WHAT could be the last full-year results from First Uranium make it clear why the Canadian company sold its assets to cover its debts, and what challenges lie in store for AngloGold Ashanti and Gold One when they take over its two key assets.

Toronto- and Johannesburg-listed First Uranium had debt of about C$150m ($147m), and its assets were not generating enough cash to cover its liabilities. It sold its Mine Waste Solutions tailings project to AngloGold for $335m and its Ezulwini gold and uranium mine to Gold One for $70m in separate deals that will close by the end of July, allowing it to cover its debts.

In results released on Monday for the year to the end of March, it became clear why First Uranium opted to sell its assets rather than try to raise further capital.

It posted a total comprehensive loss for the year of $245m, compared with $152m a year earlier. The loss was exacerbated by a $178m impairment recorded on the Ezulwini mine.

First Uranium reported a marginal increase in gold sales of 146445oz, compared with 142630oz a year earlier. The Ezulwini mine saw a 21% fall in gold output, offsetting a 19% improvement in production from Mine Waste.

Uranium sales jumped to 82862 pounds, from 20500 pounds the previous year.

The challenges AngloGold and Gold One could face were spelled out in First Uranium's outlook for each operation.

It said there were increasing levels of clay in material treated at Mine Waste's gold extraction circuit as the proportion of clean material from the Number 3 tailings dam diminished and flexibility on input sources declined.

"The performance of gold module one and two will therefore continue to diminish until such time as alternative clay-handling mechanisms with the ability to improve the reclamation rate as well as the quality of the material delivered to the plant are sourced," it said.

Mark Cutifani, CEO of AngloGold, has described Mine Waste as an important addition to its own tailings treatment business, and it is likely that the plant will be used to process AngloGold's tailings and reduce its environmental liabilities.

Mine Waste produced 24862oz of gold in the March quarter at a cash cost of $790/oz. First Uranium warned production could fall 15%-25% depending on the ratio of clean material to clay-laden material.

Output at Ezulwini fell to 8068oz in the March quarter from 11393oz in the same quarter a year earlier. Cash costs were flat at $2218/oz as operational constraints curtailed production.

The mine plan for the current financial year should deliver 50000oz of gold. First Uranium's management said it needed to clear a rockfall in a major ore-transfer system and repair equipment. Ezulwini is forecast to break even by the end of September.

Once the AngloGold and Gold One transactions are completed, First Uranium "may then proceed to be wound up and dissolved", the company said, adding: "However, the board has not made any decisions with respect to the wind-up and dissolution at this time."

seccombea@bdfm.co.za