FIU
UUU - First Uranium Corporation - First Uranium in process of distributing
information circulars for meetings on June 13, 2012 of shareholders, noteholders
and debentureholders
First Uranium Corporation
(Continued under the laws of British Columbia, Canada)
(Registration number C0777384)
(South African registration number 2007/009016/10)
Share code: FUM ISIN: CA33744R1029
FIRST URANIUM IN PROCESS OF DISTRIBUTING INFORMATION CIRCULARS FOR MEETINGS ON
JUNE 13, 2012 OF SHAREHOLDERS, NOTEHOLDERS AND DEBENTUREHOLDERS
All amounts are in US dollars unless otherwise noted.
Toronto and Johannesburg - First Uranium Corporation (TSX:FIU), (JSE:FUM)
(ISIN:CA33744R1029) ("First Uranium" or "the Company") announced that it has
completed and is in the process of delivering Information Circulars and forms of
proxies to its Shareholders, Noteholders and Debentureholders in connection with
special meetings to be held on June 13, 2012. Copies of the Information
Circulars have also been filed at www.sedar.com.
On March 2, 2012, the Corporation announced that it had agreed to sell its
subsidiary company holding, Mine Waste Solutions operations ("MWS") to
AngloGold Ashanti Limited ("AngloGold") and its subsidiary company holding
Ezulwini Mine ("Ezulwini") to Gold One International Limited ("Gold One")
for $335 and $70 million, respectively. These transactions provide for a
comprehensive resolution for all stakeholders of the Corporation and offer the
opportunity for each class of securityholders to make a recovery on their
investment. It offers the holders of the secured Notes an immediate 100%
return of their invested principal, the opportunity for the holders of
unsecured Debentures to recover up to 100% of their invested principal in two
stages and, also in stages, an opportunity for Shareholders to make a meaningful
recovery in lieu of no recovery.
The Board of Directors (the "Board") established a Special Committee of
independent directors in July 2011 in view of the financial issues facing
the Corporation including the limited free cash flow generated from its
assets, the loss of credentials under South African black economic empowerment
legislation ("BEE"), and the requirement to repay the 4.25% senior unsecured
convertible Cdn$ 150 million debentures due June 30, 2012 ("Debentures"). The
Special Committee retained financial advisors and legal counsel and had a
mandate to assess all available options to address the issues facing the
Corporation. These options included seeking a third party investment in, or
acquisition of, First Uranium. Restructuring alternatives for the Debentures
and the 7% secured convertible Cdn$ 110 million notes and the 11% secured
convertible ZAR 418.6 million notes, each due March 31, 2013 ("Notes") were
also considered and discussed with representatives of certain of the holders
of Debentures and Notes.
Between mid September 2011 and January 2012, approximately 20 parties were
contacted by the Committee's advisors. Ultimately only AngloGold, Gold One
and one other party signed confidentiality agreements and undertook due
diligence on the Corporation. In December 2011, AngloGold advised it would
not pursue the acquisition of First Uranium as a whole but that it was
interested in purchasing the MWS operations and made a non-binding offer of
$300 million. In early January 2012, following discussions with Gold One,
the Corporation received a non-binding acquisition proposal of $60 million in
cash and shares with an incremental $20 million in contingent consideration.
Neither of these non-binding offers was acceptable to the Special Committee and
the Board but they formed the basis for continued negotiations which culminated
in the definitive agreements with each of AngloGold and Gold One which are to
be considered by the Shareholders at the meeting. Since the announcement of
these transactions no other party has provided any credible offer to the
Corporation to acquire MWS or Ezulwini.
Since the formation of the Special Committee, the Corporation has continued to
experience reduced cash flow from its operations and, particularly in light of
the decision in December 2011 to take action to stem the losses at Ezulwini by
downsizing its operations and work force to concentrate on the higher grade
areas of the mine, the Special Committee commenced a search for sources of
bridge financing. Additionally, as a result of the declines in production, the
Corporation does not have access to sufficient capital to continue to invest in
its operations. Gold One's binding purchase offer made February 10, 2012 also
provided an immediate secured bridge loan facility of $10 million.
Concurrent with the negotiations leading to the announced transactions, the
Special Committee had been negotiating with its BEE partner, Vulisango Holdings
(Proprietary) Limited, with whom it had, in August 2011, entered into a
management agreement (the "Management Agreement"), to enable Vulisango to
acquire the requisite BEE interest in the assets of First Uranium and ultimately
an equity stake in the Corporation intended to satisfy the requirements of the
BEE legislation. In light of the announced transactions, those discussions were
suspended and the Corporation agreed to settle its obligations to Vulisango
under the Management Agreement such that upon expiry of the Management Agreement
upon completion of the sales of MWS and Ezulwini, Vulisango would receive a
payment of ZAR9.6 million.
In order for the Corporation to complete the asset sale transactions and to
provide all stakeholders with a recovery on their interests in the Corporation,
Debentureholders and Noteholders are being asked to approve amendments to
certain terms of their investments, including foregoing interest payments up
to the closing and, in the case of the Noteholders, to accept the settlement
terms necessary to release the assets from their security in advance of the
stated maturity of the Notes in exchange for immediate recovery of 100% of the
stated principal amount. Holders of 52% of the aggregate face value of the
Debentures and 44% of the aggregate voting rights attaching to the Notes have
executed Voting Support Agreements in favour of the amendments to the terms of
their respective securities.
The Board of Directors has accepted the recommendations of the Special Committee
in respect of the foregoing matters and has determined that the transactions
are in the best interests of the Corporation on the basis of the following:
* the process undertaken by the Special Committee and its advisors over an
eight month period resulted in the most favourable outcome for all
stakeholders among the available alternatives;
* the opportunity for certainty and immediate value without significant
shareholder dilution or the uncertainty of execution and financing risks
without available financial and capital resources to fund repayment of the
Debentures;
* the risks associated with failure to repay the Debentures or the massive
dilution of the Shareholders in the event the repayment is satisfied with
the issuance of common shares;
* the opinions of RBC Capital Markets to the effect that, as of the date of
such opinions and subject to the assumptions, limitations and
qualifications specified therein, the consideration to be received by the
Corporation under each of the AngloGold and Gold One transactions is fair,
from a financial point of view, to the Corporation, and that the cash
proceeds to be received by the Shareholders are fair, from a financial
point of view, to the Shareholders other than AngloGold Ashanti and certain
other related shareholders;
* the independent valuation and fairness opinion of Paradigm Capital that,
subject to the assumptions, limitations and qualifications therein, the
fair market value of the Corporation's subsidiary, FUSA (which owns MWS)
is in the range of $299 million to $352 million (the AngloGold
consideration is above the mid-point of that range) and that the
transaction with AngloGold is fair, from a financial point of view, to the
Shareholders, other than AngloGold;
* the required approval of the transactions by 66 2/3% of the Shareholders
who vote at the meeting, and in respect of the transaction with AngloGold
Ashanti, the requirement for approval by a majority of the minority
Shareholders;
* the absence of significant closing conditions with the receipt of a number
of regulatory approvals which were conditions precedent to closing having
already been obtained;
* the Voting Support Agreements received from certain Debentureholders and
Noteholders in connection with the matters under consideration;
* the availability of dissent rights for Shareholders who object to the sales
of MWS and Ezulwini; and
* the ability to satisfy all of the outstanding indebtedness of First Uranium
following the completion of the transactions and release of the escrowed
funds.
The Board of Directors has also considered the consequences for the Corporation
and its various stakeholders if the matters submitted to Shareholders are
rejected:
* the Corporation may not be able to comply with certain BEE requirements in
South Africa which may have a negative impact on its ability to maintain
all of its mining rights;
* if the Corporation is required to comply with the BEE legislation,
additional dilution of up to 26% of its existing Shareholders may result;
* if the AngloGold transaction is not approved, the Corporation will have the
option, if Shareholders approve, to satisfy its obligations under the
Debentures by the issuance of additional common shares which, under the
existing terms, as at the close of trading on May 3, 2012 would have
resulted in the issuance of 1,236,715,752 common shares implying that
existing Shareholders would continue to own approximately 16% of the pro
forma Corporation prior to obtaining a BEE solution;
* if the Shareholders fail to approve the issuance of additional common
shares to satisfy the Debentures, the Corporation will be unable to satisfy
the Debentures at their maturity on June 30, 2012 and will default
thereunder. Cross default terms in the Notes and in respect of other
secured lenders provide the secured lenders the right to realize on all
assets of the Corporation with the result there will be no recovery for
Shareholders;
* if the AnglGold transaction is not approved, the Corporation will be unable
to retire the Notes and release the security on Ezulwini (and provided it
can satisfy the Debentures by the issuance of common shares) accordingly
the sale to Gold One could not be completed which would require the
Corporation to repay the Gold One bridge loan, secure BEE accreditation
(which will dilute Shareholders as discussed above), and find significant
additional funding to continue to operate Mine Waste Solutions and
Ezulwini. There are no assurances that First Uranium will be successful in
securing the required BEE accreditation or, given the status of its current
operations, that it will be able to raise the amounts necessary to operate
Ezulwini and MWS or repay the Notes on maturity or repay the Gold One
bridge loan when due;
* if the Ezulwini transaction is not approved, even if the sale of MWS is
approved, the Corporation will not have sufficient funds to retire the
Notes, the Debentures, the Gold One bridge loan, and satisfy its
obligations to its creditors in full as $25 million of the consideration
from AngloGold will be subject to an escrow; and
* if the resolutions put forward at the meeting are not approved and the
Corporation is unable to satisfy its obligations under the Debentures on
maturity or repay the Gold One bridge loan when due, the Corporation may
not be able to continue as a going concern.
The foregoing is a brief summary of the disclosure contained in the
Information Circulars and securityholders are advised to review the full text
of the Information Circulars for the complete background to the transactions,
the recommendations of the Board of Directors and complete details of the
matters to be approved at the meetings.
Kingsdale Shareholder Services Inc. ("Kingsdale") is acting as the Corporation's
proxy solicitation agent. If you have any questions, please contact Kingsdale,
toll free in North America at 1-866-581-1571 or call collect outside North
America at 416-867-2272 or by email at contactus@kingsdaleshareholder.com.
About First Uranium Corporation
First Uranium Corporation (TSX:FIU, JSE:FUM) operates the Ezulwini Mine, an
underground mining operation, and Mine Waste Solutions (MWS), a tailings
recovery facility. Both operations are situated in South Africa.
For further information, please contact:
John Hick or Mary Batoff
(416) 306-3072
mary@firsturanium.ca
9 May 2012
Cautionary Language Regarding Forward-Looking Information
This news release contains and refers to forward-looking information
based on current expectations. All other statements other than statements
of historical fact included in this release are forward-looking statements
(or forward-looking information). The Company's plans involve various
estimates and assumptions and its business and operations are subject to
various risks and uncertainties. For more details on these estimates,
assumptions, risks and uncertainties, see the Company's most recent Annual
Information Form and most recent Management Discussion and Analysis on )file
with the Canadian provincial securities regulatory authorities on SEDAR at
www.sedar.com. These forward-looking statements are made as of the date
hereof and there can be no assurance that such statements will prove to be
accurate, such statements are subject to significant risks and uncertainties,
and actual results and future events could differ materially from those
anticipated in such statements, including without limitation, the statements
regarding the proposed transactions with Gold One International Limited and
AngloGold Ashanti Limited. Accordingly, readers should not place undue
reliance on forward-looking statements that are included herein, except in
accordance with applicable securities laws.
www.firsturanium.com
Date: 09/05/2012 16:01:05 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.