World Wide Minerals Ltd
WWS
Shares issued 58839225
1998-06-11 close $0.16
Friday Jun 12 1998
Mr. Paul Carroll reviews the company
Derek H.L. Buntain retired as a director after the year end although he continues to function as an
executive of the company's subsidiary, World Wide Uranium Holdings. New directors are Wallace M.
Mays and Thomas B. Evans Jr. Mr. Evans is a Washington, D.C. based government relations
consultant.
John P. Thompson has been promoted to vice-president, corporate development. Yuri A. Mover, who is
also president of the company's subsidiary, KazUran Corp., was appointed vice-president, CIS
operations.
MONGOLIA
CENTRAL ASIAN URANIUM COMPANY, LTD.
In 1995, WM Mining, Priargunsky Mining and Chemical Association and Mongol Erdene Holding
Company formed a joint venture operating as the Central Asian Uranium Company for the restart and
future development of the Dornod open pit and underground mines in northeast Mongolia. The interest
of WM Mining was acquired by World Wide Mongolia Mining on Aug. 12, 1997.
Current interests in CAUC are World Wide Mongolia Minin 58 per cent, Priargunsky 21 per cent, and
Erdene, a division of the Mongolian Ministry of Agriculture and Industry, 21 per cent. Priargunsky,
which formerly developed and managed the Dornod mine, is the sole uranium mining company in
Russia, located at Krasnokamensk in eastern Russia and is owned 51 per cent by the Ministry of Atomic
Energy of the Russian Federation.
JOINT VENTURE PARTNERS
As the majority owner, World Wide provides the project financing in the form of charter funds and
development and working capital loans to the operating company. World Wide has operational control to
introduce and implement western mining efficiencies and concepts where appropriate. World Wide has
the right to market all U3O8 produced by CAUC from the Dornod mine.
Priargunsky contributed the mining infrastructure and development facilities to CAUC, and a significant
and extensive geologic data set. Priargunsky also contributes technical capabilities in heap leaching,
operating experience, purchasing power for materials and supplies, milling and product purification
services and access to an experienced labour force.
Erdene contributed the mineral deposits and the mining licence for the joint venture, which provides for
the exclusive development of the No. 2 and No. 7 ore deposits by the joint venture. It also provides a
link to the Mongolian government to maintain the required degree of local and federal cooperation. As a
state-owned company, Erdene facilitates the review and approval of necessary permits and licences for
the joint venture.
The primary uranium ore deposits are the No. 2 open pit orebody and the high-grade No. 7 underground
orebody. Mining of the No. 2 open pit deposit began in 1988 and continued until 1995. The No. 2 mine
has been on a care-and-maintenance status since 1995.
Extensive exploration and delineation work has been completed on the No. 2 and No. 7 orebodies and
resource estimates have been completed by the former Soviet operator.
World Wide retained SKM Associates and Donald Bruce, an independent consultant, to assist in the
evaluation of the economic feasibility of the Dornod mine. The SKM evaluation is based upon three site
visits in 1997, a review of the operational history of the project, a review of the mineral resources by
Roscoe Postle Associates and a review of earlier studies and reports on the mine. It is RPA's opinion
that the technical work completed by the FSU organizations in preparing the resource estimates is to a
high technical standard and the tonnages and grades reported for the No. 2 and No. 7 orebodies are
reasonable.
A phased return to production is in place. Phase 1, which commenced in September 1997, continues to
bring the No. 2 open pit mine into commercial production.
KAZAKHSTAN
THE TGK URANIUM PROJECT
In October 1996, World Wide and the State Committee for the Management of the State Property of the
Republic of KazakEstan entered into a management agreement pursuant to which World Wide was
awarded the exclusive right to manage the assets of Tselinny Gorno-Khimicheskii Kombinat and to
market internationally the U3O8 produced. World Wide took over the management TGK, with an option
to purchase a 90 per cent interest. The core assets consist of two underground uranium mines (No. 1
and No. 5) with an estimated 35 million lb U308 and the Semisby ISL deposit, which contains an
estimated 42 million lbs U308. The TGK mill has a capacity to process 2.0 million tonnes of uranium
ore per year and has produced as much as 4.7 million lb U308 per year. World Wide developed a
comprehensive plan to improve the head grade to the mill and to divert the lower grade ore to heap leach
pads.
World Wide's 95 per cent subsidiary, KazUran Corp., entered into an agreement in February 1997 with
Kazatomprom, the Kazakhstan state-owned uranium company, to develop three existing ISL uranium
mines and four new uranium deposits in Southern Kazakhstan. The resources contained in these
deposits are considerable and World Wide estimates that 350 million lb U308 would have been
attributable to its interest in the joint venture.
In July 1997 the government of Kazakhstan had a change of heart and decided not to issue requisite
export licences to World Wide. After being unable to reverse this decision, World Wide discontinued
most of the TGK operations although toll processing of uranium concentrates continued. This action
was based on World Wide's position that the government was in default of its agreements.
World Wide maintains that it is entitled to be compensated for the effective confiscation of its TGK deal
and that it still has an interest in about 350 million lb U308 in Kazakhstan. At the time of writing this
report, World Wide believes that discussions with the government of Kazakhstan are proceeding in a
constructive manner towards resolving the repayment of its investment. Ultimate resolution could also
include a continuing role in the redevelopment of the southern ISL mines and deposits in that country.
UNITED STATES
April 1, 1993, World Wide Uranium (Texas), LLC was formed as a joint venture between World Wide
Uranium, the company's U.S. subsidiary, (75 per cent) and Everest Exploration of Corpus Christi,
Texas (25 per cent), to acquire and develop ISL uranium deposits in Texas.
As part of its capital contribution, Everest has agreed to transfer to World Wide Texas ownership of the
Hobson uranium processing plant, along with related waste-water disposal well, satellite ion exchange
uranium recovery plant and additional field equipment. These facilities are capable of recovering about
one million lb U308 per year. World Wide Uranium has agreed to contribute $6-million (U.S.) over a
three year period to be used for the acquisition of mineral rights and development costs.
The objective of the new joint venture is to lease or otherwise acquire and develop uranium deposits in
Texas, using low-cost ISL technology, to fully use the facilities that are capable of producing one
million lb U308 per year. Actual production is projected in two to three years and should be sustainable
for a period of at least ten years.
World Wide Texas has already acquired a substantial acreage of uranium mineralization under reasonable
lease terms. The company will continue to option and lease known uranium mineral properties.
In the case of World Wide Texas, the central processing facility is fully permitted, including the
waste-water disposal well. The processing facilities include complete satellite ion exchange process
equipment and an inventory of ion exchange resin.
A preliminary budget has been established to acquire up to 20,000 acres of uranium leases. Late in
1998, or early 1999, the company expects to begin drilling to define sufficient reserves to begin mining
operations.
FINANCIAL
Cash provided by operating activities during the year ended Dec. 31, 1997 was $5,735,751 compared
with cash used in operations of $176,109 during 1996. Both periods reflect increased corporate activity,
with nominal sales proceeds recorded in 1997 when the company made its first sale of concentrate for
cash proceeds of $1.3-million. Although the company has recognized financial income aggregating
$2.2-million from its investment in Kazakhstan, no cash has been received and recovery is subject to
uncertainties.
On Dec. 19, 1997, a wholly owned subsidiary of the company, World Wide Uranium Holdings,
arranged a five-year, $60-million (U.S.), revolving inventory financing facility with Deutsche Bank
AG. The facility is secured primarily by inventories of uranium concentrates and assignment of certain
sales contracts. The rate of interest is based on LIBOR, plus an applicable predetermined margin, and is
fixed at the time of borrowing against proceeds from the relevant sales contract. The undrawn portion of
the facility bears a commitment fee calculated and payable quarterly in arrears.
On Dec. 30, 1997, WWUHI drew down $18,083,141 under the facility to finance the purchase of
uranium concentrates pending production from Mongolia in 1998 and to permit it to commence
deliveries of uranium concentrate to nuclear power utilities in the first quarter of 1998 under long-term
and short-term sales contracts.
WWUHI has entered into an arrangement whereby, until April 30, 1999, it may borrow up to
1,000,000 lb of uranium concentrates. WWUHI is actively marketing the uranium concentrates to
certain utilities on terms that would be advantageous to the company under the terms of this facility and
the inventory financing facility. Repayment of the uranium loan will be product in-kind.
To Dec. 31, 1997, Dundee Bancorp had advanced to the company $5,282,062, including interest
accrued under a $5.0-million loan made available in August 1997, plus a $100,000 (U.S.) cash advance
made available in December 1997. The loan was secured by certain of the company's assets, rights and
properties and the shares of certain of the company's subsidiaries and carried interest at the Canadian
bank prime rate plus 2 per cent per year.
As part of the financing, the company granted to Dundee a warrant to purchase 750,000 common shares
at 52 cents per share until Dec. 31, 2000 as additional compensation for providing the loan. The Toronto
Stock Exchange requires that the company obtain shareholder approval for the issue of the warrant.
Effective March 6, 1998, World Wide arranged a new $9.5-million loan under a restated loan agreement
with Dundee. This represents an increase from the original $5.0-million loan made available by Dundee,
which had a maturity of March 31, 1998. The increased loan will mature July 31, 1998, bear interest at
the rate of the Canadian bank prime rate plus 3 per cent per year and is secured by assets of the company
that do not represent security for the facility provided by Deutsche Bank AG. In addition to interest on
the loan, Dundee also will be entitled to receive a cash fee of $500,000 upon the company's successful
recovery of its loan receivable from investment in uranium mines in Kazakhstan.
The net proceeds of the increased loan from Dundee were used to refinance the original $5.0-million
loan, to repay additional advances recently made by Dundee, to pay accrued interest on the loan
advances to date, to finance operating costs of the company's uranium mine development in Mongolia
and for general corporate purposes as well as to finance the purchase price for a management group to
purchase the entire 8,631,415 shareholding, representing 16.3 per cent of the then outstanding shares of
World Wide, previously held by an affiliate of Dundee. The price paid to Dundee was 29 cents per
share.
OUTLOOK
Strong future demand is expected to come from the Far East. During the next several years the Asian
market, led by China, Japan, South Korea and Taiwan, will be the focus for growth of nuclear power
generation and hence uranium consumption. China is expected to significantly increase its uranium
requirements over the next 10 to 15 years as its latest nuclear power plan is implemented and Japan has
confirmed that it is planning on adding an additional 20 new nuclear plants to its existing 53 operational
units. |
