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First Uranium Corporation FY 2012 results
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First Uranium Corporation FY 2012 results

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First Uranium Corporation FY 2012 results

First Uranium Corporation FY 2012 results

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    First Uranium Corporation FY 2012 results First Uranium Corporation FY 2012 results Document Transcript

    • FIRST URANIUM CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS For the year ended March 31, 2012
    • Contents Management’s Discussion and Analysis of the Financial Results for the Year Ended March 31, 2012 Recent Developments .................................................................................................................................... 1 Financial Position ........................................................................................................................................... 2 Corporate Overview ....................................................................................................................................... 5 Business Overview.......................................................................................................................................... 7 Summary Results for Q4 2012 and FY 2012..................................................................................................... 8 IFRS...............................................................................................................................................................10 Summary of Quarterly Results.......................................................................................................................11 Market Overview...........................................................................................................................................11 Operations Overview.....................................................................................................................................12 Permitting .....................................................................................................................................................22 Consolidated Financial Review.......................................................................................................................25 Consolidated Financial Position .....................................................................................................................27 Cash Flow Review..........................................................................................................................................28 Cash flows for the year ended March 31, 2012..............................................................................................29 Use of Proceeds.............................................................................................................................................29 Liquidity and Capital Resources .....................................................................................................................30 Financial Instruments ....................................................................................................................................32 Commitments and Contingencies..................................................................................................................32 Outlook .........................................................................................................................................................35 Related Party Transactions ............................................................................................................................35 Disclosure Controls and Procedures and Internal Control over Financial Reporting........................................36 Critical Accounting Policies and Estimates .....................................................................................................37 Changes in accounting policies ......................................................................................................................41 Outstanding Share Data.................................................................................................................................41 Risks and Uncertainties .................................................................................................................................42 Additional Information..................................................................................................................................46 Forward-looking Information.........................................................................................................................46 Non-IFRS Measures .......................................................................................................................................47 Consolidated Unaudited Financial Statements Consolidated Statement of Financial Position................................................................................................51 Consolidated Statements of Comprehensive Income.....................................................................................52 Consolidated Statements of Changes in Shareholders’ Equity........................................................................53 Consolidated Statements of Cash Flows.........................................................................................................54 Notes to the Consolidated Financial Statements............................................................................................55 Shareholder and Corporate Information...................................................................................................... IBC
    • (This page has been left blank intentionally)
    • 1. FIU MDA 2012 Management’s discussion and analysis of the audited consolidated financial position and results of operations for the year ended March 31, 2012 This Management’s Discussion and Analysis (“MD&A”) of the consolidated financial position and results of operations reviews the activities, audited consolidated results of operations and financial position of First Uranium Corporation and its subsidiaries (“First Uranium” or the “Corporation”) as at and for the year ended March 31, 2012, together with certain trends and factors that are expected to have an impact in the future. The following abbreviations are used to describe the periods under review throughout this MD&A: Abbreviation Period Abbreviation Period Q1 2012 April 1, 2011 - June 30, 2011 Q1 2011 April 1, 2010 - June 30, 2010 Q2 2012 July 1, 2011 - September 30, 2011 Q2 2011 July 1, 2010 - September 30, 2010 Q3 2012 October 1, 2011 - December 31, 2011 Q3 2011 October 1, 2010 - December 31, 2010 Q4 2012 January 1, 2012 - March 31, 2012 Q4 2011 January 1, 2011 - March 31, 2011 FY 2012 April 1, 2011 - March 31, 2012 FY 2011 April 1, 2010 - March 31, 2011 Q1 2013 April 1, 2012 - June 30, 2012 FY 2013 April 1, 2012 - March 31, 2013 The MD&A is intended to supplement and complement the audited consolidated financial statements for the year ended March 31, 2012 and the notes thereto (collectively the “Financial Statements”) which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Information contained in this MD&A is current as at June 29, 2012, unless otherwise indicated. The reporting currency for the Corporation is the US dollar, and all amounts in the following discussion are in US dollars (“$”), except where otherwise indicated. This MD&A includes certain forward-looking statements. Please read the cautionary note at the end of this document. Recent Developments The Corporation has entered into definitive agreements for the sale of its principal assets. The Corporation entered into a definitive agreement (the “AGA Agreement”) dated March 2, 2012 for the sale, indirectly, of all of the shares of Mine Waste Solutions (Proprietary) Limited (“MWS”), owner of the tailings recovery project in South Africa, to AngloGold Ashanti Limited (“AGA”) (the “AGA Transaction”). Under the terms of the AGA Agreement AGA will pay $335 million in cash (the “Purchase Price”) for all of the shares and associated claims of First Uranium (Proprietary) Limited (“FUSA”), which holds, indirectly, the MWS tailings recovery project, subject to the fulfillment of a number of conditions precedent. In addition, the Corporation entered into a definitive agreement (the “Gold One Agreement”) for the sale of First Uranium Limited (“FUL”), a wholly-owned subsidiary of the Corporation which owns all of the shares of Ezulwini Mining Company (Proprietary) Limited (“EMC”) to Gold One International Limited (“Gold One”) for $70 million in cash (the “Gold One Transaction”). Gold One also provided a loan facility to the Corporation for an amount of up to $10 million available for drawdown in accordance with the loan agreement between the parties (the “Gold One Loan Facility”) which has been fully drawn subsequent to year-end (See also Financial Conditions section of this MD&A). The proceeds from the sale of First Uranium’s principal assets will enable it to settle the 4.25% senior unsecured convertible debentures (the “Debentures”), the 7% secured convertible notes (the “Canadian Notes”) issued by the Corporation and the 11% secured convertible notes (the “Rand Notes”) issued by MWS (together, the
    • 2. FIU MDA 2012 “Notes”) and the Gold One Loan Facility under the terms agreed to with the Debenture holders, Note holders and Gold One on June 13, 2012. As of June 25, 2012, all of the conditions precedent to the AGA Transaction had been satisfied or waived. Each of the parties have confirmed such in writing and the Closing Date, as defined in the AGA Agreement, is scheduled to occur on July 3, 2012. On the Closing Date, all of the documents required to conclude the AGA Transaction will be delivered to Edward Nathan Sonnenbergs as Closing Document Stakeholder, the purchase price will, in accordance with the terms of the AGA Agreement, be delivered to Computershare Trust Company of Canada (“CTTC”) and Computershare Investor Services (Proprietary) Inc. (“CIS”), each a Purchase Price Stakeholder, and certain documents (“Discharge Documents”) relating to the discharge of the security held for the benefit of the Note holders and the Gold One Loan Facility will be lodged with the appropriate deeds office. On the Closing Date, CTTC will convert sufficient US dollars to Canadian dollars so that CTTC holds an amount in Canadian dollars to pay the principal amount (C$110 million) of the Canadian Notes outstanding and CIS will convert sufficient US dollars to South African Rand in order for CIS to pay the principal amount (ZAR418.6 million) of the Rand Notes outstanding. Upon registration of the Discharge Documents releasing all security in the MWS assets, the Closing Document Stakeholder will release the remaining closing documents from escrow and the Purchase Price Stakeholders will pay: (i) to BNY Trust Company of Canada, as trustee for the Canadian Notes, C$110 million, and to or to the order of GMG Trust Company (SA) Pty Limited, as trustee for the Rand Notes (together the “Note Trustees”), ZAR418.6 million, (ii) to Gold One, $10 million plus accrued interest to the date of payment; (iii) $25 million (the “AGA Deferred Payment”) to the warranty escrow agent; and (iv) the balance shall be paid to FUL. The Corporation has been advised that it could take up to three weeks for the Discharge Documents to be registered, accordingly, the AGA Transaction is expected to be implemented by July 24, 2012 or an earlier date depending on the date the Discharge Documents are actually registered. In order to provide sufficient time for the AGA Transaction to be implemented, Gold One and the Corporation have agreed to extend the date to satisfy the conditions precedent to the Gold One Transaction to July 31, 2012. Other than the conditions precedent associated with the implementation of the AGA Transaction, the material conditions precedent to the Gold One Transaction have been satisfied or waived subsequent to year-end, including all of the regulatory approvals to the extent required. Financial Position By the middle of calendar 2011, the Corporation was facing a number of financial issues as a result of its capital structure and the limited free cash flow being generated by its assets, as evidenced by the Q1 2012 results when cash and cash equivalents fell to $26.8 million, a drop of 46% from the position at March 31, 2011. At the same date, current liabilities were $227 million compared to $85.8 million at March 31, 2011, an increase of 165%. While management believed that the available cash resources at June 30, 2011 together with the cash forecast to be generated from the sale of gold and uranium would be sufficient to fund outstanding commitments and complete planned capital projects, that forecast excluded the repayment of the Debentures on maturity in June 2012, and shortly thereafter the Notes. In light of this, the Board regarded it as prudent to undertake a strategic analysis of available alternatives to the Corporation and to determine how the Notes and the Debentures could be retired, in the case of the Debentures, without excessive dilution to Shareholders. On June 29, 2011, Village Main Reef Limited (“Village”) announced that it was looking to realize value from its approximately 26% equity interest in the common shares in First Uranium (the “Common Shares”), acquired through its purchase of certain assets from Simmer & Jack Mines Limited. A sale by Village of all or a substantial portion of its Common Shares would seriously impact First Uranium’s BEE credentials which at that time were sustained through the Village ownership and its BEE partner, Vulisango. BEE accreditation is necessary to conduct business in South Africa and to ensure all of the permits and mining licenses of the Corporation
    • 3. FIU MDA 2012 remained intact. On July 22, 2011, Village announced its intention to sell 47,065,916 Common Shares held by it to AGA at a price of Cdn$0.60 per Common Share. As part of the sale agreement, Village also entered into lock- up and right of first refusal arrangements with AGA with respect to the Rand Notes and the remaining 13,556,737 (approximately 5%) Common Shares owned by Village. Having regard to the foregoing, including the potential loss of the Corporation’s BEE credentials, continuing operational issues and cash flow concerns and the impending maturity of the Debentures and Notes, First Uranium publicly announced on July 12, 2011 that the Board had empowered a Special Committee comprised of independent directors of the Board to undertake a strategic review of the Corporation and its capital structure and to advise on any available strategic alternatives that may be in the interests of the Corporation and its stakeholders. The Special Committee’s mandate included overseeing the process of assessing a range of options for the Corporation, including renegotiating major contracts, considering any business combination transactions which may arise, considering the terms of the Corporation’s outstanding debt instruments, and negotiating alternatives to improve the BEE credentials of the Corporation. As a result, the Vulisango Management Agreement was entered into in August 2011 and provided for certain services, including assisting First Uranium in complying with the Minerals and Petroleum Resources Development Act (“MPRDA”) and assisting and giving guidance to the Corporation with regard to its policies in accordance with the Mining Charter. Following approaches from certain Debenture holders regarding restructuring of the outstanding Debentures and from third parties who expressed interest in acquiring First Uranium and/or entering into potential joint venture transactions in respect of the Corporation’s operations, the Board, on the recommendations of the Special Committee, instructed RBC Capital Markets to begin identifying and contacting parties who might consider an investment in or the purchase of, First Uranium (the “investment and sale process”). On August 10, 2011, AGA signed a confidentiality agreement with First Uranium and commenced due diligence immediately. On August 30, 2011, First Uranium publicly announced that it was reviewing available strategic alternatives and, as a consequence (together with the public disclosure of the Village and AGA transaction) the investment and sale process became public. Throughout the period from mid September 2011 to late January 2012, RBC Capital Markets – who had been appointed as one of the advisors to the Special Committee - was in contact with approximately 20 parties which resulted in the Corporation entering into a confidentiality agreement with one additional party that had expressed an interest in pursuing a strategic transaction with First Uranium. Concurrently with the investment and sale process, from July 2011 to February 2012, RBC Capital Markets undertook a review of potential restructuring alternatives for the Notes and Debentures in conjunction with BEE accreditation requirements. The financial situation had not improved by the end of calendar 2011 as evidenced by the Q3 2012 results, which showed that the Corporation’s cash decreased by approximately $39 million to $10.6 million. As part of its ongoing attempts to improve its operating and financial results and facilitate a potential restructuring, on December 19, 2011, First Uranium announced that it was assessing options to develop and implement a new operating plan at the Ezulwini Mine to optimize cash flow and overall profitability. In an attempt to stem the losses at the Ezulwini Mine and to focus on higher grade areas and reduce overhead expenses, the Ezulwini Mine was substantially downsized by approximately 50% however the expected improvements at the Ezulwini Mine would take several months before coming into effect. Discussion with AGA in connection with a possible acquisition by AGA of First Uranium continued throughout Q3 2012. Ultimately, in December 2011, AGA indicated to First Uranium that it was not interested in purchasing the Corporation as a whole, but was interested only in acquiring MWS. With the unanticipated change in approach by AGA, the Corporation’s ongoing issues of cash flow, the imminent repayment obligations with respect to the Debentures and the inability to interest other parties in an acquisition of, or merger with, First Uranium, the
    • 4. FIU MDA 2012 Special Committee determined to pursue potential buyers for the separate acquisition of the Ezulwini Mine and, with the assistance of RBC Capital Markets, approached a number of potential interested parties. In reviewing the range of available strategic alternatives for First Uranium, the Special Committee took into consideration recent developments, including the Corporation’s continued losses, lack of liquidity, impaired BEE credentials and concern about the Corporation’s ability to carry on business as a going concern given the updated Ezulwini Mine plan and the impending debt maturities. It was apparent that First Uranium did not have, nor was it in a position to raise the capital required to complete the development of the Ezulwini Mine and the requirements for operating expenditures at the Ezulwini Mine would soon drain First Uranium’s financial resources, notwithstanding the cash flow generated from MWS. In addition, as part of the new Ezulwini Mine plan and the resultant downsizing of its workforce, significant cash severances to employees pursuant to sections 189A and 189 of the South African Labour Relations Act would be required. It became clear that the prospect of generating or raising sufficient capital to finance operations and repay the Debentures when they matured on June 30, 2012 was remote. It was also apparent that refinancing or restructuring the Debentures would be extremely problematic given ongoing operational and cash generation challenges, as well as the potential risk of a default on the Notes in March 2013. Furthermore, the issuance of the additional Common Shares in the event the Debentures were converted to equity would result in significant dilution to the Shareholders. Accordingly, with the lack of an interested buyer for the Corporation as a whole, it was determined that a sale of the MWS and the Ezulwini Mine assets to parties with greater financial resources was necessary to deal with the foregoing issues while still preserving some value for Shareholders. On December 19, 2011, AGA submitted a non-binding proposal for the purchase of MWS for a purchase price of $300 million. After ongoing discussions between First Uranium and AGA, on February 2, 2012, AGA submitted a revised non-binding offer letter with a purchase price of $335 million, which formed the basis for the negotiation and settlement of the AGA Transaction announced on March 2, 2012. In early January 2012, the Corporation also entered into discussions with Gold One regarding its interest in acquiring the Ezulwini Mine, with Gold One being the only party at the time to have expressed interest to the Corporation in making such a proposal for the Ezulwini Mine. On January 17, 2012, Gold One submitted a non- binding proposal to acquire the Ezulwini Mine for $60 million in cash and shares, with the possibility of up to an incremental $20 million in contingent consideration. After consultation with its advisors, the Special Committee, with the concurrence of the Board, declined to accept this offer but indicated to Gold One that it might be prepared to consider a further offer if the financial terms were improved. Following further negotiations culminating during the week of February 6, 2012, Gold One indicated that it would increase the offer price to $70 million. On February 10, 2012, Gold One submitted a binding written offer to purchase the Ezulwini Mine for $70 million in cash. Gold One also offered to provide bridge financing to the Corporation in the amount of up to $10 million, which was particularly important to the Special Committee which had become concerned that the Corporation would run out of cash prior to completion of the Transactions and had already commenced a search for sources of bridge financing. Neither AGA nor Gold One expressed an interest in acquiring First Uranium as a whole, and both required their respective acquisitions to be separately negotiated without any cross conditionality to the other transaction. Consequently, on March 2, 2012 First Uranium entered into the AGA Agreement for the sale indirectly of MWS to AGA for a total consideration of $335 million in cash. Also on March 2, 2012, the Corporation entered into a binding letter agreement which was superseded on March 30, 2012 by a the Gold One Agreement for the sale, indirectly, of the Ezulwini Mine, to Gold One for $70 million in cash (the “Gold One Transaction” and together with the AGA Transaction, the “Transactions”). On March 2, 2012, Gold One also provided the Gold One Loan
    • 5. FIU MDA 2012 Facility to the Corporation for an amount of up to $10 million available for drawdown in accordance with the loan agreement between the parties. Each of the AGA Transaction and the Gold One Transaction had to be considered separately by shareholders of First Uranium at a Special Meeting convened by the Corporation on June 13, 2012. In order to complete the Transactions, the Corporation also had to convene a meeting of the Debenture holders at which they were required to approve amendments to the Debenture Indenture to agree, amongst other things, that the maturity date will be extended to October 5, 2012, and if the Transactions are to be completed and implemented by October 5, 2012, no interest will accrue after March 2, 2012 and the principal amount of the Debentures will be reduced to: (a) 95% of the principal amount of the outstanding Debentures owing as at April 30, 2012; and (b) the lesser of: (i) 3% of the principal amount of the outstanding Debentures owing as at April 30, 2012; and (ii) all payments in connection with the funds held pursuant to the terms of the AGA Agreement and the Gold One Agreement (each a Warranty Escrow) received by First Uranium, whenever received. In addition, First Uranium will pay to the Debenture Trustee, for distribution pro rata to the holders of Debentures which agreed, on or before May 30, 2012, to vote in favour of the extraordinary resolution of the holders of Debentures approving the supplemental debenture indenture, an additional amount, on account of the principal amount of the Debentures held by such consenting holders of Debentures, equal to 2% of the principal amount of all the outstanding Debentures owing as at April 30, 2012. The Debenture holder meeting was also convened by the Corporation on June 13, 2012. Included as a condition precedent to the Transactions, is the release of all security against FUSA and the MWS assets (in the case of the AGA transaction) and the FUL and the Ezulwini assets (in the case of the Gold One Transaction) relating to the security held for the benefit of the Note holders and the Gold One Loan Facility. For the Corporation to fulfil this condition precedent, the Notes and the Gold One Loan Facility would have to be settled upon closing of the AGA Transaction. Consequently, the Corporation also had to convene a meeting of the Note holders at which they were required to approve amendments to the Note Indentures to agree that upon completion and implementation of the AGA Transaction, the Note holders will accept repayment in cash of 100% of the principal amount outstanding on the Notes and that no interest will accrue after March 31, 2012. The Note holder meeting was also convened by the Corporation on June 13, 2012. On June 13, 2012, both the AGA Transaction and the Gold One Transaction were approved by the shareholders of First Uranium and the Corporation also received the required approvals from the Debenture holders and Note holders (see Note 32 to the Financial Statements). The proceeds from the sale of First Uranium’s principal assets will enable it to settle the Debentures, the Notes and the Gold One Loan Facility under the terms agreed to with the Debenture holders, Note holders and Gold One on June 13, 2012. Corporate Overview As at June 29, 2012, the Corporation had 237,882,967 common shares outstanding. In addition, the Corporation has Cdn$150 million aggregate principal amount of 4.25% senior unsecured convertible debentures (the “Debentures”) due June 30, 2012 outstanding, which are convertible into common shares of First Uranium. The Corporation also has Cdn$110 million aggregate principal amount of 7% senior secured convertible notes issued by First Uranium and due March 31, 2013 (the "Canadian Notes"). During the first quarter of FY 2012, ZAR12.2 million of the ZAR430.8 million aggregate principal amount of the 11% secured convertible notes issued by MWS and due March 31, 2013 (the “Rand Notes”) were converted to 1,311,169 common shares of the Corporation. No further conversions occurred during the remainder of FY 2012. The Corporation’s common shares, Debentures and Canadian Notes are listed on the Toronto Stock Exchange (the “TSX”). In addition, the common shares are also listed on the Johannesburg Stock Exchange (the “JSE”) and
    • 6. FIU MDA 2012 on July 15, 2011, MWS listed the remaining ZAR418.6 million aggregate principal amount of the Rand Notes on the JSE. On June 13, 2012, three security holder meetings, a meeting (the “Shareholder Meeting”) of Shareholders, a meeting (the “Note holder Meeting”) of the Note holders and a meeting (the “Debenture holder Meeting”) of Debenture holders, were held to consider and vote on a number of resolutions necessary for the successful completion of the AGA Transaction and the Gold One Transaction. The following resolutions were approved at the Shareholder Meeting: (a) The AGA Resolution, whereby the Corporation and FUL agreed to sell to AGA or its designee, the FUSA Claims and all the FUSA Shares; (b) The Gold One Resolution, whereby the Corporation and FUL agreed to sell to Gold One or its designee, among other things, all the shares in the issued capital of FUL or EMC; (c) The Additional Common Shares Resolution, whereby the approval for the issuance, if necessary, of the Additional Common Shares to repay the principal amount due on maturity of the Debentures; (d) The Note Resolution, whereby the Corporation and BNY Trust Company of Canada and GMG Trust Company (SA) Pty Limited, the Note indenture trustees, will execute supplemental Note Indentures to give effect to certain amendments to the Note Indentures to, among other things, permit the completion of the AGA Transaction and the Gold One Transaction; (e) The Continuance Resolution and the By-Law Resolution, whereby the Corporation will be continued from the Province of British Columbia into the Province of Ontario to permit the Corporation to complete the Reorganization of Capital and facilitate the Initial Distribution (as defined below) and the Remaining Distribution (as defined below) realized from the sale of its assets under the AGA Transaction and the Gold One Transaction to the Shareholders in a tax efficient manner; and (f) The Reorganization Resolution, whereby the Corporation’s share capital will be reorganized to facilitate the Initial Distribution and the Remaining Distribution realized from the sale of its assets under the AGA Transaction and the Gold One Transaction to the Shareholders in a tax efficient manner. The Board, following completion of the Transactions and the repayment of all current obligations to the Debenture holders, settlement of all outstanding obligations to the Note holders and providing for a reserve for any continuing and contingent obligations, will determine an amount (the “Initial Distribution”) to be distributed to the Shareholders in the form of a redemption of Class A Special Shares. Following the release of funds from the Warranty Escrows associated with each of the Transactions, and the settlement of all remaining obligations to the Debenture holders and establishment of a reserve for any continuing and contingent obligations, the Board will determine an amount (the “Remaining Distribution”) to be distributed to the Shareholders in the form of a second redemption of Class A Special Shares. At the Note holder Meeting, Note holders approved the Note Resolution, which approves the supplemental note indentures (the “Supplemental Note Indentures”) and authorizes the Note Trustees to execute the Supplemental Note Indentures to give effect to certain amendments to the Note Indentures to permit the completion of the Transactions, in particular: (i) that interest shall not accrue on the Notes after March 31, 2012 provided that all principal amounts owing under the Notes are paid to the Note Trustees on or before October 5,
    • 7. FIU MDA 2012 2012; and (ii) that on the seventh Business Day after the final completion and implementation of the AGA Transaction, the Notes shall be redeemed by the Corporation and MWS, as applicable, in full, without payment of any prepayment or early redemption fee or bonus. The Supplemental Indentures, dated June 14, 2012, were executed by the parties. At the Debenture holder Meeting, Debenture holders approved the Debenture Resolution, which approves the supplemental debenture indenture (the Supplemental Debenture Indenture) and authorizes the Debenture Indenture Trustee to execute the Supplemental Debenture Indenture to give effect to certain amendments to the Debenture Indenture to permit the completion of the Transactions, in particular: (i) extend the maturity date of the Debentures from June 30, 2012 to the date that is the earlier of: (a) If both the AGA Transaction and the Gold One Transaction are to be completed and implemented on or before October 5, 2012, the seventh business day after the later of: (I) the date the last amount of the Deferred Payment (as defined in the AGA Agreement) is disbursed by the Escrow Agent; and (II) the date the last amount of the Deferred Payment (as defined in the Gold One Agreement) is disbursed by the Escrow Agent; or (b) October 5, 2012 if both the AGA Transaction and the Gold One Transaction are not completed and implemented on or before October 5, 2012; (ii) provide reduced payment terms such that after closing of both of the Transactions, Debenture holders will receive a cash payment of 95% of the principal amount of the Debentures, an additional cash payment of 2% of the principal amount if they have voted in favour of the Debenture Resolution on or before May 30, 2012 (the 2% will be allocated pro rata to Debenture holders tendering by May 30, 2012), and an additional payment of the lesser of: (I) 3% of the principal amount; or (II) the total amount released to the Corporation from the Deferred Payments, in priority to the Initial Distribution; (iii) interest shall not accrue on the Debentures after March 2, 2012 provided that certain minimum payments are made to the Debenture Indenture Trustee on or before October 5, 2012. The Supplemental Debenture Indenture, dated June 14, 2012, was executed. On June 13, 2012, the Corporation filed Articles of Continuance and was continued under the Business Corporations Act (Ontario). On June 25, 2012, articles of amendment were filed in respect of the Share Capital Reorganization which involves issuance of an unlimited number of Class A Special Shares and an unlimited number of Class B Common Shares and the exchange of each common share of the Corporation for a unit (the Units) consisting of 100 Class A Special Shares and one Class B Common Shares. Effective July 3, 2012 and July 2, 2012 the common shares will be delisted and the Units listed on the TSX and the JSE, respectively, under the stock symbols FUI.UN and FUU, respectively. Business Overview To be able to adequately report on the financial performance of the Corporation and its operations in this MD&A, management extracted financial information from the total columns in the Consolidated Statements of Comprehensive Income of the Financial Statements and the Consolidated Statements of Cash Flows, which is based on the consolidated financial results of the Corporation, before excluding the financial results of the discontinued operations. Revenue and cost of production related to the gold ounces delivered pursuant to the Gold Stream Transactions as discussed in note (b) to the IFRS section of this MD&A have been added back to revenue and costs of sales, respectively, in this MD&A and are not included in the derivative expense related to Gold Stream Transactions in profit and loss as disclosed in the Financial Statements. Only the fair value movement on the derivative liabilities related to the Gold Stream Transactions has been included in the
    • 8. FIU MDA 2012 derivative expense in this MD&A. The summary table on page 9 in this MD&A sets out where the financial information from the Financial Statements vary from the financial information reported in this MD&A (also see financial information tables provided under the Operations Review and Financial Review sections of this MD&A.) This is a non-IFRS measurement and investors are cautioned not to place undue reliance on it and are advised to read all IFRS accounting disclosures presented in the Corporation’s Financial Statements. Summary Results for Q4 2012 and FY 2012 First Uranium reported a consolidated gross profit of $9.2 million and $7.3 million for Q4 2012 and FY 2012, respectively, compared to the consolidated gross losses of $2.8 million and $5.9 million in Q4 2011 and FY 2011. This was as a result of a 31% and 30% improvement, respectively, in the consolidated proceeds from gold and uranium sold of $48.0 million in Q4 2012 (Q4 2011: $36.7 million) and $195.1 million in FY 2012 (FY 2011: $150.5 million). The Corporation reported a consolidated pre-tax profit of $22.7 million in Q4 2012 (Q4 2011: $79.5 million) and a consolidated pre-tax loss of $178.8 million in FY 2012 (FY 2011: $236.3 million). The impairment of the Ezulwini Mine’s assets (see Note 9 of the Financial Statements) was the primary driver for the pre-tax loss in FY 2012 and the derivative expense related to the Gold Stream Transactions was the primary driver for the pre- tax loss in FY 2011. The Corporation utilized $9.6 million cash from its operations in Q4 2012 compared to $20.4 million in Q4 2011. During FY 2012 only $15.5 million of cash was utilized to fund operating activities compared to $50.0 million during FY 2011. The Corporation utilized $29.4 million during FY 2012 (FY 2011: $101.5 million) on capital projects at the operations, mainly on the completion of the third gold module (“Phase 2”) and the new tailings storage facility at Kareerand (“TSF”), including adjoining infrastructure at MWS. Minimal cash was used to fund capital in Q4 2012 (Q4 2011: $11.6 million). The much lower capital spend in FY 2012 reflects the close-out of the major capital projects at MWS which occurred during Q3 2012. (Balance of page intentionally left blank)
    • 9. FIU MDA 2012 Reconciliation of certain financial information in the Financial Statements with MD&A (thousands of dollars) Q4 2012 Q4 2011 %Change Q3 2012 %Change FY 2012 FY 2011 %Change Revenue Revenue as disclosed in Financial Statements (a) 45,363 32,726 39% 45,572 (1%) 179,176 134,926 33% Proceeds from gold delivered into Gold Stream Transactions(b) 2,615 3,938 (34%) 4,361 (40%) 15,872 15,604 2% Proceeds from gold and uranium sold as disclosed in MD&A 47,978 36,664 31% 49,933 (4%) 195,048 150,530 30% Cost of sales (including amortization) Cost of sales as disclosed in Financial Statements (a) (32,078) (27,342) 17% (34,993) (8%) (137,648) (114,982) 20% Costs related to gold delivered into Gold Stream Transactions (b) (6,703) (12,083) (45%) (13,178) (49%) (50,115) (41,493) 21% Cost of sales related as disclosed in MD&A (38,781) (39,425) (2%) (48,171) (19%) (187,763) (156,475) 20% Gross profit (loss)(a) Gross profit as disclosed in Financial Statements (a) 13,285 5,384 147% 10,579 26% 41,528 19,944 108% Gross loss related to gold delivered into Gold Stream Transactions (c) (4,088) (8,145) (50%) (8,817) (54%) (34,243) (25,889) 32% Gross profit (loss) as disclosed in MD&A 9,197 (2,761) 433% 1,762 422% 7,285 (5,945) 223% Derivative expense related to Gold Stream Transactions Derivative income (expense) related to Gold Stream Transactions as disclosed in Financial Statements (a) 25,307 (61,050) 141% 74,932 (66%) 14,164 (172,698) 108% Add back: Gross loss related to gold delivered into Gold Stream Transactions(c) 4,088 8,145 (50%) 8,817 (54%) 34,243 25,889 32% Derivative income (expense) related to Gold Stream Transactions (fair value movement only) as disclosed in MD&A 29,395 (52,905) 156% 83,749 (65%) 48,407 (146,809) 133% Notes: (a) Revenue and cost of sales (including related amortization) as disclosed in the Total column of the Consolidated Statements of Comprehensive Income in the Financial Statements. (b) Revenue and cost of sales (including related amortization) included in derivative expense related to Gold Stream Transactions in the Total column of the Consolidated Statements of Comprehensive Income in the Financial Statements. Also see Note 21 to the Financial Statements. (c) Net effect of revenue and cost of sales (including related amortization) included in derivative expense related to Gold Stream Transactions in the Total column of the Consolidated Statements of Comprehensive Income in the Financial Statements.
    • 10. FIU MDA 2012 As at March 31, 2012, current assets, including current assets from discontinued operations, were $21.9 million (March 31, 2011: $73.4 million) and included cash and cash equivalents of $6.7 million (March 31, 2011: $49.6 million). The Corporation’s current assets, excluding current assets from discontinued operations, were $4.1 million as at March 31, 2012 and included cash equivalents of $3.8 million. During Q4 2012, MWS generated $33.9 million in proceeds (Q4 2011: $25.1 million) from 24,862 ounces of gold sold (Q4 2011: 22,150 ounces) at a Cash Cost (as defined in Note (e) on page 7 of this MD&A) of $790 per ounce (Q4 2011: $553 per ounce). MWS generated $132.2 million in proceeds during FY 2012 (FY 2011: $89.0 million) from 99,003 ounces of gold sold (FY 2011: 82,941 ounces) at a Cash Cost of $687 per ounce (FY 2011: $516 per ounce). Although MWS showed an improvement in gold sold, year on year, it’s lower than planned performance was impacted by lower average grade delivered to its gold circuits as a result of challenges with the introduction of new material into the mining mix which was exacerbated by recalcitrant clay levels at the Buffelsfontein No.3 tailings dam, impacting the volume and hence content of feed material that could be delivered to and extracted by the plant infrastructure. The Ezulwini Mine generated $12.9 million in proceeds during Q4 2012 (Q4 2011: $11.6 million) from 8,068 ounces of gold sold (Q4 2011: 11,393 ounces) at a Cash Cost of $2,218 per ounce (Q4 2011: $2,227). During FY 2012, the Ezulwini Mine generated $58.2 million in proceeds (FY 2011: $60.7 million) from 47,442 ounces of gold sold (FY 2011: 59,689 ounces) at a Cash Cost of $2,155 per ounce (FY 2011: $1,605 per ounce). The Ezulwini Mine also sold 23,675 and 82,862 pounds of uranium during Q4 2012 and FY 2012 (FY 2011: 20,500 pounds), respectively, generating $1.2 million in proceeds in Q4 2012 and $4.6 million in proceeds in FY 2012 (FY 2011: $0.8 million). No uranium was sold in Q4 2011. FY 2012 proved a particularly challenging year from a safety and production perspective at Ezulwini Mine, with 4 fatal accidents during calendar 2011, three of which occurred in the latter half of the calendar year, having a significant negative impact on employee morale and productivity of the mine. One of the very few highlights of the year for Ezulwini Mine occurred at the end of Q3 2012 with the settlement of the final quarterly guaranteed ounces requirement to Franco-Nevada pursuant to the Ezulwini Gold Stream Transaction (effectively 64% of the gold sold during Q3 2012 at $400 per ounce of gold). As of January 2012, the mine reverted to delivering only 7% of its gold production to Franco-Nevada at $400 per ounce of gold. IFRS Until March 31, 2011, First Uranium prepared its annual and interim consolidated financial statements in accordance with Canadian GAAP as set out in the Handbook of the Canadian Institute of Chartered Accountants (CICA Handbook). In calendar 2010, the CICA Handbook was revised to incorporate IFRS, and require publicly accountable enterprises to apply such standards effective for financial years beginning on or after January 1, 2011. Accordingly, the Corporation has commenced reporting on this basis in these consolidated financial statements. In these financial statements, the term “Canadian GAAP” refers to Canadian GAAP before the adoption of IFRS. The audited consolidated financial statements for the year ended March 31, 2012 (the “Financial Statements”) have been prepared in accordance with IFRS and include considerations and disclosures as required by IFRS 1, First time adoption of IFRS, using the accounting policies adopted by the Corporation. Subject to certain transition elections disclosed in Note 5 to the Financial Statements, the Corporation has consistently applied the same
    • 11. FIU MDA 2012 accounting policies in its opening IFRS balance sheet at April 1, 2010 and throughout all periods presented, as if these policies had always been in effect. The Corporation’s financial statements, which were previously prepared in accordance with Canadian GAAP, differ in some areas from IFRS. Note 5 to the Financial Statements discloses IFRS information that is material to the understanding of the Financial Statements. Summary of Quarterly Results The table below sets out selected financial data for the periods indicated as derived from First Uranium’s consolidated financial statements: Fiscal Quarters Ended (thousands of dollars, except per share amounts) Revenue** Profit (loss) for the period Basic & diluted earnings (loss) per share Total assets Long-term Liabilities March 31, 2012 45,363 8,673 0.09 660,310 (723,833) December 31, 2011 45,572 (112,374) (0.49) 623,266 (507,124) September 30, 2011 50,237 (30,598) (0.14) 834,844 (570,002) June 30, 2011 38,004 (30,800) (0.15) 952,619 (573,465) March 31, 2011 32,726 (60,792) (0. 30) 960,979 (697,180) December 31, 2010 42,045 (28,298) (0.16) 930,662 (645,772) September 30, 2010 30,299 (57,964) (0.32) 898,161 (621,499) June 30, 2010 29,856 (56,692) (0.32) 837,146 (578,667) March 31, 2010* 28,561 (26,041) (0.14) 684,643 (287,785) December 31, 2009* 31,979 (14,432) (0.09) 695,581 (264,446) September 30, 2009* 19,025 (18,441) (0.11) 658,989 (252,591) June 30, 2009* 12,895 (33,264) (0.22) 640,672 (245,800) *These numbers were extracted from the Corporation’s interim and annual consolidated financial statements that were prepared in accordance with Canadian GAAP. **Revenue relates to gold and uranium sales at discontinued operations only. Market Overview Gold The gold price remained volatile during FY 2012. In Q4 2012, gold spot prices ranged between $1,598 and $1,781 per ounce, with an average gold spot price of $1,691 for the quarter (Q2 2012: $1,688). The average gold spot price per ounce for FY 2012 was $1,650 (FY 2011: $1,294) with prices ranging between $1,434 and $1,895 per ounce over the year. The gold spot price per ounce was $1,663 at the end of FY 2012 and $1,559 at June 28, 2012. Uranium According to the Ux Consulting Company, LLC (“UxC”), the uranium spot price per pound for uranium ranged between $51 and $53 during Q4 2012 and the term price, the price at which most supply contracts are completed, remained unchanged at $63.00 per pound. During FY 2012 the uranium spot price per pound for uranium ranged between $49 and $59 and the term price, the price at which most supply contracts are completed, remained at the $63 per pound level. As of June 29, 2012, the uranium spot price per pound was $50.75 and the term price was $63.00. The Corporation currently does not have any medium to long-term uranium contracts in place and therefore sells uranium at the spot price per pound on date of delivery.
    • 12. FIU MDA 2012 Currency exchange rates During Q4 2012, In US dollar terms, the ZAR traded in a range of $0.12 – $0.13 per US dollar, averaging $0.13. For FY 2012, in US dollar terms, the ZAR traded in a range of $0.12 – $0.15 per ZAR, averaging $0.14 and closed at $0.13. Relative to the US dollar, the Cdn$ traded in a range of $0.97 – $1.01, averaging $1.01. Relative to the US dollar, the Cdn$ traded in a range of Cdn$0.97 – Cdn$1.06, averaging Cdn$1.03 and closed at Cdn$1.00. In Cdn$ terms the ZAR traded in a range of Cdn$0.12 – Cdn$0.13, averaging Cdn$0.13. In Cdn$ terms the ZAR traded in a range of Cdn$0.12 – Cdn$0.15, averaging Cdn$0.13 and maintained its position at year-end. At March 31, 2012, First Uranium held 63% in ZAR, 20% in US dollars and the remaining 15% of its cash in Cdn$. At June 29, 2012, the Corporation held 71% in ZAR, 28% in US dollars and the balance in Cdn dollars. The funds are primarily held in cash and bank-sponsored guaranteed investment certificates with Canadian and South African banks. Inflation The Corporation’s operations are subject to inflation. Over the past year the South Africa inflation rate increased from 4.1% per annum at the end of FY 2011 to 6% per annum at the end of FY 2012. However, the mining inflation rate is well above this, due to significant increases in power and reagent costs, as well as wage increases which was also above the current inflation rate. Operations Overview Mine Waste Solutions MWS is a gold and uranium tailings recovery operation located in the western portion of the Witwatersrand Basin, approximately 160 kilometres from Johannesburg. MWS consists of 14 tailings storage facilities from three gold and uranium mines that operated for 50 years of which the Buffelsfontein No.2, No.3 and No.4 tailings dams, as well as the Hartebeesfontein No.1 tailings dam, are currently being mined. In December 2008, First Uranium entered into the MWS Gold Stream Transaction with FN pursuant to which FN paid MWS $125 million upfront. In addition, FN will make an ongoing payment equal to the lesser of $400 per ounce (the Fixed Price) (subject to an annual inflation adjustment of 1 percent, starting in the fourth year after following receipt of the first payment) and the prevailing spot price per ounce at the time the gold delivered by *These rates reflect South African incident frequency rates measured in rate per million hours worked. Safety rates * Lost Time Injury Rate Reportable Injury Rate Fatality Rate Dressing Station Injury Rate FY 2012 7.00 3.50 0.00 10.50 FY 2011 1.30 1.70 0.00 10.05
    • 13. FIU MDA 2012 MWS – Year under review MWS got off to a good start in the 2012 financial year with the commissioning of the new TSF and the third gold plant module in mid-April 2011, which served to boost tonnage throughput as a result of having increased the processing capacity from an average of 1.2 mtpm to 1.8 mtpm. At the end of Q1 2012, the capital program for the third gold plant module as well as the TSF was fundamentally complete with minor trailing obligations remaining. At the end of April 2012 MWS commenced the first phase of the technical completion tests pursuant to the MWS Gold Stream Transaction which required the operation to achieve consistent production over three consecutive months where the tonnage processed and/or re-processed through the project is within 85% of the 1.933 million tonnes of tailings per month in respect of the project (“Steady State”). At the end of July 2011, MWS concluded the Steady State period, followed by the successful completion on August 24, 2011 of the technical completion test, thereby avoiding the imposition of the penalties provided under the MWS Gold Stream Transaction. However, the commissioning of the new infrastructure together with the introduction of new resources was not without its challenges. While the infrastructure improvements contributed to increased gross profits during the year as a result of higher tonnage throughput driven primarily by the increase in processing capacity, running costs and teething problems associated with the newly completed infrastructure led to increases in Cash Costs, largely as a result of increased fuel, water and power usage. Additionally, the conclusion of the final gold expansion phase of the MWS project in Q1 2012 introduced new resources into the mining mix, namely the Hartebeestfontein tailings dams No.1, and 2, which due to unique material characteristics posed numerous challenges to the plant recovery performance which ultimately impacted negatively on production.
    • 14. FIU MDA 2012 MWS Q4 2012 Q4 2011 %Change Q3 2012 %Change FY 2012 FY 2011 %Change Production Tonnes reclaimed (000s) 4,982 3,625 37% 5,107 (2%) 19,814 13,421 48% Average gold recovery grade (grams/tonne) 0.16 0.19 (16%) 0.16 (6%) 0.16 0.19 (16%) Percentage gold recovered 48% 55% (13%) 51% - 49% 55% (11%) Total ounces of gold sold 24,862 22,150 12% 25,142 (1%) 99,003 82,941 19% Ounces of gold sold at full market prices 18,604 16,617 12% 18,845 (1%) 74,297 63,040 18% Ounces of gold delivered into MWS Gold Stream Transaction at $400/oz 6,258 5,533 13% 6,297 (1%) 24,706 19,901 24% Average proceeds from gold per ounce sold ($)(d) 1,362 1,131 20% 1,321 3% 1,335 1,073 23% Average Cash Cost per ounce of gold sold ($)(e) (790) (553) 43% (613) 29% (687) (516) 33% Average cost per ounce sold ($) (790) (641) 23% (727) 9% (781) (594) 32% Financial (thousands of dollars) Proceeds from gold sales (d) 33,862 25,052 35% 33,202 2% 132,216 88,982 49% Revenue from gold sold at full market prices(a) 31,442 23,014 37% 30,734 2% 122,417 80,901 51% Proceeds from gold delivered into MWS Gold Stream Transaction(b) 2,420 2,038 19% 2,468 (2%) 9,799 8,081 21% Cost of sales (excluding amortization) (d) (19,648) (12,239) 61% (15,414) 27% (68,063) (42,808) 59% Costs related to gold sold at full market prices(a) (14,167) (9,631) 47% (11,567) 22% (50,559) (32,764) 54% Costs related to gold delivered into MWS Gold Stream Transaction(b) (5,481) (2,608) 110% (3,847) 42% (17,504) (10,044) 74% Amortization(d) - (1,955) - (2,869) - (9,285) (6,441) 44% Amortization related to gold sold at full market prices(a) - (1,470) - (2,160) - (6,979) (4,896) 43% Amortization related to gold delivered into MWS Gold Stream Transaction (b) - (485) - (709) - (2,306) (1,545) 49% Gross profit 14,214 10,858 31% 14,919 (5%) 54,868 39,733 38% Notes: See notes (a) and (b) under Reconciliation of certain financial information in Financial Statement with MD&A table on page 9. (a) To be able to adequately report on the financial performance of the Corporation and its operations in this MD&A, the revenue and cost of production related to the gold ounces delivered pursuant to the Gold Stream Transactions have been added back to revenue and costs of sales, respectively, in this MD&A and are not included in the derivative expense related to Gold Stream Transactions in profit and loss as disclosed in the Total column in the Consolidated Statements of Comprehensive Income of the Financial Statements. Only the fair value movement on the derivative liabilities related to the Gold Stream Transactions has been included in the derivative expense in this MD&A. This is a non-IFRS measurement and investors are cautioned not to place undue reliance on it and are advised to read all IFRS accounting disclosures presented in the Corporation’s Financial Statements. (b) “Cash Costs" are costs directly related to the physical activities of producing gold and uranium and include mining, processing and other plant costs; third-party refining and smelting costs; marketing expense, on-site general and administrative costs; royalties; on-mine drilling expenditures that are related to production and other direct costs. Sales of by-product metals such as uranium and silver are deducted from the above in computing cash costs. Cash costs exclude depreciation, depletion and amortization, corporate general and administrative expense, exploration, interest, and pre-feasibility costs and accruals for mine reclamation. Cash costs are calculated and presented using the "Gold Institute Production Cost Standard" applied consistently for all periods presented. The Gold Institute was a non-profit industry association comprised of leading gold producers, refiners, bullion suppliers and manufacturers. This institute has now been incorporated into the National Mining Association. The guidance was first issued in 1996 and revised in November 1999. Total cash costs per ounce is a non-IFRS measurement and investors are cautioned not to place undue reliance on it and are advised to read all IFRS accounting disclosures presented in the Corporation’s Financial Statements.
    • 15. FIU MDA 2012 The primary challenge experienced by the newly commissioned third gold module was as a result of the new Hartebeestfontein tailings dams being comprised of materials of a much larger fraction size than the historically mined Buffelsfontein tailings dams. This necessitated modifications to screening ahead of the carbon-in-leach circuit as well as modifications to the elution circuit in an effort to improve recovery performance. Initially, the overall grade delivered to the third gold module as well as recovery performance was maintained by blending the Hartebeesfontein No. 1 tailings dam material with material from higher grade remote satellite dams. During Q3 2012 however, contributions from the remote satellite dams diminished as the resource approached depletion which impacted negatively on overall grade delivered and hence gold production. Gold plant modules one and two also experienced reduced performance as a result of high clay content which reduced reclamation rates and hence gold content delivered to these modules for extraction. As a consequence of lower feed grades, reduced mining rates arising from high clay content and combined with the impact of the temporary suspension by the NNR towards the end of July 2011 (as discussed under the Permitting section of this MD&A), management downgraded its FY 2012 guidance in Q3 2012, from a range of between 105,000 and 115,000 ounces to a range of between 98,000 and 100,000 ounces. For FY 2012, MWS achieved 99,003 ounces, a 19% improvement on the 82,941 ounces in FY 2011. The first gold plant module saw a 7% drop in grade and an associated, anticipated drop in recovery as the resources from the high grade Buffelsfontein No. 2 tailings dam diminished and the proportion of the mining mix from the lower grade Buffelsfontein No. 3 tailings dam increased. The feed grade delivered to the second gold plant module during Q4 2012 increased by 9%, largely due to the proportion of high grade floor material from Buffelsfontein No. 4 tailings dam in the mining mix which is approaching the end of its life. Despite the increase in feed grade compared to Q3 2012, there was no commensurate increase in recoveries, a fact that management attributes to the recent clay intersections on Buffelsfontein No. 3 tailings dam. While a certain quantity of clay was anticipated in processing the Buffelsfontein No. 3 tailings dam, the relative proportion of clay which is difficult to reclaim compared to clean material which is easy to reclaim was not. During March 2012 the estimated split of clay material to clean material was 70%, compared to historical percentages of 20%. This has negatively impacted on both throughput and recovery performance to gold module one and two respectively. The significant proportion of clay to clean material present in the Buffelsfontein No. 3 tailings dam which supplies 90% of the tonnes processed in the first and second gold plant module negatively impacted the revenue of these two modules. Throughput rates at the third gold plant module remained fairly constant, however marginal quarter on quarter decreases in feed grade to the plant coupled with decreased recovery performance impacted negatively on Q4 2012 production compared to Q3 2012. It is expected that going forward the grade delivered to the plant will reduce by approximately 19%. The tonnage throughput increased by 37% from Q4 2011 to Q4 2012, as a result of the additional plant module that came into production during FY 2012, however, the challenges discussed above limited gold production during Q4 2012 to an increase of only 12% in gold ounces sold compared to Q4 2011, which combined with the increase in average gold selling price compared to Q4 2011, resulted in a 35% increase in revenues in Q4 2012 compared to Q4 2011. Due to the challenges experienced at MWS, particularly since Q3 2012, tonnes and ounces sold and the resulting revenues in Q4 2012 were similar to that of Q3 2012. The 49% increase in revenues from the MWS operation in FY 2012 reflects the 19% increase in gold ounces sold in FY 2012 compared to FY 2011 combined with the 23% increase in average gold selling prices year-over-year. The gold
    • 16. FIU MDA 2012 ounces sold were limited to only 19% due to the lower grades and recoveries realised during the year as mentioned above. The 61% and 49% increases in Cash Costs in Q4 2012 and FY 2012 compared to Q4 2011 and FY 2011, respectively, were driven by several factors, namely: • The high unit cost of operating the Hartebeesfontein No. 7 satellite dam (including trucking) which are important in managing the grade and fraction size mining mix reporting to the third gold module reclamation station; • Additional power costs of running the new TSF, which is situated approximately 16km from the metallurgical complex; • Additional water costs resulting from less than planned return water reporting from the TSF to the reclamation operations and the resultant need to supplement water from more expensive sources. The need to supplement water will reduce in time as the dam begins to fill and is less affected by evaporation. • There was a substantial increase in certain key reagent costs in Q4 2012 (resulting in the 27% increase compared to Q3 2012). Due to the Corporation’s decision to dispose of its principal assets at the start of Q4 2012, no amortization for the MWS assets was provided for on a consolidated basis during Q4 2012. The increase in amortization year- over-year is driven by the 48% higher tonnage throughput for FY 2012 compared to FY 2011. The higher revenues in both Q4 2012 and FY 2012 more than offset the higher costs in the respective periods and resulted in the 31% and 38% increases in gross profits generated by MWS compared to Q4 2011 and FY 2011, respectively. In an effort to try and improve the recovery performance discussed above, within the respective gold modules, optimisation test work continued throughout FY 2012. With the work concluded thus far, an opportunity to improve recovery performance for the first gold module has been defined. Circuit modifications aimed at improving leach time are expected to be concluded by the end of Q1 2013 with the intention of commissioning in early Q2 2013. Economically viable opportunities for the second and third gold modules have not emerged thus far. Notwithstanding the modifications that can be made to gold module one, the relative proportion of clay compared to clean material is expected to increase as the availability of clean sources of material on Buffelsfontein No. 3 tailings dam continues to diminish and with it, mining mix flexibility. Historical clay handling mechanisms are unable to cope with the relative volume of clay, consequently significant focus is being applied to sourcing alternative clay handling mechanisms which have the ability to improve the reclamation rate as well as the quality of the material being delivered to the plant. Until then, the performance of gold module one and two will continue to diminish both in terms of tonnage delivered to the plant and the ability of the plant to maximise recovery from clayey material. It is difficult to quantify the anticipated impact on throughput and recovery performance, however, management anticipate that this could range from 15% to 25% from current levels dependent upon the relative extent of clay to clean material on Buffelsfontein No. 3 tailings dam. Ezulwini Mine The Ezulwini Mine lies within the Witwatersrand Basin, located approximately 40 kilometres from Johannesburg on the outskirts of the town of Westonaria in the Gauteng Province, South Africa. The Ezulwini Mine is an underground mine that has two separate tabular ore bodies about 400 metres apart. The Upper Elsburg (“UE”) ore body, where most of the mining has been done to date, is a gold only deposit. The Middle Elsburg (“ME”) ore body is a gold and uranium deposit and is relatively unexploited.
    • 17. FIU MDA 2012 The Ezulwini Mine is part of the Ezulwini mining right, which includes certain surface and underground assets, acquired by the Ezulwini Mining Company (Proprietary) Limited (“EMC”). When First Uranium acquired EMC from Simmer & Jack in December 2006, Simmer & Jack was the registered owner of the Ezulwini mining right. Consequently EMC and Simmer & Jack entered into an agreement (the “Ezulwini Mining Right Agreement”) pursuant to which Simmer & Jack agreed to take the necessary steps to obtain all ministerial approvals in order to effect the ceding of the Ezulwini mining right from Simmer & Jack to EMC. On March 20, 2008, the Department of Mineral Resources (“DMR”) consented to the ceding of the Ezulwini mining right to EMC. On April 22, 2010, the Corporation registered the cession of the mining right in the name of EMC. (Balance of page intentionally left blank)
    • 18. FIU MDA 2012 Notes: See notes (a) and (b) under Reconciliation of certain financial information in Financial Statement with MD&A table on page 9 and notes (d) and (e) under MWS table on page 13. Ezulwini Mine Q4 2012 Q4 2011 %Change Q2 2012 %Change FY 2012 FY 2011 %Change Production Tonnes milled 91,302 152,395 (40%) 148,072 (38%) 566,216 594,378 (5%) Average gold recovery grade (grams/tonne) 3.11 2.64 18% 2.40 30% 2.67 2.41 11% Total ounces of gold sold 8,068 11,393 (29%) 13,405 (40%) 47,442 59,689 (21%) Ounces of gold sold at full market prices 7,574 6,951 9% 8,515 (11%) 32,107 41,031 (22%) Ounces of gold delivered into the Ezulwini Gold Stream Transaction 496 4,442 (89%) 4,889 (90%) 15,336 18,658 (18%) Average proceeds from gold per ounce sold ($)(d) 1,596 1,019 57% 1,142 40% 1,228 1,017 21% Average Cash Cost per ounce of gold sold ($)(e) (2,218) (2,227) - (2,049) 8% (2,155) (1,605) 34% Average cost per ounce sold ($) (2,218) (2,215) - (2,124) 4% (2,231) (1,680) 33% Pounds of uranium sold 23,675 - - 27,780 - 82,862 20,500 304% Average uranium selling price per pound ($) 52 - - 51 - 55 41 34% Financial (thousands of dollars) Proceeds from gold and uranium sold (d) 14,116 11,611 22% 16,731 (16%) 62,832 61,548 2% Revenue from gold sold at full market prices(a) 12,683 9,712 31% 13,416 (5%) 52,175 53,184 (2%) Proceeds from gold delivered into Ezulwini Gold Stream Transaction(b) 195 1,899 (90%) 1,893 (90%) 6,073 7,523 (19%) Revenue from uranium sold(a) 1,238 - - 1,422 - 4,584 841 1,238% Cost of sales (excluding amortization) (d) (19,132) (25,374) (25%) (28,888) (34%) (106,838) (103,712) 3% Costs related to gold and uranium production(a) (17,916) (16,407) 9% (20,480) (13%) (77,678) (74,907) 4% Costs related to gold delivered into Ezulwini Gold Stream Transaction (b) (1,216) (8,967) (86%) (8,408) (86%) (29,160) (28,805) 1% Amortization (d) - 143 - (1,001) - (3,575) (3,514) 2% Amortization related to gold and uranium production(a) - 165 - (785) - (2,436) (2,416) 1% Amortization related to gold delivered into MWS Gold Stream Transaction (b) - (22) - (216) - (1,139) (1,098) 4% Gross loss (5,016) (13,620) (63%) (13,158) (62%) (47,581) (45,678) 4%
    • 19. FIU MDA 2012 *These rates reflect South African incident frequency rates measured in rate per million hours worked. In November 2009, First Uranium entered into the Ezulwini Gold Stream Transaction with FN pursuant to which FN paid the Ezulwini Mine $50 million upfront. In addition, FN will make an ongoing payment equal to the lesser of $400 per ounce (the Fixed Price) (subject to an annual inflation adjustment of 1 percent, starting in the fourth year after the upfront payment) and the prevailing spot price per ounce, at the time the gold is delivered under the contract. Pursuant to the Ezulwini Gold Stream Transaction, the Ezulwini Mine is obliged to deliver a minimum of 16,500 and 19,500 ounces of gold into the transaction during calendar years 2010 (the 2010 Guaranteed Ounces) and 2011 (the 2011 Guaranteed Ounces) respectively, such deliveries to be comprised of at least 4,125 and 4,875 ounces per quarter, respectively (see Note 15.2 to the Financial Statements). Pursuant to the Ezulwini Gold Stream Transaction, the Ezulwini Mine granted to FN a special bond over certain plant and equipment and a pledge of 7% of the gold production from the Ezulwini Mine. First Uranium has guaranteed the obligations owed by the Ezulwini Mine to FN. Ezulwini – year under review Despite an intensive change management process implemented in Q1 2012, the anticipated improvements at Ezulwini Mine were not forthcoming and at the end of Q3 2012, a restructuring of Ezulwini Mine was announced that resulted in approximately 50% of the workforce being retrenched by the end of Q4 2012. The financial year started off promisingly enough. The uranium plant re-opened in April 2011 after a hiatus of 8 months and soon achieved uranium recoveries in excess of 80%; 5% higher than planned design recoveries of 75%. In Q1 2012 proceeds from gold sales at Ezulwini Mine rose 35% reflecting the overall increase in tonnage throughput (8%), average grade gold recovery grade (7%) and gold prices (25%) over the previous quarter (Q4 2011). These gains were offset by having to deliver higher ounces into the Ezulwini Gold Stream Transaction at $400 per ounce since Ezulwini Mine under-delivered on the required Guaranteed Ounces for Q4 2011 and as a result had to deliver the outstanding ounces in the Q1 2012 (see Note 15.2 to the Financial Statements). Costs spiked sharply with the higher tonnage profile and increase in development meters resulting in higher stores and material costs, while a 25% annual increase in electricity rates on top of a surge in usage due to increased shaft and plant activity, added to the cost burden. These factors, combined with the impact of the shaft maintenance program, meant that despite the improvement in key production metrics, the loss for Q1 2012 widened quarter on quarter and year on year. Despite this, the mood was cautiously optimistic. The shaft maintenance program which had constrained production and development during Q4 2011, was finally complete, and even though the inability to invest in development during Q4 2011 was still expected to impact on the production build-up into Q2 2012, planned additional investments in development where expected to deliver increased production build-up albeit at slower rates than previously planned. This would be aided by an increase in key conveyance speeds as a result of the successful shaft maintenance program. Safety rates * Lost Time Injury Rate Reportable Injury Rate Fatality Rate Dressing Station Injury Rate FY 2012 8.40 2.45 0.35 14.24 FY 2011 9.02 2.48 0.26 15.17
    • 20. FIU MDA 2012 Towards the end of July 2011, an integrity inspection on the re-designed IX columns in the Ezulwini Mine’s uranium plant confirmed that the columns were performing according to the design criteria. Additionally, the ramp up plan for the ME ore body which supplied ore to the uranium plant was going according to plan, being derived from conventional tabular ore body mining, unlike the complex UE ore body. Additionally, management was looking forward to the fourth quarter where instead of delivering between 30% and 40% of gold produced to FN in terms of the Ezulwini Gold Stream Transaction, Ezulwini Mine would revert to delivering only 7% of its gold production at $400 per ounce, come Q4 2012 – an event that expected to have a significant impact on the cash proceeds received by the Ezulwini Mine for its gold sold. In July, the operation hit two new production records: the plant milled 70,058 tonnes and the development crews achieved 908 development meters, both of which supported the view that the planned production ramp-up was on track. This achievement and the associated upward trends in production were derailed, sadly, by fatal accidents on August 11, 2011 and September 13, 2011. The August accident resulted in all development ends being stopped on the mine for an extended period of time and the September accident resulted in all activities in the reef horizons being stopped for a similar period of time. The impact of the accidents went far beyond the mandatory stoppages enforced by the DMR as even after the re-start of operations, production teams struggled to regain the momentum they had established during July. Given that accident-related stoppages posed one of the most significant risks to Ezulwini Mine’s ability to meet and/or exceed its targets, Management reinforced its efforts to attain a safe working environment by initiating a number of proactive safety drives. Despite these setbacks, evidence of a turnaround could still be seen: development meters per production shift were within the planning parameters and the mining team managed to build good production momentum into late October and early November; costs appeared to be coming down thanks to the various cost controls and initiatives implemented in the first half of the year; and Ezulwini’s gold plant continued to operate efficiently, even in the face of an inconsistent supply of ore following the aforementioned fatal accidents. Gold recovery for the month of September was 95.5% and uranium recovery was 82%. The re-commissioning of the elution circuit received the go ahead during Q2 2012 and was expected to be commissioned by the end of December 2011, meaning that Ezulwini’s gold plant would no longer need to toll treat its carbon at MWS, as well as yielding a number of benefits to the operation, particularly related to inventory management and reduced handling and transportation costs. However, on November 14, 2011 the mine regrettably suffered another fatal accident following a fall of ground. This resulted in a mandatory stoppage which, although necessary, had the effect of undermining the progress that had been made to that point. Tonnage throughput for Q3 2012 fell 9% compared to Q3 2011. This, along with lower average gold recovery grades resulted in a 31% decline in gold ounces sold in Q3 2012 from Q3 2011, resulting in a decrease in the proceeds from gold ounces, although at lower rates due to the higher gold price over the comparative period. Due to much lower production in Q3 2012, the mine effectively delivered 64% of its gold ounces sold during the quarter at $400 per ounce of gold in order to meet the final quarterly payment to FN pursuant to the Ezulwini Gold Stream Transaction. As a consequence, on December 19, 2011, management announced the planned restructuring in accordance with Section 189A and 189 of The South African Labour Relations Act and, at the same time, stopped mining of all marginal production panels. The planned restructuring was concluded by the end of Q4 2012. Following consultation and negotiations with organized labour, the staff complement was reduced by 1,320 employees, with many being offered alternative positions at neighbouring operations. As at April 1, 2012, the Ezulwini Mine employed 1,980 employees.
    • 21. FIU MDA 2012 In Q4 2012, the on-going drive to improve safety performance resulted in a significant improvement in key safety metrics. On March 14, 2012, the mine reached 250,000 fatality free shifts, which is the first important milestone towards the operation’s goal of 1,000,000 fatality free shifts by the end of FY 2013. Aligned to the restructuring of the Ezulwini Mine, management completed a new ten-year operating plan which included more detailed analysis of the UE section and plans for further technical work to be conducted, in order to define a four-year mineral reserve and a corresponding production plan which yields sustainable and profitable results. In terms of the new four-year plan, mining of all marginal production panels has ceased. As a consequence, mining in the ME ore body has been temporarily halted and the operation of the uranium plant suspended due to the combination of low uranium prices and the high costs associated with mining the ME ore body. The ME ore body is on average 1,500 metre further from the shaft and 300 metre deeper than the UE ore body which adds significantly to the cost of mining this area. The lower gold grades and persistently low uranium prices do not generate sufficient revenue per tonne to offset the high cost per tonne. This is further exacerbated by the high cost per tonne associated with operating the under-utilized uranium plant and the Corporation’s limited cash reserves. As a result, the Ezulwini uranium plant was placed on care and maintenance at the end of February 2012. Notwithstanding the restructured operation at the Ezulwini Mine, and the reduction in the required delivery of gold to FN to 7% of gold production, the turnaround in operations at Ezulwini had not yet realized or yielded the expected results. While the quantity and grade of the blasted tonnes was substantially in-line with the new operating plan, the mine was unable to meet its tonnage targets, due mainly to a number of tramming constraints, including a fall of ground on one of the major ore transfer levels. As a result, the operation continued to lose money in Q4 2012 and consume cash at a greater rate than planned. In order to address these issues, management have developed and are in the process of implementing a detailed action plan, which includes clearing the fall of ground, correcting the trackless section operating conditions and addressing the mechanical condition of the trackless equipment on the level. The above-mentioned issues resulted in a 40% and 5% lower tonnage throughput for Q4 2012 and FY 2012 compared to Q4 2011 and FY 2012, respectively. This, offset by improved gold recovery grades over the comparative periods, resulted in the 29% and 21% decline in gold ounces sold in Q4 2012 and FY 2012, respectively, from its comparative periods. Consequently the proceeds from gold ounces sold also decreased, although at lower rates, primarily due to the higher gold price over the comparative periods. As of Q4 2012, the Ezulwini Mine reverted to delivering only 7% of its gold production to FN pursuant to the Ezulwini Gold Stream Transaction. Costs for Q4 2012 decreased by 25% compared to Q4 2011 primarily as a result of the section 189 process along with the new mine plan implemented during the quarter. Costs for FY 2012 increased marginally (3%) compared to FY 2011, largely as a result of increased labour, power and stores and material costs. Overall costs increases were limited due to various cost controls and initiatives implemented in the first half of calendar 2011 in order to reduce costs. Power costs increased as a result of the 25% annual increase in electricity rates over the comparative periods as well as an increase in usage due to increased shaft and plant activity. Stores and material costs also increased in line with the higher tonnage profile. As of Q1 2012, stores, power and material costs were also higher as a result of the start-up of the uranium plant at the start of Q1 2012. For most of FY 2011 the uranium plant did not operate at the same levels in FY 2012. Due to the Corporation’s decision to dispose of its principal assets at the start of Q4 2012, no amortization for the Ezulwini Mine assets was provided for on a consolidated basis during Q4 2012.
    • 22. FIU MDA 2012 As at the end of Q1 2013, Ezulwini Mine is beginning to see the results of the restructuring process that was begun in December 2011, with gold sold in Q1 2013 in excess of 9 500 ounces. Cash costs are in line with budget and, assuming production ramps up to the expected levels, the Ezulwini Mine is expected to start breaking even by the close of Q2 2013. The current mine plan is targeting a gold output of approximately 50,000 ounces for FY 2013 from an average monthly production of 44,000 tonnes. Despite the uranium sections of the mine having been closed and the uranium plant put onto care and maintenance, the Ezulwini Mine will realize revenue from uranium sales in Q1 2013 related to the sale of the 25,000 pounds of uranium carried over from uranium production in FY 2012, prior to halting the uranium mining operations. Unfortunately due to constraints on the cash available for certain capital projects and the fact that the Ezulwini Mine is no longer operating its uranium plant, all work on the pilot float plant was terminated in Q4 2012. The aforementioned cash constraints also lead to a delay in the repair of the Ezulwini Mine’s elution circuit, which is now back on track and should be commissioned by the end of Q1 2013. While progress has been made at the Ezulwini Mine over the last 15 months, the operations have not yet turned cash flow positive and it requires additional capital investment to fund the operations until such time as it turns cash positive. Permitting MWS The MWS reclamation and rehabilitation operation is diverse both in terms of the nature of the operations and its geographic spread and is therefore regulated by a host of legislation. Principally by the National Water Act, National Environmental Management Act (“NEMA”) and the National Nuclear Regulator Act. MWS is of the opinion that it currently holds all the necessary authorisations in order to conduct its operations. Despite the fact that a tailings reclamation project does not require a mining right under current South African mining legislation, MWS applied for a new order mining right in 2008 in anticipation of a proposed amendment to the MPRDA which, although drafted in 2008, has yet to come into effect. A New Order Mining Right was granted to MWS in 2009 subject to MWS agreeing on a mechanism to fund the rehabilitation guarantee as well as MWS meeting the requisite BEE credentials (see Corporate Overview section of MD&A) in terms of the New Order Mining Right. This was the status when the Minister of Mineral Resources issued the purported withdrawal of the New Order Mining right on September 15, 2011. However, the withdrawal has no basis in law since MWS does not require a mining right in order to operate. MWS has respectfully informed the Minister of its rights in this regard and will take legal action, if necessary, to protect its right to operate. On this basis, operations continue and MWS will continue to pro-actively engage with the Minister and the DMR to resolve the issue. As reported in the Corporation’s news release issued on January 4, 2012, the South African Water Tribunal dismissed an appeal by a local environmental pressure group, the Federation for a Sustainable Environment, against the issuing of MWS’s Water Use Licence and the Tribunal has closed its file on the matter. On February 1, 2012 MWS received notice that the FSE intends to appeal the Water Tribunal’s decision to the High Court. MWS intends to vigorously oppose the matter. On July 25, 2011, MWS received a directive from the National Nuclear Regulator (“NNR”) to suspend operations. The suspension was related to the operation of the MWS slurry pipelines and spillages emanating from the pipelines. After intensive engagement with the NNR, the suspension was lifted provided MWS could ensure
    • 23. FIU MDA 2012 continuous improvement relating to the operation of the pipeline. To this end, an updated pipeline management program providing for improved monitoring and maintenance of the pipeline was submitted to the NNR at the end of September 2011. A follow-up inspection was conducted by NNR officials on December 23, 2011 and no major non-compliance issues were noted. MWS continues to work closely with the NNR to ensure that it complies with its licence conditions. On February 10, 2012 MWS received a notice of intention to issue a directive (“Pre-Directive”) in terms of section 31 A of the Environment Conservation Act (No. 73 of 1989) (“ECA”) and or Section 28 of the National Environmental Management Act (No. 107 of 1998) from the Department of Environmental Affairs (“DEA”). The Pre-Directive lists certain concerns that the DEA has with the MWS reclamation project and the environmental impact thereof. The DEA has requested information from MWS relating to the concerns which MWS duly submitted on February 24, 2012. While no formal feedback has been received from the DEA since the submission, management is confident that the issues have been materially addressed. Ezulwini Mine As previously reported, the DMR issued a compliance notice in terms of Section 47 of the MPRDA to the Ezulwini Mine in March 2011 pursuant to an annual DMR compliance audit inspection held at the mine on March 9, 2011. The notice stated that the mine must address certain matters in order to maintain the Ezulwini mining right. After significant interaction with the DMR over the last couple of months, management is pleased to advise that the DMR lifted the Section 47 notice on June 12, 2012. (Balance of page intentionally left blank)
    • 24. 24 FIU MDA 2012 Consolidated Financial Results (thousands of dollars) Q4 2012 Q4 2011 %Change Q3 2012 %Change FY 2012 FY 2011 %Change Proceeds from gold and uranium sold(d) 47,978 36,664 31% 49,933 (4%) 195,048 150,530 30% Revenue from gold sold at full market prices(a) 44,125 32,726 35% 44,150 - 174,592 134,085 30% Proceeds from gold delivered into Gold Stream Transactions (b) 2,615 3,938 34% 4,361 (40%) 15,872 15,604 2% Revenue from uranium sold (a) 1,238 - - 1,422 - 4,584 841 445% Cost of sales (including amortization) (d) (38,781) (39,425) (2%) (48,171) (19%) (187,763) (156,475) 20% Costs related to gold and uranium production (a) (32,078) (27,342) 17% (34,993) (8%) (137,648) (114,982) 20% Costs related to gold delivered into Gold Stream Transactions (b) (6,703) (12,083) (45%) (13,178) (49%) (50,115) (41,493) 21% Gross profit (loss) (d) 9,197 (2,761) 433% 1,762 422% 7,285 (5,945) 223% Gross profit (loss) related to gold and uranium sold at market prices (a) 13,285 5,384 147% 10,579 26% 41,528 19,944 108% Gross profit (loss) related to gold delivered into Gold Stream Transactions (c) (4,088) (8,145) (50%) (8,817) (54%) (34,243) (25,889) 32% Other income 623 955 (35%) 588 6% 2,497 3,177 (21%) Other expenditures(f) (11,101) (5,222) 113% (6,171) (95%) (31,561) (32,075) (2%) Impairment of Ezulwini Mine’s assets 1,829 - - (180,000) 101% (178,171) (1,482) 119% Fair value movement on Rand Notes liability (4,630) (5,844) (21%) 1,315 (452%) 12,065 (22,133) 155% Derivative income (expense) related to Gold Stream Transactions (fair value movement only) (d) 29,395 (52,905) 156% 83,749 (65%) 48,407 (146,809) 133% Foreign exchange (loss) gain 11,344 (5,041) 325% (2,670) 525% (64) (792) (92%) Profit (loss) before interest and income taxes 36,657 (70,818) 152% (101,427) 136% (139,542) (206,059) 32% Investment income 132 135 (2%) 59 124% 425 726 (41%) Interest and accretion expenditures (12,523) (7,606) 65% (8,290) 51% (36,866) (28,556) 29% Accretion expense on asset retirement obligations (1,530) (1,238) 24% (366) 318% (2,794) (2,452) 14% Profit (loss) before income taxes 22,736 (79,527) 129% (110,024) 121% (178,777) (236,341) (24%) Income tax (charge) recovery (14,064) 18,736 (175%) (2,350) 498% 13,678 32,596 (58%) Profit (loss) for the period 8,672 (60,791) 114% (112,374) 108% (165,099) (203,745) (19%) Other comprehensive income (loss) 78 (101) 177% 216 (64%) 430 166 159% Movement on foreign currency translation reserve 32,053 (26,451) 221% (17,429) (82%) (80,143) 51,191 (256%) Comprehensive profit (loss) for the period 40,803 (87,343) 147% (129,587) 131% (244,812) (152,388) 61% Loss per common share (0.20) (0.31) (35%) (0.49) (59%) (0.69) (1.10) (37%) Notes: See notes (a) to (c) under Reconciliation of certain financial information in Financial Statement with MD&A table on page 9 and notes (d) and (e) under MWS table on page 13. (f) Other expenditures include general, consulting and administrative expenditures, pumping and rehabilitation costs, stock-based compensation, non-production related amortization and FN penalty related to the MWS Gold Stream Transaction.
    • 25. FIU MDA 2012 Consolidated Financial Review The Corporation reported higher consolidated revenues from gold and uranium sold for Q4 2012 (31%) and FY 2012 (30%) compared to Q4 2011 and FY 2011, with consolidated costs increasing less (3% and 19%, respectively) than revenues, and culminated in consolidated gross profits for Q4 2012 and FY 2012 compared to consolidated gross losses for Q4 2011 and FY 2011. The challenges faced at MWS and the Ezulwini Mine during Q4 2012, as discussed under the Operations review section of this MD&A, resulted in consolidated revenues for Q4 2012 coming in 4% lower compared to Q3 2012. Fortunately, consolidated costs decreased by 12% compared to Q3 2012, and as a result of the Corporation’s decision to dispose of its principal assets, no amortisation (on consolidated basis only) was accounted for during Q4 2012 on the assets of both MWS and the Ezulwini Mine. The decrease in consolidated revenues were offset by the higher reduction in consolidated costs quarter-over-quarter and resulted in a substantial improvement in consolidated gross profits from Q3 2012. As a result of the section 189 process and revised mine plan at the Ezulwini Mine, its cost base reduced by 34% compared to Q3 2012. MWS’s costs, on the other hand, increased by 27% compared to Q3 2012, primarily due to significant price increases in certain key reagents. Other income, consisting primarily of fees for sludge pumping services to a third party, by-product sales, scrap sales and rental income at the Ezulwini Mine, varies from period to period relative to the pumping activity, sales and rental units occupied. Other expenditures (as defined in Note (f) to the Consolidated Financial Review table below) for Q4 2012 were substantially higher compared to Q4 2011 and Q3 2012, primarily as a result of $2.0 million in retrenchment costs in Q4 2012 resulting from Ezulwini Mine’s section 189 process and additional legal and advisory costs incurred during the quarter relating to the process ran by the Special Committee (as discussed under the Financial Position section of this MD&A) along with higher pumping costs offset by lower stock-based compensation over the comparative periods. Notwithstanding the additional and higher costs in Q4 2012, other expenditures for FY 2012 were marginally lower (2%) compared to FY 2011, mainly as a result of various cost cutting initiatives implemented throughout FY 2012. The restructuring process at the Ezulwini Mine in December 2011 resulted in an impairment assessment of the Ezulwini Mine’s assets. In assessing whether the Ezulwini Mine’s assets has been impaired, the carrying value was compared with its recoverable amount at year-end. The recoverable amount was based on the fair value less cost to sell approach derived from the Gold One consideration for the Ezulwini Mine. As a result of the impairment exercise, the carrying amount of the Ezulwini Mine’s assets that was included in property, plant and equipment has been reduced to its recoverable amount as at March 31, 2012 through the recognition of an impairment loss of $178.2 million against the carrying value thereof. The $1.5 million impairment of assets in FY 2011 resulted from a structural failure of the loading columns in the IX section of the Ezulwini Mine’s uranium plant. As discussed in note (e) to the IFRS section in this MD&A, the fair value movement related to the Rand Notes liability is recognized in the Statements of Comprehensive Income. For Q4 2012 and Q4 2011, the fair valuation of the Rand Notes liability at the end of those reporting periods resulted in a negative fair value movement due to the increase in the share price of the Corporation during the respective period. For FY 2012 and FY 2011, the First Uranium share price decreased at the end of the respective reporting periods, resulting in positive fair value movements. As discussed in note (b) to the IFRS section in this MD&A, the fair value movement related to the derivative liability related to the Gold Stream Transactions is recognized in the Statements of Comprehensive Income. The
    • 26. FIU MDA 2012 overall increase in the gold spot price over the Q4 2011 and FY 2011 reporting periods resulted in the significant increase in fair value of these derivative liabilities at the end of the reporting periods compared to the fair values at the start of the respective reporting periods, and consequently the negative fair value movements in each of these periods. Although the overall gold price strengthened in FY 2012, the fair value of the derivative liabilities decreased as a result of revised mine plans at the Corporation’s operations and were the primary drivers for derivative income being recognized in Q4 2012, FY 2012 and Q3 2012. Foreign exchange losses or gains are the result of foreign exchange differences arising from transactions and the restatement of monetary items denominated in currencies other than the functional currency (see note (a) to the IFRS section in this MD&A) and varies from period to period. Investment income primarily related to interest income earned on cash and cash equivalents invested in short- term deposits with the Corporation’s bankers until required for capital projects or to fund operating costs. The overall lower interest income in Q4 2012 and FY 2012 reflected the, on average, lower cash balances compared to Q4 2011 and FY 2011. The higher interest and accretion expenditures in Q4 2012 compared to Q4 2011 and Q 3 2012 were primarily due to the $4.3 million additional accretion expense on the Canadian Notes at the end of FY 2012, which was recognized in anticipation of the early settlement of the Canadian Notes as discussed in the Financial Position section of this MD&A. The higher interest and accretion expenditures for FY 2012 compared to FY 2011 were also higher because of the additional accretion expense, but also because of the interest and accretion on the Canadian Notes that was charged over the full year in FY 2012, while it was only recognized since issuance on April 26, 2010 in FY 2011. The accretion expense on Asset Retirement Obligations in Q4 2012 and FY 2012 were higher compared to the comparative periods of FY 2011 and Q3 2012, mainly due to the changed in estimates used to calculate the asset retirement obligation at the end of FY 2012 which also resulted in an additional accretion expense recognized at the end of FY 2012. The income tax recovery for FY 2012 was derived from a higher net deferred tax asset (“DTA”) from MWS compared to its DTA at the end of FY 2011, which was mainly driven by MWS’s increased asset base over FY 2012 along with a marginal decrease in the associated deferred tax liability which more than offset taxable income from operations during the year. The income tax charge in Q4 2012 was derived from a decrease in MWS’s DTA from the end of Q3 2012 and was mainly driven by the decrease in the associated deferred tax liability over the quarter which was offset by taxable income from operations. The income tax recoveries for both Q4 2011 and FY 2011 was derived from higher net DTA from MWS compare to its DTA at the end of the preceding reporting periods and was mainly driven by MWS’s increased asset base over Q4 2011 and FY 2011 along with increases in the associated deferred tax liabilities which were substantially more than the taxable income from operations over those periods. The consolidated gross profit from operations in Q4 2012 (compared to loss in Q4 2011), along with the positive fair value movements on the derivative liabilities related to the Gold Stream Transactions and the foreign exchanges gains during the quarter, more than offset the higher other expenditures and interest and accretion expenses compared to Q4 2011, resulting in the Corporation reporting a consolidated income for Q4 2012 compared to a consolidated loss in Q4 2011. The $178.2 million impairment of Ezulwini Mine’s assets, higher interest and accretion expenditures and lower income tax recovery in FY 2012 compared to FY 2011 more than offset the consolidated gross profit from operations in FY 2012 (compared to loss of FY 2011), and the positive fair value movements on the Rand Notes
    • 27. FIU MDA 2012 liability and derivative liabilities related to the Gold Stream Transactions, resulting in the Corporation reporting a substantially higher consolidated loss for FY 2012 compared that of FY 2011. Other comprehensive income (loss) was comprised of unrealized profits (losses) resulting from an increase in the value of investments included in the asset retirements funds from the end of the previous reporting periods. Consolidated Financial Position Summary Balance Sheet Information and Key Financial Ratios (thousands of dollars) March 31, 2012 Continuing operations March 31, 2012 Discontinued operations March 31, 2012 Total March 31, 2011 Total % Change Cash and cash equivalents 3,817 2,845 6,662 49,606 (87%) Other current assets (a) 356 14,898 15,254 23,802 (36%) Current liabilities 268,828 109,175 378,003 85,816 340% Total assets 4,187 656,123 660,310 960,979 (31%) Total liabilities 268,828 455,005 723,833 782,997 (8%) Debt (b) 266,111 54,521 320,632 330,861 (3%) Total shareholders’ equity (264,641) 201,118 (63,523) 177,982 (136%) Key financial ratios: Current ratio (c) 0.02:1 0.16:1 0.10:1 0.86:1 Debt-to-equity (d) (1.01):1 0.27:1 (5.05):1 1.86:1 Notes: (a) Other current assets include accounts receivable and inventories. (b) Debt is calculated using the principal amount due from the Debentures and the Notes translated to US dollar at the exchange rate at the end of the reporting period plus Facility with Simmer & Jack and the Gold One Loan Facility at the end of the reporting period. (c) Current assets divided by current liabilities at the end of the reporting period. (d) Debt divided by total shareholder’s equity at the end of the reporting period. Balance sheet review Total assets (including assets from discontinued operations) were primarily comprised of property, plant and equipment, a deferred tax asset resulting from the MWS operations, cash and cash equivalents, trade and other receivables, inventories and asset retirement funds. The 31% decrease in total assets since FY 2011 was primarily attributable to a combination of: • A 87% decrease in cash and cash equivalents due to $15.5 million and $30.5 million cash utilized in operating activities and investing activities, respectively; • A 69% decreased in trade and other receivables mainly due to lower value added tax receivable at end of FY 2012 compared to FY 2011, mainly resulting from lower capital expenditures; • A 31% decrease in property plant and equipment (“PPE”) – PPE increased with $20.7 million in additions during FY 2012 mainly related to capital projects at MWS, however, was reduced with $4.8 million as a result of changes in estimates of decommissioning assets, $178.2 million impairment of Ezulwini Mine assets, $13.8 million in amortization and $86.1 million as a result of foreign exchange translation movements resulting from the significant weakening of the Cdn$ and, in particular, the ZAR from the beginning of FY 2012 to the end of FY 2012; and
    • 28. FIU MDA 2012 • A 32% increase in deferred tax assets as a result of a decrease in the offsetting deferred tax liability at MWS at the end of FY 2012 compared to the end of FY 2011 resulting from the increase in MWS’s net tax asset base from FY 2011 to the end of FY 2012, offset by taxable profits generated by MWS during FY 2012. Total liabilities (including liabilities from discontinued operations) were primarily comprised of the Debentures, the Canadian Notes, the Rand Notes, the financial derivative liabilities related to the Gold Stream Transactions, asset retirement obligations, trade and other payables, the Gold One Loan Facility and taxes payable. The 8% decrease in total liabilities since FY 2011 was primarily attributable to a combination of: • A 6% increase in the Debentures liability resulting from the Debentures nearing its June 2012 maturity date; • An 8% increase in the Canadian Notes liability resulting from the re-measurement due to the expected early settlement of the Notes; • A 28% decrease in the fair value of the Rand Notes liability primarily as a result of a drop in the Corporation’s share price during FY 2012 along with a significant weakening of the ZAR over the period; • A 12% decrease in the fair value of the financial derivative liability related to the Gold Stream Transactions emanating from the partial settlement of the liabilities by way of gold deliveries to FN along with a reduction of $76.6 million resulting from revised mine plans, offset by $57.7 million positive fair value movements in the derivative liabilities related to the strengthening gold price over the period. • A 18% decrease in trade and other payables mainly due to the much lower capital expenditures at MWS. Off-Balance Sheet Arrangements The Corporation does not have any off-balance sheet arrangements. Cash Flow Review Cash flows for the three months ended March 31, 2012 (Q4 2012) (thousands of dollars) Q4 2012 Q4 2011 % Change Q3 2012 % Change Cash flows generated from (utilized in) operating activities (9,610) (20,373) (53%) 3,983 (341%) Cash flows generated by (utilized in) investing activities 424 (10,798) 104% (7,902) 105% Cash flows from financing activities 5,000 49,989 (90%) - - Net (decrease) increase in cash and cash equivalents for the period (4,186) 18,818 (122%) (3,919) 7% Effects of foreign currency movements on cash and cash equivalents 273 809 (66%) (649) 142% Cash and cash equivalents at beginning of period 10,575 29,979 (65%) 15,143 (30%) Cash and cash equivalents at end of period 6,662 49,606 (87%) 10,575 (37%) Cash profits generated by the Corporation’s mining operations improved substantially compared to Q4 2011 mainly due to the additional cash generated from additional gold sales in Q4 2012 compared to Q4 2011. Costs and expenditures did not increase to the same extent as revenues over the comparative periods. At the end of Q4 2012, the semi-annual interest payment was made to the Note holders which, along with additional costs at the
    • 29. FIU MDA 2012 Ezulwini Mine resulting from the section 189 process, resulted in the cash outflow in Q4 2012 compared to the cash inflow in Q3 2012. During Q4 2012, due to cash preservation, minimal capital expenditures were incurred at MWS and the Ezulwini Mine. During Q4 2011, MWS and the Ezulwini Mine spent $7.9 million and $3.7 million, respectively, on capital projects. The capital expenditures at MWS primarily related to the capital projects comprising the third gold plant module and the new TSF. The Ezulwini Mine capital related to ongoing mine development and infrastructure. Cash from financing activities in Q4 2012 was attributable to the $5 million draw down of the Gold One Loan Facility. Q4 2011 was attributable to net proceeds of $50.0 million received pursuant to an equity financing in March 2011. Cash flows for the year ended March 31, 2012 (thousands of dollars) FY 2012 FY 2011 % Change Cash flows utilized in operating activities (15,498) (49,995) (69%) Cash flows utilized in investing activities (30,461) (103,199) (70%) Cash flows from financing activities 5,000 190,113 (97%) Net (decrease) increase in cash and cash equivalents for the year (40,959) 36,919 (211%) Effects of foreign currency movements on cash and cash equivalents (1,985) 2,510 (179%) Cash and cash equivalents at beginning of year 49,606 10,177 387% Cash and cash equivalents at end of year 6,662 49,606 (87%) The Corporation’s mining operations utilized 69% less of its cash resources compared to FY 2011, mainly due to the additional cash flows received in FY 2012 resulting from higher gold sales compared to FY 2011 which more than offset higher costs and expenditures in FY 2012. Costs and expenditures did not increase to the same extent as revenues over the comparative periods. During FY 2012, capital expenditure of $19.8 million was incurred at MWS (FY 2011: $82.4 million) and $9.6 million at the Ezulwini Mine (FY 2011: $19.1 million). The much lower capital spend in FY 2012 compared to FY 2011 reflects the close-out of the major capital projects at MWS during Q1 2012. Cash from financing activities during FY 2011 was attributable to the net cash received pursuant to the Offering in April 2010 ($152.6 million) and the equity financing in March 2011 ($50.0 million). Use of Proceeds Inclusive of the initial public offering in December 2006, First Uranium has raised over $840 million to date. At the end of FY 2012, $430 million of the funds raised had been utilized at MWS primarily on the capital expansion project and $264 million of the funds raised had been utilized at the Ezulwini Mine on the rehabilitation and re- engineering of the mine’s main shaft, the building of the gold and uranium plant and pre-production costs. The Corporation used $139 million to fund costs relating to operating activities at the Ezulwini Mine, which currently still exceed its cash revenues generated, and general and working capital requirements.
    • 30. FIU MDA 2012 Liquidity and Capital Resources The table below includes the consolidated cash flow forecast by management (prior to the March 2011 financing), which was included in the Short Form Prospectus dated February 22, 2011 (the “Prospectus”) compared to the actual consolidated cash flow performance of the Corporation over the year under review. The following price assumptions were used in the forecast information included in the Prospectus: Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Gold price (US$/oz) 1,380 1,390 1,390 1,390 1,390 Gold price (ZAR/kg) 301,703 303,889 303,889 303,889 303,889 Uranium price (US$65/lb) 65 65 65 65 65 ZAR/US$ 6.80 6.80 6.80 6.80 6.80 As discussed under the Financial Position section of this MD&A, the Board of First Uranium empowered a Special Committee to monitor developments and undertake a strategic review of the Corporation and its capital structure and to advise on any strategic alternatives that may be in the interests of First Uranium and stakeholders in First Uranium. This process resulted in the Corporation entering into the AGA transaction and the Gold One transaction to dispose of its principal assets. (Balance of page intentionally left blank)
    • 31. FIU MDA 2012 Prospectus Cash Flow Forecast versus Most Recent Cash Flow Forecast Q1 2012 Q2 2012 (in millions of dollars) Notes Prospectus Actual Variance Prospectus Actual Variance MWS operating cash flow 1 16.30 10.64 (5.66) 7.44 21.23 13.79 MWS capital expenses 2 (12.65) (8.07) 4.58 (7.09) (3.16) 3.93 Ezulwini operating cash flow 3 (3.82) (16.32) (12.50) (0.41) (17.41) (17.00) Ezulwini capital expenses 4 (6.58) (2.85) 3.73 (6.68) (2.51) 4.17 Corporate costs (2.73) (2.86) (0.13) (3.72) (2.81) 0.91 Interest on Debentures/Notes (3.16) (3.31) (0.15) (7.30) (7.03) 0.27 Cash movement for the quarter (12.64) (22.77) (10.13) (17.76) (11.69) 6.07 Cash, opening balance 42.66 49.60 6.94 30.02 26.83 (3.19) Cash, closing balance 30.02 26.83 (3.19) 12.26 15.14 (2.88) Q3 2012 Q4 2012 (in millions of dollars) Notes Prospectus Actual Variance Prospectus Actual Variance MWS operating cash flow 1 8.62 14.45 5.83 13.87 13.71 (0.16) MWS capital expenses 2 (0.34) (1.37) (1.03) (0.14) (0.79) (0.65) Ezulwini operating cash flow 3 4.96 (10.37) (15.33) 10.10 (12.05) (22.15) Ezulwini capital expenses 4 (5.94) (1.51) 4.43 (4.93) (1.05) 3.88 Corporate costs (2.73) (2.63) 0.10 (2.73) (1.89) 0.84 Interest on Debentures/Notes (3.16) (3.13) 0.03 (7.15) (6.85) 0.30 Gold One Loan Facility drawn down at year-end - - - - 5.00 5.00 Cash movement for the quarter 1.41 (4.56) (5.97) 9.02 (3.92) (12.94) Cash, opening balance 12.26 15.14 2.88 13.67 10.58 (3.09) Cash, closing balance 13.67 10.58 (3.09) 22.69 6.66 (16.03) Notes: 1. The lower operating cash flows from MWS in Q1 2012 reflect the impact of commissioning the Phase 2 plant infrastructure and new TSF, which only reached commercial production towards the end of Q1 2012. In addition, material to Hartebeestfontein No.2 tailings dam has not demonstrated historically achieved resource to reserve block factors, as seen in respect of the Buffelsfontein No.2 and No.4 tailings dams. As a result the delivered grade to the plant in the plan has been lowered by 8% lower. The much higher operating cash flows from MWS in Q2 2012 reflect the higher production achieved during the quarter as well as the higher gold prices at which gold were sold. The higher operating profits from MWS in Q3 2012 reflect the higher production achieved during the quarter as well as the higher gold prices at which gold were sold. 2. Management have identified certain capital cost savings at MWS and also deferred certain capital elements related to the commissioning of the uranium plant resulting from management’s decision to defer commissioning of the MWS uranium plant to June 2012 (Also see Outlook section of this MD&A). 3. As discussed under the Ezulwini Mine section of the Operations Review as well as under the Outlook section of this MD&A, the Ezulwini Mine production was limited during FY 2012, which has resulted in a negative impact on the operating. 4. Management have deferred non-critical capital projects at the Ezulwini Mine, which resulted in a reduction in actual capital expenditures.
    • 32. FIU MDA 2012 The proceeds from the sale of First Uranium’s principal assets will enable it to settle the Debentures, the Notes and the Gold One Loan Facility under the terms agreed to with the Debenture holders, Note holders and Gold One. Following the completion of the Transactions, the Corporation will have effected a change of business according to the rules of the TSX. As a result of such change in business, the Corporation will be required to meet the original listing requirements of the TSX in order to remain listed. Following completion of the AGA Transaction and the Gold One Transaction, the Board and management will meet to consider the business plan for the Corporation and its future. The Corporation will consider the most efficient and orderly way in which to distribute to the Shareholders all remaining property of the Corporation (after payment of the Corporation’s creditors). The Corporation may then proceed to be wound up and dissolved. However the Board has not made any decisions with respect to the windup and dissolution at this time. Upon completion of the Transactions, the Corporation will not meet the TSX’s original listing requirements under any of the listing categories of the TSX. Therefore, the Corporation is expected to be delisted from the TSX. If the Corporation is to be delisted from the TSX, the Corporation intends to take steps to maintain liquidity in the Common Shares by applying for listing on NEX, a separate board of the TSX Venture Exchange that provides a trading forum for listed companies that have low levels of business activity or have ceased to carry on an active business, or an alternative exchange in Canada. No assurance can be given that the Corporation will meet the listing requirements for an alternate listing on NEX or an alternative exchange in Canada. In the event the securities of the Corporation are not listed on TSX, NEX or an alternative exchange, there will be no public market through which the securities may be sold and traded and Shareholders may not be able to dispose of their securities. This can be expected to affect the liquidity of the Common Shares and the transparency and availability of trading prices. Financial Instruments First Uranium uses a mixture of cash generated from gold and uranium sold by its operations, interest on cash balances, long-term debt and shareholders’ equity to maintain an efficient capital structure and ensure adequate liquidity exists to meet the cash needs of its operations. In the normal course of business, the Corporation is inherently exposed to currency and commodity price risk. The Corporation does not currently hedge its exposure to currency or commodity price risk. The Corporation does hold certain derivative instruments that do not qualify for hedge accounting. These non-hedge derivatives are described in notes 15 and 12.2 to the Financial Statements. For a discussion of the methods used to value financial instruments, refer to note 3 of the Financial Statements. Commitments and Contingencies Capital commitments At the end of FY 2012, the Corporation had $11.4 million of capital commitments, of which $8.2 million related to MWS and $3.2 million to the Ezulwini Mine. The existing commitments at MWS primarily relate to on-mine capital, capital related to certain environmental rehabilitation projects and capital to improve plant processes to deal with the clay issue discussed under the Operations review section for MWS of this MD&A. The existing commitments at the Ezulwini Mine related mainly to mine development and infrastructure cost.
    • 33. FIU MDA 2012 Contractual Obligations At March 31, 2012, First Uranium’s discontinued operations had the following contractual liabilities and their maturity dates: Payments due by date Derivative liabilities (thousands of dollars) Within 3 Months 3 Months to a Year Between 1- 3 Years Between 4- 5 Years After 5 Years Total MWS Gold Stream Transaction 9,264 26,161 54,535 44,376 162,653 296,989 Ezulwini Gold Stream Transaction 1,063 3,359 10,101 10,285 26,991 51,799 Total 10,327 29,520 64,636 54,661 189,644 348,788 Derivative liabilities are settled through the gold ounces delivered by MWS and the Ezulwini Mine, respectively, to FN pursuant to their Gold Stream Transactions over each of their respective mine lives. MWS and the Ezulwni Mine are obliged to deliver 25% and 7%, respectively, of its gold ounces sold to FN. Payments due by date Other contractual liabilities (thousands of dollars) Within 3 Months 3 Months to a Year Between 1- 3 Years Between 4- 5 Years After 5 Years Total Continuing operations Debentures (i) - 151,508 - - - 151,508 Canadian Notes (ii) - 110,297 - - - 110,297 Gold One loan facility (iii) - 5,003 - - - 5,003 Income taxes payable - - 2,766 - - 2,766 Discontinued operations Rand Notes (iii) - 54,521 - - - 54,521 Purchase obligations(iv) 7,216 4,168 - - - 11,384 Capital leases (v) 110 330 880 – – 1,320 Notes: (i) Cash amount relates to 100% of the liability value of the Debentures plus the accrued interest payable and agreed to by the Debenture holders on June 13, 2012 (See Note 32 of the Financial Statements). (ii) Cash amount relates to 100% of the liability value with no accrued interest as agreed to by the Canadian Note holders on June 13, 2012 (See Note 32 of the Financial Statements). (iii) Cash amount relates to the Gold One Loan Facility drawn down at end of FY 2012, to be settled on the close of the AGA Transaction. (iv) The purchase obligations relate to capital commitments at the end of FY 2012 and the expected cash settlement thereof. (v) The capital leases comprise of the instalments payable pursuant to the terms of the Toll Treatment Arrangement discussed under the Commitments and Contingencies section of this MD&A. Rehabilitation Obligations At March 31, 2012, the Corporation had the following net funding in place with regards to its rehabilitation obligations: (in thousands of dollars) Group Ezulwini Mine MWS Provision for rehabilitation 29,621 7,155 22,466 Current cost estimate 42,608 13,060 29,548 Less: Rehabilitation trust fund/deposit (11,360) (5,002) (6,358) Net amount subject to negotiations with DMR 31,248 8,058 23,190
    • 34. FIU MDA 2012 During FY 2012, the guarantee previously provided by the Ezulwini Mine to the DMR was cancelled as part of the process of changing its financial assurance product with regards to its unfunded rehabilitation obligation. This process was, however, stopped when the Corporation entered into the Gold One Transaction. It is anticipated that Gold One will put in place a suitable product as guarantee when it acquires the Ezulwini Mine. MWS does not currently require a new order mining right because tailings recovery facilities that reprocess tailings arising from mining operations under old order mining rights are not covered under the MPRDA. Until such time as the MPRDA has been amended to include such tailings produced from old order mining operations, MWS relies upon its other authorisations such as the EA issued to MWS in terms of NEMA, the Water Use Licence issued under the National Water Act and certificate of registration issued under the National Nuclear Regulator Act. In anticipation of a change in legislation, MWS submitted an application for a new order mining right and in July 2009, the new order mining right for MWS was approved by the DMR. The execution of the mining right is subject to certain conditions including providing financial assurance for rehabilitation liabilities to the satisfaction of the DMR. On September 15, 2011 MWS received correspondence from the DMR wherein the DMR purported to withdraw the mining right. However, the withdrawal has no basis in law since MWS does not require a mining right in order to operate. MWS Gold Stream Transaction Pursuant to the Offering, the Corporation settled the completion penalty obligation to FN in respect of the MWS Gold Stream Transaction with the issuance of 14 million common shares in First Uranium valued at $18.2 million to FN and a commitment by the Corporation to complete construction of the third gold plant module at MWS and satisfaction of the technical completion tests prior to September 1, 2011. As discussed under the Operations Review section of this MD&A, MWS completed construction of the third gold plant module during Q4 2011 and satisfied the first phase of the Technical Completion Test (Steady-State Production, each as defined in the MWS Gold Stream Transaction) at the end of July 2011. The second phase of the technical completion test involved achieving certain key criteria over 14 consecutive days as set out in the agreement. The second phase test was successfully completed on August 24, 2011 with subsequent confirmation received from FN on August 29, 2011. The successful completion of the Technical Completion Test prior to September 1, 2011 avoids the imposition of the penalties provided under the MWS Gold Stream Transaction in connection with the test. Royalty agreements Simmer & Jack, FUSA and Aberdeen International Inc. (“Aberdeen”) entered into an arrangement agreement (The “Arrangement Agreement”) dated December 20, 2006. The Arrangement Agreement provides for FUSA to pay to Simmer & Jack an amount equal the royalty payable to Aberdeen by Simmer & Jack under the Loan Agreement in respect of the gold produced from the Buffelsfontein Tailings. MWS is obliged to pay: (i) to Simmer & Jack, an amount equal to the royalty payable by Simmer & Jack to Aberdeen pursuant to the Aberdeen Agreement with Simmer & Jack in respect of the tailings to be acquired from Buffelsfontein Gold Mines Limited (“BGM”), pursuant to the Buffelsfontein Tailings and Rights Agreement; and (ii) to BGM a 1% royalty, pursuant to the terms of the Buffelsfontein Tailings and Rights Agreement. The total royalties expensed during FY 2012 amounted to $1.6 million (FY 2011: $1.1 million) in respect of (i) above and $1.6 million (FY 2011: $1.1 million) in respect of (ii) above (also see Related Party Transactions section in this MD&A).
    • 35. FIU MDA 2012 Toll Treatment Arrangement The Corporation entered into an agreement with a third party, commencing in January 2009, to calcine the yellowcake from First Uranium to produce uranium oxide packaged for dispatch to converters (the Toll Treatment Arrangement). Either party may terminate the agreement on eighteen months notice. The third party calciner constructed a plant with one half of the capacity of the plant to be dedicated for the processing of the First Uranium yellowcake and acquired a road tanker to transport the yellowcake from the First Uranium operations to the calciner’s operations. First Uranium was obliged to pay one-half of the construction cost of the calcining plant up to a maximum of $1.6 million and one half of the cost of the tanker (together referred to as the Loan). The Loan is effective as of January 5, 2009 and is repaid in monthly instalments over a seven year period commencing January 30, 2009. The Loan bears interest equal to the prime overdraft rate as quoted by commercial banks in South Africa, plus 2%. As at March 31, 2012, the loan amount payable was $1.3 million. The Corporation paid $0.4 million pursuant to the arrangement during FY 2012 (FY 2011: $0.8 million). On implementation of the AGA Transaction, the Toll Treatment Arrangement with First Uranium will be terminated and each of the Ezulwini Mine and MWS will enter into a contract with the third party calciner on the same terms and conditions as the original agreement except that each operation will have access to one half of the calcining capacity made available to First Uranium, and will pay one half of the charges and costs, including the capital costs prescribed under the original agreement. Outlook As discussed under the Recent Developments section of this MD&A, the Corporation expects to conclude and implement the AGA Transaction by July 24, 2012, following which the Gold One Transaction is expected to concluded by July 31, 2012. On the implementation of the AGA Transaction, BNY and GMG, the Indenture Trustees for the Canadian Notes and the Rand Notes, respectively, will be paid the respective principal amounts owing to the Canadian and Rand Note holders and the Gold One Loan will also be repaid. Following the conclusion of the Gold One Transaction, the Debenture Trustee will receive for distribution to Debenture holders the principal and accrued interest payments as approved by Debenture holders on June 13, 2012 together with the early consent fee payable to those Debenture holders who agreed, on or before May 30, 2012, to vote in favour of the amendments to the Debenture Indenture (see the Financial Condition section of this MD&A). Related Party Transactions Pursuant to the Offering on April 26, 2010 (see Note 12 to the Financial Statements), Simmer & Jack subscribed to 296,084 Rand Notes for a cash consideration of Cdn$40 million and the Corporation also settled the $22.6 million Facility with Simmer & Jack (including the unpaid interest on the Facility) with the issue of 167,812 Rand Notes to Simmer & Jack (Note 12 to the Financial Statements) which resulted in a total of 463,896 Rand Notes issued to Simmer & Jack. During FY 2011, Simmer & Jack reduced its holding in the Rand Notes to 392,874 Rand Notes. As discussed under the Financial Position section of this MD&A, Simmer & Jack transferred its 25.5% holding of the outstanding common shares in First Uranium and its Rand Notes to Village Main Reef Limited in June 2011. On July 22, 2011, Village Main Reef sold 47,065,916 of its common shares of First Uranium (19.79%) at Cdn$0.60 per share, to AngloGold Ashanti Ltd for a total consideration of Cdn$28 million. Following this transaction, Simmer & Jack, Buffelsfontein Gold Mines Limited and Village Main Reef are no longer considered to be related parties of First Uranium.
    • 36. FIU MDA 2012 First Uranium and Simmer & Jack had a shared services agreement (the Shared Services Agreement) pursuant to which First Uranium could retain certain services provided by Simmer & Jack. Included in the shared services fees to Simmer & Jack for FY 2011, were $0.2 million fees capitalized (2011: $2.2 million) which related to services provided in respect of technical support for the Ezulwini Mine and MWS were capitalized. During FY 2011, First Uranium relocated its South African corporate offices to the Ezulwini Mine premises and consequently the shared services provided by Simmer & Jack were reduced to the minimum. Furthermore, the Corporation agreed to reimburse Simmer & Jack 50% of the management fee that Simmer & Jack paid to its empowerment company pursuant to a letter of understanding between Simmer & Jack and the empowerment company dated September 26, 2006. The empowerment company, Vulisango, provided consulting services to Simmer & Jack relating to transformation, human resources and occupational health and safety. As discussed under the Financial Position section of the MD&A, the Shared Services Agreement with Simmer & Jack was terminated in FY 2012 and First Uranium entered into its own management agreement with Vulisango (the Management Agreement). The Management Agreement provides for a monthly fee of ZAR400,000 payable to Vulisango and although it provided for an indefinite term, it can be terminated at any time by agreement between the parties, or in the event that there is a transaction or a series of transaction that would have the effect that the Corporation is no longer the owner of either the Ezulwini mine or MWS, or their collective assets, the Corporation may, at its option, terminate the Management Agreement upon payment to Vulisango of R9.6 million. During Q4 2012 and FY 2012, the Corporation paid $0.2 million and $0.6 million, respectively, to Vulisango in connection with such services (Q4 2011: $0.2 million; FY 2011: $0.3 million). Disclosure Controls and Procedures and Internal Control over Financial Reporting Disclosure Controls and Procedures The CEO and Chief Financial Officer (“CFO”) are responsible for establishing and maintaining adequate disclosure controls and procedures, as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109). Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the Corporation’s filings under securities legislation is accumulated and communicated to management, including the CEO and CFO as appropriate, to allow timely decisions regarding public disclosure. They are also designed to provide reasonable assurance that all information required to be disclosed in these filings is recorded, processed, summarized and reported within the time periods specified in securities legislation. Management regularly reviews the disclosure controls and procedures; however, they cannot provide an absolute level of assurance because of the inherent limitations in control systems to prevent or detect all misstatements due to error or fraud. Management, including the CEO and CFO, conducted a formal evaluation of the effectiveness of the Corporation’s disclosure controls and procedures as of March 31, 2012. Based on this evaluation, the CEO and CFO have concluded that the disclosure controls and procedures were effective and provide reasonable assurance that as of March 31, 2012 information required to be disclosed in First Uranium’s annual and interim filings (as such terms are defined under NI 52-109) and other reports filed and submitted under Canadian securities laws is recorded, processed, summarized and reported within the time periods specified by those laws, and that material information is accumulated and communicated to management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosure. Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in NI 52-109. Internal control over financial reporting means a process designed by and under the
    • 37. FIU MDA 2012 supervision of the CEO and CFO, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. All internal control systems have inherent limitations and therefore the internal control over financial reporting can only provide reasonable assurance and may not prevent or detect misstatements due to error or fraud. Management, including the CEO and CFO, conducted an evaluation of the effectiveness of the Corporation’s internal control over financial reporting using the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework. Based on this evaluation, the CEO and CFO have concluded that the internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as of March 31, 2012. Changes in Internal Control over Financial Reporting During the year under review there were no changes in the Corporation’s internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting. Critical Accounting Policies and Estimates The preparation of these consolidated financial statements in accordance with IFRS requires management to make use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the period. Areas of judgement that have the most significant effect on the amounts recognized in the financial statements are estimation of asset lives, determination of ore reserve estimates, capitalization of exploration and evaluation costs, and identification of functional currencies. Key sources of estimation uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities are the estimation of close-down and restoration costs and the timing of expenditures, the review of asset carrying values and impairment charges and reversals, the estimation of environmental clean-up costs and the timing of expenditures and the recoverability of potential future income taxes and the fair valuation of the financial derivatives related to Gold Stream Transactions and the fair valuation of the Rand Notes liability. A number of the key estimates noted above are impacted by movements in the gold and uranium spot prices and the ZAR/$ exchange rate. Financial results as determined by actual events could differ from those estimated. Management estimates are also applied in arriving at the useful lives of items of property, plant and equipment and in determining the fair value of stock options. Note 3 to the Financial Statements describes the Corporation’s significant accounting policies. Property, plant and equipment The cost of an item of property, plant and equipment is recognized as an asset when: • it is probable that future economic benefits associated with the item will flow to the Corporation; and • the cost of the item can be measured reliably. Costs include expenditures incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognized in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is written off. The recognition of costs in the carrying amount of an asset ceases when the item is in the location and
    • 38. FIU MDA 2012 condition necessary to operate as intended by management. Any net income earned while the item is not yet capable of operating as intended, reduces the capitalised amount. Interest on borrowings, specifically to finance the establishment of mining assets, is capitalised during the construction phase. The present value of decommissioning cost, which is the dismantling and removal of the asset included in the environmental rehabilitation obligation, is included in the cost of the related assets and changes in the liability resulting from changes in the estimates are accounted for as follows: • Any decrease in the liability reduces the cost of the asset. The decrease in the asset is limited to its carrying amount and any excess is accounted for in profit or loss • Any increase in the liability increases the carrying amount of the asset. An increase to the cost of an asset is tested for impairment when there is an indication of impairment • These assets are depreciated over their useful lives and are expensed in profit and loss as a cost of production. Property, plant and equipment are carried at cost less accumulated amortization and any impairment losses. Exploration costs incurred to the date of establishing that a property has mineral resources are expensed. Exploration and development expenses incurred subsequent to this date and which have the potential of being economically recoverable are capitalized. If the project becomes feasible, the costs are amortized over the life of the mine. If the project is stopped, the costs are written off immediately. Management carries out a review at each financial year end to determine the appropriateness of the residual value and the useful life of each asset. Each component of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is amortized. Amortization is provided on all property, plant and equipment other than freehold land, to write down the cost, less residual value over their useful lives. Land is not amortized. The amortization charge for each period is recognized in earnings or loss unless it is included in the carrying amount of another asset. Rehabilitation Provisions The Corporation recognizes the fair value of its rehabilitation obligation as a liability in the year in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that results from the acquisition, construction, development, and/or normal use of the assets. The Corporation concurrently recognizes a corresponding increase in the carrying amount of the related long-lived asset that is depreciated over the life of the asset. The fair value of the rehabilitation provision is estimated using the expected cash flow approach (adjusted for risk) that reflects a range of possible outcomes discounted at the risk-free interest rate. Provision is made in full for the estimated future costs of pollution control and rehabilitation, in accordance with statutory requirements. Subsequent to the initial measurement, the rehabilitation provision is adjusted at the end of each year to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. Changes in the obligation due to the passage of time are recognized in income as a finance cost using the effective interest method. Changes in the obligation due to changes in estimated cash flows and discount rates are recognized as an adjustment of the carrying amount of the long-lived asset that is depreciated over the remaining life of the asset. The cost of the ongoing current programs to prevent and control pollution is charged against income as incurred.
    • 39. FIU MDA 2012 Impairment of Long-Lived Assets Non-financial assets Assets that have an indefinite useful life and which are not subject to depreciation are tested annually for impairment. Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are considered to be impaired when the higher of the asset’s fair value less cost to sell and its value in use is less than the carrying amount. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds the recoverable amount. The recoverability of the long-term mining assets is based on estimates of future discounted cash flows. These estimates are subject to risks and uncertainties including future metal prices and exchange rates. It is therefore possible that changes can occur which may affect the recoverability of the mining assets. The recoverable amounts of non-mining assets are generally determined by reference to market values. Where the recoverable amount is less than the carrying amount, the impairment is charged against income to reduce the carrying amount to the recoverable amount of the asset. The revised carrying amounts are depreciated over the remaining lives of such affected assets. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. An impairment previously recognized will be reversed when changes in circumstances that have an impact on estimates occur after the impairment was recognized. The reversal of an impairment provision will be limited to the lower of the newly calculated recoverable amount or the book value that would have existed if the impairment had not been recognized. The reversal of an impairment is recognized in profit or loss. Financial derivative liabilities related to Gold Stream Transactions During Fiscal 2009 and 2010, the Corporation entered into two gold stream transactions pursuant to which the Corporation is required to deliver guaranteed quantities of gold in specified periods as part of the performance toward these agreements and subsequent to the guaranteed period a percentage of life-of-mine production. Although there is no intention to settle the gold to be delivered pursuant to the gold stream transactions in cash, the nature of this transaction is that of a written call for which the normal purchase, normal sales exemption cannot be applied. Therefore the fair value of the remaining gold ounces to be delivered from the total life-of- mine ounces of each gold stream transaction is recognized as a financial derivative liability. These liabilities are fair valued using the Black Scholes pricing model. Key inputs to the valuation is the quantum and timing of gold ounces expected to be delivered into the transaction, the current and forward gold price and risk free discount rates. Changes in the fair value of the derivative are recognized in profit and loss. The actual cash amounts received (inflation adjusted $400 per ounce) for such deliveries and the cost of production related to the gold ounces delivered are recognized along with the fair value movements are included in the derivative expense related to Gold Stream Transactions and is recognized as such in profit and loss. Exchangeable notes The Rand Notes issued by MWS are exchangeable for common shares of First Uranium and as such is classified as a liability as the fixed number of the Corporation’s common shares could be convertible to a variable (South African Rand denominated) liability. The Corporation has elected to treat the liability at fair value through profit and loss. The fair value will be based on the listed market value of these notes from listing date. Prior to listing date valuation techniques will be used to value these notes.
    • 40. FIU MDA 2012 Non-current assets held-for-sale and discontinued operations Non-current assets or disposal group held-for-sale and discontinued operations A non-current asset or disposal group (a business grouping of assets and their related liabilities) is designated as held-for-sale and stated at lower of carrying value and fair value less cost to sell, when its carrying amount will be recovered principally through a sale transaction rather than through continuing use. The classification as held-for-sale of a non-current asset or disposal group occurs when it is available for immediate sale in its present condition and the sale is highly probable. A sale is considered highly probable if management is committed to a plan to sell the non-current asset or disposal group, an active divestiture programme has been initiated, the non-current assets or disposal group is marketed at a price reasonable to its fair value and the disposal is expected to be completed within one year from classification. Upon classification of a non-current asset or disposal group as held-for-sale, it is reviewed for impairment. The impairment charged to the statement of comprehensive income is the excess of the carrying value of the non- current asset or disposal group over its expected net selling price (fair value less costs to sell). At each subsequent reporting date, the carrying values are re-measured for possible impairment. A reversal of impairment is recognized for any subsequent increase in net selling price but not in excess of the cumulative impairment loss already recognized. No depreciation is provided on non-current assets from the date they are classified as held-for-sale. Where an investment in associate is classified as held-for-sale, the group will no longer equity account for the investment. When a disposal group is classified as held-for-sale it is also necessary to assess whether or not the criteria for discontinued operations are met. If the criteria are met, the results of the disposal group are classified as discontinued operations in the statement of comprehensive income and the comparative amounts restated for all periods presented. No restatement of balance sheet comparative amounts is done. If a non-current asset or disposal group is classified as held-for-sale but the criteria for classification as held-for- sale are no longer met, the disclosure of such non-current asset or disposal group as held-for- sale is ceased. On ceasing such classification, the non-current assets are reflected at the lower of: • the carrying amount before classification as held-for-sale adjusted for any depreciation or amortisation that would have been recognized had the assets not been classified as held-for-sale or • the recoverable amount at the date the classification as held-for-sale ceases. The recoverable amount is the amount at which the asset would have been recognized after the allocation of any impairment loss arising on the cash-generating unit as determined in accordance with the group’s policy on impairment of non-financial assets. Any adjustment required to be made on reclassification is charged to the statement of comprehensive income on reclassification, and included in income from continuing operations. Where the disposal group was also classified as a discontinued operation, the subsequent classification from held- for-sale also requires that the discontinued operation be included in continuing operations. Comparative information in the statement of comprehensive income and cash flow note disclosures relating to the classification as a discontinued operation is re-presented accordingly. Comparative information in the balance sheet is not re-presented for this change.
    • 41. FIU MDA 2012 Changes in accounting policies The accounting policies used in the preparation of the Corporation’s Financial Statements were in compliance with the IFRS adopted for all entities with financial years starting on April 1, 2011. Apart from the changes as described in the IFRS section of this MD&A, there were no changes in accounting policies on adoption of IFRS or as a result of new IFRS’s issued. The Corporation did not adopt any of the following issued, but not yet effective accounting standards. Management is still in the process of assessing the impact. Standard, amendments, interpretations Effective for financial periods beginning on or after IAS 1 (Amendment): Presentation of Financial Statements July 1, 2012 IAS 12 (Amendment): Income Taxes – Deferred Tax: Recovery of Underlying Assets January 1, 2012 IAS 19 (Amendment): Employee Benefits January 1, 2013 IAS 27 (Amended): Separate Financial Statements January 1, 2013 IAS 28 (Amended): Investments in Associates and Joint Ventures January 1, 2013 IFRS 1 (Amendment): First-time Adoption of IFRS – Removal of Fixed Dates for First-time Adopters July 1, 2011 IFRS 1 (Amendment): First-time Adoption of IFRS – Guidance on Severe Hyperinflation July 1, 2011 IFRS 7 (Amendment): Financial Instruments: Disclosures – Transfer of Financial Assets July 1, 2011 IFRS 9: Financial Instruments January 1, 2013 IFRS 9 (Amendment): Financial Instruments January 1, 2013 IFRS 10: Consolidated Financial Statements January 1, 2013 IFRS 11: Joint Arrangements January 1, 2013 IFRS 12: Disclosure of Interest in Other Entities January 1, 2013 IFRS 13: Fair Value Measurement January 1, 2013 Outstanding Share Data FY 2012 FY 2011 Common shares outstanding at beginning of the period 236,536,931 166,847,037 Shares issued in relation to the Gold Wheaton penalty – 14,000,000 Shares issued pursuant to financing transactions during the period – 52,000,000 Shares issued on conversion of Rand Notes during the period 1,311,169 3,553,227 Restricted share unit shares issued during the period 34,866 136,667 Common shares outstanding at end of the period 237,882,966 236,536,931 Unexercised restricted units outstanding at end of the period 646,299 742,831 Unexercised stock options outstanding at end of the period 5,252,501 6,593,286 Average strike price of outstanding options (Cdn$) 2.57 2.87 At June 29, 2012, First Uranium had 237,882,966 common shares outstanding and there were 5,151,501 unexercised stock options outstanding at an average strike price of Cdn$2.60 per share and 640,965 restricted stock units outstanding. At March 31, 201 and June 29, 2012, First Uranium had Cdn$150 million ($150.4 million as at March 31, 2012) principal amount of Debentures outstanding. As discussed under the Financial Positions section of this MD&A, on the Debenture holder meeting held on June 13, 2012, the Debenture holders agreed that the maturity date will be extended to October 5, 2012, no interest will accrue after March 2, 2012 and the principal amount of the Debentures will be reduced to: (a) 95% of the principal amount of outstanding Debentures owing as at April 30,
    • 42. FIU MDA 2012 2012; and (b) the lesser of: (i) 3% of the principal amount of the outstanding Debentures owing as at April 30, 2012; and (ii) all payments in connection with the funds held pursuant to the terms of the AGA Agreement and the Gold One Agreement (each a Warranty Escrow) received by First Uranium, whenever received. In addition, First Uranium will pay to the Debenture Trustee, for distribution pro rata to the Debenture holders which agreed, on or before May 30, 2012, to vote in favour of the extraordinary resolution of the Debenture holders approving the supplemental debenture indenture, an additional amount, on account of the principal amount of the Debentures held by such consenting Debenture holders, equal to 2% of the principal amount of all the outstanding Debentures owing as at April 30, 2012. At March 31, 2012 and June 29, 2012, First Uranium had Cdn$110 million ($110.3 million as at March 31, 2012) principal amount of Canadian Notes outstanding and ZAR418.6 million ($54.5 million as at March 31, 2012) principal amount of Rand Notes outstanding. As discussed under the Financial Positions section of this MD&A, on the Note holder meeting held on June 13, 2012, the Note holders agreed that upon completion and implementation of the AGA Transaction, the Note holders will accept repayment in cash of 100% of the principal amount outstanding on the Notes and that no interest will accrue after March 31, 2012. Risks and Uncertainties Uncertainties There are a number of uncertainties in the mining business of First Uranium, some of which are beyond First Uranium’s control: • the ability of the Corporation to continue as a going concern is dependent upon its ability to successfully close the Transactions; • the ability of the Corporation to meet requirements of government legislation or the DMR in order to maintain its mining rights; • the ability to maintain or secure, as the case may be, sufficient BEE investment in the Corporation in order to maintain compliance with BEE requirements as required by the applicable law; • government legislation and implementation thereof regarding mining companies in South Africa, including without limitation, securing authorizations and permits required thereunder within the timeframes required to achieve the Corporation’s plans and objectives; • the ability of the Corporation to provide financial assurance for rehabilitation liabilities to the satisfaction of the DMR; • prices for the Corporation’s production of gold; • foreign exchange and interest rates; • the supply and cost of re-agents and other substances, including sulphuric acid and carbon, used by the Corporation in the process to extract gold; • the consistent and sufficient supply of economical electrical power; • securities regulation regarding public listed companies in Canada and South Africa; and • natural disasters, war or random occurrences or acts that could result in a material change to economic and market performance, business conditions or operations.
    • 43. FIU MDA 2012 Risks First Uranium’s mining properties are in the development stage and are subject to the risks and challenges similar to other companies in a comparable stage of development and production start-up. For a detailed discussion of the Corporation’s risks please refer to the Corporation’s most recent AIF, which is available on the Corporation’s website .firsturanium.com and on .sedar.com or upon request from the Corporation. Risks with regards to proposed transactions to dispose of Corporation’s principal assets Shareholders should consider the following risk factors associated with the Transactions. Closing of the Transactions The Transactions are expected to be concluded as previously disclosed in this MD&A, subject to, in respect of the Gold One Transaction, the implementation of the AGA Transaction, in accordance with its terms, and such other outstanding closing conditions associated with the implementation of the AGA Transaction and on the condition that there is no Material Adverse Change, as defined in the Gold One Agreement. The Gold One Agreement May Be Terminated Gold One has the right to terminate the Gold One Agreement if there is a Material Adverse Change as defined in the Gold One Agreement prior to conclusion of the Gold One Transaction. Cash Proceeds to Shareholders May be Reduced On the announcement of the Transactions on March 2, 2012 and follow-up announcement on June 6, 2012 to update shareholders on the use of proceeds from the proposed sale of MWS and the Ezulwini MIne, the Corporation outlined the anticipated Cash Proceeds, including an approximate Initial Distribution amount expected to be available to Shareholders on completion of the Transactions. The Cash Proceeds noted in the respective announcements were subject to change due to, among other things, currency fluctuations, results of operations and the repayment at completion of the Transactions of all principal amounts drawn under the Gold One Loan Facility plus accrued interest thereon. The Corporation has drawn the full facility from the Gold One Loan Facility subsequent to year-end. As the Gold One Loan Facility must be repaid at the closing of the earlier of the AGA Transaction and the Gold One Transaction, the repayment of the loan will reduce the Initial Distribution at closing by $10 million plus accrued interest thereon. In addition, under the terms of the Transactions, the working capital of the operations acquired must be positive, or at a minimum there must be at least sufficient cash and other current assets to fund current liabilities. If there is a further shortfall in operating performance, then such shortfall will further reduce the Initial Distribution and result in a material reduction in the cash available for distribution to Shareholders upon the closing of the Transactions. Business Risks Mining and Prospecting Rights In July 2009, a new order mining right for MWS was approved by the DMR. The execution of the mining license is subject to certain conditions which MWS is in the process of satisfying including providing financial assurance for rehabilitation liabilities to the satisfaction of the DMR. It should however be noted that MWS does not currently require the new order mining right because tailings recovery facilities are not currently covered under the
    • 44. FIU MDA 2012 MPRDA. Until such time as the MRPDA has been amended to include tailings recovery facilities, MWS relies upon the recently issued EA governed by NEMA (see also Permitting issues at MWS section in this MD&A). Foreign Currency Exchange Rates The Corporation has exposure to the risk of significant change in foreign currency exchange rates between US dollars, Canadian dollars and the South African rand. Most of the Corporation’s expenses are currently in ZAR and the Corporation also holds Rand Notes that is ZAR denominated, which will result in increased expenses and increased liabilities in the case of any further increases in the value of the ZAR relative to the US dollar as the Corporation’s reporting currency is in US dollars. The Corporation issued Debentures and Canadian Notes that are Canadian dollar denominated, which will also result in increased expenses and increased liabilities in the case of any further increases in the value of the Canadian dollar relative to the US dollar. Business Interruption The Corporation is exposed to risks that could interrupt its business. One of the Corporation’s two projects, the Ezulwini Mine, is an underground mine that has historically had ground movement problems in the Upper Elsburg shaft pillar. There is a risk of flooding at the Ezulwini Mine, where the Corporation daily pumps approximately 65 million litres of water from the site. The pumps are well maintained and there are several contingency arrangements including multiple power sources, large diesel generators, back-up pumps and catch basins in the event of failure of the main pumps. The mine has never been flooded, including during the period of 2001 through 2006 when the mine ceased operations and was on care and maintenance. Exchange Listing If the Corporation is delisted from the TSX, the Corporation intends to take steps to maintain liquidity in the Common Shares by applying for listing on NEX, a separate board of the TSX Venture Exchange that provides a trading forum for listed companies that have low levels of business activity or have ceased to carry on an active business, or an alternative exchange in Canada. No assurance can be given that the Corporation will meet the listing requirements for an alternate listing on NEX or an alternative exchange in Canada. In the event the securities of the Corporation are not listed on TSX, NEX or an alternative exchange, there will be no public market through which the securities may be sold and traded and Shareholders may not be able to dispose of their securities. This can be expected to affect the liquidity of the Common Shares and the transparency and availability of trading prices. Insurance First Uranium’s insurance coverage does not cover all of its potential losses, liabilities and damage related to its business and certain risks are uninsured or uninsurable. The Corporation makes its insurance decisions based on the likelihood of any risk occurring, the cost of the insurance and the Corporation’s tolerance for risk. Litigation From time to time, the Corporation is involved in litigation, investigations, or proceedings related to claims arising out of its operations in the ordinary course of business. In the opinion of the Corporation’s management, these claims and lawsuits in the aggregate, even if adversely settled, will not have a material effect on the consolidated financial statements.
    • 45. FIU MDA 2012 Operational Risks Mining The business of mining generally involves a high degree of risk and First Uranium has a limited operating history. Labour A trend that could increase risk for the Corporation is the heightened labour unrest in South Africa. Workers at various South African mining operations have been demanding, through their unions, higher compensation as a result of increased revenues in the mining sector being driven by rising mineral prices. In Q2 2011 First Uranium entered into two-year contracts at both of its mining operations. These two-year contracts expired on March 31, 2012. Wage negotiations are currently underway at both MWS and the Ezulwini Mine. Once the new contracts are in place, the new conditions of employment are likely to be backdated to April 1, 2012. Power Power outages beset South Africa in early 2008 and have continued sporadically in 2009, causing disruption in business activities. In 2008, coal-fed power stations ran low on fuel and several power-generating facilities were down for maintenance. On January 24, 2008, Eskom advised that continuity of electric power supply could not be guaranteed. Specific warnings were communicated to South African mining companies, including the Corporation. To mitigate the impact of further power restrictions, the Corporation has power generation installed at its two operations, with a 30 MW power plant installed at its MWS operation and 14 MW of power at the Ezulwini Mine. The national power provider, Eskom, has re-established its reserve margins to acceptable levels by re- commissioning old generating infrastructure such that there have not been unplanned power outages in FY 2011 or FY 2012. Significant new power-generating facilities are expected to start up in South Africa from 2013. This large capital outlay on infrastructure resulted in Eskom increasing its tariffs by 25% in Q1 2012. Fuel Rising costs of fuel impact the costs of running the plants and the transportation of labour and materials to the sites and eventually the costs of moving rock from the underground mine and the metals that are to be produced at both operations. Environmental and hazardous materials Laws and regulations involving the protection and remediation of the environment and the governmental policies for implementation of such laws and regulations are constantly changing and are generally becoming more restrictive. Mining operations have inherent risks and liabilities associated with pollution of the environment and the disposal of waste products and hazardous materials occurring as a result of mining and production. First Uranium cannot give any assurance that, notwithstanding its precautions, breaches of environmental laws (whether inadvertent or not) or environmental pollution will not materially and adversely affect its financial condition and its operations’ results.
    • 46. FIU MDA 2012 Market risks Gold Prices First Uranium’s revenues are directly related to the world market prices of gold as its revenues are derived primarily from gold mining. Gold prices can be subject to volatile price movements, which can be material and can occur over short periods of time and are affected by numerous factors beyond First Uranium’s control. Additional Information Additional information relating to First Uranium is contained in the Corporation’s filings with the Canadian Securities regulator, including the AIF. These are available on SEDAR at .sedar.com and on the Corporation’s website at .firsturanium.com. Forward-looking Information This MD&A and consolidated financial statements for the year ended March 31, 2012 contain certain forward- looking statements. Forward-looking statements include but are not limited to those with respect to the timing and amount of estimated future production, costs of production, capital expenditures, price of gold, supply and price of sulphuric acid, the availability and price of electrical power, currency fluctuations, requirements for additional capital, availability of financing on acceptable terms, government regulation of mining operations, environmental risks, unanticipated reclamation expenses and title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as “goal”, “objective”, “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “does not anticipate”, or “believes” or variations of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of First Uranium to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the ability of the Corporation to bring the proposed transactions as contemplated by the Special Committee to fruition, conclusions of economic evaluations, changes in project parameters as plans are refined, possible variations in grade and ore densities or recovery rates, the failure of plant, equipment or processes to operate as anticipated, the outcome of litigious matters and regulatory processes, including the appeal of the integrated water use license for the TSF, accidents, labour disputes or other risks of the mining industry, delays in obtaining government approvals or financing or in completion of development or construction activities, risks relating to the integration of acquisitions, to international operations, to prices of gold. Although First Uranium has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. It is important to note, that: (i) approvals to transfer or grant, as the case may be, mining rights or prospecting rights will be obtained; (ii) consistent supply of sufficient power will be available to develop and operate the projects as planned; (iii) mineral reserve and resource estimates are accurate; (iv) the technology used to develop and operate its two projects has, for the most part, been proven and will work effectively; (v) that labour and materials will be sufficiently plentiful as to not impede the projects or add significantly to the estimated cash costs of operations; (vi) that BEE investors will maintain their interest in the Corporation and the Corporation will be able to secure additional BEE investment in the Corporation’s common shares to a sufficient level to maintain compliance with BEE requirements as required by applicable law; and (vii) that the innovative work on stabilizing the main shaft at the Ezulwini Mine will be successful in maintaining a safe and uninterrupted working environment until 2024.
    • 47. FIU MDA 2012 Non-IFRS Measures The Corporation believes that in addition to conventional measures prepared in accordance with IFRS, the Corporation and certain investors and analysts use certain other non-IFRS financial measures to evaluate the Corporation's performance including its ability to generate cash flow and profits from its operations. The Corporation has included certain non-IFRS measures in this document. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Readers are advised to read all IFRS accounting disclosures presented in the Corporation’s Financial Statements for more detail. (Balance of page intentionally left blank)
    • 48. FIU AFS 2012 FIRST URANIUM CORPORATION 2012 ANNUAL FINANCIAL STATEMENTS
    • 49. FIU AFS 2012 FIRST URANIUM CORPORATION REPORT OF MANAGEMENT'S ACCOUNTABILITY The accompanying consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards (IFRS). Management is responsible for ensuring that these statements, which include amounts based upon estimates and judgement, are consistent with other information and operating data contained elsewhere in the annual financial statements and reflect the Corporation's business transactions and financial position. Management is also responsible for the information disclosed in the management’s discussion and analysis including responsibility for the existence of appropriate information systems, procedures and controls to ensure that the information used internally by management and disclosed externally is complete and reliable in all material respects. In addition, management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. The internal control system includes an internal audit function and a code of business conduct and ethics, which is communicated to all levels in the organization and requires all employees to maintain high standards in their conduct of the Corporation's affairs. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Corporation’s assets are appropriately accounted for and adequately safeguarded. PricewaterhouseCoopers Inc, an independent firm of Chartered Accountants were appointed by the shareholders as external auditors to examine the consolidated financial statements in accordance with generally accepted auditing standards in Canada and provide an independent professional opinion. Their report is presented with the consolidated financial statements. The Board of Directors, acting through the Audit Committee and composed solely of independent directors, is responsible for determining that management fulfils its responsibilities in the preparation of the consolidated financial statements and the financial control of operations. The Audit Committee recommends the independent auditors for appointment by the shareholders. It meets regularly with management, the internal auditor and the shareholders' auditors to review significant accounting, reporting and internal control matters. Both the internal and shareholders' auditors have unrestricted access to the Audit Committee. The Audit Committee reviews the financial statements, the report of the shareholders' auditors, and management’s discussion and analysis and submits its report to the Board of Directors for formal approval. Deon Van Der Mescht Emma Oosthuizen President & Chief Executive Officer Senior Vice President & Chief Financial Officer Toronto, Ontario June 29, 2012
    • 50. FIU AFS 2012 INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF FIRST URANIUM CORPORATION We have audited the accompanying consolidated financial statements of First Uranium Corporation and its subsidiaries, which comprise the consolidated statements of financial position as at March 31, 2012, March 31, 2011 and April 1, 2010, and the consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for the years ended March 31, 2012 and March 31, 2011, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements The corporation’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatements, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of First Uranium Corporation and its subsidiaries as at March 31, 2012, March 31, 2011 and April 1, 2010, and their consolidated financial performance and their consolidated cash flows for the years ended March 31, 2012 and March 31, 2011 in accordance with International Financial Reporting Standards. Emphasis of Matter Without qualifying our opinions, we draw attention to Note 1 Nature of Operations and Going Concern and Note 32 Subsequent events to the consolidated financial statements which describe the matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt about the corporation’s ability to continue as a going concern. PricewaterhouseCoopers Inc. Director: A.J. Rossouw Registered Auditor 2 Eglin Rd, Sunninghill South Africa June 29, 2012
    • 51. First Uranium Corporation Consolidated Statement of Financial Position FIU AFS 2012 (in thousands of US dollars) Notes March 31, 2012 March 31, 2011 April 1, 2010 ASSETS Current assets Cash and cash equivalents 3,817 49,606 10,177 Trade and other receivables 7 356 11,805 8,362 Inventories 8 - 11,997 10,700 4,173 73,408 29,239 Assets classified as held for sale 6 656,123 - - Non-current assets Property, plant and equipment 9 14 836,485 702,512 Deferred tax asset 24 - 40,010 5,071 Asset retirement funds 10 - 11,076 8,408 14 887,571 715,991 Total assets 660,310 960,979 745,230 LIABILITIES Current liabilities Senior unsecured convertible debentures 11 148,768 - - Canadian Notes liability 12 107,336 - - Trade and other payables 13 4,956 35,104 59,344 Gold One loan facility 14 5,003 - - Income tax payable 2,765 2,232 1,619 Facility with Simmer & Jack 12 - - 22,462 Provision for penalty pursuant to MWS Gold Stream Transaction 12 - - 17,857 Derivative liabilities related to Gold Stream Transactions 15 - 48,468 20,851 Payables to related party 28 - 12 2,489 268,828 85,816 124,622 Liabilities related to assets held for sale 6 455,005 - - Non-current liabilities Derivative liabilities related to Gold Stream Transactions 15 - 348,727 229,535 Senior unsecured convertible debentures 11 - 140,373 123,713 Canadian Notes liability 12.1 - 99,422 - Rand Notes liability 12.2 - 72,645 - Asset retirement obligations 16 - 36,014 26,068 Non-current liabilities - 697,181 379,316 Total liabilities 723,833 782,997 503,938 SHAREHOLDERS’ EQUITY Share capital 17 421,004 418,950 346,443 Equity portion of senior unsecured convertible debentures 41,692 41,692 41,692 Equity portion of the Canadian Notes 11,865 11,865 - Contributed surplus 18 32,081 30,828 26,122 Foreign currency translation reserve (FCTR) (28,952) 51,191 - Fair value reserve 1,408 978 812 Accumulated deficit (542,621) (377,522) (173,777) Total shareholders’ equity (63,523) 177,982 241,292 Total liabilities and shareholders’ equity 660,310 960,979 745,230 See accompanying notes to the Consolidated Financial Statements Nature of operations and going concern 1 Commitments and contingencies 16
    • 52. First Uranium Corporation Consolidated Statements of Comprehensive Income for the years ended March 31, 2012 and 2011 FIU AFS 2012 2012 2012 2012 2011 2011 2011 Notes US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Continuing Operations Discontinued Operations (a) Total Continuing Operations Discontinued Operations(a) Total Revenue 19 - 179,176 179,176 - 134,926 134,926 Cost of sales - (137,648) (137,648) - (114,982) (114,982) Gross profit - 41,528 41,528 - 19,944 19,944 Other income 20 - 2,497 2,497 - 3,177 3,177 Other expenditures 23 (10,735) (20,826) (31,561) (10,464) (21,611) (32,075) Impairment of Ezulwini Mine’s assets 9 (178,171) (178,171) - (1,482) (1,482) Fair value movement on the Rand Notes liability 12.2 - 12,065 12,065 - (22,133) (22,133) Derivative income (expense) related to Gold Stream Transactions 21 - 14,164 14,164 - (172,698) (172,698) Foreign exchange (loss) gain (148) 84 (64) (972) 180 (792) Loss before interest and income taxes (10,883) (128,659) (139,542) (11,436) (194,623) (206,059) Investment income 121 304 425 294 432 726 Interest and accretion expense 22 (36,808) (58) (36,866) (28,556) - (28,556) Accretion expense on asset retirement obligations 16 - (2,794) (2,794) - (2,452) (2,452) Loss before income taxes 23 (47,570) (131,207) (178,777) (39,698) (196,643) (236,341) Income tax recovery (charge) 24 (448) 14,126 13,678 (389) 32,985 32,596 Loss for the year (48,018) (117,081) (165,099) (40,087) (163,658) (203,745) Other comprehensive income (loss), net of taxes: Fair value movement on investments (no tax impact) - 430 430 - 166 166 Movement on foreign currency translation reserve (no tax impact) (47,973) (32,170) (80,143) 19,056 32,135 51,191 Comprehensive income (loss) for the year (95,991) (148,821) (244,812) (21,031) (131,357) (152,388) Basic and diluted loss per common share (US$) 25 (0.20) (0.49) (0.69) (0.22) (0.88) (1.10) Weighted average number of basic and diluted common shares outstanding (‘000) 25 237,703 237,703 237,703 185,256 185,256 185,256 See accompanying notes to the Consolidated Financial Statements Nature of operations and going concern 1
    • 53. First Uranium Corporation Consolidated Statements of Changes in Shareholders’ Equity for the years ended March 31, 2012 and 2011 FIU AFS 2012 Share capital Equity portion of unsecured convertible debentures Equity portion of the Canadian Notes Contributed surplus Foreign currency translation reserve Fair value reserve Accumulated deficit Total equity Balance at April 1, 2011 418,950 41,692 11,865 30,828 51,191 978 (377,522) 177,982 Transaction with owners Share issue resulting from the conversion of Rand Notes 2,031 - - - - - - 2,031 Restricted stock units exercised 23 - - (23) - - - - Stock-based compensation - - - 1,276 - - - 1,276 Total transactions with owners 2,054 - - 1,253 - - - 3,307 Comprehensive income (loss) Loss for the year - - - - - - (165,099) (165,099) Fair value movement on investments - - - - - 430 - 430 Movement on foreign currency translation reserve - - - - (80,143) - - (80,143) Total comprehensive loss - - - - (80143) 430 (165,099) (244,812) Balance at March 31, 2012 421,004 41,692 11,865 32,081 (28,952) 1,408 (542,621) (63,523) Share capital Equity portion of unsecured convertible debentures Equity portion of the Canadian Notes Contributed surplus Foreign currency translation reserve Fair value reserve Accumulated deficit Total equity Balance at April 1, 2010 346,443 41,692 - 26,122 - 812 (173,777) 241,292 Transaction with owners Net increase in respect of bought deal financing 49,989 - - - - - - 49,989 Net increase in respect of shares issued pursuant to the MWS Gold Stream Transaction penalty 16,898 - - - - - - 16,898 Equity portion of the secured convertible notes issued - - 11,865 - - - - 11,865 Share issue resulting from the conversion of Rand Notes 5,399 - - - - - - 5,399 Restricted stock units exercised 221 - - (221) - - - - Stock-based compensation - - - 4,927 - - - 4,927 Total transactions with owners 72,507 - 11,865 4,706 - - - 89,078 Comprehensive income (loss) Loss for the year - - - - - - (203,745) (203,745) Fair value movement on investments - - - - - 166 - 166 Movement on foreign currency translation reserve - - - - 51,191 - - 51,191 Total comprehensive loss - - - - 51,191 166 (203,745) (152,388) Balance at March 31, 2011 418,950 41,692 11,865 30,828 51,191 978 (377,522) 177,982 See accompanying notes to the Consolidated Financial Statements
    • 54. First Uranium Corporation Consolidated Statements of Cash Flows for the years ended March 31, 2012 and 2011 FIU AFS 2012 2012 2012 2012 2011 2011 2011 Notes US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Continuing Operations Discontinued Operations (a) Total Continuing Operations Discontinued Operations (a) Total Loss before interest and income taxes (10,883) (128,659) (139,542) (11,436) (194,623) (206,059) Changes not affecting cash: - Non-cash portion related to derivative income (expense) related to Gold Stream Transactions 21 - (48,407) (48,407) - 146,809 146,809 - Fair value movement on the Rand Notes liability 12.2 - (12,065) (12,065) - 22,133 22,133 - Costs with regards to the issue of the Rand Notes expensed 12.2 - - - - 2,367 2,367 - Net effect of exchange rate changes on net liabilities held in foreign currencies 828 (944) (166) (1,732) (1,644) (3,376) - Impairment of Ezulwini Mine’s assets 9 - 178,171 178,171 - 1,482 1,482 - Amortization on property, plant and equipment 9 23 13,785 13,808 29 12,172 12,201 - Stock-based compensation 23 921 355 1,276 2,841 2,086 4,927 - Penalty pursuant to MWS Gold Stream Transaction - - - - 356 356 (9,111) 2,186 (6,925) (10,298) (8,862) (19,160) Movement in working capital: - Decrease (increase) in inventories - 394 394 - (1,297) (1,297) - Decrease (increase) in accounts receivable (222) 8,376 8,154 306 (3,749) (3,443) - Decrease in payables to related parties - - - - (2,477) (2,477) - Increase (decrease) in accounts payable and accrued liabilities 1,621 888 2,509 (1,828) (1,842) (3,670) Cash flows from operations (7,712) 11,844 4,132 (11,820) (18,227) (30,047) Cash interest received 121 179 300 259 215 474 Cash interest paid (13,958) (5,972) (19,930) (13,801) (6,621) (20,422) Cash flows utilized in operating activities (21,549) 6,051 (15,498) (25,362) (24,633) (49,995) Additions to property, plant and equipment 26 (2) (29,410) (29,412) (29) (101,501) (101,530) Net increase in the asset retirement funds - (984) (984) - (1,669) (1,669) Contributions to other financial assets - (65) (65) - - - Cash flows utilized in investing activities (2) (30,459) (30,461) (29) (103,170) (103,199) Intra-group financing between continuing and discontinued operations (21,159) 21,159 - (88,467) 88,467 - Draw down of Gold One loan facility 14 5,000 - 5,000 - - - Net cash received from bought deal financing 17 - - - 49,989 - 49,989 Net cash received from the issue of the Canadian Notes 12.1 - - - 103,902 - 103,902 Net cash received from the issue of the Rand Notes 12.2 - - - - 37,551 37,551 Costs related to the issue of shares to settle the Gold Wheaton penalty and Rand Notes conversion 12.2 - - - (1,329) - (1,329) Cash flows from financing activities (16,159) 21,159 5,000 64,095 126,018 190,113 Net (decrease) increase in cash and cash equivalents for the year Effects of foreign currency movements on cash and cash equivalents (37,710) (3,249) (40,959) 38,704 (1,785) 36,919 (1,351) (634) (1,985) 1,942 568 2,510 Cash and cash equivalents at beginning of the year 42,878 6,728 49,606 2,232 7,945 10,177 Cash and cash equivalents at end of the year 3,817 2,845 6,662 42,878 6,728 49,606 See accompanying notes to the Consolidated Financial Statements Nature of operations and going concern (Note 1) Significant non-cash transactions during the year ended March 31, 2012 Conversion of Rand Notes to common shares in First Uranium (Note 12.2) Significant non-cash transactions during the year ended March 31, 2011 Settlement of the MWS Gold Stream Transaction penalty with the issuance of common shares in First Uranium (Note 15.1) Conversion of the Simmer and Jack Mines, Limited loan to Rand Notes (Note 12.2)
    • 55. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 1. NATURE OF OPERATIONS AND GOING CONCERN First Uranium Corporation (First Uranium or the Corporation) was incorporated on September 22, 2005 under the Business Corporations Act (Ontario) (as 2082276 Ontario Inc., which name was amended to First Uranium Corporation on October 12, 2005). The private company restrictions were deleted from the Corporation’s articles pursuant to Articles of Amendment dated November 7, 2006. Articles of Amendment dated December 13, 2006 were filed, and on December 15, 2006, First Uranium was continued under the Business Corporations Act (British Columbia). On June 13, 2012, the Corporation filed Articles of Continuance and was continued under the Business Corporations Act (Ontario) First Uranium’s registered office is located at 141 Adelaide Street West, Suite 1210, Toronto, Ontario Canada M5H 3L5. First Uranium also maintains an office at 2 Goud Laan, Waterpan, Westonaria, South Africa. First Uranium is a Canadian resource corporation which operates the Ezulwini Mine, an underground mining operation, and Mine Waste Solutions (MWS), a tailings recovery facility. Both operations are situated in South Africa. The Corporation has a primary listing on the Toronto Stock Exchange (TSX)(FIU) and a secondary listing on the Johannesburg Stock Exchange (JSE)(FUM). First Uranium owns 100% of First Uranium Limited (FUL), which in turn holds 100% of First Uranium (Proprietary) Limited (FUSA) and 100% of Ezulwini Mining Corporation (Proprietary) Limited (EMC). EMC owns and operates the Ezulwini Mine. FUSA owns 100% of Mine Waste Solutions (Proprietary) Limited and its wholly-owned subsidiary, Chemwes (Proprietary) Limited (collectively MWS) which processes tailings from the Buffelsfontein mine (the Buffelsfontein Tailings) at its gold recovery plants. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) applicable to a going concern. This assumes the Corporation will be able to finance its operations and capital expenditures, realize the value of its assets, pay its liabilities and meet future obligations in the normal course of business. Accordingly, the accompanying financial statements do not include any adjustments to the recoverability and reclassification of recorded assets that might be necessary should the Corporation be unable to continue as a going concern. The lower than anticipated production figures at the Ezulwini Mine in the third quarter of Fiscal 2012 (See Note 9 Impairment of Ezulwini Mining Assets) necessitated restructuring of the Ezulwini Mine in order to secure the future of this operation. The restructuring process commenced in December 2011 and included a revised mine plan for the Ezulwini Mine which reduces the number of tons mined in the short term to focus on higher grade easier accessible ore. In addition, the Corporation decided to temporarily suspend the production of uranium at the Ezulwini Mine and to place the uranium plant on temporary care and maintenance. As a result, cash flows from the Ezulwini Mine was not in line with initial estimates and for the year ended March 31, 2012 the Corporation reported a loss after tax of $48.0 million from continuing operations and $117.1 million from discontinued operations. The Corporation’ continuing operations utilized $21.5 million of cash while its discontinued operations generated $6.1 million of cash during the year ended March 31, 2012. In the second quarter of Fiscal 2012, the Board of First Uranium empowered a Special Committee to monitor developments and undertake a strategic review of the Corporation and its capital structure and to advise on any strategic alternatives that may be in the interests of First Uranium and stakeholders of First Uranium. The strategic review includes reviewing available alternatives for the settlement of the senior unsecured convertible debentures that mature in June 2012 (the Debentures) (See Note 11, Senior unsecured convertible debentures) and alternatives for settlement of the senior secured convertible notes that mature in March 2013 (the Notes) (See Note 12, Senior secured convertible notes). Due to the number of stakeholders involved, the process was more complex and took longer than initially anticipated.
    • 56. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 In response to proposals received from third parties, the Corporation decided to dispose of its principal assets being the Mine Waste tailings recovery project and the Ezulwini Mine at the start of the fourth quarter of Fiscal 2012 (See Note 6, Discontinued Operations). On March 2, 2012 First Uranium entered into a definitive agreement (the AGA Agreement) for the sale indirectly of all of the shares of MWS, the tailings recovery project which it operates in South Africa to AngloGold Ashanti Limited (AGA) (the AGA Transaction). Under the terms of the AGA Agreement, AGA will pay $335 million in cash for all of the shares and associated claims of FUSA, which indirectly holds the MWS tailings recovery project, subject to the fulfilment of a number of conditions precedent. Also on March 2, 2012, the Corporation entered into a binding letter agreement (the Gold One Letter Agreement for the sale, indirectly, of all of the shares of FUL, which owns all of the shares of the Ezulwini Mine, to Gold One International Limited (Gold One) for $70 million in cash (the Gold One Transaction and together with the AGA Transaction, the Transactions). Gold One also provided a loan facility to the Corporation for an amount of up to $10 million available for drawdown in accordance with the loan agreement between the parties (the Gold One Loan Facility) (See Note 14, Gold One Loan Facility). The Gold One letter was subject to fulfilment of a number of conditions precedent, including entering into a definitive transaction agreement, which was subsequently concluded on March 30, 2012. Each of the AGA Transaction and the Gold One Transaction had to be considered separately by shareholders of First Uranium at a Special Meeting convened by the Corporation on June 13, 2012. In order to complete the Transactions, the Corporation also had to convene a meeting of the Debenture holders at which they were required to approve amendments to the Debenture Indenture to agree, amongst other things, that the maturity date will be extended to October 5, 2012, and if the Transactions are to be completed and implemented by October 5, 2012, no interest will accrue after March 2, 2012 and the principal amount of the Debentures will be reduced to: (a) 95% of the principal amount of the outstanding Debentures owing as at April 30, 2012; and (b) the lesser of: (i) 3% of the principal amount of the outstanding Debentures owing as at April 30, 2012; and (ii) all payments in connection with the escrow funds held pursuant to the terms of the AGA Agreement and the Gold One Agreement (each a Warranty Escrow) received by First Uranium, whenever received. In addition, First Uranium will pay to the Debenture Trustee, for distribution to the holders of Debentures which agreed, on or before May 30, 2012, to vote in favour of the extraordinary resolution of the holders of Debentures approving the supplemental debenture indenture, an additional amount, on account of the principal amount of the Debentures held by such consenting holders of Debentures, equal to 2% of the principal amount of all the outstanding Debentures owing as at April 30, 2012. The Debenture holder meeting was also convened by the Corporation on June 13, 2012. Included as a condition precedent to the Transactions, is the release of all security against the FUSA and MWS assets (in the case of the AGA transaction) and the FUL and the Ezulwini assets (in the case of the Gold One Transaction) relating to the security held for the benefit of the Note holders and the Gold One Loan Facility. For the Corporation to fulfil this condition precedent, the Notes and the Gold One Loan Facility would have to be settled upon closing of the AGA Transaction. Consequently, the Corporation also had to convene a meeting of the Note holders at which they were required to approve amendments to the Note Indentures to agree that upon completion and implementation of the AGA Transaction, the Note holders will accept repayment in cash of 100% of the principal amount outstanding on the Notes and that no interest will accrue after March 31, 2012. The Note holder meeting was also convened by the Corporation on June 13, 2012. On June 13, 2012, both the AGA Transaction and the Gold One Transaction were approved by the shareholders of First Uranium and the Corporation also received the required approvals from the Debenture holders and Note holders. (See Note 32, Subsequent events).
    • 57. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 The proceeds from the sale of First Uranium’s principal assets will enable it to settle the Debentures, the Notes and the Gold One Loan Facility under the terms agreed to with the Debenture holders, Note holders and Gold One. As of June 25, 2012, all of the conditions precedent of the AGA Transaction have been satisfied or waived. Each of the parties have confirmed such in writing and the Closing Date, as defined in the AGA Agreement, is scheduled to occur on July 3, 2012. On the Closing Date, all of the documents required to conclude the AGA Transaction will be delivered to Edward Nathan Sonnenbergs as Closing Document Stakeholder, the purchase price will, in accordance with the terms of the AGA Agreement, be delivered to Computershare Trust Company of Canada and Computershare Investor Services (Proprietary) Inc., each a Purchase Price Stakeholder, and certain documents (Discharge Documents) relating to the discharge of the security held for the benefit of the Note holders and the Gold One Loan Facility will be lodged with the appropriate deeds office. On the Closing Date, CTTC will convert sufficient US dollars to Canadian dollars so that CTTC holds an amount in Canadian dollars to pay the principal amount (C$110 million) of the Canadian Notes outstanding and CIS will convert sufficient US dollars to South African Rand in order for CIS to pay the principal amount (ZAR418.6 million) of the Rand Notes outstanding. Upon registration of the Discharge Documents releasing all security in the MWS assets, the Closing Document Stakeholder will release the remaining closing documents from escrow and the Purchase Price Stakeholders will pay: (i) to BNY Trust Company of Canada, as trustee for the Canadian Notes, C$110 million, and to or to the order of GMG Trust Company (SA) Pty Limited, as trustee for the Rand Notes, ZAR418.6 million; (ii) to Gold One, $10 million plus accrued interest to the date of payment; (iii) $25 million (AGA Deferred Payment) to the Warranty Escrow agent; and, (iv) the balance shall be paid to FUL, or at the direction of FUL. The Corporation has been advised that it could take up to three weeks for the Discharge Documents to be registered, accordingly, the AGA Transaction is expected to be implemented by July 24, 2012 or an earlier date depending on the date the Discharge Documents are actually registered. In order to provide sufficient time for the AGA Transaction to be implemented, Gold One and the Corporation have agreed to extend the date to satisfy the conditions precedent to the Gold One Transaction to July 31, 2012. Other than the conditions precedent associated with the implementation of the AGA Transaction, the material conditions precedent to the Gold One Transaction have been satisfied or waived subsequent to year- end, including all of the regulatory approvals to the extent required. Following the completion of the Transactions, the Corporation will have effected a change of business according to the rules of the TSX. As a result of such change in business, the Corporation will be required to meet the original listing requirements of the TSX in order to remain listed. Following completion of the AGA Transaction and the Gold One Transaction, the Board and management will meet to consider the business plan for the Corporation and its future. The Corporation will consider the most efficient and orderly way in which to distribute to the Shareholders all remaining property of the Corporation (after payment of the Corporation’s creditors). The Corporation may then proceed to be wound up and dissolved. However the Board has not made any decisions with respect to the windup and dissolution at this time. Upon completion of the Transactions, the Corporation will not meet the TSX’s original listing requirements under any of the listing categories of the TSX. Therefore the Corporation is expected to be delisted from the TSX. These conditions, along with other matters as set forth in earlier in this note and Note 32, Subsequent events, indicate the existence of a material uncertainty which may cast significant doubt about the Corporation continuing as a going concern. 2. BASIS OF PRESENTATION Until March 31, 2011, First Uranium prepared its annual and interim consolidated financial statements in accordance with Canadian generally accepted accounting principles (Canadian GAAP) as set out in the Handbook of the Canadian Institute of Chartered Accountants (CICA Handbook). In calendar 2010, the CICA
    • 58. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Handbook was revised to incorporate IFRS, and require publicly accountable enterprises to apply such standards effective for financial years beginning on or after January 1, 2011. Accordingly, the Corporation has commenced reporting on this basis in these consolidated financial statements. In these financial statements, the term “Canadian GAAP” refers to Canadian GAAP before the adoption of IFRS. The audited consolidated financial statements have been prepared in accordance with IFRS and include considerations and disclosures as required by IFRS 1, First time adoption of IFRS, using the accounting policies adopted by the Corporation. Subject to certain transition elections disclosed in Note 5, the Corporation has consistently applied the same accounting policies in its opening IFRS balance sheet at April 1, 2010 and throughout all periods presented, as if these policies had always been in effect. The Corporation’s financial statements, which were previously prepared in accordance with Canadian GAAP, differ in some areas from IFRS. Note 5 discloses IFRS information that is material to the understanding of these financial statements. The consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments which have been measured at fair value. The Corporation’s presentation currency is United States dollars. Reference herein of $ is to United States dollars. Reference of Cdn$ is to Canadian dollars and reference of ZAR is to the South African Rand. 2.1 Us e of es timates The preparation of these consolidated financial statements in accordance with IFRS requires management to make use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the period. Areas of judgement that have the most significant effect on the amounts recognized in the financial statements are estimation of asset lives, determination of ore reserve estimates, capitalization of exploration and evaluation costs, and identification of functional currencies. Key sources of estimation uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities are the estimation of close-down and restoration costs and the timing of expenditures, the review of asset carrying values and impairment charges and reversals, the estimation of environmental clean-up costs and the timing of expenditures and the recoverability of potential future income taxes and the fair valuation of the financial derivatives related to Gold Stream Transactions and the fair valuation of the Rand Notes liability. Financial results as determined by actual events could differ from those estimated. Management estimates are also applied in arriving at the useful lives of items of property, plant and equipment and in determining the fair value of stock options. 2.1.1 Determination of ore res ources and res erves The estimation of reserves impacts the depreciation of property, plant and equipment, the recoverable amount of property, plant and equipment, the timing of rehabilitation expenditure and the gold stream transaction derivative liability. Factors impacting the determination of proved and probable reserves are: • The grade of Mineral Reserves may vary significantly from time to time (i.e. differences between actual grades mined and resource model grades); • Differences between actual commodity prices and commodity price assumptions; • Unforeseen operational issues at mine sites;
    • 59. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 • Changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange rates. For the Ezulwini Mine reserves have not yet been declared. However, production per the life of mine plan based on resources adjusted for estimated mining modifying factors were used as an approximation of reserves for the above mentioned accounting purposes. 2.1.2 Carrying value of property, plant and equipment (Note 9) The estimated useful lives of property, plant and equipment are based on the historical performance as well as expectations about the future use and therefore require a significant degree of judgement to be applied by management. The depreciation rates represent management’s current best estimates of the useful lives of the assets. Residual values of the property, plant and equipment are reviewed at least annually. Adjustment will affect the depreciation charge for the reporting period. Life-of-mine assets are depreciated over the life of mine which is impacted by mineral reserves and life of mine planning. The impairment assessments required on classification of operations as discontinued operations was based on the offer prices made by AGA and Gold One. These offers were made in US$. Final proceeds realized will depend on the ZAR exchange rate at the disposal date. The impairment charge recognized for the Ezulwini Mine was based on a year-end exchange rate of ZAR7.67. A 10% weakening (strengthening) in the exchange rate will result in a $12.2 million decrease (increase) in the impairment charge after taking into account the impact on the proceeds and carrying amount of the cash generating unit. 2.1.3 As s et retirement obligations (Note 16) The Corporation’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. The Corporation recognizes management’s best estimate for asset retirement obligations in the period in which they are incurred. Actual costs incurred and actual timing thereof in future periods can differ materially from the estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates can affect the carrying amount of this provision. Estimated long-term environmental provisions, comprising pollution control, rehabilitation and mine closure, are based on the Corporation’s environmental policy taking into account current technological, environmental and regulatory requirements. Provisions for future rehabilitation costs have been determined, based on calculations which require the use of estimates. Key assumptions used are disclosed in Note 16. Changes in these estimates will not have an immediate direct impact on the income statement as changes in estimates of the provision are recognized against the decommissioning asset. Changes will impact the future depreciation of the decommissioning asset and the accretion expense for the asset retirement obligation. 2.1.4 Derivative liabilities related to Gold Stream Trans actions (Note 15) The calculation of the derivative liability is dependent on the estimated life of mine production profile and key valuation inputs as disclosed in Note 15. Changes in any of these inputs could have a significant impact on the carrying amount of the liability. However, this liability cannot decrease below the Uncredited Balance as disclosed in note 15.
    • 60. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 A 10% decrease (increase) in the gold price will result in a $52.5 million ($53.1 million) decrease (increase) in the liability and corresponding increase (decrease) in profits. 2.1.5 Income tax, deferred tax and mining royalties Significant judgement is required in determining the provision for income taxes and mining royalties. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Corporation recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determinations are made. The Corporation did not recognize a deferred tax asset for the Ezulwini Mine as realizing a deferred tax asset in the short term is not regarded as probable given the profit history. 2.1.6 Contingent liabilities By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. Disclosure is made in Note 27 of the contingent liabilities that the Corporation is exposed to. The outcome of any pending and future proceedings cannot be predicted with certainty. Thus, an adverse decision in a lawsuit could result in additional costs that are not provided for. 3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Cons olidation These consolidated financial statements include the accounts of First Uranium and all of its subsidiaries using uniform accounting policies. All significant inter-company balances and transactions have been eliminated on consolidation. 3.2 Subs idiaries Subsidiaries are all entities (including special purpose entities) over which the Corporation has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Corporation controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Corporation. They are de-consolidated from the date that control ceases. The Corporation uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Corporation. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Corporation recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. The excess of the consideration transferred for the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Corporation’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair
    • 61. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the statement of comprehensive income. Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Corporation. Transactions and non-controlling interests The Corporation treats transactions with non-controlling interests as transactions with equity owners of the Corporation. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. 3.3 Foreign currency trans lation Functional and presentation currency Items included in the financial statements of each entity in the Corporation are measured using the primary economic environment in which the entity operates (the functional currency). The Corporation’s reporting currency is the US$. Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss in the statement of comprehensive income. Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and • all resulting exchange differences are recognized as a foreign currency translation reserve, a separate component of equity. On consolidation, exchange differences arising from the translation of the net investment in foreign operations are also taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the statement of comprehensive income as part of the gain or loss on sale.
    • 62. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 3.4 Goodwill Goodwill represents the excess of the aggregate of the cost of the acquisition, the non-controlling interest and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is tested annually for impairment or whenever there is an impairment indicator. Goodwill is carried at cost less accumulated impairment loss. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. 3.5 Property, plant and equipment The cost of an item of property, plant and equipment is recognized as an asset when: • it is probable that future economic benefits associated with the item will flow to the Corporation; and • the cost of the item can be measured reliably. Costs include expenditures incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognized in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is written off. The recognition of costs in the carrying amount of an asset ceases when the item is in the location and condition necessary to operate as intended by management. Any net income earned while the item is not yet capable of operating as intended, reduces the capitalized amount. Interest on borrowings, specifically to finance the establishment of mining assets, is capitalized during the construction phase. The present value of decommissioning costs, which is the dismantling and removal of the asset included in the environmental rehabilitation obligation, is included in the cost of the related assets and changes in the liability resulting from changes in the estimates are accounted for as follows: • Any decrease in the liability reduces the cost of the asset. The decrease in the asset is limited to its carrying amount and any excess is accounted for in profit or loss. • Any increase in the liability increases the carrying amount of the asset. An increase to the cost of an asset is tested for impairment when there is an indication of impairment. • These assets are depreciated over their useful lives and are expensed in profit and loss as a cost of production. Property, plant and equipment are carried at cost less accumulated amortization and any impairment losses.
    • 63. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Amortization is provided for on all property, plant and equipment other than freehold land, to write down the cost, less residual value over their useful lives as follows: Item Depreciation Method Average useful life Buildings Straight line Life of mine Office furniture and equipment Straight line 6 years Motor vehicles Straight line 5 years Computer equipment and software Straight line 3 years Mining assets include all the tangible assets used in the direct mining production process. Mining assets also include preproduction expenditure incurred during the development of the mine and borrowing costs capitalised during the construction period where such costs are financed by borrowings. Mining assets are classified into the following categories: i) Plant and equipment Plant and equipment includes any infras tructure that is us ed in the proces s ing of the products produced. Included in plant and equipment (excluding land and buildings ) are gold plants , uranium plants , water purification plants , etc. ii) Mine Infrastructure Mine infrastructure includes all development costs incurred to develop new ore bodies, to define further mineralization in existing ore bodies and to expand the capacity of a mine. This cost includes the permanent equipping of this development. Unit of production – this method is based on the units produced during the financial period as a percentage of the total units at the beginning of the period less units produced in the current financial period. The following are the units applied: a) Ounces (oz) of gold b) Units produced – the number of ounces of gold produced during the financial period c) Units at beginning of period – the number of ounces of gold that the mine had in its reserves at the beginning of the period d) Reserves – Estimate of Proven and Probable Ore Reserves of the amount of product that can economically and legally be extracted from the company’s properties. These reserves are reassessed annually. Life of mine Mining assets are stated at cost, less accumulated amortization and impairments. Amortization is first charged on new mining ventures from the date on which the mineral property goes into commercial production. Assets that are classified under discontinued operations cease to be depreciated from the date they are classified as held for sale. Tailings for processing are amortized based on estimated proven and probable reserves. Units-of-production Life of mine Mining rights Straight-line Mining period as per licence The cost of acquiring mining rights are capitalized and amortized over the mining period awarded by the Department of Mineral Resources (DMR) to the Corporation for the respective mining right. If the mining right period exceeds the estimated life of mine, then the amortization period is limited to the life of mine.
    • 64. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Exploration costs incurred to the date of establishing that a property has mineral resources are expensed. Exploration and development expenses incurred subsequent to this date and which have the potential of being economically recoverable are capitalized. If the project becomes feasible, the costs are amortized over the life of the mine. If the project is stopped, the costs are written off immediately. Management carries out a review at each financial year end to determine the appropriateness of the residual value and the useful life of each asset. Each component of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is amortized. Land is not amortized. The amortization charge for each period is recognized in profit or loss unless it is included in the carrying amount of another asset. 3.6 Provis ions Provisions are recognized when the Corporation has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Provisions are measured using the best estimate of the expenditure required to settle the obligation i.e. the amount the Corporation would rationally pay to settle the obligation or transfer to a third party. Where the effect of discounting is material, provisions are discounted to reflect the present value. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the obligation. Provisions are not recognized for future operating losses. 3.7 As s et retirement obligations The Corporation recognizes the fair value of its rehabilitation obligation as a liability in the year in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that results from the acquisition, construction, development, and/or normal use of the assets. The Corporation concurrently recognizes a corresponding increase in the carrying amount of the related long-lived asset that is depreciated over the life of the asset. The fair value of the rehabilitation provision is estimated using the expected cash flow approach (adjusted for risk) that reflects a range of possible outcomes discounted at the risk-free interest rate. Provision is made in full for the estimated future costs of pollution control and rehabilitation, in accordance with statutory requirements. Subsequent to the initial measurement, the rehabilitation provision is adjusted at the end of each year to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. Changes in the obligation due to the passage of time are recognized in income as finance cost using the effective interest method. Changes in the obligation due to changes in estimated cash flows and discount rates are recognized as an adjustment of the carrying amount of the long-lived asset that is depreciated over the remaining life of the asset. The cost of the ongoing current programmes to prevent and control pollution is charged against income as incurred.
    • 65. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 3.8 Impairment of long-lived as s ets Non-financial assets Assets that have an indefinite useful life, which are not subject to depreciation, are tested annually for impairment. Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are considered to be impaired when the higher of the asset’s fair value less cost to sell and its value in use is less than the carrying amount. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds the recoverable amount. The recoverability of the long-term mining assets is based on estimates of future discounted cash flows. These estimates are subject to risks and uncertainties including future metal prices and exchange rates. It is therefore possible that changes can occur which may affect the recoverability of the mining assets. The recoverable amounts of non-mining assets are generally determined by reference to market values. Where the recoverable amount is less than the carrying amount, the impairment is charged against income to reduce the carrying amount to the recoverable amount of the asset. The revised carrying amounts are depreciated over the remaining lives of such affected assets. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. An impairment previously recognized will be reversed when changes in circumstances that have an impact on estimates occur after the impairment was recognized. The reversal of an impairment provision will be limited to the lower of the newly calculated recoverable amount or the book value that would have existed if the impairment had not been recognized. The reversal of any impairment is recognized in profit or loss. Goodwill Goodwill is tested annually for impairment. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The recoverable amount of the cash-generating unit to which goodwill has been allocated is based on the higher of fair value less cost-to-sell or value-in-use derived from reserve and resource ounce valuation. Impairment write-downs on goodwill may not be reversed. 3.9 Tax and deferred tax Current and deferred taxation The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The group follows the comprehensive liability method of accounting for deferred tax using the balance sheet approach. Under this method deferred income taxes are recognized for the tax consequences of temporary differences by applying expected tax rates to the differences between the tax base of all assets or liabilities and its balance sheet carrying amount, except to the extent that deferred tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and does not affect the accounting or taxable profit or loss at the time of the transaction. Deferred tax is charged to profit or loss, except where the tax relates to items recognized in other comprehensive income or directly in equity in which case the tax is also recognized in other comprehensive income or directly in equity. The effect on deferred tax of any changes in tax rates is recognized in the statement of comprehensive income, except to the extent that it relates to items previously charged or credited directly to equity.
    • 66. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 The principal temporary differences arise from amortization and depreciation on property, plant and equipment, provisions, derivative liabilities related to gold stream transactions, unutilized tax losses and unutilized capital allowances carried forward. Deferred tax assets relating to the carry forward of unutilized tax losses and unutilized capital allowances are recognized to the extent that it is probable that future taxable profits will be available against which the unutilized tax losses and unutilized capital allowances can be utilized. Deferred income tax is provided on temporary differences arising from investments in subsidiaries, joint ventures and associates, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 3.10 Share bas ed payments The Corporation operates a number of equity-settled share-based compensation plans under which the entity receives services from employees as consideration for equity instruments (options) of the group. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted: • including any market performance conditions (for example, an entity’s share price); • excluding the impact of any service and non-market performance vesting conditions (for example profitability, production targets and remaining an employee of the entity over a specified time period); and • including the impact of any non-vesting conditions (for example, the requirement for employees to save). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. The impact of the revision to original estimates, if any, is recognized in the statement of comprehensive income, with a corresponding adjustment to equity. Upon the exercise of a stock option, share capital is recorded as the sum of the proceeds received and the related amount of contributed surplus. The fair value attributable to stock options that expire unexercised is credited to contributed surplus. The fair value relating to forfeited stock options is debited to contributed surplus and credited to the statement of comprehensive income. 3.11 Interes t income recognition Interest income is recognized on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Corporation. 3.12 Borrowing cos ts Borrowing costs are recognized as an expense in the period in which they are incurred. Borrowing costs that are attributable to acquisition, construction or production of a qualifying asset are capitalized as part of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalization is determined as actual borrowing costs on funds specifically for the purpose of obtaining a qualifying asset less any temporary investment of those borrowings.
    • 67. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 The capitalization of borrowing costs commences when expenditures for the asset have occurred, borrowing costs have been incurred and activities are taking place that are necessary to prepare the asset for intended use or sale. Capitalization ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. 3.13 Leas ed as s ets Determining whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether fulfillment of the arrangement is dependent on the use of a specific asset or assets and whether the arrangement conveys the right to control the asset. Leases of property, plant and equipment where the Corporation has substantially all the risks and rewards of ownership, are classified as capital leases. Capital leases are capitalized at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding obligations, net of finance charges, are included in other liabilities. The interest element of the installment is charged to finance cost in the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under capital leases are depreciated over the shorter of the useful life of the asset or the lease term. Leases of assets under which substantially all the benefits and risks of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are expensed to profit or loss on the straight-line basis over the life of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place. 3.14 Inventories Inventories include ore stockpiles, metal work-in-progress, consumables, and finished goods and are recorded at the lower of cost or net realizable value. Net realizable values of stockpiles and gold work-in-progress are determined with reference to current market prices and any cost estimation required to bring the products being valued into a saleable condition. Supplies and spares held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished products exceeds net realizable value, the materials are written down to net realizable value. In such circumstances, the replacement cost of the materials may be the best available measure of their net realizable value. The resulting movements in the net realizable values are charged to the statement of comprehensive income. Any provisions made in relation to the net realizable value reverse in future periods in the instance the net realizable value increases due to changes in the input variables considered in its calculation. Operating expenses in the statement of comprehensive income is credited with this movement. The cost of ore stockpiles and gold produced is determined principally by the weighted average cost method using related production costs. Costs of gold produced inventories include costs such as milling costs, mining costs, amortization and mine general and administration costs but exclude transport, refining and taxes. Stockpiles consist of ore to be processed through the processing plant. The stockpiles include those that have been sampled and evaluated and are on surface. All ore is expected to be fully processed within the life of mine. Spares and consumable stores are valued at weighted average cost after appropriate impairment of redundant and slow moving items. 3.15 Revenue recognition (i) Revenue arising from gold sales is recognized when the price is determinable, the product has been delivered in accordance with the terms of the contract, the significant risks and rewards of ownership have been
    • 68. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 transferred to the customer and collection of the sales price is reasonably assured. These criteria are typically met when the gold is sold to the open market by the refinery. Revenue further excludes value added tax. Revenues from silver and other by-products sales are included in other income. (ii) Interest income: Interest is recognized on a time-proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the group. 3.16 Earnings or los s per s hare Basic earnings or loss per share is computed by dividing earnings or loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share is similar to basic earnings or loss per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding assuming that options with an average market price for the period greater than their exercise price are exercised and the proceeds used to repurchase common shares. Options with an exercise price greater than the average quoted market price of the common shares are not included in the calculation of diluted earnings or loss per share, as the effect is anti-dilutive. For convertible securities that may be settled in cash or shares at the holder’s option the more dilutive of cash settlement and share settlement is used in computing diluted earnings or loss per share. Where the exchange price of the convertible securities is greater than the common share price, their impact on the diluted earnings or loss per share is excluded from the calculation, as they are considered anti-dilutive. 3.17 Financial ins truments – Recognition and Meas urement Financial instruments are measured at fair value on initial recognition, except for certain related party transactions. Fair value is the amount at which an item could be exchanged between willing parties. Financial assets The group classifies its financial assets in the following categories: loans and receivables, available-for-sale, held- to-maturity and at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the group provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables are subsequently measured at amortized cost using the effective interest method. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables include trade and other receivables (excluding VAT and prepayments), restricted cash and cash and cash equivalents. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at fair value. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, bank overdraft and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. Trade and other receivables and receivables from related parties
    • 69. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 These assets are classified as “loans and receivables” and are recorded at amortized cost, which upon their initial measurement is equal to their fair value. Subsequent measurements are recorded at amortized cost using the effective interest rate method. The carrying amounts for these assets approximated their fair values because of their short terms of maturity. Available-for-sale assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the balance sheet date. Available-for-sale financial assets are subsequently carried at fair value. When securities classified as available- for-sale are sold or impaired, the accumulated fair value adjustments recognized in other comprehensive income are reclassified in the statement of comprehensive income as profit or loss from investment securities. The fair values of quoted investments are based on current bid prices. If the value for a financial instrument cannot be obtained from an active market, the group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances. The valuation techniques make maximum use of market inputs and rely as little as possible on entity-specific inputs. The group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If considered impaired, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss – is removed from other reserves and recognized in the statement of comprehensive income. Subsequent increases in the fair value are recognized in equity – impairment losses on equity instruments recognized in the statement of comprehensive income are not reversed through the statement of comprehensive income. Asset retirement funds The asset retirement funds are classified as “available-for-sale” and are measured at fair value at each balance sheet date. They are included in non-current assets unless it is probable that it would be disposed of in the next twelve months after the end of the reporting period. Any changes in fair value are recognized in other comprehensive income in the period in which the change arises. Fair value is calculated using the quoted prices of equities in an active market, with interest and dividends recognized in net income. If the market for a financial asset is not active (and for unlisted securities), the Corporation establishes fair value by using valuation techniques. These techniques include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the group’s management has the positive intention and ability to hold to maturity. Held-to-maturity investments are subsequently measured at amortised cost using the effective interest method. The group did not have any at year end. Financial assets at fair value through profit or loss have two subcategories: financial assets held-for-trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management in terms of specified criteria. The group did not have any at year-end.
    • 70. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Financial liabilities (i) Borrowings are initially recognized at fair value net of transaction costs incurred and subsequently measured at amortized cost, comprising original debt less principal payments and amortization, using the effective yield method. Any difference between proceeds (net of transaction cost) and the redemption value is recognized in the statement of comprehensive income over the period of the borrowing using the effective interest rate method. Fees paid on the establishment of loan facilities are capitalized as a prepayment and amortized over the period of the facility to which it relates. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (ii) Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost. Impairment of financial assets The Corporation assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired: • In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value less previously recognized impairment loss, is recognized as an impairment loss. Any fair value loss or reversal thereof is recognized in other comprehensive income. On disposal of available-for-sale assets, previously recognized fair value adjustments are transferred to profit and loss. • A provision for impairment of loans, receivables and advances is established when there is objective evidence that: - the Corporation will not be able to collect all amounts due according to the original terms of the asset; or - significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial re-organisation, and default on or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the trade receivable and advances is reduced through the use of a provision account, and the amount of the loss is recognized as an operating expense. When a trade receivable is uncollectable, it is written off against the provision account for trade receivables. Trade and other payables and payables to related parties These liabilities are classified as “other financial liabilities” and are initially measured at their fair values. Subsequent measurements are recorded at amortized cost using the effective interest rate method. The carrying values for these liabilities approximated their fair values. Derivative liabilities related to Gold Stream Transactions
    • 71. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 During Fiscal 2009 and 2010, the Corporation entered into two gold stream transactions pursuant to which the Corporation is required to deliver guaranteed quantities of gold in specified periods as part of the performance toward these agreements and subsequent to the guaranteed period a percentage of life-of-mine production. Although there is no intention to settle the gold to be delivered pursuant to the gold stream transactions in cash, the nature of this transaction is that of a written call for which the normal purchase, normal sales exemption cannot be applied. Therefore the fair value of the remaining gold ounces to be delivered from the total life-of-mine ounces of each gold stream transaction is recognized as a financial derivative liability. These liabilities are fair valued using the Black Scholes pricing model. Key inputs to the valuation is the quantum and timing of gold ounces expected to be delivered into the transaction, the current and forward gold price and risk free discount rates. Changes in the fair value of the derivative liabilities are recognized in profit and loss. The actual cash amounts received (inflation adjusted $400 per ounce) for such deliveries and the cost of production related to the gold ounces delivered along with the fair value movements are included in the derivative expense related to Gold Stream Transactions and recognized as such in profit and loss. Senior unsecured/secured convertible debentures/notes The sum of the carrying amounts assigned to the liability and equity components of the convertible debentures/notes on initial recognition is always equal to the carrying amount that would be ascribed to the instrument as a whole. The debt portion is recorded at fair value on initial recognition and subsequently accreted over the life of the convertible debentures/notes. The difference between the debt value and the face value is allocated to equity. No gain or loss arises from recognizing and presenting the components of the instrument separately. Rand Notes liability The Rand Notes issued by MWS are exchangeable for common shares of First Uranium and as such is classified as a liability as the fixed number of the Corporation’s common shares could be convertible to a variable (South African Rand denominated) liability. The Corporation has elected to treat the liability at fair value through profit and loss. The fair value will be based on the listed market value of these notes from listing date. Prior to listing date valuation techniques will be used to value these notes. 3.18 Financial ins truments – Dis clos ures Financial risk factors First Uranium’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates (See Note 29, Financial instruments). Fair value estimation In assessing the fair value of other financial instruments, the Corporation uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. The face values less any estimated credit adjustments for financial assets and financial liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the Corporation for similar financial instruments. Transaction costs for financial assets and financial liabilities For a financial asset or financial liability classified other than as held-for-trading, the Corporation has added the transaction costs that are directly attributable to the acquisition or issue of a financial asset or financial liability to the fair value of the asset or liability established at the recognition of the asset or liability. Transactions costs on financial instruments at fair value through profit and loss are recognized in the statement of comprehensive
    • 72. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 income when incurred. All financial assets, financial liabilities and non-financial derivatives are recognized on the balance sheet when the Corporation becomes a party to the contractual provisions of the financial instrument or a non-financial derivative contract. All financial instruments should be measured at fair value on initial recognition except for certain related party transactions. Fair value is the amount at which an item could be exchanged between willing parties. Measurement in subsequent periods depends on whether the financial instruments have been classified as held-for-trading, available-for-sale, held-to-maturity, loans and receivables, or other liabilities received for the convertible debenture. Offset Where a legally enforceable right of offset exists for recognized financial assets and financial liabilities, and there is an intention to settle the liability and realize the asset simultaneously, or settle on a net basis, all related financial effects are offset. Equity instruments Equity instruments issued by the Corporation are recorded on the date the proceeds are received, net of direct issue costs. The carrying amounts for cash and cash equivalents, short term investments, accounts receivable and accounts payable and accrued liabilities approximate fair value due to the short maturities of these instruments. Levels of fair value disclosure IFRS requires disclosures about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurements. This disclosure is required for all financial instruments carried at their fair values at the balance sheet date. The three levels of the fair value hierarchy are: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities Level 2 – Inputs other than quoted prices that are observable for the assets or liability either directly or indirectly Level 3 – Inputs that are not based on observable market data The Corporation applies judgment in arriving at the significance of a particular input to the fair value measurement of an instrument. 3.19 Non-current as s ets held-for-s ale and dis continued operations Non-current assets or disposal group held-for-sale and discontinued operations A non-current asset or disposal group (a business grouping of assets and their related liabilities) is designated as held-for-sale and stated at lower of carrying value and fair value less cost to sell, when its carrying amount will be recovered principally through a sale transaction rather than through continuing use. The classification as held-for-sale of a non-current asset or disposal group occurs when it is available for immediate sale in its present condition and the sale is highly probable. A sale is considered highly probable if management is committed to a plan to sell the non-current asset or disposal group, an active divestiture programme has been initiated, the non-current assets or disposal group is marketed at a price reasonable to its fair value and the disposal is expected to be completed within one year from classification. Upon classification of a non-current asset or disposal group as held-for-sale, it is reviewed for impairment. The impairment charged to the statement of comprehensive income is the excess of the carrying value of the non- current asset or disposal group over its expected net selling price (fair value less costs to sell). At each
    • 73. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 subsequent reporting date, the carrying values are re-measured for possible impairment. A reversal of impairment is recognized for any subsequent increase in net selling price but not in excess of the cumulative impairment loss already recognized. No depreciation is provided on non-current assets from the date they are classified as held-for-sale. Where an investment in associate is classified as held-for-sale, the group will no longer equity account for the investment. When a disposal group is classified as held-for-sale it is also necessary to assess whether or not the criteria for discontinued operations are met. If the criteria are met, the results of the disposal group are classified as discontinued operations in the statement of comprehensive income and the comparative amounts restated for all periods presented. No restatement of balance sheet comparative amounts is done. If a non-current asset or disposal group is classified as held-for-sale but the criteria for classification as held-for- sale are no longer met, the disclosure of such non-current asset or disposal group as held-for- sale is ceased. On ceasing such classification, the non-current assets are reflected at the lower of: • the carrying amount before classification as held-for-sale adjusted for any depreciation or amortisation that would have been recognized had the assets not been classified as held-for-sale or • the recoverable amount at the date the classification as held-for-sale ceases. The recoverable amount is the amount at which the asset would have been recognized after the allocation of any impairment loss arising on the cash-generating unit as determined in accordance with the group’s policy on impairment of non-financial assets. Any adjustment required to be made on reclassification is charged to the statement of comprehensive income on reclassification, and included in income from continuing operations. Where the disposal group was also classified as a discontinued operation, the subsequent classification from held-for-sale also requires that the discontinued operation be included in continuing operations. Comparative information in the statement of comprehensive income and cash flow note disclosures relating to the classification as a discontinued operation is re-presented accordingly. Comparative information in the balance sheet is not re- presented for this change. 3.20 Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments for which the performance is reviewed on a regular basis by the Chief Operating Decision Maker (CODM). The CODM reviews the performance of the two operating mines and the corporate office separately and as such these three segments are reported on. 3.21 Capital dis clos ures The Corporation’s objectives, policies and processes for managing capital are outlined in Note 28, Capital management. 3.22 Share purchas e warrants Share purchase warrants are valued using the relative fair valuation method which applies a weighted average of the fair values of the share capital and the warrants to allocate the total proceeds received from a share issue. All warrants have expired and the balance relating to warrants were reallocated to share capital.
    • 74. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 4. CHANGES IN ACCOUNTING POLICIES The accounting policies used in the preparation of the Corporation’s audited consolidated financial statements for the year ended March 31, 2012 were in compliance with the IFRS adopted for all entities with financial years starting on April 1, 2011. Apart from the changes as described in Note 5, Transition to IFRS, there were no changes in accounting policies on adoption of IFRS or as a result of new IFRS’s issued. The Corporation did not adopt any of the following issued, but not yet effective accounting standards. Management is still in the process of assessing the impact thereof. Standard, amendments, interpretations Effective for financial periods beginning on or after IAS 1 (Amendment) Presentation of Financial Statements July 1, 2012 IAS 12 (Amendment) Income Taxes – Deferred Tax: Recovery of Underlying Assets January 1, 2012 IAS 19 (Amendment) Employee Benefits January 1, 2013 IAS 27 (Amended) Separate Financial Statements January 1, 2013 IAS 28 (Amended) Investments in Associates and Joint Ventures January 1, 2013 IFRS 1 (Amendment): First-time Adoption of IFRS – Removal of Fixed Dates for First-time Adopters July 1, 2011 IFRS 1 (Amendment): First-time Adoption of IFRS – Guidance on Severe Hyperinflation July 1, 2011 IFRS 7 (Amendment): Financial Instruments: Disclosures – Transfer of Financial Assets July 1, 2011 IFRS 9: Financial Instruments January 1, 2013 IFRS 9 (Amendment): Financial Instruments January 1, 2013 IFRS 10: Consolidated Financial Statements January 1, 2013 IFRS 11: Joint Arrangements January 1, 2013 IFRS 12: Disclosure of Interest in Other Entities January 1, 2013 IFRS 13: Fair Value Measurement January 1, 2013 5. TRANSITION TO IFRS Transition elections The Corporation’s consolidated financial statements for the year ended March 31, 2012 is the Corporation’s first annual financial statements that comply with IFRS. These consolidated financial statements were prepared as described in Note 2. IFRS 1, First time adoption of IFRS, sets out the procedures that the Corporation must follow when it adopts IFRS for the first time as the basis for preparing its consolidated financial statements. Under IFRS 1, the standards are applied retrospectively at the transitional balance sheet date with all adjustments to assets and liabilities taken to retained earnings, unless certain optional exemptions and mandatory exceptions are applied. Accordingly, the Corporation established its IFRS accounting policies and applied these retrospectively to determine the IFRS opening balance sheet as at the transition date of April 1, 2010. The Corporation was able to retain all its accounting policies as disclosed in its March 31, 2011, annual financial statements except for changes disclosed in this note. IFRS 1, the standard dealing with the first time adoption of IFRS, permits a number of optional exemptions and requires some mandatory exceptions from full retrospective application. The Corporation is required to use the following mandatory exceptions as follows: • Estimates cannot be created or revised using hindsight. The estimates previously made by the Corporation under Canadian GAAP were not revised for the application of IFRS except where necessary to reflect any difference in accounting policies. • For non‐controlling interests, IFRS 1 lists specific requirements of IAS 27, Consolidated and separate financial statements, which are applied prospectively.
    • 75. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 • Derecognition of previously recognized financial instruments. The Corporation has applied the following exemptions and exceptions to full retrospective application of IFRS and International Financial Reporting Interpretation Committee (IFRIC): • Foreign currency translation reserve Impact of IFRS accounting policies on the Preparation of the Corporation’s April 1, 2010 consolidated financial statements The discussion below explains the key transitional adjustments between the preparation of the consolidated financial statements under Canadian GAAP and the current IFRS. Impact of first-time application of IFRS In compliance with IFRS 1, the Corporation has prepared financial information for Fiscal 2010 on the transition to IFRS, presenting figures for the impact of the transition to IFRS from Canadian GAAP. The following reconciliations have been prepared and are included in this note: • Reconciliation of consolidated statements of financial position at the transition date, April 1, 2010, and the comparative date, March 31, 2011; and • Reconciliation of consolidated statements of comprehensive income for the comparative year ended March 31, 2011. There was no material impact on the statements of cash flow at the transition date (April 1, 2010) or March 31, 2011. Explanatory Notes (a) Functional currency The functional currency for the South African entities was assessed based on the currency of the primary economic environment in which the entities operated in line with the requirements of IAS 21, The effects of changes in foreign exchange rates. Under IFRS, the functional currency of the South African entities was determined to be South African rand (ZAR) and the Canadian Corporation was Canadian dollar (Cdn$). In line with IAS 21, the conversion of results from functional currencies to the US dollar presentation currency has been performed at the actual exchange rates approximated by the average exchange rate during the reporting period for income statement items and at the closing US dollar rate at the end of the reporting period for balance sheet items apart from share capital and reserves which have been carried at historic values. The transition effects relate to the conversion rates used for entities with ZAR and Cdn$ as functional currencies. The foreign exchange difference resulting from the translation of non-US dollar functional currency entities to the presentation currency (US dollar) has been recognized as a foreign currency translation reserve. Foreign exchange differences arising from transactions and the revaluation of monetary items denominated in currencies other than the functional currency results in foreign exchange gains/losses. The foreign exchange gain (loss) has changed as a result of the change in functional currencies. (b) Gold Stream Transactions Under Canadian GAAP, the Gold Stream Transactions, which the Corporation has entered into with Franco- Nevada (FN), have been considered to have two elements for accounting purposes. The guaranteed ounces included in the gold delivery schedule of both MWS and Ezulwini Mine to FN were treated as derivative liabilities which were fair valued using the Black Scholes pricing model at every reporting date, with the revaluation effects
    • 76. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 being recognized in profit and loss as fair value movements. The non-guaranteed ounces in the agreement were recognized as deferred revenue and were in the process of being amortized to revenue in line with the ounces delivered over the life of the mines. Under IFRS, the total gold to be delivered from the life of mine ounces are recognized as financial derivative liabilities. These liabilities are fair valued using the Black Scholes pricing model. The actual cash amounts received (inflation adjusted $400 per ounce) for deliveries to FN and the cost of production related to the gold delivered to FN are recognized along with the fair value movements as a derivative expense related to Gold Stream Transactions in profit and loss. The transition effects relate to the reallocation of the revenue and cost of production related to the gold ounces delivered to FN pursuant to the Gold Stream Transactions into the derivative expense related to Gold Stream Transactions in profit and loss. The deferred revenue related to non-guaranteed ounces and financial derivative liabilities related to guaranteed ounces are reclassified and re-measured as derivative liabilities related to Gold Stream Transactions in the statement of financial position. Movements in the fair value of the derivative liabilities are included in the derivative expense related to Gold Stream Transactions and recognized in profit and loss. (c) Penalty related to MWS Gold Stream Transaction Under Canadian GAAP, the penalty settled with the issuance of 14 million First Uranium common shares in April 2010 related to the MWS Gold Stream Transaction was applied as a reduction to deferred revenue on the balance sheet. Under IFRS, the total penalty is recognized as an expense in profit and loss. (d) Debentures and Canadian Notes Under Canadian GAAP, the Debentures (see Note 11, Senior unsecured convertible debentures) were valued using the relative fair valuation method which applied a weighted average of the fair values of the debt and the equity portions of the Debentures to allocate the total proceeds received from the issue of the Debentures between debt and equity. The valuation method applied under IAS 32, Financial instruments: Presentation is the residual value method where the debt component is valued and the proceeds in excess of the debt instrument is allocated to equity. The revised calculation resulted in a lower allocation to the equity portion of the Debentures. The Canadian Notes (see Note 12, Senior secured convertible notes) were valued using the residual value method hence there were no similar differences for the Canadian Notes. (e) Rand Notes Under Canadian GAAP, the liability component of the Rand Notes (see Note 12, Senior secured convertible notes) was accreted such that the liability at maturity would have equaled the gross amount payable or convertible on maturity. The equity component of the Rand Notes was calculated using the residual value method as the balance between the face value and the liability value of the Rand Notes. Under IFRS, the Rand Notes have been classified as exchangeable notes because the Rand Notes were issued by MWS and upon conversion the holders of these notes will receive common shares in First Uranium at the point of conversion. As the Rand Notes are ZAR denominated and therefore represent a variable liability which could be settled in a fixed number of common shares in First Uranium, IAS 32 requires the full instrument to be recognized as a liability. The whole instrument was therefore fair valued using the bi-nominal model and recognized as a liability. The Rand Notes were listed on the JSE on July 15, 2011. The fair value movement of the Rand Notes liability is recognized as such in profit and loss. (f) Asset retirement obligation Under Canadian GAAP, asset retirement obligations were calculated using historical discount rates with the calculated value carried at historic values on the balance sheet without being retranslated at the spot closing rate
    • 77. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 at reporting dates. IFRS requires for the discount rates used to calculate the asset retirement obligations to be reassessed on an annual basis and for the calculated balances to be translated at the spot closing rate at the reporting period. (g) Deferred tax The revised accounting base as a result of the various conversion differences from Canadian GAAP to IFRS resulted in revised temporary differences and differences in the deferred tax asset/liability. The movement in the deferred tax asset/liability under IFRS resulted in a change in the tax expense/recovery. (h) MWS acquisition Under Canadian GAAP, the acquisition date of MWS was on June 6, 2007, the date the transaction was announced. In terms of IFRS 3, Business combinations, the transaction date is the date that control is assumed. The difference in dates resulted in different share prices used to determine the acquisition price. The share price for IFRS 3 purposes was higher resulting in a $1 million higher purchase price and share capital. The excess of the purchase price over the fair value of net assets and liabilities acquired was recognized as goodwill. This goodwill was subsequently impaired. (i) Share warrants The share warrants attached to the shares issued in the bought deal of February 11, 2009 were valued using the relative fair valuation method which applied a weighted average of the fair values of the share warrants and the share capital to allocate the total proceeds received from the share issue. As IFRS does not specify where items should be disclosed in equity, the share warrants were reclassified to contributed surplus. (j) Accumulated deficit The movement in opening accumulated deficit is sufficiently explained by the movements on the statements of financial position as disclosed in (a) to (i) above.
    • 78. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Reconciliation of Equity as previously reported under Canadian GAAP to IFRS As at April 1, 2010 As at March 31, 2011 (in thousands of dollars) Notes Canadian GAAP Effects of transition IFRS Canadian GAAP Effects of transition IFRS ASSETS Current assets Cash and cash equivalents 10,177 - 10,177 49,606 - 49,606 Inventories (a) 8,983 1,717 10,700 10,189 1,808 11,997 Trade and other receivables 8,362 - 8,362 11,805 - 11,805 27,522 1,717 29,239 71,600 1,808 73,408 Non-current assets Property, plant and equipment (a) 648,713 53,799 702,512 723,190 113,295 836,485 Deferred tax asset (g) - 5,071 5,071 - 40,010 40,010 Asset retirement funds 8,408 - 8,408 11,076 - 11,076 657,121 58,870 715,991 734,266 153,305 887,571 Total assets 684,643 60,587 745,230 805,866 155,113 960,979 LIABILITIES Current liabilities Trade and other payables 59,344 - 59,344 35,104 - 35,104 Facility with Simmer & Jack 22,462 - 22,462 - - - Derivative liabilities related to Gold Stream Transactions (b) 9,966 10,885 20,851 15,348 33,120 48,468 Deferred revenue (b) 9,991 (9,991) - 6,508 (6,508) - Provision for penalty pursuant to MWS Gold Stream Transaction (c) 17,857 - 17,857 - - - Payables to related party 2,489 - 2,489 12 - 12 Income tax payable 1,619 - 1,619 2,232 - 2,232 123,728 894 124,622 59,204 26,612 85,816 Non-current liabilities Derivative liabilities related to Gold Stream Transactions (b) 13,952 215,583 229,535 - 348,727 348,727 Deferred revenue (b), (c) 109,471 (109,471) - 108,425 (108,425) - Senior unsecured convertible debentures (d) 119,311 4,402 123,713 137,533 2,840 140,373 Senior secured convertible notes (e) - - - 156,153 (156,153) - Canadian Notes liability (e) - 99,422 99,422 Rand Notes liability (e) - - - - 72,645 72,645 Asset retirement obligations (a), (f) 26,515 (447) 26,068 34,171 1,843 36,014 Deferred tax liability (g) 18,536 (18,536) - 11,935 (11,935) - 287,785 91,531 379,316 448,217 248,964 697,181 Total liabilities 411,513 92,425 503,938 507,421 275,576 782,997 SHAREHOLDERS’ EQUITY Share capital (h) 345,344 1,099 346,443 417,492 1,458 418,950 Equity portion of senior unsecured convertible debentures (d) 46,504 (4,812) 41,692 46,504 (4,812) 41,692 Equity portion of the senior secured convertible notes (e) - - - 18,168 (6,303) 11,865 Contributed surplus (i) 15,277 10,845 26,122 30,828 - 30,828 Share purchase warrants (i) 10,845 (10,845) - - - - Foreign currency translation reserve (i) - - - - 51,191 51,191 Fair value reserve (a) 812 - 812 978 - 978 Accumulated deficit (j) (145,652) (28,125) (173,777) (215,525) (161,997) (377,522) Total shareholders’ equity 273,130 (31,838) 241,292 298,445 (120,463) 177,982 Total liabilities and shareholders’ equity 684,643 60,587 745,230 805,866 155,113 960,979
    • 79. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Reconciliation of Comprehensive Income from Canadian GAAP to IFRS For the year ended March 31, 2011 (in thousands of dollars) Notes Canadian GAAP Effects of transition IFRS Revenue (a), (b) 171,832 (36,906) 134,926 Cost of sales (a), (b) (151,824) 36,842 (114,982) Gross profit (loss) 20,008 (64) 19,944 Other income 2,909 268 3,177 Other expenditures (a), (c), (d) (32,174) 99 (32,075) Impairment of columns at uranium plant (1,482) - (1,482) Fair value movement on the Rand Notes liability (d) - (22,133) (22,133) Derivative expense related to Gold Stream Transactions (b) (7,997) (164,701) (172,698) Foreign exchange gain (loss) (j) (15,773) 14,986 (787) Loss before interest and income taxes (34,509) (171,545) (206,054) Investment income 721 - 721 Interest and accretion expense (a), (d), (e) (39,914) 11,358 (28,556) Accretion expense on asset retirement obligations (a), (f) (2,493) 41 (2,452) Loss before income taxes (76,195) (160,146) (236,341) Income tax recovery (charge) (g) 6,322 26,274 32,596 Loss for the year (69,873) (133,872) (203,745) Other comprehensive income 166 - 166 Movement on foreign currency translation reserve (a) - 51,191 51,191 Comprehensive loss for the year (69,707) (82,681) (152,388) Total comprehensive income attributable to shareholders parents of the company (69,707) (82,681) (152,388) Basic and diluted loss per common share (US$) (0.38) (0.72) (1.10) The financial information presented in the tables to this note, is presented prior to the adjustments required of IFRS 5, Non-current assets held-for-sale and discontinued operations, as reflected in Note 6. 6. DISCONTINUED OPERATIONS As discussed under Note 1, Nature of operations and going concern, the Corporation decided to dispose of its principal assets being the Mine Waste tailings recovery project and the Ezulwini Mine at the start of the fourth quarter of Fiscal 2012. On March 2, 2012 First Uranium entered into the AGA Agreement for the sale of the MWS tailings recovery project. Under the terms of the AGA Agreement, AGA will pay $335 million in cash for all of the shares and associated claims of FUSA, subject to the fulfilment of a number of conditions precedent, all of which have been satisfied or waived after year-end (see Note 32, Subsequent events). On March 30, 2012 First Uranium entered into the Gold One Agreement for the sale of the Ezulwini Mine for a total consideration of $70 million to Gold One International. The Gold One Transaction is subject to fulfilment of a number of conditions precedent. Other than the conditions precedent associated with the implementation of the AGA Transaction, most of the conditions precedent to the Gold One Transaction have been satisfied or waived subsequent to year-end, including all of the regulatory approvals to the extent required (see Note 32, Subsequent events).
    • 80. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 The assets held for sale and liabilities directly associated with assets held for sale related to the discontinued operations were summarized as follows: As at March 31, 2012 (in thousands of dollars) Discontinued Operations MWS DisposalGroup Ezulwini DisposalGroup Cash and cash equivalents 2,845 1,309 1,536 Trade and other receivables (Note 7) 3,295 2,261 1,034 Inventories (Note 8) 11,603 4,439 7,164 Current assets 17,743 8,009 9,734 Property, plant and equipment (Note 9) 574,082 459,011 115,071 Deferred tax asset (Note 24) 52,873 52,873 - Asset retirement funds (Note 10) 11,360 6,358 5,002 Other financial assets 65 - 65 Non-current assets 638,380 518,242 120,138 Total assets classified as held for sale 656,123 526,251 129,872 Rand Notes liability (Note 12.2) 52,635 52,635 - Trade and other payables (Note 13) 23,961 10,715 13,246 Derivative liabilities related to Gold Stream Transactions (Note 15) 32,579 30,932 1,647 Current liabilities 109,175 94,282 14,893 Derivative liabilities related to Gold Stream Transactions (Note 15) 316,209 266,057 50,152 Asset retirement obligations (Note 16) 29,621 22,466 7,155 Non-current liabilities 345,830 288,523 57,307 Total liabilities classified as liabilities related to assets held for sale 455,005 382,805 72,200 Operating results for the current and prior year are summarized as follows: For the year ended March 31, 2012 For the year ended March 31, 2011 (in thousands of dollars) Discontinued Operations MWSDisposal Group Ezulwini DisposalGroup Discontinued Operations MWSDisposal Group Ezulwini DisposalGroup Revenue 179,176 122,417 56,759 134,926 80,901 54,025 Cost of sales (137,648) (57,539) (80,109) (114,982) (37,660) (77,322) Gross profit 41,528 64,878 (23,350) 19,944 43,241 (23,297) Other income 2,497 354 2,143 3,177 595 2,582 Other expenditures (20,787) (9,205) (11,582) (21,582) (8,957) (12,625) Impairment of assets (Note 9) (178,171) - (178,171) (1,482) - (1,482) Fair value movement on the Rand Notes liability (Note 12.2) 12,065 12,065 - (22,133) (22,133) - Derivative income (expense) related to Gold Stream Transactions (Note 21) 14,164 (3,732) 17,896 (172,699) (108,200) (64,499) Foreign exchange gain (loss) 84 10 74 181 796 (615) Loss before interest and income taxes (128,620) 64,370 (192,990) (194,594) (94,658) (99,936) Investment income 304 243 61 428 404 24 Interest and accretion expense (58) (6) (52) - - - Accretion expense on asset retirement obligations (2,794) (2,371) (423) (2,452) (2,005) (447) Loss before income taxes (131,168) 62,236 (193,404) (196,618) (96,259) (100,359) Income tax recovery 14,140 14,140 - 32,985 32,985 - Loss for the year from discontinued operations (117,028) 76,376 (193,404) (163,633) (63,274) (100,359)
    • FIU AFS 2012 7. TRADE AND OTHER RECEIVABLES (in thousands of dollars) 2012 2011 2010 Value Added Tax and Goods and Services Tax 1,939 7,040 3,102 Prepayments and advances 594 2,543 1,433 Trade receivables 1,118 2,222 3,827 3,651 11,805 8,362 Reclassified as assets held for sale (Note 6) (3,295) - - 356 11,805 8,362 Apart from the Canadian denominated Goods and Services Tax, all other receivables are denominated in South African Rand. 8. INVENTORIES (in thousands of dollars) 2012 2011 2010 Consumables 6,366 5,831 4,257 Finished goods 2,482 3,167 2,969 Metal work-in-progress 2,755 2,999 3,474 11,603 11,997 10,700 Reclassified as assets held for sale (Note 6) (11,603) - - - 11,997 10,700 Included in finished goods and metal work-in-progress for the year ended March 31, 2012, were items carried at net realizable value amounting to $2.8 million (2011: $2.7 million) and $1.2 million (2011: $1.9 million), respectively. 9. PROPERTY, PLANT AND EQUIPMENT March 31, 2012 (in thousands of dollars) Mine Assets Land & buildings Office furniture & equipment Motor vehicles Total Cost Balance, beginning of period (April 1, 2011) 865,214 9,804 5,052 2,769 882,839 Additions during the year 20,670 - 8 27 20,705 Changes in estimate of decommissioning assets (4,821) - - - (4,821) Foreign exchange revaluation on translation (93,152) (877) (309) (156) (94,494) Balance, end of period (March 31, 2012) 787,911 8,927 4,751 2,640 804,229 Accumulated depreciation Balance, beginning of period (April 1, 2011) (41,441) (206) (3,221) (1,486) (46,354) Amortization expense for the year (12,909) (62) (447) (390) (13,808) Impairment of Ezulwini Mine’s assets (see Note 12) (178,171) - - - (178,171) Foreign exchange revaluation on translation 7,592 26 398 186 8,202 Balance, end of period (March 31, 2012) (224,929) (242) (3,270) (1,690) (230,131) Net opening carrying amount (April 1, 2011) 823,773 9,598 1,831 1,283 836,485 Net closing carrying amount before reclassification (March 31, 2012) 562,982 8,685 1,481 950 574,096 Reclassified as assets held for sale (Note 6) (562,982) (8,685) (1,467) (950) (574,098) Net closing carrying amount after reclassification (March 31, 2012) - - 14 - 14 March 31, 2011 (in thousands of dollars) Mine Assets Land & buildings Office furniture & equipment Motor vehicles Total Cost
    • 82. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Balance, beginning of the year (April 1, 2010) 716,251 8,916 4,568 2,434 732,169 Additions during the year 80,699 211 161 129 81,200 Changes in estimate of decommissioning assets 5,163 - - - 5,163 Foreign exchange revaluation on translation 63,101 677 323 206 64,307 Balance, end of year (March 31, 2011) 865,214 9,804 5,052 2,769 882,839 Accumulated depreciation Balance, beginning of the year (April 1, 2010) (26,618) (105) (2,058) (876) (29,657) Amortization expense for the year (10,601) (88) (1,000) (512) (12,201) Impairment of columns at uranium plant (1,482) - - - (1,482) Foreign exchange revaluation on translation (2,740) (13) (163) (98) (3,014) Balance, end of year (March 31, 2011) (41,441) (206) (3,221) (1,486) (46,354) Net opening carrying amount (April 1, 2010) 689,633 8,811 2,510 1,558 702,512 Net closing carrying amount (March 31, 2011) 823,773 9,598 1,831 1,283 836,485 Included in the above, are mining related assets with a net carrying amount of $115.1 million (2011: $325.2 million) related to the Ezulwini Mine and $459.0 million (2011: $509.2 million) related to MWS. The change in estimate of decommissioning assets resulted from a reduction in the rehabilitation obligation associated with the new tailings storage facility at MWS as well as a change in the rates used to calculate the rehabilitation costs. Impairment of Ezulwini Mine’s assets Three fatal accidents at the Ezulwini Mine in the latter half of the 2011 calendar year had a significant negative impact on employee morale and productivity of the mine. This is reflected in the lower than anticipated production figures which in turn necessitated the restructuring of the Ezulwini Mine in order to secure the future of this operation. The restructuring process commenced in December 2011 and included a revised mine plan for the Ezulwini Mine which reduces the number of tons mined in the short term to focus on higher grade easier accessible ore. In addition, the Corporation decided to temporarily suspend the production of uranium at the Ezulwini Mine and to place the uranium plant on temporary care and maintenance as a result of the marginal benefit that was derived from production of uranium under the current mine plan based on current production levels and current uranium prices. The proposed restructuring obliged the Corporation to perform an impairment assessment with respect to the carrying value of the Ezulwini Mine’s assets at the end of the December 31, 2011. In assessing whether the Ezulwini Mine’s assets has been impaired, the carrying value was compared with its recoverable amount. The recoverable amount was based on the fair value less cost to sell approach derived from the Gold One’s consideration for the Ezulwini Mine as discussed under Note 1, Nature of business and going concern. As discussed in Note 6, Discontinued operations, the Corporation’s intention changed from ‘use of assets’ to ‘disposal of assets’ at the start of the fourth quarter of Fiscal 2012, and accordingly the fair value less cost to sell is regarded as best approximation of the recoverable amount. As a result of the impairment exercise of the Ezulwini Mine’s assets, the carrying amount of the Ezulwini Mine’s assets that was included in property, plant and equipment has been reduced to its recoverable amount as at March 31, 2012 through the recognition of an impairment loss of $178.2 million against the carrying value thereof. The impairment losses have been separately disclosed in the statement of comprehensive income.
    • 83. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Impairment of columns at uranium plant The impairment expense of $1.5 million recognized during the year ended March 31, 2011 was recognized as a result of two columns at the Ezulwini Mine’s uranium plant having to be replaced following a structural failure on a loading column. 10. ASSET RETIREMENT FUNDS (in thousands of dollars) 2012 2011 Balance, beginning of the year 11,076 8,408 Investment income 125 252 Contributions in respect of investment funds 984 1,669 Unrealized gain on investments 430 166 Foreign exchange revaluation on translation (1,255) 581 11,360 11,076 Reclassified as assets held for sale (Note 6) (11,360) - Balance, end of the year - 11,076 The asset retirement funds, consisting of environmental rehabilitation trust funds under the Corporation’s control, are to be used to fund the respective mining operation’s rehabilitation liabilities. Funds in the trust consist primarily of cash held in interest-bearing accounts, as well as investment funds which consist of a combination of South African unit trusts. An accredited South African financial institution manages the trust funds under the direction of the trustees. The trust deed limits the trustees’ investments to institutions and investment vehicles as referred to in Section 37A of the South African Income Tax Act. Trust funds can only be drawn for rehabilitation purposes. 11. SENIOR UNSECURED CONVERTIBLE DEBENTURES (in thousands of dollars) 2012 2011 Balance, beginning of the year 140,373 123,713 Interest and accretion expense for the year (Note 22) 18,601 16,413 Interest payments made during the year (6,388) (6,230) Foreign exchange revaluation on translation (3,818) 6,477 Balance, end of the year 148,768 140,373 The interest rate on the senior unsecured convertible debentures (the Debentures) is 4.25% per annum. The Debentures pay interest semi-annually in arrears on June 30 and December 31 and have a maturity date of June 30, 2012. The Debentures are convertible at the option of the holder into common shares at any time prior to the maturity date at an exchange price of Cdn$16.42 per share. As at March 31, 2012, no portion of the Debentures had been converted. As discussed in Note 1, Nature of operations and going concern, in order to complete the Transactions, the Corporation had to convene a meeting of the Debenture holders at which the Debenture holders were required to approve amendments to the Debenture Indenture to agree, amongst other things, that the maturity date will be extended to October 5, 2012, and if the Transactions are completed and implemented by October 5, 2012, no interest will accrue after March 2, 2012 and the principal amount of the Debentures will be reduced to: (a) 95% of the principal amount of the outstanding Debentures owing as at April 30, 2012; and (b) the lesser of: (i) 3% of the principal amount of the outstanding Debentures owing as at April 30, 2012; and (ii) all payments in connection with the Warraanty Escrows received by First Uranium, whenever received. In addition, First Uranium will pay to the Debenture Trustee, for distribution pro rata to the holders of Debentures which agreed, on or before May 30, 2012, to vote in favour of the extraordinary resolution of the holders of Debentures approving the supplemental debenture indenture, an additional amount, on account of the principal amount of the Debentures held by such consenting holders of Debentures, equal to 2% of the principal amount of all the outstanding Debentures owing as
    • 84. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 at April 30, 2012. The Debenture holder meeting was convened by the Corporation on June 13, 2012 and the Debenture holders voted in favour of all the required approvals at that meeting (See Note 32, Subsequent events). 12. SENIOR SECURED CONVERTIBLE NOTES On April 26, 2010, the Corporation concluded a private placement offering (the Offering) of Cdn$150 million in senior secured convertible notes due March 31, 2013 (the Notes). The Notes issued consisted of Cdn$110 million in Canadian dollar denominated Notes (the Canadian Notes) issued by First Uranium and Cdn$40 million (ZAR296.1 million) in South African Rand denominated Notes (the Rand Notes) issued by MWS. Each Canadian Note has a principal amount of Cdn$1,000 and will be convertible, at the option of the Note holder, into 769.2307 common shares of First Uranium (Common Shares) representing a conversion price of Cdn$1.30. Each Rand Note has a principal amount of ZAR1,000 and will be convertible into 107.4 Common Shares, also representing a conversion price of Cdn1.30 as at the date the transaction was announced. The Notes are guaranteed by the subsidiaries of the Corporation, secured by second ranking security over all assets currently encumbered by FN and first ranking security over all other current and future assets of the Corporation. As discussed in Note 1, Nature of operations and going concern, included as a condition precedent to the Transactions, is the release of all security against FUSA and the MWS assets (in the case of the AGA Transaction) and the FUL and Ezulwini assets (in the case of the Gold One Transaction) relating to the security held for the benefit of the Note holders and the Gold One Loan Facility. For the Corporation to fulfil this condition precedent, the Notes and the Gold One Loan Facility would have to be settled upon closing of the AGA Transaction. Consequently, the Corporation had to convene a meeting of the Note holders at which they were required to approve amendments to the Note Indentures to agree that upon completion and implementation of the AGA Transaction, the Note holders will accept repayment in cash of 100% of the principal amount outstanding on the Notes and that no interest will accrue after March 31, 2012. The Note holder meeting was also convened by the Corporation on June 13, 2012 and the Note holders voted in favour of all the required approvals at that meeting (See Note 32, Subsequent events). In connection with the Offering and in addition to the Cdn$150 million Notes issued, the Corporation exchanged the $22.6 million outstanding Facility with Simmer and Jack Mines, Limited (Simmer & Jack) (including accrued and unpaid interest) for 167,812 Rand Notes (ZAR167.8 million) on April 26, 2010. Also in connection with the Offering, the Corporation settled the completion penalty obligation to FN pursuant to the MWS Gold Stream Transaction with the issuance of 14 million common shares in First Uranium to FN and a commitment by the Corporation to complete construction of the third gold plant module at MWS and satisfaction of the technical completion tests prior to September 1, 2011 (See Note 15, Financial derivative liability relating to MWS). The liability component of the Canadian Notes is being accreted such that the liability at maturity will equal the gross amount payable or convertible on maturity (Cdn$110 million). The rate applied to calculate the liability portion of the Canadian Notes was 11.5%. The equity component of the Canadian Notes was calculated as the balance between the face value and the liability value of the Canadian Notes. The Rand Notes have been classified as exchangeable notes because the Rand Notes were issued by MWS and upon conversion the holders of these notes will receive First Uranium common shares at the point of conversion. As the Rand Notes are denominated in South African Rand and therefore represent a variable liability which could be settled in a fixed number of common shares in First Uranium, IAS 32 requires the full instrument to be recognized as a liability. The whole instrument was therefore fair valued using the bi-nominal model and recognized as a liability. On July 15, 2011, the Rand Notes were listed on the JSE.
    • 85. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 12.1 Canadian Notes liability (in thousands of dollars) 2012 2011 Balance, beginning of the year 99,422 - Gross proceeds received with regards to the Canadian Notes - 110,077 Reallocate equity portion of the Canadian Notes - (11,865) Cost of issuing the Canadian Notes - (6,175) Interest and accretion expense for the year (Note 22) 13,909 12,143 Additional accretion expense due to expected early settlement (Note 1) 4,295 - Interest payments made during the year (7,567) (7,571) Foreign exchange revaluation on translation (2,723) 2,813 Balance, end of the year 107,336 99,422 An additional accretion expense was recognized at year-end in anticipation of the early settlement of the Canadian Notes as discussed in Note 1, Nature of operations and going concern, and Note 32, Subsequent events. The accretion expense was based on an expected settlement at the end of June 2012. 12.2 Rand Notes liability (in thousands of dollars) 2012 2011 Balance, beginning of the year 72,645 - Gross proceeds received with regards to the Rand Notes - 39,918 Facility with Simmer & Jack settled with Rand Notes - 22,629 Interest payments made during the year (5,914) (6,621) Conversion of Rand Notes into common shares in First Uranium (2,030) (5,414) Fair value movement on Rand Notes liability (12,065) 22,133 52,636 72,645 Reclassified as liabilities related to assets held for sale (Note 6) (52,636) - Balance, end of the year - 72,645 The cost of issuing the Rand Notes on April 26, 2010 was $2.4 million and was included in general, administration and consulting cost in the statement of comprehensive income for the year ended March 31, 2011. The cost of listing the Rand Notes on July 15, 2011 was $0.3 million and was included in general, administration and consulting cost in the statement of comprehensive income for the year ended March 31, 2012. The following key assumptions were used in determining the fair value of the Rand Notes liability: 2012 2011 First Uranium share price (Cdn$ per share) 0.15 0.86 Volatility of share price 63% 86% Risk-free rate 1% 2% Day outstanding to maturity 91* 731 *The days outstanding to maturity was based on the assumption that the Rand Notes would be settled at the end of June 2012. Conversion of Rand Notes During the year ended March 31, 2012, 12,207 of the Rand Notes (2011: 32,424) were converted into 1,311,169 common shares of First Uranium (2011: 3,482,331) at a net value of $2.0 million (2011: $5.0 million). At March 31, 2012, the total number of Rand Notes outstanding was 418,605 (March 31, 2011: 430,812).
    • 86. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 13. TRADE AND OTHER PAYABLES (in thousands of dollars) 2012 2011 2010 Trade payables 18,784 26,687 34,859 Accruals 10,133 8,417 24,485 28,917 35,104 59,344 Reclassified as liabilities related to assets held for sale (Note 6) (23,961) - - 4,956 35,104 59,344 The trade payables and accruals include capital expenditures of $1.7 million (2011: $2.2 million) and $2.1 million (2011: $9.2 million) at the Ezulwini Mine and MWS, respectively. Apart from the Canadian denominated trade and other payables of $1.2 million, all other trade and other payables are denominated in South African Rand. 14. GOLD ONE LOAN FACILITY (in thousands of dollars) 2012 2011 Capital drawn down on the Gold One Loan Facility 5,000 - Capitalized interest on the Gold One Loan Facility (Note 22) 3 - Balance, end of the year 5,003 - In addition to the Gold One Transaction (See Note 1, Nature of operations and going concern), Gold One has also provided a loan facility to the Corporation for an amount up to $10 million available for drawdown in accordance with the loan agreement between the parties (the Gold One Loan Facility). Any monies advanced bears interest at the South African prime rate of interest and payment has been guaranteed by Main Street 789 (Proprietary) Limited so that the Gold One Loan Facility shares the benefit of the indirect security provided in respect of the Notes (See Note 12, Senior secured convertible notes), pari passu. Pursuant to the terms of the loan agreement, any amounts drawn on the Gold One Loan Facility, plus accrued interest, will be repayable in certain events, including on demand by Gold One following on the earlier of the implementation of the AGA Transaction and June 29, 2012, the latter date having been extended to July 31, 2012 subsequent to year-end. The Corporation drew down on the full loan facility after year-end. As discussed in Note 1, Nature of operations and going concern, included as a condition precedent to the Transactions, is the release of all security against the FUSA and MWS assets (in the case of the AGA transaction) and the FUL and the Ezulwini assets (in the case of the Gold One Transaction) relating to the security held for the benefit of the Note holders and the Gold One Loan Facility. For the Corporation to fulfil this condition precedent, the Gold One Loan Facility would have to be settled along with the Notes upon closing of the AGA Transaction. Other than the conditions precedent associated with the implementation of the AGA Transaction, all of the material conditions precedent to the Gold One Transaction have been satisfied or waived subsequent to year-end, including all of the regulatory approvals to the extent required (see Note 32, Subsequent events).
    • 87. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 15. DERIVATIVE LIABILITIES RELATED TO GOLD STREAM TRANSACTIONS The total financial derivative liability for the Corporation was as follows: March 31, 2012 (in thousands of dollars) MWS Ezulwini Mine Total Balance, beginning of the year 303,267 93,928 397,195 Delivery of gold to settle the derivative liability (31,030) (18,585) (49,615) Fair value loss on valuation of liability 24,752 (23,544) 1,208 296,989 51,799 348,788 Reclassified as liabilities related to assets held for sale (Note 6) (296,989) (51,799) (348,788) Balance, end of the year - - - Current portion (Note 6) 30,932 1,647 32,579 Non-current portion (Note 6) 266,057 50,152 316,209 Total financial derivative liability (Note 6) 296,989 51,799 348,788 March 31, 2011 (in thousands of dollars) MWS Ezulwini Mine Total Balance, beginning of the year 198,575 51,811 250,386 Delivery of gold to settle the derivative liability (18,234) (16,567) (34,801) Fair value loss on valuation of liability 122,926 58,684 181,610 Balance, end of the year 303,267 93,928 397,195 Current portion 31,206 17,262 48,468 Non-current portion 272,061 76,666 348,727 Total financial derivative liability 303,267 93,928 397,195 15.1 Derivative liability relating to the MWS Gold Stream Trans action On December 1, 2008, First Uranium signed a definitive agreement with FN, whereby FN acquired the right to receive 25 percent of the life-of-mine gold production from MWS (the MWS Gold Stream Transaction). Under the terms of the MWS Gold Stream Transaction, FN paid MWS $125 million upfront. In addition, FN will make an ongoing payment equal to the lesser of $400 per ounce (the Fixed Price) (subject to an annual inflation adjustment of 1 percent, starting in the fourth year following receipt of the first payment) and the prevailing spot price at the time of such payment, for each ounce of gold delivered under the contract. The total remaining gold ounces to be delivered by MWS under the current life-of-mine plan to FN has been accounted for as a financial derivative liability which is fair valued using the Black Scholes pricing model. All cash received and cost of production relating to the delivered ounces are recognized as part of the derivative expense related to Gold Stream Transactions along with the revaluation effects of the financial derivative liability. During the year ended March 31, 2012, MWS delivered 24,674 ounces (2011: 19,873) to FN. The cash received and cost of sales related to the ounces delivered to FN as well as the effects of revaluing the financial derivative liability at the end of the reporting period were recognized in the statement of comprehensive income (see Note 21, Derivative expense related to Gold Stream Transactions). Under the terms of the MWS Gold Stream Transaction, the upfront payment is reduced by an amount equal to the difference between the market price of gold on the date of gold delivery to FN and the Fixed Price of the gold, multiplied by the total ounces of gold delivered to FN (the Uncredited Balance). At March 31, 2012 the Uncredited Balance was $42.4 million (2011: $73.4 million). Pursuant to the MWS Gold Stream Transaction, MWS granted to FN a special bond over certain of the tailings dams and a pledge of 25% of the gold production from MWS. First Uranium has guaranteed the obligations owed by MWS to FN. Upon implementation of the AGA Transaction, First Uranium will be released of its guarantee obligations.
    • 88. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Pursuant to the Offering (see Note 12, Senior Secured Convertible Notes), the Corporation settled the completion penalty obligation to FN in respect of the MWS Gold Stream Transaction with the issuance of 14 million common shares of First Uranium to FN and a commitment by the Corporation to complete construction of the third gold plant module at MWS and satisfaction of the Technical Completion Test pursuant to the MWS Gold Stream Transaction prior to September 1, 2011. MWS was able to complete the first phase of the Technical Completion Test which entailed MWS reaching Steady-State Production. The second phase entailed meeting certain key criteria with respect to tonnes of material processed, average feed grade to the plant and gold recovery for a minimum continuous period of 14 days. The second phase of the test was successfully completed on August 24, 2011 with subsequent confirmation received from FN on August 29, 2011. The successful completion of the Technical Completion Test prior to September 1, 2011 avoided the imposition of the penalties provided under the MWS Gold Stream Transaction in connection with the test. 15.2 Financial derivative liability relating to the Ezulwini Gold Stream Trans action On November 5, 2009 First Uranium signed a definitive agreement with FN, whereby FN acquired the right to receive 7 percent of the life-of-mine gold production from the Ezulwini Mine (the Ezulwini Gold Stream Transaction). Under the terms of the Ezulwini Gold Stream Transaction, FN paid the Ezulwini Mine $50 million upfront. In addition FN will make an ongoing payment equal to the lesser of $400 per ounce (the Fixed Price) (subject to an annual inflation adjustment of 1 percent, starting in the fourth year following receipt of the first payment) and the prevailing spot price at the time of such payment, for each ounce of gold delivered under the contract. Pursuant to the Ezulwini Gold Stream Transaction, the Ezulwini Mine was obliged to deliver a minimum of 16,500 and 19,500 ounces of gold into the transaction during calendar years 2010 (the 2010 Guaranteed Ounces) and 2011 (the 2011 Guaranteed Ounces), such deliveries comprised of 4,125 and 4,875 ounces per quarter, respectively. The Ezulwini Mine satisfied the Guaranteed Ounces requirement pursuant to the Ezulwini Gold Stream Transaction in full at the end of December 2011. The total deliveries to be made by the Ezulwini Mine to FN are accounted for as a financial derivative liability, which is fair valued using the Black Scholes pricing model. All cash received and cost of production relating to the delivered ounces are recognized as part of the derivative expense related to Gold Stream Transactions along with the revaluation effects of the financial derivative liability. During the year ended March 31, 2012, the Ezulwini Mine delivered 15,336 ounces (2011: 18,658) to FN. All cash received and cost of production related to the ounces delivered to FN as well as the effects of revaluing the financial derivative liability at the end of the reporting period were recognized in the statement of comprehensive income (see Note 21, Derivative expense related to Gold Stream Transactions). Under the terms of the Ezulwini Gold Stream Transaction, the upfront payment is reduced by an amount equal to the difference between the market price of gold on the date of gold delivery to FN and the Fixed Price of the gold, multiplied by the total ounces of gold delivered to FN (the Uncredited Balance). At March 31, 2012 the Uncredited Balance was $12.8 million (2011: $31.4 million). FN has the right of first refusal (ROFR) on future gold stream transactions that might be considered by First Uranium for the Ezulwini Mine and MWS. The following key assumptions were used in determining the fair values of the above derivative liabilities: 2012 2011 2010 Gold spot price per ounce (US$) 1,672 1,423 1,114 Risk-free interest rate 0.468 0.303 0.292 Gold lease volatility rate 0.03% 0.06% 0.02% Total remaining life-of-mine ounces – MWS 1,445,110 1,856,425 1,839,953 Total remaining life-of-mine ounces – Ezulwini Mine 3,528,308 4,927,272 5,302,005
    • 89. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 16. ASSET RETIREMENT OBLIGATIONS (in thousands of dollars) 2012 2011 Balance, beginning of the year 36,014 26,515 Accretion expense 2,794 2,452 Increase (decrease) in the rehabilitation provision (4,821) 5,163 Foreign exchange revaluation on translation (4,366) 1,884 29,621 36,014 Reclassified as liabilities related to assets held for sale (Note 6) (29,621) - Balance, end of the year - 36,014 The total undiscounted balance relating to the asset retirement obligations as at March 31, 2012 was $48.6 million (2011: $108 million). There was a change in estimates used in the assessment of the MWS environmental rehabilitation obligation, which resulted in a significant decrease in its rehabilitation obligation compared to the previous year’s assessment. Legal opinion was obtained during the year which allowed for the exclusion of certain reclamation areas and resulted in a much lower assessment for MWS compared to the prior year’s assessment. The key assumptions used in the calculation of the asset retirement obligations were a discount rate of 8.7% (2011: 9%) and an inflation rate of 5.7% (2011: 6%). The discount rate is in line with indicative yields for ten-year government bills in South Africa, while the inflation rate is in line with the predictions of the general inflation level by the South African Reserve Bank (SARB). The discount periods are 19 years for the Ezulwini Mine (2011: 23 years) and 18 years for MWS (2011: 18 years), in line with the timing of expected cash flows. These valuations are performed on an annual basis. 17. SHARE CAPITAL Number of shares (000) ($000) ($000) Common shares 2012 2011 2012 2011 Balance, beginning of the year 236,537 166,847 455,035 377,919 Bought deal shares issued - 52,000 - 53,269 Shares issued in relation to the FN penalty - 14,000 - 18,213 Shares resulting from the Conversion of Rand Notes 1,311 3,553 2,031 5,413 Restricted share units exercised 35 137 23 221 Balance, end of the year 237,883 236,537 457,089 455,035 Share issue costs Balance, beginning of the year (36,085) (31,476) Share issue costs in respect of the bought deal - (3,280) Share issue costs in respect of the FN share issue - (1,315) Share issue costs in respect of the Rand Notes conversion - (14) Balance, end of the year (36,085) (36,085) Share capital, end of the year 421,004 418,950 Movement in share capital (in thousands of dollars) 2012 2011 Balance, beginning of the year 418,950 346,443 Net proceeds in respect of the bought deal - 49,989 Net increase in respect of shares issued to FN - 16,898 Shares pursuant to the Rand Notes conversion 2,031 5,399 Shares pursuant to the exercise of restricted share units 23 221 Balance, end of the year 421,004 418,950 Authorized The authorized share capital of First Uranium consists of an unlimited number of common shares. At the meeting of the Shareholders of First Uranium held on June 13, 2012, Shareholders approved the reorganization of the capital of the Corporation (the Share Capital Reorganization) which involves the issuance of an unlimited number of Class A Special Shares and an unlimited number of Class B Common Shares and the exchange of each common share of the Corporation for a unit (the Units) consisting of 100 Class A Special
    • 90. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Shares and one Class B Common Shares (See Note 32, Subsequent evetns). Articles of amendment in respect thereof were filed on June 25, 2012. Effective July 3, 2012 and July 2, 2012 the common shares will be delisted and the Units listed on the TSX and the JSE, respectively, under the stock symbols FUI.UN and FUU, respectively. Issued and outstanding The Corporation settled the completion penalty obligation to FN pursuant to the MWS Gold Stream Transaction in part with the issuance of 14 million common shares at Cdn$1.30 per share (See Note 15.1, Deferred revenue relating to MWS). On March 1, 2011 First Uranium completed a bought deal financing wherein 52,000,000 common shares of First Uranium were issued at a price of Cdn$1.00 per share for gross proceeds of Cdn$52.0 million. During the year ended March 31, 2012, 12,207 of the Rand Notes (2011: 32,424) were converted into 1.3 million common shares (2011: 3.5 million) in First Uranium. (See Note 12, Senior Secured Convertible Notes). During the year ended March 31, 2012, 34,866 (2011: 136,667) restricted share units (RSUs) were exercised resulting in the issue of common shares equivalent to the number of RSUs exercised. 18. CONTRIBUTED SURPLUS The following table details the movements of contributed surplus during the year: (in thousands of dollars) 2012 2011 Balance, beginning of the year 30,828 26,122 Stock options vesting expense recognized during the year 1,430 4,198 RSUs vesting expense recognized during the year 202 729 Stock options forfeited during the year (302) (276) RSUs forfeited during the year (42) - RSUs exercised during the year (35) (221) Vesting expense related to contributions from shareholder recognized during the year - 276 Balance, end of the year 32,081 30,828 18.1 Firs t Uranium Stock Option Plan The following table is a summary of the Corporation’s options granted under its stock-based compensation plan: Number of options Weighted average exercise price (Cdn$) 2012 2011 2012 2011 Outstanding options, beginning of the year 6,593,286 3,204,622 2.87 7.74 Granted during the year 381,000 6,234,000 0.30 1.17 Forfeited during the year (1,721,785) (2,708,336) (3.22) (4.23) Expired during the year - (137,000) - (8.42) Outstanding options, end of the year 5,252,501 6,593,286 2.57 2.87 The stock-based compensation expense recognized in the statements of operations and deficit and comprehensive income (loss) in respect of the Option plan was $1.1 million (2011: $3.9 million) for the year ended March 31, 2012. During the years ended March 31, 2012 and 2011, no stock option costs were capitalized to projects. At March 31, 2012 the aggregate unexpensed balance of unvested stock options granted amounted to $0.2 million (2011: $1.9 million). No stock options were exercised during the years ended March 31, 2012 and 2011.
    • 91. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 The following table summarizes information about First Uranium’s outstanding stock options as at March 31, 2012: Options outstanding Options exercisable Exercise price ranges Cdn$ Number of options outstanding Weighted average remaining life (years) Weighted average exercise price (Cdn$) Number of options exercisable Weighted average remaining life (years) Weighted average exercise price (Cdn$) 0.01 to 2.99 4,072,499 8.39 1.15 2,615,313 8.35 1.18 3.00 to 5.99 347,857 6.61 5.14 347,857 6.61 5.14 6.00 to 8.99 734,645 5.48 8.16 734,645 5.48 8.16 9.00 to 12.99 97,500 5.28 10.65 97,500 5.28 10.65 5,252,501 7.81 2.57 3,795,315 7.56 3.13 18.2 Res tricted Stock Unit Plan The following table summarizes information about First Uranium’s outstanding RSUs at March 31, 2012 and 2011: 2012 2011 Outstanding units, beginning of the year 742,831 177,000 Granted during the year - 959,500 Forfeited during the year (61,666) (257,002) Exercised during the year (34,866) (136,667) Outstanding units, end of the year 646,299 742,831 A third of the RSUs granted in Fiscal 2011 vested on grant date, a third will vest on the first anniversary of the grant date and the remaining third on the second anniversary. The Board did not attach performance targets to these RSUs. No RSUs were granted during the year ended March 31, 2012. The stock-based compensation expense recognized in the statements of operations pursuant to the RSU Plan was $0.2 million for the year ended March 31, 2012 (2011: $0.7 million). At March 31, 2012 the aggregate unexpensed balance of unvested RSUs granted amounted to $0.04 million (2011: $0.3 million). During the year ended March 31, 2012 34,866 RSUs (2011: 136,667) were exercised resulting in the transfer of $0.02 million of contributed surplus to share capital (2011: $0.2 million). 18.3 Contributions from s hareholder Contributed surplus includes historical contributions made by Simmer & Jack which represented stock-based compensation relating to 7.6 million Simmer & Jack stock options granted during the year ended March 31, 2008, to individuals that were previously employed by Simmer & Jack at the time and that were transferred to First Uranium during that year. No such stock options were granted since then. During the year ended March 31, 2012 no stock option expenditure related to contributions from shareholder was recognized in the statement of operation (2011: $0.3 million). 19. REVENUE For the year ended March 31, 2012 For the year ended March 31, 2011 (in thousands of dollars) Continuing Operations Discontinued operations Total Continuing Operations Discontinued Operations Total
    • 92. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Sales from Gold - 174,592 174,592 - 134,085 134,085 Sales from Uranium - 4,584 4,584 - 841 841 - 179,176 179,176 - 134,926 134,926 20. OTHER INCOME For the year ended March 31, 2012 For the year ended March 31, 2011 (in thousands of dollars) Continuing Operations Discontinued operations Total Continuing Operations Discontinued Operations Total Sludge pumping income - 970 970 - 1,272 1,272 Rental income - 569 569 - 536 536 Byproduct income - 604 604 - 401 401 Scrap sales - 287 287 - 270 270 Sundry income - 67 67 - 698 698 - 2,497 2,497 - 3,177 3,177 21. DERIVATIVE INCOME (EXPENSE) RELATED TO GOLD STREAM TRANSACTIONS The total movement in the financial derivative expense have been recognized in the statement of comprehensive income, as shown below: For the year ended March 31, 2012 (in thousands of dollars) MWS Ezulwini Mine Total Cash received from gold delivered into Gold Stream Transactions 9,799 6,073 15,872 Cost of production related to gold delivered into Gold Stream Transactions (19,809) (30,306) (50,115) Net movement on financial derivative liabilities 6,278 42,129 48,407 (3,732) 17,896 14,164 Reclassified as (income) expenses related to discontinued operations (Note 6) 3,732 (17,896) (14,164) - - - For the year ended March 31, 2011 (in thousands of dollars) MWS Ezulwini Mine Total Cash received from gold delivered into Gold Stream Transactions 8,081 7,523 15,604 Cost of production related to gold delivered into Gold Stream Transactions (11,589) (29,904) (41,493) Net movement on financial derivative liabilities (104,692) (42,117) (146,809) (108,200) (64,498) (172,698) Reclassified as expenses related to discontinued operations (Note 6) 108,200 64,498 172,698 - - - 22. INTEREST AND ACCRETION EXPENSE For the year ended March 31, 2012 For the year ended March 31, 2011 (in thousands of dollars) Continuing Operations Discontinued operations Total Continuing Operations Discontinued Operations Total Interest and accretion expense on the 18,601 - 18,601 16,413 - 16,413
    • 93. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Debentures (Note 11) Interest and accretion expense on the Canadian Notes (Note 12.1) 18,204 - 18,204 12,143 - 12,143 Interest and accretion expense on the Gold One Loan Facility (Note 14) 3 - 3 - - - Interest expense – other - 58 58 - - - 36,808 58 36,866 28,556 - 28,556 23. LOSS BEFORE INTEREST AND INCOME TAXES For the year ended March 31, 2012 For the year ended March 31, 2011 (in thousands of dollars) Continuing Operations Discontinued operations Total Continuing Operations Discontinued Operations Total Included in loss before interest and income taxes are the following items: Employee benefit expenses included in: Cost of sales Salaries - 63,058 63,058 - 58,900 58,900 Operating expenditure* Salaries 4,891 - 4,891 5,325 - 5,325 Share based payments 921 355 1,276 2,841 2,086 4,927 Retrenchment costs - 2,487 2,487 - 573 573 Amortization included in: Costs of sales - 12,860 12,860 - 9,955 9,955 Operating expenditure* 22 926 948 35 1,638 1,673 Cost of consumable inventories - 51,849 51,849 - 41,337 41,337 Pumping and rehabilitation costs* - 11,012 11,012 - 8,379 8,379 Penalty pursuant to MWS Gold Stream Transaction* - - - - 356 356 Shared services fees* 38 469 507 75 2,305 2,380 Legal fees* 489 292 781 1,633 100 1,733 Royalties to third parties - 3,237 3,237 - 2,951 2,951 Mining royalties taxes - 284 284 - 266 266 *These expenses are included in the other expenditures line item in the statement of comprehensive income. 24. TAXATION Provision for income taxes The reconciliation of income taxes attributable to operations computed at the statutory tax rates to income tax recovery, using a Canadian statutory tax rate of 27.75% for the year ended March 31, 2012 (2011: 30.13%), is as follows: For the year ended March 31, 2012 For the year ended March 31, 2011
    • 94. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 (in thousands of dollars) Continuing Operations Discontinued operations Total Continuing Operations Discontinued Operations Total Loss before income taxes (47,570) (131,207) (178,777) (39,698 ) (196,643) (234,341) Income tax recovery at statutory rate (13,201) (36,410) (49,611) (11,961 ) (59,249) (71,210) Difference between Canadian rates and foreign jurisdiction 4,260 (18,765) (14,505) 3,565 2,592 6,157 Change in deferred tax assets 4,580 46,151 50,731 5,948 927 6,875 Adjustment for deferred tax rate difference 554 - 554 890 - 890 Additional capital allowance - (10,792) (10,792) - (11,543) (11,543) Non-taxable items 4,255 5,690 9,945 1,947 34,288 36,235 Income tax charge (recovery) 448 (14,126) (13,678) 389 (32,985) (32,596) Current tax expense Current expense 448 212 660 389 63 452 Deferred tax recovery Relating to the MWS operations - (14,338) (14,338) - (33,048) (33,048) 448 (14,126) (13,678) 389 (32,985) (32,596) Deferred tax assets (in thousands of dollars) Continuing Operations Discontinued operations Total Continuing Operations Discontinued Operations Total Property, plant and equipment 41 45,755 45,796 34 35,554 35,588 Non-capital loss carry-forwards 25,371 - 25,371 17,502 - 17,502 Capital loss carry-forwards 6 - 6 8 - 8 Rand Notes - 7,118 7,118 - 4,456 4,456 Share issue costs 2,553 - 2,553 4,599 - 4,599 Foreign resource expenses 974 - 974 974 - 974 Foreign exchange 3,689 - 3,689 2,163 - 2,163 32,634 52,873 85,507 25,280 40,010 65,290 Less: Deferred tax assets not recognized (32,634) - (32,634) (25,280 ) - (25,280) Net deferred tax asset - 52,873 53,873 - 40,010 40,010 Movement in net deferred tax asset Balance, beginning of the year - 40,010 40,010 - 5,071 5,071 Deferred tax recovery for the year - 14,338 14,338 - 33,048 33,048 Foreign exchange revaluation on translation - (1,475) (1,475) - 1,891 1,891 - 52,873 52,873 - 40,010 40,010 Reclassified as assets held for sale (Note 6) - (52,873) (52,873) - - - Balance, end of the year - - - - 40,010 40,010 As at March 31, 2012, the Corporation had non-capital losses of approximately $101.5 million (2011: $77.1 million) in Canada that may be applied against earnings in future years. These losses are expected to expire between 2026 and 2033. The Corporation had non-capital losses of approximately $163.6 million (2011: $254.3 million) in South Africa that may be applied against earnings in future years and does not expire.
    • 95. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Due to uncertainties in the Corporation’s ability to utilize its net operating losses in all of its operations, the Corporation has provided a valuation allowance against those future tax assets for which uncertainty exists. 25. BASIC AND DILUTED LOSS PER COMMON SHARE For the year ended March 31, 2012 For the year ended March 31, 2011 Continuing Operations Discontinued operations Total Continuing Operations Discontinued Operations Total Basic and diluted loss per share ($) (0.20) (0.49) (0.69) (0.22) (0.88) (1.10) is calculated based on the loss for the year of ($‘000) (48,018) (117,081) (165,099) (40,08 7) (163,658) (203,745) and a weighted average number of common shares outstanding of (‘000) 237,703 237,703 237,703 185,2 56 185,256 185,256 For the year ended March 31, 2012 and 2011, no share options were included in the diluted common shares calculation for earnings per share purposes because they were anti-dilutive. The impact of the conversion of the Debentures issued on May 3, 2007 and the Notes issued on April 26, 2010, and of the warrants issued on February 11, 2009 have been excluded from the diluted common shares computation because they are anti-dilutive for earnings per share purposes. 26. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended March 31, 2012 For the year ended March 31, 2011 Continuing Operations Discontinued operations Total Continuing Operations Discontinued Operations Total Additions to Property, Plant and Equipment (Note 9) (2) (20,702) (20,704) (29) (81,171) (81,200) Capital expenditure included in Trade payables and Accrued Liabilities, beginning of the year - (11,379) (11,379) - (31,949) (31,949) Add back: Capital expenditure included in Trade payables and Accrued Liabilities, end of the year - 2,671 2,671 - 11,379 11,379 Non-cash capitalized costs associated with Facility with Simmer & Jack - - - - 240 240 (2) (29,410) (29,412) (29) (101,501) (101,530) 27. COMMITMENTS AND CONTINGENCIES Lease agreements i) Facilities rental
    • 96. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 The Corporation has office two operating lease agreements for the Canadian office, of which one expires on May 31, 2013 and the other expiring November 30, 2013. The premise associated with lease expiring November 30, 2013 has been sublet for the same rental payment as the head lease. The total rent expense charged under these agreements for the year ended March 31, 2012 was $0.3 million (2011: $0.3 million). The minimum lease payments are expected to approximate $0.4 million over the next two years. ii) Toll treatment The Corporation entered into an agreement with a third party, which commenced in January 2009, to calcine the ammonium diuranate (yellowcake) from First Uranium to produce uranium oxide packaged for dispatch to converters (the Toll Treatment Arrangement). Either party may terminate the agreement on eighteen months notice. The third party calciner constructed a plant with one half of the capacity of the plant to be dedicated to the processing of yellowcake from First Uranium’s operations. It also acquired a road tanker to transport the yellowcake from the First Uranium operations to the calciner’s operations. First Uranium was obliged to pay one- half of the construction cost of the calcining plant up to a maximum of $1.6 million and one half of the cost of the tanker (together referred to as the Loan). The Loan was effective as of January 5, 2009 and is repaid in monthly instalments over a seven year period commencing January 30, 2009. The Loan bears interest equal to the repo rates as quoted by the SARB, plus 2%. During the year ended March 31, 2012, the Corporation paid $0.4 million (2011: $0.8 million) pursuant to the arrangement. On implementation of the AGA Transaction, the Toll Treatment Arrangement with First Uranium will be terminated and each of Ezulwini and Chemwes will enter into a contract with the third party calciner on the same terms and conditions as the original agreement except that each operation will have access to one half of the calcining capacity made available to First Uranium, and will pay one half of the charges and costs, including the capital costs prescribed under the original agreement. Capital commitments (in thousands of dollars) 2012 2011 MWS 8,212 4,249 Ezulwini Mine 3,172 1,133 Total contractual obligations 11,384 5,382 The capital commitments are payable within one year. Guarantees To Regarding Guarantee value $’000 Eskom Holdings Ltd Electricity accounts 1,107 Royalty agreements MWS has agreed to pay: (i) to Simmer & Jack, an amount equal to the royalty payable by Simmer & Jack to Aberdeen International Inc. pursuant to the Aberdeen Agreement with Simmer & Jack in respect of the tailings to be acquired from Buffelsfontein Gold Mines Limited (BGM), pursuant to the Buffelsfontein Tailings and Rights Agreement; and (ii) to BGM a 1% royalty, pursuant to the terms of the Buffelsfontein Tailings and Rights Agreement. The total royalties expensed during the year ended March 31, 2012 amounted to $1.6 million (2011: $1.1 million) in respect of (i) above and $1.6 million (2011: $1.1 million) in respect of (ii) above. Legal proceedings related to MWS i) MDM On May 18, 2012, the Corporation received a summons from MDM Technical Africa (Pty) Ltd (MDM). MDM was the engineering design, procurement and project construction management (EPCM) contractor during the
    • 97. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 construction phase of the Corporation’s additional gold and uranium plant modules. The MDM summons alleges that the Corporation owes MDM $4.6 million plus interest related to the performance of the EPCM contracts. The Corporation believes that the monies are not in fact owed to MDM as the issues were addressed in a close-out report prepared by an independent third party. The Corporation believes that the independent third party report is final and binding and that the Corporation has the right to set amounts off owed by MDM to it. MDM disputes both these assertions. The Corporation has entered a plea to defend the matter. (ii) NEMA The MWS reclamation and rehabilitation operation is diverse both in terms of the nature of the operations and its geographic spread and is therefore regulated by a host of legislation. Principally by the National Water Act, National Environmental Management Act (NEMA) and the National Nuclear Regulator Act. MWS is of the opinion that it currently holds all the necessary authorisations in order to conduct its operations. Despite the fact that a tailings reclamation project does not require a mining right under current South African mining legislation, MWS applied for a new order mining right in 2008 in anticipation of a proposed amendment to the Mineral and Petroleum Resources Development Act (MPRDA) which, although drafted in 2008, has yet to come into effect. A New Order Mining Right was granted to MWS in 2009 subject to MWS agreeing on a mechanism to fund the rehabilitation guarantee as well as MWS meeting the requisite BEE credentials in terms of the New Order Mining Right. This was the status when the Minister of Mineral Resources issued the purported withdrawal of the New Order Mining right on September 15, 2011. However, the withdrawal has no basis in law since MWS does not require a mining right in order to operate. MWS has respectfully informed the Minister of its rights in this regard and will take legal action, if necessary, to protect its right to operate. On this basis, operations continue and MWS will continue to pro-actively engage with the Minister and the DMR to resolve the issue. In January 2012, the South African Water Tribunal dismissed an appeal by a local environmental pressure group, the Federation for a Sustainable Environment, against the issuing of MWS’s Water Use Licence and the Tribunal has closed its file on the matter. On February 1, 2012 MWS received notice that the FSE intends to appeal the Water Tribunal’s decision to the High Court. MWS intends to vigorously oppose the matter. On July 25, 2011, MWS received a directive from the National Nuclear Regulator (NNR) to suspend operations. The suspension was related to the operation of the MWS slurry pipelines and spillages emanating from the pipelines. After intensive engagement with the NNR, the suspension was lifted provided MWS could ensure continuous improvement relating to the operation of the pipeline. To this end an updated pipeline management program providing for improved monitoring and maintenance of the pipeline was submitted to the NNR at the end of September 2011. A follow-up inspection was conducted by NNR officials on November 25, 2011 and no major non-compliance issues were noted. MWS continues to work closely with the NNR to ensure that it complies with its licence conditions. On February 10, 2012 MWS received a notice of intention to issue a directive (Pre-Directive) in terms of section 31 A of the Environment Conservation Act (No. 73 of 1989) (ECA) and or Section 28 of the National Environmental Management Act (No. 107 of 1998) from the Department of Environmental Affairs (DEA). The Pre- Directive lists certain concerns that the DEA has with the MWS reclamation project and the environmental impact thereof. The DEA has requested information from MWS relating to the concerns which MWS duly submitted on February 24, 2012. While no formal feedback has been received from the DEA since the submission, management is confident that the issues have been materially addressed. 28. CAPITAL MANAGEMENT First Uranium’s capital includes convertible debentures, convertible notes and shareholders’ equity. The Corporation’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal structure to reduce the cost of capital. The Board of Directors does not establish quantitative return on capital criteria for
    • 98. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 management, but rather relies on the expertise of the Corporation’s management to sustain future development of the business. Management reviews its capital management approach at a First Uranium group level on an ongoing basis and believes that this approach, given the relative size of the First Uranium group, is reasonable. As discussed in Note 1, Nature of operations and going concern, the Board of First Uranium empowered a Special Committee to monitor developments and undertake a strategic review of the First Uranium Group and its capital structure and to advise on any strategic alternatives that may be in the interest of the First Uranium Group and its stakeholders. As a result, First Uranium entered into the AGA Agreement for the indirect sale the MWS tailings recovery project to AGA for a total cash consideration of $335 million on March 2, 2012. On March 30, 2012, First Uranium entered into the Gold One Agreement for the indirect sale of the Ezulwini Mine for a total cash consideration of $70 million to Gold One. The proceeds from the sale Transactions will enable the Corporation to settle the Debentures, the Notes and the Gold One Loan Facility under the terms agreed to with the Debenture holders, Note holders and Gold One. Following the completion of the Transactions, the Corporation will have effected a change of business according to the rules of the TSX. As a result of such change in business, the Corporation will be required to meet the original listing requirements of the TSX in order to remain listed. Following completion of the AGA Transaction and the Gold One Transaction, the Board and management will meet to consider the business plan for the Corporation and its future. The Corporation will consider the most efficient and orderly way in which to distribute to the Shareholders all remaining property of the Corporation (after payment of the Corporation’s creditors). The Corporation may then proceed to be wound up and dissolved. However the Board has not made any decisions with respect to the windup and dissolution at this time. Upon completion of the Transactions, the Corporation will not meet the TSX’s original listing requirements under any of the listing categories of the TSX. Therefore the Corporation is expected to be delisted from the TSX. If the Corporation is to be delisted from the TSX, the Corporation intends to take steps to maintain liquidity in the Common Shares by applying for listing on NEX, a separate board of the TSX Venture Exchange that provides a trading forum for listed companies that have low levels of business activity or have ceased to carry on an active business, or an alternative exchange in Canada. No assurance can be given that the Corporation will meet the listing requirements for an alternate listing on NEX or an alternative exchange in Canada. In the event the securities of the Corporation are not listed on TSX, NEX or an alternative exchange, there will be no public market through which the securities may be sold and traded and Shareholders may not be able to dispose of their securities. This can be expected to affect the liquidity of the Common Shares and the transparency and availability of trading prices. 29. FINANCIAL INSTRUMENTS Financial risk factors First Uranium’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity, market prices, foreign currency exchange rates and interest rates. a) Credit risk Credit risk is the risk of loss associated with a counter party’s inability to fulfill its payment obligations. The Corporation’s credit risk is attributable primarily to gold sales. The Corporation has a concentration of credit risk with two customers which are closely monitored by management. Management believes that the credit risk concentration with respect to financial instruments attributable to gold sales is remote. The majority of the Corporation’s cash and cash equivalents are on deposit with highly-rated financial institutions. b) Liquidity risk
    • 99. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 As discussed in Note 1, Nature of operations and going concern, the proceeds from the sale of First Uranium’s principal assets will enable it to settle the Debentures, the Notes and the Gold One Loan Facility under the terms agreed to with the Debenture holders, Note holders and Gold One. Contractual settlement dates of First Uranium’s financial liabilities: At March 31, 2012 (in thousands of dollars) Carrying amount Total cash flows Within three months Three months to one year One to three years Greater than three years Continuing operations: Debentures* 148,768 151,508 - 146,996 - - Canadian Notes** 107,336 110,297 - 110,297 - - Accounts Payable and Accrued Liabilities*** 4,956 4,956 4,956 - - - Gold One loan facility 5,003 5,003 - 5,003 - - Income Tax Payable 2,766 2,766 - - 2,766 - Discontinued operations: Derivative liabilities 348,788 348,788 10,327 29,520 64,636 244,305 Rand Notes*** 52,635 54,521 - 54,521 - - Accounts payable and accrued liabilities*** 23,681 23,681 23,681 - - - * Cash amount relates to 100% of the liability value of the Debentures plus the accrued interest payable and agreed to by the Debenture holders on June 13, 2012 (See Note 32, Subsequent events). ** Cash amount relates to 100% of the liability value with no accrued interest as agreed to by the Canadian Note holders on June 13, 2012 (See Note 32, Subsequent events). ** Included in the Accrued liabilities is the toll treatment facility.
    • 100. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 At March 31, 2011 (in thousands of dollars) Carrying amount Total cash flows Within three months Three months to one year One to three years Greater than three years Derivative liabilities 397,195 397,195 10,626 33,145 78,317 275,107 Debentures* 140,373 164,349 3,251 3,304 157,550 - Canadian Notes* 99,422 129,162 - 7,931 121,231 - Rand Notes** 72,645 76,953 - 6,938 70,015 - Accounts payable and accrued liabilities** 35,104 35,104 35,104 - - - Income tax payable 2,232 2,232 1,320 912 - - Payables to related party 12 12 12 - - - * Carrying amount relates to the debt portion of the Debentures and the Canadian Notes only. The disclosed cash flows assume no conversion of the Debentures and the Canadian Notes. ** Carrying amounts relate to the fair value of the Rand Notes liability. The disclosed cash flows assume no conversion of the Rand Notes. *** Included in the Accrued liabilities is the toll treatment facility. c) Market risk The Corporation is exposed to cash flow interest rate risk as its surplus cash is invested in variable interest bearing deposits and investment funds held with regards to the Corporation’s asset retirement funds. The investment funds held consist of a combination of South African unit trusts of which the value fluctuates depending on market conditions. The Corporation is also exposed to variable interest rate borrowings. An increase in interest rates will result in an increase in interest received and interest paid. Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and gold prices. i) Interest rate risk The Corporation is exposed to fixed rate borrowings in the form of its debentures. An increase in interest rates results in a decrease in the fair value of the debentures and a decrease in interest rates will result in an increase in the fair value of the debentures. ii) Foreign currency risk The Corporation’s functional currency is the Cdn$ and ZAR for its operations. The Corporation is affected by currency transaction risk and currency translation risk. Consequently, fluctuations of the functional currencies in relation to other currencies, in particular the US$, impact the fair value of financial assets, liabilities and operating results. The Corporation does not hedge its exposure to foreign currency exchange risk. Certain short-term financial liabilities are denominated in other currencies. Financial assets and liabilities subject to currency translation risk primarily include US$ cash and cash equivalents of $2.6 million (2011: $34.3 million). ii) Price risk Commodity price risk (for the gold and uranium prices) is defined as the potential adverse impact on earnings and economic value due to movements and volatilities in the commodity prices. The Corporation does not hedge its exposure to commodity price fluctuation risk. An increase (decrease) in the gold price will result in an increase (decrease) in the fair value of the derivatives. Sensitivity analysis
    • 101. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Management estimates that if interest rates changed by 1%, assuming all other variables remained constant, the impact to net loss for the year ended March 31, 2012 would approximate $0.0421 million (2011: $0.0001 million). As indicated in Note 32, Subsequent events, the interest bearing debt, other than the Gold One Loan Facility, will be settled without further interest accruing to the outstanding amounts. At March 31, 2012, management estimated that if the foreign exchange rates had changed 10% against the US$ assuming all other variables remained constant, the impact on net loss from the revaluation of financial instruments would have been approximately as follows: (in thousands of dollars) 2012 2011 10% increase in value of Cdn$ (60,990) (23,166) 10% decrease in value of Cdn$ 60,990 23,166 10% increase in value of ZAR (5,264) (5,041) 10% decrease in value of ZAR 5,264 5,041 These sensitivities do not reflect the impact of the exchange rate movements on the operating results of the Corporation, the impact of which could be significant. Fair value estimation The following table gives a breakdown of how the Corporation classified its financial instruments within the fair value hierarchy as at March 31, 2012: Financial assets at fair value (in thousands of dollars) Level 1 Level 2 Level 3 Total Discontinued operations: Asset retirement funds (Note 10) - 11,360 - 11,360 Other financial assets - 65 - 65 - 11,425 - 11,425 Financial liabilities at fair value (in thousands of dollars) Level 1 Level 2 Level 3 Total Discontinued operations: Derivative liabilities (Note 15) - 348,788 - 348,788 Rand Notes liability (Note 12.2) 52,636 52,636 401,424 401,424 There were no assets or liabilities transferred from one level to another in the hierarchy during the year ended March 31, 2012. In assessing the fair value of other financial instruments, the Corporation uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. The face values less any estimated credit adjustments for financial assets and financial liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the Corporation for similar financial instruments. At March 31, 2012, the actual disclosed values of the financial instruments all approximate the fair values of these instruments. 30. RELATED PARTY TRANSACTIONS AND COMMITMENTS Related party balances (in thousands of dollars) 2012 2011 Amount due to Simmer & Jack pursuant to Shared Services Agreement - (12) Debt portion related to Rand Notes held by Simmer & Jack - (57,447)
    • 102. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 Related party transactions (in thousands of dollars) 2012 2011 Shared services fees to Simmer & Jack - (533) Costs related to the Facility with Simmer & Jack - (240) Interest and accretion expense related to Rand Notes held by Simmer & Jack - (9,240) Fees paid to empowerment company (585) (293) Stock-based compensation relating to contribution from shareholder - (130) Royalties paid to Buffelsfontein Gold Mining Estates - (1,077) Directors remuneration (844) (661) Key management fees (1,691) (1,749) Pursuant to the Offering, Simmer & Jack subscribed to 296,084 Rand Notes for a cash consideration of Cdn$40 million on April 26, 2010 and the Corporation also settled the $22.6 million Facility with Simmer & Jack (including the unpaid interest on the Facility) with the issue of 167,812 Rand Notes to Simmer & Jack ( Note 12.1, Senior Secured Convertible Notes). During the year ended March 31, 2011 Simmer & Jack reduced its holding in Rand Notes to 392,681 Rand Notes. In June 2011 Simmer & Jack transferred its 25.5% holding of the outstanding common shares in First Uranium and its 391,571 Rand Notes to Village Main Reef Limited. Subsequent to June 30, 2011, Village Main Reef sold 47,065,916 of its common shares in First Uranium (19.79%) at Cdn$0.60 per share to Anglogold Ashanti for a total consideration of Cdn$28 million. Following this transaction, Simmer & Jack and its subsidiary, Buffelsfontein Gold Mining Estates, as well as Village Main Reef are no longer considered to be related parties of First Uranium. First Uranium and Simmer & Jack had a shared services agreement (the Shared Services Agreement) pursuant to which First Uranium could retain certain services provided by Simmer & Jack. Included in the shared services fees to Simmer & Jack for the year ended March 31, 2011, were $0.2 million fees capitalized (2011: $2.2 million) which related to services provided in respect of technical support for the Ezulwini Mine and MWS were capitalized. Furthermore, the Corporation agreed to reimburse Simmer & Jack 50% of the management fee that Simmer & Jack paid to its empowerment company pursuant to a letter of understanding between Simmer & Jack and the empowerment company dated September 26, 2006. The empowerment company, Vulisango Holdings (Pty) Ltd (Vulisango) provided consulting services to Simmer & Jack relating to transformation, human resources and occupational health and safety. During the year ended March 31, 2012, the Shared Services Agreement with Simmer & Jack was terminated and First Uranium entered into its own management agreement with Vulisango (the Management Agreement). The Management Agreement provides for a monthly fee of ZAR400,000 payable to Vulisango and although it provided for an indefinite term, it can be terminated at any time by agreement between the parties, or in the event that there is a transaction or a series of transaction that would have the effect that the Corporation is no longer the owner of either the Ezulwini Mine or MWS, or their collective assets, the Corporation may, at its option, terminate the Management Agreement upon payment to Vulisango of ZAR9.6 million. 31. DIVIDENDS No dividends have been declared or proposed in the year ended March 31, 2012 or 2011, respectively. 32. SUBSEQUENT EVENT As discussed in Note 1, Nature of operations and going concern, on June 13, 2012, three security holder meetings, a meeting (the Shareholder Meeting) of Shareholders, a meeting (the Note holder Meeting) of the Note holders and a meeting (the Debenture holder Meeting) of Debenture holders, were held to consider and vote on a number of resolutions necessary for the successful completion of the AGA Transaction and the Gold One Transaction. The following resolutions were approved at the Shareholder Meeting:
    • 103. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 (a) The AGA Resolution, whereby the Corporation and FUL agreed to sell to AGA or its designee, the FUSA Claims and all the FUSA Shares; (b) The Gold One Resolution, whereby the Corporation and FUL agreed to sell to Gold One or its designee, among other things, all the shares in the issued capital of FUL or EMC; (c) The Additional Common Shares Resolution, whereby the approval for the issuance, if necessary, of the Additional Common Shares to repay the principal amount due on maturity of the Debentures; (d) The Note Resolution, whereby the Corporation and BNY Trust Company of Canada and GMG Trust Company (SA) Pty Limited, the Note indenture trustees, will execute supplemental Note Indentures to give effect to certain amendments to the Note Indentures to, among other things, permit the completion of the AGA Transaction and the Gold One Transaction; (e) The Continuance Resolution and the By-Law Resolution, whereby the Corporation will be continued from the Province of British Columbia into the Province of Ontario to permit the Corporation to complete the Reorganization of Capital and facilitate the Initial Distribution (as defined below) and the Remaining Distribution (as defined below) realized from the sale of its assets under the AGA Transaction and the Gold One Transaction to the Shareholders in a tax efficient manner; and (f) The Reorganization Resolution, whereby the Corporation’s share capital will be reorganized to facilitate the Initial Distribution and the Remaining Distribution realized from the sale of its assets under the AGA Transaction and the Gold One Transaction to the Shareholders in a tax efficient manner. The Board, following completion of the Transactions and the repayment of all current obligations to the Debenture holders, settlement of all outstanding obligations to the Note holders and providing for a reserve for any continuing and contingent obligations, will determine an amount (the Initial Distribution) to be distributed to the Shareholders in the form of a redemption of Class A Special Shares. Following the release of funds from the Warranty Escrows associated with each of the Transactions, and the settlement of all remaining obligations to the Debenture holders and establishment of a reserve for any continuing and contingent obligations, the Board will determine an amount (the Remaining Distribution) to be distributed to the Shareholders in the form of a second redemption of Class A Special Shares. At the Note holder Meeting, Note holders approved the Note Resolution, which approves the supplemental note indentures (the Supplemental Note Indentures) and authorizes the Note Trustees to execute the Supplemental Note Indentures to give effect to certain amendments to the Note Indentures to permit the completion of the Transactions, in particular: (i) that interest shall not accrue on the Notes after March 31, 2012 provided that all principal amounts owing under the Notes are paid to the Note Trustees on or before October 5, 2012; and (ii) that on the seventh Business Day after the final completion and implementation of the AGA Transaction, the Notes shall be redeemed by the Corporation and MWS, as applicable, in full, without payment of any prepayment or early redemption fee or bonus. The Supplemental Indentures, dated June 14, 2012, were executed by the parties. At the Debenture holder Meeting, Debenture holders approved the Debenture Resolution, which approves the supplemental debenture indenture (the Supplemental Debenture Indenture) and authorizes the Debenture Indenture Trustee to execute the Supplemental Debenture Indenture to give effect to certain amendments to the Debenture Indenture to permit the completion of the Transactions, in particular: (i) extend the maturity date of the Debentures from June 30, 2012 to the date that is the earlier of: (a) If both the AGA Transaction and the Gold One Transaction are to be completed and implemented on or before October 5, 2012, the seventh business day after the later of: (I) the date the last amount of the Deferred Payment (as defined in the AGA Agreement) is disbursed by the Escrow Agent; and (II) the date the last amount of the Deferred Payment (as defined in the Gold One Agreement) is disbursed by the Escrow Agent; or
    • 104. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 (b) October 5, 2012 if both the AGA Transaction and the Gold One Transaction are not completed and implemented on or before October 5, 2012; (ii) provide reduced payment terms such that after closing of both of the Transactions, Debenture holders will receive a cash payment of 95% of the principal amount of the Debentures, an additional cash payment of 2% of the principal amount if they have voted in favour of the Debenture Resolution on or before May 30, 2012 (the 2% will be allocated pro rata to Debenture holders tendering by May 30, 2012), and an additional payment of the lesser of: (I) 3% of the principal amount; or (II) the total amount released to the Corporation from the Deferred Payments, in priority to the Initial Distribution; (iii) interest shall not accrue on the Debentures after March 2, 2012 provided that certain minimum payments are made to the Debenture Indenture Trustee on or before October 5, 2012. The Supplemental Debenture Indenture, dated June 14, 2012, was executed. On June 13, 2012, the Corporation filed Articles of Continuance and was continued under the Business Corporations Act (Ontario). On June 25, 2012, articles of amendment were filed in respect of the Share Capital Reorganization which involves issuance of an unlimited number of Class A Special Shares and an unlimited number of Class B Common Shares and the exchange of each common share of the Corporation for a unit (the Units) consisting of 100 Class A Special Shares and one Class B Common Shares. Effective July 3, 2012 the common shares will be delisted and the Units listed on the TSX and the JSE under the stock symbols FUI.UN and FUU, respectively. As of June 25, 2012, all of the conditions precedent to the AGA Transaction had been satisfied or waived. Each of the parties have confirmed such in writing and the Closing Date, as defined in the AGA Agreement, is scheduled to occur on July 3, 2012. On the Closing Date, all of the documents required to conclude the AGA Transaction will, in accordance with the terms of the AGA Agreement, be delivered to Edward Nathan Sonnenbergs as Closing Document Stakeholder, the purchase price will be delivered to Computershare Trust Company of Canada and Computershare Investor Services (Proprietary) Inc., each a Purchase Price Stakeholder, and certain documents (Discharge Documents) relating to the discharge of the security held for the benefit of the Note holders and the Gold One Loan Facility will be lodged with the appropriate deeds office. On the Closing Date, CTTC will convert sufficient US dollars to Canadian dollars so that CTTC holds an amount in Canadian dollars to pay the principal amount (C$110 million) of the Canadian Notes outstanding and CIS will convert sufficient US dollars to South African Rand in order for CIS to pay the principal amount (ZAR418.6 million) of the Rand Notes outstanding. Upon registration of the Discharge Documents releasing all security in the MWS assets, the Closing Document Stakeholder will release the remaining closing documents from escrow and the Purchase Price Stakeholders will pay: (i) to BNY Trust Company of Canada, as trustee for the Canadian Notes, C$110 million, and to or to the order of GMG Trust Company (SA) Pty Limited, as trustee for the Rand Notes, ZAR418.6 million; (ii) to Gold One, $10 million plus accrued interest to the date of payment; (iii) $25 million (AGA Deferred Payment) to the Warranty Escrow agent; and (iv) the balance shall be paid to FUL, or at the direction of FUL. The Corporation has been advised that it could take up to three weeks for the Discharge Documents to be registered, accordingly, the AGA Transaction is expected to be implemented by July 24, 2012. In order to provide sufficient time for the AGA Transaction to be implemented, Gold One and the Corporation have agreed to extend the date to satisfy the conditions precedent to the Gold One Transaction to July 31, 2012. Other than the conditions precedent associated with the implementation of the AGA Transaction, the material conditions precedent to the Gold One Transaction have been satisfied or waived subsequent to year-end, including all of the regulatory approvals to the extent required.
    • 105. First Uranium Corporation Notes to the Consolidated Financial Statements March 31, 2012 FIU AFS 2012 33. SEGMENTED INFORMATION Segmented information is presented in respect of the Corporation’s business and geographical segments. The primary format business segments are based on the Corporation’s management and internal reporting structure. Inter-segment reporting is determined on an arm’s length basis. As discussed in Note 1, Nature of operations and going concern, the Corporation is in the process of disposing of its two principal assets. The assets and liabilities of the two operations as well as the related statement of operations are set out in Note 6, Discontinued operations. The continuing operations consist only of one segment and as such no further detail has been provided under this note.
    • FIU AFS 2012 SHAREHOLDER AND CORPORATE INFORMATION CORPORATE OFFICES Canada First Uranium Corporation 77 King Street West, Suite 400 Toronto-Dominion Centre Toronto, Ontario, Canada M5K 0A1 Tel: +1 416 306 3072 Fax: +1 416 306 3073 South Africa First Uranium Corporation c/o Eversheds 22 Fredman Drive, Sandton, Johannesburg, 2146 Attention: Warren Drue or Danielle Magidson TRANSFER AGENTS Computershare Investor Services Inc. 100 University Avenue, 9th floor Toronto, Ontario, Canada M5J 2Y1 Tel: 1 800 564 6253* 514 982 7555 Fax: 1 888 453 0330* 416 263 9394 service@computershare.com Computershare Investor Services Proprietary Limited 70 Marshall Street Johannesburg, South Africa, 2000 (PO Box 61051, Marshalltown, 2107 South Africa) Tel: +27 11 370 5000 +27 86 110 0950 Fax: +27 11 688 5217 +27 11 688 5248 www.uk.computershare.com * Toll free in Canada and the United States BANKERS Royal Bank of Canada 20 King Street West Lower Level Toronto, Ontario Canada M5H 1C4 ABSA Bank Limited Southdale Branch 63 Alamein Road Southdale South Africa (PO Box 261001, Excom, 2023 South Africa) LISTING DETAILS CUSIPS for FIU Units: 33744R508 33744R607 Toronto Stock Exchange (primary listing) Ticker symbols: Units – FIU.UN Johannesburg Stock Exchange (secondary listing) Registration number: 2005/033680/07 ISIN: CA33744R5087 Ticker symbol: Units – FUU AUDITORS PricewaterhouseCoopers Inc. Chartered Accountants 2 Eglin Road Sunninghill, South Africa (Private Bag X36, Sunninghill, 2157 South Africa) Changing your shareholder records To change your address, eliminate multiple mailings, transfer First Uranium shares or for other shareholder account inquiries, registered shareholders should contact the principal offices of the Transfer Agents listed above. To initiate any such change, beneficial shareholders who have their shares held on their behalf by an investment advisor, such as a stock broker, should contact the advisor directly. Disclosure documents For information on First Uranium’s corporate governance and other investor information please refer to First Uranium’s website at www.firsturanium.com.