On August 2, 2013, the Company began production activities at its Lost Creek Project. Innovative design and development have focused on employee and environmental safety, water management practices, and advanced instrumentation monitoring and data capture. First sales of Lost Creek yellowcake were made in December 2013 and during the second quarter of 2015, Lost Creek achieved the milestone of producing its one millionth pound of U3O8 since production activities began.
2016 Third Quarter Lost Creek Project Operations
For the quarter, 141,774 pounds of U3O8 were captured within the Lost Creek plant. 145,893 pounds of U3O8 were packaged in drums and 149,540 pounds of drummed U3O8 inventory were shipped out of the Lost Creek processing plant. At September 30, 2016, inventory at the conversion facility was approximately 84,808 pounds of U3O8. During the quarter, sales totaled $9.5 million with contract sales of 200,000 pounds at an average price of $47.36 per pound. The Company will also recognize $2.6 million of deferred revenue from the first half of the assignment transaction that was completed in 2016 Q1. The second half will be recognized in 2016 Q4.
Production rates at Lost Creek during the quarter were within the projected level of 140,000 to 170,000 dried and drummed pounds. We continued to operate all Mine Unit 1 (MU1) header houses throughout the quarter, including HH 1, which was first brought online in August 2013. The thirteenth and final originally-planned header house in MU1 was brought online late in May. As previously reported, HH 13 and its related patterns of production wells include certain refinements in design and well completion techniques in an effort to increase injectivity for even greater well performance. Results of HH 13’s operations continue to validate these refinements, which are now in the process of being selectively applied to the other twelve header houses within MU1. While leveling off, plant head grades from MU1 header houses continue to be higher than originally projected at this phase of production.
The final general authorization for our Class V water treatment system was received during the quarter. Pre-operational analyses and tests are currently being concluded, after which the final, operational approval will be given to commence use of the treatment and disposal system. We expect operation of the Class V system to commence during fourth quarter. In addition, routine plant and wellfield maintenance continued as scheduled.
Lost Creek Property Resource Estimate
The Lost Creek Property represents the composite of six individual contiguous Projects: Lost Creek Project, LC East Project, LC West Project, LC North Project, LC South Project and EN Project. The fully-licensed and operating Lost Creek Project is considered the core project while the others are collectively referred to as the Adjoining Projects. The Adjoining Projects were acquired by the Company as exploration targets to provide resources supplemental to those recognized at the Lost Creek Project. Most were initially viewed as stand-alone projects, but expanded over time such that collectively they represent a contiguous block of land along with the Lost Creek Project.
An amended preliminary economic assessment (PEA) was issued on February 8, 2016. The current mineral resource estimate for the Lost Creek Property, after subtracting 1.358 million pounds of uranium produced from MU1 through September 30, 2015, is 13.251 million pounds in the Measured and Indicated categories, and 6.439 million pounds in the Inferred category. The current resource estimate represents a net increase to all Lost Creek Property projects of:
- 3.146 million pounds eU3O8 in the Measured and Indicated categories (after adjustment for MU1 production), or 31% increase when compared with the previous resource estimate in the June 17, 2015 Technical Report; and
- 1.402 million pounds eU3O8 in the Inferred category, or a 28% increase to the last mineral resource.
The economic analyses within the amended PEA continue to demonstrate the potential economic viability of the project. The analyses have been revised to evaluate the impact of additional identified resources with information and data acquired through two years of ISR operations at Lost Creek. Total future life of mine production is modeled to be 13.8 million pounds and with production operations ending in 2031. This represents a nine year life of mine extension from the forecast contained in the previous PEA dated December 30, 2013.
Cautionary Note to U.S. Investors: The terms “mineral resource,” “measured mineral resource,” “indicated mineral resource,” and “inferred mineral resource” as used in this news release are Canadian mining terms that are defined in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). These Canadian terms are not defined terms under United States Securities and Exchange Commission (“SEC”) Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC by U.S. registered companies. The SEC permits U.S. companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. Accordingly, note that information contained in this news release describing the Company’s “mineral resources” is not directly comparable to information made public by U.S. companies subject to reporting requirements under U.S. securities laws. U.S. investors are cautioned not to assume that any part or all of the mineral resources in these categories will ever be converted into Mineral Reserves. U.S. investors are urged to consider closely the disclosure in our Form 10-K which may be secured from us, or online at http://www.sec.gov/edgar.shtml.
Cautionary Statement: This Amended Preliminary Economic Assessment is preliminary in nature, and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is increased risk and uncertainty to commencing and conducting production without established mineral reserves that may result in economic and technical failure which may adversely impact future profitability. The estimated mineral recovery used in this Amended Preliminary Economic Assessment is based on recovery data from wellfield operations to date, as well as Ur-Energy personnel and industry experience at similar facilities. There can be no assurance that recovery at this level will be achieved.
Mr. James Bonner, Vice President Geology with Ur-Energy, C.P.G., American Institute of Professional Geologists and a Qualified Person as defined by NI 43-101, has reviewed and approved the technical disclosure contained on this webpage.