
b) CICA Handbook Section 3251: "Equity" establishes standards for the
presentation of equity and changes in equity during the reporting period.
The adoption of this new standard by the Company is not expected to have a
material impact; and
c) CICA Handbook Section 3855: "Financial Instruments - Recognition and
Measurement" establishes standards for the recognition, classification and
measurement of financial instruments including the presentation of any
resulting gains and losses. Assets classified as available-for-sale
securities will have revaluation gains and losses included in other
comprehensive income until these assets are no longer included on the
balance sheet. At September 30, 2005, the Company had certain long-term
investments that would be classified as available-for-sale securities under
this new standard, and any unrealized gains and losses would be included in
comprehensive income.
CONTRACTUAL OBLIGATIONS
At December 31, 2005, the Company has a reclamation obligation of $12,941,880,
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 addition, the Company's contractual obligations at December 31, 2005 are as
follows:
Less Than After
Total One Year 1-3 Years 4-5 Years 5 Years
-------- --------- --------- --------- -------
Operating lease obligations $335,501 $93,683 $220,224 $21,594 $--
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 December 31, 2005 are $12,941,880, 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.
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
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 December 31, 2005 and September 30, 2005, the amount of these
restricted investments collateralizing the Company's reclamation obligations was
$13,004,356 and $12,881,972, respectively. The increase of $122,384 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 formal research and development program. 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 shut down 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.
Since then, commodity prices have improved dramatically. During 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 February 6, 2006, the uranium spot price had
increased to $37.50 per pound. The uranium market fundamentals are strong and
most analysts do not forecast any weakening of uranium prices over the next 3 to
5 years. As a result of the increase in uranium price, the Company acquired and
staked uranium exploration properties in Canada in 2004 and has commenced an
aggressive exploration program on certain of those properties, as well as
restarted its uranium exploration program in Mongolia. Vanadium prices have also
increased throughout the past 24 months and are currently trading in the range
of $9.00 to $11.00 per pound V(2)O(5), off from their peak of $25.00 to $30.00
per pound reached earlier in 2005. Historical vanadium prices range from $1.20
to $6.00 per pound V (2)O(5). As a result of the increases in both uranium and
vanadium prices, the Company is currently evaluating re-commencing mining
activities in the U.S. and has begun processing a high-grade uranium alternate
feed material at the Mill. In addition, the Company continues to evaluate
opportunities to expand its existing asset portfolio.
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 4A, at an estimated cost of $1.5 - $3.0
million. In addition, if Cell 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 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 2006
The Mill is expected to produce approximately 500,000 pounds of U(3)O(8) from
the processing of a high-grade alternate feed material. The current mill run
began in March 2005 and is anticipated to last through the end of 2006. The
Company does not have any fixed contracts for this material and will evaluate
commercial opportunities for sale of the material throughout the year.
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
The Company continues to evaluate the restart of its U.S. mining operations.
Increases in projected operating costs have delayed the restart. However, if
uranium prices continue to improve as expected, the Company anticipates
reopening its U.S. mining operations in 2006 or 2007.
The Company's exploration programs will continue to expand through 2006, both in
Canada and Mongolia. Winter drilling programs are underway on three projects:
Key Lake South, Crawford Lake and Moore Lake. The Company is also interpreting
the results of over 17,000 line km of airborne geophysics that were flown in the
first quarter of 2006 which will be followed up with summer field geophysical
programs and potentially additional drill programs. With the success of the 2005
drilling program at Moore Lake, the Company and its joint venture partner, JNR,
will begin environmental baseline monitoring in 2006 in preparation of future
project development activities.
In Mongolia, the Company will expand its exploration programs on its Joint
Venture properties and its 100% owned and Erdene optioned properties. Given the
improvement in uranium prices, and with prices projected to increase further
into at least early 2006, the Company will begin re-evaluation at the Gurvan
Saihan Joint Venture's Hairhan uranium deposit.
At the present time the Company is well financed for its planned 2006 programs
and will continue to aggressively evaluate acquisition and growth opportunities.
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.
The Company is required to comply with environmental protection laws and
regulations and permitting requirements, and anticipates that it will be
required to continue to do so in the future. Although the Company believes that
its operations are in compliance, in all material respects, with all relevant
permits, licenses and regulations involving worker health and safety as well as
the environment, the historical trend toward stricter environmental regulation
may continue. The uranium industry is subject to not only the worker health and
safety and environmental risks associated with all mining businesses, but also
to additional risks uniquely associated with uranium mining and milling. The
possibility of more stringent regulations exists in the area of worker health
and safety, the disposition of wastes, the decommissioning and reclamation of
mining and milling sites, and other environmental matters, each of which could
have a material adverse effect on the costs of reclamation or the viability of
the operations.
INTERNATIONAL URANIUM CORPORATION
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
December 31, September 30,
2005 2005
------------ -------------
ASSETS
CURRENT
Cash and cash equivalents $ 43,919,351 $ 6,111,119
Trade and other receivables 796,251 565,989
Inventories 4,178,763 3,323,645
Prepaid expenses and other 257,531 125,204
------------ ------------
49,151,896 10,125,957
Long-term investments (Notes 2 & 3) 5,225,165 4,938,055
Plant and equipment, net 3,376,944 3,217,702
Mineral properties (Note 4) 15,912,103 13,412,885
Intangible asset, net 609,375 625,000
Restricted investments (Note 5) 13,004,356 12,881,972
------------ ------------
$ 87,279,839 $ 45,201,571
============ ============
LIABILITIES
CURRENT
Accounts payable and accrued
liabilities $ 1,561,237 $ 2,092,479
Notes payable 25,896 16,557
Deferred revenue 3,830,212 3,772,647
------------ ------------
5,417,345 5,881,683
Notes payable, net of current portion 36,081 19,016
Reclamation obligations (Note 6) 12,941,880 12,934,880
Future income tax liability 1,460,897 1,460,897
Other long-term liability 99,593 99,593
------------ ------------
19,955,796 20,396,069
------------ ------------
SHAREHOLDERS' EQUITY
Share capital (Note 8)
Authorized: Unlimited number
of common shares without par value
Issued and outstanding: 88,419,066
shares (September 30, 2005:
81,569,066 shares) 98,387,635 56,145,784
Contributed surplus (Notes 9 and 10) 1,949,290 1,803,277
Deficit (33,012,882) (33,143,559)
------------ ------------
67,324,043 24,805,502
------------ ------------
$ 87,279,839 $ 45,201,571
============ ============
Commitments and contingencies (Note 13)
Subsequent events (Note 14)
ON BEHALF OF THE BOARD OF DIRECTORS:
/s/ Ron F. Hochstein /s/ William A. Rand
------------------------------------- ----------------------------------------
Ron F. Hochstein William A. Rand
See accompanying notes to the consolidated financial statements
INTERNATIONAL URANIUM CORPORATION
Consolidated Statements of Operations
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
Three Months Ended
December 31,
-------------------------
2005 2004
----------- -----------
REVENUES
Process milling $ 727,768 $ 3,629
Engineering services (Note 7) 3,153 --
----------- -----------
730,921 3,629
----------- -----------
EXPENSES
Process milling expenditures 1,010,335 3,629
Mill stand-by expenditures -- 595,170
General exploration -- 45,413
General and administrative 716,599 804,722
----------- -----------
1,726,934 1,448,934
----------- -----------
Loss from operations (996,013) (1,445,305)
Net interest and other income 496,814 160,327
Gain on foreign exchange 599,835 542,543
Gain on sale of land and equipment -- 45,038
Equity in loss of Fortress Minerals Corp. (25,244) --
Dilution gain (loss) 55,285 (68,440)
Minority interest -- 57,212
----------- -----------
Net income (loss) for the period $ 130,677 $ (708,625)
=========== ===========
Earnings (loss) per share:
Basic $ 0.00 $ (0.01)
Diluted $ 0.00 $ (0.01)
=========== ===========
Weighted-average number of shares outstanding:
Basic 80,575,343 79,681,440
Diluted 81,763,224 79,681,440
=========== ===========
See accompanying notes to the consolidated financial statements
INTERNATIONAL URANIUM CORPORATION
Consolidated Statements of Deficit
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
Three Months Ended
December 31,
---------------------------
2005 2004
------------ ------------
Deficit, beginning of period as previously reported $(33,143,559) $(29,997,716)
Retroactive effect of change in accounting policy
for stock-based compensation (Note 9) -- (773,655)
------------ ------------
Deficit, beginning of period as restated (33,143,559) (30,771,371)
Net income (loss) for the period 130,677 (708,625)
------------ ------------
Deficit, end of period $(33,012,882) $(31,479,996)
============ ============
See accompanying notes to the consolidated financial statements
INTERNATIONAL URANIUM CORPORATION
Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
Three Months Ended
December 31,
-------------------------
2005 2004
----------- -----------
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss) for the period $ 130,677 $ (708,625)
Items not affecting cash:
Amortization 217,613 15,625
Depreciation 15,625 117,444
Gain on sale of land and equipment -- (45,038)
Equity in loss of Fortress Minerals Corp. 25,244 --
Dilution loss (gain) (55,285) 68,440
Minority interest -- (57,212)
Changes in non-cash working capital items:
Decrease (increase) in trade and other receivables (230,262) 1,363,961
Increase in inventories (855,118) (73,615)
Decrease (increase) in other current assets (132,327) 99,914
Decrease in accounts payable and accrued liabilities (531,242) (517,240)
Increase in deferred revenue 57,565 22,109
----------- -----------
Net cash provided by (used in) operating activities (1,357,510) 285,763
----------- -----------
INVESTING ACTIVITIES
Purchase of portfolio investments (257,069) (122,915)
Purchase of plant and equipment (376,855) (63,863)
Proceeds from sale of surplus land and equipment -- 45,038
Expenditures on mineral properties (2,346,205) (1,330,369)
Increase in restricted investments (122,384) (113,853)
----------- -----------
Net cash used in investing activities (3,102,513) (1,585,962)
----------- -----------
FINANCING ACTIVITIES
Increase (decrease) in notes payable 26,404 (3,773)
Issuance of common shares for:
Private placements 42,241,851 --
Exercise of stock options -- 97,827
Fortress Minerals Corp. private placement -- 29,607
----------- -----------
Net cash provided by financing activities 42,268,255 123,661
----------- -----------
Net increase (decrease) in cash and cash equivalents 37,808,232 (1,176,538)
Cash and cash equivalents, beginning of period 6,111,119 12,044,955
----------- -----------
Cash and cash equivalents, end of period $43,919,351 $10,868,417
=========== ===========
Supplemental cash flow information (Note 12)
See accompanying notes to the consolidated financial statements
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
1. BASIS OF PRESENTATION
These unaudited interim consolidated financial statements of International
Uranium Corporation and its subsidiary companies and joint ventures
(collectively, the "Company") have been prepared in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP") for
interim financial statements. As a result, they do not conform in all
respects with the disclosure requirements for annual financial statements
under Canadian GAAP, and should be read in conjunction with the Company's
audited consolidated financial statements for the fiscal year ended
September 30, 2005. References to "2006 Q1" and "2005 Q1" relate to the
three months ended December 31, 2005 and 2004, respectively.
All material adjustments which, in the opinion of management, are necessary
for a fair presentation of the results of the interim periods have been
reflected. The results for 2006 Q1 have been stated utilizing the same
accounting policies and methods of application as the Company's audited
consolidated financial statements for the fiscal year ended September 30,
2005.
2. LONG-TERM INVESTMENTS
December 31, September 30,
2005 2005
------------ -------------
Portfolio investments $2,408,668 $2,151,599
Investment in Fortress Minerals Corp. (Note 3) 2,816,497 2,786,456
---------- ----------
$5,225,165 $4,938,055
========== ==========
At December 31, 2005, portfolio investments consist of common shares of
four publicly-traded companies acquired by the Company at a cost of
$2,408,668 (September 30, 2005: $2,151,599), with an aggregate market value
of $8,487,827 (September 30, 2005: $7,105,564). During 2006 Q1, the Company
acquired additional equity interests at a cost of $257,069 through the
exercise of share purchase warrants. At December 31, 2005, the Company
held share purchase warrants to acquire additional equity interests in two
of these companies for a total cost of $544,918.
3. INVESTMENT IN FORTRESS MINERALS CORP.
During the fiscal year ended September 30, 2004, the Company sold its
Mongolian precious and base metals exploration properties to Fortress
Minerals Corp. ("Fortress") and received 28,000,000 common shares of
Fortress, representing 63.14% of the then issued and outstanding common
shares of Fortress, and $656,580 in cash for reimbursement of costs
incurred on the exploration properties for the period from the date of
agreement to the actual transfer date. The net book value of the assets and
liabilities transferred was $3,088,201. During that same year, the Company
acquired through a private placement a further 732,500 units of Fortress,
each unit consisting of one common share and one-half of one share purchase
warrant, at a price of Cdn $0.40 per unit for a total cost of $220,069 (Cdn
$293,000).
At September 30, 2004, the Company exercised control over Fortress through
an ownership interest that exceeded 50%. Accordingly, the Company's
consolidated balance sheet and results of operations for the fiscal year
ended September 30, 2004 include the accounts of Fortress on a consolidated
basis with recognition of the minority interests' share of net assets and
results of operations.
During the year ended September 30, 2005, as a result of Fortress issuing
additional common shares to third parties, the Company's ownership
interest in Fortress was diluted to below 50% at which point the Company
began to apply the equity method to account for the Company's investment in
Fortress.
At December 31, 2005 and September 30, 2005, the Company held 28,732,500
common shares of Fortress, representing 44.19% and 44.39%, respectively, of
the then issued and outstanding common shares of Fortress, and a share
purchase warrant to acquire an additional 366,250 common shares of Fortress
at a price of Cdn $0.60 per share until expiry on September 1, 2006. During
2006 Q1, the Company continued to apply the equity method to account for
the Company's investment in Fortress.
Refer to Note 14
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
4. MINERAL PROPERTIES
At December 31, 2005 and September 30, 2005, mineral properties are
comprised of exploration properties located in Canada and Mongolia, and
uranium/vanadium mines on standby in the United States. Capitalized
mineral property costs relating to the U.S. mines, shut down in 1999, were
written-off and charged to the results of operations during that year. The
Company's mineral property interests are held directly or through option
agreements, and a significant portion are subject to or pending joint
venture arrangements. A summary of mineral properties expenditures is
presented below:
Three Months Ended December 31, 2005
----------------------------------------
Beginning Ending
Balance Expenditures Balance
----------- ------------ -----------
Canadian uranium properties:
Moore Lake $ 6,719,079 $ 258,264 $ 6,977,343
Other 2,597,960 1,442,705 4,040,665
Mongolian uranium properties:
Gurvan Saihan Joint Venture 983,904 441,277 1,425,181
Other 649,870 184,886 834,756
U.S. uranium /vanadium mines on standby 2,462,072 172,086 2,634,158
----------- ---------- -----------
$13,412,885 $2,499,218 $15,912,103
=========== ========== ===========
Year Ended September 30, 2005
----------------------------------------
Beginning Ending
Balance Expenditures Balance
---------- ------------ -----------
Canadian uranium properties:
Moore Lake $1,779,392 $ 4,939,687 $ 6,719,079
Other 529,786 2,068,174 2,597,960
Mongolian uranium properties:
Gurvan Saihan Joint Venture 35,198 948,706 983,904
Other 17,878 631,992 649,870
U.S. uranium /vanadium mines on standby -- 2,462,072 2,462,072
Mongolian precious/base metal properties (Note 3) 3,809,009 (3,809,009)(1) --
---------- ----------- -----------
$6,171,263 $ 7,241,622 $13,412,885
========== =========== ===========
(1) At September 30, 2005, the accounts of Fortress were no longer reported on
a consolidated basis; therefore, its Mongolian precious/base metal
properties were excluded from mineral properties as reported on the
Company's consolidated balance sheet.
During 2006 Q1, the Company acquired an option to earn a 51% interest in
the Huard-Kirsch Lakes Property located in the eastern part of the
Athabasca Basin, Saskatchewan. The Company is required to pay Cdn $25,000
in cash and incur Cdn $1.5 million in exploration expenditures on or before
September 21, 2008. During 2006 Q1, the Company and JNR Resources Inc.
formed a 60/40 joint venture to explore a number of claims located in the
Bell Lake area of northern Saskatchewan. These claims are subject to a 2%
net smelter returns royalty.
5. RESTRICTED INVESTMENTS
The Company has cash and cash equivalents and fixed-income securities on
deposit to collateralize its reclamation and certain other obligations
(Note 6).
December 31, September 30,
2005 2005
------------ -------------
Cash and cash equivalents $ 2,642,290 $ 2,573,336
Fixed income securities 10,362,066 10,308,636
----------- -----------
$13,004,356 $12,881,972
=========== ===========
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
6. RECLAMATION OBLIGATIONS
The Company's asset retirement obligations consist of estimated future
decommissioning and reclamation costs of the Company's White Mesa Mill (the
"Mill") and mining properties, and have been determined based on
engineering estimates of the costs of reclamation, in accordance with legal
and regulatory requirement. These cost estimates are reviewed periodically
by applicable regulatory authorities. In the case of the Mill, the cost
estimates are reviewed and adjusted annually by the Company to reflect the
estimated costs of reclamation and reviewed by the State of Utah Department
of Environmental Quality.
Three Months
Ended Year Ended
December 31, September 30,
2005 2005
------------ -------------
Reclamation obligations, beginning of period $12,934,880 $12,603,595
Additions to liabilities 7,000 331,285
----------- -----------
Reclamation obligations, end of period $12,941,880 $12,934,880
=========== ===========
Applicable regulations require the Company to estimate reclamation costs on
an undiscounted basis under the assumption that the reclamation would be
performed at any time by a third party contractor. Management estimates
that, once a decision is made to commence reclamation activities,
substantially all of the reclamation activities could be completed in
approximately 24-30 months. Elements of uncertainty in estimating
decommissioning and reclamation costs include potential changes in
regulatory requirements, decommissioning and reclamation alternatives.
Actual costs may be materially different from those estimated.
The Company has posted bonds (collateralized by cash and cash equivalents
and fixed income securities) in favor of the State of Utah and the
applicable state regulatory agencies in Colorado and Arizona as partial
collateral for these liabilities and has deposited fixed income securities
on account of these obligations (Note 5).
7. RELATED PARTY TRANSACTIONS
During 2006 Q1, the Company incurred legal fees of $23,136 (2005 Q1:
$8,619) with a law firm of which a partner is a director of the Company.
During 2006 Q1, the Company incurred management and administrative service
fees of $46,201 (2005 Q1: $26,288) with a company owned by the Chairman of
the Company which provides investor relations, office premises, secretarial
and other services in Vancouver at a rate of Cdn $18,000 per month plus
expenses. At December 31, 2005, an amount of Nil (September 30, 2005:
$70,238) was due to this company.
During 2006 Q1, the Company provided mine reclamation management and
engineering support services of $3,153 (2005 Q1: Nil) on a cost plus basis
to a company with common directors. At December 31, 2005, an amount of
$3,153 (September 30, 2005: $80,337) was due from this company.
During 2006 Q1, the Company entered into an agreement with Fortress to
provide executive and administrative services and charged an aggregate
$21,915 (2005 Q1: Nil) for such services. At December 31, 2005, an amount
of $23,530 (September 30, 2005: $28,696) was due from Fortress relating to
this agreement.
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
8. SHARE CAPITAL
a) Authorized: Unlimited number of common shares without par value
b) Issued and Outstanding:
Number of
Common Shares Amount
------------- -----------
Balance at September 30, 2004 79,635,066 $50,305,480
Issued for cash:
Flow-through private placement, net of issue costs of
$227,470 (c) 1,000,000 5,574,316
Exercise of stock options 787,000 418,365
Issued for mineral property acquisition (d) 147,000 906,722
Fair value of stock options exercised -- 374,997
Renunciation effects of flow-through private placements -- (1,434,096)
---------- -----------
1,934,000 5,840,304
---------- -----------
Balance at September 30, 2005 81,569,066 $56,145,784
---------- -----------
Issued for cash:
Private placement, net of issue costs of $1,230,168 (c) 6,000,000 36,780,480
Flow-through private placement, net of issue costs of
$230,757 (c) 850,000 5,461,371
---------- -----------
6,850,000 42,241,851
---------- -----------
Balance at December 31, 2005 88,419,066 $98,387,635
========== ===========
c) Private Placements
In December 2005, the Company completed a private placement of 850,000
flow-through common shares at a price of Cdn $7.75 per share for gross
proceeds of Cdn $6,587,500 ($5,692,128). Share issue costs of $230,757
were incurred, comprised of $225,812 for finders' fees and $4,945 for
related expenses, resulting in net proceeds of $5,461,371 from the
private placement. These funds are restricted to eligible Canadian
exploration expenditures which will be renounced to the subscribers in
February 2006.
In October 2005, the Company completed a private placement of
6,000,000 common shares at a price of Cdn $7.50 per share for gross
proceeds of Cdn $45,000,000 ($38,010,648). Share issue costs of
$1,230,168 were incurred, comprised of $1,212,695 for finders' fees
and $17,473 for related expenses, resulting in net proceeds of
$36,780,480 from the private placement.
In March 2005, the Company completed a private placement of 1,000,000
flow-through common shares at a price of Cdn $7.00 per share for gross
proceeds of Cdn $7,000,000 ($5,801,786). Share issue costs of $227,470
were incurred, comprised of $224,097 for finders' fees and $3,373 for
related expenses, resulting in net proceeds of $5,574,316 from the
private placement. These funds are restricted to eligible Canadian
exploration expenditures which will be renounced to the subscribers in
February 2006.
d) Mineral Property
In September 2005, the Company issued 147,000 common shares at a price
of Cdn $7.35 per share for a total value of Cdn $1,080,450 ($906,722)
as part of the acquisition of a U.S. uranium property.
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
9. STOCK OPTIONS
At December 31, 2005, the Company had a stock-based compensation plan
reserving for issuance a maximum of 10,700,000 common shares of the
Company, as amended periodically by shareholder approval (the "Plan"). At
the annual general meeting held on March 22, 2005, the shareholders of the
Company approved an amendment of the Plan to increase the maximum number of
common shares reserved for issuance from 6,700,000 to 10,700,000 common
shares, as well as other amendments required to align the Plan with new
regulatory requirements. At December 31, 2005, the Company had remaining
3,810,000 common shares available for issuance under the Plan.
The purpose of the Plan is to attract, retain and motivate directors,
officers, key employees and consultants of the Company and to advance the
interests of the Company by providing eligible persons with the opportunity
to acquire an increased proprietary interest in the Company. Under the
Plan, all stock options, including vesting provisions, if any, are granted
at the discretion of the Company's board of directors. The term of any
stock option granted may not exceed ten years and the exercise price may
not be lower than the closing price of the Company's shares on the last
trading day immediately preceding the date of grant. In general, stock
options granted under the Plan have a term of three years and have no
vesting provisions.
A continuity summary of the stock options granted under the Plan is
presented below:
Three Months Ended Year Ended
December 31, September 30,
2005 2005
--------------------- ---------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Number of Price per Number of Price per
Common Share Common Share
Shares (Cdn $) Shares (Cdn $)
--------- --------- --------- ---------
Balance, beginning of period 1,863,000 $2.62 1,940,000 $0.85
Granted 80,000 5.88 710,000 5.28
Exercised -- (787,000) 0.65
--------- ----- --------- -----
Balance, end of period 1,943,000 $2.76 1,863,000 $2.62
========= ===== ========= =====
A summary of stock options outstanding and exercisable at December 31,
2005 is presented below:
Weighted-
Average Average
Range of Exercise Exercise Price Remaining
Number of Prices per Share per Share Contractual Life
Common Shares (Cdn $) (Cdn $) (Years)
------------- ----------------- -------------- ----------------
1,163,000 $1.01 $1.01 0.90
690,000 $4.27 to $5.88 $5.08 2.28
90,000 $7.53 $7.53 2.68
--------- ----- ----
1,943,000 $2.76 1.48
========= ===== ====
Outstanding options expire between November 2006 and October 2008.
During 2005 Q1, the Company adopted amended accounting standards effective
October 1, 2004 requiring a fair value-based method of accounting for stock
options granted to employees, including directors, and to non-employees.
This amendment was adopted on a retroactive basis without restatement of
prior periods resulting in a cumulative adjustment of $773,655 to opening
deficit effective October 1, 2004. Prior to October 1, 2004, the
application of the fair value-method of accounting was limited to stock
options granted to non-employees.
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
9. STOCK OPTIONS (continued)
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions:
Three Months Ended
December 31,
------------------
2005 2004
------- ----
Risk-free interest rate 3.60% --
Expected stock price volatility 69% --
Expected life 2 years --
Expected dividend yield -- --
Weighted-average fair value per
share under options granted $1.83 --
For 2006 Q1 and 2005 Q1, stock-based compensation expense of $146,013 and
Nil, respectively, were recorded by the Company included in capitalized
mineral property expenditures.
10. CONTRIBUTED SURPLUS
A continuity summary of contributed surplus is presented below:
Three Months
Ended Year Ended
December 31, September 30,
2005 2005
------------ -------------
Balance, beginning of period $1,803,277 $ 224,718
Retroactive effect of change in accounting policy
for stock-based compensation -- 773,655
Stock-based compensation as a result of
stock options granted 146,013 1,179,901
Value of stock options assigned to share
capital upon exercise of stock options -- (374,997)
---------- ----------
Balance, end of period $1,949,290 $1,803,277
========== ==========
11. SEGMENTED INFORMATION
a) Geographic Information
Three Months Ended
December 31,
---------------------
2005 2004
--------- ---------
Revenue:
United States $ 730,921 $ 3,629
========= =========
Net income (loss):
Canada $ 490,646 $ 207,835
United States (314,424) (722,956)
Mongolia (45,545) (193,504)
--------- ---------
$ 130,677 $(708,625)
========= =========
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
11. SEGMENTED INFORMATION (continued)
December 31, September 30,
2005 2005
------------ -------------
Total assets:
Canada $60,633,129 $20,883,541
United States 24,779,430 22,784,085
Mongolia 1,867,280 1,533,945
----------- -----------
$87,279,839 $45,201,571
=========== ===========
b) Major Customers
The Company's business is such that, at any given time, it sells its
uranium and vanadium concentrates to and enters into process milling
arrangements with a relatively small number of customers. During 2006 Q1,
process milling customers accounted for approximately Accounts 99% (2005
Q1: 100%) of total revenues. Accounts receivable from any individual
customer will exceed 10% of total accounts receivable on a regular basis.
12. SUPPLEMENTAL CASH FLOW INFORMATION
Three Months Ended
December 31,
-------------------
2005 2004
-------- --------
Non-cash investing activity:
Stock-based compensation
capitalized as mineral
property expenditures $146,013 $ --
Cash received for interest 357,506 160,315
13. COMMITMENTS AND CONTINGENCIES
The Company has 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 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 final remediation have not yet been determined and could be
significant.
The Company has committed to payments under operating leases for the rental
of office space and office equipment for both the Denver and Saskatoon
offices which expire from May 31, 2008 to July 31, 2010. The future
minimum lease payments are as follows:
Fiscal Year
2006 $ 93,683
2007 117,208
2008 71,093
2009 31,923
2010 21,594
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Three Months Ended December 31, 2005
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
14. SUBSEQUENT EVENTS
In January 2006, the Company participated in a private placement to
purchase an additional 500,000 common shares of Fortress at a price of Cdn
$1.25 per share for a total cost of Cdn $625,000 ($537,496). Immediately
after the private placement, the Company held 29,232,500 common shares of
Fortress, representing a 42.33% ownership interest, and a share purchase
warrant to acquire an additional 366,250 common shares of Fortress at a
price of Cdn $0.60 per share until expiry on September 1, 2006.
In February 2006, the Company exercised share purchase warrants to acquire
a further 900,000 common shares of a publicly-traded company at a cost of
Cdn $432,000 ($376,799). The market value of these securities was Cdn
$2,295,000 ($2,001,744) on the exercise date.