Westwater Resources, Inc. (then Uranium Resources, Inc.) — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. The filing issuer is identified as Uranium Resources, Inc. All financial amounts below are in thousands of dollars, except per-share data and where noted.
Business context
The company explored, developed, and historically produced uranium using in-situ recovery methods, but had ceased production in 2009. It reported no properties in production and did not anticipate significant uranium sales revenue or related cash inflows in 2015. Its portfolio included South Texas projects and mineral holdings in New Mexico.
Financial results and position
| Metric | Q1 2015 / March 31, 2015 | Comparable period / December 31, 2014 |
|---|---|---|
| Revenue | No significant sales revenue reported | No significant sales revenue reported |
| Operating expenses | $3,101 | $3,702 in Q1 2014 |
| Net loss | $3,761; $0.14 per share | $3,460; $0.15 per share in Q1 2014 |
| Cash used in operations | $2,699 | $3,750 in Q1 2014 |
| Cash and cash equivalents | $8,381 | $5,570 at December 31, 2014 |
| Working capital | $6,792 | $3,761 at December 31, 2014 |
| Total liabilities | $12,452 | $11,967 at December 31, 2014 |
| Convertible loan | $8,000 principal; $4,794 carrying value | $8,000 principal; $4,345 carrying value |
| Asset retirement obligations | $4,260 total; $197 current | $4,196 total; $196 current |
There were no meaningful revenue or margin measures to report given the absence of production and significant sales. Interest expense was $675, including $449 of non-cash debt-discount amortization. Restricted cash was $3,941. Financing activities provided $5,492, primarily from an equity offering; investing activities provided $18 from equipment disposal.
Material changes versus Q1 2014
- Net loss increased by $301, primarily because the prior-year period included a $654 derivative gain; the loan no longer qualified as a derivative. Higher interest expense, up $261, also contributed.
- General and administrative expense fell by $547 to $2,095, and management reported cash G&A expense down approximately 30%, reflecting cost reductions and restructuring.
- Cash used in operations decreased by $1,051. Cash and working capital increased during the quarter following equity fundraising.
- On March 6, the company raised $6,000 gross, or $5,389 net, in a registered direct offering of 4.0 million units. Each unit included one common share and a warrant for 0.55 shares at $2.00 per share.
Outlook, risks, and contingencies
- Management expected existing cash to fund planned operations through Q1 2016, while continuing to reduce expenditures and seek additional financing. This was an estimate, not a guarantee; the company cautioned that further funding might not be available on acceptable terms or in sufficient amounts.
- The $8,000 secured convertible loan bears 10% interest and matures December 31, 2016. RCF may convert at $2.60 per share; it held 23.7% of outstanding shares as of May 12, 2015. Additional financing or inability to meet obligations could require changes to business plans.
- Rosita plugging and abandonment was underway: nearly all wells in Production Area 1 had been reclaimed and Production Area 2 was approximately 56% complete. Management expected to complete the plugging and abandonment phase in Q4 2015. Total recorded reclamation obligations were $4,260.
- Five preliminary Butler Ranch drill holes encountered multiple zones of anomalous to low-grade uranium mineralization. The company also reported completing the first phase of exploration at Alta Mesa Este in Q2 2015.
- Risks cited include financing availability, uranium prices and supply-demand conditions, Navajo Nation actions, permitting, regulation, operating conditions, weather, geology, and litigation. The filing reported no material changes to previously disclosed legal proceedings or risk factors, and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether cash burn, planned spending, and financing access support the stated runway through Q1 2016.
- Debt terms, accrued interest, potential conversion dilution, and repayment capacity at the December 2016 maturity.
- Actual progress and costs for Rosita reclamation, and any changes to the $4,260 asset retirement obligation.
- Exploration results and permitting or development milestones for Butler Ranch and Alta Mesa Este; initial Butler Ranch results were described as anomalous to low-grade.
- Share dilution: 29,641,527 common shares outstanding at March 31 and 29,777,989 as of May 12, 2015; also assess the offering warrants and remaining ATM capacity.