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First Uranium Corporation

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FIU
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First Uranium announces the sale of all of its principal operating assets, arrangement for a $10 million bridge loan facility and proposed reorganization proceedings and withdrawal of cautionary announcement

All amounts are in US dollars unless otherwise noted.

TORONTO AND JOHANNESBURG, March 2, 2012 /PRNewswire/ - First Uranium Corporation (TSX: FIU) (JSE: FUM) (ISIN: CA33744R1029) ("FIU" or the "Company") today announced that it has entered into agreements with respect to two separate transactions which provide for the sale of Mine Waste Solutions and its subsidiaries ("MWS") and its Ezulwini Gold Mine and related assets ("Ezulwini") and will hold a shareholders meeting to approve these transactions and a reorganization of the Company.

AngloGold Ashanti Transaction

The Company has entered into a definitive agreement (the "AGA Agreement") dated March 2, 2012 for the sale indirectly of all of the shares of MWS, the tailings recovery project which it operates in South Africa to AngloGold Ashanti Limited ("AGA") (the "AGA Transaction").  Under the terms of the AGA Agreement AGA will pay $335 million in cash (the "Purchase Price") for all of the shares and associated claims of First Uranium (Proprietary) Limited ("FUSA"), which holds, indirectly, the MWS tailings recovery project, subject to the fulfillment of a number of conditions precedent including:  (a) approval of the AGA Transaction by the shareholders of the Company; (b) release of all security against the assets of MWS including under the Secured Convertible Cdn $110 million Notes due March 31, 2013 (the "Canadian Notes") issued pursuant to a Canadian note indenture dated April 8, 2010 (the "Canadian Note Indenture") and the Secured Convertible ZAR 418.6 million Notes due March 31, 2013 (the "ZAR Notes" and together with the Canadian Notes, the "Notes") issued pursuant to a Rand note indenture dated April 23, 2010 (the "Rand Note Indenture" and together with the Canadian Note Indenture, the "Note Indentures"); (c) receipt of approval in accordance with the Exchange Control Regulations of the Republic of South Africa from the South African Reserve Bank ("SARB Approval"); (d) approval by the Competition Tribunal of South Africa under the terms of the Competition Act (or if failure to obtain such approval shall be subject to an appeal, the Competition Appeal Court) ("Competition Act Approval"); (e) approval by the Johannesburg Stock Exchange ("JSE") and The Toronto Stock Exchange ("TSX") to the extent necessary on terms mutually acceptable to the Company and AGA; and (f) that no material adverse change with regard to FIU shall have occurred.

During the period from the date of execution of the AGA Agreement to the closing, FUSA will continue to carry on business in the ordinary course and with reasonable diligence in accordance with best international mining practices in accordance with its existing mine plan.  In addition, the Company has given a number of representations, warranties and indemnities which are customary in transactions of this nature.  In order to protect AGA in the event of any breach of warranty, the parties have agreed at closing that $25 million of the Purchase Price will be placed in escrow for a period ending on the later of six (6) months from the date of closing and December 31, 2012 ("AGA Escrow").  If there are claims for loss or liability, which in the aggregate are less than $3 million, AGA will have no claim on the AGA Escrow.  If the aggregate claims exceed $3 million, AGA may claim its entire loss up to the limit of $25 million but FIU will have no further liability to AGA under the AGA Agreement.

The AGA Agreement provides that completion of the AGA Transaction will occur no later than June 29, 2012 (the "Long Stop Date"), however if the Competition Act Approval has not been obtained by the Long Stop Date, then the date for fulfillment of that condition precedent shall automatically extend without the need for any notice by, or agreement between, the parties, to August 31, 2012.

Gold One Transaction

In a separate transaction, the Company also announced today that it entered into a binding letter agreement (the "Gold One Letter Agreement") dated March 2, 2012 providing for the sale, indirectly, of all of the shares of First Uranium Limited (a wholly-owned subsidiary of the Company), which owns all of the shares of Ezulwini Mining Company (Proprietary) Limited (collectively, "Ezulwini") to Gold One International Limited ("Gold One") for $70 million in cash (the "Gold One Transaction" and together with the AGA Transaction, the "Transactions").  The Gold One Letter Agreement is subject to fulfillment of a number of conditions precedent including:  (a) entering into a definitive transaction agreement on or before March 16, 2012; (b) release of all security against the assets of Ezulwini including the security under the Notes; (c) completion of the restructuring of Ezulwini announced by FIU in December, 2011; (d) receipt of all necessary consents, rulings or directives from the Minister of the Department of Mineral Resources to the extent required; (e) approval of the Gold One Transaction by all applicable regulatory authorities including Competition Approval, SARB Approval and, if required, under the National Nuclear Regulatory Act, 1999; (f) approval by the TSX, JSE and the Australian Stock Exchange ("ASX"); (g) Gold One entering into an agreement with Nuclear Fuels Corporation of South Africa (Nufcor) related to the calcining of uranium ore produced by Ezulwini at Nufcor for 50% of the capacity to which the Company is  entitled under the existing Toll Treatment Agreement between the Company and the Nufcor; and (h) no material adverse change with regard to First Uranium and/or its business.

The Gold One Letter Agreement contemplates that the liabilities of the Company to Gold One under warranties given in the definitive transaction agreement will be limited to $5 million, which amount will be held in escrow ("Gold One Escrow") for six (6) months from the date of closing ("Escrow Release Date").  The AGA Escrow and the Gold One Escrow are herein collectively referred to as the "Escrows".

The Company has agreed to work exclusively with Gold One and has undertaken not to solicit any asset or share acquisition or proposal ("Alternative Transaction") with respect to Ezulwini.  The Company is obliged to advise Gold One if it receives an Alternative Transaction which the Board of Directors on the advice of its financial and legal advisors, determines is a superior proposal ("Superior Proposal") and Gold One will have a five (5) business day right to match any Superior Proposal.  If Gold One and the Company do not agree to amend the Gold One transaction in light of the Superior Proposal, FIU may proceed to complete a Superior Proposal or, in the event that Gold One terminates the agreement due to a material breach by FIU of its non-solicitation obligations, the Company shall thereafter on the date of closing of the Superior Proposal pay to Gold One a break fee of $2.5 million in consideration of the termination.  The Gold One Transaction also provides that the completion date will be the Long Stop Date, subject to extension by mutual agreement.

Loan Facility

Gold One has also provided a loan facility to the Company for an amount up to $10 million available for drawdown in accordance with the loan agreement between the parties (the "Loan Facility").  Any monies advanced will bear interest at the South African prime rate of interest and payment will be guaranteed by Main Street 789 (Proprietary) Limited so that the Loan Facility shares the benefit of the indirect security provided in respect of the Notes, pari passu.  Any amounts drawn on the Loan Facility will be repayable on completion of the Gold One Transaction and, if not completed, on demand after the Gold One Transaction agreement is terminated or if other specified events occur.

Shareholder Votes

Each of the AGA Transaction and the Gold One Transaction will be considered separately by shareholders of the Company at a Special Meeting which the Company anticipates will be held in mid May, 2012.  In relation to the approval of the AGA Transaction, the Company has been advised that the AGA Transaction will be considered a "related party transaction" under Multilateral Instrument 61-101, as a result of the ownership by AGA of 19.8% of the common shares of the Company.  Accordingly the Company engaged Paradigm Capital Inc. to provide a formal valuation of MWS and its related entities, a copy of which will be included in the Information Circular to be sent to shareholders.  In order to approve the AGA Transaction 66-2/3% of the votes cast by shareholders of the Company and 50.1% of the votes cast by shareholders other than AGA and certain other related parties are required. With respect to the Gold One Transaction approval is required from 66-2/3% of the votes cast by shareholders at the meeting.

The financial advisor to the Board of Directors of the Company, RBC Capital Markets, has delivered oral opinions to the effect that, as of the date of such opinions and based upon and subject to the assumptions, limitations and qualifications specified therein, the consideration to be received under each of the AGA Transaction and the Gold One Transaction is fair, from a financial point of view, to FIU and the consideration pursuant to the Transactions is fair, from a financial point of view, to the shareholders of FIU (other than AGA and certain other related parties).  The opinion of RBC Capital Markets in respect of the Gold One Transaction is subject to review of the definitive transaction agreement.  A copy of the fairness opinions will also be included in the Information Circular to be sent to shareholders.

Senior Unsecured Convertible Debentures

The Company has outstanding approximately Cdn $150 million aggregate principal amount of 4.25% Senior Unsecured Convertible Debentures ("Debentures") due June 30, 2012.  Pursuant to the Debenture Trust Indenture ("Debenture Indenture") dated May 3, 2007 the Company has the option, subject to regulatory approval, to satisfy its obligations to repay the principal amount of the Debentures at maturity (provided no event of default has occurred and is continuing) upon not less than 40 days and not more than 60 days prior notice by issuing and delivering that number of freely tradable common shares of the Company obtained by dividing the principal amount of the Debentures by 95% of the weighted average trading price of the common shares on the TSX for the 20 consecutive trading days ending 5 days before the maturity date.

In order to complete the Transactions, the Company will hold a meeting of the Debenture holders at which they will be required to approve amendments to the Debenture Indenture to agree, inter alia, that following completion: (i) neither Gold One nor AGA will be a successor corporation for the purposes of the Debenture Indenture; (ii) no interest will accrue following the date of this announcement; and (iii) the maturity date will be extended to October 5, 2012.  Furthermore, Debenture holders will agree to accept on closing of the Transactions a cash payment of 95% of the principal amount of the Debentures, an additional 2% of the principal amount if they have executed and delivered a validly completed form of election proxy voted in favour of the Company's proposals on or before the early consent deadline to be set (the 2% will be allocated pro rata to holders tendering by the deadline) and an additional payment of the lesser of (i) 3% of the principal amount or (ii) the total amount released to the Company from the Escrows, in priority to any distribution to FIU shareholders from the Escrows.  Holders of approximately 52% of the outstanding Debentures have agreed to vote in favour of the amendments to the Debenture Indenture.

In the event that the Transactions are not completed, the Company will have insufficient funds to pay the outstanding principal owing on the Debentures at the maturity date.  Accordingly, the Company proposes to issue a notice to Debenture holders in accordance with the terms of the Debenture Indenture that it will issue freely tradable common shares in accordance with the formula described above.  The issuance of common shares is subject to receipt of approvals from the TSX and shareholders of the Company.

Secured Convertible Notes

In order to complete the Transactions, the Company will hold a meeting of the Note holders at which they will be required to approve amendments to the Note Indentures to agree that following completion, the Note holders will accept repayment in cash of 100% of the principal amount outstanding on the Notes on the closing of the AGA Transaction.  The Note holders will also be required to agree that an interest payment in cash will be paid for the period ending March 31, 2012, but that no interest will accrue after March 31, 2012. The amendments to the Note Indentures will also provide, inter alia, that neither Gold One nor AGA will be a successor corporation for the purpose of the Note Indenture. Holders of approximately 44% of the outstanding Notes have agreed to vote in favour of the amendments to the Note Indentures.

Amendments to the MWS Gold Stream and the Ezulwini Gold Stream

Franco-Nevada (Barbados) Corporation, a subsidiary of Franco-Nevada GLW Holdings Corp. (collectively "Franco") is the successor to Gold Wheaton (Barbados) Corporation ("GW") which, by agreement made November 28, 2008, holds the right to receive 25% of the life of mine gold productions from MWS (the "MWS Gold Stream").  In November, 2009, GW acquired the right to receive 7% of the life of mine gold production from the Ezulwini Mine (the "Ezulwini Gold Stream") which has also been acquired by Franco.  In connection with the Ezulwini Gold Stream the Company granted a special bond over plants and equipment at Ezulwini and the pledge of the gold production from Ezulwini.

As a precondition to their obligations under the AGA Agreement and the Gold One Letter Agreement, each of AGA and Gold One has agreed with Franco to certain amendments and understandings under the MWS Gold Stream and the Ezulwini Gold Stream, respectively.  Franco is also the holder of Notes and common shares of the Company and it has agreed to vote to approve both the AGA Transaction and the Gold One Transaction, subject to a right of termination in certain circumstances.  The Company has been advised that Franco is a related party for purposes of the approvals of those transactions and the AGA Transaction and their votes will not be included in any majority of the minority vote of shareholders.

Village Main Reef Limited

Village Main Reef Limited ("Village") is the holder of 13,556,739 common shares of the Company and ZAR392,874,000 of the Notes and has agreed to vote to approve the AGA Transaction, the Gold One Transaction and the Reorganization Proceedings (as defined below).  The Company has been advised that Village is a related party for purposes of the approval of the AGA Transaction and their votes will not be included in any majority of the minority vote of shareholders.

Proforma Use of Proceeds

Upon completion of the AGA Transaction and the Gold One Transaction the Company will receive an aggregate of $405 million in cash at closing of which $30 million will be held in escrow accounts.  The Company expects that it will make the following initial payments(1) to securityholders from the proceeds received on the closing of the Transactions, after deducting approximately $23 million in operating and transaction related costs(2):

  (in million of US$)
   


Notes 
Debentures 
Shareholders 
$167.7
$147.7
$36.6
     
(1)      These amounts are approximate and subject to change due to, among other things, currency fluctuations (conversion rates for the above dollar values were based on the Bank of Canada noon rate as of March 1, 2012), results of operations and the repayment at closing of the Transactions of any amount drawn under the Loan Facility.
(2)      These amounts include retention and severance payments, payments owing to Vulisango (Proprietary) Limited (the Company's Black Empowerment Partner) upon termination of the Management Agreement with Vulisango dated August 25, 2011, payments in respect of interest owed on the Notes and Debentures and payments to financial, legal and other advisors.

The balance of the funds held in escrow will be disbursed following the release of the Escrows. Assuming no claims are made, the amount available for distribution will be $30 million which the Company intends to distribute as soon as legally permissible as follows:





Debentures                                                    
Shareholders 
$4.6
$25.4

In the event that the AGA Transaction is approved and the Gold One Transaction is not approved, the total amount available for distribution will be reduced by $70 million in which case the above Pro Forma  Use of Proceeds calculation will be amended and, in view of the requirements under the AGA Transaction to deliver the MWS assets free of security, the Note holders will receive payment in full of the amounts owed to them (assuming amendments to the Note Indenture are approved) and the balance of the proceeds available to the Company will be distributed as may be agreed among the remaining stakeholders in accordance with their respective interests.  The Company will continue to own Ezulwini which will continue as an operating mine and which will require additional funding for working capital in order to carry on its business.

In the event that the Gold One Transaction is approved and the AGA Transaction is not, the Gold One Transaction cannot be completed because the Company will be unable to deliver Ezulwini on a debt-free basis.  In that event, or in the event that both Transactions are not approved, the Company will be compelled to exercise its option to deliver common shares on the maturity of the Debentures.  Based upon the existing trading price of its common shares on the TSX for the 20 consecutive trading days ended five days prior to March 1, 2012, the Company would issue approximately 806 million common shares which would represent approximately 77% of the total issued capital following such issuance, however there are no assurances that the trading price of the FIU common shares at the maturity date of the Debentures will not be materially different than the above noted trading price, or that the number of common shares issuable on such date will not be materially different than the above noted number of common shares.

Proposed Reorganization of FIU

In addition to seeking shareholder approvals for the Transactions at the Special Meeting, the Company intends to pursue, in accordance with the applicable corporate and securities regulations, an amalgamation, arrangement, discontinuance, dissolution, liquidation, winding-up or other reorganization of the Company or its share capital ("Reorganization Proceedings") and to distribute to FIU shareholders all remaining property of the Company following the Transactions as described herein and payment of FIU's creditors.  The Company is currently considering the alternative means of undertaking the Reorganization Proceedings to ensure that the interests of all parties can be accommodated and to provide a tax effective distribution of the proceeds.  Details of the Reorganization Proceedings will be included in the information circular sent to FIU shareholders in connection with the Special Meeting.

Withdrawal of Cautionary Announcement

As shareholders of FIU have now been provided with details relating to the agreements to purchase FIU's principal assets and the Loan Facility, caution is no longer required by shareholders in dealing in their FIU shares.

Corporate Governance

In July 2011, the Board of Directors of the Company empowered a Special Committee to monitor developments and undertake a strategic review of the Company and to advise on any strategic alternatives made in the interests of the Company and its stakeholders.   Following a lengthy review and solicitation of third party interests the Special Committee entered into negotiations with both AGA and Gold One in connection with the potential acquisition of assets of the Company.  It also pursued a potential restructuring of its outstanding indebtedness and entered into negotiations with Vulisango, both through entering into a management agreement and a potential equity investment consistent with the requirements of law in South Africa. In addition to shareholders, there are a number of constituencies including Franco, Village Main Reef, the successor to Simmer & Jack Mines Limited, and various debt holders who required consideration by the Special Committee.  In view of any potential short-term cash constraints, the Company also engaged in negotiations for a short-term bridge lending facility.  Each of the Transactions announced today was reviewed by the Special Committee and recommended to the Board of Directors of the Company who have approved these Transactions.

The Company engaged RBC Capital Markets and Gary Sugar Consulting Inc. as its financial advisors together with Standard Chartered Bank as advisor with respect to the potential BEE transaction and Paradigm Capital Inc. to provide a formal valuation of MWS.

The Company also retained Fraser Milner Casgrain LLP in Canada and Eversheds in South Africa as its legal advisors.  AGA was represented by Fasken Martineau LLP in Canada and Edward Nathan Sonnenbergs in South Africa as its legal advisors.  Gold One appointed Qinisele Resources (Pty) Limited as financial advisors and Stikeman Elliott LLP in Canada and Edward Nathan Sonnenbergs in South Africa as legal advisors.

Cautionary Language Regarding Forward-Looking Information

This news release contains and refers to forward-looking information based on current expectations. All other statements other than statements of historical fact included in this release are forward-looking statements (or forward-looking information). The Company's plans involve various estimates and assumptions and its business and operations are subject to various risks and uncertainties. For more details on these estimates, assumptions, risks and uncertainties, see the Company's most recent Annual Information Form and most recent Management Discussion and Analysis on file with the Canadian provincial securities regulatory authorities on SEDAR at www.sedar.com. These forward-looking statements are made as of the date hereof and there can be no assurance that such statements will prove to be accurate, such statements are subject to significant risks and uncertainties, and actual results and future events could differ materially from those anticipated in such statements, including without limitation, the statements regarding the proposed transactions with Gold One International Limited and AngloGold Ashanti Inc. No assurance can be given that the Company will be successful in concluding the proposed transactions and achieve the desired results. Accordingly, readers should not place undue reliance on forward-looking statements that are included herein, except in accordance with applicable securities laws.

 

SOURCE First Uranium Corporation

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