Ur-Energy Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial statement amounts below are in U.S. dollars and thousands unless stated otherwise.
Business context
Ur-Energy is a uranium recovery and development company operating the Lost Creek in-situ recovery facility in Wyoming. Production remained at intentionally reduced levels; the company continued advance development at Lost Creek and preparations at Shirley Basin. The company reported no uranium sales in the first nine months of 2022.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Sales | $0 | $9 | $19 | $16 |
| Gross loss | $(1,655) | $(1,694) | $(5,020) | $(5,195) |
| Operating costs | $2,910 | $2,189 | $9,668 | $6,778 |
| Operating loss | $(4,565) | $(3,883) | $(14,688) | $(11,973) |
| Net loss | $(4,962) | $(9,108) | $(12,243) | $(23,359) |
| Loss per share | $(0.03) | $(0.04) | $(0.06) | $(0.12) |
- Q3 gross loss largely reflected a $1.655 million inventory lower-of-cost-or-net-realizable-value adjustment. The comparable nine-month adjustment was $5.039 million.
- Nine-month operating cash use was $12.336 million; investing cash use was $0.213 million; financing provided $6.509 million. Cash, cash equivalents and restricted cash decreased by $6.170 million to $47.985 million, including $39.920 million of unrestricted cash.
- At September 30, current assets were $51.202 million and current liabilities $8.605 million. Inventory was $9.903 million, consisting of uranium held at a conversion facility. The company reported $12.356 million in notes payable, including $5.290 million current; the State Bond Loan bears fixed interest of 5.75%, with principal payments having resumed in October 2022 and final payment due October 2024.
- Asset retirement obligations were $30.553 million; restricted cash of $8.065 million supported reclamation surety bonds. Shareholders’ equity was $66.543 million. Common shares outstanding were 223.126 million at September 30.
Changes versus comparable periods
- Nine-month net loss narrowed by $11.116 million, primarily because the prior-year period included a much larger warrant-liability revaluation loss. The 2022 period recorded a $1.620 million revaluation gain versus an $11.384 million loss in 2021; these amounts can be volatile and are not indicative of operating performance.
- Operating loss increased by $2.715 million for the first nine months. Development expense rose $2.485 million, mainly from Lost Creek’s MU2 advance-development program; general and administrative expense rose $0.681 million.
- The company sold a royalty interest in March 2022 for $1.3 million, recognized as other income. It also purchased 40,000 pounds of uranium for $2.0 million during the first nine months.
Outlook, commentary and risks
- In Q3, the company entered a six-year agreement with a U.S. utility for a base delivery of 200,000 pounds annually beginning in the second half of 2023. Management expects pricing to be profitable on a company-wide, all-in-cost basis and to escalate annually. The agreement is conditioned on obtaining additional sales commitments to support a development decision; management said discussions with other buyers were ongoing.
- Management said Lost Creek could reach full production within as little as six months after a formal ramp-up decision, once advance work is complete. No formal ramp-up decision or production guidance was provided. The company said it would maintain safe, compliant reduced-level operations until market conditions support a decision.
- The company had submitted a bid to the DOE/NNSA uranium reserve solicitation and was awaiting award results; success was not assured. Management reported approximately $37.3 million of cash and cash equivalents at October 27, 2022, and about 324,000 pounds of finished inventory, valued by management at approximately $17.1 million using recent spot prices.
- Management cited uranium spot-market volatility, supply-chain disruption, uncertainty around Russian-related trade and geopolitical developments, and the need for additional offtake agreements and financing as risks. The company has not established mineral reserves; mineral-resource estimates, particularly inferred resources, do not establish economic or legal mineability.
- Other project developments: Shirley Basin had received its major permits and was described as construction ready. The company was awaiting a Wyoming permit amendment for additional Lost Creek/LC East recovery areas. Casper facility construction was underway, with completion expected in mid-2023.
Key facts for investors to verify
- Whether additional utility contracts are secured and whether the company makes a formal Lost Creek ramp-up decision.
- Delivery terms, pricing protections, and conditions in the six-year sales agreement, and the outcome of the DOE/NNSA reserve bid.
- Cash burn, unrestricted cash availability, upcoming bond-loan principal payments, and any further equity issuance under the at-market facility.
- Inventory valuation and saleability, including the impact of further NRV adjustments and uranium-price changes.
- Regulatory approval timing, development costs, supply-chain availability, and the assumptions underlying project resources and reclamation obligations.