Ur-Energy Inc. — Q1 2023 Form 10-Q
Quarter ended March 31, 2023; filed May 1, 2023. Ur-Energy is a uranium recovery and development company operating the Lost Creek ISR facility in Wyoming and developing the Shirley Basin project. Financial amounts below are U.S. dollars; amounts are in millions unless otherwise noted.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Sales | $6.447 | None |
| Gross loss (GAAP) | $(0.057) | $(1.722) |
| Operating costs | $3.065 | $3.298 |
| Operating loss | $(3.122) | $(5.020) |
| Net loss | $(0.713) | $(6.928) |
| Comprehensive loss | $(1.030) | $(7.036) |
| Cash from operating activities | $2.327 | $(2.222) |
| Capital asset purchases | $(0.665) | $(0.060) |
- Q1 sales were 100,000 pounds of U3O8 delivered to the DOE uranium reserve at $64.47 per pound. The sale included 43,259 produced pounds and 56,741 purchased pounds; it was not evidence of current production at commercial scale.
- Reported cost of sales included a $2.875 million lower-of-cost-or-net-realizable-value inventory adjustment. Excluding that adjustment, management reported $2.818 million gross profit on the DOE sale, or $28.18 per pound and a 43.7% margin; these are management’s non-GAAP measures.
- Net loss improved by $6.215 million year over year, reflecting the new sale and a $4.840 million year-over-year swing in warrant revaluation (a $1.867 million gain in 2023 versus a $2.973 million loss in 2022). The warrant gain is noncash and valuation-sensitive. Q1 2022 also included $1.250 million of other income from a royalty-interest sale.
- At March 31, cash and cash equivalents were $77.276 million, restricted cash was $8.223 million, and total current assets were $84.759 million. The company reported $73.0 million of unrestricted cash as of April 26, 2023.
- Current liabilities were $8.802 million. State Bond Loan carrying amounts were $5.444 million current and $4.304 million long-term; stated principal outstanding was $9.8 million, at 5.75%, with final payment due October 2024. Asset retirement obligations were $30.861 million.
- Cash increased by $44.359 million during the quarter, largely due to $43.2 million net proceeds from the February equity-and-warrant offering. Financing cash flow was $42.697 million after debt repayment and other financing activity.
Material changes and operations
- The February offering issued 39.1 million common shares with accompanying warrants and generated approximately $43.2 million net proceeds. Shares outstanding increased from 224.7 million at year-end 2022 to 264.7 million at March 31, 2023; the offering also created a $9.109 million initial warrant liability.
- Inventory fell from $9.903 million to $6.275 million following the DOE delivery and inventory valuation adjustment. Accounts payable and accrued liabilities rose to $1.858 million from $1.168 million.
- Operating costs decreased $0.233 million year over year. Lower exploration and G&A costs more than offset increased development spending, principally for Lost Creek Mine Unit 2 construction and staffing.
- Lost Creek production had been deliberately reduced in 2020 and remained low through 2022. Q1 2023 production captured was 156 pounds. Management said required operating staff were hired and targeted bringing Header House 2-4 online in Q2 2023; winter weather and construction work affected progress.
Outlook, risks and contingencies
- Management expected 2023 sales of 280,000 pounds for approximately $17.3 million, including the completed DOE sale, at an anticipated average price of $61.89 per pound. The company said it had sufficient conversion-facility inventory for planned 2023 deliveries; 180,000 pounds were expected to be delivered in Q3 and Q4.
- Two multi-year agreements provide for a base amount of 600,000 pounds annually during 2024–2028, with possible deliveries under one agreement into 2029. Management estimated approximately $205 million of total revenue from those annual base deliveries and the 2023 sales, and said pricing was expected to be profitable on an all-in company cost basis. Actual delivery, pricing and profitability remain uncertain.
- Lost Creek Mine Unit 2 construction and development continued. The company had Wyoming approval for certain license amendments but was awaiting Land Quality Division approval of the related permit amendment; management anticipated review completion in the first half of 2023. Shirley Basin had its major permits, but planned Q1 monitoring-well drilling was deferred due to weather and Lost Creek priorities. Construction timing depends on market conditions and sales contracts.
- Management described uranium-market support and stronger term pricing, but noted uncertainty around the duration of price increases, proposed restrictions on Russian nuclear-fuel imports, supply-chain disruption and possible U.S. policy support. Spot uranium was reported at $53.95 per pound as of April 26, 2023.
- Key risks include ramp-up execution, safe and compliant operations, permitting, cost and schedule overruns, uranium prices and sales, supply-chain constraints, and the company’s history of operating losses and lack of established mineral reserves. Mineral resources—particularly inferred resources—are not mineral reserves and are not assurances of economic extraction.
- Restricted cash of $8.223 million was pledged as collateral; related surety bonds provided $28.4 million of reclamation coverage. Approximately $84.9 million of cash and restricted cash was not covered by the cited deposit-insurance programs, creating financial-institution concentration risk. The filing reported no new legal proceedings, no material changes to previously disclosed risk factors, and no material off-balance-sheet arrangements.
Investor verification points
- Confirm progress on Lost Creek’s production ramp-up, Header House 2-4 commissioning, and actual pounds produced and delivered.
- Track completion of the LC East permit amendment and whether Shirley Basin receives development funding and sales contracts.
- Reconcile planned 2023 deliveries, inventory availability and realized prices against the $17.3 million sales outlook; verify the timing, quantities and pricing of 2024–2028 contract deliveries.
- Assess cash use for development, operating costs and debt service, as well as the effects of additional equity issuance and outstanding warrants on dilution.
- Monitor inventory valuation adjustments, uranium pricing, warrant-liability remeasurement, reclamation obligations and uninsured cash concentration.