First Uranium Corporation Production Update for the Three Months Ended December 31, 2011

Friday, Jan 27, 2012

TORONTO AND JOHANNESBURG, Jan. 26, 2012 /PRNewswire/ - First Uranium Corporation (TSX:FIU), (JSE:FUM) (ISIN:CA33744R1029) ("First Uranium" or "the Company") today released its production results for the three months ended December 31, 2011 ("Q3 2012").

For Q3 2012, the Company reported a 5% decrease in gold ounces sold and a 14% decrease in uranium produced compared to the gold ounces sold and uranium produced in Q2 2012. The Company sold 38,548 ounces of gold in Q3 2012 compared to 40,529 ounces of gold in Q2 2012. Uranium produced was 30,887 pounds in Q3 2012 compared to 36,006 pounds in Q2 2012.

Said CEO Deon van der Mescht:

"The third quarter proved particularly challenging from a safety and production perspective, especially for Ezulwini Mine. The three fatal accidents in the latter half of the 2011 calendar year had a significant negative impact on employee morale and productivity. This is reflected in the lower than anticipated production figures which in turn necessitated the restructuring of the Ezulwini Mine in order to secure the future of this operation."

EZULWINI MINE

Following two fatal accidents in August and September 2011, the mining team managed to build good production momentum into late October and early November, but on November 14, 2011 the mine regrettably suffered another fatal accident as a result of a fall of ground. This resulted in a mandatory stoppage which although necessary, had the effect of undermining the progress that had been made to that point.

As a result, in Q3 2012 gold ounces sold by the Ezulwini Mine improved only slightly (3%) compared to Q2 2012 and uranium production was 14% down compared to Q2 2012.

As previously reported, the Ezulwini Mine has been the subject of an intensive turn-around process during the past nine months. Management has devoted significant resources to helping the operation achieve the production levels necessary for it to be sustainable. The expected improvement in production did not however materialize, primarily as a consequence of the extremely unfortunate fatal accidents in the latter half of the calendar year which impacted negatively on morale. As a consequence, on December 19, 2011, management announced a planned restructuring in accordance with Section 189A and 189 of The South African Labour Relations Act and, at the same time, stopped mining of all marginal production panels. The new operating plan may result in up to 1850 jobs being affected. The consultation process with organized labour is well underway and management hopes to conclude the process within the mandatory 60-day period.

Although the new operating plan is not yet completed, it is clear that the Ezulwini Mine will not achieve its previously disclosed target of between 70,000 to 80,000 ounces of gold sold and uranium sales of between 110,000 and 130,000 pounds for FY 2012.

In previous updates, the Ezulwini Mine reported on various business development initiatives aimed at leveraging the available capacity of the gold and uranium plant infrastructure, including the uranium concentrate float plant project and possible toll treatment of third party ore. Given the current restructuring of operations at the mine and within First Uranium as a whole, all business development initiatives of this type have been placed on hold for future review.

The revised business plan is being designed to optimize cash flow and result in the overall profitability of Ezulwini.

MINE WASTE SOLUTIONS

At MWS, the 6% quarter on quarter improvement in throughput was offset by a lower delivered feed grade which decreased by 8% from 0.348g/t in Q2 2012 to 0.319g/t in Q3 2012.

The first of MWS's three gold modules processes material from the higher grade Buffelsfontein # 2 tailings dam as well as Buffelsfontein # 3 tailings dam. The planned contribution from the high grade Buffelsfontein # 2 tailings dam was not realised, primarily due to the inability to reclaim the remnant footprint material at the desired rate with the knock on effect of an altered mining mix with a lower delivered feed grade. This lower-grade mining mix is anticipated to continue until the end of Q4 2012, by which time process improvements designed to enhance recoveries and mitigate the impact of a lower grade, will have been implemented.

The second gold module is performing well and this performance is expected to continue for the remainder of FY 2012 and into FY 2013.

The third gold module processes material from the Hartebeesfontein # 1 tailings dam which as previously reported has posed some challenges in terms of lower than planned grade as well as material particle size. By blending the Hartebeesfontein # 1 tailings dam material with material from higher grade remote satellite dams, the overall grade delivered to the third gold module as well as recovery performance has been preserved, albeit at slightly below planned grade. During Q3 2012 however, the required contribution from the remote satellite dams was not fully realized which impacted negatively on grade delivered and hence gold production. The requisite contribution from the remote satellite dams can be sustained until the end of FY 2012 where after process improvements are required to maintain circuit performance and preserve gold production. Test work is currently underway to deal with this challenge and is expected to continue into Q1 2013.

As a result of the challenges encountered with the first and third gold modules, guidance for gold production for FY 2012 has been downgraded from a range of 105, 000 ounces and 115, 000 ounces to between 98,000 ounces and 100,000 ounces.

SOURCE First Uranium Corporation