Ur-Energy Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The filing was signed March 6, 2023. Amounts are U.S. dollars unless stated otherwise.
Business context and reporting period
Ur-Energy explores, develops and recovers uranium, primarily in Wyoming. Lost Creek is its only operating uranium recovery facility; production has been deliberately curtailed since the third quarter of 2020 amid weak uranium prices. The company remains an exploration-stage issuer because it has not established proven or probable mineral reserves. Its reported mineral resources are not reserves and do not demonstrate economic viability.
Financial and operating highlights
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $19,000, all disposal fees; no uranium sales | $16,000; no uranium sales |
| Cost of sales | $6.861 million | $7.000 million |
| Gross loss | $6.842 million | $6.984 million |
| Operating costs | $12.952 million | $9.773 million |
| Net loss | $17.140 million; $0.08 per share | $22.938 million; $0.12 per share |
| Cash used in operations | $18.091 million | $11.698 million |
| Cash and cash equivalents at year-end | $33.003 million | $46.189 million |
| Debt principal outstanding | $11.136 million | $12.441 million |
The filing reports fourth-quarter 2022 revenue of zero and a net loss of $4.897 million, compared with fourth-quarter 2021 revenue of zero and net income of $421,000. The 2022 gross loss primarily reflects a $6.861 million inventory net-realizable-value adjustment, rather than uranium sales costs. The annual net loss improved by $5.798 million, largely because warrant revaluation changed from a $5.998 million loss in 2021 to a $1.835 million gain in 2022.
Lost Creek captured 325 pounds of U3O8 in 2022, versus 251 pounds in 2021 and 10,789 pounds in 2020; no product was dried or packaged in 2022. At year-end, uranium inventory was carried at $9.903 million. The company reported 323,790 pounds at its conversion facility, including produced inventory averaging $28.04 per pound and purchased inventory averaging $42.56 per pound.
Operating-cost growth reflected accelerated development, especially drilling and supplies for Lost Creek Mine Unit 2. Development expense rose to $4.686 million from $1.922 million; general and administrative expense rose to $6.037 million from $5.328 million.
Liquidity, debt and capital
At December 31, 2022, total assets were $107.895 million, shareholders’ equity was $62.499 million, and current liabilities were $6.603 million. Restricted cash of $8.137 million secured reclamation obligations; the company reported $28.3 million of surety-bond coverage. Asset-retirement obligations were $30.701 million.
The $34 million Wyoming State Bond Loan bears fixed interest of 5.75%, is secured by Lost Creek assets, and had $11.136 million of principal remaining at year-end. Principal payments resumed in October 2022; the final payment is scheduled for October 2024. The filing identifies covenant, cash-flow and collateral-enforcement risks.
Cash and cash equivalents declined by $13.186 million during 2022. Financing activities provided $5.893 million, including $3.7 million net proceeds from at-the-market share sales and proceeds from warrant and option exercises. Subsequent to year-end, the company raised approximately $46.1 million gross in a February 2023 offering of shares and warrants; it reported unrestricted cash of $79.0 million as of March 1, 2023. The offering increased dilution risk.
Material changes, outlook and risks
- In December 2022, management decided to ramp up Lost Creek production to support contracted deliveries. It expected new production to begin in late Q1 or early Q2 2023, although harsh winter weather had hindered construction.
- Two term sales agreements provide for 600,000 pounds annually beginning in 2024 and continuing through 2028, subject to contractual flexibility. A 2023 delivery schedule includes 280,000 pounds, including 100,000 pounds sold to DOE’s NNSA for $64.47 per pound and delivered in January 2023. Management estimated 2023 sales proceeds of $17.3 million at an average $61.89 per pound and anticipated approximately $205 million of revenue across the stated deliveries.
- Lost Creek’s first two mine units have the necessary permits for the planned return to production. An amendment to the permit to mine for additional Lost Creek and LC East areas remained pending; management expected review completion in the first half of 2023. The extension of the Lost Creek source-material license was also under review.
- Shirley Basin has received its major permits and licenses. Management planned 2023 first-half monitor-well work and was planning a satellite plant, with Lost Creek expected to process, dry and package its uranium. Construction timing depends on market conditions and securing suitable sales commitments.
- Management cited improving uranium prices and contracting conditions, while warning that prices remain volatile and the market has limited customers. Key execution risks include ramp-up, labor and contractor availability, weather, inflation, supply-chain disruption, permitting, environmental compliance, water disposal, and access to additional capital. Geopolitical effects of the war in Ukraine and uncertainty about continued U.S. uranium-reserve purchases add market uncertainty.
- Other unusual items included $1.255 million of other income, principally a $1.3 million sale of a royalty interest, and a $1.835 million non-cash warrant revaluation gain. No impairment indicators were identified by management. The auditor issued an unqualified opinion on the financial statements; management reported effective disclosure controls and internal control over financial reporting, without auditor attestation of internal controls.
Important facts for investors to verify
- Whether the Lost Creek ramp-up began on schedule and reached production sufficient to meet contracted deliveries, and whether the pending permit amendment and license extension were obtained.
- Actual deliveries, realized pricing, and margins under the term agreements and DOE sale; assess the gap between management’s projections and realized results.
- Cash consumption, remaining debt payments, and whether available funding is adequate for Lost Creek operations and any Shirley Basin development.
- Inventory quantities, carrying value and recoverability, including the effect of net-realizable-value adjustments as production and sales resume.
- Potential dilution from the February 2023 share-and-warrant offering and outstanding options and warrants.
- The status and economic assumptions of mineral-resource estimates. The filing reports no proven or probable reserves, and resource estimates are uncertain.