Mr. Jeffrey Klenda reports
UR-ENERGY RELEASES 2016 Q3 RESULTS; WEBCAST NOVEMBER 2, 2016
Ur-Energy Inc. has filed the company's Form 10-Q for the quarter ended Sept. 30, 2016, with the U.S. Securities and Exchange Commission at EDGAR and with the Canadian securities authorities on SEDAR.
Lost Creek uranium production and sales
During the nine months ended Sept. 30, 2016, the company captured 434,446 pounds of triuranium octoxide within the Lost Creek plant. A total of 450,045 pounds were packaged in drums, and 480,404 pounds of the drummed inventory were shipped to the conversion facility. The company sold 462,000 pounds of U3O8 during the nine-month period.
Chairman of the company Jeff Klenda reiterated: "The company's book of term-priced contracts, which are in place through the end of the decade, continues to protect the company in the persistently depressed uranium market. With the reliability of the Lost Creek operations, at industry-leading costs of production, our contracts provide the cash flow, which makes Ur-Energy unique among uranium companies. These factors, together with the vigilance of our management and operating teams, provide us necessary flexibility in our business."
Inventory, production and sales figures for the Lost Creek project are presented in the attached tables.
PRODUCTION AND PRODUCTION COSTS
Unit Q3 2016 Q2 2016 Q1 2016 Q4 2015 Year to date
Pounds captured lb 141,774 133,341 159,331 211,717 434,446
Ad valorem and severance tax $000 $ 552 $ 304 $ 420 $ 470 $ 1,276
Well field cash cost (1) $000 $ 858 $ 846 $ 1,013 $ 1,017 $ 2,717
Well field non-cash cost (1) (2) $000 $ 778 $ 778 $ 731 $ 619 $ 2,287
Ad valorem and severance tax per
pound captured $/lb $ 3.89 $ 2.28 $ 2.64 $ 2.22 $ 2.94
Cash cost per pound captured $/lb $ 6.05 $ 6.34 $ 6.36 $ 4.80 $ 6.25
Non-cash cost per pound captured $/lb $ 5.49 $ 5.83 $ 4.59 $ 2.92 $ 5.26
Pounds drummed lb 145,893 130,308 173,844 189,480 450,045
Plant cash cost (3) $000 $ 1,564 $ 1,505 $ 1,696 $ 1,687 $ 4,765
Plant non-cash cost (2) (3) $000 $ 494 $ 494 $ 497 $ 497 $ 1,485
Cash cost per pound drummed $/lb $ 10.72 $ 11.55 $ 9.76 $ 8.90 $ 10.59
Non-cash cost per pound drummed $/lb $ 3.39 $ 3.79 $ 2.86 $ 2.63 $ 3.30
Pounds shipped to conversion facility lb 149,540 148,714 182,150 181,568 480,404
Distribution cash cost (4) $000 $ 86 $ 123 $ 88 $ 128 $ 297
Cash cost per pound shipped $/lb $ 0.58 $ 0.83 $ 0.48 $ 0.70 $ 0.62
(1) Well field costs include all well field operating costs plus amortization of the related mineral property
acquisition costs and depreciation of the related asset retirement obligation 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 depreciation of plant equipment, capitalized ARO costs and amortization of the
investment in the mineral property acquisition costs. The expenses are calculated on a straight-line basis, so
the expense is constant for each quarter. The cost per pound from these costs will therefore vary based on
production levels only.
(3) Plant costs include all plant operating costs, site overhead costs, and depreciation of the related plant
construction and asset retirement obligation costs.
(4) Distribution 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 2016 Q2 2016 Q1 2016 Q4 2015 YTD 2016
Pounds sold lb 200,000 187,000 75,000 225,000 462,000
U3O8 sales $000 $ 9,471 $ 6,741 $ 2,709 $ 7,756 $ 18,921
Average contract price $/lb $ 47.36 $ 39.35 $ 39.35 $ 28.49 $ 43.77
Average spot price $/lb $ - $ 27.00 $ 34.50 $ 36.18 $ 30.75
Average price per pound sold $/lb $ 47.36 $ 36.05 $ 36.12 $ 34.47 $ 40.95
U3O8 cost of sales (1) $000 $ 5,818 $ 5,094 $ 1,855 $ 5,931 $ 12,767
Ad valorem and severance tax cost
per pound sold $/lb $ 3.09 $ 2.65 $ 2.61 $ 2.80 $ 2.84
Cash cost per pound sold $/lb $ 17.50 $ 16.88 $ 15.41 $ 15.42 $ 16.91
Non-cash cost per pound sold $/lb $ 8.50 $ 7.71 $ 6.71 $ 8.13 $ 7.88
------- ------- ------- ------- ------- -------
Average cost per pound sold $/lb $ 29.09 $ 27.24 $ 24.73 $ 26.35 $ 27.63
U3O8 gross profit $000 $ 3,653 $ 1,647 $ 854 $ 1,825 $ 6,154
Gross profit per pound sold $/lb $ 18.27 $ 8.81 $ 11.39 $ 8.11 $ 13.32
Gross profit margin % 38.6% 24.4% 31.5% 23.5% 32.5%
Ending inventory balances
Pounds
In-process inventory lb 57,647 62,028 71,602 88,788
Plant inventory lb - 3,654 22,062 30,367
Conversion facility inventory lb 84,808 135,723 173,178 63,776
------- ------- ------- ------- -------
Total inventory lb 142,455 201,405 266,842 182,931
Total cost
In-process inventory $000 $ 866 $ 929 $ 977 $ 994
Plant inventory $000 $ - $ 115 $ 569 $ 742
Conversion facility inventory $000 $ 2,539 $ 3,846 $ 4,388 $ 1,609
------- ------- ------- ------- -------
Total inventory $000 $ 3,405 $ 4,890 $ 5,934 $ 3,345
Cost per pound
In-process inventory $/lb $ 15.02 $ 14.98 $ 13.64 $ 11.20
Plant inventory $/lb $ - $ 31.47 $ 25.79 $ 24.43
Conversion facility inventory $/lb $ 29.94 $ 28.32 $ 25.34 $ 25.23
(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.
U3O8 sales of $9.5-million for third quarter 2016 were based on selling 200,000 pounds at an average price of $47.36 into regularly scheduled contract deliveries. The company did not make any spot sales during the quarter.
For the quarter, the company's cost of sales totalled $5.8-million based on selling 200,000 pounds from production at a total cost per pound of $29.09, up from $27.24 in the previous quarter as the higher-priced pounds from the first two quarters made up much of what was sold in the current quarter.
At the end of the quarter, the average cash cost per pound in the conversion facility ending inventory was $17.80, an increase from $17.50 at the end of the previous quarter, and is reflective of the increased cost per pound produced for the previous quarters, which was again primarily driven by the lower production levels.
The gross profit from the sale of produced uranium for the quarter was $3.7-million, which represents a gross profit margin of approximately 39 per cent. This was higher than the previous quarter due to a contract sale at a higher price, which occurred during the quarter.
TOTAL COST PER POUND SOLD RECONCILIATION (1)
Unit Q3 2016 Q2 2016 Q1 2016 Q4 2015 YTD 2016
Ad valorem and severance taxes $000 $ 552 $ 304 $ 420 $ 470 $ 1,276
Well field costs $000 $ 1,636 $ 1,624 $ 1,744 $ 1,636 $ 5,004
Plant and site costs $000 $ 2,059 $ 1,998 $ 2,193 $ 2,184 $ 6,250
Distribution costs $000 $ 86 $ 123 $ 88 $ 128 $ 297
Inventory change $000 $ 1,485 $ 1,045 $ (2,590) $ 1,513 $ (60)
------ ------ ------ ------ ------ ------
Total cost of sales $000 $ 5,818 $ 5,094 $ 1,855 $ 5,931 $ 12,767
Total pounds sold lb 200,000 187,000 75,000 225,000 462,000
Total average cost per pound sold $/lb $ 29.09 $ 27.24 $ 24.73 $ 26.35 $ 27.63
------ ------ ------ ------ ------ ------
(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 this filing. The cash and non-cash cost components are identified
in the attached 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, 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.
Continuing guidance for 2016
At the end of the second quarter of 2016, the average spot price per pound of U3O8, as reported by Ux Consulting Company LLC and TradeTech LLC, had declined to approximately $26.70. As a result of that low spot price environment, the company implemented cost-saving measures, including work force reductions at all three of the company's locations, and the company deliberately reduced its production rates to levels that would satisfy the 2016 contractual sales obligations remaining at that time.
The average reported spot price per pound of U3O8 continued to decline during the third quarter of 2016 to approximately $23 at the end of the quarter. For the week of Oct. 24, 2016, the average reported price was $20 per pound U3O8, which represents a decline of 42 per cent since Jan. 1, 2016, when the price was approximately $34.20.
In response, the company has continued to monitor and prudently manage its costs. The company has also minimized development expense activities to the extent possible without risking its ability to meet future contractual commitments and has once again lowered its production rates to levels that are consistent with its remaining 2016 and anticipated 2017 contractual sales obligations.
During the quarter, the company dried and drummed about 146,000 pounds U3O8, which was at the lower end of the projected range for the quarter. Because of the deteriorating spot price environment, the company has lowered its production forecast again and is now targeting to dry and drum between 40,000 and 45,000 pounds per month in the fourth quarter, which would bring the estimated final production for 2016 within the range of 570,000 to 585,000 pounds.
During the nine months ended Sept. 30, 2016, the company sold 462,000 pounds of U3O8 at an average price per pound of $40.95. Its gross margin per pound sold during the nine-month period was $13.32, or approximately 33 per cent. The company has one remaining contractual delivery of 100,000 pounds at about $33 per pound, and, with it completed, the company continues to expect the profit margins for the year 2016 to be between 25 per cent and 30 per cent.
Webcast and teleconference
A webcast and teleconference will be held on Nov. 2, 2016, at 9 a.m. MT/11 a.m. ET, to discuss the results and provide an operational update. Those wishing to participate by phone can do so by calling:
U.S. toll-free number: 1-877-226-2859
Canada toll-free number: 1-855-669-9657
International number: 1-412-542-4134
Ask to be joined into the Ur-Energy call.
The webcast can be accessed 10 minutes prior to the call. Preregistration and participation access are available on-line.
If you are unable to join the call, a link will be available following the webcast on the company's website.
About Ur-Energy
Ur-Energy is a junior uranium mining company operating the Lost Creek in situ recovery uranium facility in south-central Wyoming. The Lost Creek processing facility has a two-million-pound-per-year nameplate capacity. The company has begun to submit applications for permits and licences to operate Shirley basin.
We seek Safe Harbor.
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