United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

 

 

 

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD OF _________ TO _________.

 

Commission File Number: 001-33905

 

UR-ENERGY INC.

(Exact name of registrant as specified in its charter)

 

 

 

Canada

Not Applicable

State or other jurisdiction of incorporation or organization

(I.R.S. Employer Identification No.)

 

10758 West Centennial Road, Suite 200
Littleton, Colorado 80127
(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code: 720-981-4588

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

                          Common stock

 

       URG (NYSE American); URE (TSX)

 

                      NYSE American; TSX

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer ☐                     Accelerated filer ☑               Non-accelerated filer ☐             Smaller reporting company ☑

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐No ☑

 

As of May 6, 2020,  there were 160,478,059 shares of the registrant’s no par value Common Shares (“Common Shares”), the registrant’s only outstanding class of voting securities, outstanding.

 



 

 

When we use the terms “Ur-Energy,” “we,” “us,” or “our,” or the “Company” we are referring to Ur-Energy Inc. and its subsidiaries, unless the context otherwise requires. Throughout this document we make statements that are classified as “forward-looking.” Please refer to the “Cautionary Statement Regarding Forward-Looking Statements” section below for an explanation of these types of assertions.

Cautionary Statement Regarding Forward-Looking Information

 

This report on Form 10-Q contains "forward-looking statements" within the meaning of applicable United States (“U.S.”) and Canadian securities laws, and these forward-looking statements can be identified by the use of words such as "expect," "anticipate," "estimate," "believe," "may," "potential," "intends," "plans" and other similar expressions or statements that an action, event or result "may," "could" or "should" be taken, occur or be achieved, or the negative thereof or other similar statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Such statements include, but are not limited to: (i) the ability to maintain controlled, steady-state operations at Lost Creek; (ii) the outcome of our production projections for 2020; (iii) the impacts of COVID-19 (Coronavirus) on our business, operations, and financial liquidity, and the impacts of the pandemic directly and indirectly on the uranium market; (iv) the timing and outcome of permitting and regulatory approvals of the amendment for uranium recovery at the LC East Project; (v) the ability to complete additional favorable uranium sales agreements including spot sales if the market warrants; (vi) the timing and outcome of applications for regulatory approval to build and operate an in situ recovery mine at Shirley Basin; (vii) resolution of the continuing challenges within the uranium market, including supply and demand projections;  (viii) the timing and impact of implementation of recommendations made by the United States Nuclear Fuel Working Group for the revival and expansion of domestic nuclear fuel production; (ix) whether cost-savings measures which have been and will be implemented will be sufficient to support our operations;  (x) the level of loan forgiveness to be obtained for our loans under the SBA Paycheck Protection Program; and (xi) the ability and timing to ramp up when market conditions warrant, as well as the costs and level of dilution in doing so. Additional factors include, among others, the following: challenges presented by current inventories and largely unrestricted imports of uranium products into the U.S.; future estimates for production; capital expenditures; operating costs; mineral resources, grade estimates and recovery rates;  market prices; business strategies and measures to implement such strategies; competitive strengths; estimates of goals for expansion and growth of the business and operations; plans and references to our future successes; our history of operating losses and uncertainty of future profitability; status as an exploration stage company; the lack of mineral reserves; risks associated with obtaining permits and other authorizations in the U.S.; risks associated with current variable economic conditions; our ability to service our debt and maintain compliance with all restrictive covenants related to the debt facility and security documents; the possible impact of future debt or equity financings; the hazards associated with mining production operations; compliance with environmental laws and regulations; wastewater management; uncertainty regarding the pricing and collection of accounts; the possibility for adverse results in potential litigation; uncertainties associated with changes in law, government policy and regulation; uncertainties associated with a Canada Revenue Agency or U.S. Internal Revenue Service audit of any of our cross border transactions; adverse changes in general business conditions in any of the countries in which we do business; changes in size and structure; the effectiveness of management and our strategic relationships; ability to attract and retain key personnel and management; uncertainties regarding the need for additional capital; sufficiency of insurance coverages; uncertainty regarding the fluctuations of quarterly results; foreign currency exchange risks; ability to enforce civil liabilities under U.S. securities laws outside the U.S.; ability to maintain our listing on the NYSE American and Toronto Stock Exchange (“TSX”); risks associated with the expected classification as a "passive foreign investment company" under the applicable provisions of the U.S. Internal Revenue Code of 1986, as amended; risks associated with our investments and other risks and

1

uncertainties described under the heading “Risk Factors” in our Annual Report on Form 10-K, dated February 28, 2020.

 

Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources

 

Unless otherwise indicated, all resource estimates included in this Form 10-Q have been prepared in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves (“CIM Definition Standards”). NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.

 

Canadian standards, including NI 43-101, differ significantly from the requirements of the U.S. Securities and Exchange Commission (“SEC”), and resource information contained in this Form 10-Q may not be comparable to similar information disclosed by U.S. companies. In particular, the term “resource” does not equate to the term “reserves.” Under SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. SEC Industry Guide 7 does not define and the SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral resources,” “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category. Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures. Accordingly, information concerning mineral deposits set forth herein may not be comparable to information made public by companies that report in accordance with U.S. standards.

 

NI 43-101 Review of Technical Information: Michael Mellin, Ur-Energy / Lost Creek Mine Geologist, P.Geo. and Qualified Person as defined by NI 43-101, reviewed and approved the technical information contained in this Form 10-Q.

 

2

PART I

Item 1. FINANCIAL STATEMENTS

 

Ur-Energy Inc.

Unaudited Interim Consolidated Balance Sheets

(expressed in thousands of U.S. dollars)

 

 

 

 

 

 

March 31,

 

December 31,

 

2020

 

2019

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents (note 4)

5,594

 

7,752

Accounts receivable

 6

 

22

Inventory (note 5)

339

 

 -

Prepaid expenses

681

 

885

 

6,620

 

8,659

Long-term inventory (note 5)

6,994

 

7,426

Restricted cash (note 6)

7,463

 

7,463

Mineral properties (note 7)

42,555

 

43,212

Capital assets (note 8)

23,266

 

23,630

 

80,278

 

81,731

 

86,898

 

90,390

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities (note 9)

2,181

 

2,211

Environmental remediation accrual

75

 

72

 

2,256

 

2,283

Notes payable (note 10)

12,233

 

12,215

Lease liability

83

 

12

Asset retirement obligations (note 11)

31,117

 

30,972

Other liabilities - warrants (note 12)

256

 

575

 

43,689

 

43,774

 

45,945

 

46,057

Shareholders' equity (note 13)

 

 

 

Share Capital

 

 

 

Class A preferred shares, without par value, unlimited shares authorized; no shares issued and outstanding

 -

 

 -

Common shares, without par value, unlimited shares authorized; shares issued and outstanding: 160,478,059 at March 31, 2020 and 160,478,059 at December 31, 2019

185,754

 

185,754

Contributed surplus

20,551

 

20,317

Accumulated other comprehensive income

3,681

 

3,654

Deficit

(169,033)

 

(165,392)

 

40,953

 

44,333

 

86,898

 

90,390

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 Approved by the Board of Directors

/s/ Jeffrey T. Klenda, Chairman of the Board               /s/ Thomas Parker, Director

3

Ur-Energy Inc.

Unaudited Interim Consolidated Statements of Operations and Comprehensive Loss

 

(expressed in thousands of U.S. dollars except for share data)

 

 

 

 

 

Three months ended  March 31,

 

2020

 

2019

 

 

 

 

Sales (note 14)

1,370

 

4,812

Cost of sales

(3,105)

 

(5,146)

Gross profit (loss)

(1,735)

 

(334)

 

 

 

 

Operating Expenses

 

 

 

Exploration and evaluation

(391)

 

(774)

Development

(273)

 

(166)

General and administrative

(1,253)

 

(2,138)

Accretion of asset retirement obligations (note 11)

(145)

 

(143)

Loss from operations

(3,797)

 

(3,555)

 

 

 

 

Net interest expense

(132)

 

(196)

Warrant mark to market adjustment

273

 

(533)

Foreign exchange gain (loss)

15

 

(18)

 

 

 

 

Net loss for the period

(3,641)

 

(4,302)

 

 

 

 

Loss per common share

 

 

 

Basic and diluted

(0.02)

 

(0.03)

Weighted average number of common shares outstanding

 

 

 

Basic and diluted

160,478,059

 

159,729,403

 

 

 

 

COMPREHENSIVE LOSS

 

 

 

Net loss for the period

(3,641)

 

(4,302)

Other Comprehensive loss, net of tax

 

 

 

Translation adjustment on foreign operations

27

 

 1

Comprehensive loss for the period

(3,614)

 

(4,301)

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

4

 

Ur-Energy Inc.

Unaudited Interim Consolidated Statement of Shareholders’ Equity

 

(expressed in thousands of U.S. dollars except for share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Capital Stock

 

Contributed

 

Comprehensive

 

 

 

Shareholders'

 

Shares

 

Amount

 

Surplus

 

Income

 

Deficit

 

Equity

 

#

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

159,729,403

 

185,221

 

19,930

 

3,670

 

(156,974)

 

51,847

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of vested RSUs

 -

 

 -

 

(6)

 

 -

 

 -

 

(6)

Non-cash stock compensation

 -

 

 -

 

188

 

 -

 

 -

 

188

Net loss and comprehensive loss

 -

 

 -

 

 -

 

 1

 

(4,302)

 

(4,301)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

159,729,403

 

185,221

 

20,112

 

3,671

 

(161,276)

 

47,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

160,478,059

 

185,754

 

20,317

 

3,654

 

(165,392)

 

44,333

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash stock compensation

 -

 

 -

 

234

 

 -

 

 -

 

234

Net loss and comprehensive loss

 -

 

 -

 

 -

 

27

 

(3,641)

 

(3,614)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2020

160,478,059

 

185,754

 

20,551

 

3,681

 

(169,033)

 

40,953

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

5

Ur-Energy Inc.

Unaudited Interim Consolidated Statements of Cash Flow

 

(expressed in thousands of U.S. dollars)

 

 

 

 

 

 

Three months ended  March 31,

 

2020

 

2019

Cash provided by

 

 

 

Operating activities

 

 

 

Net loss for the period

(3,641)

 

(4,302)

Items not affecting cash:

 

 

 

Stock based expense

234

 

188

Loss from net realizable value adjustments

2,282

 

1,965

Depreciation and amortization

1,111

 

1,098

Accretion of asset retirement obligations and reclamation

145

 

143

Amortization of deferred loan costs

17

 

30

Warrants mark to market gain

(273)

 

533

Gain on foreign exchange

(15)

 

(18)

Other loss

 3

 

(2)

Change in non-cash working capital items:

 

 

 

Accounts receivable

16

 

 4

Inventory

(2,189)

 

(2,225)

Prepaid expenses

111

 

(17)

Accounts payable and accrued liabilities

74

 

1,402

 

(2,125)

 

(1,201)

 

 

 

 

Investing activities

 

 

 

Mineral property costs

 -

 

(8)

Decrease (increase) in other deposits

(5)

 

 -

Purchase of capital assets

(18)

 

(11)

 

(23)

 

(19)

 

 

 

 

Financing activities

 

 

 

RSUs redeemed to pay withholding or paid in cash

 -

 

(6)

Repayment of debt

 -

 

(1,269)

 

 -

 

(1,275)

 

 

 

 

Effects of foreign exchange rate changes on cash

(10)

 

41

 

 

 

 

Net change in cash, cash equivalents and restricted cash

(2,158)

 

(2,454)

Beginning cash, cash equivalents and restricted cash

15,215

 

13,830

Ending cash, cash equivalents and restricted cash (note 15)

13,057

 

11,376

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

6

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

1.Nature of Operations

 

Ur-Energy Inc. (the “Company”) was incorporated on March 22, 2004 under the laws of the Province of Ontario. The Company was continued under the Canada Business Corporations Act on August 8, 2006. Headquartered in Littleton, Colorado, the Company is an exploration stage mining company, as defined by U.S. Securities and Exchange Commission (“SEC”) Industry Guide 7. The Company is engaged in uranium mining and recovery operations, with activities including the acquisition, exploration, development and production of uranium mineral resources located in Wyoming. In August 2013, the Company commenced uranium production at its Lost Creek Project in Wyoming.

 

Due to the nature of the uranium mining methods used by the Company on the Lost Creek Property, and the definition of “mineral reserves” under National Instrument 43-101 (“NI 43-101”), which uses the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards, the Company has not determined whether the property contains mineral reserves. However, the Company’s “Amended Preliminary Economic Assessment of the Lost Creek Property, Sweetwater County, Wyoming,” February 8, 2016 (“Lost Creek PEA”), outlines the potential viability of the Lost Creek Property. The recoverability of amounts recorded for mineral properties is dependent upon the discovery of economic resources, the ability of the Company to obtain the necessary financing to develop the properties and upon attaining future profitable production from the properties or sufficient proceeds from disposition of the properties.

 

 

2.   Liquidity Risk

 

Our operations are based on a small number of large sales.  As a result, our cash flow and therefore our current assets and working capital may vary widely during the year based on the timing of those sales.  Virtually all of our sales are under contracts which specify delivery quantities, sales prices and payment dates. The only exceptions are spot sales which we are currently only making when advantageous. As a result, we are able to perform cash management functions over the course of an entire year and are less reliant on current commodity prices and market conditions. We monitor our cash projections on a weekly basis and have used various techniques to manage our cash flows including the assignment of deliveries, negotiating changes in delivery dates, purchasing inventory at favorable prices and raising capital.

 

As at March 31, 2020, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $0.7 million which are due within normal trade terms of generally 30 to 60 days, a note payable of $12.4 million, and asset retirement obligations with estimated settlement dates until 2033. The payment schedule for the note was modified on October 1, 2019 to defer principal payments for eighteen months (see note 10).

 

On April 16, 2020, we received approximately $0.9 million under the U.S. Small Business Administration (“SBA”) Payroll Protection Program which was created under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). We believe that we will be able to meet the program requirements for forgiveness of a significant portion of this funding based on our payroll and other qualifying expenses for the eight-week period beginning on April 16, 2020 (see note 17).

 

7

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

In addition, most of our current assets except for prepaid expenses are immediately realizable, if necessary, while our current liabilities include a substantial portion that is not due for three months or more which, allows us to plan for those payments well in advance and address shortfalls, if any.

 

3.Summary of Significant Accounting Policies

 

Basis of presentation

 

These unaudited interim consolidated financial statements do not conform in all respects to the requirements of U.S. generally accepted accounting principles (“US GAAP”) for annual financial statements. The unaudited interim consolidated financial statements reflect all normal adjustments which in the opinion of management are necessary for a fair presentation of the results for the periods presented. These unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2019.  We apply the same accounting policies as in the prior year. The year-end balance sheet data were derived from the audited financial statements and certain information and footnote disclosures required by US GAAP have been condensed or omitted.

 

4.Cash and Cash Equivalents

 

The Company’s cash and cash equivalents consist of the following:

 

 

 

 

 

 

 

As at

 

March 31, 2020

 

December 31, 2019

 

$

 

$

Cash on deposit at banks

1,870

 

1,755

Money market funds

3,724

 

5,997

 

 

 

 

 

5,594

 

7,752

 

 

 

8

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

 

5.  Inventory

 

The Company’s inventory consists of the following:

 

 

 

 

 

 

 

As at

 

March 31, 2020

 

December 31, 2019

 

$

 

$

In-process inventory

 -

 

 -

Plant inventory

42

 

 -

Conversion facility inventory

7,291

 

7,426

 

7,333

 

7,426

Inventory to be sold within 12 months

339

 

 -

Long term inventory

6,994

 

7,426

 

In conjunction with our lower of cost or net realizable value (“NRV”) calculations, the Company reduced the inventory valuation by $2,282 and $10,263 for the three months ended March 31, 2020 and year ended December 31, 2019, respectively. 

 

6.    Restricted Cash

 

The Company’s restricted cash consists of money market accounts and short-term government bonds.

 

The bonding requirements for reclamation obligations on various properties have been agreed to by the Wyoming Department of Environmental Quality (“WDEQ”), the Wyoming Uranium Recovery Program (“URP”) and the Bureau of Land Management (“BLM”) as applicable.  The restricted money market accounts are pledged as collateral against performance surety bonds which are used to secure the potential costs of reclamation related to those properties. Surety bonds providing $29.9 million of coverage towards specific reclamation obligations are collateralized by the restricted cash at March 31, 2020.  

 

9

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

7 Mineral Properties

 

The Company’s mineral properties consist of the following:

 

 

 

 

 

 

 

 

 

 

 

Lost Creek

 

Pathfinder

 

Other U.S.

 

 

 

Property

 

Mines

 

Properties

 

Total

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

Balance, December 31, 2019

10,184

 

19,850

 

13,178

 

43,212

 

 

 

 

 

 

 

 

Amortization

(657)

 

 -

 

 -

 

(657)

 

 

 

 

 

 

 

 

Balance, March 31, 2020

9,527

 

19,850

 

13,178

 

42,555

 

 

Lost Creek Property

 

The Company acquired certain Wyoming properties in 2005 when Ur-Energy USA Inc. purchased 100% of NFU Wyoming, LLC. Assets acquired in this transaction include the Lost Creek Project, other Wyoming properties and development databases. NFU Wyoming, LLC was acquired for aggregate consideration of $20 million plus interest. Since 2005, the Company has increased its holdings adjacent to the initial Lost Creek acquisition through staking additional claims and additional property purchases and leases. 

 

There is a royalty on each of the State of Wyoming sections under lease at the Lost Creek, LC West and EN Projects, as required by law. Other royalties exist on certain mining claims at the LC South, LC East and EN Projects. Currently, there are no royalties on the mining claims in the Lost Creek, LC North or LC West Projects.

 

Pathfinder Mines

 

The Company acquired additional Wyoming properties when Ur-Energy USA Inc. closed a Share Purchase Agreement (“SPA”) with an AREVA Mining affiliate in December 2013. Under the terms of the SPA, the Company purchased Pathfinder Mines Corporation (“Pathfinder”) to acquire additional mineral properties. Assets acquired in this transaction include the Shirley Basin mine, portions of the Lucky Mc mine, machinery and equipment, vehicles, office equipment and development databases. Pathfinder was acquired for aggregate consideration of $6.7 million, the assumption of $5.7 million in estimated asset reclamation obligations and other consideration.   

 

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

8.Capital Assets

 

The Company’s capital assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

March 31, 2020

 

December 31, 2019

 

 

 

Accumulated

 

Net Book

 

 

 

Accumulated

 

Net Book

 

Cost

 

Depreciation

 

Value

 

Cost

 

Depreciation

 

Value

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Rolling stock

3,452

 

3,326

 

126

 

3,452

 

3,311

 

141

Enclosures

33,008

 

10,594

 

22,414

 

33,008

 

10,181

 

22,827

Machinery and equipment

1,426

 

828

 

598

 

1,426

 

808

 

618

Furniture, fixtures and leasehold improvements

119

 

116

 

 3

 

119

 

115

 

 4

Information technology

1,120

 

1,078

 

42

 

1,100

 

1,072

 

28

ROU Assets

92

 

 9

 

83

 

83

 

71

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

39,217

 

15,951

 

23,266

 

39,188

 

15,558

 

23,630

 

 

 

 

 

 

     

 

 

 

 

 

 

 

9.Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities consist of the following:

 

 

 

 

 

 

 

 

 

 

As at

 

March 31, 2020

 

December 31, 2019

 

$

 

$

Accounts payable

439

 

523

Payroll and other taxes

1,539

 

1,483

Severance and ad valorem tax payable

203

 

205

 

 

 

 

 

2,181

 

2,211

 

 

 

 

 

10.Notes Payable

 

On October 15, 2013, the Sweetwater County Commissioners approved the issuance of a $34.0 million Sweetwater County, State of Wyoming, Taxable Industrial Development Revenue Bond (Lost Creek Project), Series 2013 (the “Sweetwater IDR Bond”) to the State of Wyoming, acting by and through the Wyoming State Treasurer, as purchaser. On October 23, 2013, the Sweetwater IDR Bond was issued and the proceeds were in turn loaned by Sweetwater County to Lost Creek ISR, LLC pursuant to a financing agreement dated October 23, 2013 (the “State Bond Loan”). The State Bond Loan calls for payments of

11

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

interest at a fixed rate of 5.75% per annum on a quarterly basis commencing January 1, 2014. The principal was to be paid in 28 quarterly installments commencing January 1, 2015.   

 

On October 1, 2019, the Sweetwater County Commissioners and the State of Wyoming approved a six-quarter deferral of principal payments beginning October 1, 2019. The next principal payment is therefore due April 1, 2021 and the last payment will be due in April 2023.

 

Deferred loan fees include legal fees, commissions, commitment fees and other costs associated with obtaining the financing.

 

The following table summarizes the Company’s debt instrument.

 

 

 

 

 

 

 

As at

 

March 31, 2020

 

December 31, 2019

 

$

 

$

Long term debt

 

 

 

State Bond Loan

12,441

 

12,441

Less deferred financing costs

(208)

 

(226)

 

12,233

 

12,215

 

The schedule of remaining payments on outstanding debt as of March 31, 2020 is presented below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

2020

 

2021

 

2022

 

2023

 

Final payment

 

$

 

$

 

$

 

$

 

$

 

 

State Bond Loan

 

 

 

 

 

 

 

 

 

 

 

Principal

12,441

 

 -

 

3,971

 

5,566

 

2,904

 

01-Apr-23

Interest

1,448

 

358

 

659

 

368

 

63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

13,889

 

358

 

4,630

 

5,934

 

2,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11.Asset Retirement and Reclamation Obligations

 

Asset retirement obligations ("ARO") relate to the Lost Creek mine and Pathfinder projects and are equal to the present value of all estimated future costs required to remediate any environmental disturbances that exist as of the end of the period discounted using discount rates ranging from 0.33% to 7.25%. Included in this liability are the costs of closure, reclamation, demolition and stabilization of the mines, processing plants, infrastructure, aquifer restoration, waste dumps and ongoing post-closure environmental monitoring and maintenance costs.

 

At March 31, 2020, the total undiscounted amount of the future cash needs was estimated to be $29.8 million. The schedule of payments required to settle the ARO liability extends through 2033.

 

12

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

The restricted cash discussed in note 6 is related to the surety bonds which provide security to the governmental agencies on these obligations.

 

 

 

 

 

 

 

For the period ended

 

March 31, 2020

 

December 31, 2019

 

 

 

 

 

$

 

$

Beginning of period

30,972

 

30,384

Change in estimated liability

 -

 

11

Accretion expense

145

 

577

 

 

 

 

End of period

31,117

 

30,972

 

 

 

 

 

 

12.Other Liabilities

 

As a part of the September 2018 public offering, we sold 13,062,878 warrants priced at $0.01 per warrant. Two warrants are redeemable for one Common Share of the Company’s stock at a price of $1.00 per full share. As the warrants are priced in US$ and the functional currency of Ur-Energy Inc. is Cdn$, this created a derivative financial liability. The liability created and adjusted quarterly is a calculated fair value using the Black-Scholes technique described below as there is no active market for the warrants. Any income or loss is reflected in net income for the period. The revaluation as of March 31, 2020 resulted in a  gain of  $273 for the three month period ended March 31, 2020 which is reflected on the unaudited interim consolidated statement of operations and comprehensive loss.

 

13.Shareholders’ Equity and Capital Stock

 

Stock options

 

In 2005, the Company’s Board of Directors approved the adoption of the Company's stock option plan (the “Option Plan”). The Option Plan was most recently approved by the shareholders on May 18, 2017. Eligible participants under the Option Plan include directors, officers, employees and consultants of the Company. Under the terms of the Option Plan grants of options will vest over a three-year period: 33.3% on the first anniversary, 33.3% on the second anniversary, and 33.4% on the third anniversary of the grant. The term of options is five years.

 

13

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

Activity with respect to stock options is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

average

 

 

 

Options

 

exercise price

 

 

 

#

 

$

 

 

 

 

 

 

Balance, December 31, 2019

 

 

11,076,583

 

0.64

 

 

 

 

 

 

Forfeited

 

 

(23,889)

 

0.61

 

 

 

 

 

 

Outstanding, March 31, 2020

 

 

11,052,694

 

0.64

 

The exercise price of a new grant is set at the closing price for the shares on the Toronto Stock Exchange (TSX) on the trading day immediately preceding the grant date so there is no intrinsic value as of the date of grant. The fair value of options vested during the three months ended March 31, 2020 was less than  $0.1 million.

 

As of March 31, 2020, outstanding stock options are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding

 

Options exercisable

 

 

 

 

 

 

Weighted-

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

average

 

 

 

 

 

average

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

intrinsic

 

Number

 

contractual

 

intrinsic

 

 

price

 

of options

 

life (years)

 

value

 

of options

 

life (years)

 

value

 

Expiry

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.80

 

200,000

 

0.2

 

 -

 

200,000

 

0.4

 

 -

 

29-May-20

0.61

 

516,902

 

0.4

 

 -

 

516,902

 

0.6

 

 -

 

17-Aug-20

0.56

 

897,508

 

0.7

 

 -

 

897,508

 

0.9

 

 -

 

11-Dec-20

0.51

 

2,337,434

 

1.7

 

 -

 

2,337,434

 

2.0

 

 -

 

16-Dec-21

0.72

 

300,000

 

1.9

 

 -

 

300,000

 

2.2

 

 -

 

02-Mar-22

0.51

 

200,000

 

2.4

 

 -

 

132,000

 

2.7

 

 -

 

07-Sep-22

0.63

 

1,769,411

 

2.7

 

 -

 

1,187,174

 

3.0

 

 -

 

15-Dec-22

0.54

 

200,000

 

3.0

 

 -

 

133,333

 

3.2

 

 -

 

30-Mar-23

0.66

 

976,259

 

3.4

 

 -

 

339,859

 

3.6

 

 -

 

20-Aug-23

0.64

 

826,683

 

3.7

 

 -

 

278,351

 

4.0

 

 -

 

14-Dec-23

0.56

 

2,828,497

 

4.6

 

 -

 

 -

 

 -

 

 -

 

05-Nov-24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.64

 

11,052,694

 

2.8

 

 -

 

6,322,561

 

2.1

 

 -

 

 

 

The aggregate intrinsic value of the options in the preceding table represents the total pre-tax intrinsic value for stock options with an exercise price less than the Company’s TSX closing stock price of Cdn$0.56 as of the last trading day in the period ended March 31, 2020, that would have been received by the option

14

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

holders had they exercised their options as of that date. There were no options issued or exercisable that were in the money at March 31, 2020.

 

We elect to estimate the number of awards expected to vest in lieu of accounting for forfeitures when they occur.   

 

Restricted share units

 

On June 24, 2010, the Company’s shareholders approved the adoption of the Company’s restricted share unit plan (the “RSU Plan”). The RSU Plan was approved by our shareholders most recently on May 2, 2019.  

 

Eligible participants under the RSU Plan include directors and employees of the Company. RSUs in a grant redeem on the second anniversary of the grant. Upon RSU vesting, the holder of an RSU will receive one Common Share, for no additional consideration, for each RSU held.

 

Activity with respect to RSUs is summarized as follows:

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted

 

 

 

of

 

average grant

 

 

 

RSUs

 

date fair value

Balance, December 31, 2019

 

 

1,155,928

 

0.65

 

 

 

 

 

 

Forfeited

 

 

(5,973)

 

0.68

 

 

 

 

 

 

Outstanding, March 31, 2020

 

 

1,149,955

 

0.59

 

As of March 31, 2020, outstanding RSUs are as follows:

 

 

 

 

 

 

 

 

 

 

Number of

 

Remaining

 

Aggregate

 

 

outstanding

 

life

 

intrinsic

Grant date

 

RSUs

 

(years)

 

value

 

 

 

 

 

 

$

August 20, 2018

 

225,774

 

0.39

 

93

December 14, 2018

 

217,048

 

0.71

 

89

November 5, 2019

 

707,133

 

1.60

 

290

 

 

 

 

 

 

 

 

 

1,149,955

 

1.19

 

472

 

As of September 30,  2019, one of our officers retired. Under the terms of our RSU Plan, his 54,431 outstanding RSUs automatically vested. On December 15, 2019, 28,686 RSUs were redeemed for Common Shares. The balance of his RSUs will be redeemed for cash or stock at the compensation committee’s discretion in conjunction with the scheduled redemptions of those grants.   

 

15

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

Warrants

 

On September 25, 2018, the Company issued 13,062,878 warrants to purchase 6,531,439 of our Common Shares at $1.00 per full share (see note 12). The following represents warrant activity during the period ended March 31, 2020:

 

 

 

 

 

 

 

 

 

Number

Number of

 

 

 

 

of

shares to be issued

 

Per share

 

 

warrants

upon exercise

 

exercise price

Outstanding, December 31, 2019

 

13,062,878

6,531,439

 

1.00

 

 

 

 

 

 

Outstanding, March 31, 2020

 

13,062,878

6,531,439

 

1.00

 

 

As of March 31, 2020, outstanding warrants are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

Intrinsic

 

 

price

 

of warrants

 

life (years)

 

Value

 

Expiry

$

 

 

 

 

 

$

 

 

1.00

 

13,062,878

 

1.5

 

 -

 

25-Sep-21

 

Share-based compensation expense

 

Share-based compensation expense was $0.2 million for the three months ended March 31, 2020 and $0.2 million for the three months ended March 31, 2019.

 

As of March 31, 2020, there was approximately $1.3 million of total unrecognized compensation expense (net of estimated pre-vesting forfeitures) related to unvested share-based compensation arrangements granted under the Option Plan and $0.5 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 2.1 years and 1.4 years, respectively.

 

No cash was received from the exercise of stock options for the three months ended March 31, 2020 or March 31, 2019.

 

Fair value calculations

 

The initial fair value of options and RSUs granted is determined using the Black-Scholes option pricing model for options and the intrinsic pricing model for RSUs. There were no options or RSUs granted during

16

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

the three months ended March 31, 2020 and March 31, 2019.  We have used assumptions for the mark to market calculations related to the warrant liability.

 

 

The Company estimates expected volatility using daily historical trading data of the Company’s Common Shares, because this is recognized as a valid method used to predict future volatility. The risk-free interest rates are determined by reference to Canadian Treasury Note constant maturities that approximate the expected option term. The Company has never paid dividends and currently has no plans to do so.

 

Share-based compensation expense is recognized net of estimated pre-vesting forfeitures, which results in recognition of expense on options that are ultimately expected to vest over the expected option term. Forfeitures were estimated using actual historical forfeiture experience.

 

14.  Sales

 

Sales have been derived from U3O8 being sold to domestic utilities, primarily under term contracts, as well as to a trader through spot sales.

 

Disaggregation of Revenues

 

The following table presents our revenues disaggregated by source and type:

 

 

 

 

 

 

 

 

 

 

Three months ended  March 31,

 

2020

 

2019

 

$

 

 

 

$

 

 

Sale of produced inventory

 

 

 

 

 

 

 

Company A

 -

 

0.0%

 

2,406

 

50.0%

 

 -

 

0.0%

 

2,406

 

50.0%

Sales of purchased inventory

 

 

 

 

 

 

 

Company B

1,370

 

100.0%

 

 -

 

0.0%

Company A

 -

 

0.0%

 

2,406

 

50.0%

 

1,370

 

100.0%

 

2,406

 

50.0%

 

 

 

 

 

 

 

 

 

1,370

 

100.0%

 

4,812

 

100.0%

 

The names of the individual companies have not been disclosed for reasons of confidentiality.

17

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

15.Supplemental Information for Statement of Cash Flows

 

Cash per the Statement of Cash Flows consists of the following:

 

 

 

 

 

 

As at

 

March 31, 2020

 

March 31, 2019

 

$

 

$

Cash and cash equivalents

5,594

 

3,916

Restricted cash

7,463

 

7,460

 

 

 

 

 

13,057

 

11,376

 

 

 

16.Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, restricted cash, deposits, accounts payable and accrued liabilities and notes payable. The Company is exposed to risks related to changes in interest rates and management of cash and cash equivalents and short-term investments.

 

Credit risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and restricted cash. These assets include Canadian dollar and U.S. dollar denominated certificates of deposit, money market accounts and demand deposits. These instruments are maintained at financial institutions in Canada and the U.S. Of the amount held on deposit, approximately $1.0 million is covered by the Canada Deposit Insurance Corporation, the Securities Investor Protection Corporation or the U.S. Federal Deposit Insurance Corporation, leaving approximately $12.1 million at risk at March 31, 2020 should the financial institutions with which these amounts are invested be rendered insolvent. The Company does not consider any of its financial assets to be impaired as of March 31, 2020.

 

All of the Company’s customers have Moody’s Baa or greater ratings and purchase from the Company under contracts with set prices and payment terms.

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due.

 

As at March 31, 2020, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $0.7 million which are due within normal trade terms of generally 30 to 60 days and a note payable which will be payable over a period of approximately three years as a result of the amendment to the note (see note 10).

 

18

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2020

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

We entered into an At Market Issuance Sales Agreement with MLV & Co. LLC and B Riley FBR, Inc. (May 2016, as amended August 2017) under which we may, from time to time, issue and sell Common Shares at market prices on the NYSE American or other U.S. market through the distribution agents for aggregate sales proceeds of up to $10,000,000.  We have not used the facility in 2020. 

We expect that any major capital projects will be funded by operating cash flow, cash on hand or additional financing as required. If these cash sources are not sufficient, certain capital projects could be delayed, or alternatively we may need to pursue additional debt or equity financing to which there is no assurance that such financing will be available at all or on terms acceptable to us.

Sensitivity analysis

 

The Company has completed a sensitivity analysis to estimate the impact that a change in interest rates would have on the net loss of the Company. This sensitivity analysis shows that a change of +/- 100 basis points in interest rate would have a negligible effect on either the three months ended March 31, 2020 or the comparable three months in 2019. The financial position of the Company may vary at the time that a change in interest rates occurs causing the impact on the Company’s results to differ from that shown above.

 

17.    Subsequent Event

 

Working with our primary bank, Bank of Oklahoma Financial, we applied for and obtained two loans (one for each of our subsidiaries with U.S. payroll obligations)  under the Paycheck Protection Program through the SBA. The program is a part of the CARES Act enacted by Congress March 27, 2020 in response to the COVID-19 (Coronavirus) pandemic. The total combined loan amount we qualified for was approximately $0.9 million, which we received on April 16, 2020.

 

Under the program, the repayment of these loans, including interest, will be forgiven based on payroll, payroll-related, and other allowable costs incurred in the eight-week period following the funding of the loans.  In order to have the full amount of the loans forgiven, the following requirements must be met in that eight-week period, and be sufficiently documented: 

 

1.

Spend not less than 75% of loan proceeds on eligible payroll costs;

2.

Spend the remaining 25% of loan proceeds on

a.

additional payroll costs above 75%;

b.

payments of interest on mortgage obligations incurred before February 15, 2020;

c.

rent payments on leases dated before February 15, 2020; and/or

d.

utility payments under service agreements dated before February 15, 2020.

3.

Maintain employee compensation levels (subject to specific program requirements).

The program provides for an initial six-month deferral of payments. Any amount owing on the loan has a two-year maturity (April 16, 2022), with an interest rate of one percent per annum. We anticipate a significant portion of the loans will meet the requirements for forgiveness under this program.

 

 

 

19

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

Business Overview

The following discussion is designed to provide information that we believe is necessary for an understanding of our financial condition, changes in financial condition and results of our operations. The following discussion and analysis should be read in conjunction with the MD&A contained in our Annual Report on Form 10-K for the year ended December 31, 2019.  

Incorporated on March 22, 2004, Ur-Energy is an exploration stage mining company, as that term is defined in SEC Industry Guide 7. We are engaged in uranium mining, recovery and processing activities, including the acquisition, exploration, development and operation of uranium mineral properties in the U.S. We are operating our first in situ recovery uranium mine at our Lost Creek Project in Wyoming. Ur-Energy is a corporation continued under the Canada Business Corporations Act on August 8, 2006. Our Common Shares are listed on the TSX under the symbol “URE” and on the NYSE American under the symbol “URG.”

Ur-Energy has one wholly-owned subsidiary: Ur-Energy USA Inc., incorporated under the laws of the State of Colorado. Ur-Energy USA Inc. has three wholly-owned subsidiaries: NFU Wyoming, LLC, a limited liability company formed under the laws of the State of Wyoming which acts as our land holding and exploration entity; Lost Creek ISR, LLC, a limited liability company formed under the laws of the State of Wyoming to operate our Lost Creek Project and hold our Lost Creek properties and assets; and Pathfinder Mines Corporation (“Pathfinder”), incorporated under the laws of the State of Delaware, which holds, among other assets, the Shirley Basin and Lucky Mc properties in Wyoming. Our material U.S. subsidiaries remain unchanged since the filing of our Annual Report on Form 10-K, dated February 28, 2020. 

We utilize in situ recovery (“ISR”) of the uranium at our flagship project, Lost Creek, and will do so at other projects where possible. The ISR technique is employed in uranium extraction because it allows for an effective recovery of roll front uranium mineralization at a lower cost. At Lost Creek, we extract and process uranium oxide (“U3O8”) for shipping to a third-party conversion facility to be weighed, assayed and stored until sold.

Our Lost Creek processing facility, which includes all circuits for the production, drying and packaging of uranium for delivery into sales, is designed and anticipated under current licensing to process up to one million pounds of U3O8 annually from the Lost Creek mine. The processing facility has the physical design capacity to process two million pounds of U3O8 annually, which provides additional capacity to process material from other sources. We expect that the Lost Creek processing facility may be utilized to process captured U3O8 from our Shirley Basin Project. However, the Shirley Basin permit application contemplates the construction of a full processing facility, providing greater construction and operating flexibility as may be dictated by market conditions.

As has been true since we commenced operations and sales, we have term uranium sales agreements in place with U.S. utilities for the sale in 2020 of U3O8 product at contracted pricing. We are contractually committed to sell 200,000 pounds of U3O8 during 2020, at an average price of approximately $42 per pound. Last year, we worked with our customers to establish a delivery schedule for these commitments which were scheduled for H1 2020. We entered into purchase agreements for delivery of purchased product into our contractual commitments for the 200,000 pounds of U3O8. The average cost of the purchases is $26 per pound. We delivered a portion of those 2020 contractual commitments (33,000 pounds) in Q1, and delivered the remaining amount (167,000 pounds) early in Q2.

 

20

COVID-19 (Coronavirus)

In addition to our Wyoming-based staff at Lost Creek, and in our Casper operations office, our corporate services group works in an office in Littleton, Colorado (in the Denver metropolitan area). Since mid-March, we have adhered to the White House and CDC guidance of asking personnel to work remote, if their job responsibilities allow them to do so – this includes both the Littleton and Casper-based staff. We have also been guided by Colorado’s “stay home” orders, and Wyoming’s restrictions and guidance, with respect to our various site locations. Our staff has, thus far, remained healthy. Due to the persistently depressed uranium market, our staff at Lost Creek has been reduced by 67% percent through the reductions in force we have implemented since 2016. This does not include the complete elimination of contract work performed at the site. With the fewer remaining employees commuting to and working at Lost Creek, we have altered certain work and commuting arrangements to the site, implemented physical distancing procedures and other suggested precautions, and continue to assess the evolving situation. Similarly, our production at Lost Creek has been intentionally reduced by more than 97% since the beginning of 2016. The COVID-19 situation has not yet altered our currently planned production guidance for 2020 at Lost Creek, which remains at minimal levels (see below). Because our final scheduled sale of 2020,  on April 1, was completed by book transfer (effectively a paper transaction),  then-existing COVID-19 restrictions did not impede the transfer.

SBA Paycheck Protection Program

 

In response to the COVID-19 (Coronavirus) pandemic, Congress enacted the CARES Act on March 27, 2020. Among other provisions, it created the Paycheck Protection Program through the SBA. As an eligible borrower under the program, we worked solely with our primary bank in Littleton, Bank of Oklahoma Financial, to apply for two loans (one for each of our subsidiaries with U.S. payroll obligations) to support continuing operations and payroll obligations, and in efforts to avoid further reductions in force or furloughs. Following review of our applications by our lender and the SBA, and having met program requirements, we were approved for both loans by the SBA. The total combined loan amount we qualified for under the program was approximately $0.9 million, which we received on April 16, 2020 (see further discussion below under Liquidity Outlook).

 

U.S. Nuclear Fuel Working Group and Recent Market Changes

 

On July 12, 2019, the White House issued a “Memorandum on the Effect of Uranium Imports on the National Security and Establishment of the United States Nuclear Fuel Working Group” (the “President’s Memorandum”), through which it established the United States Nuclear Fuel Working Group (the “Working Group”) to develop recommendations for reviving and expanding domestic uranium production. On April 23, 2020, the Working Group, through the Department of Energy, released its report, “Restoring America’s Competitive Nuclear Energy Advantage – A strategy to assure U.S. national security.” Relevant to uranium miners, the recommendations included, first, that the U.S. government should make direct purchases of 17 to 19 million total pounds of U3O8 to replenish the American Assured Fuel Supply uranium reserve,  through direct purchases proposed to commence in 2020. Additionally, it is recommended that a new national uranium reserve be established through the Department of Energy’s proposed budgeted purchases for ten years, beginning in FY2021. If implemented, these purchases would provide direct support to the front end of the fuel cycle and help re-establish our nation’s critical capabilities. As included in the President’s FY2021 Budget Request, during the first year, it is expected that the reserve would directly support the operation of at least two U.S. uranium mines and the sole U.S. conversion facility. The 10-year budget item is for $150 million per year.

 

Additionally, the report calls for support of the Department of Commerce’s efforts to extend the Russian Suspension Agreement to protect against future uranium dumping. A lower cap on Russian imports should be considered. Consistent with many of the conclusions in the report finding myriad national security concerns, another of the recommendations is that the NRC be permitted to deny imports of nuclear fuel fabricated in

21

Russia or China for national security purposes. In its ground-up approach, the report then recommends a restart of the sole U.S. conversion plant beginning no later than 2022 and produce 6,000 to 7,500 tons of UF6 and thereafter to restart domestic enrichment in or about 2023, with at least 25% of material being unobligated. By law, unobligated material must be sourced domestically. There can be no certainty of the final outcome of the Working Group’s findings and recommendations in terms of how and when the recommendations to assure national security will be implemented.

 

During Q1 and in early Q2, several announcements have had an impact on the global uranium market. In March, Cameco announced the temporary suspension of production at its Cigar Lake uranium mine due to concerns over the COVID-19 pandemic. The suspension of Cigar Lake meant that there is no ongoing production in Canada. At the same time, processing at the related McClean Lake Mill was also suspended. Subsequently, Kazatomprom announced its plan to reduce onsite staff to minimum numbers and reduce its production plans for 2020 by approximately 10.4 million pounds U3O8. The reduction is expected to continue for at least a three-month period following the early April announcement. Cameco subsequently addressed this announcement (as to its ownership stake in Kazakh projects), and announced its plan to suspend processing at its Port Hope UF6 conversion facility for four weeks. More recently, Cameco announced it was extending the suspension of Cigar Lake for an indeterminate length of time. Cameco’s announcements mean there is no longer a conversion facility operating in North America and there is no meaningful uranium production in North America

Mineral Rights and Properties

We currently have 12 U.S. uranium properties. Ten of our uranium properties are located in the Great Divide Basin, Wyoming, including Lost Creek. Currently, we control nearly 1,900 unpatented mining claims and three State of Wyoming mineral leases for a total of approximately 37,500 acres in the area of the Lost Creek Property, including the Lost Creek permit area (the “Lost Creek Project” or “Project”), and certain adjoining properties referred to as LC East, LC West, LC North, LC South and EN Project areas (collectively, with the Lost Creek Project, the “Lost Creek Property”). In the Shirley Basin, Wyoming, our Shirley Basin Project comprises more than 3,700 Company-controlled acres. Our Lucky Mc Project holds 1,800 acres in Fremont County, Wyoming.  Our Excel gold project holds approximately 2,100 acres of mining claims in Nevada.

 

Lost Creek Property

For the three months ended March 31, 2020,  4,113  pounds of U3O8 were captured within the Lost Creek plant and 1,433 pounds of U3O8 were packaged in drums. Our inventory at the converter totaled approximately 268,552 at March 31, 2020. The Results of Operations are detailed further below.

 

Applications for amendment to the Lost Creek licenses and permits were submitted in 2014. The amendments seek to include recovery from the uranium resource in the LC East Project immediately adjacent to the Lost Creek Project. Reviews by WDEQ continue to progress. The BLM has completed its review and granted approval. We anticipate that all permits and authorizations for the modification of the Lost Creek licenses and permits to recover uranium in the LC East Project will be completed in 2020.

 

Shirley Basin Project 

 

WDEQ continues with its review of our applications for a permit to mine and for a source material license for our Shirley Basin Project. We anticipate the State processes to be complete, with necessary permits and authorizations received, in 2020.  The BLM has completed its review and granted approval of the project. Additionally, work is well underway on initial engineering evaluations, designs and studies for the development of Shirley Basin operations.

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Results of Operations

 

The following tables provide detailed financial information on our sales, cost of sales, gross profit and production and ending inventory as they relate to U3O8 pounds. 

 

Reconciliation of Non-GAAP measures with US GAAP financial statement presentation

 

The U3O8 and cost per pound measures included in the following tables do not have a standardized meaning within US GAAP or a defined basis of calculation. These measures are used by management to assess business performance and determine production and pricing strategies. They may also be used by certain investors to evaluate performance. Where applicable, reconciliation of these measures to US GAAP financial statement presentation are included within the respective table.

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit

    

2020 Q1

    

2019 Q4

    

2019 Q3

    

2019 Q2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U3O8 Sales Reconciliation (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales per financial statements

 

$000

 

$

1,370

 

$

10,849

 

$

5,115

 

$

11,479

Less disposal fees

 

$000

 

$

 -

 

$

(1)

 

$

 -

 

$

(2)

U3O8 sales

 

$000

 

$

1,370

 

$

10,848

 

$

5,115

 

$

11,477

U3O8 pounds sold

 

lb

 

 

33,000

 

 

180,000

 

 

122,500

 

 

265,000

U3O8 price per pound sold

 

$/lb

 

$

41.52

 

$

60.26

 

$

41.76

 

$

43.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U3O8 Sales by Product

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U3O8 Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Produced

 

$000