UR-ENERGY INC quarterly report, Q2 FY2022

Ur-Energy Inc. — Q2 2022 Form 10-Q

Reporting period: Three and six months ended June 30, 2022. Financial statement amounts are in U.S. dollars, generally thousands, unless noted. Ur-Energy is a uranium recovery company operating Lost Creek in Wyoming; production remained at reduced levels.

Key financial results and liquidity

Metric	Q2 2022	Q2 2021	Six months 2022	Six months 2021
Revenue	$19	$7	$19	$7
Gross loss	$(1,643)	$(1,828)	$(3,365)	$(3,501)
Operating costs	$3,460	$2,777	$6,758	$4,589
Operating loss	$(5,103)	$(4,605)	$(10,123)	$(8,090)
Net loss	$(353)	$(6,879)	$(7,281)	$(14,251)
Operating cash used	Not separately presented by quarter	$(6,396)	$(5,791)

Q2 sales were disposal-fee billings only; the company reported no uranium sales in the first half of either 2022 or 2021. Gross losses primarily reflect inventory write-downs to net realizable value: $1.662 million in Q2 and $3.384 million year to date.
Q2 net loss narrowed substantially, principally because of a $4.888 million noncash warrant-liability revaluation gain, versus a $2.920 million loss in Q2 2021. The six-month comparison likewise benefited from the warrant revaluation swing. The Q2 2022 basic and diluted loss per share rounded to nil; six-month loss per share was $0.03.
Operating costs rose $0.683 million in Q2 and $2.169 million for the first half, mainly due to Lost Creek’s MU2 advance-development program and higher 2022 bonuses; first-half G&A also increased.
At June 30, cash and cash equivalents were $43.267 million, restricted cash was $8.026 million, and finished conversion-facility inventory was $7.923 million on the balance sheet. Cash, cash equivalents and restricted cash totaled $51.293 million, down from $54.155 million at year-end 2021. First-half investing cash use was $0.085 million; financing provided $3.651 million.
Notes payable totaled $12.344 million net of financing costs ($12.441 million principal), under the 5.75% Wyoming State Bond Loan. Principal payments were scheduled to resume October 1, 2022, with final payment due October 2024. Asset retirement obligations were $30.140 million.
Current assets were $53.878 million and current liabilities $8.568 million. Restricted cash collateralized surety bonds; the filing reports $27.6 million of reclamation-bond coverage and approximately $50.7 million of cash and restricted cash potentially exposed if the relevant financial institutions became insolvent.

Material changes and operating developments

Lost Creek continued reduced-level operations. The company reported 166 pounds captured year to date in its production table, whose unit/scale presentation is unclear; no pounds were drummed or shipped. It reported approximately 283,790 pounds of finished uranium at the conversion facility at June 30.
Development expense increased as Ur-Energy advanced drilling and construction in Lost Creek’s MU2 wellfield. The fourth header house was expected to be completed in 2022; equipment and long-lead items were being acquired for further development.
Ur-Energy sold a royalty interest related to the Lance project for $1.3 million in March; the full amount was recorded as other income. It also raised $3.3 million net from at-the-market share sales and received proceeds from option and warrant exercises during the first half.
On June 2, 2022, John W. Cash became Chairman and President following Jeffrey T. Klenda’s retirement. Cash had become CEO effective March 1, 2022.

Outlook, management commentary and risks

Management said improved uranium spot and term pricing had not yet reached a level it considered sufficient to support a production-ramp decision. It stated Lost Creek could reach full production rates within as little as six months after a go decision, with an annualized production run rate of up to 1.2 million pounds. The facility is licensed to process up to 2.2 million pounds annually, including material from other sources.
Management said cash resources were sufficient to maintain and enhance operational readiness. As of August 1, 2022, cash and cash equivalents were $42.2 million; management estimated finished inventory at nearly 324,000 pounds and approximately $15.7 million at recent spot prices, and said it did not expect to sell existing inventory within 12 months unless advantageous.
The company submitted a bid to the U.S. Department of Energy’s uranium reserve solicitation, for purchases of up to one million pounds from qualified domestic producers. There was no assurance Ur-Energy would be selected; proposals were due August 1, 2022.
Shirley Basin had received major permits and was described as construction-ready, but construction timing and investment depend on company decisions and market conditions. A Lost Creek permit amendment for additional areas remained subject to Wyoming review.
Management highlighted supply-chain disruption, inflation, uranium-price volatility, geopolitical and potential Russia-related trade restrictions, permitting, operating and reclamation costs, and the uncertainty of the timing and economics of any production restart. The company has not established mineral reserves; resources, particularly inferred resources, are not reserves and may not be economically recoverable.
Research projects included field testing a proposed injection-well installation method and evaluating an advanced water-treatment system. Expected savings and performance were prospective, not established results. A proposed sale of a non-core property remained under consideration.
Subsequent to quarter-end, the company reported receiving $2.7 million from exercise of warrants for 3.6 million common shares and purchasing 40,000 pounds of U₃O₈ at $49.50 per pound for approximately $2.0 million.

Most important facts for investors to verify

Whether uranium contract pricing, DOE reserve awards, or other market developments ultimately support a formal production-ramp decision and the expected funding and schedule.
The production-table unit/scale and the reconciliation of reported June finished inventory with management’s August estimate and the subsequent uranium purchase.
The timing and amounts of resumed State Bond Loan principal payments, and the company’s cash runway under continued operating losses and development spending.
Whether the Lost Creek permit amendment and planned development work are completed on schedule, and whether Shirley Basin proceeds to construction.
The sensitivity of reported earnings to noncash warrant-liability revaluations and inventory net-realizable-value adjustments, which materially affected results.
The outcome of the proposed non-core asset sale, DOE bid, and ongoing research projects; none was assured in the filing.