MINERAL RIGHTS AND PROPERTIES

12 Months Ended

Jul. 31, 2012

MINERAL RIGHTS AND PROPERTIES [Text Block]

NOTE 5: MINERAL RIGHTS AND PROPERTIES

Mineral Rights

At July 31, 2012, the Company had mineral rights in the States of Arizona, Colorado, New Mexico, Texas and Wyoming and in the Republic of Paraguay. These mineral rights were acquired for the purposes of uranium mining and related activities, including exploration, development, extraction and processing of uranium concentrates, at a cost of $42,425,697, including $33,018,768 representing the fair value of non-cash consideration and $2,365,456 representing the present value of the retirement obligation associated with the Palangana Mine, net of $1,713,504 in impairment charges. 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 July 31, 2012, annual maintenance payments of approximately $1,186,000 were required to maintain these mineral rights.

Mineral rights and property acquisition costs consist of the following:
		July 31, 2012			July 31, 2011
Mineral Rights and Properties, Unproven
Palangana Mine	$	6,610,453		$	5,710,187
Goliad Project		8,689,127			8,689,127
Burke Hollow Project		1,313,250			-
Channen Project		428,164			-
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
Slick Rock Project		163,213			47,913
Todilto Project		166,720			182,320
Yuty Project		11,947,144			-
Coronel Oviedo Project		1,133,412			880,579
Other property acquisitions		857,119			789,302
		42,425,697			17,442,713
Accumulated depletion		(1,057,495	)		(360,418	)
		41,368,202			17,082,295
Databases		2,345,038			1,433,890
Accumulated amortization		(1,374,484	)		(968,782	)
		970,554			465,108
Land Use Agreements		375,155			375,155
Accumulated amortization		(118,991	)		(81,475	)
		256,164			293,680
	$	42,594,920		$	17,841,083

The Company has not established proven or probable reserves on any of its mineral projects.

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 159,236 restricted common shares of the Company with an estimated fair value estimated of $511,148.

The estimated depletion and amortization of mineral rights and properties for the next five fiscal years is as follows:

July 31, 2013	$	1,415,096
July 31, 2014		1,319,053
July 31, 2015		534,428
July 31, 2016		416,735
July 31, 2017		245,589
Total	$	3,930,901

Mineral property expenditures incurred by major projects are as follows:

		Year Ended July 31,
		2012		2011		2010
Mineral Property Expenditures
Palangana Mine	$	7,597,102	$	7,859,841	$	3,643,662
Goliad Project		646,314		995,849		2,353,547
Burke Hollow Project		1,176,101		-		-
Channen Project		190,009		-		-
Hobson		123,005		367,904		30,300
Salvo Project		1,113,659		1,268,088		83,788
Nichols Project		150,000		15,496		5,976
Land work - Texas		423,291		388,633		164,740
Anderson Project		375,058		13,707		-
Workman Creek Project		50,069		-		-
Yuty Project		627,623		-		-
Coronel Oviedo Project		2,207,255		250,992		-
Other Mineral Property Expenditures		259,236		259,670		156,701
	$	14,938,722	$	11,420,180	$	6,438,714

During Fiscal 2012, the Company did not incur any impairment charges (Fiscal 2011: $143,396; Fiscal 2010: $43,600). During Fiscal 2011, the Company impaired the Monument Canyon property located in Utah and the Carrizo, Devillier and Maetze properties located in Texas.

During Fiscal 2010, the Company sold its 49% interest in Cibola Resources, LLC for a cash payment of $11.0 million. As a result, the Company recorded an $8,534,081 gain on the sale of assets which is reported as discontinued operations.

Palangana Mine, Texas

The Company has various mining lease and surface use agreements granting the Company the exclusive right to explore, develop and mine for uranium at the Palangana Mine, a 9,601-acre property located in Duval County, Texas approximately 100 miles south of the Hobson Processing Facility. Effective December 18, 2009, the Company acquired the Palangana Mine as part of the acquisition of South Texas Mining Venture, L.L.P. (“STMV Acquisition”) with an estimated fair value of $3,911,800 at acquisition.

Upon commencement of production during the second quarter of Fiscal 2011, the Company began depreciating and depleting the capitalized costs of the Palangana Mine over a 30 to 42-month period. At July 31, 2012, capitalized costs of the Palangana Mine was $6,610,453 (July 31, 2011: $5,710,187), less accumulated depletion of $1,057,495 (July 31, 2011: $360,418), a net book value of $5,552,958 (July 31, 2011: $5,349,769). Included in capitalized costs was $2,365,456 of reclamation liability on July 31, 2012 (July 31, 2011: $1,798,387).

Goliad Project, Texas

The Company has various mining lease and surface use agreements granting the Company the exclusive right to explore, develop and mine for uranium on the Goliad Project, a 2,242-acre property located in Goliad County, Texas. The agreements have a minimum term of five years with extension provisions. At July 31, 2012, capitalized costs totaled $8,689,127 (July 31, 2011: $8,689,127).

Burke Hollow Project, Texas

During Fiscal 2012, the Company entered into a mining lease and surface use agreement granting the Company the exclusive right to explore, develop and mine 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 consolidated balance sheet. At July 31, 2012, capitalized costs totaled $1,313,250 (July 31, 2011: $Nil).

Channen Project, Texas

During Fiscal 2012, the Company entered into a lease option agreement granting the Company the exclusive 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 $428,164 in cash which was capitalized as mineral rights and properties on the Company’s consolidated balance sheet. At July 31, 2012, capitalized costs totaled $428,164 (July 31, 2011: $Nil).

Salvo Project, Texas

The Company has various mining lease and surface use agreements granting the Company the exclusive right to explore, develop and mine for uranium on the Salvo Project, a 5,340-acre property located in Bee County, Texas. The agreements have a minimum term of five years with extension provisions. At July 31, 2012, capitalized costs totaled $363,645 (July 31, 2011: $303,645).

Nichols Project, Texas

The Company has various mining lease and surface use agreements granting the Company the exclusive right to explore, develop and mine for uranium on the Nichols Project, a 1,040-acre property located in Karnes County, Texas. The agreements have a minimum term of five years with extension provisions. At July 31, 2012, capitalized costs totaled $154,774 (July 31, 2011: $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 9,852-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 and accrued liabilities valued at $1,241,260; and

• assumption of Concentric’s convertible debenture liabilities valued at $1,707,938.

At July 31, 2012, capitalized costs totaled $9,154,268 (July 31, 2011: $427,616).

Effective September 9, 2011 and as part of the merger with Concentric, the Company assumed the obligations of certain Series “A” and “B” convertible debentures previously issued by Concentric with a combined estimated fair value of $1,707,938. The Series “A” convertible debentures were comprised of a total $628,376 in principal accruing interest at 15% annually, convertible into shares of Concentric at $0.90 per share and maturing on December 31, 2012. The Series “B” convertible debentures were comprised of a total $498,644 in principal accruing interest at 15% annually, convertible into shares of Concentric at $1.22 per share and maturing on April 22, 2013 and May 21, 2013.

During Fiscal 2012, the Company settled all of the Series “A” and “B” convertible debentures with an aggregate value of $1,757,619 for cash payments totaling $1,370,486 and the issuance of 128,508 shares of the Company with a fair value of $699,340, resulting in the recognition of a loss on settlement of convertible debentures of $312,207.

During Fiscal 2012, the Company recognized a loss in fair value of convertible debentures of $49,681.

During Fiscal 2012, the Company settled the following accounts payable and accrued liabilities previously incurred by Concentric and assumed by the Company:

• made cash payments totaling $292,045 as full settlements of a total $511,415 owed to various vendors resulting in the recognition of a gain on settlement of accounts payable of $219,370; and

• issued a total 40,312 shares of the Company with a fair value of $158,426 as full settlements of a total $129,000 owed to two former directors of Concentric resulting in the recognition of a loss on settlement of accounts payable of $29,426.

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 4,192-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 of the Company valued at $915,000; and

• transaction costs incurred valued at $187,518.

At July 31, 2012, capitalized costs totaled $1,187,158.

Los Cuatros Project (formerly New River Project), Arizona

On January 25, 2010, the Company acquired 640 acres of mineral exploration claims located in Maricopa County, Arizona, together with database records containing material information regarding the mineral claims. At July 31, 2012, capitalized costs totaled $257,250 (July 31, 2011: $257,250).

Slick Rock Project, Colorado

Pursuant to a Uranium Mining Lease dated May 23, 2012, the Company acquired from URenergy, LLC a mining lease for uranium on the Slick Rock Project located in San Miguel and Montrose Counties, Colorado. The Slick Rock Project is subject to a 3.0% production royalty requiring an annual advance royalty payment of $30,000 beginning on November 30, 2017. As consideration for this acquisition, the Company paid $100,000 in cash. At July 31, 2012, capitalized costs totaled $163,213 (July 31, 2011: $47,913).

Todilto Project, New Mexico

Effective January 14, 2009, the Company entered into an Option and Joint Venture Agreement (the “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:

• a cash payment of $75,000 to the Company (received);

• issuing 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 on the Todilto Project; and

• completion of a feasibility study.

During Fiscal 2012, the Company received an additional 750,000 shares of Kaboko common stock with a fair value of $15,600 which was applied against the capitalized costs of the Todilto Project. At July 31, 2012, capitalized costs totaled $166,720 (July 31, 2011: $182,320).

Coronel Oviedo Project, Paraguay

Pursuant to a Share Exchange Agreement dated May 11, 2011 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 two prospecting permits in the area of Coronel Oviedo, Paraguay (the “Coronel Oviedo Project”), 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. The Company also has a right of first refusal to acquire all or any portion of the remaining one percent (1.0%) royalty interest. 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 of the Company valued at $722,250; and

• transaction costs incurred valued at $158,329.

Pursuant to a Property Acquisition Agreement dated October 14, 2011, as amended on February 28, 2012 and March 31, 2012, between the Company and three private Paraguayan companies (the “Property Acquisition Agreement”), the Company acquired a 100% interest in a further two prospecting permits in the area of Coronel Oviedo, Paraguay, adjacent to the Coronel Oviedo Project, 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 $166,667. The Company also has a right of first refusal to acquire all or any portion of the remaining one percent (1.0%) royalty interest. As consideration for this acquisition, the Company made a cash payment of $7,500 and issued 100,000 shares. The acquisition of these permits 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 $7,500;

• issuance of 100,000 shares of the Company valued at $229,000; and

• transaction costs incurred valued at $16,333

At July 31, 2012, capitalized costs totaled $1,133,412 (July 31, 2011: $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 539,936 acres 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 incurred 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 stock options, broker options and warrants issued by the Company was calculated using the Black-Scholes option pricing model with the following assumptions:

	Stock Options	Broker Options	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 Expected 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		11,947,144
Accounts payable and accrued liabilities		(163,991	)
Loan payable to a related party		(260,650	)
Deferred income tax liabilities		(853,727	)
	$	10,805,852
At July 31, 2012, capitalized costs totaled $11,947,144.

During Fiscal 2012, the Company made cash payments totaling $38,883 as full settlements of a total $70,231 owed to various vendors resulting in the recognition of a gain on settlement of accounts payable of $31,348.

Pursuant to a Settlement and Release Agreement dated and effective August 7, 2012 (the “Settlement Agreement”), the Company renegotiated certain acquisition and royalty agreement terms previously agreed to between Cue and the original property vendors of the Yuty Project. The Settlement Agreement confirms an overriding royalty payable to the property vendors of $0.21 for each pound of uranium produced from the Yuty Project, and supersedes all prior agreements entered into between Cue and the property vendors. As consideration for the Settlement Agreement, the Company paid $50,000 in cash and issued 75,000 restricted shares. This transaction was incurred subsequent to July 31, 2012, and will be recorded on the consolidated financial statements for the three months ending October 31, 2012.