UrAsia interim financial results Trading Symbol (TSXV: UUU and AIM:UUU) For the three months ended October 31, 2006 (All amounts are in United States dollars (US$) unless otherwise noted) VANCOUVER, Dec. 29 /CNW/ - UrAsia Energy Ltd. (the 'Company' or 'UrAsia') is pleased to report the Company's unaudited interim consolidated financial results for the three months ended October 31, 2006 The Company is a Canadian-based uranium mining and development company that is focused on the development and operation of low cost, in-situ leach uranium projects in Central Asia. On November 7, 2005 UrAsia acquired indirect interests in three uranium projects in the Republic of Kazakhstan, including the Akdala operating mine "Akdala" and the South Inkai uranium project "South Inkai" and the Kharassan uranium project "Kharassan". In addition, the Company has an extensive uranium exploration portfolio in the Kyrgyz Republic. UrAsia has a 70% interest in the Betpak Dala Joint Venture, which has a 100% interest in the Akdala operating uranium mine and the South Inkai uranium development project; and a 30% interest in the Kyzylkum Joint Venture which has a 100% interest in the Kharassan uranium development project. Highlights for the Quarter - Net Income for the three months ended October 31, 2006 amounted to $25,912,000 ($0.05 per share), after crediting an unrealized foreign exchange gain of $27,023,000 - Loss from operations for the three months ended October 31, 2006 was $2,636,000, and included earnings from mine operations of $1,567,000. - Production increased for the fourth quarter in a row to 513,000 pounds of U(3)O(8). (70 % share). Sales amounted to 99,000 pounds of U(3)O(8). (70 % share). - Sales of U(3)O(8) in November and December, 2006 amounted to 880,000 pounds of U(3)O(8) (70 % share) at an average price of $51/lb for proceeds of $45 million. Commenting on the Company's interim financial results, Phillip Shirvington, President and Chief Executive Officer, said: "The Company continues to meet or exceed its construction and production targets, and is reaping the benefits of its un-hedged sales contracts as the spot price continues to increase. Deliveries during calendar 2006 are heavily weighted towards the end of the year." Financial Results of Operations During the three months ended October 31, 2006 all production and sales related to the Company's 70% interest in the Akdala uranium mine. The Company's attributable share of revenue from uranium sales, under new contracts amounted to $4,193,000 or approximately $42.25/lb of U(3)O(8). Deliveries, which occur at intermittent intervals during the year, were low for the quarter at 99,200 pounds of U(3)O(8). After the deduction of production costs expended during the period of $1,417,000 ($14.28/lb U(3)O(8)), depreciation and depletion charges of $1,209,000 ($12.18 /lb U(3)O(8)), the mine operations reflected a pre-tax income of $1,567,000. The production unit cost increase, from $11.76 in the previous year, is a function of the fixed costs of production being applied against a lower sales volume in the period. The average unit cost of depletion increased from the previous year average of $6.29 /lb U(3)O(8) to $12.18 /lb U(3)O(8), due to the finalization of the purchase price allocation between Akdala Mine and South Inkai. Sales to nuclear facilities do not occur evenly throughout the year as they are dependant upon delivery dates to utilities. Deliveries in the quarter were approximately only 20% of production. After the deduction of general and administration costs of $1,195,000, non-cash stock based compensation expense of $1,099,000, exploration costs of $1,779,000 and other expenses of $130,000 the Loss from operations amounted to $2,636,000. After allowing for interest and other income of $2,215,000, unrealized foreign exchange gains of $27,023,000 and income taxes of $690,000, the Company recorded Net Income for the three months ended October 31, 2006 of $25,912,000 ($0.05 per share). The unrealized foreign exchange gain arose mainly from translation of the future Kazak Income Tax liability in respect of the Company's investment in Kazakhstan. During the quarter the Kazakh Tenge weakened by 7% against the US dollar. Cash position At December 20, 2006, the Company had a cash position of approximately $56 million that will be used to continue development of the South Inkai and Kharassan uranium projects within the Republic of Kazakhstan and to continue exploration drilling, which commenced this year, on the Company's Kyrgyz uranium exploration licenses. Construction and Development Update The initial construction phase at the South Inkai and Kharassan uranium projects has progressed well with production still being targeted for the end of 2007. During the three month period ended October 31, 2006, at South Inkai construction of the road to the process plant was completed, and the foundations for the office building, accommodation module, auxiliary building, special laundry and shift camp were completed. Earth-moving for slime pit and pregnant and leaching solution ponds were completed and work continues on the consolidation of the bed by means of rammer and roller. Earth-moving and foundation works on the main plant are 90% completed, foundation ramming and backfilling are under way. An additional contract was awarded in October for the construction of the ammonium nitrate warehouse with solution plant, acid storage with pumping station, ramp for acid tank truck, first aid outlet and production pumping house. Due to the increase of electrical power requirements at the South Inkai construction site and the commissioning of additional power consuming equipment, an additional 400 KVA transformer was ordered and is to be installed in December 2006. At Kharassan construction has commenced with the completion of the foundation work for most structures including the equipment and machinery storehouse. Other progress includes: Pregnant solutions (main) plant - foundations and equipment pedestals completed with "non-standard" process equipment being mounted and a total of 6 ion exchange columns set; Accommodation building - foundation construction in progress; Pregnant /leaching solution ponds - earthwork completed; and Sulfuric acid storage building - concrete work completed. The five buildings above are scheduled to have roofing and siding installed by the end of December together with the delivery of "non-standard" major process equipment. Construction of the bridge across the Syr-Darya River is in full progress. The first coffer dam was set and two piers for first of two supports in the river bed had been drilled at the end of October. Construction of the two main bridge supports is on schedule for completion in December before the rising of the river level. Construction and re-paving of the road from the bridge site to the industrial complex began in October. On October 20, 2006, UrAsia entered into an agreement to acquire a 50% interest in Joint Drilling LLP, a Kazakhstan drilling contractor, licensed in Kazakhstan to drill uranium wells. The company will supply up to eight US built GEFCO drill rigs to Joint Drilling in order to accelerate the numerous drilling programs on all of UrAsia's mining and development properties. Outlook The Company is continuing to proceed with its Kazakhstan uranium projects which entail the continuation of production at the Akdala mining operation at a rate of 2.6 million pounds per annum, and the development of the in-situ mining operations at South Inkai and Kharassan. UrAsia's attributable annual production for the calendar year 2006 is expected to be approximately 1.8 million pounds of U(3)O(8) (700 t U). URASIA ENERGY LTD. Consolidated Balance Sheets (Unaudited) (United States dollars in thousands) As at Oct 31/2006 Jul 31/2006 ------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 107,477 $ 128,328 Restricted cash 2,500 2,500 Accounts receivable 2,062 10,173 Current portion of loans to joint ventures 6,457 4,440 Inventory 19,874 11,940 Prepaid expenses 3,035 1,177 ------------------------------------------------------------------------- 141,405 158,558 Loans to joint ventures 24,000 21,000 Mineral properties, plant and equipment 773,623 762,547 Other assets 10,502 8,920 ------------------------------------------------------------------------- $ 949,530 $ 951,025 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities $ 4,395 $ 6,095 Income taxes payable 3,152 3,080 ------------------------------------------------------------------------- 7,547 9,175 Due to Republic of Kazakhstan 1,046 1,046 Future income taxes 338,211 365,491 Asset retirement obligation 1,961 1,953 ------------------------------------------------------------------------- 348,765 377,665 ------------------------------------------------------------------------- Shareholders' equity Share capital 613,483 612,941 Contributed surplus 10,258 9,307 Retained deficit (22,976) (48,888) ------------------------------------------------------------------------- 600,765 573,360 ------------------------------------------------------------------------- $ 949,530 $ 951,025 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Commitments and contingencies (Note 8) Subsequent events (Note 11) Approved by the Board: "Ian Telfer" Director ------------ "Phillip Shirvington" Director --------------------- URASIA ENERGY LTD. Consolidated Statements of Operations and Retained (Deficit) Earnings (Unaudited) (United States dollars in thousands, except per share amounts) Three months ended Oct 31/2006 Oct 31/2005 ------------------------------------------------------------------------- Mine operations Revenue from uranium sales $ 4,193 $ - ------------------------------------------------------------------------- Production costs 1,417 - Depreciation and depletion 1,209 - ------------------------------------------------------------------------- Earnings from mine operations 1,567 - ------------------------------------------------------------------------- Expenses General and administration 1,195 122 Stock-based compensation 1,099 - Exploration 1,779 - Other 130 - ------------------------------------------------------------------------- 4,203 122 ------------------------------------------------------------------------- Loss from operations (2,636) (122) ------------------------------------------------------------------------- Other income Interest and other income 2,215 193 Foreign exchange gain 27,023 727 ------------------------------------------------------------------------- 29,238 920 ------------------------------------------------------------------------- Income before income taxes 26,602 798 ------------------------------------------------------------------------- Provision for (recovery of) income taxes Current 1,069 2 Future (379) - ------------------------------------------------------------------------- 690 2 ------------------------------------------------------------------------- Net income for the period 25,912 796 Retained (deficit) earnings, beginning of period (48,888) 51 ------------------------------------------------------------------------- Retained (deficit) earnings, end of period $ (22,976) $ 847 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per share: Basic $ 0.05 $ 0.01 Diluted $ 0.05 $ 0.01 Weighted average number of shares outstanding (000's): Basic 479,850 98,378 Diluted 483,249 98,378 URASIA ENERGY LTD. Consolidated Statements of Cash Flows (Unaudited) (United States dollars in thousands) Three months ended Oct 31/2006 Oct 31/2005 ------------------------------------------------------------------------- Operating activities Net income for the period $ 25,912 $ 796 Items not involving cash: Depreciation and depletion 1,209 - Stock-based compensation 1,099 - Future income taxes (379) - Foreign exchange gain (27,885) - Other 8 - Changes in non-cash working capital: Accounts receivable 8,112 748 Accrued interest receivable to joint ventures (517) - Prepaid expenses (1,811) - Inventory (4,810) - Accounts payable and accrued liabilities (1,779) (303) ------------------------------------------------------------------------- Cash (used in) provided by operating activities (841) 1,241 ------------------------------------------------------------------------- Financing activities Issue of common shares, net of issue costs 395 48,720 Repayment of short-term loan - (106) ------------------------------------------------------------------------- Cash provided by financing activities 395 48,614 ------------------------------------------------------------------------- Investing activities Acquisition of interest in Betpak - (5,000) Cash advances to joint ventures (4,500) - Acquisitions of mineral properties, plant and equipment (14,332) (1,265) Advance cash payment for other assets (2,409) - ------------------------------------------------------------------------- Cash used in investing activities (21,241) (6,265) ------------------------------------------------------------------------- Effect of exchange rate change on cash 836 - Net cash (outflow) inflow for the period (20,851) 43,590 Cash and cash equivalents, beginning of period 128,328 2,630 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 107,477 $ 46,220 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental Information Income taxes paid $ 748 $ - Interest paid $ - $ - On behalf of UrAsia Energy Ltd. "Phillip Shirvington" President and Chief Executive Officer To view the full financial statements for the quarter, please visit www.sedar.com. For further information contact Investor Relations at 1-866-798-0824 or (604) 608 0824. The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. The foregoing information may contain forward-looking statements relating to the future performance of UrAsia Energy Ltd. Forward-looking statements, specifically those concerning future performance, are subject to certain risks and uncertainties, and actual results may differ materially. These risks and uncertainties are detailed from time to time in the Company's filings with the appropriate securities commissions. For further information: Investor Relations at 1-866-798-0824 or (604) 608 0824. (UUU UUU.) END