Mr. Jeffrey Klenda reports
UR-ENERGY RELEASES 2018 Q3 RESULTS
Ur-Energy Inc. has filed the company's Form 10-Q for the quarter ended Sept. 30, 2018, with the U.S. Securities and Exchange Commission's EDGAR and Canadian securities authorities' SEDAR.
Ur-Energy chair and chief executive officer Jeffrey Klenda said: "Our strategy to limit development and supplement production with cost-effective purchases allowed us to again increase our inventory position, which now stands at nearly 330,000 pounds of finished product with a current market value of over $9.0-million. This readily saleable inventory, combined with our strong cash position and solid book of 2019 purchase and sale contracts, puts us in an enviable position as we await the outcome of the Section 232 trade action process."
Lost Creek uranium production and sales
Inventory, production and sales figures for the Lost Creek project are presented in the attached tables.
PRODUCTION AND PRODUCTION COSTS
Unit Q3 2018 Q2 2018 Q1 2018 Q4 2017 YTD 2018
Pounds captured lb 80,604 89,209 84,047 67,982 253,860
Ad valorem and severance tax $000 $81 $133 $179 $160 $393
Well field cash cost (1) $000 422 516 671 686 1,609
Well field non-cash cost (2) $000 400 400 403 575 1,203
Ad valorem and severance tax per pound captured $/lb 1.00 1.49 2.13 2.35 1.55
Cash cost per pound captured $/lb 5.24 5.78 7.98 10.09 6.34
Non-cash cost per pound captured $/lb 4.96 4.48 4.79 8.44 4.74
Pounds drummed lb 78,441 74,302 79,961 60,461 232,704
Plant cash cost (3) $000 1,109 1,230 1,226 1,210 3,565
Plant non-cash cost (2) $000 485 493 492 493 1,470
Cash cost per pound drummed $/lb 14.14 16.57 15.33 20.01 15.32
Non-cash cost per pound drummed $/lb 6.18 6.64 6.15 8.15 6.32
Pounds shipped to conversion facility lb 72,902 74,416 73,515 73,367 220,833
Distribution cash cost (4) $000 36 34 19 48 89
Cash cost per pound shipped $/lb 0.49 0.46 0.26 0.65 0.40
Pounds purchased lb - 100,000 370,000 - 470,000
Purchase costs $000 - 2,225 9,251 - 11,476
Cash cost per pound purchased $/lb - 22.25 25.00 - 24.42
Notes:
(1) Well field cash costs include all well field operating costs. Well field construction
and development costs, which include well field drilling, header houses, pipelines, power
lines, roads, fences and disposal wells, are treated as development expense and are not
included in well field operating costs.
(2) Non-cash costs include the amortization of the investment in the mineral property
acquisition costs and the depreciation of plant equipment, and the depreciation of
their related asset retirement obligation costs. The expenses are calculated on a
straight-line basis, so the expenses are typically constant for each quarter. The cost
per pound from these costs will therefore typically vary based on production levels
only.
(3) Plant cash costs include all plant operating costs and site overhead costs.
(4) Distribution cash costs include all shipping costs and costs charged by the
conversion facility for weighing, sampling, assaying and storing the U3O8 prior to sale.
SALES AND COST OF SALES
Unit Q3 2018 Q2 2018 Q1 2018 Q4 2017 YTD 2018
Pounds sold lb - 100,000 380,000 - 480,000
U3O8 sales $000 $- $3,790 $19,663 $- $23,453
Average contract price $/lb - 37.90 52.50 - 49.39
Average spot price $/lb - - 23.75 - 23.75
Average price per pound sold $/lb - 37.90 51.74 - 48.86
U3O8 cost of sales (1) $000 170 2,225 9,758 376 12,153
Ad valorem and severance tax cost per pound sold $/lb - - 2.30 - 3.90
Cash cost per pound sold $/lb - - 31.20 - 39.30
Non-cash cost per pound sold $/lb - - 17.20 - 24.50
------- ------- ------- ------- -------
Cost per pound sold -- produced $/lb - - 50.70 - 67.70
Cost per pound sold -- purchased $/lb - 22.25 25.00 - 24.42
------- ------- ------- ------- -------
Average cost per pound sold $/lb - 22.25 25.68 - 25.32
U3O8 gross profit $000 (170) 1,565 9,905 (376) 11,300
Gross profit per pound sold $/lb - 15.65 26.06 - 23.54
Gross profit margin % 0.0% 41.3% 50.4% 0.0% 48.2%
Ending inventory balances
Pounds
In-process inventory lb 14,588 43,733 28,937 26,796
Plant inventory lb 20,944 15,391 15,504 9,043
Conversion facility inventory lb 308,762 233,712 159,296 94,077
------- ------- ------- -------
Total inventory lb 344,294 292,836 203,737 129,916
------- ------- ------- -------
Total cost
In-process inventory $000 359 518 416 315
Plant inventory $000 665 548 538 369
Conversion facility inventory $000 11,143 8,738 6,044 3,831
------- ------- ------- -------
Total inventory $000 12,167 9,804 6,998 4,515
------- ------- ------- -------
Cost per pound
In-process inventory $/lb 24.61 11.84 14.38 11.76
Plant inventory $/lb 31.75 35.61 34.70 40.81
Conversion facility inventory $/lb 36.09 37.39 37.94 40.72
Note:
(1) Cost of sales includes all production costs (notes 1, 2, 3 and 4 in the
attached production and production cost table) adjusted for changes in
inventory values.
There were no U3O8 sales during the quarter. Year-to-date sales data are presented in the attached total cost per pound sold reconciliation table.
TOTAL COST PER POUND SOLD RECONCILIATION
Unit Q3 2018 Q2 2018 Q1 2018 Q4 2017 YTD 2018
Ad valorem and severance taxes $000 $81 $133 $179 $160 $393
Well field costs $000 822 916 1,074 1,260 2,812
Plant and site costs $000 1,594 1,723 1,718 1,703 5,035
Distribution costs $000 36 34 19 48 89
Inventory change $000 (2,364) (2,806) (2,483) (2,795) (7,653)
-------- -------- -------- -------- --------
Cost of sales -- produced $000 170 - 507 376 677
Cost of sales -- purchased $000 - 2,225 9,251 - 11,476
-------- -------- -------- -------- --------
Total cost of sales $000 170 2,225 9,758 376 12,153
-------- -------- -------- -------- --------
Pounds sold produced lb - - 10,000 - 10,000
Pounds sold purchased lb - 100,000 370,000 - 470,000
-------- -------- -------- -------- --------
Total pounds sold lb - 100,000 380,000 - 480,000
Average cost per pound sold -- produced (1) $/lb - - 50.70 - 67.70
Average cost per pound sold -- purchased $/lb - 22.25 25.00 - 24.42
-------- -------- -------- -------- --------
Total average cost per pound sold $/lb - 22.25 25.68 - 25.32
-------- -------- -------- -------- --------
Note:
(1) The cost per pound sold reflects both cash and non-cash costs, which are
combined as cost of sales in the statement of operations included in the
company's filing. The cash and non-cash cost components are identified in the
attached inventory, production and sales tables.
The cost of sales includes ad valorem and severance taxes related to the extraction of uranium, all costs of well field, plant and site operations, including the related depreciation and amortization of capitalized assets, and reclamation and mineral property costs, plus product distribution costs. These costs are also used to value inventory, and the resulting inventoried cost per pound is compared with the estimated sales prices based on the contracts or spot sales anticipated for the distribution of the product. Any costs in excess of the calculated market value are charged to cost of sales.
Equity financing
In September, the company announced a $10-million (U.S.) public offering of common shares. The offering of 12,195,122 common shares and accompanying warrants to purchase up to 6,097,561 common shares, at a combined public offering price of 82 cents per common share and accompanying warrant, closed on Sept. 25, 2018. Ur-Energy also granted the underwriters a 30-day option to purchase up to 1,829,268 additional common shares and warrants to purchase up to an aggregate of 914,634 common shares on the same terms. The 30-day option period has now expired. The underwriters exercised a portion of their option to purchase additional securities at closing, acquiring 867,756 additional warrants to purchase an aggregate of 433,878 common shares. The underwriters made no further exercise of the option to purchase additional securities after closing. Including the partial exercise of the option at closing, Ur-Energy issued a total of 12,195,122 common shares and 13,062,878 warrants to purchase up to 6,531,439 common shares. Net proceeds from the offering were approximately $9.2-million. The company anticipates that proceeds from the offering will be used to maintain and enhance operational readiness. Additionally, proceeds may be used for working capital and general corporate purposes.
Continuing guidance for 2018
At the end of the third quarter of 2018, the average spot price of U3O8, as reported by Ux Consulting Company LLC and TradeTech LLC, had increased to approximately $27.50 per pound. Market fundamentals have not changed sufficiently to warrant further development of mine unit two. The company anticipates meeting its projected production level of 250,000 to 300,000 pounds drummed for the year.
Through Sept. 30, 2018, the company sold 470,000 pounds of U3O8 under term contracts at an average price of approximately $49.39 per pound and 10,000 pounds of U3O8 under a spot sale for $23.75 per pound. The company purchased 470,000 pounds at an average cost of $24.42 per pound. The remaining 10,000 pounds were delivered from the company's produced inventory. The company has no more contract sales scheduled in 2018.
No additional new production areas are currently planned for the rest of the year. Production guidance for fourth quarter is between 40,000 and 60,000 pounds U3O8 dried and drummed. Full-year 2018 guidance, similar to 2017, estimates production of between 250,000 and 300,000 pounds, but the production rate may be adjusted based on operational matters and other indicators in the market.
As at Oct. 24, 2018, the company's unrestricted cash position was $10.7-million.
About Ur-Energy Inc.
Ur-Energy is a uranium mining company operating the Lost Creek in situ recovery uranium facility in south-central Wyoming. It has produced, packaged and shipped more than 2.4 million pounds from Lost Creek since the commencement of operations. Applications are under review by various agencies to incorporate the company's LC East project area into the Lost Creek permits, and to construct and operate at the company's Shirley basin project. Ur-Energy is engaged in uranium mining, recovery and processing activities, including the acquisition, exploration, development and operation of uranium mineral properties in the United States.
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