Ur-Energy Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. All financial amounts below are in U.S. dollars and, unless noted, thousands. Ur-Energy is a Wyoming-focused uranium company operating its Lost Creek in-situ recovery mine. Lost Creek continued at reduced production levels while the Company awaited improved uranium-market conditions.
Financial performance and position
| Metric | Q3 2021 | Nine months 2021 | Comparable 2020 |
|---|---|---|---|
| Sales | $9 | $16 | $0 and $8,304, respectively |
| Cost of sales | $1,703 | $5,211 | $1,840 and $11,462 |
| Gross loss | $1,694 | $5,195 | $1,840 and $3,158 |
| Operating costs (financial statements) | $2,189 | $6,778 | $2,157 and $6,446 |
| Operating loss | $3,883 | $11,973 | $3,997 and $9,604 |
| Net loss (financial statements) | $9,108 | $23,359 | $3,696 and $9,564 |
| Basic and diluted loss per share (financial statements) | $0.04 | $0.12 | $0.02 and $0.06 |
There were no uranium sales in the first nine months of 2021; the small reported sales were disposal-fee income. The 2020 year-to-date uranium sales were 200,000 pounds, at an average $41.50 per pound. The 2021 gross losses primarily reflect $5.211 million of inventory lower-of-cost-or-net-realizable-value adjustments, rather than uranium sales costs. The Company reported no meaningful sales margin for 2021.
- Cash flow: Operating activities used $9.133 million in the first nine months; investing activities used $0.063 million; financing activities provided $38.324 million. Financing included equity and warrant/option proceeds.
- Liquidity: September 30 cash and cash equivalents were $33.413 million; restricted cash was an additional $7.861 million and is pledged for reclamation. Current assets were $36.159 million and current liabilities $6.429 million.
- Debt and obligations: Notes payable were $12.311 million, comprising the State Bond Loan; principal payments were deferred until October 2022 and the final payment is scheduled for October 2024. Asset retirement obligations were $29.400 million. Warrant liabilities totaled $11.852 million, including $4.175 million current.
- Inventory: The Company held approximately 284,789 pounds of U3O8 at quarter-end, with a carrying value of $7.921 million. Management cited an estimated $13.4 million value at recent spot prices.
Material changes versus 2020
- Year-to-date sales fell from $8.304 million, including 200,000 pounds of uranium, to $16,000 of disposal-fee income; no uranium sales were made in 2021 through September.
- Net loss increased substantially, driven in part by an $11.384 million noncash warrant-liability mark-to-market loss, compared with a $592,000 gain in 2020. The liability revaluation reflects, among other inputs, the Company’s share price and volatility.
- Cash and cash equivalents rose from $4.268 million at December 31, 2020 to $33.413 million, primarily due to equity offerings, at-the-market sales, and exercises of warrants and options. Share count increased to 206.286 million at quarter-end from 170.254 million at year-end.
- Operating costs rose year over year, with management attributing the increase primarily to 2021 bonus payments. The Company also recognized $903,000 of PPP loan forgiveness in other income.
Outlook, management commentary and risks
- Management said it did not anticipate uranium sales in 2021 and planned to preserve finished inventory unless a sale became advantageous.
- Lost Creek remained at reduced production. The Company began work after quarter-end on a fourth header house in Mine Unit 2, expected to be ready for production early in 2022. Management estimated $2.2 million for near-term development programs and approximately $14 million for development during a full production ramp-up. A ramp-up decision depends on market conditions; management estimated Lost Creek could return to full production rates within nine months of such a decision.
- Management reported that major permits for Shirley Basin had been obtained and that the project was ready for construction when market conditions warrant. The LC East mine-unit permit amendment remained under review by Wyoming’s Land Quality Division.
- Management cited stronger uranium-market activity, including physical uranium fund purchases and potential U.S. government support through a national uranium reserve, but stated that DOE had not provided a timeline for launching the reserve. These developments and future uranium prices are uncertain.
- Subsequent to quarter-end, the Company received $8.2 million from at-the-market share sales and warrant exercises. Management reported $40.9 million of cash and cash equivalents as of October 27, 2021.
- Key risks include sustained weak or volatile uranium prices, the timing and cost of ramping production, permitting, financing needs, reclamation obligations, foreign exchange, and the noncash volatility of warrant-liability valuations. The Company disclosed no new legal proceedings or material changes to its previously reported risk factors.
Important facts for investors to verify
- Financial-statement discrepancies: The MD&A presents different operating costs, operating losses, net losses and per-share losses from the financial statements. For example, it reports nine-month net loss of $23.754 million and loss per share of $0.13, while the statements of operations report $23.359 million and $0.12. The cash-flow statement also begins with a $23.754 million loss. Confirm the correct amounts against the filed financial statements and XBRL data.
- Confirm the timing, remaining cost and permitting status of Lost Creek development, including the LC East amendment and Mine Unit 2 work.
- Assess whether available cash and future financing can support operating needs and planned development while uranium sales remain limited; distinguish unrestricted cash from reclamation-restricted funds.
- Review the assumptions and potential earnings impact of the warrant-liability valuation, as well as dilution from outstanding warrants, options and at-the-market share issuance.
- Verify the proposed sale of the non-core Pathfinder property; the filing describes it as held for sale and says an offer was under consideration, not that a transaction had closed.