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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For August 14, 2006
International Uranium Corporation
(Translation of registrant's name into English)
Independence Plaza, Suite 950, 1050 Seventeenth Street, Denver, CO 80265
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-________________.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
International Uranium Corporation
---------------------------------
(Registrant)
Date: August 14, 2006 By: /s/ Ron F. Hochstein
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Ron F. Hochstein, President and CEO
EXHIBIT INDEX
Exhibit Number Description
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1 Third Quarter Report for period ending June 30, 2006
REPORT TO SHAREHOLDERS
3RD QUARTER 2006
(U.S. DOLLARS)
On June 14, 2006 International Uranium Corporation ("IUC" or the "Company") made
its long awaited announcement that it is re-commencing mining operations in the
United States. As many of you may know, the last time some of these mines were
operating was 1998-99 and in fact some have not been operating since the
mid-1980's. Even though the mines have been dormant for a number of years, they
are in very good condition. Over the past year, prior to the decision to restart
mining operations, Company representatives have been inspecting the mine
workings in order to be prepared for a smooth startup of the mining operations.
The decision to restart mining operations was a long awaited decision. We had
originally anticipated opening the operations when uranium prices reached the
$35.00 per pound level. However, as we began our work to evaluate this decision
we found that the mining and operating costs at the mines and at the Company's
White Mesa Mill had increased quite significantly, thus requiring a higher
uranium price. We have now reached that level, and we would like to thank our
shareholders for their patience.
At this point in time contractors have been selected for the three mining
operations on the Colorado Plateau (the Sunday, Pandora and Topaz mines) that
will be the first to start up. We are currently reviewing contracts with those
mine contractors with the goal of starting mining operations within the next 7
to 10 days. The first truck load of uranium/vanadium ore arriving at the White
Mesa Mill will indeed be a great day for IUC! Our announcement to restart the
mines has resulted in a lot of activity for the many small miners in the area of
the Mill. We have received a significant amount of interest in initiating an ore
purchase program and in setting up toll milling agreements. Based on this
initial level of interest, the Company is anticipating publishing an ore buying
schedule within the next 4 to 6 weeks, which potentially could bring in a
considerable quantity of mill feed. If the amount of ore from the ore purchase
program and toll milling agreements is large enough, the Company may consider
accelerating its start date for conventional mill operations from January 2008
to 2007.
Permitting of the Henry Mountains Complex operations continues to proceed as
planned, with the permits anticipated to be received in February 2007. Mining
operations at the Tony M mine in the Henry Mountains Complex will begin as soon
as the permits are issued.
The Company's White Mesa Mill continues to operate, processing alternate feed
materials that are expected to result in the production of approximately 500,000
pounds of U(3)O(8). Originally we anticipated producing 500,000 pounds during
this fiscal year but due to ongoing mechanical issues at the Mill a portion of
this production will be pushed to fiscal 2007. As of the end of this quarter,
the Company has produced approximately 88,000 pounds of uranium as yellowcake
from this Mill run, with another 130,000 pounds in-process. During the quarter,
the Company signed a Memorandum of Agreement with the State of Utah for the
engineering design review and issuance of a Construction Permit for the
re-lining of tailings Cell 4A at the Mill. The State is near completion of its
design review. However, because of the longer than anticipated time taken for
their review, the Company may have to push construction off to 2007 versus this
year as originally planned. This will not impact our production plans, but the
delays highlight the issue that faces the U.S. uranium industry, which is the
lack of resources that many of the regulators are experiencing. This is going to
impact and delay many potential producers as they attempt to move their projects
forward.
On June 13, 2006, the Utah Department of Environmental Quality, Division of
Radiation Control, granted the Company an amendment to its radioactive materials
license to receive and process up to 32,000 tons of alternate feed material from
FMRI's Muskogee Facility located in Muskogee, Oklahoma. This represents a new
source of alternate feed material for the Mill. With the increase in uranium
price, the Company's focus has shifted to its exploration, mining and processing
activities; however, the alternate feed business which the Company began
developing in 1998 will continue to provide a source of Mill feed and additional
contribution to the Mill overhead and fixed costs. On July 13, 2006, the Glen
Canyon Group of the Utah Chapter of the Sierra Club filed a request for a
petition to intervene to attempt to have the FMRI license amendment overturned.
The issues that the plaintiffs are raising are very similar
to the issues raised on several previous license amendment challenges, which
were subsequently dismissed by the U.S. Nuclear Regulatory Commission. The
Company will defend this action.
In the Athabasca Basin region of Northern Saskatchewan, Canada, the Company
began its summer drilling program at the Moore Lake project where there are
currently two drills operating. A third drill is scheduled to be operating
within the next week. During the summer program, the Company and its joint
venture partner will drill an estimated 17,500 metres and will continue to test
the 527 and 525 Zones, as well as follow up on the Avalon and West Venice grids.
Results will be released as they become available.
In addition to the Moore Lake exploration program, IUC has extensive field
programs underway on a number its wholly owned and optioned properties in the
Basin. A drill program on Cameco's Park Creek project, where the Company is
incurring expenditures to earn up to a 75% interest, will also be starting
within the next 7 to 10 days. The drill camp was set up this past week and
equipment is being mobilized to begin the 2,200 metre drill program. A third
drill program will also be underway by mid-August on the Sims Lake project in
Labrador, where the Company is earning up to a 75% interest from Consolidated
Abaddon Resources Ltd. Ground geophysical crews are currently being mobilized to
complete this work prior to drilling.
In April, the Company began its largest exploration program ever undertaken in
Mongolia, with over 65,000 metres of drilling and 10,000 km of autogamma surveys
planned. The program includes work on the Gurvan Saihan Joint Venture properties
in which the Company holds a 70% interest, as well as on our 100% owned
properties and on the Erdene Gold properties, in which the Company has an option
to earn a 65% interest. The program is about 50% complete at this time, and
although the results to date have not identified any ore grade mineralization, a
number of areas have been identified for further follow up.
In early June, the Mongolian parliament passed an amended Mineral Law. The Law
is not yet in place, however, because the Speaker of Parliament and the
President's signatures are required before the Law will be formally passed. The
amended Mineral Law contains a number of troublesome issues, such as the right
of the government to "purchase" up to 34% of any deposit of strategic
importance, increases in license and mining fees, establishment of work
commitments, and an increase in the royalty rate for minerals from 2.5% to 5.0%.
The Company is continuing to evaluate the impact of the amended Mineral Law on
its 100% owned and Erdene Gold joint venture properties. The Gurvan Saihan Joint
Venture has a Mineral Agreement which supersedes the Mineral Law. Although the
Mineral Law amendments are troublesome, the Mongolian parliament also passed an
amended tax law which reduced the Value Added Tax from 15% to 10 and the
corporate income tax rate from 30% to 25%, and which instituted other tax
incentives. The Company will continue its 2006 exploration and development
programs and will evaluate its Mongolian assets following these programs later
this year.
By the end of June the uranium price was $45.50 per pound which surpasses the
highest reported spot price of $45.00 per pound previously on record. During the
third quarter the uranium price rose 12%, and since the end of the quarter has
risen an additional 4% or $1.75 per pound to $47.25 per pound uranium.
For the third quarter ended June 30, 2006, IUC recorded net income of $758,323
($0.01 per share) and net income of $1,728,696 ($0.02 per share) for the first
nine months of fiscal 2006, as compared to net income of $449,193 ($0.01 per
share) and a net income of $111,585 ($0.00 per share) for the third quarter and
first nine months of fiscal 2005, respectively. The net income generated during
the third quarter of fiscal 2006 resulted primarily from interest income and
foreign exchange gains.
The Company has filed an application with the regulators to change its fiscal
year from an October 1 - September 30 fiscal year to a January 1 -- December 31
fiscal year. If approved, the 2006 fiscal year will be 15 months long, which
will mean that the Company will file a fourth quarter report for the quarter
ending September 30, 2006 and then file the Annual Report for the year ending
December 31, 2006. In addition, the Company is in the process of preparing a
listing application on the American Stock Exchange, and anticipates submitting
it within the next couple of weeks.
Given that the Company's securities are already registered in the United States,
the application for a listing on an American stock exchange is a natural
progression.
The Company continues to be encouraged by the strong long-term fundamentals of
the uranium market. Activities in Saskatchewan, Mongolia and the United States
are focused on developing the Company's existing assets, and the Company
continues to expand its uranium exploration activities and aggressively evaluate
potential acquisition opportunities to add to its asset portfolio.
ON BEHALF OF THE BOARD,
"Ron F. Hochstein"
Ron F. Hochstein,
President & CEO
August 14, 2006
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INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
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INTRODUCTION
This Management's Discussion and Analysis ("MD&A") of International Uranium
Corporation and its subsidiary companies and joint ventures (collectively, the
"Company") for the nine months ended June 30, 2006 provides a detailed analysis
of the Company's business and compares its financial results with those of the
same period from the previous year. This MD&A is dated as of August 10, 2006 and
should be read in conjunction with the Company's unaudited interim consolidated
financial statements for the nine months ended June 30, 2006 and the Company's
audited consolidated financial statements and MD&A for the fiscal year ended
September 30, 2005. The financial statements are prepared in accordance with
generally accepted accounting principles in Canada. References to the "2006
Period" and "2005 Period" relate to the nine months ended June 30, 2006 and
2005, respectively. All references to years such as "2006" or "2005" relate to
the fiscal years ended September 30 of those years.
Other continuous disclosure documents, including the Company's press releases,
quarterly and annual reports and Annual Report on Form 20-F, are available
through its filings with the securities regulatory authorities in Canada at
www.sedar.com and the United States Securities and Exchange Commission at
www.sec.gov.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this MD&A and elsewhere in the Company's
quarterly report for the 2006 Period constitute "forward-looking statements".
Such forward-looking statements involve a number of known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date the statements
were made, and readers are advised to consider such forward-looking statements
in light of the risks set forth below and detailed under RISK FACTORS in the
Company's Form 20-F.
Risk factors that could affect the Company's future results include, but are not
limited to, risks inherent in mineral exploration, mining and milling activities
and other operating and development risks, competition, environmental
regulations, changes to reclamation requirements, dependence on a limited number
of customers, volatility and sensitivity to market prices for uranium and
vanadium, milling recoveries, ability to attract and retain skilled employees,
the ability to find and retain qualified contractors, the impact of changes in
foreign currencies' exchange rates, political risk arising from operating in
Mongolia, changes in government regulation and policies including trade laws and
policies, demand for nuclear power, replacement of reserves and production,
receipt and renewal of licenses, permits and approvals from governmental
authorities.
OVERVIEW
The Company owns the White Mesa uranium mill (the "Mill") and several uranium
and uranium/vanadium mines in the United States and is engaged in uranium
exploration in the Athabasca Basin region of Saskatchewan, Canada and in
Mongolia. Through its Mill, located in Utah, the Company is also in the business
of recycling uranium-bearing waste materials, referred to as "alternate feed
materials," for the recovery of uranium, alone or in combination with other
metals to be sold by the Company. As a result of the recent re-opening of a
number of the Company's U.S. mines, the Mill is also scheduled to process
conventional ore starting in 2007/2008.
RESULTS OF OPERATIONS
GENERAL
The Company recorded net income of $1,728,696 ($0.02 per share) for the 2006
Period compared with $111,585 ($0.00 per share) for the 2005 Period.
Revenues totaled $1,399,077 for the 2006 Period compared with $50,479 for the
2005 Period, an increase of $1,348,598. Expenses totaled $5,243,532 for the 2006
Period compared with $6,923,764 for the 2005 Period, a decrease of $1,680,232
due primarily to a write-down of mineral properties of $1,869,790 recorded
during the 2005 Period. Other income and expenses totaled a net other income of
$5,573,151 for the 2006 Period compared with $6,621,671 for the 2005 Period, a
decrease of $1,048,520.
REVENUES
For the 2006 Period, revenues of $1,399,077 consisted primarily of process
milling fees of $1,395,798 (2005 Period: $50,479) generated through a toll
milling agreement. Under this agreement, the Company completed the processing
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INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
of approximately 500 tons of ore during the 2006 Period and received a gross
process milling fee of $1,373,999, less a consulting fee payable to a third
party of $398,432 included in process milling expenditures.
During the 2006 Period, the Company continued to receive alternate feed
materials. Alternate feed materials, usually classified as waste products by the
processing facilities that generate these materials, contain uranium that can be
recovered at the Mill as an environmentally preferable alternative to direct
disposal. The Company receives a fee for a majority of its alternate feed
materials once they are delivered to the Mill. In addition to the recycling
fees, the Company will retain any uranium recovered from these materials, which
can be sold in subsequent periods, at which time the revenue from the sales will
be recorded.
During the 2006 Period, the Company received alternate feed materials from a
commercial metals producer. The Company receives a fee on receipt of these
materials representing approximately 22% of the total fees from that producer,
which is recorded as revenue, and a recycling fee, representing the remaining
78% of the fees from that producer, which is recorded as deferred revenue until
the material is processed, at which time it becomes revenue. The Company also
received material from the Linde site, a Formerly Utilized Sites Remedial Action
Program or FUSRAP site in the United States. A portion of the Linde fees, equal
to the costs that are incurred receiving the materials, is recognized as
revenue, while the remaining recycling fees are recorded as deferred revenue
until the materials are processed at which time revenues are recognized. Also
during the 2006 Period, the Company continued to receive high-grade alternate
feed materials under its existing contract with Cameco Corporation. The Company
does not receive a recycling fee for these types of material; however, the
Company is able to retain all of the proceeds received from the sale of the
uranium produced.
During the 2006 Period, alternate feed materials received totaled 2,523 tons of
alternate feed materials (2005 Period: 2,454 tons). The Company anticipates that
receipt of alternate feed materials will continue to be at reduced levels until
the fourth quarter of 2006 when a new alternate feed source is expected to begin
shipments to the Mill. At June 30, 2006, approximately 47,091 tons of alternate
feed materials remained in stockpile waiting to be processed during the current
mill run.
The Mill had been on stand-by since May 2003 and began processing its stockpile
of high-grade alternate feed materials on March 21, 2005. As of June 30, 2006,
there were approximately 3,374 tons of these high-grade materials at the Mill to
be processed, containing approximately 379,000 pounds of uranium.
At June 30, 2006, the Company had produced and currently holds approximately
88,000 pounds of uranium from these materials with a market value of
approximately $4.2 million. In view of the continued rise in uranium prices
expected by the Company, it currently does not have commercial forward sales
commitments for the projected uranium production and will determine the most
appropriate timing for its uranium sales. The Company continues to hold
approximately 65,000 pounds of vanadium in inventory, as vanadium pregnant
liquor, for future sale.
The Company has a 50% interest in a joint venture with Nuclear Fuel Services,
Inc. ("NFS") for the pursuit of a U.S. Department of Energy ("DOE") alternate
feed program for the Mill. This 50/50 joint venture is carried out through
Urizon Recovery Systems, LLC ("Urizon"). The DOE has chosen a contractor who
will manage the disposition of the materials that would be the feedstock for the
Urizon program, in conjunction with the closure of an existing DOE site. The
joint venture currently expects that a decision will be made by the DOE and its
contractor in 2006 as to how DOE intends to proceed on the disposition of the
material, and that the joint venture will have an opportunity to propose the
Urizon Program to the DOE contractor as a suitable disposition option for this
feedstock. The financial results for Urizon are included in the Company's
financial statements on a proportionate consolidation basis.
PROCESS MILLING AND MILL STAND-BY EXPENDITURES
Process milling expenditures were $2,398,080 for the 2006 Period compared with
$7,328 for the 2005 Period, an increase of $2,390,752 as a result of the Mill
startup and operation. This increase includes the consulting fee of $398,432
paid by the Company as disclosed above under REVENUES. Mill stand-by
expenditures were Nil for the 2006 Period compared with $1,069,953 for the 2005
Period, representing the pre-startup expenditures of the Mill.
Both process milling and mill stand-by expenditures consist primarily of payroll
and related expenses for personnel, environmental programs, contract services
and other overhead expenditures required to operate the Mill or to maintain the
Mill on stand-by.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $2,845,452 for the 2006 Period compared
with $3,813,803 for the 2005 Period, a decrease of $968,351. This decrease was
primarily the result of the following changes:
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INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
a) inclusion of $750,481 of general and administrative expenses of Fortress on
a consolidated basis for the 2005 Period compared to Nil for the 2006
Period;
b) stock-based compensation expense of $6,793 for the 2006 Period compared to
$935,090 for the 2005 Period, for a decrease of $928,297;
c) offset by an increase in consulting and other fees of $185,352 for the 2006
Period relating to compliance with Section 404 of the Sarbanes-Oxley Act;
and
d) offset by an increase in other public company expenses of $179,869 due to
additional compliance costs.
General and administrative expenses consist primarily of payroll and related
expenses for personnel, contract and professional services and other overhead
expenditures.
STOCK-BASED COMPENSATION
Stock-based compensation was $280,183 for the 2006 Period, of which $273,390 is
included in capitalized mineral property expenditures and $6,793 is included in
general and administrative expense, compared with $935,090 for the 2005 Period
included in general and administrative expense.
OTHER INCOME AND EXPENSES
Other income and expenses totaled a net $5,573,151 for the 2006 Period compared
with $6,621,671 for the 2005 Period, a decrease of $1,048,520. This decrease was
due primarily to a one-time gain of $2,923,219 from the sale of short-term
investments and minority interest of $916,687 relating to Fortress, both during
the 2005 Period, offset by increases during the 2006 Period in gain on foreign
exchange of $1,814,947 and $930,734 in net interest and other income.
Net interest and other income were $1,424,946 for the 2006 Period compared with
$494,212 for the 2005 Period, an increase of $930,734 due primarily to an
increase of $727,044 in interest income and the recognition of $118,710 in other
income relating to the termination of a joint venture agreement on a certain
mineral property in Utah. Interest income increased significantly as a result of
two private placements completed during the 2006 Period providing the Company
with net cash proceeds of $42,241,851. Gain on foreign exchange was $2,240,355
for the 2006 Period compared with $425,408 for the 2005 Period, an increase of
$1,814,947. Foreign exchange gains are due to the effects of the overall
strengthening of the Canadian dollar as compared to the U.S. dollar. As the
Company's cash and cash equivalents are held primarily in Canadian dollars, a
continued strengthening of the Canadian dollar as compared to the U.S. dollar
results in additional gains on foreign exchange being recognized upon
translation to U.S. dollars for financial reporting purposes.
Dilution gain was $2,319,277 for the 2006 Period compared with $1,932,252 for
the 2005 Period, an increase of $387,025, while minority interest recovery was
Nil for the 2006 Period compared with $916,687 for the 2005 Period. Dilution
gain represents the Company's proportionate share of the increase in Fortress'
net assets resulting from the issuance of common shares by Fortress over the
same period. Minority interest represents the minority interest's proportionate
share of Fortress' loss for the period since acquisition. As an offset to these
increases, the Company's share in the net loss incurred by Fortress was $393,753
for the 2006 Period compared to $122,087 for the 2005 Period reflecting the
application of the equity method to account for the Company's investment in
Fortress.
MINERAL PROPERTIES
GENERAL
Capitalized mineral property expenditures were $22,390,203 at June 30, 2006
compared with $13,412,885 at September 30, 2005, an increase of $8,977,318
during the 2006 Period of which $6,542,205 was incurred in Canada, $857,473 was
incurred in the United States and $1,577,640 was incurred in Mongolia.
Capitalized mineral property expenditures were $7,775,306 at June 30, 2005
compared with $6,171,263 at September 30, 2004, an increase of $1,604,043 during
the 2005 Period net of a write-down of mineral property of $1,869,790.
URANIUM EXPLORATION
During 2004, the Company acquired interests in and staked a number of uranium
exploration properties in the Athabasca Basin region of Saskatchewan, Canada and
commenced an exploration program on certain of those properties. The Company
continues to increase its land position in the Athabasca Basin region through
option agreements and land staking.
During 2005, the Company exercised its option to acquire a 75% interest in the
Moore Lake Property from JNR, subject to a 2.5% net smelter return royalty.
Pursuant to the exercise terms under the option agreement, the
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INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
Company incurred a minimum Cdn $4,000,000 in exploration expenditures and
purchased common shares of JNR for $317,458 (Cdn $400,000). The Company and JNR
have entered into a 75/25 joint venture agreement for this property.
During the 2006 Period, the Company entered into the following arrangements
relating to its exploration properties:
a) The Company acquired an option from Consolidated Abaddon Resources Inc. to
earn a 51% interest in the Huard-Kirsch Lakes Property located in the
eastern part of the Athabasca Basin, Saskatchewan. The Company paid Cdn
$25,000 in cash and is required to incur Cdn $1.5 million in exploration
expenditures on or before November 1, 2008 to earn its interest;
b) The Company and JNR Resources Inc. formed a 60/40 joint venture to explore
a number of claims in the Bell Lake area located in the northern part of
the Athasbasca Basin. These claims are subject to a 2% net smelter returns
royalty;
c) The Company acquired an option from Consolidated Abaddon Resources Inc. to
earn up to a 75% interest in the Sims Lake Property located in the west
central part of Labrador. The Company is required to pay Cdn $40,000 in
cash and incur Cdn $450,000 in exploration expenditures over two years to
earn an initial 51% interest and incur further exploration expenditures of
Cdn $1 million on or before January 1, 2010 to earn an additional 24%
interest. These claims are subject to a 2% net smelter returns royalty; and
d) The Company signed a letter of intent with Cameco Corporation for an option
to earn up to a 75% interest in the Park Creek Property located in the
eastern part of the Athabasca Basin. The Company is required to incur
exploration expenditures of Cdn $2.8 million over three years to earn an
initial 49% interest and a further Cdn $3 million over two years to earn an
additional 26% interest.
Mineral property expenditures to June 30, 2006 were incurred primarily on the
Company's Canadian and Mongolian exploration properties, where the Company is
undertaking extensive drilling programs augmented by geophysical and geological
field programs.
Capitalized mineral property expenditures on the Moore Lake Property were
$8,543,144 at June 30, 2006 (June 30, 2005: $4,574,562) compared with $6,719,079
at September 30, 2005 (September 30, 2004: $1,779,392), an increase of
$1,824,065 during the 2006 Period (2005 Period: $2,795,170) as a result of
drilling and geological field programs. The remainder of the Canadian-based
capitalized mineral property expenditures relate to other projects in the
Athabasca Basin region, for a total of $7,316,100 at June 30, 2006 (June 30,
2005: $1,418,563) compared with $2,597,960 at September 30, 2005 (September 30,
2004: $529,786), an increase of $4,718,140 during the 2006 Period (2005 Period:
$888,777) as a result of land staking costs, geological field, geophysical and
drilling programs.
The Company has a 70% interest in the Gurvan Saihan Joint Venture in Mongolia.
The other parties to the joint venture are the Mongolian government as to 15%
and Geologorazvedka, a Russian government entity, as to 15%. Capitalized mineral
property expenditures on the Gurvan Saihan Joint Venture were $2,209,216 at June
30, 2006 (June 30, 2005: $404,509) compared with $983,904 at September 30, 2005
(September 30, 2004: $35,198), an increase of $1,225,312 during the 2006 Period
(2005 Period: $369,311) as a result of a major drilling program.
The Company also conducts uranium exploration in Mongolia on its 100% owned
licenses. Capitalized mineral property expenditures for these licenses were
$449,044 at June 30, 2006 (June 30, 2005: $170,709) compared with $238,596 at
September 30, 2005 (September 30, 2004: $17,878), an increase of $210,448 during
the 2006 Period (2005 Period: $152,831) as a result of drilling programs which
began during the period.
During 2005, the Company entered into an agreement with Erdene Gold Inc.
("Erdene") to acquire a 65% interest in Erdene's Mongolian uranium properties in
consideration for expenditures of Cdn $6 million over a four-year period. In
addition, the Company purchased, by way of private placement, one million common
shares of Erdene at a price of Cdn $1.00 per share. Capitalized mineral property
expenditures on these properties were $553,154 at June 30, 2006 (June 30, 2005:
Nil) compared with $411,274 at September 30, 2005 (September 30, 2004: Nil), an
increase of $141,880 during the 2006 Period (2005 Period: Nil) as a result of
drilling programs.
URANIUM MINING AND DEVELOPMENT
In June 2006, the Company announced the recommencement of active mining
operations at a number of its U.S. uranium/vanadium mines. Mining activity will
commence during the fourth quarter of 2006 and mined ore will be stockpiled at
the Mill.
During 2005, the Company was successful in a competitive bid for a state lease
in southeastern Utah. The Company paid an initial cash payment of $1 million and
annual advance minimum royalty and rental payments of $60,013. This property is
adjoined by a number of privately-held, unpatented mining claims acquired by the
Company that together comprise the Tony M Mine. These private claims were
acquired for $200,000 in cash payments and 250,000
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INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
common shares of the Company, of which 147,000 common shares were issued at a
value of $906,722. The remainder of the shares will be issued subject to
confirmation of certain title matters. The Tony M Mine adjoins the Company's
existing Bullfrog exploration property, which together are now referred to as
the "Henry Mountains Complex". During 2005, the Company announced initiation of
permitting for mining of the Henry Mountains Complex.
Capitalized mineral property expenditures in the United States were $3,319,545
at June 30, 2006 (June 30, 2005: $1,206,963) compared with $2,462,072 at
September 30, 2005 (September 30, 2004: Nil), an increase of $857,473 during the
2006 Period (2005 Period: $1,206,963) primarily as a result of development
expenditures incurred on the Colorado Plateau and permitting expenditures on the
Henry Mountains Complex.
INVESTMENT IN FORTRESS MINERALS CORP.
On June 23, 2004, the Company sold its Mongolian precious and base metals
exploration properties to Fortress Minerals Corp. ("Fortress"), a company
incorporated in Canada and listed for trading on the TSX Venture Exchange. In
exchange, the Company received 28,000,000 common shares of Fortress,
representing 63.14% of the issued and outstanding common shares of Fortress at
that time. The Company has since participated in two private placement
financings and acquired a further 1,232,500 common shares of Fortress at a total
cost of $757,565 (Cdn $918,000).
At June 30, 2006, the Company held 29,232,500 common shares of Fortress,
representing 41.66% of its issued and outstanding common shares, with a market
value of $29,855,805 (Cdn $33,325,050) based on the closing price as of that
date. The Company also holds a share purchase warrant to acquire an additional
366,250 common shares at a price of Cdn $0.60 per share until expiry on
September 1, 2006. Since April 30, 2005, the Company has applied the equity
method to account for its investment in Fortress.
SUMMARY OF QUARTERLY FINANCIAL RESULTS
====================================================================================================================
2006 2006 2006 2005
Q3 Q2 Q1 Q4
--------------------------------------------------------------------------------------------------------------------
Total revenues $ 2,131 $ 666,025 $ 730,921 $ 80,337
Net income (loss) 758,323 839,696 130,677 (2,405,150)
Basic and diluted earnings (loss) per share 0.01 0.01 0.00 (0.03)
====================================================================================================================
====================================================================================================================
2005 2005 2005 2004
Q3 Q2 Q1 Q4
--------------------------------------------------------------------------------------------------------------------
Total revenues $ 46,509 $ 341 $ 3,629 $ 389,194
Net income (loss) 449,193 292,394 (708,625) 632,242
Basic and diluted earnings (loss) per share 0.01 0.00 (0.01) 0.01
====================================================================================================================
Refer to RESULTS OF OPERATIONS above for disclosure of the 2006 Period changes.
Variations in the results of operations for each of the quarters of 2005 are
primarily the result of changes in expense and other income/expense items.
Results for 2006 Q3 include a gain on foreign exchange of $1,755,575. Results
for 2006 Q2 include a dilution gain of $1,761,695 relating to the investment in
Fortress. Results for 2005 Q1 include a gain on foreign exchange of $542,543.
Results for 2005 Q2 include stock-based compensation of $277,831 and write-down
of mineral property of $1,869,790, offset by a gain on sale of short-term
investments of $2,893,377 and minority interest of $793,372. Results for 2005 Q3
include stock-based compensation of $657,259 and equity in loss in Fortress of
$122,087, offset by a dilution gain of $1,860,784. Results for 2005 Q4 include
process milling expenditures of $1,431,516 and equity in loss in Fortress of
$556,866.
Variations in the results of operations for 2004 Q4 are primarily due to a
dilution gain of $548,549 and minority interest of $94,327.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $32,808,027 at June 30, 2006 compared with
$6,111,119 at September 30, 2005, an increase of $26,696,908 during the 2006
Period. This increase was due primarily to net cash proceeds of $42,241,851
received from the issuance of common shares through private placements, offset
primarily by mineral property expenditures of $9,402,046 and net cash used in
operating activities of $3,887,124.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
Working capital was $35,824,164 at June 30, 2006 compared with $4,244,274 at
September 30, 2005, an increase of $31,579,890 during the 2006 Period. This
increase was due primarily to the $26,696,908 increase in cash and cash
equivalents as discussed above, and increases in trade and other receivables and
inventories as discussed below.
Net cash used in operating activities was $3,887,124 during the 2006 Period
compared with $2,137,501 during the 2005 Period, an increase of $1,749,623. Net
cash used in operating activities are comprised of net loss for the period,
adjusted for non-cash items and for changes in working capital items.
Significant changes in working capital items during the 2006 Period include
increases of $1,652,279 (2005 Period: $1,089,324 decrease) in trade and other
receivables and $3,283,750 (2005 Period: $1,829,945) in inventories. The
increase in trade and other receivables during the 2006 Period is primarily the
result of exploration expenditures incurred by the Company charged back to a
joint venture partner. The increase in inventories during the 2006 Period
consists primarily of process milling costs relating to the alternate feed
material processing and the approximately 88,000 pounds of yellowcake produced
to June 30, 2006.
Net cash used in investment activities was $11,182,220 during the 2006 Period
compared with $4,108,637 during the 2005 Period, an increase of $7,073,583. This
increase was due primarily to an increase of $3,539,656 in expenditures on
mineral properties during the 2006 Period and the effects of $4,013,179 in net
cash received from the sale of short-term investments during the 2005 Period.
During the 2006 Period, mineral property expenditures were $9,402,046 (2005
Period: $5,862,390), portfolio investment purchases were $634,118 (2005 Period:
$1,094,280) and plant and equipment purchases totaled $764,414 (2005 Period:
$747,511). During the 2006 Period, restricted investments increased by $381,642
(2005 Period: $340,657) as a result of interest income.
During the 2006 Period, the Company completed two significant equity financings
for total gross proceeds of $43,702,776 (Cdn $51,587,500). On October 14, 2005,
the Company completed a private placement of 6,000,000 common shares at a price
of Cdn $7.50 per share for gross proceeds of $38,010,648 (Cdn $45,000,000). On
December 5, 2005, the Company completed a private placement of 850,000
flow-through common shares at a price of Cdn $7.75 per share for gross proceeds
of $5,692,128 (Cdn $6,587,500) which funds are restricted to eligible Canadian
exploration expenditures. Net proceeds from these private placement financings
totaled $42,241,851. During the 2006 Period, the Company participated in a
private placement to purchase an additional 500,000 common shares of Fortress at
a price of Cdn $1.25 per share for a total cost of $537,496 (Cdn $625,000).
In total, these sources and uses of cash resulted in a net cash inflow of
$26,696,908 during the 2006 Period compared with a net cash outflow of $605,452
during the 2005 Period.
The Company's existing cash and cash equivalents balance and, to a lesser
degree, its expected cash flow from its 2006 operations are sufficient to
satisfy its anticipated working capital requirements, capital expenditure
requirements and planned exploration programs for at least the next twelve
months. Additional funding through the issuance of common shares or flow-through
common shares may be required to fund future corporate opportunities.
Flow-through common shares provide a mechanism whereby the tax benefits of
certain Canadian exploration and development expenditures incurred or to be
incurred by the Company are renounced or "flowed-through" to the subscribers.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
TRANSACTIONS WITH RELATED PARTIES
During the 2006 Period, the Company had the following related party
transactions:
a) incurred legal fees of $34,644 (2005 Period: $40,825) with a law firm of
which a partner is a director of the Company;
b) incurred management and administrative service fees of $141,039 (2005
Period: $117,186) with a company owned by the Chairman of the Company which
provides investor relations, office premises, secretarial and other
services in Vancouver at a rate of Cdn $18,000 per month plus expenses. At
June 30, 2006, an amount of Nil (September 30, 2005: $70,238) was due to
this company;
c) provided mine reclamation management and engineering support services of
$3,279 (2005 Period: Nil) on a cost plus basis to a company with common
directors. At June 30, 2006, an amount of Nil (September 30, 2005: $80,337)
was due from this company; and
d) provided executive and administrative services to Fortress and charged an
aggregate $80,479 (2005 Period: Nil) for such services. At June 30, 2006,
an amount of $36,057 (September 30, 2005: $28,696) was due from Fortress
relating to this agreement.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
OUTSTANDING SHARE DATA
At June 30, 2006 and August 10, 2006, there were 88,472,066 common shares issued
and outstanding and stock options outstanding to purchase a total of 2,043,000
common shares, for a total of 90,515,066 common shares on a fully-diluted basis.
CRITICAL ACCOUNTING ESTIMATES
The Company's significant accounting policies are summarized in Note 2 of the
audited consolidated financial statements of the Company for the fiscal year
ended September 30, 2005. The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting principles
in Canada requires management to make judgments with respect to certain
estimates and assumptions. These estimates and assumptions, based on
management's best judgment, affect the reported amounts of certain assets and
liabilities, including disclosure of contingent liabilities. On an ongoing
basis, management re-evaluates its estimates and assumptions. Actual amounts,
however, could differ significantly from those based on such estimates and
assumptions.
Significant areas critical in understanding the judgments that are involved in
the preparation of the Company's consolidated financial statements and the
uncertainties inherent within them include the determination of impairment of
long-lived assets, assets retirement obligations and stock-based compensation.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company's long-lived assets consist of plant and equipment, mineral
properties and intangible asset. These assets are recorded at cost and, as to
plant and equipment and intangible asset, depreciated on a straight-line basis
over their estimated useful lives of three to fifteen years. Expenditures
relating to mineral properties are capitalized at cost, less recoveries in the
pre-production stage, until such time these properties are put into commercial
production, sold or abandoned. Upon commencement of production, capitalized
mineral property expenditures will be charged to the results of operations over
the estimated life of the mine in accordance with the unit-of-production method.
At the end of each accounting period, the Company reviews the carrying value of
its long-lived assets based on a number of factors. For capitalized mineral
property expenditures, these factors include analysis of exploration results,
permitting considerations and current economics. Should an impairment be
determined, the Company would write-down the recorded value of the long-lived
asset to fair value.
ASSET RETIREMENT OBLIGATIONS
The Company's asset retirement obligations consist of estimated future
decommissioning and reclamation costs of the Mill and U.S. mining properties,
and have been determined based on engineering estimates of the costs of
reclamation, in accordance with and reviewed periodically by state regulatory
requirements. In the case of the Mill, the cost estimates are reviewed annually
by the State of Utah Department of Environmental Quality, and adjusted by the
Company to reflect the estimated costs of reclamation.
Applicable regulations require the Company to estimate reclamation costs on an
undiscounted basis under the assumption that the reclamation would be performed
at any time by a third party contractor. Management estimates that, once a
decision is made to commence reclamation activities, substantially all of these
activities could be completed in approximately 24-30 months. During the 2006
Period, the Mill's estimated reclamation liability increased by $943,795 to
$11,893,975 (2005: $331,285 increase to $10,950,180). During the 2006 Period,
the estimated reclamation liability for the Company's mines increased by $36,144
to $2,020,844 (2005: unchanged at $1,984,700). Elements of uncertainty in
estimating decommissioning and reclamation costs include potential changes in
regulatory requirements, and in decommissioning and reclamation alternatives.
Actual costs may be significantly different from those estimated.
The Company has posted bonds (collateralized by cash and cash equivalents and
fixed income securities) in favor of the State of Utah and the applicable state
regulatory agencies in Colorado and Arizona as partial collateral for these
liabilities and has deposited fixed income securities on account of these
obligations.
STOCK-BASED COMPENSATION
Effective October 1, 2004, the Company retroactively adopted, without
restatement, the amended standards of the Canadian Institute of Chartered
Accountants ("CICA") Handbook Section 3870: Stock-Based Compensation and Other
Stock-Based Payments ("Section 3870") which established standards for the
recognition, measurement and disclosure of stock-based compensation and other
stock-based payments made in exchange for goods and services.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
Section 3870 requires a fair value-based method of accounting for stock options
granted to employees, including directors, and to non-employees.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model. This model requires the calculation of
certain variables, including the volatility of the Company's stock price,
requiring various estimates and assumptions to be made by management. Actual
results may be significantly different from those calculated using this model.
Prior to October 1, 2004, the application of the fair value-method of accounting
was limited to stock options granted to non-employees. The intrinsic value-based
method of accounting was applied to stock options granted to employees which did
not result in additional stock-based compensation expense as the exercise price
was equal to the market price on the grant date. Pro forma disclosure of net
income (loss) and earnings (loss) per share had the fair value-method been
applied to stock options granted to employees is required.
The Company adopted the amendments to Section 3870 on a retroactive basis
without restatement of prior periods. As a result, a cumulative adjustment of
$773,655 to opening deficit effective October 1, 2004 has been reported
separately on the consolidated statements of deficit. This adjustment represents
the fair value of stock options granted to employees of $737,904 during 2004 and
$35,751 during 2003.
CHANGES IN ACCOUNTING POLICIES
In January 2005, the CICA issued the following new accounting standards,
effective October 1, 2006:
a) CICA Handbook Section 1530: "Comprehensive Income" establishes standards
for reporting comprehensive income, defined as a change in value of net
assets that is not due to owner activities, by introducing a new
requirement to temporarily present certain gains and losses outside of net
income. The impact of this new standard is discussed below in c);
b) CICA Handbook Section 3251: "Equity" establishes standards for the
presentation of equity and changes in equity during the reporting period.
The adoption of this new standard by the Company is not expected to have a
material impact; and
c) CICA Handbook Section 3855: "Financial Instruments - Recognition and
Measurement" establishes standards for the recognition, classification and
measurement of financial instruments including the presentation of any
resulting gains and losses. Assets classified as available-for-sale
securities will have revaluation gains and losses included in other
comprehensive income until these assets are no longer included on the
balance sheet. At June 30, 2006, the Company had certain long-term
investments that would be classified as available-for-sale securities under
this new standard, and any unrealized gains and losses would be included in
comprehensive income. This new standard may have a material impact on the
Company's financial statements commencing in 2007.
CONTRACTUAL OBLIGATIONS
At June 30, 2006, the Company had a reclamation liability of $13,914,819, the
timing of which will depend upon the Company's business objectives. While this
reclamation obligation was valued on the assumption that the Company must be
able to fund reclamation of the White Mesa Mill and U.S. mining operations at
any time, the Company currently has no intention of placing the Mill or U.S.
mines into reclamation.
In addition, the Company's contractual obligations at June 30, 2006 are as
follows:
====================================================================================================================
Less Than After
Total One Year 1-3 Years 4-5 Years 5 Years
--------------------------------------------------------------------------------------------------------------------
Operating lease obligations $ 378,006 $ 46,524 $ 299,247 $ 32,235 $ -
====================================================================================================================
ENVIRONMENTAL RESPONSIBILITY
Each year, the Company reviews the anticipated costs of decommissioning and
reclaiming its Mill and mine sites as part of its environmental planning
process. Further, the Company formally reviews the Mill's reclamation estimate
annually with applicable regulatory authorities. The Mill and mine reclamation
estimates at June 30, 2006 are $13,914,819, which are expected to be sufficient
to cover the projected future costs for reclamation of the Mill and mine
operations. However, there can be no assurance that the ultimate cost of such
reclamation obligations will not exceed the estimated liability contained in the
Company's financial statements.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
The Company has posted bonds as security for these liabilities and has deposited
cash, cash equivalents, and fixed income securities as collateral against these
bonds. At June 30, 2006 and September 30, 2005, the amount of these restricted
investments collateralizing the Company's reclamation obligations was
$13,245,940 and $12,881,972, respectively. The increase of $363,968 was due to
interest income from these investments.
As mentioned in previous reports, the Company has detected some chloroform
contamination at the Mill site that appears to have resulted from the operation
of a temporary laboratory facility that was located at the site prior to and
during the construction of the Mill facility, and from septic drain fields that
were used for laboratory and sanitary wastes prior to construction of the Mill's
tailings cells. In April 2003, the Company commenced an interim remedial program
of pumping the chloroform-contaminated water from the groundwater to the Mill's
tailings cells. This will enable the Company to begin clean up of the
contaminated areas and to take a further step towards resolution of this
outstanding issue. Although the investigations to date indicate that this
contamination appears to be contained in a manageable area, the scope and costs
of remediation have yet to be determined and may be significant.
RESEARCH AND DEVELOPMENT
The Company does not have a formal research and development program. Process
development efforts expended in connection with processing alternate feed
materials are included as a cost of processing. Process development efforts
expended in the evaluation of potential alternate feed materials that are not
ultimately processed at the Mill are included in Mill overhead costs. The
Company does not rely on patents or technological licenses in any significant
way in the conduct of its business.
TREND INFORMATION
Since October 1, 2003, uranium prices have increased over 270%, from $12.20 per
pound to $45.50 per pound at the end of June 2006. As of August 10, 2006, the
uranium spot price had increased an additional $2.25 to $47.25 per pound. The
uranium market fundamentals are strong and most analysts do not forecast any
weakening of uranium prices over the next 3 to 5 years. As a result of the
increase in the price of uranium, the Company acquired and staked Canadian
uranium exploration properties in 2004 and 2005 and has commenced an aggressive
exploration program on certain of those properties, as well as restarted its
uranium exploration program in Mongolia. In addition the Company began
processing a high-grade uranium alternate feed material at the Mill. Vanadium
prices are currently trading in the range of $8.00 to $9.00 per pound V(2)O(5),
off from their peak of $25.00 to $30.00 per pound reached earlier in 2005.
Historical vanadium prices range from $1.20 to $6.00 per pound V2O5. Based on
the strong uranium fundamentals and the vanadium market projections, in June
2006 the Company announced the recommencement of mining operations at a number
of its U.S. uranium/vanadium mines. Operations at the mines will begin during
the fourth quarter of 2006.
The Mill's tailings system currently has capacity to process all of the
alternate feed materials under contract with the Company. This capacity,
however, is expected to run out within the next one to three years given the
recommencement of the Company's U.S. mining operations. In order to provide
additional tailings capacity, the Company will reline the existing tailings Cell
4A, at an estimated cost of $4.0 - $5.0 million. In addition, if Cell 4A is put
into use, the reclamation obligation for the Mill would increase by
approximately $1.5 million, which would require an increase in the Mill's
reclamation bond by that amount. The Company has submitted engineering plans to
the State of Utah for review. The relining of Cell 4A will provide the Company
with approximately 2 million tons of additional tailings capacity, which should
be ample capacity for the next several years.
RISKS AND UNCERTAINTIES
Exploration for and development of mineral properties involves significant
financial risks, which even a combination of careful evaluation, experience and
knowledge may not eliminate. While discovery of an ore body may result in
substantial rewards, few properties which are explored are ultimately developed
into producing mines. Major expenditures may be required to establish reserves
by drilling, constructing mining and processing facilities at a site, developing
metallurgical processes and extracting uranium and other metals from ore. It is
impossible to ensure that the current exploration programs of the Company will
result in profitable commercial mining operations.
Under the United States Nuclear Regulatory Commission's Alternate Feed Guidance,
the Mill is required to obtain a specific license amendment allowing for the
processing of each new alternate feed material. Various third parties have
challenged certain of the Mill's license amendments, although none of such
challenges have been successful to date. The Company intends to continue to
defend its positions and the validity of its license amendments and proposed
license amendments. If the Company does not ultimately prevail in any such
actions and any appeals therefrom, the Company's ability to process certain
types of alternate feeds, in certain circumstances, may be adversely affected,
which could have a significant impact on the Company.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Management's Discussion and Analysis
Nine Months Ended June 30, 2006
(Unaudited) -- Prepared by Management)
Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
The Company is required to comply with environmental protection laws and
regulations and permitting requirements, and anticipates that it will be
required to continue to do so in the future. Although the Company believes that
its operations are in compliance, in all material respects, with all relevant
permits, licenses and regulations involving worker health and safety as well as
the environment, the historical trend toward stricter environmental regulation
may continue. The uranium industry is subject to not only the worker health and
safety and environmental risks associated with all mining businesses, but also
to additional risks uniquely associated with uranium mining and milling. The
possibility of more stringent regulations exists in the area of worker health
and safety, the disposition of wastes, the decommissioning and reclamation of
mining and milling sites, and other environmental matters, each of which could
have a material adverse effect on the costs of reclamation or the viability of
the operations.
OUTLOOK
In June 2006, the Company announced the re-opening of a number of its U.S.
uranium/vanadium mines. Mining is scheduled to begin during the fourth quarter
of 2006 with mined ore stockpiled at the Mill. The Company plans to begin
development activities on one mine and commence mining operations at three other
mines, all on the Colorado Plateau.
The Mill is continuing to process alternate feed material and is expected to
produce approximately 500,000 pounds of U(3)O(8) from the processing of a
high-grade alternate feed material, of which approximately 210,000 pounds are
scheduled to be produced during 2006. The current mill run began in March 2005
and is anticipated to last through to the second quarter of 2007. The Company
does not have any fixed contracts for this material and will evaluate commercial
opportunities for sale of the material throughout the year.
The Company's exploration programs continue through 2006, both in Canada and
Mongolia. Currently, the Company has two drilling programs underway at the Moore
Lake Joint Venture and Park Creek project. In addition to the drilling programs,
the Company has significant field programs on a number of its properties.
In Mongolia, the Company has drilled over 30,000 meters with about 35,000 meters
remaining in the drill program on its Joint Venture properties, its 100% owned
and Erdene optioned properties. The Company will continue to monitor the
Mongolian political situation, in particular the amendments to the Mineral Law,
and their potential impacts to the Company's exploration and development
programs.
The Company is well financed for its planned 2006 programs and will continue to
aggressively evaluate acquisition and growth opportunities.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------
====================================================================================================================
June 30, September 30,
2006 2005
--------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents $ 32,808,027 $ 6,111,119
Trade and other receivables 2,218,268 565,989
Inventories 6,607,395 3,323,645
Prepaid expenses and other 181,974 125,204
--------------------------------------------------------------------------------------------------------------------
41,815,664 10,125,957
Long-term investments (Notes 2 & 3) 8,035,193 4,938,055
Plant and equipment, net 4,528,079 3,217,702
Mineral properties (Note 4) 22,390,203 13,412,885
Intangible asset, net 578,125 625,000
Restricted investments (Note 5) 13,245,940 12,881,972
--------------------------------------------------------------------------------------------------------------------
$ 90,593,204 $ 45,201,571
====================================================================================================================
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 2,085,736 $ 2,092,479
Notes payable 27,307 16,557
Deferred revenue 3,878,457 3,772,647
--------------------------------------------------------------------------------------------------------------------
5,991,500 5,881,683
Notes payable, net of current portion 22,063 19,016
Reclamation obligations (Note 6) 13,914,819 12,934,880
Future income tax liability 5,496,460 1,460,897
Other long-term liability 99,593 99,593
--------------------------------------------------------------------------------------------------------------------
25,524,435 20,396,069
--------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 8)
Authorized: Unlimited number of common shares without par value
Issued and outstanding: 88,472,066 shares (September 30, 2005:
81,569,066 shares) 94,418,952 56,145,784
Contributed surplus (Notes 9 & 10) 2,064,680 1,803,277
Deficit (31,414,863) (33,143,559)
--------------------------------------------------------------------------------------------------------------------
65,068,769 24,805,502
--------------------------------------------------------------------------------------------------------------------
$ 90,593,204 $ 45,201,571
====================================================================================================================
Commitments and contingencies (Note 13)
ON BEHALF OF THE BOARD OF DIRECTORS:
"Ron F. Hochstein" "William A. Rand"
------------------------------- --------------------------------
Ron F. Hochstein William A. Rand
See accompanying notes to the consolidated financial statements
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Interim Consolidated Statements of Operations
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------
====================================================================================================================
Three Months Ended June 30, Nine Months Ended June 30,
2006 2005 2006 2005
--------------------------------------------------------------------------------------------------------------------
REVENUES
Process milling $ 2,131 $ 46,509 $ 1,395,798 $ 50,479
Engineering services (Note 7) - - 3,279 -
--------------------------------------------------------------------------------------------------------------------
2,131 46,509 1,399,077 50,479
--------------------------------------------------------------------------------------------------------------------
EXPENSES
Process milling expenditures 600,571 3,358 2,398,080 7,328
Mill stand-by expenditures - - - 1,069,953
Bad debts - - - 64,801
General and administrative 1,077,159 1,461,359 2,845,452 3,813,803
General exploration - - - 98,089
Write-down of mineral properties (Note 4) - - - 1,869,790
--------------------------------------------------------------------------------------------------------------------
1,677,730 1,464,717 5,243,532 6,923,764
--------------------------------------------------------------------------------------------------------------------
Loss from operations (1,675,599) (1,418,208) (3,844,455) (6,873,285)
OTHER INCOME AND EXPENSES
Net interest and other income 495,922 183,561 1,424,946 494,212
Gain (loss) on foreign exchange 1,755,575 (115,607) 2,240,355 425,408
Gain on sale of land and equipment - 10,900 - 98,138
Gain on sale of short-term investments - - - 2,923,219
Loss on sale of restricted investments (2,169) (16,317) (17,674) (46,158)
Equity in loss of Fortress Minerals Corp. (317,703) (122,087) (393,753) (122,087)
Dilution gain 502,297 1,860,784 2,319,277 1,932,252
Minority interest - 66,167 - 916,687
--------------------------------------------------------------------------------------------------------------------
Income (loss) for the period before taxes 758,323 449,193 1,728,696 (251,614)
Recovery of future income taxes - - - 363,199
--------------------------------------------------------------------------------------------------------------------
Net income for the period $ 758,323 $ 449,193 $ 1,728,696 $ 111,585
====================================================================================================================
Earnings per share:
Basic $ 0.01 $ 0.01 $ 0.02 $ 0.00
Diluted 0.01 0.01 0.02 0.00
====================================================================================================================
Weighted-average number of shares outstanding:
Basic 88,446,418 81,071,055 87,940,089 80,334,938
Diluted 90,232,119 82,452,165 90,271,255 81,762,262
====================================================================================================================
See accompanying notes to the consolidated financial statements
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Interim Consolidated Statements of Deficit
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------
====================================================================================================================
Three Months Ended June 30, Nine Months Ended June 30,
2006 2005 2006 2005
--------------------------------------------------------------------------------------------------------------------
Deficit, beginning of period as
previously reported $ (32,173,186) $ (31,108,979) $ (33,143,559) $ (29,997,716)
Retroactive effect of change in accounting
policy for stock-based compensation
(Note 9) - - - (773,655)
--------------------------------------------------------------------------------------------------------------------
Deficit, beginning of period as restated (32,173,186) (31,108,979) (33,143,559) (30,771,371)
Net income for the period 758,323 449,193 1,728,696 111,585
--------------------------------------------------------------------------------------------------------------------
Deficit, end of period $ (31,414,863) $ (30,659,786) $ (31,414,863) $ (30,659,786)
====================================================================================================================
See accompanying notes to the consolidated financial statements
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Interim Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------
====================================================================================================================
Three Months Ended June 30, Nine Months Ended June 30,
CASH PROVIDED BY (USED IN): 2006 2005 2006 2005
--------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income for the period $ 758,323 $ 449,193 $ 1,728,696 $ 111,585
Items not affecting cash:
Amortization 15,625 15,625 46,875 46,875
Depreciation 141,068 126,858 397,832 334,773
Bad debts - - - 64,801
Stock-based compensation 6,793 657,259 6,793 935,090
Write-down of mineral properties - - - 1,869,790
Gain on sale of land & equipment - (10,900) - (98,138)
Gain on sale of short-term investments - - - (2,923,219)
Loss on sale of restricted investments 2,169 16,317 17,674 46,158
Equity in loss of Fortress Minerals Corp. 317,703 122,087 393,753 122,087
Dilution gain (502,297) (1,860,784) (2,319,277) (1,932,252)
Minority interest - (66,167) - (916,687)
Recovery of future income taxes - - - (363,199)
Changes in non-cash working capital items:
Decrease (increase) in trade and
other receivables (278,682) (51,933) (1,652,279) 1,089,324
Increase in inventories (1,405,056) (1,347,544) (3,283,750) (1,829,945)
Decrease (increase) in other current
assets 204,366 170,478 (56,770) 172,489
Increase in accounts payable and
accrued liabilities 271,283 335,358 727,519 585,627
Increase in reclamation obligations - - - 331,285
Increase in deferred revenue 17,535 160,207 105,810 216,055
--------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (451,170) (1,283,946) (3,887,124) (2,137,501)
--------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of portfolio investments - (831,340) (634,118) (1,094,280)
Investment in Fortress Minerals Corp. - (396,842) - (180,387)
Purchase of plant and equipment (355,917) (130,549) (764,414) (747,511)
Proceeds from sale of short-term investments - - - 4,013,179
Proceeds from sale of surplus land and
equipment - 16,171 - 103,409
Expenditures on mineral properties (4,220,615) (1,398,151) (9,402,046) (5,862,390)
Increase in restricted investments (133,718) (86,356) (381,642) (340,657)
--------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (4,710,250) (2,827,067) (11,182,220) (4,108,637)
--------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in notes payable (6,386) (3,902) 13,797 (11,511)
Issuance of common shares for:
Private placements - - 42,241,851 5,374,952
Exercise of stock options 48,100 16,876 48,100 277,245
Subscription for common shares of Fortress - - (537,496) -
--------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 41,714 12,974 41,766,252 5,640,686
--------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (5,119,706) (4,098,039) 26,696,908 (605,452)
Cash and cash equivalents,
beginning of period 37,927,733 15,537,542 6,111,119 12,044,955
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 32,808,027 $ 11,439,503 $ 32,808,027 $ 11,439,503
====================================================================================================================
Supplemental cash flow information (Note 12)
See accompanying notes to the consolidated financial statements
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Nine Months Ended June 30, 2006
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
These unaudited interim consolidated financial statements of International
Uranium Corporation and its subsidiary companies and joint ventures
(collectively, the "Company") have been prepared in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP") for
interim financial statements. As a result, they do not conform in all
respects with the disclosure requirements for annual financial statements
under Canadian GAAP, and should be read in conjunction with the Company's
audited consolidated financial statements for the fiscal year ended
September 30, 2005. References to the "2006 Period" and "2005 Period"
relate to the nine months ended June 30, 2006 and 2005, respectively.
All material adjustments which, in the opinion of management, are necessary
for a fair presentation of the results of the interim periods have been
reflected. The results for the 2006 Period have been stated utilizing the
same accounting policies and methods of application as the Company's
audited consolidated financial statements for the fiscal year ended
September 30, 2005.
2. LONG-TERM INVESTMENTS
===============================================================================================================
June 30, September 30,
2006 2005
---------------------------------------------------------------------------------------------------------------
Portfolio investments $ 2,785,717 $ 2,151,599
Investment in Fortress Minerals Corp. (Note 3) 5,249,476 2,786,456
---------------------------------------------------------------------------------------------------------------
$ 8,035,193 $ 4,938,055
===============================================================================================================
At June 30, 2006, portfolio investments consist of common shares of four
publicly-traded companies acquired by the Company at a cost of $2,785,717
(September 30, 2005: $2,151,599), with an aggregate market value of
$13,701,639 (September 30, 2005: $7,105,564). During the 2006 Period, the
Company acquired additional equity interests at a cost of $634,118 through
the exercise of share purchase warrants. At June 30, 2006, the Company held
share purchase warrants to acquire additional equity interests in one of
the companies for a total subscription price of $180,737.
3. INVESTMENT IN FORTRESS MINERALS CORP.
At June 30, 2006, the Company held 29,232,500 common shares (September 30,
2005: 28,732,500 common shares) of Fortress Minerals Corp. ("Fortress"),
representing 41.66% (September 30, 2005: 44.39%) of its issued and
outstanding common shares, and a share purchase warrant to acquire an
additional 366,250 common shares at a price of Cdn $0.60 per share until
expiry on September 1, 2006. During the 2006 Period, the Company
participated in a private placement to purchase an additional 500,000
common shares of Fortress at a price of Cdn $1.25 per share for a total
cost of Cdn $625,000 ($537,496).
Through this investment, the Company is deemed to have significant
influence over Fortress for accounting purposes. Accordingly, the Company
applies the equity method to account for its investment in Fortress.
4. MINERAL PROPERTIES
At June 30, 2006 and September 30, 2005, mineral properties are comprised
of exploration properties located in Canada and Mongolia, and
uranium/vanadium mines in the United States. Capitalized mineral property
costs relating to the mines were previously written-off and charged to the
results of operations during 1999.
The Company's mineral property interests are held directly or through
option or joint venture agreements.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Nine Months Ended June 30, 2006
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
4. MINERAL PROPERTIES (continued)
A summary of mineral property expenditures is presented below:
===============================================================================================================
Nine Months Ended June 30, 2006
Beginning Ending
Balance Expenditures Balance
---------------------------------------------------------------------------------------------------------------
Canadian uranium properties:
Moore Lake Joint Venture $ 6,719,079 $ 1,824,065 $ 8,543,144
Other 2,597,960 4,718,140 7,316,100
Mongolian uranium properties:
Gurvan Saihan Joint Venture 983,904 1,225,312 2,209,216
Other 649,870 352,328 1,002,198
U.S. uranium/vanadium mines 2,462,072 857,473 3,319,545
---------------------------------------------------------------------------------------------------------------
$ 13,412,885 $ 8,977,318 $ 22,390,203
===============================================================================================================
===============================================================================================================
Year Ended September 30, 2005
Beginning Ending
Balance Expenditures Balance
---------------------------------------------------------------------------------------------------------------
Canadian uranium properties:
Moore Lake $ 1,779,392 $ 4,939,687 $ 6,719,079
Other 529,786 2,068,174 2,597,960
Mongolian uranium properties:
Gurvan Saihan Joint Venture 35,198 948,706 983,904
Other 17,878 631,992 649,870
U.S. uranium/vanadium mines on standby - 2,462,072 2,462,072
Mongolian precious/base metal properties (Note 3) 3,809,009 (3,809,009) (1) -
---------------------------------------------------------------------------------------------------------------
$ 6,171,263 $ 7,241,622 $ 13,412,885
===============================================================================================================
(1) At September 30, 2005, the accounts of Fortress were no longer
reported on a consolidated basis; therefore, its Mongolian precious/
base metal properties were excluded from mineral properties as
reported on the Company's consolidated balance sheet.
During the 2006 Period, the Company entered into the following arrangements
relating to its exploration properties:
a) The Company acquired an option from Consolidated Abaddon Resources
Inc. to earn a 51% interest in the Huard-Kirsch Lakes Property located
in the eastern part of the Athabasca Basin, Saskatchewan. The Company
paid Cdn $25,000 in cash and is required to incur Cdn $1.5 million in
exploration expenditures on or before November 1, 2008 to earn its
interest;
b) The Company and JNR Resources Inc. formed a 60/40 joint venture to
explore a number of claims in the Bell Lake area located in the
northern part of the Athabasca Basin. These claims are subject to a 2%
net smelter returns royalty;
c) The Company acquired an option from Consolidated Abaddon Resources
Inc. to earn up to a 75% interest in the Sims Lake Property located in
the west central part of Labrador. The Company is required to pay Cdn
$40,000 in cash and incur Cdn $450,000 in exploration expenditures
over two years to earn an initial 51% interest and incur further
exploration expenditures of Cdn $1 million on or before January 1,
2010 to earn an additional 24% interest. These claims are subject to a
2% net smelter returns royalty; and
d) The Company signed a letter of intent with Cameco Corporation for an
option to earn up to a 75% interest in the Park Creek Property located
in the eastern part of the Athabasca Basin. The Company is required to
incur exploration expenditures of Cdn $2.8 million over three years to
earn an initial 49% interest and a further Cdn $3 million over two
years to earn an additional 26% interest.
During the 2005 Period, the Company recorded a write-down of mineral
property of $1,869,790 relating to a decision by Fortress not to pursue its
option on the Shiveen Gol Property, a precious/base metal property located
in Mongolia.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Nine Months Ended June 30, 2006
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
5. RESTRICTED INVESTMENTS
The Company has cash and cash equivalents and fixed-income securities on
deposit to collateralize its reclamation and certain other obligations
(Note 6).
===============================================================================================================
June 30, September 30,
2006 2005
---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 4,180,731 $ 2,573,336
Fixed income securities 9,065,209 10,308,636
---------------------------------------------------------------------------------------------------------------
$ 13,245,940 $ 12,881,972
===============================================================================================================
6. RECLAMATION OBLIGATIONS
The Company's asset retirement obligations consist of estimated future
decommissioning and reclamation costs of the Company's White Mesa Mill (the
"Mill") and mining properties, and have been determined based on
engineering estimates of the costs of reclamation, in accordance with legal
and regulatory requirements. These cost estimates are reviewed periodically
by applicable regulatory authorities. In the case of the Mill, the cost
estimates are reviewed and adjusted annually by the Company to reflect the
estimated costs of reclamation and reviewed by the State of Utah Department
of Environmental Quality. During the 2006 Period, the Company recorded
additional reclamation liability of $943,795 relating to the Mill (Note
13).
===============================================================================================================
Nine Months
Ended Year Ended
June 30, September 30,
2006 2005
---------------------------------------------------------------------------------------------------------------
Reclamation obligations, beginning of period $ 12,934,880 $ 12,603,595
Additions to liabilities 979,939 331,285
---------------------------------------------------------------------------------------------------------------
Reclamation obligations, end of period $ 13,914,819 $ 12,934,880
===============================================================================================================
Applicable regulations require the Company to estimate reclamation costs on
an undiscounted basis under the assumption that the reclamation would be
performed at any time by a third party contractor. Management estimates
that, once a decision is made to commence reclamation activities,
substantially all of the reclamation activities could be completed in
approximately 24-30 months. Although the reclamation obligations recognized
represent the fair value of such obligations, elements of uncertainty in
estimating decommissioning and reclamation costs include potential changes
in regulatory requirements, decommissioning and reclamation alternatives.
Actual costs may be materially different from those estimated.
The Company has posted bonds (collateralized by cash and cash equivalents
and fixed income securities) in favor of the State of Utah and the
applicable state regulatory agencies in Colorado and Arizona as partial
collateral for these liabilities and has deposited fixed income securities
on account of these obligations (Note 5).
7. RELATED PARTY TRANSACTIONS
During the 2006 Period, the Company had the following related party
transactions:
a) incurred legal fees of $34,644 (2005 Period: $40,825) with a law firm
of which a partner is a director of the Company;
b) incurred management and administrative service fees of $141,039 (2005
Period: $117,186) with a company owned by the Chairman of the Company
which provides corporate development, office premises, secretarial and
other services in Vancouver at a rate of Cdn $18,000 per month plus
expenses. At June 30, 2006, an amount of Nil (September 30, 2005:
$70,238) was due to this company;
c) provided mine reclamation management and engineering support services
of $3,279 (2005 Period: Nil) on a cost plus basis to a company with
common directors. At June 30, 2006, an amount of Nil (September 30,
2005: $80,337) was due from this company; and
d) provided executive and administrative services to Fortress and charged
an aggregate $80,479 (2005 Period: Nil) for such services. At June 30,
2006, an amount of $36,057 (September 30, 2005: $28,696) was due from
Fortress relating to this agreement.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Nine Months Ended June 30, 2006
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
8. SHARE CAPITAL
a) Authorized: Unlimited number of common shares without par value
b) Issued and Outstanding:
===========================================================================================================
Number of
Common Shares Amount
-----------------------------------------------------------------------------------------------------------
Balance at September 30, 2004 79,635,066 $ 50,305,480
-----------------------------------------------------------------------------------------------------------
Issued for cash:
Flow-through private placement, net of issue costs of $227,470 1,000,000 5,574,316
(c)
Exercise of stock options 787,000 418,365
Issued for mineral property acquisition (d) 147,000 906,722
Fair value of stock options exercised - 374,997
Renunciation effects of flow-through private placements - (1,434,096)
-----------------------------------------------------------------------------------------------------------
1,934,000 5,840,304
-----------------------------------------------------------------------------------------------------------
Balance at September 30, 2005 81,569,066 $ 56,145,784
-----------------------------------------------------------------------------------------------------------
Issued for cash:
Private placement, net of issue costs of $1,230,168 (c) 6,000,000 36,780,480
Flow-through private placement, net of issue costs of $230,757 850,000 5,461,371
(c)
Exercise of stock options 53,000 48,100
Fair value of stock options exercised - 18,780
Renunciation effects of flow-through private placements (c) - (4,035,563)
-----------------------------------------------------------------------------------------------------------
6,903,000 38,273,168
-----------------------------------------------------------------------------------------------------------
Balance at June 30, 2006 88,472,066 $ 94,418,952
===========================================================================================================
c) Private Placements
In December 2005, the Company completed a private placement of 850,000
flow-through common shares at a price of Cdn $7.75 per share for gross
proceeds of Cdn $6,587,500 ($5,692,128). Share issue costs comprised
of related expenses and finders' fees totaling $230,757 were incurred,
resulting in net proceeds of $5,461,371 from the private placement.
These funds are restricted to eligible Canadian exploration
expenditures and were renounced to the subscribers in February 2006.
As a result, the effects of the foregone tax benefits to the Company
have been recorded as additional share issue costs upon renunciation.
In October 2005, the Company completed a private placement of
6,000,000 common shares at a price of Cdn $7.50 per share for gross
proceeds of Cdn $45,000,000 ($38,010,648). Share issue costs comprised
of related expenses and finders' fees totaling $1,230,168 were
incurred, resulting in net proceeds of $36,780,480 from the private
placement.
In March 2005, the Company completed a private placement of 1,000,000
flow-through common shares at a price of Cdn $7.00 per share for gross
proceeds of Cdn $7,000,000 ($5,801,786). Share issue costs comprised
of related expenses and finders' fees totaling $227,470 were incurred,
resulting in net proceeds of $5,574,316 from the private placement.
These funds are restricted to eligible Canadian exploration
expenditures and were renounced to the subscribers in February 2006.
As a result, the effects of the foregone tax benefits to the Company
upon renunciation have been recorded as additional share issue costs
totaling $4,035,563.
d) Mineral Property
In September 2005, the Company issued 147,000 common shares at a price
of Cdn $7.35 per share for a total value of Cdn $1,080,450 ($906,722)
as part of the acquisition of a U.S. uranium property.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Nine Months Ended June 30, 2006
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
9. STOCK OPTIONS
At June 30, 2006, the Company had a stock-based compensation plan reserving
for issuance a maximum of 10,700,000 common shares of the Company, as
amended periodically by shareholder approval (the "Plan"), and had
remaining 3,657,000 common shares available for issuance under the Plan.
The purpose of the Plan is to attract, retain and motivate directors,
officers, key employees and consultants of the Company and to advance the
interests of the Company by providing eligible persons with the opportunity
to acquire an increased proprietary interest in the Company. Under the
Plan, all stock options are granted at the discretion of the Company's
board of directors, including any vesting provisions if applicable. The
term of any stock option granted may not exceed ten years and the exercise
price may not be lower than the closing price of the Company's shares on
the last trading day immediately preceding the date of grant. In general,
stock options granted under the Plan have a term of three years without
vesting provisions, except for grants to new employees which are subject to
vesting provisions over a one-year period.
A continuity summary of the stock options granted under the Plan is
presented below:
===============================================================================================================
Nine Months Ended Year Ended
June 30, September 30,
2006 2005
---------------------------------------------------------------------------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Number of Price per Number of Price per
Common Share Common Share
Shares (Cdn $) Shares (Cdn $)
---------------------------------------------------------------------------------------------------------------
Balance outstanding, beginning of period 1,863,000 $ 2.62 1,940,000 $ 0.85
Granted 233,000 5.48 710,000 5.28
Exercised (53,000) 1.01 (787,000) 0.65
---------------------------------------------------------------------------------------------------------------
Balance outstanding, end of period 2,043,000 $ 2.99 1,863,000 $ 2.62
===============================================================================================================
Exercisable, end of period 1,969,000 $ 2.90 1,863,000 $ 2.62
===============================================================================================================
A summary of stock options outstanding and exercisable at June 30, 2006 is
presented below:
=====================================================================================
Weighted-
Average Average
Range of Exercise Exercise Price Remaining
Number of Prices per Share per Share Contractual Life
Common Shares (Cdn $) (Cdn $) (Years)
-------------------------------------------------------------------------------------
1,110,000 $1.01 $1.01 0.41
843,000 $4.27 to $5.88 $5.11 1.98
90,000 $7.53 $7.53 2.19
-------------------------- ------------------------------------
2,043,000 $2.99 1.14
========================== ====================================
Outstanding options expire between November 2006 and May 2009.
During the 2005 Period, the Company adopted amended accounting standards
effective October 1, 2004 requiring a fair value-based method of accounting
for stock options granted to employees, including directors, and to
non-employees. This amendment was adopted on a retroactive basis without
restatement of prior periods resulting in a cumulative adjustment of
$773,655 to opening deficit effective October 1, 2004. Prior to October 1,
2004, the application of the fair value-method of accounting was limited to
stock options granted to non-employees.
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Nine Months Ended June 30, 2006
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
9. STOCK OPTIONS (continued)
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions:
===============================================================================================================
Nine Months Ended
June 30,
2006 2005
---------------------------------------------------------------------------------------------------------------
Risk-free interest rate 3.98% 2.84%
Expected stock price volatility 64% 88%
Expected life 2 years 1.9 years
Expected dividend yield - -
Weighted-average fair value per
share under options granted $1.74 $1.51
===============================================================================================================
During the 2006 Period, stock-based compensation totaled $280,183 of which
$273,390 has been included in capitalized mineral property expenditures
related to optionees directly involved with the Company's mineral
properties. The remaining $6,793 was recorded and included in general and
administrative expenses. During the 2005 Period, stock-based compensation
of $935,090 was recorded and included in general and administrative
expenses.
10. CONTRIBUTED SURPLUS
A continuity summary of contributed surplus is presented below:
===============================================================================================================
Nine Months
Ended Year Ended
June 30, September 30,
2006 2005
---------------------------------------------------------------------------------------------------------------
Balance, beginning of period $ 1,803,277 $ 224,718
Retroactive effect of change in accounting policy
for stock-based compensation - 773,655
Stock-based compensation as a result of
stock options granted 280,183 1,179,901
Value of stock options transferred to share
capital upon exercise of stock options (18,780) (374,997)
---------------------------------------------------------------------------------------------------------------
Balance, end of period $ 2,064,680 $ 1,803,277
===============================================================================================================
11. SEGMENTED INFORMATION
a) Geographic Information
===========================================================================================================
Three Months Ended Nine Months Ended
June 30, June 30,
2006 2005 2006 2005
-----------------------------------------------------------------------------------------------------------
Revenue:
United States $ 2,131 $ 46,509 $ 1,399,077 $ 50,479
-----------------------------------------------------------------------------------------------------------
Net income (loss):
Canada $ 1,567,603 $ (983,784 $ 3,238,353 $ (1,044,937)
United States (809,266) (229,302) (1,504,951) 1,072,013
Mongolia (14) 1,662,279 (4,706) 84,509
-----------------------------------------------------------------------------------------------------------
$ 758,323 $ 449,193 $ 1,728,696 $ 111,585
===========================================================================================================
--------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
Nine Months Ended June 30, 2006
(Unaudited - Prepared by Management)
(Expressed in U.S. Dollars, Unless Otherwise Noted)
--------------------------------------------------------------------------------
11. SEGMENTED INFORMATION (continued)
===============================================================================================================
June 30, September 30,
2006 2005
---------------------------------------------------------------------------------------------------------------
Total assets:
Canada $ 59,127,716 $ 20,883,541
United States 28,288,734 22,784,085
Mongolia 3,176,754 1,533,945
---------------------------------------------------------------------------------------------------------------
$ 90,593,204 $ 45,201,571
===============================================================================================================
b) Major Customers
The Company's business is such that, at any given time, it sells its
uranium and vanadium concentrates to and enters into process milling
arrangements with a relatively small number of customers. During the
2006 Period, process milling customers accounted for approximately 99%
(2005 Period: 100%) of total revenues. Accounts receivable from any
individual customer will exceed 10% of total accounts receivable on a
regular basis.
12. SUPPLEMENTAL CASH FLOW INFORMATION
===============================================================================================================
Three Months Ended Nine Months Ended
June 30, June 30,
2006 2005 2006 2005
---------------------------------------------------------------------------------------------------------------
Non-cash investing and financing activities:
Stock-based compensation capitalized as
mineral property expenditures $ 127,377 $ - $ 273,390 $ -
Exploration expenditures included in
accounts payable and accrued liabilities 544,769 - 544,769 -
Cash received for interest 462,423 183,534 1,220,436 493,392
===============================================================================================================
13. COMMITMENTS AND CONTINGENCIES
The Company has detected some chloroform contamination at the Mill site
that appears to have resulted from the operation of a temporary laboratory
facility that was located at the site prior to and during the construction
of the Mill facility, and septic drain fields that were used for laboratory
and sanitary wastes prior to construction of the Mill's tailings cells. In
April 2003, the Company commenced an interim remedial program of pumping
the chloroform-contaminated water from the groundwater to the Mill's
tailings cells. This will enable the Company to begin clean up of the
contaminated areas and to take a further step towards resolution of this
outstanding issue. Although the investigations to date indicate that this
contamination appears to be contained in a manageable area, the scope and
costs of final remediation have not yet been determined and could be
significant.
Upon final acceptance by the State of Utah of the $943,795 increase in the
Mill's reclamation liabilities, the Company will be required to increase
the Mill bond and may be required to fund in cash its restricted
investments to collateralize the additional liability.
The Company has committed to payments under operating leases for the rental
of office space and office equipment for both the Denver and Saskatoon
offices which expire from May 31, 2008 to July 31, 2010. The future minimum
lease payments are as follows:
===============================================================================================================
Fiscal Year
---------------------------------------------------------------------------------------------------------------
2006 $ 46,524
2007 149,927
2008 105,629
2009 43,691
2010 32,235
===============================================================================================================