MINERAL RIGHTS AND PROPERTIES

9 Months Ended

Apr. 30, 2012

MINERAL RIGHTS AND PROPERTIES [Text Block]

NOTE 5: MINERAL RIGHTS AND PROPERTIES

Mineral Rights

At April 30, 2012, the Company had mineral rights covering 95,315 acres located in the States of Arizona, Colorado, New Mexico, Texas and Wyoming and an additional 816,936 acres located in Paraguay. These mineral rights were acquired for the purposes of uranium exploration, development and mining at a cost of $41,844,602, net of $1,713,504 in impairment charges. The acquisition costs of $41,844,602 include $35,108,692 representing the fair value of non-cash consideration and $6,735,910 representing the cash consideration. Included in the non-cash consideration is $2,222,823 representing the present value of the retirement obligation associated with the Palangana Mine and $949,828 representing deferred income tax liabilities associated with the acquisition of the Yuty Project. These mineral rights were acquired through staking and lease or option agreements and are subject to varying royalty interests, some of which are indexed to the sale price of uranium. At April 30, 2012, annual maintenance payments of $1,066,620 were required to maintain these mineral rights.

Mineral rights and property acquisition costs consist of the following:

		April 30, 2012			July 31, 2011
Mineral Rights and Properties, Unproven
Palangana Mine	$	6,335,731		$	5,710,187
Goliad Project		8,689,127			8,689,127
Burke Hollow Project		1,313,250			-
Channen Project		398,728			-
Salvo Project		363,645			303,645
Nichols Project		154,774			154,774
Anderson Project		9,154,268			427,616
Workman Creek Project		1,187,158			-
Los Cuatros (formerly New River) Project		257,250			257,250
Todilto Project		166,720			182,320
Yuty Project		12,043,245			-
Coronel Oviedo Project		880,579			880,579
Other property acquisitions		900,127			837,215
		41,844,602			17,442,713
Accumulated depreciation and depletion		(773,852	)		(360,418	)
		41,070,750			17,082,295
Databases		2,345,038			1,433,890
Accumulated depreciation		(1,276,568	)		(968,782	)
		1,068,470			465,108
Land Use Agreements		375,155			375,155
Accumulated depreciation		(109,612	)		(81,475	)
		265,543			293,680
	$	42,404,763		$	17,841,083

During the three and nine months ended April 30, 2012, the Company did not record any impairment charges (three and nine months ended April 30, 2011: $Nil).

Pursuant to a Data Purchase and Sale Agreement dated August 19, 2011, the Company purchased certain database covering the Goliad formation from Uranium One Inc. for total consideration of $911,148, comprised of a cash payment of $400,000 and the issuance of 159,326 restricted common shares of the Company with a fair value estimated to be $511,148.

Mineral property expenditures incurred by major projects are as follows:

		Three Months Ended April 30,				Nine Months Ended April 30,
		2012		2011		2012		2011
Mineral Property Expenditures
Palangana Mine	$	1,387,984	$	1,845,119	$	5,833,106	$	6,276,677
Goliad Project		91,654		190,361		398,632		448,867
Salvo Project		406,146		513,725		969,065		892,747
Nichols Project		-		-		150,000		15,496
Land work - Texas		92,402		109,079		312,870		267,808
Anderson Project		185,497		-		339,390		-
Workman Creek Project		40,346		-		47,735		-
Yuty Project		588,548		-		588,548		-
Coronel Oviedo Project		923,263		-		1,829,126		-
Other Mineral Property Expenditures		296,149		265,691		438,808		559,371
	$	4,011,989	$	2,923,975	$	10,907,280	$	8,460,966

Palangana Mine, Texas

On December 18, 2009, the Company acquired the Palangana Mine as part of the acquisition of STMV with an estimated fair value of $3,911,800 at acquisition. The Palangana Mine is an 8,684-acre property located approximately 100 miles south of the Hobson Processing Facility and is subject to 6% to 12% sliding scale production royalties.

Upon commencement of production in November 2010, the Company began depreciating and depleting the capitalized costs of the Palangana Mine over a 42 to 84-month period. At April 30, 2012, capitalized costs totaled $6,335,731, less accumulated depreciation and depletion of $773,852, for a net book value of $5,561,879. Included in capitalized costs was $2,222,823 of reclamation liability at April 30, 2012 (July 31, 2011: $1,798,387).

Goliad Project, Texas

On October 11, 2005, the Company entered into a mineral asset option agreement granting the Company the right to acquire title to the leases totaling 2,342 acres, encompassing the Goliad Project. The Goliad Project is located in south Texas near the northeast end of the extensive South Texas Uranium trend. At April 30, 2012, capitalized costs totaled $8,689,127.

Burke Hollow Project, Texas

During the three months ended April 30, 2012, the Company entered into a mining lease and surface use agreement granting the Company the right to explore for uranium on the Burke Hollow Project, a 17,510-acre property located in Bee County, Texas.

The acquisition of the Burke Hollow Project was accounted for in accordance with ASC 360, Property, Plant and Equipment as an asset acquisition. Total consideration paid by the Company was $1,313,250 in cash which was capitalized as mineral rights and properties on the Company’s balance sheet.

Channen Project, Texas

During the three months ended April 30, 2012, the Company entered into a lease option agreement granting the Company the right to explore for uranium and enter into a mining lease and surface use agreement on the Channen Project, a 10,704-acre property located in Goliad County, Texas. The lease option agreement is subject to minimum exploration expenditures totaling $1.75 million over a two-year period ending December 31, 2013.

The acquisition of the Channen Project was accounted for in accordance with ASC 360, Property, Plant and Equipment as an asset acquisition. Total consideration paid by the Company was $398,728 in cash which was capitalized as mineral rights and properties on the Company’s balance sheet.

Salvo Project, Texas

On November 29, 2010, the Company entered into various lease agreements granting the Company the exclusive right to conduct mining exploration and related operations over an area covering 4,965 acres. The leases have a minimum term of five years with provisions for extensions. At April 30, 2012, capitalized costs totaled $363,645.

Nichols Project, Texas

The Company has various mining lease and surface use agreements granting the Company the exclusive right to conduct mining exploration and related operations on the Nichols Project covering 1,348 acres. The leases have a minimum term of five years with provisions for extensions. In September 2011, the Company extended the majority of the leases by paying $150,000 in cash. At April 30, 2012, capitalized costs totaled $154,774.

Anderson Project, Arizona

Pursuant to a Merger Agreement and Plan of Merger dated May 5, 2011 and effective September 9, 2011 (the “Merger Agreement”), the Company merged with Concentric Energy Corp. (“Concentric”) resulting in the acquisition of an undivided 100% interest in the 7,581-acre Anderson Property located in Yavapai County, Arizona. In accordance with the Merger Agreement, Concentric’s shareholders received 0.1075 of one share of the Company’s common stock for every one share of Concentric common stock, resulting in the issuance of 1,253,440 shares of the Company to the former Concentric shareholders. In addition, holders of Concentric share purchase warrants received 0.1075 of one share purchase warrant of the Company for every one Concentric share purchase warrant, resulting in the issuance of share purchase warrants representing 375,834 shares of the Company exercisable at prices ranging from $9.30 to $65.12 per share to the former holders of Concentric share purchase warrants.

Pursuant to an Acquisition Agreement dated April 11, 2011, as amended on June 24, 2011, and effective September 9, 2011 (the “Acquisition Agreement”) concurrently with the Merger Agreement, the Company was assigned all of Global Uranium Corp.’s (“Global”) rights and interests under the terms and conditions of an Option and Joint Venture Agreement dated April 13, 2010 between Concentric and Global with respect to the Anderson Project. In accordance with the Acquisition Agreement, the Company provided the following consideration to Global:

• an initial cash payment of $150,000 ;
• a further cash payment of $200,000 representing repayment in full of a secured loan between Global and Concentric thereby releasing and assigning to the Company the security previously granted by Concentric to Global; and
• a final cash payment of $150,000 and the issuance of 350,000 restricted shares of the Company.

The acquisition of the Anderson Project was accounted for in accordance with ASC 360, Property, Plant and Equipment, as an asset acquisition and the respective fair values of the material line items are summarized as follows:

• Cash payment of $500,000 ;
• Issuance of 1,603,440 shares of the Company and warrants to purchase 375,834 shares valued at $5,195,797 ;
• Transaction costs incurred valued at $509,273 ;
• Assumption of Concentric’s accounts payable liabilities and accrued liabilities valued at $1,241,260 ; and

• Assumption of Concentric’s convertible debenture liabilities valued at $1,707,938 (Note 14).

During the three and nine months ended April 30, 2012, the Company paid $90,000 and $242,045 in cash to various vendors as full settlement of a total $135,498 and $$415,756, respectively, in accounts payable assumed from the merger with Concentric. As a result, a gain of $45,498 and $173,711 on settlement of accounts payable, respectively, was recorded.

During the three and nine months ended April 30, 2012, the Company issued 40,312 shares with a fair value of $158,426 to two former directors of Concentric as full settlement of a total $129,000 in accounts payable assumed from the merger with Concentric. As a result, a loss of $29,426 on settlement of accounts payable was recorded.

At April 30, 2012, capitalized costs totaled $9,154,268.

Workman Creek Project, Arizona

Pursuant to a Property Acquisition Agreement dated November 7, 2011, as amended on November 25, 2011, and effective November 30, 2011, the Company acquired from Cooper Minerals, Inc. (“Cooper”) an undivided 100% interest in the 3,520-acre Workman Creek Project located in Gila County, Arizona. The Workman Creek Project is subject to a 3.0% net smelter revenue royalty requiring an annual advance royalty payment of $100,000. The Company has an exclusive right and option to acquire one-half ( 1.5%) of the net smelter revenue royalty for $1,000,000 at any time until January 21, 2024. Additionally, certain individuals hold an option to acquire a 0.5% net smelter revenue royalty exercisable by paying the Company the sum of $333,340 at any time until January 21, 2024.

As consideration for this acquisition, the Company made cash payments totaling $84,640 and issued 300,000 shares. The acquisition of the Workman Creek Project was accounted for in accordance with ASC 360, Property, Plant and Equipment, as an asset acquisition and the respective fair values of the material line items are summarized as follows:

• Cash payment of $84,640 ;
• Issuance of 300,000 shares valued at $915,000 ; and
• Transaction costs incurred valued at $187,518.

At April 30, 2012, capitalized costs totaled $1,187,158.

Los Cuatros Project, Arizona

On January 25, 2010, the Company executed an amendment to the underlying purchase agreement to acquire 640 acres of mineral exploration claims located in Maricopa County, Arizona, together with database records containing material information regarding the mineral claims. At April 30, 2012, capitalized costs totaled $257,250.

Todilto Project, New Mexico

Effective January 14, 2009, the Company entered into an Option and Joint Venture Agreement with Kaboko Mining Limited, formerly Uran Limited, (“Kaboko”) over a certain area of the Company’s Todilto Project located in New Mexico. Kaboko may earn a 65% interest in the area by:

• an initial cash payment of $75,000 to the Company (received);
• issuing and delivering to the Company an initial 1,000,000 shares and a further 750,000 shares each at the end of years one, two and three, for a total issuance of 3,250,000 shares of Kaboko common stock (received);
• incurring exploration expenditures of $100,000 in year one (completed), $200,000 in year two (completed), $300,000 in year three (completed), $400,000 in year four and $500,000 in year five, for a total of $1,500,000 in exploration expenditures incurred in the area; and

• the completion of a feasibility study.

During the three months ended April 30, 2012, the Company received a further 750,000 shares of Kaboko with a fair value of $15,600 which was applied against the capitalized costs of the Todilto Project. At April 30, 2012, capitalized costs totaled $166,720.

Coronel Oviedo Project, Paraguay

Pursuant to a Share Exchange Agreement dated May 11, 2011 (the “Agreement”) and effective May 24, 2011, the Company acquired a 100% interest in Piedra Rica Mining S.A., a private Paraguayan company, which holds an undivided 100% interest in the Coronel Oviedo Project located in Paraguay. The Coronel Oviedo Project is comprised of two prospecting permits covering a total 247,000 acres and is subject to a 1.5% gross overriding royalty. The Company has an exclusive right and option at any time to acquire one-half percent ( 0.5%) of the gross overriding royalty for $500,000, including a right of first refusal to acquire all or any portion of the remaining one percent ( 1.0%).

As consideration for this acquisition, the Company issued 225,000 shares. The acquisition of the Coronel Oviedo Project was accounted for in accordance with ASC 360, Property, Plant and Equipment, as an asset acquisition and the respective fair values of the material line items are summarized as follows:

• Issuance of 225,000 shares valued at $722,250 ; and
• Transaction costs incurred valued at $158,329

At April 30, 2012, capitalized costs totaled $880,579.

Yuty Project, Paraguay

Pursuant to an Arrangement Agreement dated January 20, 2012 and effective March 30, 2012 (the “Arrangement Agreement”), the Company acquired all of the outstanding common shares of Cue Resources Ltd. (“Cue”) by way of a plan of arrangement, resulting in the acquisition of an undivided 100% interest in the 230,650-hectare Yuty Project located in southeastern Paraguay. In accordance with the Arrangement Agreement, Cue’s shareholders received 0.0195 of one share of the Company’s common stock for every one share of Cue common stock, resulting in the issuance of 2,345,926 shares of the Company to the former Cue shareholders in exchange for 120,304,067 shares of Cue. Holders of Cue share purchase warrants, stock options and broker options received equivalent securities of the Company at the 0.0195 ratio in exchange for their Cue securities, resulting in the issuance of share purchase warrants, stock options and broker options to purchase an aggregate 987,967 shares of the Company exercisable at prices ranging from $3.59 to $23.08 per share.

Pursuant to a Secured Loan Agreement dated January 20, 2012, the Company advanced CAD$335,000 to Cue with interest calculated at 3% per annum in order for Cue to continue meeting its ongoing operational costs prior to the closing which occurred on March 30, 2012. In accordance with the Arrangement Agreement and effective March 30, 2012, the Company settled debts with certain management members and related parties of Cue by payment of an aggregate $30,075 in cash and the issuance of 171,303 shares of UEC.

The acquisition of the Yuty Project was accounted for in accordance with ASC 360, Property, Plant and Equipment, as an asset acquisition and the respective fair values of the consideration paid are summarized as follows:

• Issuance of 2,345,926 shares of the Company valued at $9,149,111 in exchange for 120,304,067 shares of Cue;
• Issuance of share purchase warrants valued at $70,460 to purchase 900,446 shares of the Company exercisable at prices ranging from $6.15 and $7.69 per share until expiry on November 10, 2012 and April 19, 2012, respectively, in exchange for Cue share purchase warrants to purchase 46,177,187 shares of Cue exercisable at prices ranging from $0.12 to $0.15 per share;

• Issuance of stock options valued at $76,442 to purchase 48,748 shares of the Company exercisable at prices ranging from $5.13 to $23.08 per share until expiry from July 15, 2013 to August 3, 2016, in exchange for Cue stock options to purchase 2,500,000 shares of Cue exercisable at prices ranging from $0.10 to $0.45 per share;
• Issuance of broker options valued at $28,149 to purchase 38,773 shares of the Company exercisable at a price of $3.59 per share until expiry on November 10, 2012, in exchange for Cue broker options to purchase 1,988,423 shares of Cue exercisable at a price of $0.07 per share;
• Secured loan of CAD$335,000 to Cue with interest at 3% per annum valued at $337,769 ;
• Debt settlements with certain management members and related parties of Cue by payment of $30,075 in cash and the issuance of 171,303 shares of the Company valued at $668,082 ; and
• Transaction costs incurred valued at $445,764.

The fair value of options, broker options and warrants issued by the Company was valued with the Black-Scholes options pricing model at the following assumptions:

	Stock Options	Broker Options	Purchase Warrants
Weighted Average Risk Free Interest Rate	0.34%	0.19%	0.18%
Weighted Average Expected Volatility	84.92%	47.49%	50.95%
Weighted Average Contractual Life in Years	2.83	0.62	0.50
Expected Dividend Yield	0.00%	0.00%	0.00%

The allocation of the respective fair values of the consideration paid and the identifiable assets acquired and liabilities assumed are as follows:

Consideration paid
2,345,926 UEC common shares at $3.90 per share	$9,149,111
900,446 UEC warrants issued to exchange 46,177,187 CUE warrants	70,460
48,748 UEC options issued to exchange 2,500,000 CUE stock options	76,442
38,773 UEC options issued to exchange 1,988,423 CUE broker options	28,149
Secured loan to Cue	337,769
Debt settlement with a management member - cash	30,075
Debt settlement with management members and related parties - 171,303 UEC shares issued	668,082
Transaction costs	445,764
	$10,805,852
Assets acquired and liabilities assumed
Cash and cash equivalent	$104,216
Other current assets	32,860
Mineral rights and properties	12,043,245
Accounts payable and accrued liabilities	(163,991)
Loan payable to a related party	(260,650)
Deferred income tax liabilities	(949,828)
	$10,805,852

At April 30, 2012, capitalized costs totaled $12,043,245.