Ur-Energy Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unless noted otherwise, financial figures below are in U.S. dollars; millions are rounded. Ur-Energy is a uranium recovery company operating Lost Creek in Wyoming and developing Shirley Basin. The company identifies as an SEC exploration-stage issuer and has not established mineral reserves at Lost Creek.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Sales | $39,000 | $19,000 | $6.486 million | $19,000 |
| Gross loss | $2.912 million | $1.643 million | $2.969 million | $3.365 million |
| Operating costs | $6.019 million | $3.460 million | $9.084 million | $6.758 million |
| Net loss | $7.284 million | $353,000 | $7.997 million | $7.281 million |
| Loss per share, basic and diluted | $0.03 | Nil as reported | $0.03 | $0.03 |
- Q2 sales were disposal fees; there were no uranium sales in the quarter. In January, the company sold 100,000 pounds to the U.S. DOE uranium reserve program for $6.447 million, or $64.47 per pound.
- Six-month GAAP cost of sales was $9.455 million, including $5.826 million of inventory lower-of-cost-or-net-realizable-value adjustments. Excluding those adjustments, management reported $2.818 million gross profit on the DOE sale, a 43.7% gross margin. These are management-presented measures, not the overall GAAP result.
- At June 30, cash and cash equivalents were $67.958 million; restricted cash was $8.323 million. Total current assets were $75.454 million and current liabilities were $8.104 million.
- Six-month cash used in operations was $4.962 million; investing used $1.186 million; financing provided $41.266 million, largely reflecting the February equity offering. Cash, cash equivalents and restricted cash totaled $76.281 million at period end.
- Notes payable had a $8.416 million net carrying amount ($5.523 million current and $2.893 million long-term); the State Bond Loan principal balance was $8.47 million before deferred financing costs. The loan bears 5.75% interest, with final payment due October 2024. Asset retirement obligations were $30.985 million.
- Shareholders’ equity was $89.411 million. Common shares outstanding rose from 224.7 million at year-end 2022 to 264.7 million at June 30, primarily following the February public offering.
Material changes versus prior period
- Six-month sales increased from $19,000 to $6.486 million, reflecting the DOE uranium sale; there were no uranium sales in the first half of 2022.
- Q2 net loss rose to $7.284 million from $353,000. The quarter included a $1.194 million warrant revaluation gain, versus $4.888 million a year earlier; operating costs also rose, principally due to Lost Creek Mine Unit 2 development. Six-month net loss increased to $7.997 million from $7.281 million.
- Six-month operating costs increased by $2.326 million, mainly from development spending on Lost Creek Mine Unit 2, including additional staffing and drilling, as well as unusually severe winter-related costs.
- Cash and cash equivalents increased from $33.003 million at December 31, 2022, to $67.958 million at June 30, 2023, supported by the February offering, which generated approximately $43.1 million net proceeds.
- Inventory fell from $9.903 million to $6.275 million, including the DOE delivery and inventory valuation adjustments.
Outlook, management commentary and risks
- Lost Creek restarted commercial production flow from Header House 2-4 in mid-May. Management said production grades and rates increased late in June and expected further ramp-up as additional header houses come online, including HH 2-5 later in 2023.
- Management forecast 2023 sales of 280,000 pounds for approximately $17.3 million, including 180,000 pounds scheduled for delivery in Q3 and Q4. It reported 223,790 pounds in conversion-facility inventory as of August 3, 2023, with sufficient inventory for remaining 2023 deliveries.
- The company reported three multi-year sales agreements. It anticipated nearly 600,000 pounds of deliveries in 2024 and stated that contract prices were expected to be profitable on a company-wide, all-in cost basis; delivery, pricing and production outcomes remain uncertain.
- Shirley Basin has its major permits and authorizations, but management said construction depends on market conditions and securing supporting offtake contracts. The Lost Creek LC East permit amendment still awaited WDEQ Land Quality Division approval; management anticipated review completion in 2023.
- Management highlighted ramp-up execution, supply-chain delays, uranium-market and spot/term price uncertainty, regulatory approvals, capital needs, operating and reclamation costs, and geopolitical developments affecting nuclear-fuel supply. Production and sales expectations are forward-looking and subject to these and other risks.
- The company reported $63.7 million of unrestricted cash as of August 3, 2023. Cash balances carry concentration risk: approximately $75.7 million of cash and restricted cash was not covered by deposit-protection programs at June 30.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. No new legal proceedings or material changes to reported risk factors were noted.
Important facts for investors to verify
- Whether Lost Creek’s production ramp-up and HH 2-5 schedule are achieved, and how quickly production costs and inventory valuation adjustments change.
- Actual delivery volumes, timing and realized prices under DOE and multi-year contracts, including the forecast 2023 deliveries and 2024 commitments.
- Final regulatory approval timing for the LC East amendment and the remaining approvals for the new Lost Creek disposal well.
- Cash use, additional financing or dilution needs, and repayment of the State Bond Loan through October 2024.
- Inventory valuation assumptions and the significant non-cash warrant-liability revaluation effects on reported earnings.