Westwater Resources, Inc. (then Uranium Resources, Inc.) — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012. The company acquired its current Westwater Resources name later; this filing reports under Uranium Resources, Inc. It explores, develops and mines uranium using in-situ recovery methods, but had no uranium production or sales in the quarter. Financial statements are unaudited.
Financial performance and position
| Metric | Q1 2012 | Q1 2011 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Operating loss | $3.70 million | $3.09 million |
| Net loss | $3.61 million | $3.03 million |
| Net loss per share, diluted | $0.04 | $0.03 |
| Cash used in operations | $2.54 million | $3.52 million |
| Cash and equivalents | $9.91 million | $2.89 million at Dec. 31, 2011; $11.14 million at Mar. 31, 2011 |
| Total current assets / current liabilities | $11.41 million / $4.55 million | $3.18 million / $3.48 million at Dec. 31, 2011 |
| Total assets | $40.43 million | $31.40 million at Dec. 31, 2011 |
Investing activities used $1.92 million, including a $917,000 loan to Neutron Energy and $965,000 of property and equipment additions. Financing provided $11.48 million, principally from equity issuance. Long-term debt was $450,000; current and long-term capital leases totaled about $104,000. Asset-retirement obligations were $4.54 million. Restricted certificates of deposit of $9.42 million support surety requirements. No operating margin was generated because there were no sales.
Changes versus the prior comparable period
- Net loss widened by about $580,000; operating loss increased about $607,000. General and administrative expense rose to $3.01 million from $2.30 million, mainly reflecting higher salaries and payroll costs and legal, accounting and public-company expenses.
- Property impairment declined to $269,000 from $306,000, while total uranium-project costs declined to $655,000 from $760,000.
- Operating cash use improved to $2.54 million from $3.52 million. Cash increased from year-end largely because of equity financing; it remained below the prior-year quarter-end balance.
- Common shares outstanding increased to 106.06 million from 94.01 million at year-end, largely following the March private placement.
Outlook, transactions and risks
- Management projected no uranium sales revenue or related cash inflows for 2012. South Texas projects remained shut in; restoration and reclamation work continued. Management expected cash, RCF funding commitments and the ATM program to cover liquidity needs for the next 12 months, but said an additional $30 million–$50 million would be needed in 2012 for Churchrock development. Management cautioned that required financing may not be available.
- The company agreed to acquire Neutron Energy, subject to approval by both companies’ shareholders. RCF provided $10 million through a share purchase and committed $20 million to retire most of Neutron’s debt; URI could elect to obtain an additional $5 million at closing. URI agreed to fund up to $4.5 million of Neutron’s operating and development budgets before closing. The filing reports $917,000 advanced by March 31 and $2.4 million advanced through May 10, 2012.
- The ATM agreement authorized up to $15 million in gross share sales; $12.9 million remained available. The filing gives inconsistent January net-proceeds figures: approximately $1.519 million in one passage and $1.491 million in another.
- Management cited uranium-price declines and higher estimated project costs in recording impairment charges. Uranium spot price was reported at $52 per pound on May 7, 2012. Other stated risks include capital availability, permitting, regulation, operating conditions, and supply and demand.
- Legal and permitting matters included ENDAUM litigation concerning New Mexico operations, a Kleberg County settlement dispute, and an April 2012 Navajo Nation order alleging trespass and requiring an appropriate right-of-way to access the Section 8 Churchrock property. URI was negotiating with the Navajo Nation; access and permitting outcomes could affect development plans.
- Texas restoration obligations are supported by letters of credit and performance bonds. The company disclosed $5.858 million of letters of credit collateralized by restricted CDs and $2.835 million of performance bonds; additional payments or collateral may be required.
Important facts for investors to verify
- Whether the Neutron acquisition received shareholder approval, closed, and triggered the stated RCF financing and debt-conversion arrangements.
- Cash burn and funding availability, especially progress toward the stated $30 million–$50 million Churchrock capital requirement and the remaining ATM capacity.
- Churchrock access rights, permitting status, and developments in the cited litigation and Navajo Nation order.
- Project restoration costs, asset-retirement estimates, surety collateral requirements, and future impairment assumptions.
- The ATM proceeds discrepancy and the timing and terms of any additional equity issuance or RCF advances.