Forsys Metals Corp
TSX : FSY
FRANKFURT : F2T

Forsys Metals Corp

July 07, 2010 09:11 ET

Forsys Corporate and Morgan Stanley Strategic Review Update

TORONTO, ONTARIO--(Marketwire - July 7, 2010) -

Morgan Stanley - Strategic Review Update

On October 14, 2009, Forsys Metals Corp ("Forsys" or the "Company") (TSX:FSY)(FRANKFURT:F2T)(NSX:FSY) announced that Morgan Stanley & Co ("Morgan Stanley") had been hired to conduct a strategic review. On March 9, 2010 the Company announced that Morgan Stanley had completed a comprehensive review of potential strategic and financial alternatives for the Company and had invited a select group of interested parties to submit proposals with respect to a potential transaction with the Company.

The Company now reports that negotiations with the interested parties have not, to date, resulted in any formal agreement being reached. The Company and Morgan Stanley are continuing open discussions with selected parties, which may or may not result in a transaction being concluded.

The Company's Board and senior management, with the assistance of Morgan Stanley, continue to focus on maximizing the value of the Company's wholly-owned Valencia Uranium Project ("Valencia") in order to fully realize its potential value for the Company.

Milestones Achieved

Significant milestones have been achieved during the strategic review process including:

  • In December 2009 the Company reported an 18% increase in Reserves to 60.5 Mlbs U308, grading 156 ppm with a 67 ppm cut-off including reserves of 49.8 Mlbs, grading 194 ppm with a 100 ppm cut-off for Valencia. Measured and Indicated Resources were increased to 77.2 Mlbs U308 grading 146 ppm with a 60 ppm cut-off including 60.5 Mlbs U308 grading 191 ppm with a 100 ppm cut-off. Life of mine was increased to over 17 years at an average annual 8.4 Mtpa milling rate and U3O8 production of approximately 3.5 Mlbs assuming a 67 ppm cut-off.

  • In January 2010 a detailed review of the processing options for Valencia with AMEC Minproc was completed. Two options were reported, a "Base Case", utilizing three-stage crushing, rod milling and acid leach. The alternative option "Option 1" would employ single stage crushing, SAG milling, uranium flotation and acid leach. The flotation option evidences a significantly improved economic outcome for the Valencia project (See the Company's News Release dated February 4, 2010 on the Forsys website and the Company's filings on SEDAR).

  • In February 2010 in conjunction with Snowden Mining Industry Consultants (Pty) Ltd., an independent Australian mining consultancy, the Company released an Addendum to the Valencia Technical Report dated June 23, 2009. The Addendum detailed the outcome of the additional work undertaken in 2009 which capitalized on work completed in June 2009, incorporating additional drilling completed since January 2009. The internal rate of return for the Base Case of 27% and for Option 1 of 30% assuming a long-term uranium price of US$70/lb was a significant improvement over the previous study and confirmed the economic potential of Valencia.

  • Over the past 4 months the Company has advanced negotiations with respectively NamWater and NamPower for the long-term supply of water and power for Valencia .The Company has draft agreements and memorandum's of understanding in place and in conjunction with other end-users is finalizing a fiscal program to increase power and water capacity for Valencia and the entire uranium industry in Namibia.

The Uranium Market

The Morgan Stanley strategic review and subsequent third party negotiations have been conducted during a period of significant challenges for the uranium industry. The industry average uranium spot price is currently US$41.75/lb U3O8 (long term price US$59.00/lb) and has traded between US$40.75 and US$48.00/lb U3O8 mark during the strategic review process (long-term price US$59.00 to US$64.50/lb), and mining equities have suffered in the context of credit concerns in Europe, inconsistent economic data from the US and mixed signals on the growth prospects for the Sub-Asian and Asian economies particularly India and China.

Based on market analysis and independent reports, the Board and senior management of Forsys believe the fundamentals of the uranium market remain supportive for near-term development opportunities such as Valencia. Recent announcements have confirmed that the demand for uranium is expected to strengthen in the mid-term and that the current period of depressed prices and excess inventory should change. This view is further supported by the World Nuclear Association figures that there are now 59 nuclear plants under construction (with 24 in China alone) and another 149 ordered or planned worldwide; an increase of nearly 50% over the current total.

Looking forward

Forsys will continue to build the quality of its asset base and advance its flagship Valencia uranium project which has full mining, environmental and construction approvals. Additional testwork is underway to further improve recoveries and efficiencies in the designed plant.

A drill program at Namibplaas (EPL 3638) just 5 km northeast of Valencia, has recently commenced which is intended to add to the overall resource total for Valencia.

The Company along with its advisors Morgan Stanley will continue to assess project and corporate opportunities that are consistent with its business and enhance long-term value.

Forsys will look to manage its risks whilst continuing with its goal of becoming a profitable new uranium producer. The Company's cash position at 30 June remains secure with CAD$15 million in the treasury.

About Forsys Metals Corp

Forsys Metals Corp, having BEE sponsorship, is an emerging uranium producer with 100% ownership in the fully permitted Valencia uranium project. With an expanding reserve base, the Company is currently in the process of working with its financial advisors Morgan Stanley reviewing strategic options for the development of the Valencia Uranium project. Current NI 43-101 compliant reserves at Valencia are 60.5 Mlbs U308 supporting a 17 year mine life and current Measured and Indicated resources are 75.5 Mlbs U308 with a further 8.4 Mlbs Inferred U308. The Company also has an extensive portfolio of uranium exploration projects totaling over 252,000 ha located in Namibia, Africa, a politically stable and mining friendly jurisdiction.

On Behalf of the Board of Directors of Forsys Metals Corp

Marcel Hilmer, CEO

For further information visit our website at www.forsysmetals.com.

Sedar Profile #00008536

Forward-Looking Information

This news release contains projections and forward-looking information that involve various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance of the Company. The following are important factors that could cause Forsys actual results to differ materially from those expressed or implied by such forward looking statements: fluctuations in uranium prices and currency exchange rates; uncertainties relating to interpretation of drill results and the geology; continuity and grade of mineral deposits; uncertainty of estimates of capital and operating costs; recovery rates, production estimates and estimated economic return; general market conditions; the uncertainty of future profitability; and the uncertainty of access to additional capital. Full description of these risks can be found in Forsys various statutory reports including the Annual Information Form available on the SEDAR website at www.sedar.com. These risks and uncertainties could cause actual results and the Company's plans and objectives to differ materially from those expressed in the forward looking information. Actual results and future events could differ materially from anticipated in such information. These and all subsequent written and oral forward looking information are based on estimates and opinions of management on the dates they are made and expressed qualified in their entirety by this notice. The Company assumes no obligation to update forward looking information should circumstances or management's estimates or opinions change.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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