First Uranium to reduce its workforce by half at Ezulwini

First Uranium (FIU-T) says it may cut up to 1,850 jobs at the Ezulwini gold-uranium mine in South Africa because it cannot sustain production levels.

The possible workforce reduction comes as the company restructures its operating plan to improve cash flow and profitability. The mine, located 40 km from Johannesburg, employs 3,745.

The new plan is part of the company’s strategic review announced on July 12 to reduce operating losses. 

It aims to lower fixed costs, mine more of Ezulwini’s profitable sections, focus on safety  improvements and boost mining efficiency.

In the quarter ended Sept. 30, the company reported an operating loss of US$3.6 million. It also experienced two fatalities during the quarter which resulted in a work stoppage and weakened employee morale and development. For the year to date, it has reported four causalities at the underground mine. 

Ezulwini consists of two tabular orebodies – the Upper Elsburg and Middle Elsburg – which are 400 metres apart.

The upper orebody hosts gold mineralization and is where most of the mining takes place, whereas the middle orebody contains gold and uranium that have seen little drilling.

First Uranium’s president and CEO Deon van der Mescht says the restructuring is pertinent to safeguarding the resources the company has invested into the operation. 

For the past nine months Ezulwini has undergone an “intensive turnaround process” to improve the mine’s production levels, but has fallen short of doing so. 

“The expected improvement in production has not been forthcoming,” admits the CEO, adding the less-than-satisfactory production is largely owing to unfortunate accidents that have occurred over the past several months.

The company has yet to say how the new plan would impact its cost and production guidance for the fiscal year ending March 31, 2012.

In October 2011, First Uranium said it anticipated sales between 70,000 oz. and 80,000 oz. gold, and 110,000 lbs. and 130,000 lbs. uranium for the fiscal year.

On the day the news was announced, First Uranium closed down 8% to a 52-week low of 17¢. It reached a high of $1.43 apiece on Jan. 13, 2011. 

The company, which is 20%-owned by AngloGold Ashanti (AU-N), says Franco Nevada‘s (FNV-T) gold stream agreement will not be affected by the refocused Ezulwini mine. 

The agreement pertains to gold recovered at the Mine Waste Solutions gold-uranium tailings project, located on the western portion of the Witwatersrand basin 160 km from Johannesburg.