UR-Energy Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial amounts are in U.S. dollars unless noted. Ur-Energy is an exploration-stage uranium company operating the Lost Creek in-situ recovery project in Wyoming; production remained at reduced levels.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Uranium sales | $0 | $0 |
| Cost of sales / gross loss | $1.722 million | $1.673 million |
| Operating costs | $3.298 million | $1.812 million |
| Operating loss | $5.020 million | $3.485 million |
| Net loss | $6.928 million | $7.372 million |
| Basic and diluted loss per share | $0.03 | $0.04 |
| Cash from operating activities | $(2.222) million | $(2.076) million |
- Q1 cost of sales consisted of inventory write-downs to net realizable value, not product sales. The $1.722 million adjustment was noncash.
- Operating costs rose $1.486 million year over year, mainly from Lost Creek MU2 development, bonuses, higher labor costs and professional services. Net loss improved primarily due to $1.250 million of other income from selling a royalty interest and lower warrant revaluation losses.
- At March 31, cash and cash equivalents were $46.315 million; restricted cash was $8.020 million. Cash, cash equivalents and restricted cash together increased $0.180 million during the quarter. Investing activities used $0.060 million; financing activities provided $2.440 million, including ATM share sales and option and warrant exercises.
- Current assets were $48.909 million and current liabilities $9.327 million. Gross State Bond Loan principal was $12.441 million, with a 5.75% fixed interest rate; principal payments are scheduled to resume October 1, 2022. Asset retirement obligations were $30.027 million.
- Book-value conversion-facility inventory was $7.923 million, approximately 284,000 pounds. Management estimated the finished inventory would be worth about $15.1 million at recent spot prices; it did not anticipate selling it within 12 months unless advantageous.
Operations and changes from the prior period
- Lost Creek remained in reduced production. The company reported 83 pounds captured in Q1, with no pounds drummed or shipped. It reported no uranium sales in either Q1 2022 or Q1 2021 and did not anticipate uranium sales in 2022.
- The principal year-over-year cost increase was operating expense: development expense increased by $0.489 million, primarily for MU2 advance development, and general and administrative expense increased by $0.932 million, including bonuses, labor and professional services.
- The warrant-liability mark-to-market loss was $2.973 million, versus $3.404 million in Q1 2021. This noncash valuation charge remains sensitive to share price, volatility and other model assumptions.
- In March, the company sold a royalty interest related to the Lance project for $1.3 million, recognized entirely as other income. It also continued to consider selling a non-core, unpermitted property; no completed transaction was reported.
Outlook, management commentary and risks
- Management said spot uranium pricing had strengthened, while long-term contract prices needed to support a production restart had not yet materialized. It would continue monitoring market conditions and maintaining operational readiness rather than announcing a ramp-up decision.
- At Lost Creek, the company expected header house HH 2-4 to be ready for production in Q3 2022. Management said production could reach an annualized rate of up to 1.2 million pounds and, after a restart decision, full production rates could be reached in as little as six months, subject to continued development and market conditions.
- Shirley Basin had received its major project permits and was described as construction-ready. The company was also awaiting Wyoming Land Quality Division approval for the Lost Creek permit amendment adding LC East.
- Management cited stronger nuclear-energy policy support, uranium-market supply constraints and potential U.S. uranium-reserve purchases as favorable developments, but emphasized uncertainty around implementation and market effects. Russia’s invasion of Ukraine could disrupt supply and affect prices or demand; the longer-term market impact was uncertain.
- Other material risks include supply-chain disruption, uranium price volatility, permitting, costs and execution of development plans, the need for long-term sales contracts, and the company’s history of losses. The company has not established mineral reserves; reported mineral resources are not reserves and are subject to significant economic and feasibility uncertainty.
- On March 1, 2022, John W. Cash became CEO; Jeffrey T. Klenda remained chairman and president pending his planned retirement after the June 2022 annual meeting. Subsequent to quarter-end, the company issued 0.7 million shares through its ATM facility for $1.2 million.
Key facts for investors to verify
- Whether long-term uranium contracts and market conditions support a restart decision, and what timing and costs management ultimately communicates.
- Progress on HH 2-4, the MU2 development schedule, and required approval for the LC East permit amendment.
- Actual cash use, future ATM issuance and dilution, and the timing of State Bond Loan principal repayments beginning in October 2022.
- Inventory’s realizable value versus its carrying value, and whether any inventory sales or additional write-downs occur.
- Changes in the warrant liability and the assumptions underlying its valuation, as well as progress or terms for the contemplated non-core property sale.