Business context and reporting period
Ur-Energy Inc. filed this Form 10-K for the fiscal year ended December 31, 2020. The company explores, develops and produces uranium in the United States. Lost Creek, its operating in-situ recovery mine in Wyoming, was its only uranium production operation; Shirley Basin was under development and permitting.
Operations remained at reduced levels amid weak uranium-market conditions. The company sold 200,000 pounds of U3O8 in 2020, all from purchased inventory, and completed its remaining term-contract deliveries in the second quarter. It reported no spot sales.
Financial and operating metrics
Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $8.316 | $32.255 |
| Gross profit (loss), GAAP | $(4.652) | $1.980 |
| Operating costs | $8.689 | $10.258 |
| Operating loss | $(13.341) | $(8.278) |
| Net loss | $(14.785) | $(8.418) |
| Loss per share, basic and diluted | $(0.09) | $(0.05) |
| Cash used in operating activities | $8.443 | Cash provided: $3.987 |
- U3O8 sales fell to 200,000 pounds from 665,000 pounds; average realized price declined to $41.50 per pound from $48.50.
- All 2020 sales were purchased product. The company reported a $7.802 million lower-of-cost-or-net-realizable-value inventory adjustment. Excluding that adjustment, uranium sales gross profit was $3.134 million, or about a 38% margin; this is a company-presented measure, not GAAP gross profit.
- Lost Creek captured 10,789 pounds and packaged 15,873 pounds in 2020, compared with 47,957 and 50,794 pounds, respectively, in 2019. Total cumulative production through year-end was 2.734 million pounds.
- Year-end cash and cash equivalents were $4.268 million, down from $7.403 million. Restricted cash was $7.859 million and is pledged against reclamation surety bonds; it is not freely available cash. Total assets were $81.830 million and shareholders’ equity was $34.096 million.
- Financing activities provided $5.327 million, including net proceeds of $4.3 million from an August 2020 share-and-warrant offering and $0.9 million in PPP loans. Investing activities used $0.025 million.
- Debt included a $12.441 million Wyoming State Bond Loan at 5.75% and $0.9 million of PPP loans. State Bond Loan principal payments were deferred; payments were scheduled to resume October 2022, with final payment due October 2024. The loan is secured by Lost Creek assets.
- Finished and in-process uranium inventory was reported at $7.814 million on the balance sheet. Management reported approximately 268,485 pounds at the conversion facility at year-end.
Material changes versus the prior comparable period
- Revenue declined about 74%, mainly reflecting fewer pounds sold and lower realized prices; all remaining term-contract deliveries ended in Q2 2020.
- GAAP gross profit moved to a loss, including the inventory valuation adjustment. The net loss widened to $14.785 million from $8.418 million.
- Production was reduced further in Q3, and the company implemented an additional reduction in force, including 11 employees at Lost Creek and the Littleton office. Operating costs decreased about 15%, primarily due to lower labor costs.
- Cash declined by $3.135 million. Operating cash use and the August equity financing contributed to the year-end position; the prior year had generated cash from operations.
- The State Bond Loan received a further principal-payment deferral. The company also raised $4.3 million net from its August offering.
Outlook, commentary and risks
- Management said it was preserving operational readiness and would continue cost controls pending improved market conditions and new sales opportunities. It estimated cost-saving measures would exceed $7 million in 2021 and $4 million in 2022.
- Management said Lost Creek could ramp toward an annualized production rate of one million pounds, potentially within six months of a go decision; estimated development costs for that ramp-up were about $14 million. This is conditional, not a production commitment.
- Remaining permits for the LC East expansion were expected in 2021 H2; Shirley Basin permits and authorizations were expected in 2021 H1. These were forward-looking expectations, not completed approvals in the filing.
- Congress approved $75 million for a proposed national uranium reserve for FY2021, but implementation, procurement timing, future appropriations and Ur-Energy’s ability to secure contracts remained uncertain. The company said it intended to preserve U.S.-origin inventory for possible reserve sales.
- After year-end, the company completed a February 2021 offering with gross proceeds of approximately $15.2 million. Management reported unrestricted cash of $18.6 million as of February 24, 2021, before any unspecified subsequent changes.
- Principal risks include uranium-price and sales-contract uncertainty, reliance on imported supply and government policy, access to capital, debt-service and secured-collateral exposure, permitting and environmental obligations, COVID-19 effects, and the uncertainty of mineral-resource estimates. The company has no proven or probable mineral reserves; reported resources do not establish economic viability.
- The company applied for forgiveness of its PPP loans but had not received forgiveness by the filing date; it continued to account for them as debt. Management reported no impairment indicators requiring a formal impairment test, while the auditor identified impairment-indicator assessment as a critical audit matter.
Important facts for investors to verify
- Whether LC East and Shirley Basin permits were obtained on the anticipated timelines, and the cost and schedule of any restart or development.
- Whether a national uranium reserve is implemented, funded beyond FY2021 and accessible through a procurement process that produces viable contracts for the company.
- How much of the reported inventory is saleable at prices above carrying value, and the effect of future uranium prices on inventory valuation and cash realization.
- Whether PPP loans were forgiven and whether the company can meet deferred State Bond Loan obligations without jeopardizing collateral.
- Future cash burn, financing needs, dilution from shares and warrants, and whether management’s projected savings and ramp-up estimates are achieved.
- Resource disclosures are primarily under Canadian NI 43-101 standards; they are not mineral reserves and may not be comparable to U.S. reserve disclosures.