First Uranium to slash 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 has not been able to sustain production levels.

The possible workforce reduction comes as the company looks to restructure the operating plan to improve cash flow and profitability. Currently, the mine, which sits 40 km from Johannesburg, employs 3,745.

The new plan is part of the company’s strategic review that it announced on July 12, 2011, to reduce operating losses. It plans to achieve that by lowering fixed costs by mining more of Ezulwini’s “profitable” sections, and by focusing on safety and boosting mining efficiency.

In the quarter ended Sept. 30, 2011, the company reported an operating loss of US$3.6 million.

It also experienced two fatalities during the quarter which resulted in work stoppage and affected employee morale and development. For the year to date, it has reported four causalities at the underground mine.  

Ezulwini consists of two separate tabular orebodies – Upper Elsburg and Middle Elsburg – sitting 400 metres apart. The upper orebody hosts gold mineralization and is where most of the mining takes place, whereas the middle orebody contains both gold and uranium and has seen little drilling.

First Uranium’s president and CEO, Deon van der Mescht, said the restructuring of the mine plan is pertinent to safeguarding the significant amount of resources the company has invested into the operation.  

For the past nine months Ezulwini has undergone an “intensive turn-around process,” to improve the mine’s production levels but has fallen short of its goal.

“The expected improvement in production has not been forthcoming,” admits van der Mescht, adding the less-than-satisfactory level of production is largely due to the unfortunate accidents that have occurred during the last half of the year.

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, First Uranium said it anticipated sales of between 70,000 to 80,000 oz. gold and 110,000 and 130,000 lb. of 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 19.79%-owned by AngloGold Ashanti (AU-N), says Franco Nevada‘s (FNV-T) gold stream agreement will not be affected by the refocusing process at the Ezulwini mine. Since that agreement is for gold recovered at the Mine Waste Solutions gold-uranium tailings project, located on the western portion of the Witwatersrand Basin, about 160 km from Johannesburg.