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First Uranium shares plunge as production comes up short

Uranium oxide.

Shamil Zhumatov/Reuters/Shamil Zhumatov/Reuters

First Uranium's third-quarter gold sales dropped 5 per cent and uranium production fell 14 per cent from the prior quarter due to accidents at its Ezulwini mine in South Africa, and the miner cut its full-year gold production forecast, sending its shares down as much as 20 per cent.

The company, whose Ezulwini mine was affected by three fatal accidents in the latter half of 2011, now sees 2012 gold production at 98,000-100,000 ounces, down from its earlier forecast of 105,000-115,000 ounces.

"Uranium numbers aren't very important at this moment. It's gold that matters and that's where large percentage of their revenue is coming from, owing to higher spot gold prices," BMO Capital Markets analyst Edward Sterck told Reuters.

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Spot gold prices on Thursday touched $1,729.76 per ounce, a nearly seven-week high.

Gold sales in the third quarter fell to 38,548 ounces from 40,529 ounces in the second quarter, the company said.

First Uranium, which also operates the Mine Waste Solutions located in South Africa, is struggling mainly because of Ezulwini, where production costs are higher than gold price, analyst Sterck said.

"The problem the company is having with the mine is that the geology on the ground is not helpful, it's quite challenging, especially down 1200 meters. You're operating in a dark environment, so it's quite hard to pick out the difference between the different geological layers."

On Dec. 19, the company had said it would seek approval to reduce workforce and cut costs at the Ezulwini Mine.

The mine would not achieve its prior target of 70,000-80,000 ounces of gold sales and 110,000-130,000 pounds of uranium sales for fiscal year 2012, the company said in a statement.

Uranium production in the third quarter was down 14 per cent at 30,887 pounds in the second quarter, the company said.

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Shares of First Uranium, which have lost more than half of their value in the past 6 months, were trading down at 24 Canadian cents on Thursday on the Toronto Stock Exchange.

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