Westwater Resources, Inc. (issuer named in filing: Uranium Resources, Inc.) — Q1 2017 Form 10-Q
Quarter ended March 31, 2017. The filing describes an energy-metals exploration and development company focused on uranium projects in the United States and Turkey and lithium exploration in Nevada and Utah. It reported no revenue in either Q1 2017 or Q1 2016.
Financial performance and position
- Net income: $1.845 million, or $0.09 per share, versus a $4.273 million net loss, or $0.86 per share, in Q1 2016. The improvement was primarily driven by a $4.422 million gain on the sale of Hydro Resources Inc. (HRI), lower interest expense and lower general and administrative expenses.
- Expenses: Operating expenses were $2.607 million, down from $3.078 million. Mineral property expenses rose to $0.769 million from $0.731 million; general and administrative expenses declined to $1.668 million from $2.145 million. With no revenue, operating margins are not meaningful.
- Cash flow: Operating activities used $3.287 million, compared with $2.205 million used a year earlier. Investing activities provided $1.973 million, primarily from the HRI sale; financing activities provided $7.887 million, reflecting equity proceeds partly offset by debt repayment. Cash and cash equivalents ended the quarter at $9.882 million, excluding $3.941 million of restricted cash.
- Liquidity and debt: Working capital was $11.4 million, versus a $4.3 million deficit at December 31, 2016. The company repaid the remaining $5.5 million RCF convertible loan in February; no obligations remained under that loan. Total liabilities were $7.348 million, including $4.907 million of asset retirement obligations.
- Assets and equity: Total assets were $66.380 million and stockholders’ equity was $59.032 million at March 31, 2017. Equity offerings increased shares outstanding substantially during the quarter.
Material changes, outlook and risks
- The January sale of HRI, which held the Churchrock and Crownpoint projects, generated $2.5 million in stated cash consideration, a $5.0 million promissory note, Laramide shares and warrants, and a retained 4% Churchrock net smelter returns royalty. The filing recorded a $4.422 million disposal gain. The note is payable in installments through 2020; interest is deferred until March 31, 2018. The royalty’s recorded fair value was nil.
- Two Q1 equity offerings generated net proceeds of $8.9 million and $4.5 million. On April 14, the company established an at-the-market offering of up to $30 million. Management said working capital was expected to fund liquidity through March 31, 2018, and that the ATM facility and existing working capital were expected to support operations in 2018 and beyond. These are expectations, not assurances; additional financing may not be available on acceptable terms.
- Management planned exploration and geological evaluation of lithium properties in 2017–2018 and said it would advance the Temrezli uranium project when uranium prices permit economic development. No production or revenue guidance was provided.
- Key risks include access to capital, uranium and lithium prices, permitting and regulation, foreign operations, project operating conditions, geology, and the ability to complete transactions. The company reported material environmental compliance and approximately $4.9 million in reclamation obligations. A Kingsville permit proceeding was resolved after quarter-end, with payments totaling $16,683.
- Subsequent to quarter-end, Laramide shareholder approval led the company to record an additional $0.5 million fair value for warrants received in the HRI sale. The filing’s ATM update reports net proceeds of “$37,152 million” as of May 11, 2017; that stated unit/value is unclear and should be checked against the original filing.
Most important facts to verify
- Confirm the issuer identity and any relationship to Westwater Resources, Inc.; the filing itself names Uranium Resources, Inc.
- Verify the ATM proceeds figure reported as “$37,152 million” and the remaining offering capacity.
- Review the collectability, repayment schedule and valuation assumptions for Laramide’s $5.0 million note, as well as the contingent value of the royalty and warrants.
- Assess cash burn, future financing needs and the basis for management’s liquidity outlook, given the absence of revenue and continued operating cash outflows.