Ur-Energy Inc. — FY2021 Form 10-K
Business context and reporting period. Ur-Energy is a uranium recovery and exploration company focused on Wyoming, with Lost Creek as its operating project and Shirley Basin as its principal development project. This 10-K covers the fiscal year ended December 31, 2021; amounts are U.S. dollars. Despite past production, the company remains an exploration-stage issuer because it has not established proven or probable mineral reserves.
Key financial and operating metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $16,000, all disposal fees; no uranium sales | $8.316 million |
| Gross loss | $6.984 million | $4.652 million |
| Operating costs | $9.773 million | $8.689 million |
| Net loss | $22.938 million; $0.12 per share | $14.785 million; $0.09 per share |
| Cash used in operating activities | $11.698 million | $8.443 million |
| Cash and cash equivalents at year-end | $46.189 million | $4.268 million |
| State Bond Loan balance | $12.4 million principal | $12.4 million principal |
Financial statements report a $7.0 million lower-of-cost-or-net-realizable-value inventory adjustment in 2021, versus $7.802 million in 2020; excluding these adjustments, uranium gross profit was nil in 2021 and $3.134 million in 2020. The 2021 net loss included a $5.998 million non-cash warrant revaluation loss and a $903,000 gain from forgiveness of PPP loans. The filing does not provide a meaningful uranium-sales margin for 2021 because no uranium was sold.
Cash flow from investing activities was a $1.190 million use, principally for a Casper office purchase. Financing activities provided $54.871 million, including net proceeds from equity issuance and warrant and option exercises. Restricted cash was $7.966 million, pledged for reclamation obligations; total cash, cash equivalents and restricted cash were $54.155 million. Year-end inventory was carried at $7.923 million, while management estimated finished product could be worth about $14.4 million at recent spot prices. The company reported $29.915 million of asset retirement obligations and $6.224 million of current liabilities.
Lost Creek captured 251 pounds of U3O8 in 2021, compared with 10,789 pounds in 2020; no product was dried and packaged in 2021. The company reported approximately 284,000 pounds of finished inventory at year-end, including 267,049 produced pounds and 16,741 purchased pounds.
Material changes versus the prior comparable period
- Uranium revenue fell from $8.3 million in 2020 to zero in 2021; the $16,000 of reported revenue was disposal-fee income. FY2020 sales were 200,000 pounds of purchased uranium at an average $41.50 per pound.
- Net loss widened by $8.153 million, while operating costs rose $1.084 million, mainly reflecting bonuses and Lost Creek development drilling. Warrant revaluation losses increased substantially year over year.
- Cash and cash equivalents rose by $41.921 million, primarily from financing. The company raised about $55.2 million during 2021, including public-offering and at-market sales proceeds, warrant exercises and option exercises.
- Common shares outstanding increased from 170.3 million to 216.8 million at year-end. Additional options, restricted share units and warrants may result in further dilution.
- The state loan’s principal payments were deferred; quarterly payments were scheduled to resume October 1, 2022, with final payment due October 1, 2024.
Outlook, management commentary and risks
Management said its cash position and inventory provide funds to maintain operational readiness. It expected to complete a Lost Creek Mine Unit 2 drilling and development program estimated at $2.2 million. Management stated that Lost Creek could ramp toward an annualized wellfield production rate of up to 1.2 million pounds, potentially within nine months after a “go” decision; full ramp-up development costs were estimated at about $14 million. These are plans and estimates, not committed production guidance. No current uranium sales agreements were in place, and management did not expect to sell existing finished inventory in 2022 at prevailing spot prices.
Shirley Basin received its major permits and authorizations in 2021, and management described the project as ready for construction when market conditions warrant. A satellite plant using the Lost Creek facility for processing, drying and packaging was the current plan. The Lost Creek permit-to-mine amendment for LC East remained under review, with completion anticipated in 2022.
Uranium spot and long-term prices improved during 2021, but management emphasized that utility term contracting remained insufficient to support a production restart. The proposed U.S. national uranium reserve, initially funded at $75 million, had not yet been implemented; its timing, procurement terms and the company’s potential role were uncertain. Other significant risks include uranium-price volatility and competition from state-supported producers, dependence on future financing and equity issuance, labor and supply-chain constraints, permitting and environmental obligations, operational hazards, and geopolitical uncertainty following Russia’s invasion of Ukraine. The company also disclosed that about $53.7 million of cash and restricted cash was above applicable deposit-insurance coverage limits.
Subsequent to year-end, John W. Cash became CEO effective March 1, 2022; Jeffrey T. Klenda remained Chairman and President pending his planned retirement in June 2022. Management reported effective disclosure controls and effective internal control over financial reporting; the auditor did not provide an internal-control attestation. The independent auditor issued an unqualified opinion on the financial statements.
Important facts for investors to verify
- Whether the uranium reserve program is implemented, its purchasing terms, and whether Ur-Energy secures new term sales contracts at prices that support production.
- Whether Lost Creek’s LC East permit amendment is approved and the timing, cost and execution of planned wellfield work and any production ramp-up.
- Whether Shirley Basin construction proceeds, and the project’s actual capital, operating and permitting requirements.
- Current unrestricted cash, cash burn, inventory saleability and valuation, remaining debt-payment schedule, and compliance with State Bond Loan covenants.
- The assumptions behind mineral-resource estimates and economic assessments: the company reports resources, not reserves, and mineral resources do not demonstrate economic viability. Reported resource estimates depend on projected prices and costs.
- Potential dilution from outstanding warrants, options and equity issuance; assess the warrant liability’s sensitivity to share-price and volatility assumptions.