UEX CORPORATION
2013 ANNUAL REPORT
Message to Shareholders
March 14, 2014
It is my pleasure to be able to deliver to you my first Message to Shareholders as the President and CEO of our
Company. I am excited to join UEX Corporation after several years in the uranium industry both as a senior
manager of exploration for Cameco Corporation, as well as in the capacity of leading an AIM-listed junior
uranium explorer. UEX has a great reputation within the uranium exploration and development sector,
institutional brokers and analysts and with shareholders themselves, and I consider myself fortunate to be
asked to join such an outstanding company with exceptional assets and with the ability to take advantage of
future organic and external opportunities that currently reside in our industry. I look forward to reporting to you
our ongoing successes over the coming years.
Before talking to you about our recent success and our Company’s future, I would like to thank on behalf of the
Board of Directors, the Management Team, and Shareholders, our recently retired President and CEO, Graham
Thody for his long and distinguished service to the Company, whose guidance successfully steered UEX
through some challenging times in the uranium sector. Graham retired from the CEO and President’s role in
mid-January but will continue to work with the Company as a Board Member and special advisor.
The past year has been one of unprecedented uncertainty for the entire nuclear sector, impacting all of its
participants from utilities right down to uranium producers and explorers. From longer than expected delays in
nuclear power plant restarts in Japan, which continued to drag on our commodity price, the end of the Highly
Enriched Uranium agreement in December, along with the undeniable and unprecedented expansion of nuclear
power, 2013 was an interesting year for the uranium industry, but one that we as a Company have weathered
very favourably.
UEX has not been immune to the pressures impacting the industry; however, our shareholders are well
positioned to take advantage of what I believe is an inevitable uranium price increase. Due to our established
N.I. 43-101 uranium resources and our ten-year history as a “blue-chip” uranium junior, our share price has
closely reflected past movements in the price of uranium.
While many uranium companies have pulled in their horns over the past few years awaiting better times, UEX
continues to actively work towards increasing the future value of our assets.
UEX's portfolio of assets, located in the world's premiere uranium mining district, is indeed the envy of many of
our competitors. UEX holds 49.1% of the Shea Creek Deposits, the second largest undeveloped uranium
resource in the prolific Athabasca Basin, and owns 100% of the Raven and Horseshoe Deposits, the seventh
largest undeveloped uranium resource in the Basin, located on the doorstep of two operating uranium mills.
In 2013, our Company, along with AREVA, invested a combined $5.1 million in the search for new deposits on
trend with our world-class Shea Creek deposits, identified new and highly prospective drill-ready targets for
future exploration programs in addition to issuing a new and updated N.I. 43-101 resource that increased the
already substantial existing resource base. I believe that significant potential exists to grow the size of the
current deposits. The Company gained a new partner to restart exploration on the Black Lake Project and we
also vested a 25% interest in the Beatty River Project.
Notwithstanding our past successes, it is our future that excites me and is the reason I was eager to join the
Company. UEX is in the unique position of owning world-class uranium resources, actual pounds in the ground
that underpin the Company’s fundamental value as a uranium investment.
There is an unparalleled potential to grow our existing resource base through a combination of brownfields
exploration and high-quality grassroots projects, a capacity unmatched by most junior uranium companies. I can
attest to the quality of UEX's assets, as I was involved for several years with the identification and evaluation of
uranium projects around the world for Cameco.
UEX is in an enviable position to increase shareholder value through excellent organic opportunities that reside
within our robust project portfolio, and to evaluate and possibly capture new uranium investment opportunities,
property acquisitions and corporate mergers at relatively attractive prices. I believe that my past experience
and knowledge, much of which was gained with Cameco, can be brought to bear to achieve the goal of
increasing shareholder value.
Many savvy investors are already aware of our significant strengths as a company, as well as the many
challenges we have faced in our sector as of late, but through the efforts of the UEX management team,
coupled with oversight from our seasoned board, I am confident that our future results will be noteworthy. I
relish the challenge of helping move our Company into the coming nuclear renaissance and look forward to our
future successes.
Roger Lemaitre
President & CEO
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
THE COMPANY
Introduction
This Management’s Discussion and Analysis (“MD&A”) of UEX Corporation (“UEX” or the “Company”) for the
year ended December 31, 2013 is intended to provide a detailed analysis of the Company’s business and
compares its financial results with those of the previous year. This MD&A is dated March 14, 2014 and should
be read in conjunction with the Company’s audited annual financial statements and related notes for the years
ended December 31, 2013 and 2012. The financial statements are prepared in accordance with International
Financial Reporting Standards (“IFRS”).
Other disclosure documents of the Company, including its Annual Information Form, filed with the applicable
securities regulatory authorities in Canada are available at www.sedar.com.
Overview
UEX’s fundamental goal is to remain one of the leading global uranium explorers to advance its portfolio of
Athabasca Basin uranium deposits and discoveries through the development stage to the production stage.
Since being listed on the Toronto Stock Exchange in 2002, UEX has pursued exploration on a diversified
portfolio of prospective uranium projects in three areas within the Athabasca Basin in Saskatchewan. The
Company is focusing its main efforts on two advanced projects, the 100%-owned Hidden Bay Project (“Hidden
Bay”) which includes the Horseshoe, Raven and West Bear deposits in the eastern Athabasca Basin, and the
Kianna, Anne, Colette and 58B deposits within the 49.1%-owned Shea Creek Project (“Shea Creek”) in the
western Athabasca Basin.
Athabasca Basin
UEX is involved in fifteen uranium projects in the Athabasca Basin, including five that are 100% owned and
operated by UEX, one joint venture with AREVA Resources Canada Inc. (“AREVA”) that is operated by UEX,
eight projects joint-ventured with and operated by AREVA, and one project joint-ventured with AREVA and JCU
(Canada) Exploration Company, Limited (“JCU”), which is operated by AREVA. AREVA is part of the AREVA
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
group, one of the world’s largest nuclear service providers. In 2013, AREVA and UEX agreed to combine the
Shea Creek Project and the contiguous Douglas River Project (“Douglas River”) as the known mineralization at
the northern boundary of Shea Creek extends into the Douglas River property. The combined projects are now
referred to as the Shea Creek Project.
The fifteen projects, totaling 261,040 hectares (645,044 acres), are located on the eastern, western and
northern perimeters of the Athabasca Basin, the world’s richest uranium district, which in 2013 accounted for
approximately 15% of global primary uranium production. UEX’s 100%-owned projects also include the Riou
Lake Project (“Riou Lake”) and the Northern Athabasca Projects. The Black Lake Project (“Black Lake”) is
owned 89.99% by UEX and the remainder by AREVA. UEX is the project operator. Black Lake was the site of
a uranium discovery made by UEX during a drilling program in September 2004. UEX entered into an earn-in
agreement with Uracan Resources Ltd. (“Uracan”) on January 24, 2013 whereby Uracan can earn a 60%
interest in the project (see “Black Lake Project”). UEX completed its earn-in to a 25% interest in the Beatty
River Project (“Beatty River”) with JCU by funding $858,118 in exploration expenditures in prior periods and
making a payment to JCU of $3,441 in the first quarter of 2013. Beatty River is located in the western
Athabasca Basin in northern Saskatchewan, 40 kilometres south of the Shea Creek uranium deposits and
approximately 40 kilometres north of the recent Patterson Lake uranium discovery. At present, AREVA, the
operator, holds a 50.7% interest, UEX holds a 25.0% interest and JCU holds a 24.3% interest in Beatty River
(see “Beatty River Project”).
The current technical report on the Hidden Bay property, entitled “Preliminary Assessment Technical Report on
the Horseshoe and Raven Deposits, Hidden Bay Project, Saskatchewan, Canada” (the “Preliminary
Assessment Technical Report”, the “PA” or the “Hidden Bay Report”) prepared by SRK Consulting (Canada)
Inc. (“SRK Consulting”) and G. Doerksen, P.Eng., L. Melis, P.Eng., M. Liskowich, P.Geo., B. Murphy, FSAIMM,
K. Palmer, P.Geo. and Dino Pilotto, P.Eng., with an effective date of February 15, 2011 and filed on SEDAR at
www.sedar.com on February 23, 2011, details mineral resource estimates at a cut-off grade of 0.05% U3O8 as
follows:
Deposit
Horseshoe
Raven
West Bear
TOTAL
Tonnes
Grade
U3O8 (%)
U3O8
(lbs)
Tonnes
Grade
U3O8 (%)
U3O8
(lbs)
5,119,700
0.203
22,895,000
287,000
0.166
1,049,000
Indicated
5,173,900
0.107
12,149,000
78,900
0.908
1,579,000
Inferred
822,200
0.092
1,666,000
-
-
-
10,372,500
0.160
36,623,000
1,109,200
0.111
2,715,000
The Preliminary Assessment Technical Report found the economics of mining the Horseshoe and Raven
deposits to be positive and, based on a spot price of US$60 per pound of U3O8, reported undiscounted earnings
before interest and taxes (“EBIT”) of $246 million, a pre-tax net present value (“NPV”) at a 5% discount rate of
$163 million and an internal rate of return (“IRR”) of 42% (see “Hidden Bay Project”).
The Preliminary Assessment Technical Report is preliminary in nature, includes inferred mineral resources that
are considered too speculative geologically to have economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is no certainty that the preliminary economic assessment
will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
‐ 2 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Projects in the mining sector have experienced rising costs, including rising capital and operating costs, during
the past few years. Rising capital and operating costs would, in the absence of other changes, negatively
impact EBIT, NPV and IRR which have been calculated based upon estimated costs at the time the PA was
prepared.
The Western Athabasca Projects (the “Projects”), which include the Kianna, Anne, Colette and 58B deposits
located at Shea Creek, consist of eight joint ventures with UEX holding an approximate 49.1% interest and
AREVA holding an approximate 50.9% interest. AREVA is the operator of the Projects, and UEX and AREVA
are in the process of negotiating joint-venture agreements for the Projects.
In the second quarter of 2013, an agreement was signed with AREVA which grants UEX the option to increase
its ownership interest in the Western Athabasca Projects, which includes the Shea Creek Project, by 0.9% to a
maximum interest of 49.9% by spending $18.0 million on exploration over the six-year period ending December
31, 2018. UEX is under no obligation to propose a budget in any year of the agreement. The ownership
interest for the Projects shall be increased at the end of the year by the proportional amount of the additional
exploration expenditures incurred in the year which are in addition to the annual budget amounts proposed by
AREVA. UEX may propose an additional exploration budget of up to $4.0 million in any single year without the
prior approval of AREVA, who remains the project operator. To date UEX has earned an additional 0.097%
(approximately 0.1%) ownership interest in the Projects which results in a corresponding increase in the
Company’s share of the N.I. 43-101 resources.
In April 2013, UEX received an updated N.I. 43-101 independent mineral resource estimate for Shea Creek
prepared by James N. Gray, P.Geo., of Advantage Geoservices Limited which incorporates additional drilling
results from the 2010, 2011 and 2012 drilling campaigns (see UEX news release dated April 17, 2013). This
estimate includes resources from the Kianna, Anne, Colette and 58B deposits based on drilling information up
to December 31, 2012. A technical report supporting the new mineral resource estimate was filed on SEDAR
on May 31, 2013. Details of the mineral resource estimate at a cut-off grade of 0.30% U3O8 are as follows:
Deposit
Kianna
Anne
Tonnes
Grade
U3O8 (%)
U3O8
(lbs)
Tonnes
Grade
U3O8 (%)
U3O8
(lbs)
1,034,500
1.526
34,805,000
560,700
1.364
16,867,000
564,000
1.992
24,760,000
134,900
0.880
2,617,000
Colette
Indicated
327,800
0.786
5,680,000
Inferred
493,200
0.716
7,780,000
58B
TOTAL (1)
141,600
0.774
2,417,000
83,400
0.505
928,000
2,067,900
1.484
67,663,000
1,272,200
1.005
28,192,000
(1) Certain amounts presented in the Shea Creek N.I. 43-101 report have been rounded for presentation purposes. This rounding may impact the
footing of certain amounts included in the tables above.
‐ 3 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Growth Strategy
The main growth strategies of UEX are:
• To continue the exploration and evaluation work required to delineate and develop economic uranium
resources at Shea Creek;
• To advance the evaluation/development process at the Horseshoe, Raven and West Bear uranium
deposits at the Hidden Bay Project to a production decision once uranium commodity prices have
demonstrated a sustained recovery from current spot and long-term prices;
• To maintain, explore and advance to discovery its other uranium projects; and
• To pursue a diversified portfolio of uranium projects from early exploration through to development and
production, which may include outright property acquisitions or other business combinations.
THE INDUSTRY
Uranium Industry Trends
A number of trends in the nuclear industry have the potential to affect UEX’s business environment. The
earthquake and tsunami that struck Japan in March of 2011 and their effect on the Fukushima nuclear plants
(together referred to as the “Event’’) continues to impact the nuclear industry. The sale of excess fuel
inventories by some Japanese utilities with reactors shut down due to the Event has contributed to the pressure
on the spot price and long-term price of U3O8 which continued into 2014. In 2013, the spot price of uranium fell
to its lowest level since late 2005. Many companies in the uranium exploration and development industry
experienced a corresponding reduction in the market value of their shares. The medium and long-term effect of
the Event on UEX and the uranium industry continues to be observed and evaluated; however UEX, along with
many industry insiders, believes that the fundamentals which underpin the uranium sector are sound and will
continue to improve as more nuclear plants come on-line and many more move into the approval or
construction phase.
At the beginning of 2013, the spot and long-term prices of U3O8 were US$42.75 per pound and US$56.00 per
pound respectively. Both quoted prices declined during 2013 and, as of the date of this document, The Ux
Consulting Company, LLC (www.uxc.com) reports the spot price at US$35.00 per pound of U3O8 and the
long-term price at US$50.00 per pound of U3O8. With several recently announced project deferrals and
temporary uranium mine closures, we are optimistic that the uranium commodity price has found its floor.
In the years following the Event, many countries had stepped back to re-evaluate the safety of nuclear power
and have subsequently reaffirmed their commitment to clean energy. Electricity demands are rising rapidly
worldwide, notably in the developing world where the majority of new reactor builds are underway. Over the
past year, we have witnessed a greater number of nuclear power plants proposed, planned and under
construction than prior to the Event in Japan. Currently there are 70 nuclear power plants under construction
globally, a pace of growth that has not been matched since the early 1980s.
‐ 4 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
The U.S. government has committed to fund up to half the cost of a five-year project to design and
commercialize small modular reactors (“SMRs”) for the United States. The technology has been used for naval
propulsion since 1955 and is used today by several of the world’s navies; however, to date it has not been
commercialized for civilian electrical power generation. SMRs are typically about one-third the size of current
nuclear power plants (180 megawatts of power versus 1,000 megawatts for many full-scale nuclear power
plants) and could be contained entirely underground. By 2022, it is expected that SMRs will be manufactured in
factories and moved to areas that, in the past, could not support a larger reactor installation, such as remote
industrial sites or smaller towns. SMRs have the potential to significantly reduce the cost of nuclear power
generation, provide scalability in that additional units could be added as required and also contribute to the
reduction of greenhouse gases created from locations that are currently burning fossil fuels to generate
electricity.
Global warming and clean energy concerns support increased interest in nuclear power. In view of the Event,
several countries reviewed their existing and future plans related to nuclear energy, and Germany, with nine
reactors accounting for less than 3% of world uranium demand, announced that it would plan to exit nuclear
generation by 2022. However, significantly more reactors are under construction or being planned worldwide
than are proposed to be decommissioned. China, India and Russia have 44 reactors in the construction stage
and 107 reactors in the planning stage. Saudi Arabia has announced plans to construct 16 nuclear reactors by
2030.
At year end, all reactors in Japan remain off-line with the two reactors that were operating having been shut
down for scheduled maintenance. The Japanese economy has been doubly hit by the global economic
slowdown and the higher cost of replacement electricity generation from coal and liquefied natural gas. It has
been reported that carbon dioxide intensity from Japan’s electrical industry surged following the shutdown of its
nuclear reactors, reaching levels estimated to be 39% greater than when the country’s reactors were operating
normally. It is also estimated that 100 million tonnes per year more carbon dioxide is being emitted than when
reactors were operating, adding 8% to the country’s annual emissions. Japan’s Nuclear Regulation Authority
announced the standards against which future restarts will be evaluated on June 18, 2013. Since this
announcement, four Japanese utilities representing seventeen reactors have made applications to restart their
facilities. With the initial six-month estimate to review these applications having recently passed, we are
optimistic that we will see nuclear restarts in Japan in 2014.
Canada signed an agreement in 2013 allowing for the export of uranium to China which grants Canadian
producers access to the fastest growing consumer of uranium in the world. China’s State Council is accepting
new applications for the construction of reactors, paving the way for a significant build out of third-generation
nuclear reactors. On June 6, 2013, the Hongyanhe nuclear power plant in China began commercial operation.
In addition, on September 27, 2013, the Canada-India Nuclear Cooperation Agreement came into effect which
allows Canadian companies to export uranium, nuclear technology, and related services and equipment to India
for peaceful uses at facilities under International Atomic Energy Agency (IAEA) safeguards.
‐ 5 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Uranium Supply and Demand
Uranium supply sources include primary mine production and secondary sources. Principal primary producers
of uranium include Cameco Corporation (“Cameco”) and the AREVA group, both of which produce from
deposits in the Athabasca Basin of northern Saskatchewan. In 2013, worldwide annual consumption was
estimated at approximately 167 million pounds U3O8. World primary production in 2013 was estimated at
approximately 156 million pounds U3O8. Historically, the shortfall between consumption and production has
been covered by several secondary sources including excess inventories held by utilities, producers, other fuel
cycle participants, reprocessed uranium and plutonium derived from used reactor fuel, and uranium supplied
under the Highly Enriched Uranium (HEU) agreement which terminated December 2013.
It is currently estimated that, for 2014, the worldwide annual consumption will exceed global primary production
by 10 million pounds U3O8. Uranium sourced from secondary supply will decline placing additional strain in
primary production. The HEU agreement provided utilities with a stable and secure source of uranium. The
termination of this agreement removes approximately 24 million pounds of U3O8 from the market each year.
Plans to increase primary uranium supply on several development projects worldwide have been impacted by
the recent low uranium prices, leading to the delay or shelving of these projects and further reducing near to
mid-term uranium supply levels. This accelerating gap between future primary supply and growth in demand
will lead to uranium price increases in the short to medium term.
Demand for uranium is directly linked to the level of electricity generated by nuclear power plants. Currently,
434 reactors are operable in 31 countries worldwide. Nuclear electricity generation worldwide has been
growing, since world nuclear generating capacity has continued to expand as more reactors are built than are
closed, and existing reactors are being operated at higher capacity. Presently, there are 70 reactors under
construction and by the year 2022 it has been recently estimated that there will be 90 net new operating
reactors worldwide. UEX believes that the longer than expected delays for restarts of Japan’s nuclear power
plants have put downward pressure on the spot and long-term price for uranium; however, the Company also
feels that the uranium supply and demand fundamentals leading to a recovery of the uranium commodity price
remain sound.
Long-Term Outlook
In the Company’s view, the long-term uranium outlook remains positive as demand for electricity continues to
grow. Nuclear energy, which is safe, clean, reliable and affordable, will remain an important part of the world’s
energy mix. New reactors will come on stream and many existing reactors, now off-line for inspection and
upgrade, are expected to be re-commissioned. Demand for uranium is projected to increase at an estimated
4% annually over the next ten years. It is currently estimated that by 2023 worldwide annual uranium
consumption will reach 240 million pounds U3O8 and existing primary production will decline to 120 million
pounds U3O8. Consequently, there will continue to be the need for new supply from primary sources during the
next decade, as well as the need for higher uranium prices to incentivize this new supply. The long-term
fundamentals that have driven the growth of the nuclear industry during the past few years remain compelling.
‐ 6 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
FINANCIAL UPDATE
Selected Financial Information
The following is selected financial data from the audited financial statements of UEX for the last three completed
fiscal years. The data should be read in conjunction with the audited financial statements for the years ended
December 31, 2013, 2012 and 2011 and the notes thereto.
Summary of Annual Financial Results
Interest income
Net loss for the year
Basic and diluted loss
per share
Capitalized exploration and evaluation
expenditures, net of impairment and
fair value consideration received (if any)
Total assets
December 31, 2013
December 31, 2012 December 31, 2011
$ 202,074
(2,348,002)
$ 221,465
(3,911,251)
$ 108,911
(5,405,217)
(0.010)
(0.018)
(0.027)
4,670,032
4,325,063
9,086,919
173,871,037
172,460,671
160,680,154
The following quarterly financial data is derived from the unaudited condensed interim financial statements of
UEX as at (and for) the three-month periods ended on the dates indicated below.
Summary of Quarterly Financial Results (Unaudited)
2013
Quarter 4
2013
Quarter 3
2013
Quarter 2
2013
Quarter 1
Interest income
$ 42,073
$ 59,221
$ 38,559 $ 62,221
Net loss for the period
Basic and diluted loss
per share
Capitalized exploration and evaluation
expenditures, net of impairment charges and
fair value consideration received (if any)
(1,175,040)
(271,163)
(464,957 )
(436,842)
(0.005)
(0.001)
(0.002 )
(0.002)
1,104,791
2,101,877
995,539
467,825
Total assets
173,871,037
175,308,389
174,898,927
171,919,938
2012
Quarter 4
2012
Quarter 3
2012
Quarter 2
2012
Quarter 1
Interest income
$ 48,016
$ 52,834
$ 107,511 $ 13,104
Net loss for the period
Basic and diluted loss
per share
Capitalized exploration and evaluation
expenditures, net of impairment charges and
fair value consideration received (if any)
(2,412,604)
(356,474)
(636,549 )
(505,624)
(0.011)
(0.002)
(0.003 )
(0.002)
(496,359)
2,216,322
1,310,955
1,294,145
Total assets
172,460,671
175,444,858
175,141,957
175,242,789
‐ 7 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
UEX’s business is not affected by seasonality as the Company is able to perform exploration and evaluation
work year round. Variations in capitalized exploration and evaluation expenditures from quarter to quarter and
year to year are affected by the timing and size of the exploration and evaluation programs in the periods.
Beginning in 2012 and continuing through 2013, in response to a decrease in uranium prices following the
earthquake and tsunami that hit Japan’s Fukushima nuclear power plant and the global economic slowdown
that affected UEX’s share price, certain discretionary exploration and evaluation expenditures were and
continue to be deferred. This decrease in exploration and evaluation expenditures is reflected in the 2013
quarterly financial results. Variations in net loss are primarily affected by the number of options granted and/or
vesting in the period and the associated inputs used in calculating share-based payment expense, by the timing
of mineral property impairments that may have occurred during the period and the timing of the recognition of
deferred taxes associated with the renunciation of tax benefits related to flow-through expenditures.
In the fourth quarter of 2012, the Company determined that the carrying value of the James Creek Project, one
of the Western Athabasca Projects joint-ventured with AREVA, was impaired and a $1,609,741 charge is
reflected in the net loss for the fourth quarter of 2012. The determination for the James Creek impairment was
due to the fact that AREVA, the project operator, did not propose a budget for 2013 and the seven James Creek
claims lapsed. There were no mineral property impairment charges in 2013.
The Q4 2013 loss was increased by $625,617 in deferred tax expense for the period as a result of the
renunciation of the tax benefits associated with qualified exploration expenditures which were incurred with
flow-through dollars, net of the reversal of the flow-through premium. The Q4 2012 loss was also increased by
$144,853 in deferred tax expense for the period due to the renunciation of the tax benefits associated with
qualified exploration expenditures, which were incurred with flow-through dollars.
Share Capital
The Company is authorized to issue an unlimited number of common shares without par value, of which
227,838,679 common shares were issued and outstanding as at December 31, 2013, and an unlimited number
of preferred shares (no par value) issuable in series, of which 1,000,000 preferred shares have been designated
Series 1 Preferred Shares, none of which are issued and outstanding. At December 31, 2013, the Company
had reserved a total of 16,821,000 common shares related to director, employee and consultant share purchase
options. The share purchase options are exchangeable into common shares at exercise prices ranging from
$0.36 per share to $1.45 per share.
In the third quarter of 2013, pursuant to a retirement agreement, 500,000 share purchase options with an
exercise price of $1.45 were voluntarily cancelled and also, on the same date, 685,000 share purchase options
with an exercise price of $1.34 were voluntarily cancelled. In addition, pursuant to this retirement agreement,
150,000 share purchase options with a weighted-average exercise price of $0.60, which would have otherwise
vested on June 5, 2014, vested on January 1, 2014. Also in the third quarter of 2013, 15,000 share purchase
options were cancelled due to a termination.
As at March 14, 2014, there were 227,838,679 common shares issued and outstanding and 17,821,000 share
purchase options outstanding for a total of 245,659,679 on a fully-diluted basis.
‐ 8 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Results of Operations for the Year Ended December 31, 2013
For the year ended December 31, 2013, the Company reported a net loss of $2,348,002 versus a net loss of
$3,911,251 for the year ended December 31, 2012. The net loss for the year ended December 31, 2013 was
lower primarily due to a $1,609,741 write-down of mineral properties recorded in 2012, with no similar
impairment occurring in 2013, and a $443,305 decrease in share-based compensation expense as the annual
options grant occurred late in the fourth quarter of 2013 versus late in the second quarter of 2012. The lower
net loss for the year was partly offset by a $425,889 increase in deferred income tax expense.
In response to the decrease in the uranium commodity price, along with a corresponding decrease in the
Company’s share price, the Company further reduced its exploration and evaluation expenditures in 2013 as
compared to 2012 and did not pay annual bonuses as had occurred in the previous year. This decision is not
immediately evident in the $7,906 net increase in salaries expense for the year, which includes an increased
amount of geological salary costs of approximately $58,000 expensed in the year due to a focus on corporate
matters but capitalized to mineral properties in the previous year. In addition, the current year’s salaries
expense included a salary adjustment of approximately $40,000 for the CEO reflecting an increase in time
commitment to the Company following his retirement announcement. Salaries also included a full year of
employee health benefits which had been incurred for only five months in the comparative year.
Interest income was $202,074 for the year ended December 31, 2013 versus $221,465 for the year ended
December 31, 2012. The decrease in interest income was due to the effect of slightly lower short-term
investment balances in the current year. In 2013, the Company had an average cash balance invested of
approximately $11.7 million versus $13.3 million in the prior year.
Legal and audit fees decreased by $17,678 during the year ended December 31, 2013 as compared to the
previous year. This decrease is related to joint-venture compliance audit costs of approximately $55,000
incurred in the comparative year that were not incurred in the current year, offset by an increase in legal costs
associated with project evaluation, the retirement of the Company’s CEO, amendments to the Western
Athabasca Option agreement with AREVA, the Black Lake earn-in agreement with Uracan and the evaluation of
work related to the advancement of Hidden Bay, all of which were not incurred in the prior year. The $115,230
increase in office expenses was primarily due to project evaluation work in 2013 that was not conducted in
2012, increased office consulting costs for land claims administration associated with learning the new MARS
claim management process for Saskatchewan mineral claims, and costs associated with identifying and
evaluating potential strategic opportunities for the Company. Salaries expense increased by $7,906 as
compared to 2012 due primarily to an increased amount of geological salaried time focused on corporate
matters during the year (approximately 45% expensed versus 10% in the comparative year) and a salary
adjustment for the CEO as noted above. These increases were offset by annual bonuses paid in 2012 but not
in the current year. Travel and promotional expenses for the year decreased by $53,693 as compared to the
previous year, due primarily to the scaling back of investor relations and promotional activities in the current
year and the associated travel costs.
The vesting of share purchase options during the year ended December 31, 2013 resulted in total share-based
compensation expense of $667,309, of which $157,082 was allocated to mineral property expenditures and the
remaining $510,227 was charged to operations. The vesting of share purchase options during the year ended
December 31, 2012 resulted in total share-based compensation expense of $1,346,364, of which $392,832 was
allocated to mineral property expenditures and $953,532 was charged to operations. These differences in
‐ 9 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
share-based compensation expense result primarily from the annual options grant occurring much later in 2013
versus 2012. Despite the decrease in share-based compensation expense, a slightly larger percentage of
share-based compensation was expensed versus deferred to mineral properties in the current year due to
geological staff spending more of their time on corporate matters rather than exploration projects, when
compared to the year ended December 31, 2012.
In the current year, the Company received 300,000 Uracan shares as partial consideration for a farm-out
agreement that UEX signed with Uracan for the Black Lake Project. The market value of these securities at
December 31, 2013 was the same as their market value when they were received in February 2013. The
Company has not disposed of any of these shares in the year and did not hold any marketable securities in the
comparative year.
In the current year, the Company also received 150,000 Uracan share purchase warrants as partial
consideration for the farm-out agreement with Uracan for the Black Lake Project. The fair value of the warrants,
as determined using the Black-Scholes option-pricing model, has decreased by $4,198 from the values
determined when they were received, as a result of updated Black-Scholes valuation input assumptions. The
Company did not hold any similar investments in the comparative year.
The deferred income tax expense for the year ended December 31, 2013 was $311,296 compared to a deferred
income tax recovery for the year ended December 31, 2012 of $114,593. This tax expense differential of
$425,889 resulted from several factors including the much higher level of evaluation expenditures incurred in
2012 at Hidden Bay funded by non-flow-through dollars and the recovery of deferred tax in 2012 created by the
write-down of an exploration property. The deferred income tax expense reflects the deferred income tax
liability created by the renouncement of flow-through expenditures (net of the reversal of the flow-through
premium), as well as the increase in non-capital losses carried forward due to the addition of the current year’s
operating losses.
The continuity of expenditures on UEX’s uranium projects for the years ended December 31, 2013 and 2012 is
as follows:
December 31, 2013
Project
Hidden Bay
Riou Lake
Western Athabasca
Black Lake
Beatty River
Balance
December 31
2012
$ 75,363,225
10,425,937
57,548,301
15,232,776
865,950
Exploration and
evaluation
expenditures
during the period
$
860,244
-
3,808,943
33,335
3,441
Fair value
consideration
received
$
-
-
-
(35,931)
-
$ 159,436,189
$
4,705,963
$
(35,931)
Balance
December 31
2013
$ 76,223,469
10,425,937
61,357,244
15,230,180
869,391
$ 164,106,221
‐ 10 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
December 31, 2012
Project
Hidden Bay
Riou Lake
Western Athabasca
Black Lake
Beatty River
Balance
December 31
2011
$ 72,668,796
10,385,783
56,011,738
15,188,721
856,088
Exploration and
evaluation
expenditures
during the year
$
2,694,429
40,154
3,146,304
44,055
9,862
Impairment
charge for
the year
$
-
-
(1,609,741)
-
-
$ 155,111,126
$
5,934,804
$
(1,609,741)
Balance
December 31
2012
$ 75,363,225
10,425,937
57,548,301
15,232,776
865,950
$ 159,436,189
In 2013, exploration and evaluation expenditures at Hidden Bay of $860,244 included evaluation expenditures
of $702,379 (2012 exploration and evaluation expenditures of $2,694,429 included evaluation expenditures of
$1,299,781) primarily relating to component technical studies. Total evaluation expenditures of $7,292,299 as
at December 31, 2013 are included in the $76,223,469 balance (the December 31, 2012 exploration and
evaluation total of $75,363,225 includes $6,589,920 of evaluation expenditures) and represent costs associated
with the continuing evaluation of and advancement of Hidden Bay. These costs include the West Bear
Preliminary Feasibility Study (February 24, 2010), the Hidden Bay Preliminary Assessment Technical Report
(February 23, 2011) and various component technical studies.
At December 31, 2013, total exploration and evaluation assets to date of $61,357,244 for Western Athabasca
includes evaluation expenditures of $7,370,026 (the December 31, 2012 exploration and evaluation total of
$57,548,301 includes $7,370,026 of evaluation expenditures) relating to the Shea Creek Project. There were
no evaluation expenditures incurred in 2013 or 2012 that were related to this project as AREVA and UEX have
focused on exploration activities. For further information regarding expenditures on the projects shown in the
table above, please refer to “Exploration and Evaluation Activities”. Also please refer to the “Critical Accounting
Estimates, Valuation of mineral properties” section.
During the year ended December 31, 2013, the Company incurred exploration and evaluation expenditures
totaling $4,508,143 for all projects before non-cash share-based compensation and depreciation totaling
$197,820. In addition, $35,931 of fair value consideration relating to the farm-out agreement with Uracan for
Black Lake was recorded as a reduction in the carrying value of this project in the first quarter of 2013.
Exploration and evaluation expenditures incurred for all projects during the year ended December 31, 2012
totaled $5,503,491 before non-cash share-based compensation and depreciation totaling $431,313. This
$995,348 reduction in expenditures before non-cash items during the year ended December 31, 2013 was
primarily due to there being no exploration drilling at the Hidden Bay Project during the year, the completion of a
small amount of evaluation work, and the smaller size of the regular joint-venture exploration budget for the
Western Athabasca Projects of which UEX’s 49% share was $1.52 million in 2013 versus $2.94 million in 2012.
The expenditures to December 31, 2013 associated with the $2.0 million supplemental budget for the Western
Athabasca related to the earn-in option for the Western Athabasca Projects, of which UEX is responsible for
funding 100%, did not fully replace the amounts spent in the comparative year. Previously planned exploration
at Hidden Bay is being deferred in response to the current capital market conditions and the decrease in
uranium commodity prices.
‐ 11 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
The Company has an interest in several joint operations relating to the exploration and evaluation of various
properties in the western and northern Athabasca Basin. These interests are governed by contractual
arrangements but have not been organized into separate legal entities or vehicles. The joint arrangements that
the Company is party to in some cases entitle the Company, or its joint venture partner, to a right of first refusal
on the projects should one of the partners choose to sell their interest. The joint arrangements are governed by
management committees which set the annual exploration budgets for these projects. Should the Company be
unable to, or choose not to, fund its required contributions as outlined in the agreement, there is a risk that the
Company’s ownership interest could be diluted. As a result of decisions to fund exploration programs for the
joint arrangements, the Company may choose to complete further equity issuances or fund these amounts
through the Company’s general working capital.
UEX is party to the following joint arrangements:
Ownership interest
Effective December 31, 2013 and March 14, 2014
Western
Athabasca
UEX Corporation
AREVA Resources Canada Inc.
JCU (Canada) Exploration Company, Limited
49.097 %
50.903
-
Black
Lake
89.990 %
10.010
-
Beatty
River
25.000 %
50.702
24.298
100.000 %
100.000 %
100.000 %
Results of Operations for the Three-Month Period Ended December 31, 2013
For the three-month period ended December 31, 2013 the Company reported a net loss before other
comprehensive income of $1,175,040 versus a net loss of $2,412,604 for the three-month period ended
December 31, 2012. The net loss for the three-month period ended December 31, 2013 was lower primarily
due to a $1,609,741 write-down of mineral properties recorded in Q4 2012, with no similar impairment occurring
in 2013, and a $102,975 decrease in salaries expense as no annual bonuses were paid in 2013. The lower net
loss for the period was partly offset by a $480,674 increase in deferred income tax expense.
In response to the decrease in the uranium commodity price, along with a corresponding decrease in the
Company’s share price, the Company further reduced its exploration and evaluation expenditures in 2013 as
compared to 2012 and did not pay annual bonuses in the fourth quarter as had occurred in the previous year.
The resulting decrease in salaries expense for the three-month period was partly offset by an increased amount
of geological salary costs of approximately $13,000 which were expensed in the current period and capitalized
in the comparative period due to a focus on corporate matters, and a salary adjustment of approximately
$23,000 for the CEO reflecting an increase in time commitment to the Company following his retirement
announcement.
Interest income was $42,073 for the three-month period ended December 31, 2013 versus $48,016 for the
three-month period ended December 31, 2012. The decrease in interest income was due to the effect of lower
short-term investment balances. In the fourth quarter of 2013, the Company had an average cash balance
invested of approximately $10.4 million versus $13.3 million in the comparative period.
‐ 12 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Legal and audit fees decreased during the three-month period ended December 31, 2013 by $23,347 as
compared to the previous period. This decrease primarily related to a portion of the prior year’s joint-venture
compliance audit costs and amendments to the Western Athabasca Option agreement with AREVA which were
incurred in the comparative period but were not incurred in the current period, partly offset by legal costs
incurred in the current period associated with the retirement of the Company’s CEO. The $52,244 increase in
office expenses was primarily due to project evaluation work in the current period that was not conducted in the
comparative quarter, increased office consulting costs for land claims administration, and costs associated with
identifying and evaluating potential strategic opportunities for the Company. Salaries expense decreased by
$102,975 as compared to 2012 due primarily to annual bonuses paid in the fourth quarter of 2012, with no
bonuses paid in the current year. This decrease was offset by an increased amount of geological salaried time
focused on corporate matters during the year (approximately 50% expensed versus 20% in the comparative
period) and a salary adjustment for the CEO as noted above. Travel and promotional expenses for the three-
month period ended December 31, 2013 decreased by $31,519 as compared to the previous period due
primarily to the scaling back of investor relations and promotional activities in the current period and the
associated travel costs.
The vesting of share purchase options during the three-month period ended December 31, 2013 resulted in
total share-based compensation expense of $200,801, of which $40,753 was allocated to mineral property
expenditures and the remaining $160,048 was charged to operations. The vesting of share purchase options
during the three-month period ended December 31, 2012 resulted in total share-based compensation expense
of $218,728 of which $54,955 was allocated to mineral property expenditures and $163,773 was charged to
operations. These differences in share-based compensation expense result primarily from the annual options
grant occurring much later in the year as compared to 2012. Despite the decrease in share-based
compensation expense, a slightly larger percentage of share-based compensation was expensed versus
deferred to mineral properties in the current period due to geological staff allocating more of their time to
corporate matters rather than to exploration projects.
In the first quarter of 2013, the Company received 300,000 Uracan shares as partial consideration for a farm-out
agreement that UEX signed with Uracan for the Black Lake Project. The market value of these securities has
increased by $12,000 since September 30, 2013. The unrealized increase in market value is reflected in other
comprehensive income in the current three-month period. The increase in the market value of these shares in
the fourth quarter of 2013 returned these shares to the same market value they had, when they were received
in February of 2013. The Company has not disposed of any of these shares in the period and did not hold any
marketable securities in the comparative period. The tax impact of this unrealized gain resulted in the
recognition of a deferred income tax expense of $1,620 in other comprehensive income for the fourth quarter of
2013.
In the first quarter of 2013, the Company also received 150,000 Uracan share purchase warrants as partial
consideration for the farm-out agreement with Uracan for the Black Lake Project. The fair value of the warrants,
as determined using the Black-Scholes option-pricing model, has increased by $628 since September 30, 2013,
partially due to the increase in Uracan’s share price, but also as a result of updated Black-Scholes valuation
input assumptions. The Company did not hold any similar investments in the comparative period.
The deferred income tax expense for the three-month period ended December 31, 2013 was $625,617
compared to a deferred income tax expense for the three-month period ended December 31, 2012 of $144,853.
‐ 13 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
This tax expense differential of $480,764 resulted from several factors including the much higher level of
evaluation expenditures incurred in the fourth quarter of 2012 at Hidden Bay funded by non-flow-through dollars
and the recovery of deferred tax in Q4 2012 created by the write-down of a mineral property. The deferred
income tax expense reflects the deferred income tax liability created by the renouncement of flow-through
expenditures (net of the reversal of the flow-through premium), as well as the increase in non-capital losses
carried forward due to the addition of the Q4 2013 operating losses.
Financing Activities
On June 5, 2013 the Company completed a non-brokered private placement of 6,350,000 flow-through shares
at a price of $0.50 per share for gross proceeds of $3,175,000 with issue costs of $44,972 and a referral fee of
$60,000 paid from existing cash reserves. A flow-through premium related to the sale of the associated tax
benefits was determined to be $127,000 on issuance. Cameco did not exercise its pre-emptive right to
participate in the offering and as a result, their ownership interest in UEX declined from approximately 22.58%
to approximately 21.95% after the placement was completed.
Use of Proceeds from the June 5, 2013 Flow-through Private Placement as at December 31, 2013
PROPOSED USE OF
PROCEEDS (1)
Flow-through
Private Placement
ACTUAL USE OF
PROCEEDS
Use of
Proceeds
Remaining to
be Spent
Western Athabasca Projects
Exploration and drilling
TOTAL
$ 3,175,000
$ 3,175,000
$ -
$ 3,175,000
$ 3,175,000
$ -
(1) Expenses of $104,972 related to the offering were funded by the Company’s existing working capital and not withheld
from placement proceeds.
The proceeds from the June 5, 2013 placement were used to fund UEX’s 49% share of the $3.1 million Western
Athabasca joint-venture exploration budget with AREVA as well as UEX’s 100% share of the $2.0 million
supplemental exploration budget which relates to the additional earn-in agreement with AREVA for the Western
Athabasca Projects which was signed in the first quarter of 2013. As at December 31, 2013, the Company has
spent all of the $3.175 million flow-through monies raised in the June 5, 2013 placement. The Company
renounced the income tax benefit of this issue to its subscribers effective December 31, 2013, and did not incur
any Part XII.6 tax related to this placement.
In 2012, the Company completed an underwritten bought deal public financing for 10,000,000 common shares
at a price of $0.80 per share for gross proceeds of $8,000,000 on March 13, 2012. Cameco exercised its
pre-emptive right to participate in the offering and purchased 3,208,902 shares for $2,333,746, so as to
maintain its ownership at approximately 22.58%, on the same terms as the offering except no cash commission
was payable. In addition, the underwriter exercised its 10% over-allotment rights and Cameco exercised its
associated pre-emptive right resulting in the Company receiving another $1,033,375. Share issue costs include
a cash commission of $440,000 and other issuance costs of $275,633.
‐ 14 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Proceeds from Short Form Prospectus Offering of March 13, 2012
Offering &
Cameco
Pre-emptive
Distribution
10% Over-
Allotment
Additional
Cameco
Pre-emptive
Distribution
Total
Actual Net
Proceeds
Difference
Gross Proceeds
$10,333,746 $ 800,000 $ 233,375
$11,367,121
$11,367,121 $ -
Fees payable to
Underwriters
400,000
40,000
-
440,000
440,000
-
Expenses of Offering
200,000
-
-
200,000
275,633
75,633
Net Proceeds
$ 9,733,746 $
760,000
$ 233,375
$10,727,121
$10,651,488 $ 75,633
Use of Proceeds from Short Form Prospectus Offering as at December 31, 2013
PROPOSED USE OF PROCEEDS (1)
Offering &
Cameco
Pre-emptive
Distribution
10% Over-
Allotment
Additional
Cameco
Pre-emptive
Distribution
Total
ACTUAL USE OF
PROCEEDS
Use of
Proceeds
Difference /
Remaining
to be Spent
$ 3,000,000 $ - $ -
$ 3,000,000
$ 300,280 $ -
100,000
1,750,000
200,000
2,000,000
-
-
-
-
-
100,000
100,000
-
-
-
-
1,750,000
200,000
2,000,000
56,676
109,270
1,662,029
-
-
337,971
2,683,746
760,000
233,375
3,677,121
3,191,963
4,968,932
Shea Creek Project
Exploration and drilling (i)
Updated mineral
resource estimate
Hidden Bay Project
Exploration and drilling (ii)
Capital expenditures (iii)
Evaluation (2)
Working capital & general
corporate expenses
TOTAL
$ 9,733,746 $ 760,000 $ 233,375
$10,727,121
$ 5,420,218 $ 5,306,903
(1) In the Short Form Prospectus, amounts were presented in millions
(2) Referred to as “Development to December 31, 2012 with goal of advancing toward the pre-feasibility stage” in the Short Form Prospectus
When the short form prospectus was prepared and filed, the use of proceeds table included only funds related
to the offering which, in addition to the $8.8 million bought deal, included proceeds from shares to be issued to
Cameco for having exercised their pre-emptive right to maintain their existing ownership percentage of the
Company and proceeds related to the 10% over-allotment. At that time all conditions precedent related to the
flow-through placement and the associated Cameco private placement had not been met. Upon completion of
the flow-through, UEX had an obligation to fund $3.0 million in qualified exploration costs. UEX has fully
expended the $3.0 million on qualified exploration costs and has renounced the tax benefit effective
December 31, 2012. The flow-through placement was completed on March 14, 2012 and management has
‐ 15 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
reallocated these flow-through amounts to be used to fund the 2012 drilling at Shea Creek. This eliminated the
potential Part XII.6 tax that could have become payable due to the timing of the spending of the flow-through
funds.
In the months following the Offering and the completion of the private placements, market conditions in the
resource sector deteriorated significantly and the ability to raise capital became challenging and highly dilutive
for most public companies. Management took the following steps to preserve capital in difficult and uncertain
market conditions:
(i) Shea Creek exploration of $3.0 million for 2012 which was to be funded out of this placement was
funded by the flow-through placement which was closed on March 14, 2012 (see second quarter
2013 MD&A) and the amount allocated for this purpose in the short form prospectus offering was
transferred to working capital and general corporate expenses.
(ii) Planned exploration expenditures of $1.75 million at Hidden Bay were deferred with these amounts
being allocated to working capital and general corporate expenses.
(iii) Planned capital expenditures on the Hidden Bay Project, which included the acquisition of the Raven
camp, were completed at less than anticipated cost and other non-critical expenditures were deferred
with the remaining funds allocated to working capital and general corporate expenses.
Should market conditions improve and circumstances are such that undertaking these expenditures are in the
best interest of UEX, funds may be reallocated to exploration from working capital.
On March 14, 2012, the Company completed a non-brokered private placement of 3,260,869 flow-through
shares at a price of $0.92 per share for gross proceeds of $3,000,000 with issue costs of $37,044 and no
commission payable. A flow-through premium related to the sale of the associated tax benefits was determined
to be $97,826 on issuance (market price on date of subscription was $0.89). Cameco exercised its pre-emptive
right to participate in the offering and purchased 951,256 common shares at a non-flow-through price of $0.84
per share offered by the Company, so as to maintain its ownership interest at approximately 22.58%. Effective
December 31, 2012, the Company renounced flow-through expenditures relating to the flow-through funds
raised in 2012 ($3.0 million under the general rule) and did not incur Part XII.6 tax.
No share purchase options were exercised during the years ended December 31, 2013 or 2012.
Liquidity and Capital Resources
As UEX has not begun production on any of its mineral properties, the Company does not generate cash from
operations. As at December 31, 2013, the Company had current assets of $9,608,052, including $9,321,916 in
cash and cash equivalents, compared to current assets as at December 31, 2012 that totaled $12,852,916 and
included $12,580,134 in cash and cash equivalents. Working capital at December 31, 2013 was $9,387,418
compared to working capital of $12,342,017 at December 31, 2012. At December 31, 2013, the Company’s
cash balances were invested in highly liquid term deposits redeemable within 90 days or less. The Company
had sufficient cash resources at December 31, 2013 to fund its approved 2014 budgets for exploration,
evaluation and administrative costs, and anticipates a cash balance at December 31, 2014 of approximately
$5.0 million.
‐ 16 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Accounts payable and other liabilities at December 31, 2013 were $220,634, which is lower than the December
31, 2012 balance of $510,899. This difference is primarily comprised of a decrease in joint operation amounts
owed to AREVA due to the timing of exploration work performed on the Shea Creek Project during the current
period, which was substantially complete by the end of November 2013, as compared to the $231,384 owed as
at December 31, 2012 from exploration work that had continued into December 2012. Also, $153,620 was
owed to SRK Consulting for development work at December 31, 2012, with no comparable payable at
December 31, 2013, as SRK’s work was completed earlier in the current year.
The Company’s net deferred income tax liability of $13,376,478 at December 31, 2013 is comprised of a
$16,659,679 deferred income tax liability related to the tax effect of the difference between the carrying value of
the Company’s mineral properties and their tax values, offset by the Company’s deferred income tax assets
totaling $3,283,201. At December 31, 2012, the Company’s net deferred income tax liability was $12,966,524
and was comprised of a $15,801,130 deferred income tax liability related to the tax effect of the difference
between the carrying value of the Company’s mineral properties and their tax values, offset by the Company’s
deferred income tax assets totaling $2,834,606. The deferred income tax liability increased from December 31,
2012 to December 31, 2013 primarily due to the renouncement of the tax benefit of certain exploration
expenditures which were settled with flow-through dollars ($3.175 million) and capitalized in mineral properties.
This increase in liability was partly offset by the increase in the tax value of non-capital loss carryforwards from
the comparative year due to the impact of the general and administrative losses from the current year, as well
as capitalized exploration expenditures which were not funded with flow-through dollars and thus not renounced
to shareholders, which together created a larger deferred income tax asset to offset against the deferred income
tax liabilities.
Commitments
In the normal course of business, the Company enters into contracts and performs business activities that give
rise to commitments for future minimum payments. The Company has an obligation under an operating lease
for its office premises until November 30, 2015 and an obligation related to a retirement consulting agreement.
Future minimum lease payments as at December 31, 2013 are as follows:
Lease for office premises
$ 60,566
$ 56,743
$ nil
$ nil
$ nil
2014
2015
2016
2017
2018
Pursuant to a retirement agreement, the Company has entered into a consulting arrangement whereby the
former Chief Executive Officer has agreed to provide management transition services for a two-year period
commencing January 1, 2014, for a consulting fee of $366,000. One half of this consulting fee was paid in
January 2014, with the remainder to be paid in January 2015.
The Company has no other financial commitments or obligations beyond those required to fund its 2014
exploration budgets for the Western Athabasca of approximately $982,000. The 2014 exploration program for
the Western Athabasca commenced in early January 2014.
‐ 17 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
A $650,000 prepayment was received from Uracan in early 2014 and amounts to 100% of the currently
budgeted 2014 winter exploration program at Black Lake. This program commenced in early January 2014. In
the third quarter of 2013, UEX received from Uracan a prepayment of $104,060 which represented the full
budget amount for the 2013 exploration program at Black Lake. The unspent amount of $79,006 as at
December 31, 2013 was fully expended upon completion of the 2013 exploration program in January 2014.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, amounts receivable, investments
and accounts payable and other liabilities. Interest income is recorded in the statement of operations and
comprehensive loss. Cash and cash equivalents, as well as amounts receivable, are classified as loans and
receivables, and accounts payable and other liabilities are classified as other financial liabilities and recorded at
amortized cost using the effective interest rate method. In addition, any impairment of loans and receivables is
deducted from amortized cost. Investments include warrants which have been classified as Financial assets at
fair value through profit or loss (“FVTPL”) and as such are stated at fair value with any changes in fair value
recognized in profit or loss. The investments also include shares which have been classified as
Available-for-sale financial assets and are carried at fair value with changes in fair value recognized in other
comprehensive income with amounts accumulated in other comprehensive income recognized in profit or loss
when they are sold.
The Company operates entirely in Canada and is not subject to any significant foreign currency risk. The
Company’s financial instruments are exposed to limited liquidity risk, credit risk and market risk.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company manages liquidity risk through the management of its capital structure. The Company’s objective
when managing capital is to safeguard the Company’s ability to continue as a going concern in order to pursue
the exploration and development programs on its mineral properties. The Company manages its capital
structure, consisting of shareholders’ equity, and makes adjustments to it, based on funds available to the
Company, in order to support the exploration and development of its mineral properties. Historically, the
Company has relied exclusively on the issuance of common shares for its capital requirements. Accounts
payable and other liabilities are due within the current operating period.
Credit risk is the risk of an unexpected loss if a third party to a financial instrument fails to meet its
contractual obligations. The Company’s exposure to credit risk includes cash and cash equivalents and
amounts receivable. The Company reduces its credit risk by maintaining its bank accounts at large international
financial institutions. The maximum exposure to credit risk is equal to the carrying value of cash and cash
equivalents and amounts receivable. The Company’s investment policy is to invest its cash in highly liquid
short-term interest-bearing investments that are redeemable 90 days or less from the original date of
acquisition.
‐ 18 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Market risk is the risk that changes in market prices such as foreign exchange rates and interest rates will affect
the Company’s income. The Company is subject to interest rate risk on its cash and cash equivalents. The
Company reduces this risk by investing its cash in highly liquid short-term interest-bearing investments that earn
interest on a fixed rate basis.
The carrying values of amounts receivable and accounts payable and other liabilities are a reasonable estimate
of their fair values because of the short period to maturity of these instruments.
Cash and cash equivalents are classified as loans and receivables and are initially recorded at fair value and
subsequently at amortized cost with accrued interest recorded in accounts receivable.
Investments are recorded at fair value. The fair value change for the Uracan shares represents the change to
the quoted price of these publicly traded securities from the date they were acquired. These shares and
warrants are being held for long-term investment purposes. The fair value change for the share purchase
warrants reflects changes to the Black-Scholes valuation input assumptions on acquisition compared to the
December 31, 2013 revaluation date. The warrants have an exercise price of $0.15 per share (which is
currently above market share price), and have an expiry date of February 13, 2016.
The impacts of fair value changes are incidental to the Company as the assets impacted by these changes do
not represent significant value in comparison with the core assets of the Company. The Company has not
exercised any of the Uracan share purchase warrants that it holds.
The fair value of the Uracan shares, classified as Level 1, is based on the market price for these actively traded
securities at February 13, 2013 on acquisition and at December 31, 2013, the financial statement fair value
date.
The fair value of the warrants received from Uracan, classified as Level 3, has been determined using the
Black-Scholes option-pricing model with the following weighted-average assumptions as at the dates indicated:
Number of warrants received – Uracan
Expected forfeiture rate
Weighted-average grant date fair values
Expected volatility
Risk-free interest rate
Expected life
(1) Date of acquisition
December 31
2013
February 13
2013
December 31
(1) 2012
150,000
0.00%
$ 0.06
150.18%
1.14%
150,000
0.00%
$ 0.06
127.26%
1.22%
2.19 years
3.00 years
-
-
-
-
-
-
Market factors, such as fluctuations in the trading prices for the marketable securities as well as fluctuations in
the risk-free interest rates offered by the Bank of Canada for short-term deposits, are updated each time the
Uracan warrants are revalued. The Company expects that these valuation inputs are likely to change at every
reporting period which will result in adjustments to the fair value of these warrants in future periods.
‐ 19 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
The following table shows the valuation techniques used in the determination of fair values within Level 3 of the
hierarchy, as well as the key unobservable inputs used in the valuation model:
Level 3 item
Valuation approach
Key unobservable inputs
Inter-relationship between key
unobservable inputs and fair
value measurement
Warrants – Uracan
The fair value has been
determined by using the
Black-Scholes option
pricing model.
Expected volatility for Uracan
shares, derived from the shares’
historical prices (weekly).
The estimated fair value for the
warrants increases as the volatility
increases.
Related Party Transactions
The Company was involved in the following related party transactions for the three and twelve months ended
December 31, 2013 and 2012:
Related party transactions include the following payments which were made to related parties other than key
management personnel:
Other consultants (1)
Other consultants share-based payments (3)
Panterra Geoservices Inc.(2)
Panterra Geoservices Inc. share-based payments (3)
Three months ended
December 31
Year ended
December 31
2013
2012
2013
2012
$ - $ 5,525
$ 2,400 $ 60,130
299
6,300
11,607
2,099
8,750
7,801
$ 18,206
$ 24,175
4,446
42,950
13,674
29,750
28,020
54,722
$ 77,816 $ 158,276
(1) Other consultants include close members of the family of R. Sierd Eriks, UEX’s Vice-President of Exploration, who
provide geological consulting services with specific services invoiced as provided.
(2) Panterra Geoservices Inc. is a company owned by David Rhys, a member of the management advisory board that
provides geological consulting services to the Company. The management advisory board members are not paid a
retainer or fee; specific services are invoiced as provided.
(3) Share-based compensation expense is the fair value of options granted which have been calculated using the
Black-Scholes option-pricing model and the assumptions disclosed in Note 11(c) of the December 31, 2013 annual
financial statements.
‐ 20 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Key management personnel compensation includes management and director compensation as follows:
Three months ended
December 31
Year ended
December 31
2013
2012
2013
2012
Salaries and short-term employee benefits (4)
Share-based payments (3)
$ 207,621
168,772
$ 319,307
190,500
$ 844,592 $ 896,716
1,164,376
578,805
$ 376,393
$ 509,807
$1,423,397 $2,061,092
(3) Share-based compensation expense is the fair value of options granted which have been calculated using the
Black-Scholes option-pricing model and the assumptions disclosed in Note 11(c) of the December 31, 2013 annual
financial statements.
(4) In the event of a change of control of the Company, certain senior management may elect to terminate their
employment agreements and the Company shall pay termination benefits of two times their respective annual
salaries at that time and all of their share purchase options will become immediately vested with all other employee
benefits, if any, continuing for a period of two years.
Accounting Policies
The accounting policies and methods employed by the Company determine how it reports its financial condition
and results of operations, and may require management to make judgments or rely on assumptions about
matters that are inherently uncertain. The Company’s results of operations are reported using policies and
methods in accordance with IFRS. In preparing financial statements in accordance with IFRS, management is
required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses for the period. Management reviews its estimates and assumptions on an ongoing basis using
the most current information available.
Change in Accounting Policy
The following new or amended standards have been adopted in the financial statements for the year beginning
January 1, 2013:
IFRS 7 Financial Instruments: Disclosures: Amendments – Offsetting Financial Assets and Financial Liabilities
The amendments to IFRS 7 require entities to disclose information about rights of offset and related
arrangements for financial instruments under an enforceable master netting agreement or similar agreement.
The application of these amendments may result in more disclosures being made with respect to offsetting
financial assets and financial liabilities in the future.
IFRS 13 Fair Value Measurement
The adoption of IFRS 13 by the Company has had no material impact on the financial results of the
Company. The adoption of IFRS 13 did, however, result in some additional fair value disclosures including the
valuation inputs and techniques used in determining fair value.
‐ 21 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Joint Arrangements
Joint arrangements are arrangements of which the Company has joint control, established by contracts
requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.
They are classified and accounted for as follows:
(i)
Joint operation – when the Company has rights to the assets, and obligations for the liabilities, relating
to an arrangement, it accounts for each of its assets, liabilities and transactions, including its share of
those held or incurred jointly, in relation to the joint operation.
(ii)
Joint venture – when the Company has rights only to the net assets of the arrangement, it accounts for
its interest using the equity method.
The Company has an interest in several joint operations relating to the exploration and evaluation of various
properties in the western and northern Athabasca Basin. The financial statements include the Company’s
proportionate share of the joint operations’ assets, liabilities, revenue and expenses with items of a similar
nature on a line-by-line basis from the date that the joint arrangement commences until the date that the joint
arrangement ceases. These interests are governed by contractual arrangements but have not been organized
into separate legal entities or vehicles.
The Company does not have any joint arrangements that are classified under IFRS 11 as joint ventures.
However, “joint operations” as defined by IFRS are nevertheless commonly referred to as “joint ventures” by
UEX, its operating partners and the general mining industry, and use of the term “joint venture” by UEX in its
disclosures for the purposes of describing its operating results is considered consistent with these statements.
The joint arrangements that the Company is party to in some cases entitle the Company to a right of first refusal
on the projects should one of the partners choose to sell their interest. The joint arrangements are governed by
a management committee which sets the annual exploration budgets for these projects. In certain cases,
should the Company choose not to fund their minimum required contributions as outlined in the agreement,
there is a risk that the Company’s ownership interest could be diluted. As a result of decisions to fund
exploration programs for the joint arrangements, the Company may choose to complete further equity issuances
or fund these amounts through the Company’s general working capital.
Critical Accounting Estimates
The Company prepares its financial statements in accordance with IFRS, which require management to
estimate various matters that are inherently uncertain as of the date of the financial statements. Accounting
estimates are deemed critical when a different estimate could have reasonably been used or where changes in
the estimate are reasonably likely to occur from period to period, and would materially impact the Company’s
financial statements. The Company’s significant accounting policies are discussed in the financial statements.
Critical estimates inherent in these accounting policies are discussed below.
Valuation of mineral properties
The recovery of amounts shown for exploration and evaluation assets is dependent upon the discovery of
economically recoverable resources, the ability of the Company to obtain financing to complete exploration and
development of the properties, and on future profitable production or proceeds of disposition. The Company
‐ 22 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
recognizes in income any costs recovered on mineral properties when amounts received or receivable are in
excess of the carrying amount. Upon transfer of exploration and evaluation assets into development properties,
all subsequent expenditures on the exploration, construction, installation or completion of infrastructure facilities
is capitalized within development properties.
All capitalized exploration and evaluation assets are monitored for indications of impairment. Where a potential
impairment is indicated, assessments are performed for each area of interest. To the extent that the exploration
expenditures are not expected to be recovered, this amount is recorded as a write-down of interest in mineral
properties in the statement of operations and comprehensive loss in the period.
The Company performed an evaluation of impairment indicators under IFRS 6(20) for its exploration and
evaluation assets (mineral properties) as at December 31, 2013 and has concluded that there are no indicators
of impairment. However, as at December 31, 2013, the market capitalization of the Company was below the
carrying value of its net assets which are primarily represented by mineral properties. Accordingly, the
Company has also reviewed the value attributed per pound in the ground of U3O8 in recent arms-length
transactions for the acquisition of uranium resources defined by National Instrument 43-101. As a result of this
review management has concluded that the carrying value of the Company’s net assets is supported.
Environmental rehabilitation provision
The Company recognizes the fair value of a liability for environmental rehabilitation in the period in which the
Company is legally or constructively required to remediate, if a reasonable estimate of fair value can be made,
based on an estimated future cash settlement of the environmental rehabilitation obligation, discounted at a
pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the
obligation. The environmental rehabilitation obligation is capitalized as part of the carrying amount of the
associated long-lived asset and a liability is recorded. The environmental rehabilitation cost is amortized on the
same basis as the related asset. The liability is adjusted for the accretion of the discounted obligation and any
changes in the amount or timing of the underlying future cash flows. Significant judgements and estimates are
involved in forming expectations of the amounts and timing of environmental rehabilitation cash flows. The
Company has assessed each of its mineral projects and determined that no material environmental
rehabilitations exist as the disturbance to date is minimal.
Share-based payments
The Company has a share option plan which is described in Note 11(c) of the financial statements for the year
ended December 31, 2013. The fair value of all share-based awards is estimated using the Black-Scholes
option-pricing model at the grant date and amortized over the vesting periods. An individual is classified as an
employee when the individual is an employee for legal or tax purposes (direct employee) or provides services
similar to those performed by a direct employee, including directors of the Company. Share-based payments to
non-employees are measured at the fair value of the goods or services received, or the fair value of the equity
instruments issued if it is determined the fair value of the goods or services cannot be reliably measured, and
are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted
to reflect the number of awards expected to vest.
None of the Company’s awards call for settlement in cash or other assets. Upon the exercise of the share
purchase options, consideration paid together with the amount previously recognized in the share-based
payments reserve is recorded as an increase in share capital. The offset to the recorded cost is to share-based
‐ 23 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
payments reserve. Consideration received on the exercise of share purchase options is recorded as share
capital and the related share-based payments value in the reserve is transferred to share capital. Charges for
share purchase options that are forfeited before vesting are reversed from share-based payments reserve. For
those share purchase options that expire or are forfeited after vesting, the recorded value is transferred to
retained earnings (deficit).
Recent Accounting Announcements
The International Accounting Standards Board issued the following IFRSs with an effective date for year ends
starting on or after January 1, 2015:
The International Accounting Standards Board has issued IFRS 9 Financial Instruments (“IFRS 9”) to replace
IAS 39 Financial Instruments, which is intended to reduce the complexity in the measurement and classification
of financial instruments. The current version of IFRS 9 does not include a mandatory effective date but is
available for early adoption. An effective date will be determined when all phases of the update to IFRS 9 are
completed. The Company does not expect IFRS 9 to have a material impact on the financial statements. The
classification and measurement of the Company’s financial assets is not expected to change under IFRS 9
because of the nature of the Company’s operations and the types of financial assets that it holds.
‐ 24 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
EXPLORATION AND EVALUATION UPDATE
Mineral Resource Estimates
Tables 1 and 2 show respective summaries of UEX’s Indicated and Inferred mineral resource estimates by
deposit.
UEX Corporation – Indicated Mineral Resource Estimates (1) (2) (3)
TABLE 1
Deposit
Kianna (2)
Anne (2)
Colette (2)
58B (2)
Shea Creek Totals (4) (5)
Horseshoe (3)
Raven (3)
West Bear (3)
Hidden Bay Totals
TOTALS
Tonnes
Grade
U3O8 (%)
Total
U3O8 (lbs)
UEX’s share
U3O8 (lbs)
1,034,500
564,000
327,800
141,600
2,067,900
5,119,700
5,173,900
78,900
10,372,500
12,440,400
1.526
1.992
0.786
0.774
1.484
0.203
0.107
0.908
0.160
0.380
34,805,000
24,760,000
5,680,000
2,417,000
67,663,000
22,895,000
12,149,000
1,579,000
17,088,211
12,156,417
2,788,710
1,186,674
33,220,503
22,895,000
12,149,000
1,579,000
36,623,000
36,623,000
104,286,000
69,843,503
UEX Corporation – Inferred Mineral Resource Estimates (1) (2) (3)
TABLE 2
Deposit
Kianna (2)
Anne (2)
Colette (2)
58B (2)
Shea Creek Totals (4) (5)
Horseshoe (3)
Raven (3)
Hidden Bay Totals
TOTALS
Tonnes
Grade
U3O8 (%)
Total
U3O8 (lbs)
UEX’s share
U3O8 (lbs)
560,700
134,900
493,200
83,400
1,272,200
287,000
822,200
1,109,200
2,381,400
1.364
0.880
0.716
0.505
1.005
0.166
0.092
0.111
0.589
16,867,000
2,617,000
7,780,000
928,000
8,281,191
1,284,868
3,819,747
455,620
28,192,000
13,841,426
1,049,000
1,666,000
2,715,000
1,049,000
1,666,000
2,715,000
30,907,000
16,556,426
Notes:
(1) The mineral resource estimates follow the requirements of National Instrument 43-101 – Standards of Disclosure for Mineral Projects and
classifications follow CIM definition standards.
(2) The Shea Creek mineral resources were estimated at a cut-off of 0.30% U3O8, and are documented in the Shea Creek Technical Report with an
effective date of May 31, 2013 which was filed on SEDAR at www.sedar.com on May 31, 2013.
(3) The Hidden Bay mineral resources were estimated at a cut-off of 0.05% U3O8, and are documented in the Hidden Bay Technical Report with an
effective date of February 15, 2011 which was filed on SEDAR at www.sedar.com on February 23, 2011.
(4) UEX’s interest in the Western Athabasca Projects (inclusive of Shea Creek) has increased from 49.000% to 49.097% as at December 31, 2013.
(5) Certain amounts presented in the Shea Creek N.I. 43-101 report have been rounded for presentation purposes. This rounding may impact the
footing of certain amounts included in the tables above.
‐ 25 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Exploration and Evaluation Activities
The following is a general discussion of UEX’s recent exploration and evaluation activities. Mineral resources
that are not mineral reserves do not have demonstrated economic viability. For more detailed information
regarding UEX’s exploration projects, please refer to UEX’s current Annual Information Form, available at
www.sedar.com, or to UEX’s website at www.uex-corporation.com.
Western Athabasca Projects: Shea Creek
The Shea Creek Project (“Shea Creek”) is one of the eight 49.1%-owned Western Athabasca Projects (the
“Projects”) joint-ventured with AREVA, the operator, which also include the Erica, Alexandra, Mirror River,
Laurie, Nikita, Uchrich and Brander Lake projects. In 2013, AREVA and UEX agreed to combine the Shea
Creek Project and the contiguous Douglas River Project (“Douglas River”) as the known mineralization at the
northern boundary of Shea Creek extends into the Douglas River property. The combined projects are now
referred to as the Shea Creek Project.
Shea Creek is the flagship exploration property among the Western Athabasca Projects, consisting of fourteen
claims totaling 27,343 hectares (67,566 acres) and is host to the following deposits:
•
•
•
•
Kianna Deposit (“Kianna”);
Anne Deposit (“Anne”);
Colette Deposit (“Colette”); and
58B Deposit (“58B”).
Shea Creek is located in northwest Saskatchewan, just south of AREVA’s former Cluff Lake mine which
produced over 62 million pounds of U3O8 during its successful 22 years of operation. Shea Creek hosts the
second largest undeveloped uranium resource in the Athabasca Basin. High-grade uranium is distributed along
a three-kilometre long strike length at the north end of the 33-kilometre long Saskatoon Lake Conductor. The
deposits at Shea Creek show three styles of mineralization: unconformity-hosted, basement-hosted and
perched. Access is provided year-round by Provincial Highway 955 and by air.
In 2004, UEX entered into an agreement with AREVA to fund $30 million of exploration costs in exchange for a
49% interest in the Western Athabasca Projects, which include Shea Creek. The Kianna Deposit was identified
in 2006, and UEX successfully met its funding target and earned its 49% interest in 2007. The 58B Deposit was
identified in 2010.
On April 4, 2013 an agreement was signed with AREVA which grants UEX the option to increase its ownership
interest in the Western Athabasca Projects, which includes Shea Creek, by 0.9% to 49.9% through the
expenditure by UEX of an aggregate of up to $18.0 million (the “Additional Expenditures”) on exploration over
the six-year period ending December 31, 2018. UEX remains under no obligation to propose a budget in any
year of the agreement. UEX’s interest for the Projects shall be increased at the end of each calendar year by
‐ 26 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
the proportional amount of the Additional Expenditures incurred in such year which are in addition to the
pro-rata budget amounts proposed by AREVA. UEX may propose an additional exploration budget of up to
$4.0 million in any single year without the prior approval of AREVA, who remains the project operator. These
Additional Expenditures would be supplementary to any annual budget proposed by AREVA. AREVA is
required to propose a minimum annual budget (to be shared pro-rata) of not less than $2.0 million for the
Western Athabasca Projects, inclusive of Shea Creek, during the option period provided: that UEX proposes to
spend at least $2.0 million of Additional Expenditures in the same year; and, the average weekly spot price of
U3O8 for the most recent twelve months ended September 30 is not less than $40 per pound of U3O8.
This agreement provides UEX with a multi-year opportunity to build upon our past successes with AREVA by
continuing exploration intended to expand known Shea Creek resources while concurrently seeking new
uranium deposits.
Expenditures of $2.0 million relating to this new agreement were incurred in 2013 with exploration work
completed in December 2013. This supplemental program focused on the Kianna East mineralized zones
where UEX had considerable exploration success in 2012.
An annual program with a budget of $3.1 million for 2013, of which UEX funded $1.52 million, was carried out
with field exploration south of the Anne Deposit and at Kianna North.
Cumulative expenditures at December 31, 2013 by UEX on exploration and evaluation at Shea Creek were
$43.6 million and $7.4 million, respectively, with approximately 253,000 metres of drilling completed. Included
in these exploration expenditures at December 31, 2013 is approximately $423,000 in cumulative exploration
expenditures incurred at the Douglas River Project, which has now been combined with Shea Creek.
Shea Creek Updated Mineral Resource Estimate
In April 2013, UEX received an updated N.I. 43-101 independent mineral resource estimate incorporating
additional drilling results from the 2010, 2011 and 2012 drilling campaigns (see UEX news release dated April
15, 2013). This estimate is supported by a technical report entitled “Technical Report on the Shea Creek
property, northern Saskatchewan, with an updated mineral resource estimate”, prepared for UEX Corporation
by R.S. Eriks, P.Geo., J.N. Gray, P.Geo., D.A. Rhys, P.Geo. and S. Hasegawa, P.Geo. with an effective date of
May 31, 2013 filed on SEDAR May 31, 2013. This updated mineral resource estimate contained therein was
prepared under the direction of James N. Gray of Advantage Geoservices Limited and supersedes the previous
N.I. 43-101 independent mineral resource estimate for the Kianna, Anne and Colette deposits which is
supported by a technical report entitled “Technical Report on the Shea Creek Property, Saskatchewan, Canada,
Including Mineral Resource Estimates for the Kianna, Anne and Colette Deposits” by K. Palmer, P.Geo.of
Golder Associates Ltd. (“Golder”) with an effective date of May 26, 2010 and filed on SEDAR on July 9, 2010.
‐ 27 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
The updated uranium mineral resource estimate for the four Shea Creek deposits at a cut-off grade of 0.30%
U3O8 totals:
• 67.66 million pounds of U3O8 in the Indicated mineral resource category comprising 2,067,900
tonnes grading 1.48% U3O8 – an increase of 6% from the mineral resource estimate prepared for
UEX by Golder in 2010; and
• 28.19 million pounds of U3O8 in the Inferred mineral resource category comprising 1,272,200
tonnes grading 1.01% U3O8 – an increase of 15% from the mineral resource estimate prepared for
UEX by Golder in 2010.
This mineral resource estimate for Shea Creek incorporates resources from the Kianna, Anne, Colette and 58B
deposits (“Kianna”, “Anne”, “Colette” and “58B”, respectively) based on drilling information up to December 31,
2012 (see Figure 1 below). This estimate represents an update of the previous resource estimate prepared by
Golder and reported in May of 2010.
The changes in the mineral resource since the 2010 estimate reflect substantial increases in the basement
mineral resources of the Kianna Deposit and new mineral resources from the 58B Deposit. These resource
increases are partially offset by mineral resource losses at Colette due to the restriction of mineralization in
central and southern parts of that deposit based on new infill drilling. In addition, interpolation of anomalously
high-grade samples was controlled not only by grade capping, as was done in 2010, but also through a process
of restricted interpolation ranges applied to the very high end of the grade distribution. This change in approach
was applied to all of the Shea Creek deposits. The small reduction in the Anne mineral resource estimate,
where no drilling has occurred since the 2010 resource estimate, reflects the effect of this change in approach
to the treatment of high-grade drill intervals throughout the deposits.
This mineral resource estimate confirms that Shea Creek is the second largest undeveloped uranium resource
in the Athabasca Basin. It also ranks as the fourth largest uranium resource in the Basin, exceeded in size only
by McArthur River, Cigar Lake and Millennium. Mineralization at Shea Creek is still largely open and has
excellent potential to expand as drilling continues.
The 2013 mineral resource estimate identifies that much of the mineralization at Shea Creek is found over an
approximately 1.4 kilometre strike length in southern parts of the Shea Creek deposit trend at the Kianna and
Anne deposits (see Figure 2 below). Notably, at a 1.0% cut-off grade most of the resources are retained at
much higher grades as shown below:
• Combined mineral resources at the Kianna and Anne deposits at a cut-off grade of 0.3% U3O8 total 59.6
million pounds of U3O8 in 1,598,500 tonnes grading 1.69% U3O8 in the Indicated category and an
additional 19.5 million pounds of U3O8 in 695,600 tonnes grading 1.27% U3O8 in the Inferred category;
and
• Combined mineral resources at the Kianna and Anne deposits at a cut-off grade of 1.0% U3O8 total 48.3
million pounds of U3O8 in 698,300 tonnes grading 3.18% U3O8 in the Indicated category and an
additional 14.4 million pounds of U3O8 in 252,800 tonnes grading 2.59% U3O8 in the Inferred category.
‐ 28 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Mineral resource estimates at various cut-off grades are summarized in Table 3. Of note is that at significantly
higher cut-off grades, the majority of the contained uranium is retained at substantially higher grades.
TABLE 3
Shea Creek Mineral Resource Estimates, Tonnes and Grade at Various U3O8 % Cut-off Grades
These mineral resource estimates were completed in April 2013 (incorporating drilling information up to
December 31, 2012) using CIM standards of estimation of mineral resources and reserves.
Category
Cut-off
U3O8 (%)
Tonnes
Grade
U3O8 (%)
U3O8 (lbs)
Indicated
Inferred
0.1
0.3
0.5
1.0
1.5
0.1
0.3
0.5
1.0
1.5
3,227,300
2,067,900
1,464,800
795,800
521,300
2,601,600
1,272,200
784,500
340,100
215,600
1.018
1.484
1.935
2.966
3.883
0.586
1.005
1.388
2.310
2.937
72,458,000
67,663,000
62,492,000
52,047,000
44,625,000
33,616,000
28,192,000
23,999,000
17,323,000
13,961,000
The majority of the estimated mineral resources are from the Kianna and Anne deposits, where a significant
portion of the resources lie in impermeable basement rocks beneath the Athabasca unconformity. Breakdowns
of the mineral resource estimates by deposit at cut-off grades of 0.3% U3O8 and 1.0% U3O8 are provided in
Tables 4 and 5, respectively.
TABLE 4
Breakdown of the Contribution of Each Deposit at Shea Creek to the Total Mineral Resource Estimate
at a 0.3% U3O8 Cut-off Grade
Deposit
Tonnes
Grade
U3O8
(%)
1,034,500
1.526
564,000
1.992
327,800
0.786
Indicated
U3O8
(lbs)
34,805,000
24,760,000
5,680,000
Inferred
141,600
0.774
2,417,000
Tonnes
Grade
U3O8
(%)
U3O8
(lbs)
560,700
1.364
16,867,000
134,900
0.880
493,200
0.716
83,400
0.505
2,617,000
7,780,000
928,000
2,067,900
1.484
67,663,000
1,272,200
1.005
28,192,000
Kianna
Anne
Colette
58B
TOTALS (1)
(1) Certain amounts presented in the Shea Creek N.I. 43-101 report have been rounded for presentation purposes. This rounding may
impact the footing of certain amounts included in the tables above.
‐ 29 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
TABLE 5
Breakdown of the Contribution of Each Deposit at Shea Creek to the Total Mineral Resource Estimate
at a 1.0% U3O8 Cut-off Grade
Deposit
Tonnes
Grade
U3O8
(%)
446,800
2.796
242,500
3.890
70,700
1.684
Indicated
U3O8
(lbs)
27,544,000
20,795,000
2,624,000
Inferred
35,900
1.370
1,084,000
Tonnes
Grade
U3O8
(%)
U3O8
(lbs)
233,700
2.530
13,036,000
19,100
3.308
85,800
1.508
1,500
1.280
1,392,000
2,852,000
43,000
795,800
2.966
52,047,000
340,100
2.310
17,323,000
Kianna
Anne
Colette
58B
TOTALS (1)
(1) Certain amounts presented in the Shea Creek N.I. 43-101 report have been rounded for presentation purposes. This rounding may
impact the footing of certain amounts included in the tables above.
Comparison with the Previous Mineral Resource Estimate
The new mineral resource estimate reflects the following changes at each deposit since the 2010 estimate
prepared by Golder:
Kianna Deposit: Discovery of new basement-hosted zones, including the Kianna East Zone, and drilling
expansion of other zones has resulted in a substantial increase of 54% in the Indicated
mineral resource at a 0.3% U3O8 cut-off. The majority of the current mineral resource
estimate at Kianna is now found in basement rocks. Areas of basement mineralization,
particularly on the north side of Kianna and in the Kianna East Zone, are still open and are
expected to be targeted by future drilling.
Anne Deposit:
No new drilling was conducted at Anne since the 2010 mineral resource estimate. The
small decline in the Anne mineral resource estimate reflects a change in approach to the
treatment of high-grade drill intervals. In addition to capping high grades, a restriction was
placed on interpolation distances for samples at the upper end of the grade distribution.
Further geological interpretation and potential infill drilling, particularly in the Anne
basement mineralization where the widely spaced drilling restricts the ability to interpret the
continuity of higher grade mineralization, may be undertaken to address this interpretation.
A review of this basement mineralization has identified additional areas for potential
expansion.
Colette Deposit: Since the previous mineral resource estimate, infill and step-out drilling was conducted
throughout the Colette area. While this drilling identified a thick unconformity-hosted pod in
the north part of the Colette Deposit that now represents a significant portion of the current
Colette mineral resource estimate, infill drilling in parts of the central and southern parts of
the deposit failed to establish continuity of mineralization in some of the higher grade parts
of the central Colette unconformity mineralization and also restricted distribution of some of
‐ 30 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
the previously interpreted basement zones. Basement mineralization in the southern parts
of Colette has potential for expansion, and continuations of the Shea Creek trend to the
north of Colette are still open.
58B Deposit:
This new deposit adds to the total Shea Creek mineral resource estimate. Basement
mineralization has been tested only by widely spaced drill holes, and the mineralization
remains open in several directions.
Mineral Resource Estimation Details
The 2013 Shea Creek mineral resource estimate was prepared by James N. Gray, P.Geo., of Advantage
Geoservices Limited, an independent Qualified Person as defined by N.I. 43-101. This estimate utilized results
of 477 diamond drill holes and directional cuts (totaling 402,800 metres) which were drilled since 1992. Drill
spacing across the deposits is variable, ranging between 5 metres to greater than 50 metres. On average,
Indicated blocks are within 8 metres of a drill hole and Inferred blocks within 16 metres.
The mineralized wireframe models from the Kianna, Anne, Colette and 58B deposits bounding perched,
unconformity and basement mineralization were prepared at a 0.05% U3O8 cut-off and used to constrain the
mineral resource estimate at each deposit area. Estimation was by ordinary kriging using Gemcom Software.
The impact of anomalously high-grade samples was controlled though a process of grade capping as well as
restriction placed on high-grade interpolation distances.
The mineral resource estimate primarily utilized uranium geochemical analyses from the Saskatchewan
Research Council (SRC) Geoanalytical Laboratories in Saskatoon, Saskatchewan. The principal geochemical
analytical methods used for uranium analysis on the Shea Creek samples are ICP-MS (Inductively Coupled
Plasma Mass Spectroscopy) for samples with grades lower than 1,000 ppm U, and U3O8 uranium assay by
ICP-OES (Inductively Coupled Plasma Optical Emission Spectroscopy) for samples determined by ICP-MS to
contain uranium concentrations higher than 1,000 ppm U. In addition to AREVA’s internal quality controls,
duplicate and independent check analyses were performed by UEX on sample suites representing
approximately 5% of the mineralized assay database since mineralization was discovered in 1992.
In cases where geochemical analyses were not available due to incomplete sampling or core recovery issues,
downhole gamma probe data were used to calculate equivalent uranium grades obtained using a DHT27-STD
gamma probe which collects continuous readings along the length of the drill hole. Probe results are calibrated
using an algorithm calculated from the comparison of probe results against geochemical analyses in previous
drill holes in the Shea Creek area.
A total of 674 dry bulk density samples, representing all rock types and mineralization styles from the Shea
Creek deposits, form a comprehensive basis for the density component of the mineral resource estimate.
‐ 31 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Figures 1 & 2
Shea Creek Deposits
Western Athabasca Projects: 2014 Exploration Program – $2.0 Million
The 2014 exploration program has an approved budget of $2.0 million, for which UEX is responsible for its
49.097% share, or approximately $982,000. This exploration program will be directed solely toward exploration
of the Laurie, Mirror River and Erica Projects. Mobilization onto the Laurie Project area has been completed and
drilling of approximately 2,000 metres began in late January of 2014. A ground geophysical program on the
Erica Project is expected to commence in late March 2014. Drilling of approximately 2,000 metres at the Mirror
River Project will commence upon the completion of the exploration drilling at Laurie.
‐ 32 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Western Athabasca Projects: 2013 Exploration Program – $3.1 Million
The 2013 exploration program had a budget of $3.1 million, of which UEX funded its 49% share, or $1.52
million. This exploration program consisted of a $0.5-million geophysical program in the northern Colette and
southern Anne areas which began in May and a $2.6-million drilling program south of the Anne Deposit and
along the Saskatoon Lake East Conductor (“SLEC”) east of the Anne and Kianna Deposits that commenced in
early June. In addition, one hole tested open portions of the northern part of the Kianna Deposit (“Kianna
North”).
The 2013 exploration program focused on the highly prospective Saskatoon Lake Conductor (“SLC”) which
continues to the south of Anne. The SLC represents a faulted graphitic unit beneath the overlying Athabasca
sandstone and is spatially associated with the Colette, 58B, Kianna and Anne deposits all of which occur along
and adjacent to this conductor over a three-kilometre strike length in the northern parts of Shea Creek. Outside
of the immediate area of the deposits, the continuation of this conductor is sparsely tested by isolated, widely
spaced drill holes. The few drill holes in this area include several mineralized intersections which have not been
followed up, including drill hole SHE-2 drilled in 1992. This drill hole intersected a shallow-dipping brecciated
fault zone just beneath the unconformity in association with the SLC and returned 0.342% U3O8 over 0.4 metres
in an area located approximately two kilometres southeast of the Anne Deposit.
The 2013 exploration program commenced in May with a geophysical Tensor Magnetotelluric (“MT”) survey to
further refine the position and potential areas of offset along northeast-trending faults crosscutting the SLC (see
Figure 3). Steeply dipping faults of this orientation are associated with the significant mineralization at the
Kianna and Anne deposits where they intersect the SLC. These structures can be inferred from the 2008 MT
survey conducted on the northern parts of the property. A total of 50.4 line-kilometres were surveyed which
extended the previous MT coverage for approximately six kilometres southeast of Anne and infilled two
additional lines to the north. The geophysical survey was completed in mid-June and processing of the data as
well as combining it with existing (2008) data has been completed. In conjunction with previous geophysical
data, the survey was important for target generation relating to the 2013 drilling program at the southern limits of
the 2008 data in order to allow refinement of the drill hole placements in this sparsely tested area.
Drilling Results – Anne South
Drilling totaling 4,849.0 metres was carried out south of the Anne Deposit (see Figure 4) and was completed in
late October. There are only four previous drill holes in this area, including drill hole SHE-24 which intersected
mineralization grading 0.074% U3O8 over 2.3 metres in the basement rocks approximately 20 metres below the
unconformity. The drilling assessed untested gaps between existing drill holes, some of which are more than
800 metres apart, and also tested areas where initial drill holes intersected only the margins of the prospective
corridor. This area is geologically similar to that associated with the Shea Creek deposits and previous holes
here have also intersected anomalous radioactivity and favourable clay alteration.
Two directional holes were completed using SHE-24 as a pilot hole. Holes SHE-24-1 and SHE-24-2 targeted
the up-dip (northeast) and down-dip (southwest) extensions of mineralization in SHE-24 respectively. The holes
both encountered favorable graphitic structural zones in the basement. Hole SHE-24-1 intersected minor
mineralization of 0.05% eU3O8 over 1.9 metres within weakly hematized conglomeratic sandstone, including
0.17% eU3O8 over a narrow 0.2 metre interval just above the unconformity from 703.3 to 703.5 metres.
A new pilot hole, SHE-143, tested the SLC on line 62+00N (see Figure 4). The drill hole intersected a strongly
graphitic structural zone from 800.0 to 804.2 metres containing abundant angular rubble with small sections of
fault gouge.
‐ 33 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Figure 3
Northern Shea Creek Area - 2013 Geophysical Program
‐ 34 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Figure 4
Northern Shea Creek Area - 2013 Drilling Programs
‐ 35 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Three directional holes, SHE-143-1, SHE-143-2 and SHE-143-3, were completed using the SHE-143 pilot hole.
Hole SHE-143-1 tested a significant elevation drop of the unconformity 200 metres southeast of historical drill
holes SHE-28 and SHE-30. In addition, the hole tested the southeastern continuity of the lower graphitic-pelite
package that hosts the Kianna East Zone mineralization. A graphitic reverse structure was intersected
approximately 24 metres below the unconformity from 760.8 metres to 761.4 metres. A well-developed fault
zone extends from 761.4 to 768.4 metres with trace to weak pitchblende mineralization locally with a grade of
0.143% eU3O8 over 0.9 metres from 765.4 to 766.3 metres. A thick interval of aluminous rocks was intersected
from 1,014.5 to 1,055.0 metres comprising dominantly graphitic/pyritic metapelite to 1,022.0 metres, grading
into intercalated garnetite/pelite to the bottom of the interval. This aluminous interval is interpreted to be the
lateral equivalent of the lower graphitic pelite associated with mineralization in the Kianna East area due to the
similarities in lithology and stratigraphic position. In addition, this interpretation fits well with the geophysical
hypothesis that the SLEC is the up-dip expression at the unconformity of this lower graphitic unit. The SLEC is
located approximately one kilometre to the east of both the Kianna and Anne deposits (see Figure 4).
Hole SHE-143-2 was the second directional cut off of SHE-143 testing the unconformity 40 metres north-
northeast of the unconformity pierce point in SHE-143-1. A wide interval of brecciated sandstone was
encountered from 720.7 metres to the unconformity at 752.2 metres. Weak mineralization is present within this
breccia just above the unconformity from 748.4 to 749.3 metres grading 0.211% eU3O8 over 0.9 metres. A
graphitic reverse structure was observed from 759.7 metres to 762.5 metres defined by strongly graphitic
hardened gouge and rubble.
.
Hole SHE-143-3 was the third directional cut off of SHE-143 to test for basement mineralization north of hole
SHE-143-2. A thick interval of breccia was intersected in the basal sandstone from 759.5 metres to the
unconformity at 786.1 metres comprised of alternating intervals of angular, strongly silicified sandstone clasts
coated with sandy-clay or cemented by quartz.
A new pilot hole, SHE-146, tested the SLC on line 56+00N, 600 metres southeast of the SHE-24 series holes
(see Figure 4). Basement consisted primarily of fresh felsic gneiss with local metabasite encountered from
745.6 to 770.2 metres. The presence of the metabasite and absence of the aluminous package of pelitic rocks
indicates that the intersection of the graphitic reverse structure with the unconformity is further to the west of the
SHE-146 collar.
Hole SHE-146-1 was the first directional cut off of SHE-146, testing for the intersection of the aluminous
package with the unconformity to the southwest of the SHE-146 collar location. Aluminous pelitic rocks were
intersected in the basement from 714.2 to 751.8 metres that are dominantly graphitic at the base with up to 15%
graphite locally as stringers and disseminated pyrite common. This graphitic/pyritic interval is likely the source
of the ground-based EM anomalies in the area.
Drilling Results – Saskatoon Lake East Conductor - East of Anne
A total of 1,329.0 metres of drilling was completed east of the Anne Deposit (see Figure 4). A new pilot hole,
SHE-144, tested a MT anomaly defining the SLEC on line 64+00N; approximately 1,100 metres east of the
Anne Deposit (see Figure 4). A graphitic metapelite was intersected approximately 56 metres below the
unconformity from 758.1 to 760.1 metres comprised of 5% to 7% graphite with common pyrite veins.
Hole SHE-144-1 was the first directional cut off of SHE-144 testing the intersection of graphitic metapelite with
the unconformity at a point 80 metres northeast of the SHE-144 collar. A narrow interval of graphitic pelitic
‐ 36 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
gneiss was intersected approximately 17 metres below the unconformity from 731.7 to 734.2 metres. The
graphite content varies from trace to moderate and is typically disseminated along the foliation and in fractures.
A second narrow unit of graphitic pelitic gneiss with trace to moderate pyrite content was encountered from
761.3 to 764.9 metres.
These drill holes confirmed the presence and location of the SLEC and, although no mineralization was
intersected, established a new target area for parallel mineralization to the trend of deposits at Shea Creek.
Drilling Results – Saskatoon Lake East Conductor - East of Kianna
Drilling totaling 1,673.0 metres was carried out east of the Kianna Deposit (see Figure 4). A new pilot hole,
SHE-145, tested the up-dip extension of the Kianna East graphitic horizon at the unconformity (SLEC) on line
75+00N, approximately one kilometre northeast of the Kianna main deposit. A graphitic pelitic gneiss with
moderate graphite content and trace pyrite was intersected from 753.5 to 758.5 metres. This pelitic interval is
interpreted to be the equivalent unit to the lower graphitic pelite that hosts the Kianna East mineralization.
The first cut from SHE-145, SHE-145-1, tested the intersection of graphitic pelitic unit encountered in SHE-145
with the unconformity at a point 40 metres northeast of the SHE-145 collar. Pelitic bands containing trace to
weak disseminated graphite and pyrite are present between 761.8 and 762.3 metres.
A second directional cut, SHE-145-2, tested the intersection of graphitic pelitic unit with the unconformity in the
area of an interpreted structural break in the MT geophysical data at a point 135 metres southeast of the
SHE-145 collar. A pelitic interval with an intercalated massive, gritty zone was noted from 876.9 to 881.9
metres.
These drill holes further confirmed the presence and location of the SLEC. The occurrence of the Kianna East
Zone along this graphitic unit suggests that hydrothermal activity associated with mineralization was active
along this conductor, and future exploration will target prospective structural sites along its length.
Drilling Results – Kianna North
This area, also referred to as the GAMP Zone, includes a zone of mineralization which lies to the north of the
main Kianna basement zone and was initially intersected in 2010. During that program, drill hole SHE-136-1
intersected 1.84% eU3O8 over 16.6 metres approximately 50 metres to the north of the main Kianna basement
zone. Subsequent drilling intercepts in the area include 1.28% eU3O8 over 25.1 metres in hole SHE-130-4
drilled in 2011. This zone of mineralization, which was incorporated into the 2013 updated mineral resource
estimate, is still open to the east. Additional mineralized intercepts, which lie outside of this resource, define
further prospective targets for similar mineralization styles.
One new directional drill hole, SHE-135-17, expanded the eastern extension of basement-hosted mineralization
in the Kianna North area (see Figure 5). Results from this drill hole include:
SHE-135-17*:
(UC)
(B)
(B)
0.33% eU3O8 over 9.4 metres;
0.80% eU3O8 over 31.5 metres, including:
4.05% eU3O8 over 4.1 metres.
*
See UEX’s news release dated November 27, 2013
This area remains highly prospective for open northern and eastern extensions of basement mineralization, and
for potential new zones where previous drill holes have intersected mineralization outside of the resource area.
‐ 37 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
2013 Kianna North Drill Results: SHE-135-17 with Updated Wireframe Models
Figure 5
S
H
E
‐
1
1
8
‐
3
S
H
E
‐
1
3
5
0
3
1
‐
E
H
S
S
H
E
‐
1
3
5
‐
1
7
3
‐
0
3
1
‐
E
H
S
7
‐
6
3
1
‐
E
H
S
1
‐
6
3
1
‐
E
H
S
4
3
1
‐
E
H
S
View looking
South
Kianna North - GAMP Zone
(2010-11 Discovery)
Basement Mineralization
6‐3
3
E‐1
H
S
3
‐
0
3
1
‐
E
H
S
1
‐
6
3
1
‐
E
H
S
S
H
E
‐
1
1
8
‐
3
SHE‐135‐17
SHE‐135
SHE‐134
SHE‐114‐17
View looking
downward to Southwest
Unconformity Mineralization
Note: Images of mineralized zones depicted above are based upon a minimum cut-off grade of 0.05% U3O8
and show updated UEX wireframe models which include the 2013 drill results. Drill hole SHE-135-17
is not included in the 2013 Mineral Resource Estimate reported in the Shea Creek Technical Report.
‐ 38 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Western Athabasca Projects: 2014 Supplemental Exploration Program
UEX has the option to propose a supplemental exploration program for the Western Athabasca Projects for
2014 which will allow up to $4.0 million of Additional Expenditures at UEX’s sole expense. The Company is
under no obligation to propose a supplemental budget in any year. Currently the Company is evaluating market
conditions before making a decision to propose a supplemental program and budget in 2014.
Western Athabasca Projects: 2013 Supplemental Exploration Program – $2.0 Million
In addition to the $3.1-million exploration program, a $2.0-million supplemental exploration program was
completed on the Shea Creek Project funded by UEX under the option signed on April 4, 2013 which allows up
to $4.0 million of Additional Expenditures in any year of the agreement.
The 2013 supplemental drilling program consisted of 4,125.5 metres was designed to test open portions of the
high-grade Kianna East mineralized zone (see Figure 4 for drilling area). Considerable exploration success was
achieved in this area in 2012. The drilling program was completed in early November of 2013.
Kianna East
Kianna East represents a shallow southwest-dipping zone of mineralization which lies approximately 80 to 110
metres below and east of the main Kianna basement zone and about 200 metres below the unconformity (see
Figure 6). Given the orientation of the drill holes, the Kianna East intercepts lie at or close to true thickness.
Significant previous results from drilling at Kianna East, which were incorporated into the 2013 updated mineral
resource estimate include:
SHE-135-11*
SHE-135-13*
SHE-118-24** 1.55% eU3O8 over 19.9 metres; and
SHE-135-12** 2.36% U3O8 over
3.59% eU3O8 over 16.0 metres;
3.70% eU3O8 over 18.1 metres;
7.0 metres.
* See UEX’s news release dated October 15, 2012
** See UEX’s news release dated November 14, 2012
This high-grade zone occurs parallel to and along the top of a southwest-dipping graphitic unit which forms an
electromagnetic (EM) anomaly to the east of, and parallel to, the Saskatoon Lake Conductor (see Figure 4
inset). The new zone is open to the northwest, southeast and up dip to the northeast.
‐ 39 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Figure 6
2013 Kianna East Drill Results: SHE-135-16, SHE-142, and SHE-142-1 to SHE-142-4
with Updated Wireframe Models
‐ 40 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Drilling Results – Kianna East
One new pilot hole, SHE-142, and three directional drill holes, SHE-142-1, SHE-142-2 and SHE-142-3, were
completed to test the up dip projection, the northern, eastern and southern extensions respectively of the
previous drilling in Kianna East (see Figure 6). A fourth directional hole, SHE-142-4, was drilled to test the
northwestern extension of the Kianna East mineralized zone. Due to strongly fractured and brecciated
sandstone above the unconformity in SHE-142-4, the hole was lost before reaching the projected depth of the
Kianna East mineralization. Several additional directional holes (SHE-142-4A, SHE-142-4B and SHE-142-4C)
were attempted to intersect the Kianna East Zone, but were abandoned before the target depth due to stuck
rods. Hole SHE-135-16, a directional cut from the SHE-135 pilot hole, successfully tested the intended target
area of the SHE-142-4 series holes.
Highlights of the drill results with a grade-thickness product of greater than 1.0 and grades of greater than 0.4%
eU3O8 include:
SHE-142*:
(B) 0.85% eU3O8 over 22.3 metres, including:
Upper Kianna East Zone (B) 5.93% eU3O8 over 1.4 metres, and
Kianna East Zone (B) 1.30% eU3O8 over 6.9 metres;
SHE-142-3**:
Kianna East Zone (B) 0.99% eU3O8 over 5.3 metres, including:
(B) 3.21% eU3O8 over 1.5 metres; and
SHE-135-16**:
Upper Kianna East Zone (B) 0.73% eU3O8 over 1.9 metres, and
Kianna East Zone (B) 0.48% eU3O8 over 3.0 metres.
*
See UEX’s news release dated August 6, 2013
** See UEX’s news release dated November 27, 2013
The mineralization in drill hole SHE-142 expands Kianna East mineralization approximately 15 metres to the
east of drill hole SHE-118-24, which intersected 1.55% eU3O8 over 19.9 metres, and maintains a substantial
width. The position of the drill hole suggests that the zone still continues to the northeast of the previously
reported drilling beyond the 2013 Shea Creek resource estimate and there may be potential for the thick,
higher-grade areas seen in previous drilling to extend into this area.
Drill hole SHE-142-1 intersected a section of lower-grade mineralization grading 0.23% eU3O8 over 1.6 metres
approximately 35 metres north of mineralization in drill hole SHE-118-24. In addition, the hole intersected a
fault zone with strongly tectonized and brecciated graphitic pelitic gneiss from 934.1 metres to 969.7 metres
which shows strong clay alteration and dravite infilling between breccia fragments. This fault zone is present in
all of the Kianna East drill holes and represents the controlling, shallow dipping structure to the mineralization
which may project up eastward to the Athabasca unconformity where it represents an exploration target for
additional areas of unconformity mineralization.
‐ 41 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Drill hole SHE-142-2 intersected several pitchblende veins from 842.9 to 843.3 metres with mineralization
grading 0.31% eU3O8 over 0.4 metres. No significant mineralization was encountered above a moderately
graphitic, pelitic gneiss intersected from 922.6 to 949.5 metres.
In addition to the high grade Kianna East Zone mineralization intersected in hole SHE-142-3 grading 0.99%
eU3O8 over 5.3 metres from 961.2 to 966.5 metres, weak mineralization was encountered from 798.4 to 799.0
metres grading 0.63% eU3O8 over 0.6 metres from 798.4 to 799.0 metres as disseminated pitchblende blebs
associated with strong secondary hematite, trace limonite and moderate bleaching.
Hole SHE-142-4 was the fourth directional cut from SHE-142 testing the continuity of mineralization in Kianna
East to the northwest. Significant breccia development was observed in the sandstone from 712.0 metres to
the unconformity at 727.2 metres comprised of alternating zones of desilicified and silicified sandstone as well
as solution-style and collapse-style brecciation below 716.0 metres depth. Weak mineralization consisting of
disseminated pitchblende associated with dravite veinlets oriented parallel to foliation was encountered from
905.9 to 907.1 metres grading 0.243% eU3O8 over 1.2 metres. The drill hole was lost at 939 metres before
reaching the projected depth of the Kianna East mineralization due to stuck rods caused by falling in of
desilicified sand from above the unconformity. Downhole probing could only be carried out a depth of 914.0
metres. The hole was restarted as SHE-142-4A.
Hole SHE-135-16, a directional cut from the SHE-135 pilot hole, tested the same target area as the SHE-142-4
series holes. Mineralization intersected in the hole grading 0.48% eU3O8 over 3.0 metres from 979.9 to 982.9
metres consists of disseminated pitchblende within strongly graphitic and locally brecciated sections. Weak
mineralization was also observed from 956.0 to 961.2 metres grading 0.16% eU3O8 over 5.2 metres in a
strongly argillized gneiss as disseminated pitchblende blebs associated with dravite alteration.
Beatty River Project
Beatty River consists of seven claims totaling 6,688 hectares (16,526 acres) located in the western Athabasca
Basin approximately 40 kilometres south of the Shea Creek deposits. UEX entered into an agreement dated
June 15, 2004 with JCU wherein JCU granted UEX an option to acquire a 25% interest in Beatty River. Under
the agreement, UEX would earn a 25% interest in Beatty River by funding $865,000 in exploration expenditures
by December 31, 2013. Expenditures under this agreement by UEX to December 31, 2012 amounted to
$858,118. In early 2013, UEX and JCU amended their agreement and UEX fulfilled its earn-in on the Beatty
River Project by making a payment to JCU of $3,441.
At present, AREVA, the operator, owns a 50.7% interest, UEX owns a 25.0% interest and JCU owns a 24.3%
interest in Beatty River. No program has been proposed for 2014.
‐ 42 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Hidden Bay Project
UEX operates its 100%-owned Hidden Bay Project (“Hidden Bay”), which consists of 41 claims totaling 57,024
hectares (140,909 acres) and is host to the following deposits:
•
•
Horseshoe Deposit (“Horseshoe”);
Raven Deposit (“Raven”); and
• West Bear Deposit (“West Bear”).
Hidden Bay was acquired from Cameco upon UEX’s formation in 2002 establishing Cameco’s initial equity
position in UEX. Extensive drilling programs were conducted on the property in the following years, leading to
the release of a mineral resource estimate for Horseshoe, Raven and West Bear in 2009.
Located in northeast Saskatchewan, the Hidden Bay property hosts the seventh largest undeveloped uranium
resource in the Athabasca Basin. Resources at Horseshoe and Raven have been estimated following
N.I. 43-101 guidelines. The current Preliminary Assessment Technical Report estimates these deposits contain
35.0 million pounds U3O8 Indicated Mineral Resources and 2.7 million pounds U3O8 Inferred Mineral Resources
at a cut-off grade of 0.05% U3O8. West Bear contains an additional 1.6 million pounds U3O8 in the Indicated
category at a cut-off grade of 0.05% U3O8. See the resource table on page 2 for additional information.
The Preliminary Assessment Technical Report found the economics of mining the Horseshoe and Raven
deposits to be positive. The proximity of the Hidden Bay deposits to uranium milling facilities operated by
Cameco and AREVA provide opportunities for potential toll milling arrangements. The principal hydroelectric
transmission lines that service both of these mill facilities also pass 3 kilometres to the north of the deposits and
could provide electricity to site. In 2012, the Company acquired the Raven camp which provides on-site
accommodation. The PA recommends that the Hidden Bay Project be advanced to a preliminary feasibility
level, and that this next phase of study also include UEX’s West Bear Deposit. The PA utilized cut-off grades
calculated on the basis of US$60 per pound of U3O8 and estimated that 16.6 million pounds of U3O8 could be
extracted over a seven-year mine life at this price per pound of U3O8 (the “Base Case”). The Base Case
estimated undiscounted earnings before interest and taxes (“EBIT”) of $246 million, a pre-tax net present value
(“NPV”) at a 5% discount rate of $163 million and an internal rate of return (“IRR”) of 42%.
The Preliminary Assessment Technical Report is preliminary in nature, includes inferred mineral resources that
are considered too speculative geologically to have economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is no certainty that the preliminary economic assessment
will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Projects in the mining sector have experienced rising costs, including rising capital and operating costs, during
the past few years. Rising capital and operating costs would, in the absence of other changes, negatively
impact EBIT, NPV and IRR which have been calculated based upon estimated costs at the time the PA was
prepared.
Cumulative expenditures at December 31, 2013 by UEX on exploration and evaluation at Hidden Bay were
$59.9 million and $6.8 million, respectively, with approximately 488,000 metres of drilling completed.
‐ 43 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Hidden Bay Project: 2014 Exploration and Evaluation Programs
Brownfields exploration for Hidden Bay continues to be deferred until market conditions in the mining sector,
and in particular in the uranium space, improve. Field barrel testing and monitoring programs will continue in
2014.
Hidden Bay Project: 2013 Exploration and Evaluation Programs
UEX, having purchased the Raven exploration camp which will generate appreciable long-term cost savings,
will continue to evaluate infrastructure requirements such as the connection of the camp to the nearby power
grid.
UEX personnel have worked with various consultants on studies that have looked at ways of optimizing the
future mining and processing of the resources at Raven and Horseshoe. UEX is conducting field tests on waste
rock materials which require a longer time frame to complete. In support of this, a field barrel testing program
was set up by UEX personnel in August 2013. The field barrel tests were initiated to provide data in support of
the source term predictions for the Horseshoe Deposit and to further assess the reactivity of waste rock from
the Raven Deposit. Management believes that as a result of undertaking these various studies it has improved
its knowledge of the deposits, potential mining scenarios, and the alternatives available for future development.
These studies provide the basis for future project evaluation and potential development. UEX plans to defer
further evaluation and development, such as the preparation of a preliminary feasibility study, until there is a
sustained recovery of spot and long-term uranium commodity prices to more appropriate levels.
Black Lake Project
In early 2013, UEX entered into an agreement with Uracan Resources Ltd. (“Uracan”) whereby Uracan can earn
into the Black Lake Project (the “Project”) in northern Saskatchewan, which is a joint venture with AREVA
Resources Canada Inc. Currently, UEX holds an 89.99% interest and AREVA holds a 10.01% interest in the
Project.
Uracan must fund a total of $10.0 million of project expenditures over 10 years to earn their 60% interest in the
Project from UEX, with no partial earn-in permitted. Uracan has committed to spend $2.0 million on project
expenditures by December 31, 2014, with a firm commitment to fund $1.5 million even if a decision is made by
Uracan not to proceed with the earn-in or the agreement is otherwise terminated. Should the agreement be
terminated prior to $1.5 million in project costs having been funded by Uracan, any shortfall is payable directly
to UEX. During the remainder of the option period, minimum expenditures of $1.0 million per year are to be
funded by Uracan. UEX remains the project operator until such time as Uracan has earned its 60% interest in
the Project and is entitled to a 10% management fee under the Black Lake joint-venture agreement.
Uracan has issued 300,000 shares and 150,000 share purchase warrants to UEX. The warrants are
exercisable for three years at a price of $0.15 for each warrant. Uracan has also granted to UEX a 1% NSR
royalty from their ownership interest and upon UEX receiving a total of $10.0 million in royalty payments, the
NSR royalty will terminate.
‐ 44 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Black Lake Project: 2014 Exploration Program
A winter 2014 diamond drilling program consisting of six holes totaling approximately 3,000 metres commenced
in early February. The drilling program will test high priority targets identified utilizing a neural network for spatial
analysis. Road clearing and mobilization was carried out in January 2014 in preparation for the winter 2014
drilling program.
In the first quarter of 2014, UEX received from Uracan a prepayment of $650,000 and amounts to 100% of the
currently budgeted 2014 winter drilling program at Black Lake, which together with the 2013 budget
expenditures contributes toward Uracan’s $2.0 million exploration expenditure requirement by December 31,
2014.
Black Lake Project: 2013 Exploration Program
The 2013 program involved planning and implementation of a drilling program to be carried out on the Black
Lake property in the winter of 2014. A preliminary study utilizing a neural network for spatial analysis with the
ultimate goal of generating drill targets for the 2014 drilling program was conducted on the Black Lake Project
area. The study incorporated airborne geophysical surveys (EM, magnetics and gravity), ground geophysics
(magnetics, gravity, EM and resistivity) and previous drilling results (including geochemical analysis, alteration,
PIMA/Terraspec, normative clay, downhole probing, structures and lithology). Data analysis included a
geophysical characterization of mineralization, lithologies and proximal alteration identifying parameters that
correlate with uranium mineralization. The data layers of interest were incorporated into a single probability
map using a Neural Net program (property scale and detail scale for the northern area). Targets were then
generated and prioritized using the results of the Neural Net.
In the third quarter of 2013, UEX received from Uracan a prepayment of $104,060 which represents the full
budget amount for the 2013 exploration program at Black Lake. Planning and preparations as well as road
clearing and mobilization were completed with this 2013 budget for the winter 2014 drilling program which
began in early February of 2014.
Other Athabasca Projects
UEX is deferring exploration programs at Riou Lake for the near-term until uranium market conditions improve.
Eight claims within the Northern Athabasca Projects lapsed on February 5, 2013 and one claim lapsed on
February 5, 2014; however, these claims had been written off in 2010 due to a lack of planned exploration
activity at that time.
‐ 45 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Qualified Person
The disclosure of technical information regarding UEX’s properties in this MD&A has been reviewed and
approved by R. Sierd Eriks, P.Geo., UEX’s Vice-President of Exploration and Roger Lemaitre, P.Eng., P.Geo.,
UEX’s President and CEO, who are Qualified Persons as defined by National Instrument 43-101 – Standards of
Disclosure for Mineral Projects and are non-independent of UEX.
Geochemical Analysis
Geochemical analyses are carried out at the SRC Geoanalytical Laboratories in Saskatoon, Saskatchewan.
The primary geochemical analytical methods used for uranium analysis are ICP-MS (Inductively Coupled
Plasma Mass Spectroscopy) for samples with grades lower than 1,000 ppm U, and U3O8 uranium assay by
ICP-OES (Inductively Coupled Plasma Optical Emission Spectroscopy) for samples determined by ICP-MS to
contain uranium concentrations higher than 1,000 ppm U.
Equivalent Uranium Grades
Some of the uranium grades reported for Shea Creek in our MD&A are calculated from gamma probe logging.
The probe results are reported as uranium equivalent (eU3O8). Equivalent grade results are obtained using a
DHT27-STD gamma probe which collects continuous readings along the length of the drill hole. Probe results
are calibrated using an algorithm calculated from the comparison of probe results against geochemical analyses
in previous drill holes in the Shea Creek area. The reader is referred to UEX’s news release of March 24, 2009
for further discussion of probe calibration and comparative treatment of geochemical and probe data.
‐ 46 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Risks and Uncertainties
An investment in UEX common shares is considered speculative due to the nature of UEX’s business and the
present stage of its development. A prospective investor should carefully consider the risk factors set out
below.
It is not possible to determine if the exploration programs of UEX will result in profitable commercial
mining operations
The successful exploration and development of mineral properties is speculative. Such activities are subject to
a number of uncertainties, which even a combination of careful evaluation, experience and knowledge may not
eliminate. Most exploration projects do not result in the discovery of commercially mineable deposits. There is
no certainty that the expenditures made or to be made by UEX in the exploration and development of its mineral
properties or properties in which it has an interest will result in the discovery of uranium or other mineralized
materials in commercial quantities. While discovery of a uranium deposit may result in substantial rewards, few
properties that are explored are ultimately developed into producing mines. Major expenses may be required to
establish reserves by drilling and to construct mining and processing facilities at a site. There is no assurance
that the current exploration programs of UEX will result in profitable commercial uranium mining operations.
UEX may abandon an exploration project because of poor results or because UEX feels that it cannot
economically mine the mineralization.
Joint ventures
UEX participates in certain of its projects (such as the Western Athabasca and Black Lake projects) through
joint ventures (referred to as “joint operations” in the financial statements) with third parties. UEX has other joint
ventures and may enter into more in the future. There are risks associated with joint ventures, including:
•
•
•
•
disagreement with a joint-venture partner about how to develop, operate or finance a project;
a joint-venture partner not complying with a joint-venture agreement;
possible litigation between joint-venture partners about joint-venture matters; and
limited control over decisions related to a joint venture in which UEX does not have a controlling interest.
In particular, UEX is in the process of negotiating joint-venture agreements with AREVA on the Western
Athabasca Projects and there is no assurance that the parties will be able to conclude a mutually satisfactory
agreement.
Reliance on other companies as operators
Where another company is the operator and majority owner of a property in which UEX has an interest, UEX is
and will be, to a certain extent, dependent on that company for the nature and timing of activities related to
those properties and may be unable to direct or control such activities.
Uranium price fluctuations could adversely affect UEX
The market price of uranium is the most significant market risk for companies exploring for and producing
uranium. The marketability of uranium is subject to numerous factors beyond the control of UEX. The price of
uranium has recently experienced and may continue to experience volatile and significant price movements
over short periods of time. Factors impacting price include demand for nuclear power, political and economic
conditions in uranium producing and consuming countries, natural disasters such as those that struck Japan in
‐ 47 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
March, 2011, reprocessing of spent fuel and the re-enrichment of depleted uranium tails or waste, sales of
excess civilian and military inventories (including from the dismantling of nuclear weapons) by governments and
industry participants and production levels and costs of production in countries such as Kazakhstan, Russia,
Africa and Australia.
Reliance on the economics of the Preliminary Assessment Technical Report
The market price of U3O8 has decreased since the date of the PA. The uranium industry has been adversely
affected by the natural disasters that struck Japan on March 11, 2011 and the resulting damage to the
Fukushima nuclear facility. These events resulted in many countries, which presently rely on nuclear power for
a portion of their electrical generation, stating that they will review their commitment to this source of clean
energy. These reviews resulted in downward pressure on the price of uranium and may have a significant
effect on the country-by-country demand for uranium. The current long-term U3O8 market price, as reported by
Ux Consulting on February 24, 2014, is US$50.00 /lb. Given that the PA presented three economic scenarios
using prices ranging from US$60 to US$80 /lb of U3O8, the economic analysis which uses U3O8 prices higher
than the prevailing market price may no longer be accurate and readers of the PA are therefore cautioned when
reading or relying on the PA.
Competition for properties could adversely affect UEX
The international uranium industry is highly competitive and significant competition exists for the limited supply
of mineral lands available for acquisition. Many participants in the mining business include large, established
companies with long operating histories. UEX may be at a disadvantage in acquiring new properties as many
mining companies have greater financial resources and more technical staff. Accordingly, there can be no
assurance that UEX will be able to compete successfully to acquire new properties or that any such acquired
assets would yield reserves or result in commercial mining operations.
Resource estimates are based on interpretation and assumptions
Mineral resource estimates presented in this document and in UEX’s filings with securities regulatory
authorities, news releases and other public statements that may be made from time to time are based upon
estimates. These estimates are imprecise and depend upon geological interpretation and statistical inferences
drawn from drilling and sampling analysis, which may prove to be unreliable. There can be no assurance that
these estimates will be accurate or that this mineralization could be extracted or processed profitably.
Mineral resource estimates for UEX’s properties may require adjustments or downward revisions based upon
further exploration or development work, actual production experience, or future changes in uranium price. In
addition, the grade of mineralization ultimately mined, if any, may differ from that indicated by drilling results.
There can be no assurance that minerals recovered in small-scale tests will be duplicated in large-scale tests
under on-site conditions or in production scale.
Failure to obtain additional financing on a timely basis could cause UEX to reduce its interest in its
properties
The Company currently has sufficient financial resources to carry out its anticipated short-term planned
exploration and development on all of its projects and to fund its short-term general administrative costs;
however, there are no revenues from operations and no assurances that sufficient funding will be available to
conduct further exploration and development of its projects or to fund exploration expenditures under the terms
‐ 48 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
of any joint-venture or option agreements after that time. If the Company’s exploration and development
programs are successful, additional funds will be required for development of one or more projects. Failure to
obtain additional funding could result in the delay or indefinite postponement of further exploration and
development or the possible loss of the Company’s properties. It is intended that such funding will be obtained
primarily from future equity issues. If additional funds are raised from the issuance of equity or equity-linked
securities, the percentage ownership of the current shareholders of UEX will be reduced, and the newly issued
securities may have rights, preferences or privileges senior to or equal to those of the existing holders of UEX’s
common shares. The ability of UEX to raise the additional capital and the cost of such capital will depend upon
market conditions from time to time. There can be no assurances that such funds will be available at
reasonable cost or at all.
Competition from other energy sources and public acceptance of nuclear energy
Nuclear energy competes with other sources of energy, including oil, natural gas, coal and hydro-electricity.
These other energy sources are to some extent interchangeable with nuclear energy, particularly over the
longer term. Lower prices of oil, natural gas, coal and hydro-electricity may result in lower demand for uranium
concentrate and uranium conversion services. Furthermore, the growth of the uranium and nuclear power
industry beyond its current level will depend upon continued and increased acceptance of nuclear technology as
a means of generating electricity. Because of unique political, technological and environmental factors that
affect the nuclear industry, the industry is subject to public opinion risks which could have an adverse impact on
the demand for nuclear power and increase the regulation of the nuclear power industry.
Dependence on key management employees
UEX’s development to date has depended, and in the future will continue to depend, on the efforts of key
management employees. UEX will need additional financial, administrative, technical and operations staff to fill
key positions as the business grows. If UEX cannot attract and train qualified people, the Company’s growth
could be restricted.
Compliance with and changes to current environmental and other regulatory laws, regulations and
permits governing operations and activities of uranium exploration companies, or more stringent
interpretation, implementation, application or enforcement thereof, could have a material adverse
impact on UEX
Mining and refining operations and exploration activities, particularly uranium mining, refining and conversion in
Canada, are subject to extensive regulation by provincial, municipal and federal governments. Such regulations
relate to production, development, exploration, exports, taxes and royalties, labour standards, occupational
health, waste disposal, protection and remediation of the environment, mines decommissioning and
reclamation, mine safety, toxic substances and other matters. Compliance with such laws and regulations has
increased the costs of exploring, drilling, developing and constructing. It is possible that, in the future, the costs,
delays and other effects associated with such laws and regulations may impact UEX’s decision to proceed with
exploration or development or that such laws or regulations may result in UEX incurring significant costs to
remediate or decommission properties which do not comply with applicable environmental standards at such
time. UEX believes it is in substantial compliance with all material laws and regulations that currently apply to
its operations. However, there can be no assurance that all permits which UEX may require for the conduct of
uranium exploration operations will be obtainable or can be maintained on reasonable terms or that such laws
and regulations would not have an adverse effect on any uranium exploration project which UEX might
‐ 49 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
undertake. World-wide demand for uranium is directly tied to the demand for electricity produced by the nuclear
power industry, which is also subject to extensive government regulation and policies.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement
actions. These actions may result in orders issued by regulatory or judicial authorities causing operations to
cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of
additional equipment or remedial actions. Companies engaged in uranium exploration operations may be
required to compensate others who suffer loss or damage by reason of such activities and may have civil or
criminal fines or penalties imposed for violations of applicable laws or regulations.
Conflicts of interest
Some of the directors of UEX are also directors of other companies that are similarly engaged in the business of
acquiring, exploring and developing natural resource properties. Such associations may give rise to conflicts of
interest from time to time. In particular, one of those consequences may be that corporate opportunities
presented to a director of UEX may be offered to another company or companies with which the director is
associated, and may not be presented or made available to UEX. The directors of UEX are required by law to
act honestly and in good faith with a view to the best interests of UEX, to disclose any interest which they may
have in any project or opportunity of UEX, and to abstain from voting on such matter. Conflicts of interest that
arise will be subject to and governed by procedures prescribed in the Company’s by-laws and Code of Ethics
and by the Canada Business Corporations Act.
Internal controls
Internal controls over financial reporting are procedures designed to provide reasonable assurance that
transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and
transactions are properly recorded and reported. A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and
financial statement preparation.
Market price of shares
Securities of mining companies have experienced substantial volatility in the past often based on factors
unrelated to the financial performance or prospects of the companies involved. These factors include
macroeconomic conditions in North America and globally, and market perceptions of the attractiveness of
particular industries. The price of UEX’s securities is also likely to be significantly affected by short-term
changes in uranium or other commodity prices, currency exchange fluctuation, or in its financial condition or
results of operations as reflected in its periodic reports. Other factors unrelated to the performance of UEX that
may have an effect on the price of the securities of UEX include the following: the extent of analytical coverage
available to investors concerning the business of UEX may be limited if investment banks with research
capabilities do not follow UEX’s securities; lessening in trading volume and general market interest in UEX’s
securities may affect an investor’s ability to trade significant numbers of securities of UEX; and the size of
UEX’s public float and its inclusion in market indices may limit the ability of some institutions to invest in UEX’s
securities. If an active market for the securities of UEX does not continue, the liquidity of an investor’s
investment may be limited and the price of the securities of the Corporation may decline. If an active market
does not exist, investors may lose their entire investment in the Company. As a result of any of these factors,
the market price of the securities of UEX at any given point in time may not accurately reflect the long-term
‐ 50 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
value of UEX. Securities class-action litigation has been brought against companies following periods of
volatility in the market price of their securities. UEX may in the future be the target of similar litigation.
Securities litigation could result in substantial costs and damages and divert management’s attention and
resources.
The potential costs which could be associated with any liabilities not covered by insurance or in excess
of insurance coverage may cause substantial delays and require significant capital outlays, adversely
affecting UEX’s financial position
The nature of the risks UEX faces in the conduct of its operations are such that liabilities could exceed policy
limits in any insurance policy or could be excluded from coverage under an insurance policy. The potential
costs that could be associated with any liabilities not covered by insurance or in excess of insurance coverage
or compliance with applicable laws and regulations may cause substantial delays and require significant capital
outlays, adversely affecting UEX’s financial position.
Disclosure Controls and Procedures
The Company has established disclosure controls and procedures to ensure that information disclosed in this
MD&A and the related unaudited interim condensed financial statements was properly recorded, processed,
summarized and reported to the Company’s Board and Audit Committee. The Company’s certifying officers
conducted or caused to be conducted under their supervision an evaluation of the disclosure controls and
procedures as required under applicable Canadian securities laws as at December 31, 2013. Based on the
evaluation, the Company’s certifying officers concluded that the disclosure controls and procedures were
effective to provide a reasonable level of assurance that information required to be disclosed by the Company in
its annual filings and other reports that it files or submits under applicable Canadian securities laws is recorded,
processed, summarized and reported within the time period specified and that such information is accumulated
and communicated to the Company’s management, including the certifying officers, as appropriate to allow for
timely decisions regarding required disclosure.
It should be noted that while the Company’s certifying officers believe that the Company’s disclosure controls
and procedures provide a reasonable level of assurance and that they are effective, they do not expect that the
disclosure controls and procedures will prevent all errors and fraud. A control system, no matter how well
conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met.
Internal Controls over Financial Reporting
The Company’s certifying officers acknowledge that they are responsible for designing internal controls over
financial reporting, or causing them to be designed under their supervision in order to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with IFRS.
There were no changes in these controls during the most recent interim period ending December 31, 2013 that
had materially affected, or are reasonably likely to materially affect, such controls.
‐ 51 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
In May of 2013, the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) released
an updated Internal Control – Integrated Framework which companies will be required to transition to for
officer’s certificates filed after December 15, 2014. Currently the Company applies the COSO 2006 Internal
Control over Financial Reporting – Guidance for Smaller Public Companies which is based on the 1992 COSO
Framework.
The Company is currently reviewing the new COSO Internal Control – Integrated Framework (2013 Framework)
but has not yet determined what changes, if any, may be required to the Company’s internal controls to be in
compliance with the new COSO framework.
Based upon the Internal Control over Financial Reporting – Guidance for Smaller Public Companies by The
Committee of Sponsoring Organization of the Treadway Commission (COSO) framework, the Company’s
certifying officers have evaluated or caused to be evaluated under their supervision the effectiveness of the
Company’s internal controls over financial reporting. Based upon this assessment, management has concluded
that as at December 31, 2013, the Company’s internal control over financial reporting was effective to provide
reasonable assurance regarding the preparation of the Company’s financial statements in accordance with
IFRS.
The internal controls over financial reporting were designed to ensure that testing and reliance could be
achieved. Management and the Board of Directors work to mitigate the risk of a material misstatement in
financial reporting; however, there can be no assurance that this risk can be reduced to less than a remote
likelihood of a material misstatement.
‐ 52 ‐
UEX CORPORATION
Management’s Discussion and Analysis
Year ended December 31, 2013
(Expressed in Canadian dollars, unless otherwise noted)
Cautionary Statement Regarding Forward-Looking Information
Certain statements contained in this MD&A may constitute “forward-looking information” within the meaning of
applicable Canadian securities legislation. These statements appear in a number of different places in this
MD&A and can be identified by words such as “estimates”, “projects”, “expects”, “intends”, “anticipates”,
“assumes”, “believes”, “plans”, “strategy”, “goal”, “objective”, “potential”, “optimistic” or their negatives or other
comparable words or statements that contain actions, events or results “may”, “will”, “could”, “would”, “might”, or
“should” occur, be taken or be achieved. Forward-looking information includes statements regarding the
outlook for our future operations, plans and timing for the commencement or advancement of exploration
activities on our properties, statements about future market conditions, supply and demand conditions, forecasts
of future costs and expenditures, the outcome of any legal proceedings, and other expectations, intention and
plans that are not historical fact. Forward-looking information is based on certain factors and assumptions
including expected economic conditions, uranium prices, results of operations, performance and business
prospects and opportunities. UEX considers the factors and assumptions on which this forward-looking
information is based to be reasonable at the time it was prepared, but cautions readers that these assumptions
may ultimately prove to be incorrect. Forward-looking information by its nature necessarily involves risks,
uncertainties and other factors including without limitation: that UEX’s exploration activities may not result in
profitable commercial mining operations; the risks associated with UEX’s participation in joint ventures; reliance
on other companies as operators; uranium price fluctuations; that actual capital and operating costs associated
with the Hidden Bay project may significantly exceed those estimated in the Hidden Bay project technical report;
the economic analysis contained in the current Hidden Bay project’s technical report may not be realized;
competition for properties; mineral resource estimates are based on interpretations and assumptions; that
failure to obtain additional financing on a timely basis could cause UEX to reduce its interest in its properties;
competition from other energy sources and public acceptance of nuclear energy; dependence on key
management employees; compliance with and changes to environmental and other regulatory laws; conflicts of
interest; accounting policies; internal controls; market price of UEX’s shares; potential costs which could be
associated with any liabilities not covered by insurance or in excess of insurance coverage; and other factors all
as more particularly described herein under the heading “Risks and Uncertainties” and include unanticipated
and unusual events. These and other factors could cause actual results to differ materially from future results
expressed or implied by such forward-looking information. Many of these factors are beyond the control of
UEX. Except as required by applicable securities law, UEX disclaims any intention or obligation to update or
revise forward-looking information, whether as a result of new information, future events or otherwise.
Consequently, all forward-looking information in this MD&A is qualified by this cautionary statement and there
can be no assurance that actual results or developments anticipated by UEX will be realized. For the reasons
set forth above, investors should not place undue reliance on forward-looking information.
‐ 53 ‐
Audited Financial Statements of
UEX CORPORATION
Years ended December 31, 2013 and 2012
KPMG LLP
Chartered Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
(604) 691-3031
Fax
www.kpmg.ca
Internet
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of UEX Corporation
We have audited the accompanying financial statements of UEX Corporation, which comprise
the balance sheets as at December 31, 2013 and December 31, 2012, the statements of operations and
comprehensive loss, changes in equity and cash flows for the years then ended, and notes, comprising a
summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors’ Responsibility
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 comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on our judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of UEX
Corporation as at December 31, 2013 and December 31, 2012, and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards.
Chartered Accountants
March 14, 2014
Vancouver, Canada
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
UEX CORPORATION
Balance Sheets
As at December 31, 2013 and 2012
Assets
Current assets
Cash and cash equivalents
Amounts receivable
Prepaid expenses
Non-current assets
Equipment
Mineral properties
Investments
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and other liabilities
Non-current liabilities
Deferred tax liability
Total liabilities
Shareholders’ equity
Share capital
Share-based payments reserve
Deficit
Notes
2013
2012
3
4
5
6
7
8, 14
9
10
11
11(c)
$ 9,321,916
143,558
142,578
$ 12,580,134
171,425
101,357
9,608,052
12,852,916
125,031
164,106,221
31,733
171,566
159,436,189
-
$ 173,871,037
$ 172,460,671
$ 220,634
$ 510,899
13,376,478
12,966,524
13,597,112
13,477,423
175,316,661
4,585,900
(19,628,636 )
172,345,291
5,088,191
(18,450,234)
160,273,925
158,983,248
Total liabilities and shareholders’ equity
$ 173,871,037
$ 172,460,671
Nature and continuance of operations
Commitments
Subsequent events
1
7(iv), 7(v), 12
7(v), 9, 11(c), 12
See accompanying notes to the financial statements.
Approved on behalf of the Board and authorized for issue on March 14, 2014.
“signed” “signed”
Director
Roger M. Lemaitre
Emmet A. McGrath
Director
- 1 -
UEX CORPORATION
Statements of Operations and Comprehensive Loss
Years ended December 31, 2013 and 2012
Revenue
Interest income
Expenses
Bank charges and interest
Depreciation
Filing fees and stock exchange
Legal and audit
Loss on disposal of equipment
Maintenance
Office expenses
Rent
Salaries
Share-based compensation
Travel and promotion
Unrealized loss on held-for-trading financial assets
Write-down of mineral properties
Loss before income taxes
Notes
2013
2012
$ 202,074
$ 221,465
16
11(c)
7(v), 8, 14
7(iv)
4,295
13,589
123,015
204,295
2,105
1,250
330,021
116,042
817,654
510,227
112,089
4,198
-
4,270
14,775
124,474
221,973
-
17,078
214,791
111,145
809,748
953,532
165,782
-
1,609,741
2,238,780
4,247,309
(2,036,706 )
(4,025,844)
Deferred income tax recovery (expense)
10
(311,296 )
114,593
Net loss and comprehensive loss for the year
$ (2,348,002 )
$ (3,911,251)
Basic and diluted loss per share
$ (0.010 )
$ (0.018)
Basic and diluted weighted-average number of shares
outstanding
225,142,014
217,853,362
See accompanying notes to the financial statements.
- 2 -
UEX CORPORATION
Statements of Changes in Equity
Years ended December 31, 2013 and 2012
Number of
common
shares
Share
capital
Share-based
payments
reserve
Deficit
Total
Balance, December 31, 2011
203,067,652
$ 157,826,395
$ 8,008,322 $ (18,805,478 )
$ 147,029,239
Net loss for the year
Issued pursuant to private
placements
Share issuance costs
Value attributed to flow-through
premium on issuance
Deferred income taxes on share
issuance costs
Share-based payment
transactions
Transfer to deficit on expiry and
cancellation of share purchase
options
18,421,027
15,166,176
(752,677)
(97,826)
203,223
(3,911,251 )
(3,911,251)
15,166,176
(752,677)
(97,826)
203,223
1,346,364
1,346,364
(4,266,495)
4,266,495
-
Balance, December 31, 2012
221,488,679
172,345,291
5,088,191
(18,450,234 )
158,983,248
Net loss for the year
Issued pursuant to private
placements
Share issuance costs
Value attributed to flow-through
premium on issuance
Deferred income taxes on share
issuance costs
Share-based payment
transactions
Transfer to deficit on expiry and
cancellation of share purchase
options
6,350,000
3,175,000
(104,972)
(127,000)
28,342
667,309
(2,348,002 )
(2,348,002)
3,175,000
(104,972)
(127,000)
28,342
667,309
(1,169,600)
1,169,600
-
Balance, December 31, 2013
227,838,679
$ 175,316,661
$ 4,585,900 $ (19,628,636 )
$ 160,273,925
See accompanying notes to the financial statements.
- 3 -
UEX CORPORATION
Statements of Cash Flows
Years ended December 31, 2013 and 2012
Cash provided by (used for):
Operating activities
Net loss for the year
Adjustments for:
Depreciation
Deferred income tax expense (recovery)
Interest income
Loss on disposal of equipment
Share-based compensation
Unrealized fair value loss on held-for-trading financial assets
Write-down of mineral property
Changes in non-cash operating working capital
Amounts receivable
Prepaid expenses
Accounts payable and other liabilities
Investing activities
Interest received
Investment in exploration and evaluation assets
Purchase of equipment
Financing activities
Proceeds from common shares issued
Share issuance costs
Increase (decrease) in cash and cash equivalents during the year
Cash and cash equivalents, beginning of year
2013
2012
$ (2,348,002 )
$ (3,911,251)
13,589
311,296
(202,074 )
2,105
510,227
4,198
-
7,447
(41,221 )
74,547
14,775
(114,593)
(221,465)
-
953,532
-
1,609,741
1,502
(32,522)
3,076
(1,667,888 )
(1,697,205)
191,018
(4,841,478 )
(9,898 )
(4,660,358 )
146,240
(5,424,426)
(124,634)
(5,402,820)
3,175,000
(104,972 )
15,166,176
(752,677)
3,070,028
14,413,499
(3,258,218 )
12,580,134
7,313,474
5,266,660
Cash and cash equivalents, end of year
$ 9,321,916
$ 12,580,134
Supplementary information
Non-cash transactions
Increase (decrease) in accounts payable and other liabilities relating to mineral
property expenditures
Increase in other liabilities due to flow-through premium
Decrease in other liabilities due to extinguishment of flow-through premium on
renouncement
Decrease in amounts receivable relating to mineral property expenditures
Non-cash share-based compensation included in mineral property expenditures
Fair value of shares and warrants received as partial consideration for mineral
property earn-in (reduction in carrying value of mineral properties)
Depreciation included in mineral property expenditures
Advance payment received in period
Prepayment received for Black Lake exploration, net of 2013 disbursements,
included in other liabilities (see Notes 7(v) and 9)
See accompanying notes to the financial statements.
- 4 -
$ (364,812 )
$ 43,422
127,000
(127,000 )
31,476
157,082
(35,931 )
40,739
97,826
(97,826)
35,643
392,832
-
38,481
79,006
-
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
1.
Nature and continuance of operations
UEX Corporation (the “Company”) was incorporated under the Canada Business Corporations Act on
October 2, 2001. The Company entered into an agreement with Pioneer Metals Corporation (“Pioneer”)
and Cameco Corporation (“Cameco”) to establish the Company as a public uranium exploration company.
On July 17, 2002, under a plan of arrangement with Pioneer, Pioneer transferred to the Company its
uranium exploration properties and all related assets, including the Riou Lake and Black Lake projects. On
the same date, Cameco transferred its Hidden Bay uranium exploration property and certain related assets,
in exchange for shares of the Company.
The Company is currently engaged in the exploration and evaluation of its mineral properties located in the
province of Saskatchewan. The Company’s shares are listed on the Toronto Stock Exchange under the
symbol UEX. The head office and principal address is located at 808 Nelson Street, Suite 1007,
Vancouver, British Columbia, Canada V6Z 2H2. The Company’s registered office is 595 Burrard Street,
Suite 2600, Vancouver, British Columbia, Canada V7X 1L3.
The Company is exploring and evaluating its mineral properties and has not yet determined whether its
mineral properties contain mineral resources that are economically recoverable. The recoverability of
amounts shown for mineral properties is dependent upon the discovery of economically recoverable mineral
resources, the ability of the Company to obtain the necessary financing to complete explorations and
development and upon future profitable production or proceeds from the disposition of its mineral
properties.
The Company performed an evaluation of impairment indicators under IFRS 6(20) for its exploration and
evaluation assets (mineral properties) as at December 31, 2013 and has concluded that there are no
indicators of impairment. However, as at December 31, 2013, the market capitalization of the Company
was below the carrying value of its net assets which are primarily represented by mineral properties.
Accordingly, the Company has also reviewed the value attributed per pound in the ground of U3O8 in recent
arms-length transactions for the acquisition of uranium resources defined by National Instrument 43-101.
As a result of this review the Company has concluded that the Company’s net assets are not impaired.
The Company has sufficient financial resources for exploration, evaluation and administrative costs for at
least twelve months from the end of the reporting period. The Company will require additional financing
from time to time and, although it has been successful in the past, there is no assurance that it will be able
to obtain adequate financing in the future or that such financing will be available on acceptable terms.
2.
Basis of preparation and significant accounting policies
(a) Statement of compliance
These financial statements, including comparative figures have been prepared in accordance with
International Financial Reporting Standards (“IFRS”), as issued by the International Accounting
Standards Board (“IASB”). The accounting policies set out below have been applied consistently to all
periods presented in these financial statements. The financial statements of UEX Corporation were
reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on
March 14, 2014.
(b) Functional and presentation currency
These financial statements are presented in Canadian dollars, which is the functional currency of the
Company. Transactions in currencies other than the entity’s functional currency are recorded at the
rate of exchange prevailing on the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are retranslated to the functional currency at the exchange
rate at that date.
- 5 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
2.
Basis of preparation and significant accounting policies (continued)
(c) Use of estimates and judgments
The preparation of financial statements requires management to make accounting estimates and
assumptions requiring judgment in applying the Company’s accounting policies. These estimates and
assumptions may affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates
are revised and in any future periods affected. Actual amounts may differ from such estimates.
Information about judgment and estimates is contained in the notes to the financial statements, with the
key areas summarized below.
Significant areas requiring the use of critical judgments in applying accounting policies that have the
most significant effect on the amounts recognized in the financial statements relate to:
(i)
Ongoing review for the support of the carrying value of mineral properties, including:
consideration of ongoing and anticipated expenditures on the mineral properties; evaluation of
the success of exploration to date and other general factors such as commodity prices and
outlook; evaluation of UEX’s market capitalization compared to the net assets of the Company
(which are primarily mineral properties); and comparison to recent arm’s length transactions for
similar assets in order to evaluate the appropriateness of the carrying value presented in the
financial statements (see Note 1 Nature and continuance of operations, Note 2(j) Mineral
properties and Note 7 Mineral properties).
(ii) Review of asset carrying values and impairment assessments for the Company considering
whether circumstances have occurred which have impacted the estimated useful life of the
assets such as damage or obsolescence, as well as the timing of impairments and the
determination of recoverable amounts (see Note 2(i) Equipment and Note 6 Equipment).
(iii) Determination of deferred income tax assets relating to management’s assessment of the
probability that future taxable profit will be available to utilize deferred tax assets (see Note 10
Income taxes).
(iv) Evaluating company-specific facts and circumstances to determine whether accruals or
recognition of liabilities may be required with respect to asset retirement obligations or other
circumstances (see Note 2(k) Provisions).
(v)
Interpretation of new accounting guidelines and assessing their potential impact on the
Company’s financial statements requires judgment with respect to company-specific facts and
circumstances.
Significant areas requiring assumptions and estimation that have a significant risk of resulting in a
material adjustment within the next financial year relate to:
(i)
(ii)
Estimates and/or assumptions used in determining the fair value of non-cash share-based
compensation, including Black-Scholes inputs such as the expected forfeiture rate and the
expected life of share-purchase options (see Note 11(c) Share-based compensation).
Assumptions used to estimate the useful lives of property, plant and equipment for determining
appropriate depreciation rates (see Note 2(i) Equipment and Note 6 Equipment).
(iii) Estimates that would be used, should the recording of a rehabilitation provision or asset
retirement obligation be required in the financial statements in the future. Estimates would relate
to the expected inflation rate, estimated mine life and the discount rates applied (see Note 2(k)
Provisions).
- 6 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
2.
Basis of preparation and significant accounting policies (continued)
(d) Joint arrangements
Joint arrangements are arrangements of which the Company has joint control, established by contracts
requiring unanimous consent for decisions about the activities that significantly affect the arrangements’
returns. They are classified and accounted for as follows:
(i)
Joint operation – when the Company has rights to the assets, and obligations for the liabilities,
relating to an arrangement, it accounts for each of its assets, liabilities and transactions, including
its share of those held or incurred jointly, in relation to the joint operation.
(ii)
Joint venture – when the Company has rights only to the net assets of the arrangement, it
accounts for its interest using the equity method.
The Company has an interest in several joint operations relating to the exploration and evaluation of
various properties in the western and northern Athabasca Basin. The financial statements include the
Company’s proportionate share of the joint operations’ assets, liabilities, revenue and expenses with
items of a similar nature on a line-by-line basis from the date that the joint arrangement commences
until the date that the joint arrangement ceases. These interests are governed by contractual
arrangements but have not been organized into separate legal entities or vehicles.
The Company does not have any joint arrangements that are classified as joint ventures.
(e) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and highly liquid investments
with an original maturity of three months or less.
(f) Financial assets
The Company classifies its financial assets in the following categories:
(i)
Financial assets at fair value through profit or loss (“FVTPL”);
(ii) Held-to-maturity investments;
(iii) Available-for-sale financial assets; and
(iv) Loans and receivables.
The classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of financial assets at initial recognition.
Financial assets at FVTPL
Financial assets are classified as FVTPL when the financial asset is held for trading or is designated as
FVTPL. A financial asset is classified as held for trading when it is purchased and incurred with the
intention of generating profits in the near term, part of an indentified portfolio of financial instruments
that the Company manages and has an actual pattern of short-term profit-taking; or a derivative that is
not designated as a hedging instrument.
- 7 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
2.
Basis of preparation and significant accounting policies (continued)
(f) Financial assets (continued)
Financial assets at FVTPL (continued)
Financial assets classified as FVTPL are stated at fair value with any resultant gain or loss recognized
in profit or loss. The net gain or loss recognized incorporates any dividend or interest earned on the
financial asset. Financial assets at FVTPL include warrants (classified as held-for-trading) which are
presented as non-current assets unless management intends to dispose of these assets within 12
months of the end of the reporting period.
Held-to-maturity investments
Investments are measured at amortized cost using the effective interest rate method. Transaction
costs are added and amortized to the statement of operations over the life of the financial instrument on
an effective yield basis. The Company does not have any assets classified as held-to-maturity
investments.
Available-for-sale financial assets (“AFS”)
Short-term investments are classified as available-for-sale and are carried at fair value (where
determinable based on market prices of actively traded securities) with changes in fair value recorded
in profit and loss. Management assesses the carrying value of AFS financial assets each period and
any impairment charges are recognized in profit or loss. When financial assets classified as available-
for-sale are sold, the accumulated fair value adjustments recognized in other comprehensive income
are included in profit and loss. AFS assets are included in non-current assets unless the investment
matures or management intends to dispose of it within 12 months of the end of the reporting period.
The Company’s AFS assets include marketable securities that are not held for the purpose of trading.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in
an active market. Such assets are classified as current or non-current assets based on their maturity
date and are measured initially at fair value and subsequently at amortized cost using the effective
interest rate method. The Company has cash and cash equivalents, as well as trade and other
amounts receivable classified as loans and receivables.
De-recognition of financial assets
A financial asset is de-recognized when the contractual right to the asset’s cash flows expires or if the
Company transfers the financial asset and substantially all risks and rewards of ownership to another
entity.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each period
end. Financial assets are impaired when there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the financial asset, the estimated future cash flows of
the investment have been impacted.
(g) Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss (“FVTPL”)
or financial liabilities at amortized cost.
.
- 8 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
2.
Basis of preparation and significant accounting policies (continued)
(g) Financial liabilities (continued)
Financial liabilities
Financial liabilities at amortized cost are initially measured at fair value, net of transaction costs incurred
and subsequently measured at amortized cost. Any difference between the amounts originally
received, net of transaction costs, and the redemption value is recognized in profit or loss over the
period to maturity using the effective interest method.
Financial liabilities are classified as current or non-current based on their maturity dates. The Company
has classified accounts payable and other liabilities as other financial liabilities.
De-recognition of financial liabilities
The Company de-recognizes financial liabilities when, and only when, the Company’s obligations are
discharged, cancelled or they expire.
(h) Impairment of non-financial assets
Non-financial assets are evaluated at least annually by management for indicators that carrying value is
impaired and may not be recoverable. When indicators of impairment are present, the recoverable
amount of an asset is evaluated at the level of a cash generating unit (“CGU”), the smallest identifiable
group of assets that generates cash inflows that are largely independent of the cash inflows from other
assets or groups of assets. The recoverable amount of a CGU is the greater of the CGU’s fair value
less costs to sell and its value in use. An impairment loss is recognized in profit or loss to the extent the
carrying amount exceeds the recoverable amount.
(i) Equipment
Equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost
comprises the fair value of consideration given to acquire or construct an asset and includes the direct
charges associated with bringing the asset to the location and condition necessary for putting it into
use, along with the future cost of dismantling and removing the asset.
When parts of an item of equipment have different useful lives, they are accounted for as separate
items (major components) of equipment. The costs of the day-to-day servicing of equipment are
recognized in profit or loss as incurred.
Depreciation
Depreciation is based on the cost of an asset less its residual value. Depreciation is provided over the
expected useful lives of the assets, using the following rates:
Asset
Exploration camp
Exploration equipment
Computer equipment
Office furniture
Leasehold improvements
Basis
Declining balance
Declining balance
Declining balance
Declining balance
Straight line
- 9 -
Rate
5% - 30%
30%
30% - 100%
20%
Lesser of term of lease or useful life
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
2.
Basis of preparation and significant accounting policies (continued)
(i) Equipment (continued)
Depreciation (continued)
Depreciation methods and expected useful lives are reviewed at each reporting date and adjusted as
required. Commencing on January 1, 2014 the Company began depreciating all assets on a straight-
line basis over their useful lives. In the current and comparative periods, certain asset categories
identified above were depreciated on a declining-balance basis, which may result in an overestimation
of their useful lives by not fully depreciating the assets, which can trigger a loss on disposal. Given the
low value of the fixed assets that the Company holds, this change in useful life estimate does not have
a material impact on the financial results of the Company.
Asset
Exploration camp
Exploration equipment
Computer equipment
Office furniture
Leasehold improvements
Basis
Straight line
Straight line
Straight line
Straight line
Straight line
Useful Life
5 - 20 years
3 - 5 years
1 - 5 years
3 - 5 years
Lesser of term of lease or 10 years
(j) Mineral properties
Exploration and evaluation assets
All acquisition, exploration and development costs are capitalized until such time as the project to which
they relate is put into commercial production, sold, abandoned or the recovery of costs is determined to
be unlikely. Upon reaching commercial production, these capitalized costs are amortized over the
estimated reserves on a unit-of-production basis. For properties which do not yet have proven
reserves, the amounts shown represent costs to date and are not intended to represent present or
future values. The underlying value of all properties is dependent on the existence and economic
recovery of mineral resources in the future which includes acquiring the necessary permits and
approvals. Management has not identified any exploration and evaluation assets to be classified as an
intangible asset. Expenditures incurred before the Company has obtained the legal rights to explore a
specific area are expensed as incurred.
The recovery of amounts shown for exploration and evaluation assets is dependent upon the discovery
of economically recoverable resources, the ability of the Company to obtain financing to complete
exploration and development of the properties, and on future profitable production or proceeds of
disposition. The Company recognizes in income costs recovered on mineral properties when amounts
received or receivable are in excess of the carrying amount. Upon transfer of exploration and
evaluation assets into development properties, all subsequent expenditures on the exploration,
construction, installation or completion of infrastructure facilities are capitalized within development
properties.
All capitalized exploration and evaluation assets are monitored for indications of impairment. Where a
potential impairment is indicated, assessments are performed for each area of interest. To the extent
that the exploration expenditures are not expected to be recovered, this amount is recorded as a
write-down of interest in mineral properties in the statement of operations and comprehensive loss in
the period.
- 10 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
2.
Basis of preparation and significant accounting policies (continued)
(j) Mineral properties (continued)
Development properties
When mineral reserves have been determined and the decision to proceed with development has been
approved, exploration and evaluation assets are tested for impairment then reclassified as a component
of property, plant and equipment. The expenditures related to development and construction are
capitalized as construction-in-progress. Costs associated with the commissioning of new assets
incurred in the period before they are operating in the manner intended by management, are
capitalized. Development expenditures are net of the proceeds of the sale of metals from ore extracted
during the development phase. Interest on borrowings related to the construction and development of
assets are capitalized as pre-production stripping costs and classified as a component of property, plant
and equipment.
Reserve estimates
The Company estimates its reserves and mineral resources based on information compiled by Qualified
Persons as defined in accordance with Canadian Securities Administrators National Instrument 43-101
(Standards for Disclosure of Mineral Projects). Reserves are used when performing impairment
assessments on the Company’s mineral properties once they have moved from Exploration and
Evaluation to Development. There are numerous uncertainties inherent in the estimation of mineral
reserves, and assumptions that are valid at the time of estimation may change significantly when new
information becomes available. Changes in the forecasted prices of commodities, exchange rates,
production costs or recovery rates may change the economic status of reserves and may, ultimately,
result in the reserves being revised.
(k) Provisions
General
Provisions are recorded when a present legal or constructive obligation exists as a result of past events
where it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate of the amount of the obligation can be made. The expense
relating to any provision is presented in profit or loss net of any reimbursement.
Environmental rehabilitation provision
The Company recognizes the fair value of a liability for environmental rehabilitation in the period in
which the Company is legally or constructively required to remediate, if a reasonable estimate of fair
value can be made, based on an estimated future cash settlement of the environmental rehabilitation
obligation, discounted at a pre-tax rate that reflects the current market assessments of the time value of
money and the risks specific to the obligation. The environmental rehabilitation obligation is capitalized
as part of the carrying amount of the associated long-lived asset and a liability is recorded. The
environmental rehabilitation cost is amortized on the same basis as the related asset. The liability is
adjusted for the accretion of the discounted obligation and any changes in the amount or timing of the
underlying future cash flows. Significant judgments and estimates are involved in forming expectations
of the amounts and timing of environmental rehabilitation cash flows. The Company has assessed
each of its mineral projects and determined that no material environmental rehabilitations exist as the
disturbance to date is minimal.
- 11 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
2.
Basis of preparation and significant accounting policies (continued)
(l)
Income taxes
The Company uses the balance sheet method of accounting for income taxes. Under the balance
sheet method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
substantively enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Deferred tax assets also result from
unused loss carry-forwards, resource-related income tax pools and timing differences for other
deductions. A deferred tax asset is recognized for unused tax losses, tax credits and deductible
temporary differences to the extent that it is probable that future taxable profits will be available against
which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be realized.
(m) Flow-through shares
Under Canadian income tax legislation, a company is permitted to issue shares whereby the company
agrees to incur qualifying expenditures and renounce the related income tax deductions to the
investors. To account for flow-through shares, the Company allocates total proceeds from the issuance
of flow-through shares between the offering of shares and the sale of tax benefits.
The total amount allocated to the offering of shares is based on the quoted price of the underlying
shares. The remaining amount which is allocated to the sale of tax benefits is recorded as a liability
and is reversed when the tax benefits are renounced. The difference between the amount originally
recorded as a liability and the estimated income tax benefits on date of renouncement is recognized as
a gain or loss in earnings. The tax effect of the renunciation is recorded at the time the Company
makes the renunciation, which may differ from the effective date of renunciation. If the flow-through
shares are not issued at a premium, a liability is not established and on renunciation the full value of the
tax assets renounced is recorded as a deferred tax expense.
(n) Share capital
Common shares are classified as equity. The Company records proceeds from share issuances net of
direct issue costs and any tax effects. Common shares issued for consideration, other than cash, are
valued at the quoted market price on the date the shares are issued.
(o) Share-based payments
The Company has a share option plan which is described in Note 11(c). The fair value of all
share-based awards is estimated using the Black-Scholes option-pricing model at the grant date and
amortized over the vesting periods. An individual is classified as an employee when the individual is an
employee for legal or tax purposes (direct employee) or provides services similar to those performed by
a direct employee, including directors of the Company. Share-based payments to non-employees are
measured at the fair value of the goods or services received or the fair value of the equity instruments
issued if it is determined the fair value of the goods or services cannot be reliably measured and are
recorded at the date the goods or services are received. The amount recognized as an expense is
adjusted to reflect the number of awards expected to vest.
- 12 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
2.
Basis of preparation and significant accounting policies (continued)
(o) Share-based payments (continued)
None of the Company’s awards call for settlement in cash or other assets. Upon the exercise of the
share purchase options, consideration paid together with the amount previously recognized in
contributed surplus is recorded as an increase in share capital. The offset to the recorded cost is to
share-based payments reserve. Consideration received on the exercise of share purchase options is
recorded as share capital and the related share-based payments reserve is transferred to share capital.
Charges for share purchase options that are forfeited before vesting are reversed from share-based
payments reserve. For those share purchase options that expire or are forfeited after vesting, the
amount previously recorded in share-based payments reserve is transferred to deficit.
(p) Earnings (loss) per share
Basic earnings (loss) per share is calculated using the weighted-average number of common shares
outstanding and earnings (loss) available to shareholders. For all periods presented, earnings (loss)
available to shareholders equals reported earnings (loss). The treasury share method is used to
calculate diluted earnings per share. Under the treasury share method, the weighted-average number
of common shares outstanding for the calculation of diluted loss per share assumes that the proceeds
received on exercise of diluted share purchase options are used to repurchase outstanding shares at
average market prices during the period.
(q) Recent accounting announcements
The following new or amended standards have been adopted in these financial statements for the
period beginning January 1, 2013.
(i)
IFRS 7 – Financial Instruments: Disclosures: Amendments – Offsetting Financial Assets and
Financial Liabilities
The amendments to IFRS 7 require entities to disclose information about rights of offset and
related arrangements for financial instruments under an enforceable master netting agreement
or similar agreement. The application of these amendments did not have an impact on these
financial statements.
(ii)
IFRS 13 – Fair Value Measurement
The adoption of IFRS 13 by the Company has had no material impact on the financial results of
the Company. The adoption of IFRS 13 did, however, result in some additional fair value
disclosures including the valuation inputs and techniques used in determining fair value.
The International Accounting Standards Board has issued IFRS 9 Financial Instruments (“IFRS 9”) to
replace IAS 39 Financial Instruments, which is intended to reduce the complexity in the measurement
and classification of financial instruments. The current version of IFRS 9 does not include a mandatory
effective date but is available for early adoption. An effective date will be determined when all phases
of the update to IFRS 9 are completed. The Company does not expect IFRS 9 to have a material
impact on the financial statements. The classification and measurement of the Company’s financial
assets is not expected to change under IFRS 9 because of the nature of the Company’s operations and
the types of financial assets that it holds.
- 13 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
3.
Cash and cash equivalents
Cash
Short-term deposits
4.
Amounts receivable
Interest receivable
Other receivables
December 31
2013
$ 429,610
8,892,306
December 31
2012
$ 310,019
12,270,115
$ 9,321,916
$ 12,580,134
December 31
2013
$ 130,942
12,616
December 31
2012
$ 119,885
51,540
$ 143,558
$ 171,425
Interest receivable reflects interest earned on short-term deposits. Other receivables include $12,186 of
Goods and Services Tax (GST) receivable as at December 31, 2013 ($51,540 of Harmonized Sales Tax
(HST) receivable as at December 31, 2012).
5.
Prepaid expenses
Advances to vendors
Mineral claim deposits
Prepaid expenses
December 31
2013
$ 16,357
December 31
2012
$ 36,244
43,344
82,877
4,596
60,517
$ 142,578
$ 101,357
- 14 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
6.
Equipment
Exploration
camp
Exploration
equipment
Computing
equipment
Furniture
and
fixtures
Total
Cost
Balance at December 31, 2011
Additions
Balance at December 31, 2012
Additions
Disposals
$ -
99,327
$ 312,625
759
$ 239,770
18,281
$ 17,891
6,267
$ 570,286
124,634
99,327
-
-
313,384
-
-
258,051
5,036
(25,203 )
24,158
4,862
-
694,920
9,898
(25,203)
Balance at December 31, 2013
$ 99,327
$ 313,384
$ 237,884
$ 29,020
$ 679,615
Accumulated depreciation and
impairment
Balance at December 31, 2011
Depreciation charge for the year
Balance at December 31, 2012
Depreciation charge for the year
Disposals
$ -
14,899
$ 265,011
14,399
$ 197,201
21,331
$ 7,886
2,627
$ 470,098
53,256
14,899
25,328
-
279,410
10,192
-
218,532
14,937
(23,098 )
10,513
3,871
-
523,354
54,328
(23,098)
Balance at December 31, 2013
$ 40,227
$ 289,602
$ 210,371
$ 14,384
$ 554,584
Net book value
Balance at December 31, 2011
$ -
$ 47,614
$ 42,569
$ 10,005
$ 100,188
Balance at December 31, 2012
$ 84,428
$ 33,974
$ 39,519
$ 13,645
$ 171,566
Balance at December 31, 2013
$ 59,100
$ 23,782
$ 27,513
$ 14,636
$ 125,031
7. Mineral properties
Exploration and evaluation assets
Hidden Bay
Riou Lake
(i)
(ii)
Western
Athabasca
(iv)
Black Lake Beatty River
(v)
(vi)
Total
Balance at December 31, 2011
$ 72,668,796
$ 10,385,783
$ 56,011,738
$ 15,188,721
$ 856,088
$ 155,111,126
Additions
2,694,429
40,154
3,146,304
44,055
9,862
5,934,804
Impairment charge for the period
-
-
(1,609,741)
-
-
(1,609,741)
Balance at December 31, 2012
75,363,225
10,425,937
57,548,301
15,232,776
865,950
159,436,189
Additions
Fair value consideration (Note 7(v))
860,244
-
-
-
3,808,943
-
33,335
(35,931)
3,441
4,705,963
-
(35,931)
Balance at December 31, 2013
$ 76,223,469
$ 10,425,937
$ 61,357,244
$ 15,230,180
$ 869,391
$ 164,106,221
The Company’s mineral property interests include both 100%-owned projects as well as joint operations in
which the Company has less than 100% ownership. The joint operations are governed by contractual
arrangements but have not been organized into separate legal entities or vehicles.
- 15 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
7. Mineral properties (continued)
Exploration and evaluation assets (continued)
The joint arrangements that the Company is party to in some cases entitle the Company to a right of first
refusal on the projects should one of the partners choose to sell their interest. The joint arrangements are
governed by a management committee which sets the annual exploration budgets for these projects.
Should the Company be unable to, or choose not to, fund its required contributions as outlined in the
agreement, there is a risk that the Company’s ownership interest could be diluted. As a result of decisions
to fund exploration programs for the joint arrangements, the Company may choose to complete further
equity issuances or fund these amounts through the Company’s general working capital.
100%-owned projects
(i) Hidden Bay Project
The Company’s 100%-owned Hidden Bay Project, including the Horseshoe, Raven and West Bear
deposits, is located in the eastern Athabasca Basin of northern Saskatchewan, Canada. In 2013,
total exploration and evaluation expenditures of $860,244 at Hidden Bay included evaluation
expenditures of $702,379 (2012 - $1,299,781) primarily relating to component technical studies.
Total evaluation costs of $7,292,299 are included in the $76,223,469 balance as at December 31,
2013 (December 31, 2012 - $6,589,920) representing costs associated with the continuing evaluation
of and advancement of Hidden Bay, and include the West Bear Preliminary Feasibility Study
(February 24, 2010) the Hidden Bay Preliminary Assessment Technical Report (February 23, 2011)
and various component technical studies.
(ii) Riou Lake Project
The Company holds a 100% interest in the Riou Lake Project located in the northern Athabasca
Basin.
(iii) Northern Athabasca Projects
The Company holds a 100% interest in the Northern Athabasca Projects located in the northern
Athabasca Basin. The Company wrote off the deferred mineral property costs associated with its
Northern Athabasca Projects in 2010 due to a lack of ongoing exploration activity. UEX continues to
maintain mineral claims comprising the Jacques Point, Butler Lake, Munroe Lake and Fond du Lac
projects.
Joint operations
(iv) Western Athabasca Projects
The Western Athabasca Projects (the “Projects”), located in the western Athabasca Basin, which
include the Kianna, Anne, Colette and 58B deposits located at the Shea Creek Project, are eight joint
ventures with the Company holding an approximate 49.1% interest and AREVA Resources Canada
Inc. (“AREVA”) holding an approximate 50.9% interest as at December 31, 2013 and the Company
holding a 49.0% interest and AREVA holding a 51.0% interest as at December 31, 2012. The
Company is in the process of negotiating joint-venture agreements with AREVA. As at December 31,
2013, total exploration and evaluation assets to date for Western Athabasca include evaluation
expenditures of $7,370,026 (December 31, 2012 - $7,370,026).
The Kianna, Anne, Colette and 58B deposits are subject to a royalty of US$0.212 per pound of U3O8
sold to a maximum royalty of US$10,000,000.
In November 2013, a budget for 2014 of $2.0 million, of which UEX is responsible for funding
approximately $982,000, was approved.
- 16 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
7. Mineral properties (continued)
Exploration and evaluation assets (continued)
Joint operations (continued)
(iv) Western Athabasca Projects (continued)
On April 10, 2013 an agreement was signed with AREVA which grants UEX the option to increase its
ownership interest in the Western Athabasca Projects, which includes the Shea Creek Project, by
0.9% to a maximum interest of 49.9% by spending $18.0 million on exploration over the six-year
period ending December 31, 2018. UEX is under no obligation to propose a budget in any year of the
agreement. The ownership interest for the Projects shall be increased at the end of the year by the
proportional amount of the additional exploration expenditures incurred in the year which are in
addition to the budget amounts proposed by AREVA. UEX may propose an additional exploration
budget of up to $4.0 million in any single year without the prior approval of AREVA, who remains the
project operator. During 2013, UEX expended $1,944,020 under this option agreement which
increased its interest in the eight joint ventures by approximately 0.1%.
UEX and AREVA agreed to combine the Shea Creek Project and the contiguous Douglas River
Project as the known mineralization at the northern boundary of Shea Creek extends into the Douglas
River property. The combined projects are now referred to as the Shea Creek Project.
In 2012, a decision was made to allow seven James Creek mineral claims to lapse in 2013 and not to
propose future exploration budgets at that time. As a result of these events, the Company wrote off
$1,609,741 of deferred exploration and evaluation assets in the 2012 fiscal year.
(v) Black Lake Project
The Black Lake Project (“Black Lake”), located in the northern Athabasca Basin, is a joint venture with
the Company holding an 89.99% interest and AREVA holding a 10.01% interest as at December 31,
2013, and the Company holding an 89.97% interest and AREVA holding a 10.03% interest as at
December 31, 2012.
On December 24, 2013, the Company placed a cash deposit of $43,344 with the Saskatchewan
Ministry of the Economy to maintain a mineral claim for Black Lake that would have otherwise lapsed
in January 2014. This cash deposit maintains the claim in good standing for a period of one year to
January 2015 and is refundable to the Company upon completion of exploration work equal to the
amount of the deposit plus the annual work assessment required to maintain the claim.
In early 2013, UEX signed an agreement with Uracan Resources Ltd. (“Uracan”) whereby Uracan can
earn a 60% interest in Black Lake.
Uracan must fund a total of $10.0 million of project expenditures over 10 years to earn their 60%
interest in Black Lake from UEX, with no partial earn-in permitted. Uracan has committed to spend
$2.0 million on project expenditures by December 31, 2014, with a firm commitment to fund
$1.5 million even if a decision is made by Uracan not to proceed with the earn-in or the agreement is
otherwise terminated. Should the agreement be terminated prior to $1.5 million in project costs
having been funded by Uracan, any shortfall is payable directly to UEX. During the remainder of the
option period, minimum expenditures of $1.0 million per year are to be funded by Uracan. UEX
remains the project operator until such time as Uracan has earned its 60% interest in Black Lake and
is entitled to a 10% management fee under the Black Lake joint venture agreement. Uracan issued
300,000 shares and 150,000 share purchase warrants to UEX. The warrants are exercisable for
three years at a price of $0.15 for each warrant. Uracan has also granted to UEX a 1% NSR royalty
from their ownership interest and upon UEX receiving a total of $10.0 million in royalty payments, the
NSR royalty will terminate.
- 17 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
7. Mineral properties (continued)
Exploration and evaluation assets (continued)
Joint operations (continued)
(v) Black Lake Project (continued)
The opening value upon receipt was determined to be $27,000 for the Uracan shares and $8,931 for
the Uracan warrants. The combined amount of $35,931 has been recorded as a reduction in the
carrying value of the Black Lake Project. In the third quarter of 2013, UEX received from Uracan a
prepayment of $104,060 which represented the full budget amount for the 2013 exploration program
at Black Lake. As of December 31, 2013, $79,006 of the 2013 program budget remained unspent
and will be incurred in early 2014.
In January 2014, UEX received a prepayment of $650,000 from Uracan which amounts to 100% of
the currently budgeted 2014 winter exploration programs at Black Lake.
(vi) Beatty River Project
The Company acquired a 25% interest in the Beatty River Project, which is located in the western
Athabasca Basic, from JCU (Canada) Exploration Company, Limited (“JCU”) by funding $858,118 in
exploration expenditures and by making a payment to JCU of $3,441.
UEX is party to the following joint arrangements:
Ownership interest
Effective December 31, 2013
UEX Corporation
AREVA Resources Canada Inc.
JCU (Canada) Exploration Co. Ltd.
(1)
Western
Athabasca
49.097 %
50.903
-
(2)
Black
Lake
89.990 %
10.010
-
(3)
Beatty
River
25.000 %
50.702
24.298
Total
100.000 %
100.000 %
100.000 %
Ownership interest
Effective December 31, 2012
UEX Corporation
AREVA Resources Canada Inc.
JCU (Canada) Exploration Co. Ltd.
(1)
Western
Athabasca
49.000 %
51.000
-
(2)
Black
Lake
89.970 %
10.030
-
(3)
Beatty
River
- %
50.702
49.298
Total
100.000 %
100.000 %
100.000 %
(1) Subsequent to year end, UEX notified AREVA that their ownership interest in the Western Athabasca projects had been diluted
from 51.00% to 50.903% as a result of $1,944,020 in exploration expenditures having been incurred which were 100% funded
by UEX under the terms of the optional six-year $18 million, 0.9% additional earn-in agreement.
(2) Subsequent to year end, UEX notified AREVA that their ownership interest in Black Lake had been diluted from 10.030% to
10.010% as a result of their decision to not participate in the 2013 programs (see Note 7(v) Black Lake Project). In 2013, UEX
entered into an agreement with Uracan Resources Ltd. (“Uracan”) whereby the Company will transfer to Uracan a 60% interest
in the Black Lake Project upon completion of their funding of $10 million in exploration expenditures on UEX’s behalf.
(3) UEX completed its earn-in on the Beatty River Project in 2013 and holds a 25% interest in the project (see Note 7(vi) Beatty
River Project).
- 18 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
8.
Investments
The Company holds 300,000 share and 150,000 warrant certificates of Uracan which were received in early
2013 as partial consideration for the signing of an agreement which allows Uracan to earn a 60% interest in
the Black Lake project (see Note 7(v)). These shares and warrants are being held for long-term investment
purposes. The investments include warrants which have been classified as Financial assets at fair value
through profit or loss (“FVTPL”) and as such are stated at fair value with any changes in fair value
recognized in profit or loss. The investments also include shares which have been classified as
Available-for-sale financial assets and are carried at fair value. Changes in fair value are recognized in
other comprehensive income with amounts in accumulated other comprehensive income recognized in
profit and loss when they are sold.
December 31
2013
December 31
2012
Common shares held – Uracan (TSX.V: URC) (see Note 14)
$ 27,000
$ -
Warrants held – Uracan (see Note 14)
4,733
-
$ 31,733
$ -
The fair value of the Uracan shares is based on the market price for these actively traded securities.
The fair value of the warrants received from Uracan was determined using the Black-Scholes option-pricing
model with the following weighted-average assumptions as at the dates indicated:
Number of warrants received – Uracan
Expected forfeiture rate
Weighted-average grant / valuation date fair values
Expected volatility
Risk-free interest rate
Expected life
(1) Date of acquisition
9.
Accounts payable and other liabilities
Trade payables
Other liabilities
Uracan – Black Lake prepayment for 2013 program
December 31
2013
February 13
2013 (1)
December 31
2012
150,000
0.00%
$ 0.06
150.18%
1.14%
150,000
0.00%
$ 0.06
127.26%
1.22%
2.19 years
3.00 years
-
-
-
-
-
-
December 31
2013
$ 50,936
90,692
79,006
December 31
2012
$ 444,652
66,247
-
$ 220,634
$ 510,899
The prepayment received from Uracan represented the full budgeted amount of $104,060 for the 2013
exploration program at Black Lake. The unspent amount of $79,006 as at December 31, 2013 was fully
expended upon completion of the 2013 exploration program in January 2014.
- 19 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
10.
Income taxes
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
liabilities at December 31, 2013 and December 31, 2012 are presented below:
Deferred tax assets
Losses carried forward
Charitable donations
Equipment
Share issuance costs
Investments
Deferred tax liabilities
Mineral properties
Net deferred tax liabilities
December 31
2013
December 31
2012
$ 2,937,669
8,438
162,609
173,918
567
$ 2,432,582
8,438
147,372
246,214
-
3,283,201
2,834,606
16,659,679
15,801,130
$ 13,376,478
$ 12,966,524
At December 31, 2013, the Company has non-capital losses available for income tax purposes totaling
approximately $10,880,257 (2012 - $9,009,561) which may be carried forward to reduce future years’
taxable income. These losses, if not utilized will begin expiring in 2028, with the current period’s non-capital
losses expiring in 2033.
A reconciliation of income taxes at statutory rates with the reported taxes for the years ended December 31,
2013 and 2012 is as follows:
Loss before income taxes
Statutory rates
Income tax recovery at statutory rates
Non-deductible expenses and permanent differences
Exploration expenditures renounced net of flow-through premium
Year ended December 31
2013
2012
$ (2,036,706 )
$ (4,025,844)
27%
549,911
(130,957 )
(730,250 )
27%
1,086,978
(260,212)
(712,173)
Deferred income tax recovery (expense)
$ (311,296 )
$ 114,593
11. Share capital
(a) Authorized
The authorized share capital of the Company consists of an unlimited number of common shares and
an unlimited number of (no par value) preferred shares issuable in series, of which 1,000,000 preferred
shares have been designated Series 1 Preferred Shares.
- 20 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
11. Share capital (continued)
(b) Issued and outstanding – common shares
Balance, December 31, 2012
Issued pursuant to private placement in 2013
Share issuance costs
Value attributed to flow-through premium on issuance
Deferred income taxes on share issuance costs
Number of
shares
Value
221,488,679
$ 172,345,291
6,350,000
3,175,000
(104,972)
(127,000)
28,342
Balance, December 31, 2013
227,838,679
$ 175,316,661
On March 13, 2012, the Company completed an underwritten bought deal public financing for
10,000,000 common shares at a price of $0.80 per share for gross proceeds of $8,000,000. Cameco
exercised its pre-emptive right to participate in the offering and purchased 2,917,183 shares for
$2,333,746 (thereby maintaining its ownership at approximately 22.58%) on the same terms as the
offering, except no cash commission was payable. In addition, the underwriter exercised its 10%
over-allotment rights and Cameco exercised its associated pre-emptive right resulting in the Company
issuing 1,291,719 shares and receiving another $1,033,375. Share issue costs include a cash
commission of $440,000 and other issuance costs of $275,633.
On March 14, 2012, the Company completed a non-brokered private placement of 3,260,869
flow-through shares at a price of $0.92 per share for gross proceeds of $3,000,000 with issue costs of
$37,044 and no commission payable. A flow-through premium related to the sale of the associated tax
benefits was determined to be $97,826 on issuance. Cameco exercised its pre-emptive right to
participate in the offering and purchased 951,256 common shares at a non-flow-through price of $0.84
per share offered by the Company, so as to maintain its ownership interest at approximately 22.58%.
On June 5, 2013, the Company completed a non-brokered private placement of 6,350,000 flow-through
shares at a price of $0.50 per share for gross proceeds of $3,175,000 with issue costs of $44,972 and a
referral fee of $60,000. A flow-through premium related to the sale of the associated tax benefits was
determined to be $127,000, and a related $28,342 deferred income tax was recorded in share capital.
Cameco did not exercise its pre-emptive right to participate in the offering and as a result, their
ownership interest in UEX declined from approximately 22.58% to approximately 21.95%.
(c) Share-based compensation
Under the Company’s share-based compensation plan, the Company may grant share purchase
options to its key employees, directors, officers and others providing services to the Company. The
maximum number of shares issuable under the plan is a rolling number equal to 10% of the issued and
outstanding common shares of the Company from time to time. Under the plan, the exercise price of
each share purchase option shall be fixed by the Board of Directors but shall not be less than the
quoted closing market price of the shares on the Toronto Stock Exchange on the date prior to the share
purchase option being granted and a share purchase option’s maximum term is 10 years. The shares
subject to each share purchase option shall vest at such time or times as may be determined by the
Board of Directors.
- 21 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
11. Share capital (continued)
(c) Share-based compensation (continued)
A summary of the status of the Company’s share-based compensation plan as at December 31, 2013
and December 31, 2012 and changes during the years ended on these dates is presented below:
Outstanding, December 31, 2011
Granted
Expired
Outstanding, December 31, 2012
Granted
Cancelled
Expired
Outstanding, December 31, 2013
Number of share
purchase options
Weighted-average
exercise price
19,060,700
2,460,000
(5,334,700 )
16,186,000
2,285,000
(1,200,000 )
(450,000 )
16,821,000
$ 1.24
0.60
1.45
1.08
0.36
1.38
0.80
$ 0.97
On July 26, 2013, pursuant to a retirement agreement, 500,000 share purchase options with an
exercise price of $1.45 were voluntarily cancelled and also, on the same date, 685,000 share purchase
options with an exercise price of $1.34 were voluntarily cancelled. In addition, pursuant to this
retirement agreement, 150,000 share purchase options with a weighted-average exercise price of
$0.60, which would have otherwise vested on June 5, 2014, will vest on January 1, 2014. On
August 16, 2013, 15,000 share purchase options were cancelled due to a termination.
In the year ended December 31, 2013, $961,852 was transferred from the share-based payments
reserve to deficit relating to the cancellation of 1,200,000 share-purchase options and $207,748 was
transferred from the share-based payments reserve to deficit relating to the expiry of 450,000 share
purchase options. In the year ended December 31, 2012, $4,266,495 was transferred from the
share-based payments reserve to deficit relating to the voluntary surrender of 775,000 share purchase
options and the expiry of 180,000 share purchase options.
The share-based payments reserve values of $4,585,900 as at December 31, 2013 and $5,088,191 as
at December 31, 2012 on the balance sheet reflect the expensed and capitalized fair value of vested
share purchase options. If all options that are vested were exercised, the entire balance of the
share-based payments reserve would be transferred to share capital.
On January 15, 2014, the Company granted 1,000,000 share purchase options to a new senior officer
pursuant to the Company’s share option plan. The share purchase options were issued at an exercise
price of $0.41 and expire on January 15, 2019.
- 22 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
11. Share capital (continued)
(c) Share-based compensation (continued)
As at December 31, 2013, the Company had a total of 16,821,000 share purchase options outstanding
related to director, employee and consultant share purchase options, the details of which are as follows:
Range of
exercise prices
Number
of share
purchase
options
Outstanding
Weighted-
average
exercise price
Weighted-
average
remaining
contractual life
(years)
Exercisable
Number
of share
purchase
options
Weighted-
average
exercise price
$ 0.36 - 0.86
5,215,000
$ 0.52
5.70
2,871,668
$ 0.57
0.87 - 1.16
5,701,000
0.99
6.01
5,701,000
0.99
1.17 - 1.45
5,905,000
1.34
5.21
5,905,000
1.34
16,821,000
$ 0.97
5.63
14,477,668
$ 1.05
The estimated fair value expense of all share purchase options vested during the year ended
December 31, 2013 is $667,309 (2012 - $1,346,364). The amount included in mineral properties for
the year ended December 31, 2013 is $157,082 (2012 - $392,832) and the remaining $510,227 (2012 -
$953,532) was expensed. The unamortized balance of share-based compensation expense for share
purchase options that were not vested at December 31, 2013 is $340,101 (2012 - $562,820).
The fair value of the options granted each year was determined using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
Number of options granted
Expected forfeiture rate
Weighted-average grant date fair values
Expected volatility
Risk-free interest rate
Expected life
(d) Flow-through shares
December 31
2013
December 31
2012
2,285,000
0.47%
$ 0.36
69.03%
1.51%
4.25 years
2,460,000
0.55%
$ 0.60
79.48%
1.12%
4.02 years
The Company has financed a portion of its exploration programs through the use of flow-through share
issuances. Income tax deductions relating to these expenditures are claimable by the investors and not
by the Company.
As at December 31, 2013, the Company had spent, on qualified expenditures, all of the $3.175 million
flow-through monies raised in the June 5, 2013 placement (see Note 11(b)). The Company renounced
the income tax benefit of this issue to its subscribers effective December 31, 2013.
- 23 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
12. Commitments
The Company has an obligation under an operating lease for its office premises and an obligation related to
a retirement consulting agreement. The future minimum payments are as follows:
2014
2015
2016
2017
2018
December 31
2013
$ 243,566
239,743
-
-
-
Pursuant to a retirement agreement, the Company has entered into a consulting arrangement whereby the
former Chief Executive Officer has agreed to provide management transition services for a two-year period
commencing January 1, 2014 for a consulting fee of $366,000. One half of this consulting fee was paid in
January 2014, with the remainder to be paid in January 2015.
Other commitments in respect of the Company’s mineral properties are disclosed in Note 7 and Note 11(d).
13. Management of capital
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a
going concern in order to pursue the exploration and evaluation programs on its mineral properties. The
Company manages its capital structure, consisting of shareholders’ equity, and makes adjustments to it,
based on funds available to the Company, in order to support the exploration and evaluation of its mineral
properties. Historically, the Company has relied exclusively on the issuance of common shares for its
capital requirements.
All of the Company’s cash and cash equivalents are available for exploration and evaluation programs and
administrative operations. The Company has not changed its approach to capital management during the
current period, and is not subject to any external capital restrictions.
14. Management of financial risk
The Company operates entirely in Canada and is therefore not subject to any significant foreign currency
risk. The Company’s financial instruments are exposed to limited liquidity risk, credit risk and market risk.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company manages liquidity risk through the management of its capital structure as outlined in Note 13.
Accounts payable and other liabilities are due within the current operating period.
Credit risk is the risk of an unexpected loss if a third party to a financial instrument fails to meet its
contractual obligations. The Company’s exposure to credit risk includes cash and cash equivalents and
amounts receivable. The Company reduces its credit risk by maintaining its bank accounts at large national
financial institutions. The maximum exposure to credit risk is equal to the carrying value of cash and cash
equivalents and amounts receivable. The Company’s investment policy is to invest its cash in highly liquid
short-term interest-bearing investments that are redeemable 90 days or less from the original date of
acquisition.
- 24 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
14. Management of financial risk (continued)
Market risk is the risk that changes in market prices such as foreign exchange rates and interest rates will
affect the Company’s income. The Company is subject to interest rate risk on its cash and cash
equivalents. The Company reduces this risk by investing its cash in highly liquid short-term interest-bearing
investments that earn interest on a fixed rate basis.
All financial instruments measured at fair value are categorized into one of three hierarchy levels, described
below, for disclosure purposes. Each level is based on the transparency of the inputs used to measure the
fair values of assets and liabilities:
● Level 1 - Values based on unadjusted quoted prices in active markets that are accessible at the
measurement date for identical assets or liabilities;
● Level 2 - Values based on quoted prices in markets that are not active or model inputs that are
observable either directly or indirectly for substantially the full term of the asset or liability; and
● Level 3 - Values based on prices or valuation techniques that require inputs that are both unobservable
and significant to the overall fair value measurement.
The carrying values of amounts receivable, and accounts payable and other liabilities are a reasonable
estimate of their fair values because of the short period to maturity of these instruments.
Cash and cash equivalents are classified as loans and receivables and are initially recorded at fair value
and subsequently at amortized cost with accrued interest recorded in accounts receivable.
The following table summarizes those assets and liabilities carried at fair value:
Investments
Level 1
Level 2
Level 3
Total
Shares – Uracan (TSX-V: URC)
Warrants – Uracan (1)
$ 27,000
-
$ -
-
$ -
4,733
$ 27,000
4,733
$ 27,000
$ -
$ 4,733
$ 31,733
(1) Black-Scholes inputs for the Uracan warrant valuation are disclosed in Note 8 – Investments.
- 25 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
14. Management of financial risk (continued)
The following table shows a reconciliation from the beginning balances to ending balances for Level 1 fair
value measurements for investments:
Balance, December 31, 2012
Shares received as partial consideration for the Black Lake
Project earn-in on February 13, 2013 (see Note 7(v))
Unrealized gain (loss) on change in fair value of financial assets
at FVTPL (shares) – year ended December 31, 2013
Number of
Shares
Change in
Fair Value
(OCI)
Fair Value
-
$ -
300,000
27,000
-
-
Balance, December 31, 2013
300,000
$ 27,000
The Company’s policy is to recognize transfers out of Level 3 as of the date of the event or change in
circumstances that caused the transfer. There have been no transfers out of Level 3 in the period.
The following table shows a reconciliation from the beginning balances to ending balances for Level 3 fair
value measurements:
Balance, December 31, 2012
Warrants received as partial consideration for the Black Lake
Project earn-in on February 13, 2013 (see Note 7(v))
Unrealized gain (loss) on change in fair value of held-for-trading
financial assets (warrants) – year ended December 31, 2013
Number of
Warrants
Change in
Fair Value
(Expense)
Fair Value(1)
-
$ -
150,000
8,931
(4,198 )
(4,198)
Balance, December 31, 2013
150,000
$ 4,733
(1) See Note 8 for Black-Scholes assumptions.
The following table shows the valuation techniques used in the determination of fair values within Level 3 of
the hierarchy, as well as the key unobservable inputs used in the valuation model:
Level 3 item
Valuation approach Key unobservable inputs
Inter-relationship between key
unobservable inputs and fair
value measurement
Warrants – Uracan
The fair value has been
determined by using the
Black-Scholes option
pricing model.
Expected volatility for Uracan
shares, derived from the
shares’ historical prices
(weekly).
The estimated fair value for the
warrants increases as the volatility
increases.
- 26 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
15. Segmented information
The Company conducts its business as a single operating segment, being the mining and mineral
exploration business in Canada. All mineral properties and equipment are located in Canada.
16. Office expenses
Insurance
Office supplies and consulting
Telephone
17. Related party transactions
Year ended December 31
2012
2013
$ 49,090
267,211
13,720
$ 330,021
$ 48,632
153,272
12,887
$ 214,791
The value of all transactions relating to key management personnel, close members of the family of persons
that are key management personnel and entities over which they have control or significant influence are as
follows:
(a) Related party transactions
Related party transactions include the following payments which were made to related parties other
than key management personnel:
Other consultants (1)
Other consultants share-based payments (3)
Panterra Geoservices Inc.(2)
Panterra Geoservices Inc. share-based payments (3)
Year ended December 31
2012
2013
$ 2,400
4,446
42,950
28,020
$ 77,816
$ 60,130
13,674
29,750
54,722
$ 158,276
(1) Other consultants include close members of the family of R. Sierd Eriks, UEX’s Vice-President of Exploration, who provide
geological consulting services with specific services invoiced as provided.
(2) Panterra Geoservices Inc. is a company owned by David Rhys, a member of the management advisory board that
provides geological consulting services to the Company. The management advisory board members are not paid a
retainer or fee; specific services are invoiced as provided.
(3) Share-based compensation expense is the fair value of options granted which have been calculated using the
Black-Scholes option-pricing model and the assumptions disclosed in Note 11(c).
- 27 -
UEX CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2013 and 2012
17. Related party transactions (continued)
(b) Key management personnel compensation
Key management personnel compensation includes management and director compensation as
follows:
Salaries and short-term employee benefits (4)
Share-based payments (3)
Year ended December 31
2012
2013
$ 844,592
578,805
$ 1,423,397
$ 896,716
1,164,376
$ 2,061,092
(3) Share-based compensation expense is the fair value of options granted which have been calculated using the
Black-Scholes option-pricing model and the assumptions disclosed in Note 11(c).
(4)
In the event of a change of control of the Company, certain senior management may elect to terminate their employment
agreements and the Company shall pay termination benefits of up to two times their respective annual salaries at that
time and all of their share purchase options will become immediately vested with all other employee benefits, if any,
continuing for a period of up to two years.
- 28 -
Corporate Information
Head Office
Solicitors
UEX Corporation
Suite 1007 - 808 Nelson Street
Vancouver, British Columbia, Canada V6Z 2H2
Telephone:
Fax:
Email:
Website:
(604) 669-2349
(604) 669-1240
uex@uex-corporation.com
www.uex-corporation.com
Blake, Cassels & Graydon LLP
Suite 2600 - 3 Bentall Centre
P.O. Box 49314
595 Burrard Street
Vancouver, British Columbia V7X 1L3
Auditors
Transfer Agency
KPMG LLP
777 Dunsmuir Street
Vancouver, British Columbia V7Y 1Q3
Computershare Investor Services Inc.
3rd Floor, 510 Burrard Street
Vancouver, British Columbia V6C 3B9
Directors and Officers
Mark P. Eaton
Director, Chairman of the Board
Roger M. Lemaitre
President, Chief Executive Officer and Director
Graham C. Thody
Director
Colin C. Macdonald
Director
Suraj P. Ahuja
Director
Emmet A. McGrath
Director
R. Sierd Eriks
Vice-President, Exploration
Nan Lee
Vice-President, Project Development
Ed Boney
Chief Financial Officer and Corporate Secretary