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EXHIBIT 1
ANNUAL REPORT
INTERNATIONAL URANIUM CORPORATION
2000
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Management's Discussion and Analysis............................................................4
Management's Report to the Shareholders.........................................................9
Auditors' Report to the Shareholders...........................................................10
Consolidated Financial Statements..............................................................11
Notes to Consolidated Financial Statements.....................................................14
</TABLE>
All dollar references in this report are expressed in U.S. dollars unless
otherwise indicated.
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TO OUR SHAREHOLDERS
This has been a year of transition for your Company. International
Uranium Corporation moved forward with a new focus on developing its
uranium-bearing alternate feed recycling business. IUC initiated this change of
direction away from uranium mining not only as a reflection of current and
projected uranium market conditions, but also in recognition of the potential
opportunities available for the Company in the processing/recycling industry. I
am happy to say that the Company has made this transition and is in a strong
financial position to aggressively pursue the alternate feed market and to look
at opportunities to diversify.
During this past year, the Company enjoyed several notable successes in
the development of the alternate feed business. The first was the decision by
the Nuclear Regulatory Commission ("NRC") upholding the amendment that allowed
the Company to process the Ashland 2 material. This decision validated the
Company's view that the recycle of uranium-bearing materials through the White
Mesa Mill is a realistic, environmentally superior alternative to direct
disposal of these materials. Other significant developments included the award
of the Company's third contract with the U.S. Army Corps of Engineers under the
U.S. government's FUSRAP program, and the increase in the Ashland 1 FUSRAP
contract, awarded in 1999, from 100,000 tons to over 145,000 tons of
uranium-bearing material. The Company's business development activities continue
to expand in an effort to develop the backlog necessary to operate the White
Mesa Mill efficiently on a continuous basis.
In addition to successes on the commercial front, we also continued to
make progress on the regulatory front. The Mill operates under a license from
the NRC. Each alternate feed project requires an amendment to that license. In
2000, the Company submitted four license amendments for alternate feed projects,
bringing the total to date to thirteen. Of the four submitted in 2000, three
were approved and the remaining one is in the review stage. Generally, IUC has
good support for its alternate feed program from the NRC and the local community
and government. While the Company has had its disagreements with the State of
Utah in the past regarding the processing of certain types of alternate feeds at
the Mill, these matters are now resolved and this relationship has improved
immensely. We continue to work with the State on several initiatives including
the development of a groundwater discharge permit for the White Mesa Mill, to
supplement the NRC's groundwater protection program at the Mill.
Other events over the year, which have enabled the Company to focus on
alternate feeds, have included:
o The mining operations of the Company remained on stand-by status and
efforts to sell the operations in Utah, Arizona and Colorado continue.
The Company was successful in selling its mining operations center,
which was based in Fredonia, Arizona.
o At the Company's Mongolian in-situ leach development project, the
field operations were shut down, the field equipment liquidated and the
representative office scaled back. Efforts to identify additional
participants in the Gurvan-Saihan Joint Venture to further the
exploration program are continuing. Over the past two years, the
uranium resources have been increased to over 22 million pounds on
Joint Venture lands.
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o At the Company's head office in Denver, targeted reductions were made
in order to reduce overhead costs, but yet maintain the resources
necessary to continue to pursue business opportunities.
Our decision to focus on alternate feeds was reinforced by the
continued weakening of the uranium and vanadium markets. Over the past year, the
nuclear fuel market continued to show the effects of surplus uranium inventory,
which combined with a fifty-percent drop in spot market volume, resulted in
uranium prices ending the fiscal year below $8.00 per pound U3O8. The last time
the uranium price reached this level was in 1991. While uranium prices were in
steady decline throughout the year, vanadium was much more volatile. Due to a
temporary shortage of supply, vanadium prices rose from $1.29 per pound V2O5 in
December to over $2.45 per pound during the first quarter of 2000. Since then
the market has once again entered a period of oversupply, and prices have
dropped to the $1.50 to $1.75 per pound V2O5 range. The prognosis for the
vanadium market is poor, due to continued oversupply. The uranium market
forecast is for prices to remain flat with the potential for some gradual price
improvement over an extended time period.
In order to maintain a strong cash position and to protect against any
further decline in the value of our uranium inventory, the Company made the
decision to sell all of its long term uranium sales contracts and uranium
inventory. Combining the contracts with the uranium inventory, produced from the
alternate feed campaigns and the conventional ore run completed in the first
quarter of this fiscal year, yielded an opportunity for the Company to sell the
remaining uranium inventory for above market prices.
Even though it was a year of transition, the Company ended the fiscal
year in a strong financial position with over $11.6 million in cash, or just
under $0.18 per share. For the fiscal year the Company sustained a loss of over
$15.2 million, or approximately $0.23 per share. Of this loss, approximately
$11.0 million resulted from the write down of the Company's interest in the
Gurvan-Saihan Joint Venture. This decision was made because there is little
reasonable expectation of a significant uranium price recovery that would enable
the Company to put this project into production over the next few years. A write
down of uranium and vanadium inventories also contributed over $2.3 million to
the loss, but this was partially offset by a $1.1 million reduction in the White
Mesa Mill reclamation obligation.
With the significant developments over the last year, the organization
has gone through a myriad of changes. One of these was the resignation of Earl
E. Hoellen. Earl was the President and Chief Executive Officer of IUC since its
inception in 1997 and was instrumental in IUC achieving many of its successes.
On behalf of the employees, I would like to thank Earl for his many
contributions, and we look forward to his continued involvement on the Board.
Through this year of transition we asked a lot of our employees, and
they have stepped up to meet the challenge. I'd like to take this opportunity to
thank each one of them for their efforts in helping to transform IUC into the
company it has become.
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So, what is ahead for 2001? IUC intends to strengthen its position in
the alternate feed, uranium-bearing material processing business. Given the
current delivery schedules for our two existing FUSRAP contracts, we anticipate
restarting the Mill in mid-2001 to process this material plus other alternate
feeds. Several business initiatives are planned to increase our exposure in the
"traditional" alternate feed markets and to evaluate new opportunities to
exploit the primary asset of your Company, the White Mesa Mill.
On behalf of the Board, the management and the employees of IUC, I'd
like to thank you for your continued support.
/s/ Ron F. Hochstein
---------------------
Ron F. Hochstein
President and Chief Executive Officer
3
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis of the financial condition and
results of operations for International Uranium Corporation ("IUC" or the
"Company") for the fiscal year ended September 30, 2000 should be read in
conjunction with the consolidated financial statements and accompanying notes.
The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in Canada.
Summary
IUC recorded a net loss of $15,244,651 ($0.23 per share) compared with
a net loss of $17,097,677 ($0.26 per share) in 1999. Results for 2000 included
inventory and other asset write-downs of $2,335,290, a write-down of Mongolia
mineral properties of $10,963,248, a net loss of $4,675 on the sale of land and
surplus mining equipment, and a net gain of $1,073,206 resulting from a decrease
in Mill reclamation obligations. In 1999, the net loss included a $168,141 gain
on the sale of surplus mining equipment, a net loss of $7,709,170 for inventory
write-downs, $7,039,958 for the write-off of U.S. mineral properties and
$541,641 for the write-off of goodwill. Excluding these items, IUC lost
$3,014,644 ($0.05 per share) in 2000 and $1,975,049 ($0.03 per share) in 1999.
Changes in the market price of uranium and vanadium significantly
affected IUC's profitability and cash flow. The spot market value of uranium
continued to fall throughout the fiscal year. At the end of the fiscal year, the
spot market price was $7.40 per pound U3O8 compared to $9.75 per pound U3O8 at
the beginning of the year. IUC's realized uranium prices of $11 and $13 per
pound U3O8 in 2000 and 1999, respectively, tracked the declining spot market for
uranium. In order to maintain a strong cash position and to protect against any
further decline in the spot uranium price, the Company sold its remaining
long-term contracts and uranium inventory. During fiscal 2000, approximately 87%
of the material delivered by the Company was from long-term contracts, with the
balance coming from spot market sales.
The spot market for vanadium rose from a low of $1.29 per pound V2O5 in
December 1999 to above $2.25 per pound V2O5 for the period from March to May
2000. By fiscal year end the vanadium price was back to $1.70 per pound V2O5.
The Company was able to sell a significant portion of its inventory during the
period of higher prices. IUC's realized price per pound V2O5 was $1.88 during
fiscal 2000.
Due to the depressed uranium market and current market forecasts, the
Company shut down the field operations at the Gurvan-Saihan Joint Venture, the
Company's uranium development and exploration project in Mongolia. The project
office in Ulaanbaatar has been downsized significantly, but will be maintained.
The Company intends to maintain the project in a stand-by mode until market
conditions warrant additional investment or the Company locates a Joint Venture
participant.
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Results of Operations
Revenues
Revenues for fiscal 2000 and 1999 of $16,060,172 and $14,046,832,
respectively, consisted of uranium sales, vanadium sales and process milling
fees. Revenues for fiscal 2000 increased $2,013,340 or 14% as compared to fiscal
1999. Uranium sales for fiscal 2000 were $12,810,100 as compared to $9,611,450
in fiscal 1999, an increase of $3,198,650 or 33%. The increase was due primarily
to the Company's decision to sell all of its remaining long-term contracts and
uranium inventory. Vanadium sales for fiscal 2000 were $2,415,588 as compared to
$146,867 in fiscal 1999, an increase of $2,268,721. The increase was due
primarily to the Company's decision to sell in fiscal 1999 only a very small
quantity of the vanadium it produced that year.
Process milling fees for fiscal 2000 of $834,484 decreased $3,454,031
or 81% as compared to process milling fees of $4,288,515 for fiscal 1999.
Alternate feed processing activities in fiscal 2000 have consisted primarily of
the receipt, sampling and analysis of the Ashland 1 material. Approximately
19,000 tons of material was received during the fourth quarter bringing the
total received to over 123,500 tons from the Ashland 1 site. In addition, the
Company was awarded its third FUSRAP (Formerly Utilized Sites Remedial Action
Program) contract for the processing and disposal of approximately 75,000 tons
of uranium-bearing material from the Linde site in Tonawanda, New York. This
material began arriving at the Mill during September 2000. The Company receives
a recycling fee as these materials are delivered, which is recorded as deferred
revenue until the material is processed. In addition to the recycling fees, the
Company will retain the uranium recovered from these materials.
Cost of Products and Services Sold
Cost of products sold for fiscal 2000 were $12,643,509, an increase of
$4,255,642 or 51% as compared to fiscal 1999. The increase was due primarily to
the higher volumes of uranium and vanadium delivered. During fiscal 2000, the
Company delivered 1,165,652 pounds of uranium to three customers and 1,287,553
pounds of vanadium to five customers as compared to 720,000 pounds of uranium
and 69,937 pounds of vanadium during fiscal 1999.
Process milling expenditures for fiscal 2000 of $489,778 decreased
$2,012,376 or 80% as compared to process milling expenditures of $2,502,154 for
fiscal 1999. During fiscal 2000, the Company did not process any alternate feed
materials, as compared with two alternate feed processing runs in 1999. The
Company is currently building a sufficient stockpile of material to allow for a
longer, more efficient, processing campaign. Processing of the Ashland 1 and
Linde material is currently scheduled to begin during the third quarter of
fiscal 2001.
In addition to FUSRAP materials, the Company continues to receive
deliveries of alternate feeds from a nuclear fuel cycle operator under a
long-term arrangement. While the Company will not receive a processing fee for
this particular alternate feed it will produce uranium from these materials,
which will then be sold in later periods. It is anticipated that these materials
will be processed in the second and third quarters of fiscal 2001.
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Mill Stand-by
Mill stand-by expenses consist primarily of payroll and related
expenses for personnel, parts and supplies, contract services and other overhead
expenditures required to receive alternate feed material and maintain the Mill
in a stand-by mode. During the first quarter of fiscal 2000, the conventional
mill run that began in fiscal 1999 was completed. The Mill produced
approximately 158,000 pounds of uranium and 1,100,000 pounds of vanadium during
this period. The Mill was on stand-by for the remainder of the year. Mill
stand-by expenditures were $2,144,984 or 13% of revenues for fiscal 2000 as
compared to $1,059,794 or 8% of fiscal 1999 revenues. The increase of $1,085,190
was due to nine months of stand-by versus three months in fiscal 1999. The
increase in costs due to the longer duration of the stand-by was partially
offset by significant staff reductions at the Mill.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of
payroll and related expenses for personnel, legal, contract services and other
overhead expenditures. Selling, general and administrative expenses were
$4,044,761 or 25% of revenues for fiscal 2000 compared to $4,445,190 or 32% of
fiscal 1999 revenues. The decrease of $400,429 related primarily to the
Company's decision at the end of the second fiscal quarter to significantly
reduce overhead costs, and focus its efforts and resources on the development of
the alternate feed/uranium-bearing waste recycling business. It is expected that
these reduced levels of overhead expenditures will continue to decline through
fiscal 2001 as the Company continues to pursue other alternate feed projects and
evaluates other potential opportunities.
Write-down of Inventories and Mongolia Project
In fiscal 2000, due to the continued depressed price of uranium and
vanadium, the Company reduced the carrying value of its finished goods
inventories by $1,026,415. These same low commodity prices, combined with low
expectations of any appreciable price recovery in the near term, resulted in the
Company reducing the carrying value of its investment in the Gurvan-Saihan Joint
Venture by $10,963,248. In addition, the Company adjusted the carrying value of
the Other Asset and the offsetting Deferred Credit by a net $1,308,875 to
reflect the Company's perception of future market prices. The Other Asset and
Deferred Credit represent a put option entered into in fiscal 1999, which can be
exercised at the buyer's discretion from October 1, 2001 to March 1, 2003.
Capital Resources and Liquidity
At September 30, 2000, the Company had cash and cash equivalents of
$11,650,600 and working capital of $10,556,005 as compared to cash and cash
equivalents of $469,407 and working capital of $11,635,665 at September 30,
1999.
Net cash provided by operating activities was $5,500,826 for the fiscal
year ended September 30, 2000. The cash flow resulted primarily from the sale of
inventory of $9,211,253, less the loss from continuing operations of
$15,244,651, offset by non-cash items of depreciation
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and amortization of $1,094,376, write-down of assets of $13,298,538 and the
reduction in Mill reclamation obligations of $1,073,206. Cash flow from
operations was also affected by the decrease in accounts payable and accrued
liabilities of $1,476,562. This decrease was primarily the result of the
completion during fiscal 2000 of the conventional mill run that began in fiscal
1999.
Net cash provided by investing activities was $525,671 for the fiscal
year ended September 30, 2000. The cash flow resulted primarily from the sale of
surplus mining equipment of $627,211 and a reduction in the Company's bonding
requirements of $473,552, offset by additions to plant and equipment of $244,957
and investments in the Gurvan-Saihan Joint Venture of $332,063.
The Company is projecting only minor expenditures during fiscal year
2001 for property, plant and equipment.
Net cash provided by financing activities during the fiscal year ended
September 30, 2000 totaled $5,154,696 and consisted primarily of an increase in
deferred revenues of $6,156,562, offset by payments on the working capital loan
agreement with Wells Fargo Bank, NA of $950,000. During March 2000, the Company
renewed its working capital loan agreement with Wells Fargo Bank, NA. The
principal amount was reduced from $10 million to $5 million and the maturity
date was extended from March 31, 2000 to March 31, 2001. This facility provides
for advances based on receivable levels and uranium inventories provided certain
financial covenants are maintained. The Company is in the process of
renegotiating this facility.
Environmental Responsibility
Each year, the Company reviews the anticipated costs of decommissioning
and reclaiming its mill and mine sites as part of its environmental planning
process. The Company also formally reviews costs when it submits license renewal
applications to regulatory authorities. Based on this review, the mill
reclamation obligation was reduced by $1,073,206, and it was determined that the
Company's estimated total reclamation obligation of $12,192,494 is currently
sufficient to cover these projected future costs.
The Company has also posted bonds as security for these liabilities and
has deposited marketable securities on account of these obligations. The amount
of these restricted marketable securities collateralizing the Company's
reclamation obligations was $8,870,989 at September 30, 2000.
2001 Fiscal Year Outlook
The Company's decision to focus its resources and attention primarily
on the development of its alternate feed, uranium-bearing waste recycling
business means that the Company is less susceptible to variations in uranium and
vanadium market prices. The Company's U.S. mining operations will continue to be
on a care and maintenance basis, as well as its Mongolian project. Due to the
decision to sell all of the uranium inventory and sales
7
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contracts, the Company is relying primarily on revenue from alternate feed
processing fees and the uranium produced from these feeds.
The reduction in Mill stand-by costs and general and administration
expenditures means that the Company will have the resources to continue to
aggressively pursue the alternate feed market. The Company currently has three
firm contracts, which provide sufficient feed to operate the Mill for up to nine
months. The Company is continuing to pursue other contracts; however, it is also
looking at opportunities to diversify.
Cautionary Note Regarding Forward-Looking Statements
The Company wishes to caution readers that disclosures made in the
foregoing Management's Discussion and Analysis and elsewhere in this annual
report represent forward-looking statements. These forward-looking statements
involve known and unknown risks and uncertainties which may cause the actual
results, performance, or achievements of the Company to be materially different
from any future results, performance, or achievements expressed or implied by
any forward-looking statements made by or on behalf of the Company.
Risk factors that affect the Company's results and the above discussion
of the 2001 outlook include, but are not limited to, competition, environmental
regulations, the ability to develop the alternate feed business, changes to
reclamation requirements, dependence on a limited number of customers,
volatility and sensitivity to market prices for uranium and vanadium, the impact
of changes in foreign currencies' exchange rates, political risk arising from
operating in Mongolia, changes in government regulation and policies including
trade laws and policies, demand for nuclear power, replacement of reserves and
production, receipt of permits and approvals from governmental authorities
(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.
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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 Canadian 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/ Ron F. Hochstein
--------------------
Ron F. Hochstein
President and
Chief Executive Officer
/s/ David C. Frydenlund
-----------------------
David C. Frydenlund
Vice President and
Chief Financial Officer
November 24, 2000
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AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of International
Uranium Corporation as at September 30, 2000 and 1999 and the consolidated
statements of operations and (deficit) retained earnings, and cash flows for the
years 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 Canadian 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, 2000 and 1999, and the results of its operations and the changes in its cash
flow for the years then ended in accordance with generally accepted accounting
principles in Canada.
/s/ PricewaterhouseCoopers LLP
------------------------------
Chartered Accountants
Vancouver, Canada
November 24, 2000
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INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(United States Dollars)
<TABLE>
<CAPTION>
At September 30,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,650,600 $ 469,407
Trade and other receivables 2,443,063 2,226,303
Inventories (Note 3) 1,913,538 11,930,637
Prepaid expenses and other 256,688 191,425
------------ ------------
16,263,889 14,817,772
Properties, plant and equipment, net (Note 4) 4,977,118 6,790,627
Mongolia mineral properties (Note 5) -- 10,484,299
Notes receivable 200,088 202,016
Restricted cash and marketable securities (Note 6) 8,870,989 9,344,541
Other asset (Note 7) 2,840,000 4,248,875
Goodwill and other, net -- 3,679
------------ ------------
$ 33,152,084 $ 45,891,809
============ ============
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities $ 656,051 $ 2,132,614
Notes payable (Note 8) 15,830 1,049,493
Deferred revenue 5,036,003 --
------------ ------------
5,707,884 3,182,107
Notes payable, net of current portion 54,607 22,811
Reclamation obligations (Note 9) 12,192,494 13,265,700
Deferred revenue 4,244,000 3,123,441
Deferred credit (Note 7) 4,220,000 4,320,000
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26,418,985 23,914,059
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SHAREHOLDERS' EQUITY
Share capital (65,525,066 shares
issued and outstanding) (Note 10) 37,439,402 37,439,402
Deficit (30,706,303) (15,461,652)
------------ ------------
6,733,099 21,977,750
------------ ------------
$ 33,152,084 $ 45,891,809
============ ============
</TABLE>
Contingency (Note 14)
On behalf of the Board
/s/Ron F. Hochstein /s/ Lukas H. Lundin
Ron F. Hochstein, Director Lukas H. Lundin, Director
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INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND (DEFICIT) RETAINED
EARNINGS
(United States Dollars)
<TABLE>
<CAPTION>
Years Ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
OPERATIONS
Revenue
Uranium sales $ 12,810,100 $ 9,611,450
Vanadium sales 2,415,588 146,867
Process milling 834,484 4,288,515
------------ ------------
Total revenue 16,060,172 14,046,832
------------ ------------
Costs and expenses
Uranium cost of sales 10,637,373 8,237,348
Vanadium cost of sales 2,006,136 150,519
Process milling expenditures 489,778 2,502,154
Mill stand-by expenditures 2,144,984 1,059,794
Selling, general and administrative 4,044,761 4,445,190
Write-down of inventories (Note 3) 1,026,415 7,709,170
Write-down of other asset and
deferred credit, net (Note 7) 1,308,875 --
Depreciation 470,621 316,474
------------ ------------
22,128,943 24,420,649
------------ ------------
Loss before the following (6,068,771) (10,373,817)
Decrease in reclamation obligations 1,073,206 --
Write-off of Mongolia mineral properties (Note 5) (10,963,248) --
Write-off of mineral properties (Note 4) -- (7,039,958)
Write-off of goodwill -- (541,641)
Net interest and other income 714,162 857,739
------------ ------------
Loss for the year (15,244,651) (17,097,677)
============ ============
Loss per common share $ (0.23) $ (0.26)
============ ============
(DEFICIT) RETAINED EARNINGS
(Deficit) Retained earnings, beginning of year $(15,461,652) $ 1,636,025
Loss for the year (15,244,651) (17,097,677)
------------ ------------
Deficit, end of year $(30,706,303) $(15,461,652)
============ ============
</TABLE>
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INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(United States Dollars)
<TABLE>
<CAPTION>
Years Ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Loss for the year $(15,244,651) $(17,097,677)
Items not affecting cash
Depreciation and amortization 1,094,376 664,633
Loss (gain) on sale of land and equipment 4,675 (168,141)
Amortization of uranium sales contract purchase cost -- 729,730
Write-down of inventories 1,026,415 7,709,170
Write-down of other asset and deferred credit 1,308,875 --
Write-off of Mongolia mineral properties 10,963,248 --
Write-off of mineral properties -- 7,039,958
Write-off of goodwill -- 541,641
Change in reclamation liabilities (1,073,206) --
------------ ------------
(1,920,268) (580,686)
Changes in non-cash working capital items
Decrease in marketable securities -- 11,731
(Increase) decrease in trade and other receivables (216,761) 753,297
Decrease (increase) in inventories 9,211,253 (10,490,259)
(Increase) in other current assets (96,836) (35,568)
(Decrease) increase in other accounts payable and
accrued liabilities (1,476,562) 370,773
------------ ------------
Net cash provided by (used in) operations 5,500,826 (9,970,712)
------------ ------------
INVESTING ACTIVITIES
Plant and equipment (244,957) (2,057,178)
Mongolia mineral properties (332,063) (912,990)
Proceeds from sale of surplus equipment 627,211 322,660
Collection of notes receivable 1,928 1,522
Decrease (increase) in restricted marketable securities 473,552 (1,044,166)
------------ ------------
Net cash Provided by (used in) investment activities 525,671 (3,690,152)
------------ ------------
FINANCING ACTIVITIES
(Decrease) increase in notes payable (1,001,866) 980,166
Increase in deferred credit -- 4,320,000
Increase in deferred revenue 6,156,562 2,547,830
------------ ------------
Net cash provided by financing activities 5,154,696 7,847,996
------------ ------------
Increase (decrease) in cash and cash equivalents 11,181,193 (5,812,868)
Cash and cash equivalents, beginning of year 469,407 6,282,275
------------ ------------
Cash and cash equivalents, end of Year $ 11,650,600 $ 469,407
============ ============
SUPPLEMENTARY CASH FLOW INFORMATION
Cash interest paid $ 53,641 $ 113,523
Cash interest received $ 719,324 $ 786,926
Non-cash investing and financing activities
Transfer of inventory to other asset $ -- $ 4,248,875
</TABLE>
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INTERNATIONAL URANIUM CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(United States Dollars)
1. ORGANIZATION AND NATURE OF OPERATIONS
International Uranium Corporation and its subsidiaries (the "Company") is a
company engaged in the business of recycling uranium-bearing waste products,
referred to as "alternate feed materials," for the recovery of uranium, alone or
in combination with other metals, as an alternative to the direct disposal of
these waste products. Alternate feed materials are generally ores or residues
from other processing facilities that contain uranium in quantities or forms
that can be recovered at the Company's White Mesa uranium mill (the "Mill"),
located near Blanding Utah. The Company also owns several uranium and
uranium/vanadium mines and exploration properties that were placed on stand-by
during the 1999 fiscal year. In addition, the Company is engaged in the selling
of uranium recovered from these operations in the international nuclear fuel
market and also sells vanadium and other metals that can be produced as a
co-product with uranium.
2. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada.
a) 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 I) Ltd., International Uranium Company
(Mongolia) Ltd., and International Uranium (USA) Corporation.
b) 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.
c) Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities.
14
<PAGE> 17
d) Restricted cash and marketable securities
Restricted cash and marketable securities are valued at the lower of
cost and market value.
e) Inventories
Ore stockpiles, in-process inventories, uranium and vanadium
concentrates are valued at the lower of cost and net realizable value.
Consumable supplies and spare parts are valued at their weighted
average cost.
f) Properties, plant and equipment
Mineral properties and plant and equipment are recorded at the lower of
cost and net realizable value. 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. Gains or losses from normal sales or
retirements of assets are included in other income or expense.
g) Exploration properties
Mineral exploration costs are capitalized as incurred. When it is
determined that a mineral property can be economically developed, the
cost of the property and the related exploration and development
expenditures will be amortized using the unit-of-production method over
the estimated life of the ore body. If a project is unsuccessful, the
mining property and the related exploration expenditures are written
off.
h) Asset impairment
The Company reviews and evaluates its long-lived assets for impairment
when events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. An impairment loss is measured
as the amount by which asset-carrying value exceeds recoverable amount.
The recoverable amount is generally determined using estimated future
cash flow analysis. Long-lived assets are considered impaired if total
estimated future cash flows on an undiscounted basis are less than the
carrying amount of the asset. An impairment loss is measured and
recorded based on undiscounted estimated future cash flows. Future cash
flows include estimates of recoverable pounds of uranium and vanadium,
uranium and vanadium prices (considering current and historical prices,
price trends and related factors), estimates of future alternate feed
processing opportunities and associated revenues, and production,
capital and reclamation costs. Assumptions underlying future cash flow
estimates are subject to risks and uncertainties. Any differences
between significant assumptions and actual market conditions and/or the
Company's performance could have a material effect on the Company's
financial position and results of operations.
15
<PAGE> 18
i) Environmental protection and reclamation costs
Estimated future decommissioning and reclamation costs are based
principally on existing legal and regulatory requirements. Such costs
related to the Mill are accrued and charged over the expected operating
life of the Mill using the straight-line method. Future reclamation
costs for inactive mines are accrued based on management's best
estimate at the end of each period of the undiscounted costs expected
to be incurred at a site. Such cost estimates include, where
applicable, ongoing care, maintenance and monitoring costs. Changes in
estimates are reflected in earnings in the period an estimate is
revised.
j) 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 5). 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.
k) Earnings per share
Earnings per common share is determined using the weighted average
number of shares outstanding during the year, which for the years
ending September 30, 2000 and 1999 was 65,525,066 shares.
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 along with the risks and
rewards of ownership. Sales of the Company's uranium long-term supply
contracts are included in uranium sales.
Process milling fees are recognized as the applicable material is
processed, in accordance with the specifics of the applicable
processing agreements.
16
<PAGE> 19
Deferred revenues represent processing proceeds received in advance of
the required processing activity.
m) Reclassifications
Certain amounts in prior years have been reclassified to conform to the
2000 presentation.
n) Share options
The Company has a share option plan which is described in Note 10. c).
No compensation expense is recognized when share options are issued.
Any consideration on exercise of share options is credited to share
capital.
3. INVENTORIES
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Vanadium Concentrates $ 837,869 $ 1,257,604
Uranium Concentrates -- 8,583,323
Ore Stockpiles -- 144,112
In Process 20,450 569,499
Parts and Supplies 1,055,219 1,376,099
------------ ------------
$ 1,913,538 $ 11,930,637
============ ============
</TABLE>
In the current year, the Company wrote-down the carrying value of its finished
goods inventories to market value by $1,026,415. In the prior year, the Company
recorded a write-down of $7,709,170 relating to its ore stockpiles and
concentrate inventories.
4. PROPERTIES, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Accumulated
Depreciation,
Depletion,
Amortization and Sept. 30, 2000 Sept. 30, 1999
Cost Write-Offs Net Net
----------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Mill Buildings and Equipment $ 6,501,912 $ 2,345,244 $ 4,156,668 $ 4,943,205
Other Machinery and Equipment 1,779,346 958,896 820,450 1,847,422
Mineral Properties 7,616,865 7,616,865 -- --
----------- ----------- ----------- -----------
$15,898,123 $10,921,005 $ 4,977,118 $ 6,790,627
=========== =========== =========== ===========
</TABLE>
In fiscal 1999, the Company recorded a write-off of $7,039,958 relating
to its U.S. mineral properties.
17
<PAGE> 20
Under the terms of a Royalty Deed and subsequent amendments with certain Swiss
utilities the Company has made advance royalty payments on certain United States
mineral properties. During the period from January 1, 1998 through December 31,
2000 advance royalty payments of $250,000 were made each year. In June 2000, the
Company entered into a Termination Agreement, which cancelled all interests and
other rights granted to the Swiss utilities under the Royalty Deed and
subsequent amendments.
5. 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 eight uranium
exploration areas covering 3.2 million acres in central eastern Mongolia. The
other parties to 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 Mongolian mineral properties. To date the Company
has funded all expenditures and expects to do so for the foreseeable future.
In fiscal 2000, as a result of continued deterioration in uranium prices and the
Company's decision to halt further exploration, the Company wrote-off its
investment in the Venture.
6. RESTRICTED CASH AND MARKETABLE SECURITIES
Amounts represent cash and marketable securities the Company has placed on
deposit to secure its reclamation bonds and certain other obligations (Notes 7
and 9).
7. OTHER ASSET
On September 13, 1999 the Company entered into a uranium concentrates sale and
put option agreement with a third party. The Company transferred a certain
quantity of uranium under this agreement giving the third party the option to
put up to an equivalent quantity to the Company at a fixed price within the
period beginning October 1, 2001 and ending March 1, 2003. The transaction was
accounted for as a deferred credit and the cost of the inventory was
reclassified as an other asset. A bond (Note 6) secures a portion of the
transaction.
In fiscal 2000, the Company wrote-down the carrying value of the other asset,
and the offsetting deferred credit, to reflect the change in market value of the
underlying inventory by a net $1,308,875.
8. NOTES PAYABLE
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Wells Fargo Bank, NA $ -- $ 950,000
Other 15,830 99,493
------------ ------------
$ 15,830 $ 1,049,493
============ ============
</TABLE>
18
<PAGE> 21
During March 2000, the Company renewed its working capital loan agreement with
Wells Fargo Bank, NA. The principal amount was reduced from $10 million to $5
million and the maturity date was extended from March 31, 2000 to March 31,
2001. This facility provides for advances based on receivable levels and uranium
inventories provided certain financial covenants are maintained. The Company is
in the process of renegotiating this facility.
9. PROVISIONS FOR RECLAMATION
Estimated future decommissioning and reclamation costs of the Mill and mining
properties are based principally on legal and regulatory requirements. At
September 30, 2000 and September 30, 1999, $12,192,494 and $13,265,700,
respectively, were accrued for reclamation costs. The Company has posted bonds
in favor of the United States Nuclear Regulatory Commission and the applicable
state regulatory agencies as security for these liabilities and has deposited
marketable securities on account of these obligations (Note 6).
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>
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Number Issued 65,525,066 65,525,066
Amount $ 37,439,402 $ 37,439,402
============ ============
</TABLE>
c) Share options
The Company has adopted a share option plan under which the Board of
Directors may from time to time grant to directors, officers, key
employees and consultants of the Company, options to purchase shares of
the Company's common stock. These options are intended to advance the
interests of the Company by providing eligible persons with the
opportunity, through share options, to acquire an increased proprietary
interest in the Company. Options granted under the share option plan
generally have an exercise price of the fair market value of such
shares on the date of grant. All outstanding options granted to date
vest immediately and expire three years from the date of the grant of
the option.
19
<PAGE> 22
Share option transactions were as follows:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
--------------------------------- ---------------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
------------ ---------------- ---------- --------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year 3,389,000 Cdn $1.03 2,814,000 Cdn $1.11
Granted 3,605,000 Cdn $0.24 900,000 Cdn $0.75
Expired (2,714,000) Cdn $1.10 (325,000) Cdn $0.94
---------- --------- ---------- ---------
Outstanding, end of year 4,280,000 Cdn $0.32 3,389,000 Cdn $1.03
========== ========= ========== =========
</TABLE>
The outstanding options expire between January 2002 and May 2003 and have a
weighted average remaining contractual life of 2.4 years.
11. INCOME TAXES
Non-capital loss carry forwards for Canadian tax purposes of approximately
$903,000 begin to expire in 2004. For U.S. income tax purposes, loss carry
forwards of approximately $4,500,000 begin to expire in 2015 unless utilized.
The benefits of these amounts have not been reflected in these consolidated
statements.
12. SEGMENTED INFORMATION
a) Geographic information
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Revenue
Canada $ -- $ --
United States 16,060,172 14,046,832
Mongolia -- --
------------ ------------
$ 16,060,172 $ 14,046,832
============ ============
Net Loss
Canada $ (267,297) $ (463,753)
United States (3,983,443) (16,580,589)
Mongolia (10,993,911) (53,335)
------------ ------------
$(15,244,651) $(17,097,677)
============ ============
Property, Plant and Equipment, net
Canada $ -- $ --
United States 4,720,795 6,357,892
Mongolia 256,323 432,735
------------ ------------
$ 4,977,118 $ 6,790,627
============ ============
</TABLE>
20
<PAGE> 23
b) Major Customers
The Company's business is such that, at any given time, it sells its
uranium and vanadium concentrates to and enters into process milling
arrangements with a relatively small number of customers. The customers
with whom it does business vary substantially from year to year. During
the year ended September 30, 2000, a uranium customer accounted for 51%
of total revenues. Accounts receivable from any individual customer
will exceed 10% of total accounts receivable on a regular basis.
13. RELATED PARTY TRANSACTIONS
a) During the year ended September 30, 2000, the Company incurred legal
fees of $16,606 with a law firm of which a partner is a director of the
Company. Amounts due to this firm were $1,017 as of September 30, 2000.
Legal fees incurred with this law firm were $12,524 for the year ended
September 30, 1999.
b) During the year ended September 30, 2000, the Company incurred
management and administrative service fees of $90,000 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 $94,108 were paid to this same company during
the year ended September 30, 1999.
c) During the period ended September 30, 1997, the Company loaned
$200,000 to an officer of the Company in order to facilitate relocation
to the Company headquarters. This loan is non-interest bearing and is
payable on the earlier of termination of employment or June 30, 2001.
The loan is secured by the officer's personal residence.
d) Subsequent to the retirement of Mr. Earl E. Hoellen as President and
Chief Executive officer of the Company, a company controlled by Mr.
Hoellen, a director of the Company, earned a commission of $59,516 in
connection with the sale by the Company of its uranium inventories and
sales contracts.
14. CONTINGENCY
The Company has detected some chloroform contamination at the Mill site that
appears to have resulted from the operation of a temporary laboratory facility
that was located at the site prior to and during the construction of the Mill
facility. The source and extent of this contamination are currently under
investigation, and a corrective action plan, if necessary, is yet to be devised.
Although the investigations to date indicate that this contamination appears to
be contained in a manageable area, the scope and costs of remediation have not
yet been determined and could be significant.
The Company is required to comply with environmental protection laws and
regulations and permitting requirements, and the Company anticipates that it
will be required to continue to do so in the future. Although the Company
believes that its operations are in compliance, in all material respects, with
all relevant permits, licenses and regulations involving worker health and
21
<PAGE> 24
safety as well as the environment, the historical trend toward stricter
environmental regulation may continue. The uranium industry is subject to not
only the worker health and safety and environmental risks associated with all
mining businesses, but also to additional risks uniquely associated with uranium
mining and milling. The possibility of more stringent regulations exists in the
area of worker health and safety, the disposition of wastes, the decommissioning
and reclamation of mining and milling sites, and other environmental matters,
each of which could have a material adverse effect on the costs of reclamation
or the viability of the operations.
15. FINANCIAL INSTRUMENTS
As at September 30, 2000 and 1999, 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.
22
<PAGE> 25
EXECUTIVE OFFICERS
Ron F. Hochstein
President and
Chief Executive Officer
David C. Frydenlund
Vice President, General Counsel, Chief Financial
Officer, and
Corporate Secretary
BOARD OF DIRECTORS
John H. Craig
Audit Committee
Compensation Committee
Corporate Governance and
Nominating Committee
Environment, Health, and Safety
Committee
Toronto, Ontario, Canada
David C. Frydenlund
Environment, Health, and Safety
Committee
Denver, Colorado, USA
Christopher J.F. Harrop
Audit Committee
Corporate Governance and
Nominating Committee
Environment, Health, and Safety
Committee
Toronto, Ontario, Canada
Ron F. Hochstein
Denver, Colorado, USA
Earl E. Hoellen
Denver, Colorado, USA
Lukas H. Lundin
Chairman
Compensation Committee
Vancouver, B.C., Canada
William A. Rand
Audit Committee
Compensation Committee
Corporate Governance and
Nominating Committee
Vancouver, B.C., Canada
INTERNATIONAL URANIUM
CORPORATION CORPORATE
DIRECTORY
EXECUTIVE OFFICE
International Uranium (USA)
Corp.
Independence Plaza, Suite 950
1050 Seventeenth Street
Denver, Colorado, USA 80265
Telephone: 303.628.7798
Fax: 303.389.4126
CHAIRMAN'S OFFICE
International Uranium Corp.
885 West Georgia St.,
Suite 1320
Vancouver, British Columbia
Canada V6C 3E8
MONGOLIA OFFICE
International Uranium Company
(Mongolia) Ltd.
III-IV Micro Region
Building 7 Apartment 41
Ulaanbaatar, Mongolia
WHITE MESA MILL OFFICE
International Uranium (USA)
Corp.
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
2300 N Street N.W.
Washington, DC USA 20037
Parsons Behle & Latimer
One Utah Center, Suite 1800
201 South Main Street
Salt Lake City, Utah USA 84145
INVESTOR RELATIONS
International Uranium Corp.
885 West Georgia St.,
Suite 1320
Vancouver, British Columbia,
Canada V6C 3E8
Telephone: 604.689.7842
Fax: 604.689.4250
BANKERS
Canadian Imperial Bank of
Commerce
Vancouver, B.C., Canada
WELLS FARGO BANK
Denver, Colorado, USA
AUDITORS
PricewaterhouseCoopers LLP
Vancouver, B.C., 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 Corporation's Vancouver office,
Suite 1320, 885 West Georgia Street, Vancouver, B.C. Canada on Thursday,
February 15, 2001, at the hour of 10:00 a.m. (Vancouver time).
