Ur-Energy Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015, with quarterly data for Q4 2015. Unless noted, amounts are in U.S. dollars. Ur-Energy is a uranium exploration-stage company under SEC Industry Guide 7, despite operating its Lost Creek in-situ recovery (ISR) mine in Wyoming since 2013; it had not established proven or probable mineral reserves.
Financial and operating performance
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $41.9 million | $29.3 million |
| Gross profit | $12.6 million | $11.5 million |
| Net loss | $0.8 million | $8.7 million |
| Cash from operating activities | $5.4 million | $1.9 million |
| Cash and cash equivalents, year-end | $1.4 million | $3.1 million |
| Working capital | $(7.5) million | $(2.6) million |
| Total assets | $95.8 million | $103.5 million |
Uranium sales were 925,000 pounds at an average $45.20 per pound, including 725,000 pounds of company-produced material and 200,000 purchased pounds. Uranium sales gross profit was $12.5 million, or $13.53 per pound and approximately 30% margin. Lost Creek captured 783,547 pounds and packaged 727,245 pounds during 2015.
In Q4, revenue was $7.8 million and net income was $0.6 million, compared with Q4 2014 revenue of $6.6 million and a $2.5 million net loss. Q4 uranium sales totaled 225,000 pounds at an average $34.47 per pound; uranium sales gross profit was $1.8 million, with a 23.5% margin.
At year-end, notes payable had $33.2 million of scheduled principal outstanding: $28.9 million on the State Bond Loan, secured by Lost Creek, and $4.3 million on the RMB facility, secured by Pathfinder assets. The RMB facility carried an approximately 8.75% rate and was due by December 2016; the State Bond Loan carries 5.75% interest and runs through October 2021. Restricted cash was $7.6 million, principally supporting reclamation surety bonds, and should not be treated as freely available liquidity. The company used $7.0 million in financing activities during 2015, largely for debt repayments.
Changes versus prior year
- Revenue rose approximately 43%, while uranium pounds sold increased from 517,760 to 925,000. The average realized price fell from $51.22 to $45.20 per pound, primarily because of lower-priced spot sales.
- Net loss narrowed from $8.7 million to $0.8 million. A $3.3 million income-tax recovery related to the Pathfinder acquisition was a major contributor; operating loss also narrowed to $1.9 million from $7.0 million.
- Production increased: pounds captured rose from 596,176 to 783,547, while produced pounds sold increased from 517,760 to 725,000. Produced cost per pound sold fell to $29.53 from $34.49, mainly as fixed costs were spread over higher production.
- Year-end cash declined by $1.7 million, and the working-capital deficit widened by $4.9 million. Long-term liabilities declined to $50.0 million from $60.4 million, while asset retirement obligations rose to $26.1 million from $23.4 million.
- The company submitted a Wyoming mine-permit application for Shirley Basin in December 2015 and advanced permitting applications for the Lost Creek KM horizon and LC East.
Outlook, risks and notable items
- 2016 outlook: Management targeted production of approximately 60,000 pounds per month, or 650,000–750,000 pounds for the year, with production aligned to contracted deliveries and market conditions. Contracted 2016 deliveries total 662,000 pounds. The outlook cites an average realizable price of $47.61 per pound; another section describes the average as approximately $47.
- Ten utility offtake agreements cover deliveries through 2021. The company said these commitments represent a significant portion of anticipated production, but no single contract is a substantial portion of projected annual production.
- Management reported that some first-quarter 2016 deliveries were shifted to mid-year, creating near-term cash-flow unevenness. It raised approximately $5.9 million net in a February 2016 share placement and reported $6.8 million of unrestricted cash as of February 25, 2016. It said additional funding was not expected to be needed in 2016 unless advantageous, while acknowledging future financing is not assured.
- Uranium prices remained weak: year-end 2015 spot and long-term prices were $34.23 and $44.00 per pound, respectively; the reported spot price for the week of February 22, 2016 was $33.50. Lower prices may constrain spot-sale economics and project development.
- Key risks include the absence of SEC-defined mineral reserves and the uncertainty of resource estimates; production, recovery, and wellfield performance; uranium-price volatility; negative working capital and debt-service requirements; dependence on financing; permitting and environmental regulation; reclamation obligations; and the possibility of additional operating delays or costs. Proposed EPA groundwater-restoration rules could add requirements and costs, with final effects uncertain.
- The $3.3 million tax recovery reflected management’s conclusion that Pathfinder would be integrated into operations and that tax attributes could offset the acquisition-related deferred tax liability. The company continued to maintain a full valuation allowance on deferred tax assets.
- The filing reports effective disclosure controls and internal control over financial reporting; PwC issued an unqualified audit opinion. No legal proceedings or unresolved SEC staff comments were reported.
Most important facts for investors to verify
- Whether 2016 production, delivery timing, and realized prices align with the 650,000–750,000-pound production target and 662,000-pound contract obligation.
- Available unrestricted cash, working-capital needs, and the ability to meet scheduled debt payments, particularly the RMB obligations due in 2016.
- Progress and timing of regulatory approvals for Lost Creek expansions and Shirley Basin, and any resulting capital or compliance costs.
- Whether production and unit costs remain on track as Lost Creek wellfields mature, and whether uranium pricing supports spot sales and future development.
- Reclamation and surety requirements, including the $26.1 million recorded asset retirement obligation and $7.6 million of restricted cash.
- Reconcile disclosure differences: the February share-placement costs are described as both $0.5 million and $0.6 million, and the 2016 contracted-price estimate appears as both approximately $47 and $47.61 per pound.