Business context and reporting period
Ur-Energy Inc. is a Canadian-incorporated, exploration-stage uranium company operating the Lost Creek in-situ recovery mine in Wyoming. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2020. Financial amounts below are in U.S. dollars unless noted.
Financial and operating highlights
| Metric | Q3 2020 | Nine months 2020 | Comparable 2019 |
|---|---|---|---|
| Sales | $0 | $8.304 million | Q3: $5.115 million; nine months: $21.406 million |
| Gross profit (loss) | ($1.840 million) | ($3.158 million) | Q3: ($2.400 million); nine months: ($2.418 million) |
| Operating costs | $2.157 million | $6.446 million | Q3: $2.620 million; nine months: $7.920 million |
| Net loss | ($3.696 million) | ($9.564 million) | Q3: ($4.200 million); nine months: ($10.533 million) |
| Loss per share, basic and diluted | ($0.02) | ($0.06) | Q3: ($0.03); nine months: ($0.07) |
- No uranium was sold in Q3. Nine-month sales were 200,000 pounds, all purchased product, at an average $41.50 per pound. The company completed its remaining term-contract deliveries in Q2.
- Q3 cost of sales included a $1.840 million inventory lower-of-cost-or-net-realizable-value adjustment; the nine-month adjustment was $6.296 million. Excluding that adjustment, management reported $3.1 million of gross profit on nine-month uranium sales, or approximately 38% margin.
- Nine-month operating cash use was $5.844 million versus $0.450 million in 2019. Investing activities used $0.020 million; financing provided $5.099 million. Ending cash, cash equivalents and restricted cash were $14.500 million, including $6.643 million unrestricted cash and $7.857 million restricted cash.
- At September 30, current assets were $15.219 million and current liabilities $3.222 million. The current assets include $7.619 million of inventory. Shareholders’ equity was $38.876 million.
- Notes payable had a $13.166 million balance-sheet carrying value: $12.687 million long-term and $0.479 million current. Principal outstanding included a $12.441 million State Bond Loan and $0.897 million in PPP loans, before deferred financing costs. The State Bond Loan bears 5.75% interest.
- Inventory was valued at $7.619 million, including approximately 268,485 pounds at the conversion facility. Q3 Lost Creek production included 2,503 pounds captured and 4,926 pounds drummed.
Material changes versus the prior comparable period
Nine-month sales fell to $8.304 million from $21.406 million, reflecting lower deliveries; Q3 sales were zero versus $5.115 million in Q3 2019. Despite no Q3 sales, net loss narrowed to $3.696 million from $4.200 million, while the nine-month net loss improved to $9.564 million from $10.533 million. Operating costs declined year over year, mainly from lower labor costs and no 2019 performance bonuses, partly offset by increased development costs for LC East and Shirley Basin permitting.
Operating cash use increased substantially year over year, which management attributed primarily to 2019 sales of previously produced inventory and 2020 sales of purchased product. Cash and cash equivalents declined by $0.760 million from December 31, 2019. An August share-and-warrant offering raised $4.680 million gross and approximately $4.3 million net; shares outstanding increased to 169,667,672 by September 30.
Outlook, management commentary and risks
- Management said it did not anticipate sales in Q4 2020 and expected to sell a substantial portion of finished inventory in 2021 at then-prevailing spot prices, subject to market conditions or additional financing. Unrestricted cash was $5.9 million as of October 28, 2020.
- On October 6, 2020, after quarter-end, Wyoming approved another six-quarter deferral of State Bond Loan principal. Payments are scheduled to resume in October 2022, with final payment in October 2024. Combined with cost reductions, management estimated savings exceeding $7 million in 2021 and $4 million in 2022.
- Production has been reduced at Lost Creek amid weak uranium markets; staffing has been reduced. Management says the site can return to a one-million-pound annualized production rate, with a ramp-up as short as six months and estimated development costs of approximately $14 million.
- Management anticipated LC East approvals in the first half of 2021 and Shirley Basin permits in Q1 2021. Timing and approval remain uncertain.
- The company expects its $0.9 million PPP loans to qualify for forgiveness but had not yet applied for or received forgiveness; the loans remain recorded as debt.
- Management described potential support from a proposed U.S. uranium reserve and changes to Russian import limits, but funding, legislation, implementation and market impact remained uncertain. The reported spot price was $29.60 per pound as of October 28, 2020.
- Key risks include persistent low uranium prices and reliance on future sales or financing, possible shareholder dilution, COVID-19 impacts, regulatory and permitting delays, PPP forgiveness uncertainty, and substantial reclamation obligations. Restricted cash of $7.857 million supports surety bonds; estimated future reclamation costs including inflation were $39.5 million. The company has not established mineral reserves.
Important facts for investors to verify
- Whether and when the company sells its finished uranium inventory, and the realized spot price and cash proceeds.
- Cash use, unrestricted liquidity and access to further financing, including any use of the $10 million at-the-market facility or $100 million shelf registration.
- PPP loan forgiveness outcome and the effect of the State Bond Loan deferral on future debt service.
- Progress and actual timing of LC East and Shirley Basin permits, and the costs and timeline required to restart or expand production.
- Subsequent inventory valuation adjustments, production levels, reclamation funding requirements and any material changes in uranium-market policy or prices.