BMO Capital Markets analyst Edward Sterck continues to have serious concerns about the finances of First Uranium Corp.
On Monday, the company reported a third quarter loss of US9¢ a share. More importantly, Mr. Sterck pointed out that First Uranium got environmental approval reinstated for its MWS tailings facility in South Africa, but cannot continue development because the approval has conflicting information. Not good.
As a result of this problem, the company is unlikely to complete development of a third gold plant at MWS by a June 1st deadline, and may therefore have to make a $42-million penalty payment to royalty company Gold Wheaton Gold Corp. First Uranium said that it requires US$50-million in external financing, and that does not include the potential Gold Wheaton payment, or the repayment of a US$22.4-million credit facility from Simmer & Jack Mines Ltd., which is due in August.
Mr. Sterck is assuming that the environmental approval is not received in time, that the penalty payment is made to Gold Wheaton, and that the Simmer & Jack facility is rolled over. Put together, he rates the stock an "underperform" with a price target of $1.20 a share.
"BMO estimates a fiscal 2011 funding gap of US$137-million, an amount which may be difficult to secure in the current environment," he wrote in a note to clients.