Westwater Resources, Inc. — 2011 Q2 Form 10-Q Summary
Issuer identification: The supplied filing is for Uranium Resources, Inc., not Westwater Resources, Inc. Verify that this is the intended filing. The report covers the quarter and six months ended June 30, 2011; financial statements are unaudited.
Business context
The company acquired, explored, developed and mined uranium properties using in-situ recovery. Its South Texas production was shut in by 2009 amid low uranium prices and high costs. No uranium was produced in the first half of 2011, and the company reported no inventory or projected 2011 sales revenue.
Financial performance and position
| Metric | Q2 2011 / June 30, 2011 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 for Q2 and first half | $0 in corresponding 2010 periods |
| Net loss | $2.69 million Q2; $5.72 million first half | $1.72 million Q2; $4.07 million first half in 2010 |
| Operating loss | $2.70 million Q2; $5.80 million first half | $1.99 million Q2; $4.34 million first half in 2010 |
| Cash and equivalents | $8.24 million | $15.39 million at December 31, 2010 |
| Restricted certificates of deposit | $8.36 million | $7.34 million at December 31, 2010 |
| Total assets | $35.94 million | $42.56 million at December 31, 2010 |
| Long-term debt and capital leases | $450,000 debt; approximately $157,000 lease obligations, including current portion | Debt unchanged; lease obligations were approximately $203,000 |
First-half operating cash use was $6.09 million, versus $3.35 million in 2010; investing cash use was $1.03 million, including $1.02 million added to restricted certificates of deposit. Financing used $25,000, with no comparable 2011 equity raise. The company reported $7.3 million cash at July 31, 2011. With no revenue, margins are not meaningful. Current assets exceeded current liabilities by approximately $5.51 million at June 30.
Changes, outlook and risks
- First-half G&A rose to $4.27 million from $3.18 million. Management cited higher salaries and payroll costs, legal and public-company expenses, and consulting and professional services. Total cost of uranium sales rose to $1.46 million from $1.09 million, including higher impairment and Los Finados exploration costs.
- Property impairment was $588,000 in the first half, compared with $390,000 in 2010, reflecting lower estimated future cash flows amid weaker uranium prices and higher project cost estimates.
- Management said existing resources were expected to maintain liquidity for nine to twelve months beyond June 30, 2011. The company was seeking opportunities to expand its resource base, which could require additional financing; there is no assurance financing will be available.
- Under a May 2011 Los Finados agreement, Cameco Texas will fund most exploration costs and may earn up to a 70% interest; it paid the company $300,000. Exploration obligations extend over a three-year program.
- Key risks include uranium price volatility, permitting and regulatory matters, financing needs, and environmental restoration costs. The Navajo Nation mining ban affects approximately 49% of the company’s in-place mineralized uranium material in New Mexico, according to the filing.
- ENDAUM filed suit in July 2011 challenging the New Mexico Environment Department’s handling of a discharge-permit renewal for the Churchrock Section 8 property and seeking to prevent discharges while renewal is pending. The company said it would intervene and defend its rights.
- The company paid $1.375 million in February 2011 to finalize a legal settlement and amended royalties for future production. It reported disclosure controls effective as of June 30, 2011.
Most important facts for investors to verify
- Confirm the issuer and filing are the intended ones: the source identifies Uranium Resources, Inc., despite the request naming Westwater Resources, Inc.
- Assess the liquidity runway against continued operating cash burn, zero projected 2011 sales, and management’s nine-to-twelve-month estimate.
- Review the assumptions behind uranium-property impairment, restoration liabilities and restricted surety collateral.
- Track the Churchrock permitting litigation, Navajo Nation restrictions, and the status and funding of the Cameco exploration program.
- Check whether new financing, production plans or material changes in uranium prices alter the company’s outlook.