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Ur-Energy Inc
Symbol URE
Shares Issued 169,667,672
Close 2020-10-30 C$ 0.60
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Ur-Energy talks production, omits Q3 P&L from NR

2020-10-30 17:48 ET - News Release

Mr. Jeff Klenda reports

UR-ENERGY RELEASES 2020 Q3 RESULTS

Ur-Energy Inc. has filed the company's Form 10-Q for the quarter ended Sept. 30, 2020, with the U.S. Securities and Exchange Commission and with Canadian securities authorities on SEDAR.

Ur-Energy chief executive officer Jeff Klenda said: "We are pleased that the U.S. Nuclear Fuel Working Group, as well as bipartisan congressional support, remains focused on securing the future of our industry and our nation. As we await additional positive developments, like the recent amendment and 20-year extension of the Russian suspension agreement, we continue our efforts to support the uranium production industry and to safeguard America's national and energy security through the reinvigoration of the front end of our nuclear fuel cycle.

"After making further, market-appropriate adjustments to our Lost Creek operations, we anticipate substantial savings in 2021 and 2022, which are greatly enhanced by the recent agreement to defer principal payments on our state bond loan until October, 2022. We remain grateful to the State of Wyoming and Sweetwater county for their continuing support. With $5.9-million of cash and approximately 270,000 pounds of finished, ready-to-sell product at the conversion facility, we now have ample runway to support operations into 2022."

Results of operations

For the three months ended Sept. 30, 2020, 2,503 pounds of uranium (U3O8) were captured within the Lost Creek plant and 4,926 pounds of U3O8 were packaged in drums. The company's inventory at the converter totalled approximately 268,485 pounds of U3O8 at Sept. 30, 2020.

During the quarter, the company took steps to further reduce production operations at Lost Creek and adjust to the continued depressed state of the uranium markets while it awaits the recommended relief from the Working Group and further positive developments in the uranium markets. The reduced production levels allowed the company to make further operating cost reductions at Lost Creek and related support cost reductions at the corporate office in Littleton. The cost reductions include savings from additional reductions in force at both locations as well as other cost containment measures. Together with the further deferral of principal payments on the state bond loan, these measures will result in substantial savings to the company, estimated to exceed $7-million and $4-million in calendar years 2021 and 2022, respectively.

The attached tables provide detailed financial information on the company's sales and cost of sales as they relate to U3O8 pounds. The U3O8 and cost per pound measures included in the following tables do not have a standardized meaning within United States generally accepted accounting principles (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 U.S. GAAP financial statement presentation are included within the respective table.

There were no sales in the third quarter, and the company does not anticipate making any sales in the fourth quarter.

Cost of sales per the financial statements includes ad valorem and severance taxes related to the extraction of uranium, all costs of well field and plant 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. The resulting inventoried cost per pound is compared with the NRV of the product, which is based on the estimated sales price of the product, net of any necessary costs to finish the product. Any inventory value in excess of the NRV is charged to cost of sales per the financial statements. These NRV adjustments are excluded from the U3O8 cost of sales and U3O8 cost per pound sold figures because they relate to the pounds of U3O8 in ending inventory and do not relate to the pounds of U3O8 sold during the period.

Continuing guidance for 2020

Following multiple announcements of industry production suspensions and reductions earlier this year, U3O8 spot prices increased to $33 per pound in June. U3O8 spot prices have decreased to just under $30 per pound since then. While the production cuts may amount to as much as 46 million pounds of primary production on an annualized basis, positive impacts on long-term U3O8 prices have not materialized.

The Working Group report makes several strong recommendations to revitalize domestic uranium mining, most relevant among which is 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. Additionally, the report recommends the establishment of a national uranium reserve, which is included in the President's fiscal year 2021 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. The budget item is for $150-million per year from fiscal 2021 to fiscal 2030. However, in July the U.S. House Committee on Appropriations decided not to finance the budget item without further information from the Department of Energy (DOE), for which they directed the DOE to submit a plan for the proposed establishment of a uranium reserve within six months of the appropriation bill's enactment.

The amendment and extension of the RSA, completed in early October, continues caps on Russian imports of nuclear fuel to the U.S. for an additional 20 years, through 2040. The amendment reduces the current cap of 20 per cent of demand to an average of 17 per cent of demand over the 20-year period, with reductions starting in 2028 and continuing through 2040. These provisions in the RSA are positive developments in the long term. Notably, Senator Barrasso has introduced legislation to codify the recent extension of the RSA.

Still, no specific action or remedies have resulted from the Working Group's plan at this time and, while the report is strong in its recommendations, there can be no certainty of the final outcome of the Working Group's findings and recommendations, or the timing and impact of any actions taken in response to those findings and recommendations. This includes both the congressional budget appropriations process and proposed legislation related to the national uranium reserves. The outcome of these continuing processes and its effects on the U.S. uranium market, therefore, remains uncertain.

In addition to the restructuring of the state bond loan, the company has continued to implement other company-wide cost-saving measures as it awaits the recommended relief from the Working Group report and further positive developments in the uranium markets. Recently, it further reduced production operations at Lost Creek to market-appropriate levels. The reduced production levels allowed the company to make further operating cost reductions at Lost Creek and related support cost reductions at the corporate office. The cost reductions include savings from additional reductions in force at both locations as well as other cost containment measures. Together with the further deferral of principal payments on the state bond loan, these measures will result in substantial savings to the company, estimated to exceed $7-million and $4-million in calendar years 2021 and 2022, respectively.

With the company's remaining highly experienced technical and operation staff, it will continue to maintain operational readiness at its fully permitted Lost Creek mine and plant. Ur-Energy is prepared to expand uranium production at Lost Creek to an annualized run rate of one million pounds.

The Lost Creek facility has the constructed and licensed capacity to process up to two million pounds of U3O8 per year and previously reported mineral resources to feed the processing plant for many years to come. A ramp-up of production at Lost Creek will advance further development in the first two mine units, followed by the 10 additional mining areas as defined in the Lost Creek property preliminary economic assessment, as amended. With future development and construction in mind, the company's current staff members were retained as having the greatest level of experience and adaptability allowing for an easier transition back to full operations. Lost Creek operations can increase to full production rates in as little as six months following a go decision, simply by developing additional header houses within the fully permitted MU2. Development expenses during this six-month ramp-up period are estimated to be approximately $14-million and are almost entirely related to MU2 drilling and header house construction costs.

The company will continue to closely monitor the uranium market and any actions or remedies resulting from the Working Group's report, DOE's and DOC's efforts, or legislative actions, which may positively impact the uranium production industry. Until such time, the company will continue to minimize costs and maximize runway to maintain current operations and avoid unnecessary dilution while maintaining the operational readiness needed to ramp-up production when called upon.

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 2.6 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 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. Shares of Ur-Energy trade on the New York Stock Exchange American under the symbol URG and on the Toronto Stock Exchange under the symbol URE. Ur-Energy's corporate office is in Littleton, Colo., and its registered office is in Ottawa, Ont.

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