<PAGE> 1
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 the month of February, 1999
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: February 25, 1999 By: /s/ Earl E. Hoellen
------------------ -----------------------------------
Earl E. Hoellen, President
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EXHIBIT INDEX
99.1 Press Release dated February 23, 1999
99.2 Annual Report for the year ended September 30, 1998
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EXHIBIT 99.1
INTERNATIONAL URANIUM CORPORATION ANNOUNCES FISCAL YEAR 1998 RESULTS
FEBRUARY 23, 1999 (IUC - T.S.E.) ... INTERNATIONAL URANIUM CORPORATION ("IUC")
is pleased to announce net after-tax earnings of U.S. $1,617,331 for the fiscal
year ending September 30, 1998. This equates to approximately US. $0.02 per
share, or Cdn $0.04 per share. This was IUC's first full year results.
Total revenue for fiscal 1998 was U.S. $32,940,876, while the total cost of
revenues was U.S. $32,210,546, resulting in a gross profit of U.S. $730,330.
Net interest income was U.S. $1,128,562. Uranium sales made up U.S. $19,890,300
of total sales while recycling fees from alternate feed activities made up the
remaining U.S. $13,050,576 of revenues. Cost of uranium sales was U.S.
$17,829,592, resulting in gross profits of U.S. $2,060,708, while cost of
processing alternate feeds was U.S.$10,066,538, resulting in gross profits of
U.S.$2,984,038. Working capital at year-end was U.S. $20,298,166.
For fiscal year 1998, IUC made progress in the three main areas of its business
plan: mining operations, alternate feed processing and mineral exploration.
During the first fiscal quarter, IUC commenced mining operations at its Sunday
Mine Complex, in western Colorado and its Rim Mine in eastern Utah. Over the
course of the year, IUC mined uranium/vanadium ores from these mines and
stockpiled the ore at the White Mesa Mill ("Mill") in anticipation of processing
during 1999. The Company also initiated an ore purchase program to supplement
its own production. Originally, the Company anticipated several independent
mining operations to re-open their mines and sell their uranium/vanadium ore to
the Company. However, this supply did not materialize in any significant amount.
Several of the independent miners who had contemplated opening their mines
decided not to do so because of the burden of new regulatory requirements since
they last operated and low commodity prices. Nevertheless, the Company's own
mines operated within budget although production was down slightly from
projected levels. IUC expects to produce approximately 300,000 pounds U3O8 and
2,000,000 pounds V2O5 during 1999 from its own mined ores.
IUC made great progress in developing the business of processing "alternate
feeds" through the Mill for uranium recovery. Alternate feeds are
uranium-bearing byproducts from other processing facilities which are usually
classified as waste products to the generators of the materials. During the
year, IUC completed the processing of uranium-tantalum residues for a major
tantalum producer. Although costs were somewhat higher than originally projected
and tantalum recoveries less, the project nevertheless demonstrated the ability
of the Mill to process uranium-bearing materials and recover co-products other
than vanadium. The Company also secured several other contracts to process
alternate feeds from other nuclear fuel cycle processing companies and is
developing a backlog of business in this area.
The most exciting event in the alternate feed area was the award of a contract
to process 45,000 tons of uranium-bearing soils from a former defense, or
Formerly Utilized Sites
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Remedial Action Program ("FUSRAP") site, by the U.S. Army Corps of Engineers
("Corps"). The Corps is cleaning up these former defense sites and the
expectation is that several million tons of uranium-bearing soil-like materials
will need to be either disposed of or recycled. Previously, these materials
could only be directly disposed of in a limited number of disposal sites in the
U.S. By recycling these soils through IUC's Mill, the Corps was able to
remediate this site at a fraction of the cost that would have been incurred had
they disposed of the soils at a disposal-only facility. IUC, which receives a
recycling fee for processing these materials, expects this business to be a
significant contributor to its earnings in the future.
The Company continued with its exploration program in Mongolia during 1998
through its 75% interest in the Gurvan Saihan Joint Venture. Based on the
success of its 55,000 meter drilling program in 1997, IUC completed another
53,000 meters of drilling during the 1998 field season. This drilling resulted
in the addition of another 5.5 million pounds to the uranium deposit delineated
in the Hairhan region last year. Total resources on Joint Venture lands in
Mongolia are now over 23 million pounds. The Company also completed an in-situ
leach amenability test, which demonstrated that the Hairhan deposit is amenable
to in-situ leach methods with favorable recovery and reagent usage rates.
Headquartered in Denver, Colorado, IUC is engaged in the business of producing
uranium concentrates from mined ores and waste byproducts, and the selling and
trading of these concentrates in the international nuclear fuel market. In
addition, IUC also produces and sells vanadium as well as other metals that can
be produced as a co-product with uranium.
ON BEHALF OF THE BOARD
"Earl E. Hoellen"
President
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EXHIBIT 99.2
Strength through DIVERSITY
Image of Circular Globe, with integrated images
International Uranium Corporation
Annual Report 1998
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IUC Company Logotype
Highlights
Reported net earnings of US$1.6 million, or $0.02 (Cdn $0.04) per share
Working capital of US$20.3 million as of September 30, 1998
Over 1.5 million pounds of U308 delivered to six customers, domestic and foreign
Expanded land position in Mongolia in response to favorable exploration results,
and increased uranium deposits by over 5 million pounds through additional
drilling
Received first NRC license amendment and contract to process uranium-bearing
material from former defense-related site
Continued ore production at Sunday Mine Complex
Table of Contents
Letter to Shareholders ........................................2
Marketing......................................................6
Processing Operations .........................................8
Mining Operations ............................................10
Mongolia .....................................................12
Regulatory and Environment ...................................14
ManagementOs Discussion and Analysis .........................16
ManagementOs Report to the Shareholders.......................19
AuditorsO Report..............................................20
Consolidated Financial Statements.............................21
Notes to Financial Statements.................................24
Board of Directors and Executive Officers.....................32
All dollar references in this report are expressed in U.S. dollars unless
otherwise indicated
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Corporate Profile
International Uranium Corporation (IUC) is in the business of producing uranium
concentrates and selling and trading these concentrates and other fuel cycle
products in the international nuclear fuel market. As a co-product to its
uranium production, IUC produces and sells vanadium and other metals. In
addition to mining and processing uranium from natural ores, IUC also recovers
uranium by recycling uranium-bearing waste streams from other processing
facilities.
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Globe Graphic
Page 2
Photo of Earl Hoellen CEO of IUC.
TO OUR SHAREHOLDERS
Last year I reported to you that our accomplishments during 1997 - commencing
mining activities in the U.S., demonstrating the viability of processing
uranium-bearing byproducts known as alternate feeds, advancing our exploration
program in Mongolia, and establishing IUC as a player in the international
uranium marketplace -D would lay the groundwork for our future growth. Despite
challenging market conditions, I am pleased to report that your Company advanced
its operations on all of these fronts during 1998.
The global natural resources sector has been in a depressed state over the last
year, and the uranium market has been no exception. Demand was down, the
near-term oversupply situation continued, and market prices sank to levels below
$10 per pound U3O8. For many uranium companies, simply breaking even was a
reason to celebrate. This is why I am pleased to report that IUC ended its first
full year of operations with earnings of just over US$1.6 million, or $0.02 per
share.
Future prospects for the uranium market remain positive, however. The market is
still faced with a primary production deficit of two to one against demand.
Towards the end of calendar 1998, this situation was further amplified by
announcements from several major uranium producers of production cutbacks. By
the end of 1998, there was also reason to believe that a commercial arrangement
with Russia regarding the disposition of the uranium feed from RussiaOs Highly
Enriched Uranium would be completed by mid-1999, which would help stabilize the
market. As a result, the potential for uranium prices to recover and rise over
the next few years to levels that would support continued investment in uranium
resources has increased dramatically.
All of this is consistent with the strategy that IUC embarked upon less than two
years ago. IUC continues to believe that the opportunities for a niche player in
the global uranium industry remain great. However, in order to capitalize on
these opportunities, we must remain flexible, both in terms of production
operations and marketing activities, as well as maintaining the financial
strength to capitalize on asset acquisitions where appropriate. Through the
development of the recycling business -D processing uranium-bearing byproducts
- -D IUC expects to generate positive earnings even during times of depressed
uranium market prices. This will allow IUC to selectively increase its uranium
holdings either by acquisition or by exploration, thereby increasing the warrant
value on uranium for the future. These uranium resources can then be developed
and put into production as dictated by market conditions. All of which should
contribute to our primary goal of increasing shareholder value.
Mining
With this strategy in mind, IUC continued its mining operations during fiscal
year 1998. Production costs on a per pound basis at the Company's
uranium/vanadium mines were within budget for the year, although production
levels were at a somewhat reduced level from those originally anticipated. IUC's
mining operations do not require a lot of infrastructure and, as a result, the
Company will be able to reduce operations quickly if market conditions do not
support continued economic operations. Conversely, since many of the Company's
mines on standby are in a developed or partially developed stage, the Company
could readily expand production if justified by market conditions. To that end,
IUC furthered its progress on the permitting of its Reno Creek in-situ leach
property in Wyoming, which should be completed in fiscal 1999. While the Company
does not have any firm production plans for this property at this time, Reno
Creek could be put into production by the end of 2000, if market conditions
warrant.
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Page 3, Shareholders, con't
The Company's independent ore purchase program was a disappointment in 1998. We
originally believed that many small, independent mines in the Uravan district of
the Colorado Plateau mining region would recommence operations and sell their
ore to IUC. Unfortunately, this has not materialized to the degree we had hoped.
While many independents did evaluate re-opening their mines, most have found
that their operations are not economic at current commodity prices due to new
regulatory and environmental licensing requirements that have come into effect
since they last operated. As a result, the amount of ore purchased by the
Company was a fraction of what we originally projected.
The ore being produced from the Company's mines and the limited amounts
purchased from the independents are being stockpiled at the Company's White Mesa
Mill, near Blanding, Utah. This ore will continue to be stockpiled at the Mill
until the third or fourth quarter of fiscal 1999, depending upon the processing
schedule for alternate feeds. It will then be processed through the Mill to
recover the uranium as well as the vanadium values in the ore. The uranium
concentrates produced from the processing of these ores later this year will
mark the first uranium production in the United States by conventional means in
several years.
Processing
As I reported to you last year, I believe that, aside from our employees, the
White Mesa Mill is perhaps IUC's greatest asset. During this past fiscal year,
we began to show just how valuable it really is. Commissioned in 1980, the Mill
has processed conventional ores for the recovery of uranium and vanadium for
many years. In addition, IUC's license from the Nuclear Regulatory Commission
gives IUC the right to process other uranium-bearing materials known as
"alternate feeds." Alternate feeds are uranium-bearing byproduct materials from
other processing facilities, which usually are classified as waste products to
the generators of the materials. Requiring only a routine amendment to its
license for each different alternate feed, IUC can process these uranium-bearing
materials and recover uranium, in some cases, at a fraction of the cost of
processing conventional ore. In other cases, the generators of these alternate
feed materials are willing to pay a recycling fee to IUC to process these
materials to recover uranium and then dispose of the remaining byproduct,
instead of just directly disposing of the materials at a limited number of
disposal sites. This gives IUC the ability to process alternate feeds and
generate earnings that are largely independent of uranium market prices.
During fiscal 1998, IUC had several notable achievements associated with the
development of its alternate feed business. The Company completed its processing
run of uranium-bearing tantalum residues for a major tantalum producer. While
the costs were higher than originally expected and the tantalum recoveries less
than expected, the project nevertheless demonstrated the ability of the White
Mesa Mill to process uranium-bearing materials and recover co-products other
than vanadium. The project, which was completed at a profit, also drew
considerable attention from other tantalum and rare earth producers who have
these types of ores and materials that also contain recoverable amounts of
uranium. Several projects of this type are under consideration by the Company at
this time.
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Globe Graphic
Page 4
The Company also secured several other contracts to process alternate feeds and
has developed a backlog of future business. Perhaps the most significant of
these was the award of a contract to IUC to process over 45,000 tons of
uranium-bearing soils that were excavated from a FUSRAP site near Buffalo, New
York. These FUSRAP sites, which stands for Formerly Utilized Site Remedial
Action Program, are former defense production sites that are being cleaned up by
the U.S. Army Corps of Engineers. Previously, material excavated from these
sites was only directly disposed of at a limited number of disposal sites, and
at considerable cost. The Corps, charged with the task of reducing the cost of
this remediation program, awarded a contract to IUC to recycle the materials
from the Buffalo site and recover uranium before disposing of the resulting
tailings in the White Mesa Mill's fully licensed tailings cells. By processing
these soils through the Mill for the recovery of uranium, IUC was able to allow
the Corps to clean up this site at a fraction of the cost that would have been
incurred had the disposal-only option been used. In addition to being more
cost-effective, this recycling technology is also environmentally superior to
the disposal-only option, since radioactive uranium is removed from the soils
before final disposal.
There are potentially several million tons of uranium-bearing soils and
materials located at these former defense sites. The ability to recycle these
materials through the White Mesa Mill can be a very profitable business for IUC.
However, while the progress we have made to date is considerable, I do need to
caution that there are some regulatory uncertainties associated with this
uranium recycling business. As I noted, IUC's license gives us the right, with
appropriate license amendments, to process alternate feeds. These amendments are
granted under the rules and regulations of the Nuclear Regulatory Commission.
Furthermore, these licensing actions are subject to challenge by parties that
may or may not have a legitimate reason to be heard on our operations. Some of
IUC's alternate feed projects have been challenged by the State of Utah, which
believes that the State should have regulatory authority over these projects
instead of the NRC. We have also seen challenges to our activities by a
commercial disposal company that has heretofore enjoyed a virtual monopoly on
the disposal of these materials. IUC's White Mesa Mill has been granted eight
license amendments for processing alternate feeds out of eight requests, and we
have successfully defended all challenges before the NRC, to date. While no
guarantees can be given, we remain confident that the issues between IUC and the
State of Utah can be resolved and that challenges to our activities by
competitors through the attempted use of the environmental licensing process for
purely commercial reasons will continue to fail by virtue of their illegitimacy.
We continue to believe that the development of the business of recycling
uranium-bearing waste materials and the associated safe management of the
resulting waste byproduct will not only mitigate the effects of down cycles in
the uranium market but will develop into a profitable stand-alone business in
its own right. We intend to continue to devote the resources necessary to
aggressively pursue this business opportunity.
Exploration
As part of its strategy to develop additional uranium resources, the Company
continued its exploration program in Mongolia during 1998. Bolstered by the
success of 1997Os drilling program, the Company conducted 53,000 meters of
exploration and resource delineation drilling during the year. This program
added another 5.5 million pounds of uranium resources to the deposit discovered
in the Hairhan region of the Company's exploration lands last year, bringing
total resources in this area to 16.2 million pounds. Total resources on Company
lands amenable to low cost, in situ leach mining are now approximately 23
million pounds. The Company also successfully completed an in situ leach
amenability test, a precursor to a full pilot operation. The test demonstrated
that the Hairhan deposit is amenable to in situ leaching with favorable recovery
and reagent usage rates.
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As a result of the declining uranium market during the year, the Company intends
to reduce the level of its exploration drilling budget for fiscal 1999. After
engaging in such an aggressive program over the last two years, 1999Os efforts
will concentrate on correlation and analysis of the data acquired during the
past two years and the application of this work to expand our inventory of
favorable exploration targets. The Company will also focus efforts on refining
production cost models for future mining projects in Mongolia.
Marketing
The historically challenging conditions of the uranium market led IUC to broaden
its vision beyond just simply being a conventional uranium mining company. Such
a traditional, single-minded approach will not accomplish our primary goal of
building shareholder value. As a result, we have spent the last year evaluating
market conditions to develop opportunities to not only sell uranium but to
develop new sources of supply to enhance profitability during market downturns.
We are also committing considerable commercial resources to develop our
recycling business to the point that it can profitably sustain the Company
during these inevitable market downturns, and amplify our profitability when
market conditions improve.
Despite the weak uranium market during the past fiscal year, IUC was
nevertheless active in the market. Over the course of the year, the Company sold
over 1.5 million pounds of uranium concentrates. Lower prices presented some
trading opportunities to fill existing contracts with lower cost purchased
pounds, as well. Because of the types of alternate feeds projected to be
processed in 1999, as well as the planned conventional ore run, the Company will
have more uranium available from its own production than in 1998. This should
coincide well with any upturn in uranium prices that several analysts are
forecasting for 1999. In fact, while the price of uranium fell from $11.00 per
pound U3O8 as the fiscal year began in October 1997 to $9.75 per pound by the
end of the year in September 1998, and ultimately to $8.75 per pound by December
1998, the price had rebounded to $10.50 per pound by January 1999.
Fundamentals for the long-term uranium market remain positive. IUC's
comprehensive marketing program continues to be focused on securing long-term
contracts for the Company's production, and moving in and out of the spot market
as trading opportunities arise.
The Company also expects to be active in the vanadium market during fiscal 1999,
since significant quantities of vanadium will be produced from the conventional
ore processing run scheduled for later in fiscal 1999. This market also came
under price pressure during the last fiscal year. Unlike many analyst's earlier
projections, the near-record high vanadium prices encountered in early 1998 did
not hold as the year progressed. However, having reached a low of $2.50 per
pound V2O5 late in calendar 1998, the price has begun to rebound, with most
analysts predicting the price to recover to $3.50 per pound by mid-1999 when IUC
expects to be in production.
Conclusion
Since our birth in May 1997, the men and women of IUC have worked tirelessly to
move this Company from the drawing board to a profitable and unique niche player
in the uranium production industry. In so doing, we have become a team of people
who believe in themselves, in each other, and in their ability to improve IUC
each day. So, as we turn our eye toward 1999 and beyond, to a new millenium, we
are excited by the challenges that lie ahead and convinced that our best days
are yet to come. I am grateful to all of our nearly 150 employees for their
efforts and dedication in creating this Company, which is committed to building
long term value for you, our shareholders.
On behalf of the Board, the management and the employees of IUC, I'd like to
thank you once again for your continuing support.
/s/ Earl E. Hoellen
Earl E. Hoellen
President and Chief Executive Officer
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Globe Graphic
Page 6
Photo of three individuals reviewing report.
MARKETING
Uranium
Over the last ten years, annual quantities transacted in the uranium spot market
have averaged more than 25 million pounds U3O8, representing 10-15% of total
sales volume. However, in 1998 total spot volume fell dramatically to around 11
million pounds. Several factors contributed to this condition including a high
level of multi-year uranium contracting by utilities during 1995 and 1996 that
reduced unfilled uranium needs in 1997 and 1998. In addition, there was
relatively little purchasing by uranium production companies that, at times,
have found it economically attractive to fill some of their existing long-term
sales commitments by making spot purchases.
Softer demand took its toll in the market by causing prices to fall into single
digits by the end of the year. Although spot market prices actually increased
slightly during the fourth quarter of 1997, by the end of 1998 the U3O8 market
price had dropped more than 25%. The market price began the year at $12.00 per
pound U3O8, but quickly dropped to the $10.50 level, where it stagnated for six
months. Then, during the fourth quarter, in response to perceived inventory
liquidations, uranium price levels fell below the $9.00 mark, finishing the year
at $8.75 per pound U3O8.
Looking forward, 1999 has started out much differently from the previous year.
Market demand is stronger and prices appear to be headed for improvement, at
least in the near term. In fact, by the end of January, the U3O8 price had
rebounded to $10.50 per pound U3O8. Apparent factors include increased producer
buying to fill uranium needs in 1999 and 2000. Towards the end of 1998,
several large, uranium producing companies announced cutbacks in production
levels and the intention to fill some future sales commitments with spot market
purchases. As 1999 began, there was also growing optimism that a long-term
commercial arrangement would be concluded early in the year between Russia's
Ministry of Atomic Energy and three Western companies regarding the disposition
of the natural uranium feed that will result from Russia's Highly Enriched
Uranium military stockpile. It is widely believed that such an arrangement will
result in a more moderate and predictable introduction of this material into the
marketplace.
In the end, the uranium market can continue to be characterized as "good news,
bad news." In the near-term, while there are some positive signs on the horizon,
there is still considerable uncertainty in the market. The fate of the Russian
and C.I.S countries' suspension agreements, Russian HEU feed, uranium
inventories held by the now-privatized USEC, Inc., all contribute to this
uncertainty which tends to dampen any potential for upward price movement. For
the longer-term, however, prospects are much more positive. The market is still
faced with a primary production deficit of two to one against demand. When
near-term uranium inventories finally clear the market, experts believe the
price of uranium will need to rise to the $18.00-20.00 per pound U3O8 range in
order to sustain the production necessary to help bridge this supply/demand gap.
<PAGE> 9
Obviously, the international uranium market is complex. Transitory trading
patterns, highly competitive, political by nature--these are all phrases that
apply to this market. However, this complexity gives rise to commercial
opportunities which IUC plans to take full advantage of, when deemed prudent.
Identification and pursuit of profitable transactions results from a
comprehensive marketing strategy which recognizes the ever-changing nature of
the marketplace and the value of market intelligence.
IUC's marketing strategy is straightforward. We cannot be content as merely a
uranium producer. Value must be added at each turn of the market. IUC intends to
maximize the value of its participation in the uranium market by taking a
portfolio approach to marketing its own production, augmented by trading, where
appropriate. Long term contracts, with both market related and base escalated
pricing, will be our primary focus. In addition, our marketing and trading
efforts will not be limited to the U.S. IUC intends to truly be an
"international" uranium company and will look to Europe and Asia as
opportunities arise.
Vanadium
In general, world metals markets were in a depressed state in 1998, experiencing
downward price pressure throughout most of the year. The vanadium market faired
better than most of these other metals, however, remaining strong through the
middle of the year before succumbing to some of the same negative market
pressures experienced by the other metals.
Vanadium began 1998 at $5.60 per pound V2O5, well over the average historical
price of the commodity. Prices moved upward to $7.00 by the end of February,
then slowly drifted down to $6.00 per pound V2O5 by July. At this point, prices
fell steadily throughout the remainder of the year to a low of $2.50 per pound
by December. The price began to firm up at this point and, by January 1999, had
recovered to the $3.00 per pound V2O5 level.
There continues to be cautious optimism for vanadium prices by analysts for the
remainder of 1999, especially when compared to other metals markets. While
difficult world conditions are expected to persist throughout 1999, analysts
have estimated average prices for the year near $3.50 per pound V2O5.
Stronger vanadium prices bode well for IUC. During the course of the year, IUC
expects to produce nearly two million pounds V2O5, which will represent
approximately 5% of the U.S. market and 1.5% of the world market. IUC will
re-evaluate its sales strategy as production commences to minimize the market
impact of our production and maximize realized prices. IUC's ability to produce
high-quality vanadium also makes us a candidate to take advantage of niche
vanadium markets that typically yield higher prices.
The long-term outlook for vanadium remains positive. Annual consumption is
estimated at 140 million pounds V2O5 per year, with a 2% to 3% increase in
consumption per year. Extensive research for the uses of vanadium add to market
optimism, especially in the development of the redox battery, which could
revolutionize the battery industry. Production supply is expected to remain
steady for the balance of 1999. New projects continue to be developed; however,
it is too early for any projects to figure into supply numbers in the near term.
Photo of man w/barrels.
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Globe Graphic
Page 8
Photo of White Mesa Mill.
PROCESSING OPERATIONS
White Mesa Mill
The White Mesa Mill continues to be one of IUC's most strategic assets. Located
near Blanding, Utah, the Mill is a 2000 ton per day, acid leach uranium recovery
facility. The Mill also has a co-product recovery circuit designed to recover
the vanadium occurring with uranium in the Colorado Plateau ores. At full
capacity, the Mill is capable of producing 6 million pounds of uranium per year
from higher grade uranium ores, such as those found in the Arizona Strip, or 3.5
million pounds of uranium and 18 million pounds of vanadium per year from
Colorado Plateau ores. With less than 4 million tons of its 10 million ton
tailings capacity utilized, and with no groundwater contamination or other
environmental problems, IUC continues to evaluate ways to maximize the value of
this asset.
IUC has invested several hundred thousand dollars upgrading the Mill since
acquiring it in 1997. During the year, the Mill's Semi-Autogenous Grind (SAG)
mill was relined and the vanadium circuit was refurbished in anticipation of
processing conventional Colorado Plateau ores during the third and fourth fiscal
quarters of 1999.
Alternate Feeds
IUC has demonstrated that processing conventional ores is not the only way to
produce uranium. Under IUC's Source Material License issued by the U.S. Nuclear
Regulatory Commission (NRC), IUC has the right to process not only conventional
ore to recover uranium but also to process alternate feed materials. Alternate
feeds are uranium-bearing byproduct materials from other processing facilities
and are usually classified as waste products to the generators of the materials.
By recycling alternate feeds, IUC can, in some cases, recover uranium at a
fraction of the cost of processing conventional ores. In other cases, IUC is
paid a fee to recycle the alternate feed materials to recover uranium, or other
metals, and dispose of the remaining byproduct in our tailings cells. By working
with IUC through recycling, the suppliers of alternate feed materials can
significantly reduce their remediation costs, as there are only a limited number
of disposal sites for uranium-bearing materials in the United States.
During fiscal 1998, IUC completed the processing of 16,000 tons of
uranium-bearing tantalum residues. This project has opened the door for other
tantalum and rare earth producers who have similar uranium-bearing ores to
process. IUC also concluded a long-term contract with a major uranium producer
to receive and process alternate feeds beginning in 1999. These alternate feed
ores contain, on average, anywhere from 1% to 7% natural uranium and will
provide IUC with a source of relatively low-cost uranium over the next several
years.
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Clockroom photo
Page 9, Processing con't
Alternate feed materials are not just limited to private industry. The federal
government has recognized the importance of recycling through Congressional and
regulatory mandates encouraging the use of recycling. In the case of the U.S.
Army Corps of Engineers, they have responsibility for the remediation of what
are known as FUSRAP sites (Formerly Utilized Remedial Action Program), or former
defense sites. There are several of these FUSRAP sites across the U.S. that,
together, will need to have millions of tons of uranium-bearing soil excavated
and then transported to either a disposal facility or to a recycling and
disposal facility, like the White Mesa Mill. This past year, USACE awarded the
first contract to recycle FUSRAP materials to IUC. The contract was for the
Ashland 2 site, located near Buffalo, New York. The use of IUC's innovative
recycle and disposal option can result in savings of up to 75% over the cost of
using a disposal-only alternative. The recycling option is also environmentally
superior to the disposal-only option, as radioactive uranium is removed from the
materials before final disposal.
IUC continues to expect that the development of the business of recycling
uranium-bearing waste materials will result in a profitable, stand-alone
business for IUC. As noted above, there are millions of tons of this type of
material in the U.S., enough to keep the White Mesa Mill operating at capacity
for the foreseeable future.
Photo of Sag Mill.
<PAGE> 12
Globe Graphic
Page 10
Photo of Man drilling in mine.
MINING OPERATIONS
IUC has adopted a flexible and pragmatic approach to ore production, taking into
account delivery commitments, market conditions and mining economics for
specific deposits. By continually monitoring production costs and maintaining
tight operational controls, IUC can cut back operations quickly if market
conditions do not support continued economic operations. And, since many of the
Company's mines on standby are in a developed or partially developed stage, IUC
has the ability to ramp up production quickly, if warranted. The Company's
prospective mining properties are diverse, incorporating both conventional and
in situ leach mining methods.
Conventional Mining
IUC's reserves that are mineable by conventional underground methods include
properties in the Colorado Plateau and the Arizona Strip uranium districts of
the United States. The Colorado Plateau properties are characterized by
uranium-bearing ores that are also rich in vanadium, which is produced as a
co-product to uranium. Deeper, breccia pipe-type deposits characterize the
Arizona Strip properties. The grade of uranium found in this type of deposit is
typically between 0.5 and 1.0% uranium, significantly higher than the average
grade of uranium found in the U.S. today.
IUC commenced mining operations at the Company's Sunday Mine Complex in the
Colorado Plateau in late 1997 and, shortly thereafter in January 1998, at the
Rim Mine. Ore grades from these mines average 0.25% for uranium and 1.60% for
vanadium. The Company has been stockpiling ore from these mines, along with ore
purchased from independent producers, in anticipation of commencing conventional
ore processing at the White Mesa Mill in the third or fourth quarter of fiscal
1999. In total, over 60,000 tons of ore have been stockpiled through the end of
1998, containing approximately 280,000 pounds of recoverable uranium
concentrates and 2 million pounds of vanadium pentoxide.
Photo of man in tractor.
<PAGE> 13
IN MEMORIAM
While we take every effort to ensure that our employees have the safest possible
work environments, we also recognize the inherent dangers associated with mining
operations. This past September, we lost Jimmy D. Dial, a friend and employee,
in an unavoidable and tragic accident at our Sunday Mine. All of the employees
at IUC extend their sorrow to Jimmy's friends and family. His presence will be
truly missed.
Underground mining photograph.
Total ore production for fiscal 1998 was lower than originally projected. While
production from Company mines was on target, the ore purchased from independent
miners in the area was far below expectations. IUC had expected that many small
miners would recommence production operations and sell their ore to the Company,
providing additional feedstock for the Mill. Unfortunately, new environmental
and regulatory licensing requirements combined with weak commodity prices forced
several independent operators who had planned to open their mines to re-evaluate
doing so.
In Situ Leach Mining
IUC's portfolio of future mining projects includes not only conventional mines
but in situ leach mines, as well. This environmentally friendly solution mining
method utilizes naturally occurring groundwater, fortified with oxygen, to
mobilize the uranium contained in the geologic formation. That fluid is then
pumped to the surface for further processing. This groundwater is then recycled
back through the deposit, resulting in minimal environmental intrusion and
reclamation requirements.
Most of the uranium production in the U.S. today is done by the in situ leach
solution mining technique. IUC's Reno Creek property in Wyoming and
Dewey-Burdock property in South Dakota are properties with uranium deposits
amenable to this mining method. During fiscal 1998, permitting work continued on
the Reno Creek property. While IUC had expected to have completed the permitting
process by the end of the fiscal year, regulatory changes have moved the
expected permitting completion date into the fall of 1999.
Photo of men w/uranium.
<PAGE> 14
Globe Graphic
Page 12
MONGOLIA
Encompassing an area approximating one million square miles, the Republic of
Mongolia is located between China and the Russian Federation. Once home to the
great ruler and conqueror, Genghis Khan, modern-day Mongolia has embarked on a
national program to provide economic growth through reasoned development of its
vast endowment of natural resources, including uranium. Recognizing the crucial
role of western investment, the Mongolian government has established a
foundation of mineral laws and regulations based principally on the United
States model. Great effort has been made to shape mining laws in a rapidly
changing environment to encourage foreign interest in this countryOs vast
natural resources.
IUC is conducting a large uranium exploration program in the south central
region of Mongolia through its 70% interest in the Gurvan Saihan Joint Venture.
The Joint Venture, which also includes the Mongolian government (15%) and
Geologorazvedka (15%), a Russian geological concern, has an exclusive
exploration concession comprising over 4 million acres in 12 separate target
areas. One of the largest uranium exploration programs in Mongolia, the Joint
Venture was recognized during the past year by the Mongolian Ministry of
Agriculture and Industry as "The Best Investor in the Minerals Sector for
1997-1998."
Photo of facility in Mongolia.
<PAGE> 15
Photo of insidefacility at Mongolia.
The Joint Venture's 1998 field program included 53,000 meters of both
delineation and reconnaissance drilling. Primary objectives of this year's
program consisted of expanding and further delineating the main deposit
discovered last year at Hairhan, as well as conducting reconnaissance drilling
on other target areas. This drilling added 5.5 million pounds of uranium
resources to the Hairhan deposit, bringing total resources in the area to over
16 million pounds U3O8. Including drilling results from all target areas, the
Gurvan Saihan Joint Venture now has total resources of over 23 million pounds of
uranium which are amenable to low cost, in situ leach mining methods.
The Joint Venture also conducted a leach amenability test on the Hairhan deposit
during 1998 to confirm the suitability of the deposit to in situ leach
techniques. The test results were very positive and provided necessary technical
data for the design of a commercial mining facility in the future.
Declining uranium prices throughout 1998 have required IUC to reduce the level
of its exploration drilling budget in Mongolia for fiscal 1999. Extensive
drilling programs performed in 1997 and 1998 have generated valuable and unique
data which will be further studied in 1999 to expand the inventory of favorable
exploration targets for future programs. Production cost models will also be
evaluated to refine estimated costs for future production plans in Mongolia.
Photo of Family in Mongolia.
Photo of man cleaning equipment.
<PAGE> 16
Globe Graphic
Page 14
Photo of Women in lab.
REGULATORY AND ENVIRONMENT
Corporate Commitment
IUC is committed to the operation of its facilities in a manner that puts the
safety of its employees, its community and the environment above all else. We
believe that every task should be performed with a shared concern for the safety
of our fellow employees, contractors, visitors, customers and the communities
where we operate. Whenever issues of safety conflict with other corporate
objectives, safety shall be our first consideration.
Processing
IUC's operations at the White Mesa Mill are part of a highly regulated industry
principally governed by the U.S. Nuclear Regulatory Commission (NRC). The Mill
has a well-established relationship with the NRC dating back nearly 20 years,
since the Mill was constructed in 1980. During that time, the White Mesa Mill
has received and processed conventional ores and alternate feeds for the
recovery of uranium and disposed of the resulting byproducts under the Mill's
Source Material License issue by the NRC. The Company continues to work closely
with federal, state and local regulators as well as the public to ensure the
strictest of compliance under the regulations set forth in our license.
IUC believes that protection of groundwater is vital. The Mill's tailings cells
were designed with synthetic liners to contain any liquid, and are sited in such
a way that no potential seepage from the tailings cells is likely to ever reach
the underlying regional aquifer. In addition, a thin, perched zone of poor
quality groundwater rest on top of 1200 feet of dense shale, which seperates the
regional aquifer from this perched zone. We follow an NRC-approved groundwater
monitoring program in which we monitor this perched zone to provide early
detection of seepage from the tailings cells, if any. After 18 years of
continuous monitoring, there has been no evidence that there have been any
releases to the perched zone, much less the regional aquifer.
Illustrated diagram of Tailings Cell.
<PAGE> 17
Photo of aerial of White Mesa Mill.
Stakeholder Awareness is a critical issue for nuclear industry participants. IUC
took steps this past year to raise the level of public awareness, education and
involvement in its operations by developing a quarterly newsletter called the
Rumor Mill. This publication provides information about regulatory issues,
environmental news, general operations and recent and future events. Public
outreach programs, like the Rumor Mill, are designed to promote awareness of
IUC's operations and help reduce any concerns of the community due to
insufficient information, or misinformation generated.
Mining
IUC's mines continue to operate under close scrutiny from federal and state
regulators, including the State of Colorado Mined Land Reclamation Board, the
State of Utah Division of Oil, Gas and Mining, and the Arizona Department of
Environmental Quality. Our mines are also regularly inspected by the Mine Safety
and Health Administration.
Mongolia
Environmental protection and restoration procedures are practiced in the
exploration and field testing being done in Mongolia. Prior to conducting any
drilling, establishing fixed camps, or assembly of in situ leach test
facilities, meetings are held to obtain approval of local environmental
authorities. After completion of field work, follow up inspections are conducted
to obtain approval of surface reclamation and restoration. The Gurvan Saihan
Joint Venture enjoys strong support from local authorities and has established
an image as a careful and conscientious neighbor concerned about protecting the
unique environment of Mongolia.
Photo of Canyon and tree.
Photo of canyon.
<PAGE> 18
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Page 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Amounts in U.S. Dollars unless otherwise stated)
The following discussion and analysis of the financial condition and results of
operation for International Uranium Corporation (IUC) for the fiscal year ending
September 30, 1998 should be read in conjunction with the consolidated financial
statements and related notes therein. The consolidated financial statements are
prepared in accordance with generally accepted accounting principles in Canada.
Results of Operations
International Uranium Corporation completed its first full fiscal year on
September 30, 1998. Net income for the year was $1,617,331 which was
approximately $0.02 per share (approximately Cdn$0.04 per share). During the
year, IUC had total sales of $32,940,876. Of these revenues, $19,890,300 was
from sales of uranium (60%) and $13,050,576 (40%) was derived from IUC's process
milling of alternate feeds. Approximately 62% of total revenues were from three
major customers, one of which accounted for 37% of total revenues.
These results are significantly higher than the corresponding results for the
fiscal period ended September 30, 1997, where IUC had net income of $18,694
resulting from revenues of $523,865. Although IUC was formed on October 3, 1996,
its primary operating activities did not commence until after the purchase of
Energy Fuels' assets in May 1997. IUC had no sales of uranium for the year
ending September 30, 1997, and its $523,865 of process milling revenues were
derived from the startup of a major alternate feed processing run which was
completed during the fiscal year ending in September 1998.
The spot market value of uranium (value reflected in contracts with a single
delivery which generally call for material to be delivered within a one-year
period) began the fiscal year at $11.00 per pound U308, rose to $12.75 in
November, then declined during the remainder of the fiscal year to $9.75 in
September. The base market price for long-term contracts (contracts which call
for deliveries in multiple future years) was approximately $11.10 per pound U308
in September 1998.
Of IUC's 1998 uranium sales, approximately 84% of the material was sourced from
uranium purchases and 16% of the material was produced from IUC's alternate feed
production. The $19,890,300 of uranium sales proceeds resulted from seven
separate sales transactions. Approximately 41% of the sales revenues (24% of the
material delivered) arose from long-term contracts and the balance was from
transactions in the spot market. The cost of uranium sold was $17,829,592
resulting in gross profits of $2,060,708.
IUC's $13,050,576 of alternate feed revenue consisted of $12,304,604 which was
derived from the processing of alternate feed containing uranium, tantalum, and
niobium from a single customer. This particular alternate feed run required
extensive design and engineering work, along with certain circuit modifications,
which were more than originally contemplated. Therefore, this processing run
took considerably longer to complete than planned. Additionally, IUC was
expecting to achieve more satisfactory recoveries at lower costs than those
actually achieved. Even though these complexities caused results to not be as
favorable as originally projected, IUC's alternate feed activities were
profitable. IUC's processing costs relating to alternate feeds totalled
$10,066,538 for 1998 resulting in a gross profit of $2,984,038.
Selling, general and administrative expenses for 1998 totalled $3,580,149,
compared to $1,008,012 in 1997. The increase was due to IUC expanding to a full
operating status during 1998, along with the fact that the 1997 expenses only
reflect approximately five months of activity. Depreciation and amortization
expense was $734,267 in 1998, compared to $41,387 in 1997. Interest income and
other income increased to $1,128,562 in 1998 from $781,947 in 1997. These total
revenues and expenses resulted in net income before taxes of $1,858,892 in 1998
compared to $18,694 in 1997.
A $241,561 provision for taxes is shown for 1998. No provision was necessary in
1997. The 1998 provision is lower than the amount that would normally be
applicable should the combined federal and provincial expected tax rate be
applied to 1998 net income before taxes of $1,858,892 primarily due to lower
rates on certain income IUC received from its United States operations during
the period. It is not anticipated that these lower rates will be available in
the future.
The above resulted in 1998 net income of $1,617,331 compared to 1997 net income
of $18,694.
IUC continued mining uranium and vanadium bearing ores from its Sunday and Rim
Mine complexes in the Colorado Plateau District of western Colorado and eastern
Utah. To supplement its own production, IUC also commenced an "Ore Purchase
Program", buying ore from other independent miners in the district. Ore from
IUC's mines and purchased ore is being delivered and stockpiled at IUC's White
Mesa Mill where it will be processed in 1999. These ore stockpiles have been
included in IUC's inventory as of September 30, 1998, at a cost of $3,117,441.
These ore stockpiles contain approximately seven pounds of vanadium for each
pound of uranium. Thus at year end values, vanadium accounted for approximately
70% of the revenue potential from these stockpiles. IUC has been able to produce
ore from its Sunday and Rim Mines at costs within its forecast budget and at
satisfactory production levels.
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont.)
However, the amount of ore supplied via the ore purchase program has been
significantly below projections. Independent miners have had difficulty in
arranging the capital necessary to re-establish their mining properties and have
faced delays in completing regulatory and environmental licensing requirements.
IUC continued development work on certain of its mining properties including
continued underground drift development of its Topaz Mine. IUC renewed the
application and review process for a permit to mine from the Wyoming Department
of Environmental Quality and for a source material license from the Nuclear
Regulatory Commission for the Reno Creek in-situ leach project located in the
Powder River Basin of Wyoming. This review process is expected to be completed
in 1999. IUC's investment and development expenditures on its U.S. mining
properties totalled $1,895,814 in 1998. This compares with the approximately
$729,000 that was expended in 1997 for the period after purchase of the assets
in May through September 30,1997.
The Gurvan Saihan Joint Venture, IUC's uranium development and exploration
program in Mongolia, completed its 1998 drilling program and leach amenability
testing with favorable results. The Joint Venture has now delineated over 22.5
million pounds of uranium resources for this program. Total expenditures by IUC
relating to this Joint Venture were $3,209,363 in 1998, compared to the
$1,191,525 expended after the purchase of the Joint Venture interest in May and
continuing through September 30, 1997.
IUC continued to increase its focus on acquiring and processing alternate feeds
during the year. This resulted in IUC successfully contracting to receive and
process over 41,000 cubic yards of material from a former defense, or FUSRAP
(Formerly Utilized Sites Remedial Action Program) site near Tonawanda, New York.
Shipments of material commenced in the fourth quarter of IUC's fiscal year and
successful processing was substantially completed in the first quarter of fiscal
1999.
Capital Resources and Liquidity
IUC's working capital at September 30, 1998 was $20,298,166, of which $6,282,275
consisted of cash and cash equivalents. This compares to September 30, 1997
working capital of $24,283,678, of which $13,953,355 consisted of cash and cash
equivalents. Income from operations, after adjustments for expenses not
affecting cash (depreciation, amortization of contract purchase costs, and
other), provided $3,887,429 of cash compared to $267,766 in 1997. However, net
cash used by operations increased from $3,163,190 in 1997 to $5,178,612 in 1998,
primarily due to the utilization of cash to reduce short-term liabilities during
the year. IUC has also continued to utilize cash to increase its inventory
levels. This inventory increase is primarily due to IUC's ore stockpiles which
will be processed during the next year.
Expenditures for property, plant and equipment totaled $3,812,556, of which
$2,204,791 represents improvements and circuit modifications at the Mill to
allow for more efficient ore and alternate feed processing. Investments in the
Gurvan Saihan Joint Venture totaled $3,209,363.
IUC is projecting fiscal year 1999 expenditures for property, plant and
equipment of approximately $2,300,000, of which $1,250,000 will be for further
improvements at the Mill. Expenditures on the Mongolia mineral properties are
projected to be $1,300,000. Additionally, IUC is projecting to purchase
approximately $7,950,000 of uranium next year under a long-term purchase
contract at prices approximating the then current spot price. These purchases
will be utilized for delivery under its current sales contracts or future
contracts depending on IUC's uranium production levels. IUC is anticipating
funding these outlays from current operations and working capital (which is
sufficient to cover these planned expenditures). Nevertheless, IUC is
considering the possibility of negotiating and having available a short-term
revolving credit facility during the coming fiscal year to assist and supplement
inventory and project financing, in addition to providing short-term cash
flexibility, as necessary.
Environmental Responsibility
Each year, IUC reviews the anticipated costs of decommissioning and reclaiming
its mill and mine sites as part of its environmental planning process. These
estimated costs are also formally reviewed by IUC when it submits license
renewal applications to regulatory authorities. Based on this review, it was
determined that IUC's estimated reclamation obligation of $13,265,700 is
currently sufficient to cover these projected future costs.
IUC has also posted bonds securing these liabilities and has deposited
marketable securities on account of these obligations. The amount of these
restricted marketable securities collaterallizing IUC's reclamation obligation
was $8,300,375 at September 30, 1998.
<PAGE> 20
Globe Graphic
Page 18
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont.)
1999 Fiscal Year Outlook
IUC's profitability is highly dependent upon uranium and vanadium prices. These
commodity prices both softened considerably in the last half of fiscal 1998 and
have continued to fall. As mentioned above, uranium spot prices began the year
at $11.00 per pound U308, rose to $12.75 then declined to $9.75 in September.
Subsequent to year-end, the price continued to fall to $8.75 per pound U308
prior to recovering to $10.50 in January 1999. Vanadium prices began the year at
approximately $4.10 per pound V205, rose to approximately $6.70 in the early
summer and then declined to approximately $5.70 by the end of September. Since
year-end, the vanadium price declined significantly to approximately $2.80 per
pound V205. Most market analysts are expecting a rebound in the vanadium prices
during 1999; however, they do not expect to see the high price levels that were
experienced during 1998. The uranium market continues to face uncertainty,
particularly over the impact of new supply sources, such as highly enriched
uranium from Russia and U.S. government stockpiles and the potential sale of 62
million pounds from uranium inventories held by USEC, Inc. through 2005. Due to
these uncertainties, IUC has discontinued further development of its Topaz Mine
until prices recover. Should the spot prices for both uranium and vanadium
remain depressed, IUC will re-evaluate its current mining operations and other
properties in order to determine the appropriate level of future production and
development. Although IUC has deliveries scheduled under its current contracts
in 1999, any additional sales revenue will be dependent on market prices and new
demand. To mitigate this exposure in future years, IUC will continue its focus
on long-term contracts.
In order to lessen its dependence on these commodity prices, IUC continues to
expand its alternate feed processing activities. With the expansion of the
alternate feed business, IUC is faced with continued regulatory review and third
party challenges with respect to receiving the required approvals and license
amendments for each alternate feed project. IUC could be unsuccessful in
acquiring the necessary approvals or in defending itself against such challenges
to these license amendments. Additionally, processing these materials could
require different procedures for each type of material depending on its
composition. These efforts will increase IUC's costs relating to processing
alternate feeds; however, IUC believes that alternate feed processing will
provide significant future profits.
IUC anticipates processing alternate feeds at the White Mesa Mill through the
first half of fiscal year 1999. IUC will then either process its conventional
ores or process alternate feeds from proposed future transactions which are
currently being pursued. The processing order of these runs will be dependent on
future market values, the amount of conventional or alternate feed ore available
at the White Mesa Mill, the profitability of each run, and other operating
factors.
IUC will continue its current mining efforts as long as market prices remain at
a level that supports such activity. Should prices continue to decline, IUC
could place its mining properties in a care and maintenance status in order to
reduce development and production expenditures. This will enable IUC to conserve
its working capital and maintain its reserve position while preserving the
opportunity for IUC to benefit from any future price recovery.
Risks and Uncertainties
Year 2000
This risk involves the potential for IUC's operations to be disrupted by the
failure of computer systems, which were not designed to function using dates for
the new century. IUC has completed initial reviews to assess the risks of Year
2000 compliance and has developed and implemented plans for making necessary
program conversions and software upgrades.
These steps will be continued in 1999 in order to finalize adjustment plans,
implement required changes, and complete necessary compliance testing. Expenses
related to Year 2000 compliance are not expected to be material to IUC's
financial results or condition. Note that it is not possible to be certain that
all aspects of the Year 2000 issue affecting IUC, including those related to the
efforts of customers, suppliers, or other third parties, will be fully resolved.
Cautionary Note Regarding Forward-Looking Statements
IUC wishes to caution readers that disclosures made in the foregoing
Management's Discussion and Analysis and elsewhere in this annual report which
are not historical facts are forward-looking statements that involve risks,
uncertainties and other factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements.
Such factors that affect IUC's results and the above discussion of the 1999
outlook include, but are not limited to, volatility and sensitivity to market
prices for uranium and vanadium, competition, environmental regulations, 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, dependence on a
limited number of customers, replacement of reserves and production, receipt of
permits and approvals from governmental authorities (including amendments for
each alternate feed transaction) and other operating and development risks.
As a result of the foregoing and other factors, no assurance can be given as to
the future results, levels of activity and achievement.
<PAGE> 21
MANAGEMENT'S REPORT TO THE SHAREHOLDERS
The accompanying consolidated financial statements have been prepared by
Management in accordance with generally accepted accounting principles in
Canada.
Management is responsible for ensuring that these statements, which include
amounts based upon estimates and judgement, are consistent with other
information and operating data contained in the annual report and reflect the
corporation's business transactions and financial position.
Management maintains accounting and internal control systems designed to
safeguard assets and to properly record and execute transactions. The accounting
and internal systems are utilized to provide reasonable assurance of compliance
with Company policies and procedures and the safeguarding of assets. Management
has also adhered to policies regarding compliance with laws and governmental
regulations. Judgements are required to assess and balance the relative costs
and expected benefits of these controls.
The Company's independent auditors, PricewaterhouseCoopers LLP, whose report on
their examination follows, have audited the consolidated financial statements in
accordance with generally accepted auditing standards.
The Board of Directors pursues its responsibility for these financial statements
through its Audit Committee, which meets periodically with management and the
independent auditors, to assure that each is carrying out its responsibilities.
The independent auditors meet with the Audit Committee with and without
management representatives present to discuss the scope and results of their
audit, their comments on the adequacy of accounting controls, and the quality of
financial reporting.
/s/ Earl E. Hoellen /s/ Thad L. Meyer
Earl E. Hoellen Thad L. Meyer
President and Vice President, Finance and
Chief Executive Officer Chief Financial Officer
November 27, 1998
<PAGE> 22
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Page 20
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of International Uranium
Corporation as at September 30, 1998 and 1997 and the consolidated statements of
operations and retained earnings, and cash flow for the periods then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 30,
1998 and 1997, and the results of its operations and the changes in its cash
flow for the periods then ended in accordance with generally accepted accounting
principles in Canada.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Vancouver, Canada
November 27, 1998
<PAGE> 23
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(United States Dollars)
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
assets
Current assets:
Cash and cash equivalents $ 6,282,275 $13,953,355
Marketable securities 11,731 39,978
Trade and other receivables 2,979,600 63,198
Inventories (Note 3) 12,481,713 10,113,853
Notes receivable (Note 4) -- 4,791,513
Favorable uranium sales contracts (Note 5) 729,730 1,270,270
Prepaid expenses and other 188,532 433,497
- --------------------------------------------------------------------------------
22,673,581 30,665,664
Properties, plant and equipment, net (Note 6) 13,516,937 10,858,679
Mongolia mineral properties (Note 7) 9,500,932 6,191,525
Notes receivable 203,538 206,142
Restricted marketable securities (Note 8) 8,300,375 7,945,356
Favorable uranium sales contracts,
net of current protion -- 729,730
Goodwill and other, net 575,351 603,243
- --------------------------------------------------------------------------------
$54,770,714 $57,200,339
================================================================================
liabilities
Current liabilities:
Accounts payable and accrued liabilities $ 1,761,841 $ 961,865
Inventory purchases -- 5,050,000
Notes payable 37,963 9,537
Deferred revenue 575,611 210,185
Due to related parties (Note 14) -- 150,399
- --------------------------------------------------------------------------------
2,375,415 6,381,986
Notes payable, net of current portion 54,172 19,962
Reclamation obligations (Note 9) 13,265,700 13,265,700
- --------------------------------------------------------------------------------
15,695,287 19,667,648
- --------------------------------------------------------------------------------
shareholders' equity
Share capital (Note 10) 37,439,402 37,513,997
Retained earnings 1,636,025 18,694
- --------------------------------------------------------------------------------
39,075,427 37,532,691
- --------------------------------------------------------------------------------
$54,770,714 $57,200,339
================================================================================
</TABLE>
On behalf of the Board
/s/ Earl E. Hoellen /s/ Lukas H. Lundin, Director
Earl E. Hoellen, Director Lukas H. Lundin, Director
<PAGE> 24
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Page 22
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(United States Dollars)
<TABLE>
<CAPTION>
Period from
Incorporation
Year Oct. 3, 1996,
Sept. 30, 1998 to Sept. 30, 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
operations
Revenue
Uranium sales $ 19,890,300 $ --
Process milling 13,050,576 523,865
- ----------------------------------------------------------------------------------------
Total revenue 32,940,876 523,865
- ----------------------------------------------------------------------------------------
Costs and expenses
Uranium cost of sales 17,829,592 --
Process milling expenditures 10,066,538 237,719
Selling, general and administrative 3,580,149 1,008,012
Depreciation 734,267 41,387
- ----------------------------------------------------------------------------------------
32,210,546 1,287,118
- ----------------------------------------------------------------------------------------
Operating income (loss) 730,330 (763,253)
Net interest and other income 1,128,562 781,947
- ----------------------------------------------------------------------------------------
Net income before taxes 1,858,892 18,694
Provision for income taxes (Note 11) 241,561 --
- ----------------------------------------------------------------------------------------
Net income for the period $ 1,617,331 $ 18,694
========================================================================================
Net income per common share $ 0.02 $ --
========================================================================================
retained earnings
Retained earnings, beginning of period 18,694 --
Net income 1,617,331 18,694
- ----------------------------------------------------------------------------------------
Retained earnings, end of period $ 1,636,025 $ 18,694
========================================================================================
</TABLE>
<PAGE> 25
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(United States Dollars)
<TABLE>
<CAPTION>
Period from
Incorporation
Year Oct. 3, 1996,
Sept. 30, 1998 to Sept. 30, 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
cash provided by (used in)
Net income for the period $ 1,617,331 $ 18,694
Items not affecting cash
Depreciation and amortization 734,267 41,387
Gain on sale of equipment (99,865) (2,500)
Amortization of uranium sales
contract purchase cost 1,270,270 --
Increase in deferred revenue 365,426 210,185
- ------------------------------------------------------------------------------------------
3,887,429 267,766
Changes in non-cash working capital items
Decrease in marketable securities 28,247 17,334
Increase in trade and other receivables (2,916,402) (63,198)
Increase in inventories (2,019,516) (9,113,859)
Decrease (increase) in other current assets 242,053 (433,497)
(Decrease) increase in liability
for inventory purchases (5,050,000) 5,050,000
Increase in other accounts payable
and accrued liabilities 799,976 961,865
(Decrease) increase in due to related parties (150,399) 150,399
- ------------------------------------------------------------------------------------------
Net cash used by operations (5,178,612) (3,163,190)
==========================================================================================
investing activities
Properties, plant and equipment (3,812,556) (2,679,149)
Mongolia mineral properties (3,209,363) (1,191,525)
Proceeds from sale of surplus equipment 102,310 2,500
Notes receivable -- (856,892)
Collection of notes receivable 4,794,117 3,028,380
Increase in restricted marketable securities (355,020) (7,945,356)
Acquisition of Energy Fuels, net of
cash received -- (10,081,071)
Acquisition of Thornbury Capital Corp,
net of cash received -- (673,282)
- ------------------------------------------------------------------------------------------
Net cash used in investment activities (2,480,512) (20,396,395)
==========================================================================================
financing activities
Stock purchased for retirement (74,595) --
Increase (decrease) in notes payable 62,639 (1,057)
Common shares issued for cash, net -- 36,690,454
Common shares issued on amalgamation -- 823,543
- ------------------------------------------------------------------------------------------
Net cash (used in) provided
by financing activities (11,956) 37,512,940
==========================================================================================
(Decrease) increase in cash and cash equivalents (7,671,080) 13,953,355
Cash and cash equivalents, beginning of period 13,953,355 --
- ------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 6,282,275 $ 13,953,355
==========================================================================================
</TABLE>
<PAGE> 26
Globe Graphic
Page 24
INTERNATIONAL URANIUM CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1998 and 1997
(United States Dollars)
1. Organization and Nature of Operations
International Uranium Corporation (the "Company") was originally incorporated as
a private company on October 3, 1996 under the laws of the province of Ontario.
In May 1997, the Company achieved public company status and began trading on the
Toronto Stock Exchange utilizing the symbol OIUCO. Headquartered in Denver,
Colorado, the Company is engaged in the business of producing uranium
concentrates and the selling and trading of these concentrates in the
international nuclear fuel market. In addition, the Company also produces and
sells vanadium, as well as other minerals that can be produced as a co-product
with uranium.
The Company continues to produce ore at its Sunday Mine Complex in Colorado and
the Rim Mine in Utah. The Company also has several partially developed mines and
numerous targeted mines and exploration properties within the states of
Colorado, Utah, Arizona, Wyoming and South Dakota, as well as a 70% joint
venture interest in an exploration project in central eastern Mongolia.
Additionally, the Company owns the 2,000 ton per day White Mesa Mill (the
"Mill") near Blanding, Utah. The Mill is used to process the Company's mined ore
along with ore purchased or toll milled from other independent mines. The Mill
is also used to process alternate feeds, which generally are ores or residues
from other processing facilities that contain uranium in quantities or forms
that are either uneconomic to recover or cannot be recovered at these other
facilities, but can be economically recovered at the Mill.
2. Significant Accounting Policies
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada.
a) Use of estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires the Company's management to make estimates and
assumptions that affect the amounts reported in these
financial statements and notes thereto. Actual results could
differ from those estimated.
b) Basis of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, International
Uranium Holdings Corporation, International Uranium Alberta
Corporation, International Uranium (Bermuda) Ltd.,
International Uranium Company (Mongolia) Ltd., and
International Uranium (USA) Corporation.
c) Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit and
highly liquid short-term interest bearing securities.
d) Marketable securities and restricted short-term investments
Marketable securities and restricted short term investments
are valued at the lower of cost or market value.
<PAGE> 27
e) Inventories
Inventories of ore stockpiles, uranium concentrates and
refined and converted products are valued at the lower of cost
or net realizable value. Consumable supplies and spares are
valued at the lower of weighted average cost or replacement
value.
f) Properties, plant and equipment
Mineral properties, plant and equipment are recorded at cost.
Mineral properties are depleted by the units-of-production
method based on ore reserves. Plant and equipment are
depreciated on a straight-line basis over their estimated
useful lives from three to fifteen years.
g) Exploration properties
The Company defers the property acquisition costs and ongoing
exploration expenditures on properties still in the
exploration stage and carries these as assets until the
results of the exploration projects are known. If a project is
successful, the cost of the property and the related
exploration and development expenditures will be amortized
over the life of the property utilizing the
units-of-production method. If a project is unsuccessful, the
mining property and the related exploration expenditure are
written off.
h) Environmental protection and reclamation costs
The estimated costs for decommissioning and reclaiming
producing mineral properties, plant and equipment acquired by
purchase have been fully accrued on an undiscounted basis.
Estimated costs of decommissioning and reclamation associated
with newly acquired or developed mineral properties, plant and
equipment, as well as revised regulatory requirements are
accrued through periodic charges to earnings, on the
units-of-production basis in the case of mine costs or on the
straight line basis in the case of mill costs. Actual costs of
decommissioning and reclamation incurred at the time of
closure are deducted against this accrual.
Environmental costs not associated with the decommissioning or
reclamation of producing mineral properties, plant and
equipment are capitalized as property, plant and equipment
costs where they result in the betterment of an asset, or
expensed as incurred in all other circumstances.
i) Foreign currency translation
These consolidated financial statements are denominated in
United States dollars, the Company's functional currency.
Substantially all of the Company's assets and operations are
located in the United States, with the exception of the
Gurvan-Saihan Joint Venture (Note 7). The majority of its
costs are denominated in United States dollars and all of its
products for sale are priced in United States dollars.
Amounts denominated in foreign currencies are translated into
United States dollars as follows:
a) Monetary assets and liabilities at the rates
of exchange in effect at balance sheet
dates;
b) Non-monetary assets at historical rates;
c) Revenue and expense items at the average
rates for the period.
The net effect of the foreign currency translation is included
in the statement of earnings.
<PAGE> 28
Globe Graphic
Page 26
j) Net earnings per share
Net earnings per common share is determined using the weighted
average number of shares outstanding during the year, which
for the year ending September 30, 1998 was 65,698,048 shares
and for the period ending September 30, 1997 was 42,067,497
shares.
k) Goodwill
Goodwill is amortized on a straight-line basis over twenty
years.
l) Revenue recognition
In accordance with normal industry practices, the Company
contracts for future delivery of uranium produced. Sales
revenue is recorded in the period that title passes to the
customer.
Process milling fees are recognized as the applicable material
is processed, in accordance with the specifics of the
applicable processing agreement.
Deferred revenues represent processing proceeds received in
advance of the required processing activity.
3. Inventories
<TABLE>
<CAPTION>
September 30, 1998 September 30, 1997
---------------------------------------------------------------------------------
<S> <C> <C>
Uranium Concentrates $ 7,838,433 $ 8,935,544
Ore Stockpiles 3,117,441 --
In Process 79,600 181,797
Parts & Supplies 1,446,239 996,512
---------------------------------------------------------------------------------
$ 12,481,713 $ 10,113,853
=================================================================================
</TABLE>
4. Notes Receivable -- Short Term
Amount represented the balance of an outstanding promissory note to the Company
from Union Carbide Corporation which bore interest at the U.S. prime rate. The
note, plus accrued interest, was payable in monthly installments and was paid
off in its entirety in May 1998. The balance as of September 30, 1997 was
$4,791,513.
5. Favorable Uranium Sales Contracts
As part of the Energy Fuels assets (Note 12), the Company acquired uranium
supply contracts with certain utilities. At the time of the Energy Fuels
purchase, the value of these contracts was determined to be $2,000,000 based on
the excess of the sales price over the market value of the uranium to be
delivered. Of this value, $1,270,270 related to the deliveries to be made in the
first quarter of the year ended September 30, 1998, and $729,730 relates to
deliveries in the first quarter of the year ending September 30, 1999.
6. Properties, Plant and Equipment
<TABLE>
<CAPTION>
Accumulated
Depreciation Sept. 30, 1998 Sept. 30,1997
Cost & Depletion Net Net
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mill Buildings
& Equipment $ 5,044,364 $ 666,215 $ 4,378,149 $ 3,241,630
Other Machinery
& Equipment 2,811,926 427,465 2,384,461 2,461,021
Mining Properties 7,054,197 299,870 6,754,327 5,156,028
-----------------------------------------------------------------------------------
$ 14,910,487 $ 1,393,550 $ 13,516,937 $ 10,858,679
===================================================================================
</TABLE>
<PAGE> 29
Depreciation and depletion totaled $1,189,203 for the year ending September 30,
1998 of which $506,096 is included in inventory and mineral properties at
year-end. For the period ending September 30, 1997, depreciation and depletion
totaled $236,897 of which $208,237 was included in inventory and mineral
properties.
7. Mongolia Mineral Properties
Mongolia mineral properties are made up of the Company's 70% interest in the
Gurvan-Saihan Joint Venture (the "Venture") which holds nine uranium exploration
areas covering 14,700 square kilometers in central eastern Mongolia. The other
parties of the Venture are the Mongolian government as to 15% and
Geologorazvedka, a Russian geological concern, as to 15%. A royalty in the
amount of 4% is payable to the Mongolian government. The Company has
proportionately consolidated its 70% interest in the Venture, which is
substantially represented by Mongolia mineral properties. To date the Company
has funded all expenditures and expects to do so for the foreseeable future.
8. Restricted Marketable Securities
Amounts represent marketable securities the Company has placed on deposit in
favor of a bonding company to secure its reclamation bonds (Note 9).
9. Provision for Reclamation
As part of the acquisition of Energy Fuels (Note 12), the Company assumed
responsibility for the environmental and reclamation obligations of Energy Fuels
relating to all existing mines and the Mill, as well as for all reclamation and
environmental obligations associated with mined out, inactive, reclaimed or
partially reclaimed mines and properties, that were so acquired.
The total amount of the reclamation liability has been estimated by the Company
at $13,265,700. The Company has posted bonds in favor of the United States
Nuclear Regulatory Commission and the applicable state regulatory agencies
securing these liabilities and has deposited marketable securities on account of
the obligation (Note 8).
Elements of uncertainty in estimating reclamation and decommissioning costs
include potential changes in regulatory requirements, decommissioning and
reclamation alternatives. Actual costs will differ from those estimated and such
differences may be material.
10. Share Capital
a) Authorized -- unlimited number of common shares.
b) Issued and outstanding
<TABLE>
<CAPTION>
Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C>
Issued:
For cash (Cdn $0.25 per share) 26,500,000 $ 4,906,166
On conversion of special warrants 37,800,000 31,784,288
Amalgamation 1,443,066 823,543
-----------------------------------------------------------------------------
Balance, September 30, 1997 65,743,066 $ 37,513,997
Stock purchased for retirement (218,000) (74,595)
-----------------------------------------------------------------------------
Balance, September 30, 1998 65,525,066 $ 37,439,402
=============================================================================
</TABLE>
In May 1997, the Company completed a private placement financing of 37,800,000
common shares pursuant to the exercise of special warrants that had been issued
in March 1997 at a price of Cdn$1.25 ($0.90) per special warrant for net
proceeds of Cdn$44,217,190 ($31,784,288), after deducting share issue costs and
agent fees of Cdn$3,032,802 ($2,186,137).
<PAGE> 30
Globe Graphic
Page 28
c) Stock options
The Company has adopted an Employee Stock Option Plan under
which the Board of Directors may from time to time grant to
directors, officers, eligible employees of, or consultants to,
the Company or its subsidiaries, or to employees of management
companies providing services to the Company, options to
acquire common shares in such numbers for such terms and at
such exercise prices as may be determined by the Board. The
purpose of the Stock Option Plan is to advance the interests
of the Company by providing eligible personnel with a
financial incentive for the continued improvement of the
Company's performance and encouragement to stay with the
Company.
Options granted to executive officers and certain employees of
the Company vest as to one-third on the date of grant, as to
another one-third one year after the date of grant and the
remainder two years after the date of grant. All other options
vest as to one-half on the date of grant and as to the
remainder one year after the date of grant. All options
granted to date expire three (3) years from the date of the
grant of the option.
Options were outstanding as follows:
<TABLE>
<CAPTION>
September 30, 1998 September 30, 1997
-------------------------------------------------------------------------------
<S> <C> <C>
Option Price per Share
Cdn $1.25 2,000,000 2,639,000
Cdn $0.75* 814,000 --
-------------------------------------------------------------------------------
2,814,000 2,639,000
===============================================================================
</TABLE>
*Represents options repriced from Cdn $1.25 to Cdn $.75 on June 17,
1998.
11. Income Taxes
The provision for income taxes differs from the amount computed by applying the
combined expected federal and provincial income tax rate to earnings before
income taxes. The reasons for these differences are as follows:
<TABLE>
<CAPTION>
September 30, 1998
------------------------------------------------------------------------
<S> <C>
Earnings before income taxes $001,858,892
Combined federal and provincial tax rate 45%
------------------------------------------------------------------------
Computed income tax expense $ 836,501
Increase (decrease) in taxes resulting from:
Foreign earnings subject to different tax rates (636,090)
Large corporation and other taxes 41,150
------------------------------------------------------------------------
Net income taxes $ 241,561
========================================================================
</TABLE>
<PAGE> 31
12. Acquisition of Energy Fuels Assets and the Amalgamation
In May 1997, the Company completed the acquisition of substantially all of the
uranium producing assets and assumed certain obligations of Energy Fuels Ltd.,
Energy Fuels Exploration Company and Energy Fuels Nuclear, Inc. (collectively
"Energy Fuels") for an approximate total consideration of $35 million. Energy
Fuels was in Chapter 11 Bankruptcy proceedings in the United States. The
acquisition price was settled as follows:
Cash payment to vendors $19,354,336
Direct acquisition costs 1,937,631
Reclamation obligations assumed 13,265,700
Notes payable assumed 30,556
---------------------------------------------------------
$34,588,223
=========================================================
The acquisition was accounted for by the purchase method. The allocation of the
purchase price is summarized as follows:
Cash and certificates of deposit $ 11,210,896
Favorable uranium sales contracts 2,000,000
Notes receivable 7,169,143
Parts and supplies inventory 999,994
Properties, plant and equipment 8,208,190
Mongolia mineral properties 5,000,000
---------------------------------------------------------
$ 34,588,223
=========================================================
The Energy Fuels assets included several developed mines on standby, several
partially developed mines, as well as numerous targeted mines and exploration
properties, within the states of Colorado, Utah, Arizona, Wyoming and South
Dakota, as well as a 70% interest in a joint venture with the government of
Mongolia and a Russian geological concern to develop and produce uranium
reserves in Mongolia.
Assets purchased also included the 2,000 ton per day White Mesa Mill near
Blanding, Utah. The Mill also has a vanadium recovery circuit.
Concurrent with the acquisition of Energy Fuels, in May 1997, the Company
completed an amalgamation with Thornbury Capital Corporation ("Thornbury"). Each
of the shareholders of Thornbury received one common share in the amalgamated
company for every five common shares held prior to the amalgamation and the
shareholders of the Company received one common share for every one common share
held prior to the amalgamation. As a result of this transaction, the
shareholders of the Company acquired control of Thornbury, and accordingly, the
transaction has been accounted for as an acquisition by the Company of
Thornbury.
<PAGE> 32
Globe Graphic
Page 30
The acquisition is summarized as follows:
Purchase consideration
1,443,066 common shares issued $ 823,543
Net assets acquired at book value (150,261)
-------------------------------------------------------------
Excess purchase consideration $ 673,282
=============================================================
Attributed to
Marketable securities $ 57,312
Goodwill 615,970
-------------------------------------------------------------
$ 673,282
=============================================================
The purpose of the amalgamation was to facilitate the financing of the
Energy Fuels purchase and to achieve public company status.
13. Segmented Information
a) Geographic segments
<TABLE>
<CAPTION>
September 30, 1998 September 30,1997
-------------------------------------------------------------------------
<S> <C> <C>
Revenue
Canada $ -- $ --
United States 32,940,876 523,865
Mongolia -- --
-------------------------------------------------------------------------
Total $ 32,940,876 $ 523,865
=========================================================================
Net Income
Canada $ (608,062) $ (13,310)
United States 2,235,975 47,534
Mongolia (10,582) (15,530)
-------------------------------------------------------------------------
Total $ 1,617,331 $ 18,694
=========================================================================
Assets
Canada $ 669,882 $ 999,979
United States 44,215,100 49,380,108
Mongolia 9,885,732 6,820,252
-------------------------------------------------------------------------
Total $ 54,770,714 $ 57,200,339
=========================================================================
</TABLE>
<PAGE> 33
b) Major customers
The Company's business is such that, at any given time, it can
only sell its uranium concentrates to and enter into process
milling arrangements with a relatively small number of
customers. The customers with whom it does business vary
substantially from year to year. During the year ended
September 30, 1998, a process milling customer and a major
electric generating utility accounted for 37.4% and 14.8% of
total revenues, respectively. In the period ended September
30, 1997, all revenue was earned from the process milling
customer. Accounts receivable from any individual customer
will exceed 10% of total accounts receivable on a regular
basis.
14. Related Party Transactions
a) During the year ended September 30, 1998, the Company
incurred legal fees of $50,197 with a law firm of which a
partner is a director of the Company. Amounts due to this firm
were $1,064 as of September 30, 1998. Legal fees incurred with
this law firm were $188,692 for the period ended September 30,
1997.
b) During the year ended September 30, 1998, the Company incurred
management and administrative service fees of $99,383 with a
company owned by the Chairman of the Company which provides
office premises, secretarial and other services in Vancouver.
Management and administration fees of $343,641 were paid to
this same company during the period ended September 30, 1997,
which include costs incurred throughout 1996 in pursuing the
acquisition of Energy Fuels assets.
c) During the period ended September 30, 1997, the Company loaned
$850,000 to an officer of the Company in order to facilitate
relocation to the Company headquarters. Of this amount,
$650,000 was repaid prior to year end leaving $200,000
outstanding at September 30, 1997 and 1998. This loan is
non-interest bearing and is payable on the earlier of
termination of employment or June 30, 1999. The loan is
secured by the officer's personal residence.
d) During the period ended September 30, 1997, the Company
incurred interest of $147,315 on a letter of credit and other
loan facilities provided by a director of the Company as part
of the acquisition of Energy Fuels. This amount was paid
during the year ending September 30, 1998.
15. Commitments
Certain Swiss utilities hold a royalty (the "Swiss Royalty") of 4.5% of all
uranium and 2.5% of vanadium and all other minerals produced during the period
from January 1, 1998 through December 31, 2000 from certain of the United States
properties. Advance royalty payments in the amount of $250,000 are made each
year during this period. The royalty increases to 9% of all uranium and 5% of
vanadium on January 1, 2001, however the advance payments terminate. The Swiss
Royalty does not apply to the Mongolia mineral properties, nor to any tolled or
purchased ore of or from third parties that is processed in the Mill, nor to any
properties acquired after the date that the Swiss royalty was granted.
16. Financial Instruments
As at September 30, 1998 and 1997, the fair value of the Company's financial
instruments approximates their carrying values because of the short-term nature
of these instruments and, where applicable, because interest rates approximate
market rates.
17. Uncertainty Due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
Year 2000 as 1900 or some other date, resulting in errors when information using
Year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
<PAGE> 34
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Page 32
EXECUTIVE OFFICERS
Executive Staff photo
Executive officers in order from left to right, DAVID C. FRYDENLUND, Vice
President, General Counsel and Corporate Secretary; EARL E. HOELLEN, President
and Chief Executive Officer; HAROLD R. ROBERTS, Vice President, Operations; THAD
L. MEYER, Vice President, Treasurer and Chief Financial Officer
BOARD OF DIRECTORS
LUKAS H. LUNDIN, Chairman (2) EARL E. HOELLEN
Vancouver, British Columbia, Canada Denver, Colorado, USA
JOHN H. CRAIG (1,2,3,4) ADOLF H. LUNDIN
Toronto, Ontario, Canada Geneva, Switzerland
DAVID C. FRYDENLUND (4) WILLIAM A. RAND (1,2,3)
Denver, Colorado, USA Vancouver, British Columbia,Canada
CHRISTOPHER J.F. HARROP (1,3,4) (1) Audit Committee
Toronto, Ontario, Canada (2) Compensation Committee
(3) Corporate Governance Committee
(4) Environment, Health, and Safety
Committee
<PAGE> 35
INTERNATIONAL URANIUM CORPORATION
CORPORATE DIRECTORY
EXECUTIVE OFFICE
International Uranium (USA) Corporation
Independence Plaza, Suite 950
1050 Seventeenth Street
Denver, Colorado, USA 80265
Telephone:303.628.7798
Fax:303.389.4125
CHAIRMANOS OFFICE
International Uranium Corporation
885 West Georgia Street, Suite 1320
Vancouver, British Columbia, Canada V6C 3E8
DISTRICT MINING OFFICES
International Uranium (USA) Corporation
Box 909
Dove Creek, Colorado, USA 81324
International Uranium (USA) Corporation
H.C. 64, Box 153
2555 North Highway 89A
Fredonia, Arizona, USA 86022
International Uranium Company
(Mongolia) Ltd.
Central post, Box 880
Ulaanbaatar-D13, Mongolia
WHITE MESA MILL OFFICE
International Uranium (USA) Corporation
6425 S Highway 191
P.O. Box 809
Blanding, Utah, USA 84511
REGISTERED AND RECORDS OFFICE
Cassels Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario, Canada M5H 3C2
LEGAL COUNSEL
Cassels Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario, Canada M5H 3C2
Shaw Pittman Potts & Trowbridge
2300 N Street N.W.
Washington, DC USA 20037
Parsons Behle & Latimer
One Utah Center, Suite1800
201 South Main Street
Salt Lake City, Utah USA 84145
INVESTOR RELATIONS
International Uranium Corporation
885 West Georgia Street, Suite 1320
Vancouver, British Columbia, Canada V6C 3E8
Telephone: 604.689.7842
Fax: 604.689.4250
BANKERS
Canadian Imperial Bank of Commerce
Vancouver, British Columbia, Canada
Norwest Bank
Denver, Colorado, USA
AUDITORS
Price WaterhouseCoopers LLP
Vancouver, British Columbia, Canada
TRANSFER AGENT
Montreal Trust Company of Canada
Toronto, Ontario, Canada
SHARE CAPITAL
Authorized: unlimited common shares
Issued and Outstanding: 65,525,066 shares
STOCK EXCHANGE LISTING
The Toronto Stock Exchange
Trading Symbol: IUC
The Annual General Meeting will be held at the King Edward Hotel, 37 King Street
East, Toronto, Ontario Canada, in the Belgravia Room, on Tuesday, March 23, 1999
at the hour of 4:30 p.m. (Toronto time).
<PAGE> 36
International Uranium Corporation
Independence Plaza, Suite 950
1050 Seventeenth Street
Denver, Colorado 80265
303.628.7798
303.389.4125 FAX
Photo of Clock from clock room.
Photo of worker at tailings tank.
Photo of two miners in hard hats.
Aerial Photo of White Mesa Mill.
Photo of man and blue barrels.
Photo of women and children in Mongolia.
Photo of two men in tunnel.
Photo of tree in canyon.
Partial photo of Sag Mill at White Mesa Mill.
Sunset Photo of White Mesa Mill.
Photo of man cleaning in yellow jacket.
