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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, 2015

 

 

 

 

 

 

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: 333-193316

 

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

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes    No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company:

 

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

 

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 April 29, 2015, there were 130,048,326 shares of the registrant’s no par value Common Shares (“Common Shares”), the registrant’s only outstanding class of voting securities, outstanding.

 



 


 

Table of Contents

UR-ENERGY INC.

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1. 

Financial Statements

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

34 

Item 4. 

Controls and Procedures

35 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1. 

Legal Proceedings

35 

Item 1A. 

Risk Factors

35 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

35 

Item 3. 

Defaults Upon Senior Securities

35 

Item 4. 

Mine Safety Disclosures

35 

Item 5. 

Other Information

36 

Item 6. 

Exhibits

37 

 

 

 

SIGNATURES 

 

 

 

 

 


 

Table of Contents

 

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 of this document 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 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) our timeline for full ramp up of production operations to design capacity at our Lost Creek project; (ii) the technical and economic viability of Lost Creek; (iii) our ability to complete additional favorable uranium sales agreements including spot sales if production is available and the market warrants; (iv) the production rates and life of the Lost Creek Project and subsequent production from adjoining properties, including LC East; (v) the potential of exploration targets throughout the Lost Creek Property (including the ability to expand resources); (vi) the potential of our other exploration and development projects, including Shirley Basin, as well as the technical and economic viability of Shirley Basin; (vii) the timing and outcome of environmental baseline studies at Shirley Basin; (viii) the outcomes of our 2015 guidance and production projections; and (ix) the continuing and long-term effects on the uranium market of events in Japan in 2011 including supply and demand projections. These other factors include, among others, the following: future estimates for production, production start-up and operations, capital expenditures, operating costs, mineral resources, recovery rates, grades and 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 in the United States; risks associated with current variable economic conditions; our ability to service our debt and maintain compliance with all restrictive covenants related to the debt facilities and security documents; the possible impact of future financings; the hazards associated with mining production; compliance with environmental laws and regulations; uncertainty regarding the pricing and collection of accounts; the possibility for adverse results in pending and potential litigation; uncertainties associated with changes in 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; uncertainties regarding the need for additional capital; uncertainty regarding the fluctuations of quarterly results; foreign currency exchange risks; ability to enforce civil liabilities under U.S. securities laws outside the United States; ability to maintain our listing on the NYSE MKT LLC (“NYSE MKT”) 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 status as a "controlled foreign corporation" under the applicable provisions of the U.S. Internal Revenue Code of 1986, as amended; risks associated with our investments and other risks and uncertainties described under the heading “Risk Factors” and under the heading of “Risk Factors” in our Annual Report on Form 10-K, dated March 2, 2015.

 

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

 

Unless otherwise indicated, all resource estimates included in this Form 10-K 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. NI 43-101 permits the disclosure of an historical estimate made prior to the adoption of NI 43-101 that does not comply with NI 43-101 to be disclosed using the historical terminology if the disclosure: (a) identifies the source and date of the historical estimate; (b) comments on the relevance and reliability of the historical estimate; (c) to the extent known, provides the key assumptions, parameters and methods used to prepare the historical estimate; (d) states whether the historical estimate uses categories other than those prescribed by NI 43-101; and (e) includes any more recent estimates or data available. 

 

Canadian standards, including NI 43-101, differ significantly from the requirements of the United States Securities and Exchange Commission (“SEC”), and resource information contained in this Form 10-K 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 United States standards.

 

NI 43-101 Review of Technical Information: John Cooper, Ur-Energy Project Geologist, P.Geo. and SME Registered Member, and Qualified Person as defined by National Instrument 43-101 reviewed and approved the technical information contained in this Quarterly Report on Form 10-Q.

 

PART I

Item 1. FINANCIAL STATEMENTS

 

 

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Ur-Energy Inc.

Unaudited Interim Consolidated Balance Sheets

 

(expressed in thousands of U.S. dollars)

 

 

 

 

 

 

 

March 31,

 

December 31,

 

2015

 

2014

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents (note 4)

2,182 

 

3,104 

Accounts receivable (note 5)

13 

 

28 

Inventory (note 6)

4,703 

 

5,168 

Current deferred financing costs (note 12)

191 

 

190 

Prepaid expenses

1,095 

 

856 

 

8,184 

 

9,346 

 

 

 

 

Restricted cash (note 7)

7,556 

 

7,556 

Mineral properties (note 8)

51,455 

 

52,750 

Capital assets (note 9)

32,451 

 

32,993 

Equity investment (note 10)

1,089 

 

1,090 

Deferred financing costs (note 12)

668 

 

716 

 

93,219 

 

95,105 

 

101,403 

 

104,451 

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities (note 11)

4,799 

 

4,532 

Current portion of notes payable (note 12)

10,934 

 

7,374 

Reclamation obligations

85 

 

85 

 

15,818 

 

11,991 

Notes payable (note 12)

27,812 

 

33,193 

Deferred income tax liability (note 13)

3,345 

 

3,345 

Asset retirement obligations (note 14)

23,571 

 

23,445 

Other liabilities - warrants (note 15)

423 

 

376 

 

55,151 

 

60,359 

 

70,969 

 

72,350 

Shareholders' equity (note 16)

 

 

 

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: 130,048,326 at March 31, 2015 and 129,365,076 at December 31, 2014

168,749 

 

168,118 

Warrants

4,175 

 

4,175 

Contributed surplus

14,050 

 

14,250 

Accumulated other comprehensive income

3,363 

 

3,337 

Deficit

(159,903)

 

(157,779)

 

30,434 

 

32,101 

 

101,403 

 

104,451 

 

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

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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,

 

2015

 

2014

 

 

 

 

Sales (note 17)

7,387 

 

6,147 

 

 

 

 

Cost of sales

(5,390)

 

(3,240)

 

 

 

 

Gross profit

1,997 

 

2,907 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

Exploration and evaluation

(685)

 

(1,018)

Development

(1,029)

 

(574)

General and administrative

(1,517)

 

(2,312)

Accretion

(126)

 

(38)

 

 

 

 

Loss from operations

(1,360)

 

(1,035)

 

 

 

 

Interest (expense) (net)

(688)

 

(636)

Warrant mark to market adjustment (note 15)

(77)

 

(263)

Foreign exchange gain ( loss)

 

(14)

 

 

 

 

Net loss for the period

(2,124)

 

(1,948)

 

 

 

 

Loss per common share

 

 

 

Basic and diluted

(0.02)

 

(0.02)

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

Basic and diluted

129,709,518 

 

128,101,046 

 

 

 

 

COMPREHENSIVE LOSS

 

 

 

Net loss for the period

(2,124)

 

(1,948)

Other Comprehensive loss, net of tax

 

 

 

Translation adjustment on foreign operations

26 

 

35 

 

 

 

 

Comprehensive loss for the period

(2,098)

 

(1,913)

 

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

 

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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

 

Warrants

 

Surplus

 

Income

 

Deficit

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

#

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

129,365,076 

 

168,118 

 

4,175 

 

14,250 

 

3,337 

 

(157,779)

 

32,101 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

468,082 

 

463 

 

 -

 

(161)

 

 -

 

 -

 

302 

Redemption of vested RSUs

215,168 

 

167 

 

 -

 

(226)

 

 -

 

 -

 

(59)

Non-cash stock compensation

 -

 

 -

 

 -

 

188 

 

 -

 

 -

 

188 

Net loss and comprehensive income

 -

 

 -

 

 -

 

 -

 

26 

 

(2,124)

 

(2,098)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2015

130,048,326 

 

168,749 

 

4,175 

 

14,050 

 

3,363 

 

(159,903)

 

30,434 

 

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

 

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Ur-Energy Inc.

Unaudited Interim Consolidated Statements of Cash Flow

(expressed in thousands of U.S. dollars)

 

 

 

 

 

Three months ended  March 31,

 

2015

 

2014

 

 

 

 

Cash provided by (used in)

 

 

 

Operating activities

 

 

 

Net loss for the period

(2,124)

 

(1,948)

Items not affecting cash:

 

 

 

Stock based expense

188 

 

293 

Depreciation and amortization

1,862 

 

1,939 

Accretion expense

126 

 

38 

Warrants mark to market loss

77 

 

263 

RSUs redeemed for cash

(59)

 

(66)

Change in non-cash working capital items:

 

 

 

Accounts receivable

15 

 

1,488 

Inventory

465 

 

(1,863)

Prepaid expenses

67 

 

(51)

Accounts payable and accrued liabilities

11 

 

1,149 

 

628 

 

1,242 

 

 

 

 

Investing activities

 

 

 

Mineral property costs

 -

 

(57)

Funding of equity investment

 -

 

(4)

Purchase of capital assets

(24)

 

(297)

 

(24)

 

(358)

 

 

 

 

Financing activities

 

 

 

Issuance of common shares and warrants for cash

 -

 

 -

Share issue costs

 -

 

43 

Proceeds from exercise of stock options

302 

 

834 

Proceeds from debt financing

 -

 

1,500 

Cost of debt financing

 -

 

(37)

Repayment of debt

(1,822)

 

(76)

 

(1,520)

 

2,264 

 

 

 

 

Effects of foreign exchange rate changes on cash

(6)

 

(103)

Net change in cash and cash equivalents

(922)

 

3,045 

Beginning cash and cash equivalents

3,104 

 

1,627 

Ending cash and cash equivalents

2,182 

 

4,672 

 

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

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

1.Nature of Operations

 

Ur-Energy Inc. was incorporated on March 22, 2004 under the laws of the Province of Ontario. It was continued under the Canada Business Corporations Act on August 8, 2006. Ur-Energy-Inc. and its wholly-owned subsidiaries Ur-Energy USA Inc.; NFU Wyoming, LLC; Lost Creek ISR, LLC; NFUR Bootheel, LLC; Hauber Project LLC; NFUR Hauber, LLC; and Pathfinder Mines Corporation (the Company”) is an exploration stage mining company as defined by U.S. Securities and Exchange Commission (“SEC”) Industry Guide 7.  We are headquartered in Littleton, Colorado. The Company is engaged in uranium mining and recovery operations, with activities including acquisition, exploration, development and operations of uranium mineral properties located in Wyoming. The Company commenced uranium production at its Lost Creek Project in August 2013.

 

Due to the nature of the uranium mining methods we use on the Lost Creek Property, and the definition of “mineral reserves” under the SEC Industry Guide 7, the Company has not determined whether the Lost Creek Property contains mineral reserves. However, the Company’s December 30, 2013 NI 43-101 Technical Report on Lost Creek, “Preliminary Economic Assessment of the Lost Creek Property, Sweetwater County, Wyoming,” outlines the potential viability of the Lost Creek Property. As well, the Company’s January 27, 2015 NI 43-101 Technical Report on Shirley Basin, “Preliminary Economic Assessment of Shirley Basin Uranium Project Carbon County, Wyoming, USA,” (the “Shirley Basin PEA”) outlines the potential viability of the Shirley Basin Project. 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

 

The Company has financed its operations from its inception primarily through the issuance of equity securities and debt instruments. Construction and development of the Lost Creek Project commenced in October 2012 after receiving the Record of Decision from the United States Department of the Interior Bureau of Land Management (“BLM”).  Production began in August 2013 after receiving final operational clearance from the United States Nuclear Regulatory Commission (“NRC”). The Company made its first deliveries and related sales in December 2013.  It is now generating funds from sales to finance its operations.

 

Based upon the Company’s current working capital balances and the expected timing of product sales, it is possible that additional funding might be sought. Although the Company has been successful in raising debt and equity financing in the past, there can be no guarantee that such funding will be available in the future.

 

 

3.Summary of Significant Accounting Policies

 

Basis of presentation

 

These financial statements have been prepared by management in accordance with United States generally accepted accounting principles (“US GAAP”) and include all of the assets, liabilities and expenses of the Company. All inter-company balances and transactions between the subsidiaries and/or the parent have been eliminated upon consolidation.

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

These unaudited interim consolidated financial statements do not conform in all respects to the requirements of generally accepted accounting principles for annual financial statements. The unaudited interim financial statements reflect all normal adjustments which in the opinion of management are necessary for a fair statement 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, 2014.

 

Exploration Stage

 

The Company has established the existence of uranium resources for certain uranium projects, including the Lost Creek Property. The Company has not established proven or probable reserves, as defined by SEC under Industry Guide 7, through the completion of a final or “bankable” feasibility study for any of its uranium projects, including the Lost Creek Property. Furthermore, the Company has no plans to establish proven or probable reserves for any of its uranium projects for which the Company plans on utilizing in-situ recovery (“ISR”) mining, such as the Lost Creek Project or the Shirley Basin Project. As a result, and despite the fact that the Company commenced recovery of U3O8 at the Lost Creek Project in August 2013, the Company remains in the Exploration Stage as defined under Industry Guide 7, and will continue to remain in the Exploration Stage until such time proven or probable reserves have been established.

 

Since the Company commenced recovery of uranium at the Lost Creek Project without having established proven and probable reserves, any uranium resources established or extracted from the Lost Creek Project should not be in any way associated with having established, or production from, proven or probable reserves. Accordingly, information concerning mineral deposits set forth herein may not be comparable to information made public by companies that have reserves in accordance with United States standards.

 

Previous period comparatives

 

During the second quarter of 2014, we recorded an immaterial out of period adjustment due to the reclassification of severance and ad valorem taxes as a cost of extraction instead of a direct cost of sale.  The taxes were previously reported as a direct cost of sale in the first quarter of 2014.

 

New accounting pronouncements

 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU”) 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The update requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and represents a change in accounting principle. The update is effective for fiscal periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. We are evaluating the impact of ASU 2015-03 on our consolidated financial statements.

 

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

4Cash and Cash Equivalents

 

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

 

 

 

 

 

 

 

As of March 31,

 

As of December 31,

 

2015

 

2014

 

$

 

$

Cash on deposit at banks

874 

 

431 

Money market funds

1,308 

 

2,673 

 

 

 

 

 

2,182 

 

3,104 

 

 

5.Accounts Receivable

 

The Company’s accounts receivable consist of the following:

 

 

 

 

 

 

 

As of March 31,

 

As of December 31,

 

2015

 

2014

 

$

 

$

Trade accounts receivable

 

 

 

Other Companies

 

19 

Total trade receivables

 

19 

Other receivables

 

 

 

 

 

Total accounts receivable

13 

 

28 

 

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

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

6.Inventory

 

The Company’s inventory consists of the following:

 

 

 

 

 

 

 

As of March 31,

 

As of December 31,

 

2015

 

2014

 

$

 

$

In-process inventory

1,368 

 

2,084 

Plant inventory

761 

 

882 

Conversion facility inventory

2,574 

 

2,202 

 

 

 

 

 

4,703 

 

5,168 

 

As of March 31, 2015, there was no inventory on hand with costs in excess of net realizable value.

 

7.Restricted Cash

 

The Company’s restricted cash consists of the following:

 

 

 

 

 

 

 

As of March 31,

 

As of December 31,

 

2015

 

2014

 

$

 

$

 

 

 

 

Money market account (a)

7,456 

 

7,456 

Certificates of deposit (b)

100 

 

100 

 

 

 

 

 

7,556 

 

7,556 

 

(a) The bonding requirements for reclamation obligations on various properties have been agreed to by the Wyoming Department of Environmental Quality (“WDEQ”), the BLM and the NRC.  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 $26.7 million of coverage towards specific reclamation obligations are collateralized by $7.5 million of the restricted cash at March 31, 2015.

 

(b) A certificate of deposit ($0.1 million) provides security for the Company’s credit cards.

 

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

8Mineral Properties

 

The Company’s mineral properties consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

Lost Creek

 

Pathfinder

 

Other US

 

 

 

Property

 

Mines

 

Properties

 

Total

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

Balance, December 31, 2014

18,512 

 

21,028 

 

13,210 

 

52,750 

 

 

 

 

 

 

 

 

Amortization

(1,295)

 

 -

 

 -

 

(1,295)

 

 

 

 

 

 

 

 

Balance, March 31, 2015

17,217 

 

21,028 

 

13,210 

 

51,455 

 

United States

 

Lost Creek Property

 

The Company acquired certain Wyoming properties when Ur-Energy USA Inc. entered into the Membership Interest Purchase Agreement (“MIPA”) with New Frontiers Uranium, LLC in 2005. Under the terms of the MIPA, the Company 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 and EN Projects. There are no royalties on the mining claims in the Lost Creek, LC North, LC East 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”). Assets acquired in this transaction include the Shirley Basin Mine, portions of the Lucky Mc Mine, machinery and equipment, vehicles, office equipment, and exploration and development databases. Pathfinder was acquired for aggregate consideration of $6.6 million, a 5% production royalty under certain circumstances and the assumption of certain asset reclamation obligations which were estimated by AREVA at $5.7 million.  Additional royalties exist on certain of the mineral properties at Shirley Basin as described in the January 2015 Shirley Basin PEA.  The purchase price allocation attributed $5.7 million to asset retirement obligations, $3.3 million to deferred tax liabilities, $15.3 million to mineral properties and the balance to the remaining assets and liabilities.

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

 

9.Capital Assets

 

The Company’s capital assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

March 31, 2015

 

December 31, 2014

 

 

 

Accumulated

 

Net Book

 

 

 

Accumulated

 

Net Book

 

Cost

 

Depreciation

 

Value

 

Cost

 

Depreciation

 

Value

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Rolling stock

3,881 

 

2,946 

 

935 

 

3,878 

 

2,852 

 

1,026 

Enclosures

32,987 

 

2,340 

 

30,647 

 

32,968 

 

1,927 

 

31,041 

Machinery and equipment

992 

 

446 

 

546 

 

992 

 

426 

 

566 

Furniture, fixtures and leasehold improvements

119 

 

84 

 

35 

 

119 

 

81 

 

38 

Information technology

1,121 

 

833 

 

288 

 

1,119 

 

797 

 

322 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,100 

 

6,649 

 

32,451 

 

39,076 

 

6,083 

 

32,993 

 

 

 

 

10.Equity Investment

 

Following its earn-in to the Bootheel Project in 2009, Jet Metals Corp was required to fund 75% of the project’s expenditures and the Company the remaining 25%. The project has been accounted for using the equity accounting method with the Company’s pro rata share of the project’s loss included in the Statement of Operations since the date of earn-in and the Company’s net investment is reflected on the Balance Sheet. Under the terms of the operating agreement, the Company elected not to participate financially for the year ended March 31, 2012 which reduced the Company’s ownership percentage to approximately 19%. The equity accounting method has been continued because of the Company’s ability to directly influence the budget process and therefore the operations of the project. There have been no subsequent changes in the percentage of ownership of the project.  Impairment testing was performed at December 31, 2014 which resulted in no change to the carrying cost of the investment.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

11.Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities consist of the following:

 

 

 

 

 

 

 

 

 

 

 

As of March 31,

 

As of December 31,

 

2015

 

2014

 

$

 

$

Accounts payable

1,669 

 

1,503 

Severance and ad valorem tax payable

1,665 

 

1,947 

Payroll and other taxes

1,465 

 

1,082 

 

 

 

 

 

4,799 

 

4,532 

 

 

 

 

12.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 interest at a fixed rate of 5.75% per annum on a quarterly basis commencing January 1, 2014. The principal is payable in 28 quarterly installments commencing January 1, 2015 and continuing through October 1, 2021. The State Bond Loan is collateralized by all of the assets at the Lost Creek Project. As a condition of the financing, earlier loan facilities with RMB Australia Holding Ltd (“RMBAH”) together with certain construction equipment loans were paid off with the funding proceeds from the State Bond Loan.

 

On June 24, 2013, the Company entered into a $20.0 million First Loan Facility with RMBAH. The initial $20.0 million was drawn and repaid during 2013. An amendment to the First Loan Facility allowed for $5.0 million to be redrawn. This was done on December 19, 2013 for the acquisition of Pathfinder. On March 14, 2014, the loan was amended to change the interest rate, extend the loan maturity date to June 30, 2016 and increase the current loan to $10.0 million which included an additional line of credit of $3.5 million as a result of the completion and results of the Technical Report (NI 43-101) on the newly acquired Shirley Basin Project.  On March 14, 2014, the Company also drew down an additional $1.5 million on its First Loan Facility.  On September 19, 2014, the Company drew down the $3.5 million line of credit.  The amended interest rate is approximately 8.75%. Principal payments of $0.81 million are due quarterly.  The line of credit is renewable until March 31, 2016.

 

Deferred loan fees includes legal fees, commissions, commitment fees and other costs associated with obtaining the various financings. Those fees amortizable within 12 months of March 31, 2015 are considered current assets.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

The following table lists the current (within 12 months) and long term portion of each of the Company’s debt instruments:

 

 

 

 

 

 

 

As at

 

As at

 

March 31, 2015

 

December 31, 2014

Current debt

 

 

 

Sweetwater County bond

4,184 

 

4,124 

RMBAH First Loan Facility

6,750 

 

3,250 

 

 

 

 

 

10,934 

 

7,374 

Long term debt

 

 

 

Sweetwater County bond

27,812 

 

28,881 

RMBAH First Loan Facility

 -

 

4,312 

 

 

 

 

 

27,812 

 

33,193 

 

Schedule of payments on outstanding debt as of March 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt

Total

 

2015

 

2016

 

2017

 

2018

 

2019

 

Subsequent

 

Maturity

Sweetwater County bond

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

31,996 

 

3,115 

 

4,367 

 

4,623 

 

4,895 

 

5,183 

 

9,813 

 

October 1, 2021

Interest

6,577 

 

1,335 

 

1,568 

 

1,311 

 

1,039 

 

752 

 

572 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBAH First Loan Facility

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

6,750 

 

2,438 

 

4,312 

 

 -

 

 -

 

 -

 

 

 

March 31, 2016

Interest

492 

 

397 

 

95 

 

 -

 

 -

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

45,815 

 

7,285 

 

10,342 

 

5,934 

 

5,934 

 

5,935 

 

10,385 

 

 

 

 

 

 

13.Income Taxes

 

The deferred income tax liability relates to the acquisition of Pathfinder. When the Company acquired Pathfinder, it had no basis in its remaining assets. Accordingly, the Company has no tax basis in these assets. Under US GAAP, the Company has to record a liability for the estimated additional taxes that would arise on the disposition of those assets because of the lack of basis in those assets.

 

14.Asset Retirement and Reclamation Obligations

 

Asset retirement obligations ("ARO") relate to the Lost Creek Project and Pathfinder 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 at a risk-free rate. Included in this liability are the costs of closure, reclamation, demolition and stabilization

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

of the mines, processing plants, infrastructure, aquifer restoration, waste dumps and ongoing post-closure environmental monitoring and maintenance costs.

 

At March 31, 2015, the total undiscounted amount of the future cash needs was estimated to be $24.8 million. The schedule of payments required to settle the ARO liability extends through 2033.

 

The restricted cash as discussed in note 7 is related to the surety bonds which provide security to the related governmental agencies on these obligations.

 

 

 

 

 

 

 

Three months ended 

 

Year ended

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

$

 

$

Beginning of year

23,445 

 

17,279 

Change in estimated liability

 -

 

5,669 

Accretion expense

126 

 

497 

 

 

 

 

End of period

23,571 

 

23,445 

 

 

 

 

 

15.Other Liabilities

 

For the December 2013 private placement, we issued units consisting of one common share of the Company’s stock and one half warrant. Each full warrant is priced at US$1.35 which created a derivative financial instrument. The liability created is adjusted to a calculated fair value quarterly 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 year. The revaluation as of March 31, 2015 resulted in a loss of $77 thousand for the three months ended March 31, 2015 which is reflected on the statement of operations.

 

16.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”). Eligible participants under the Option Plan include directors, officers, employees and consultants of the Company. Under the terms of the Option Plan, stock options generally vest with Option Plan participants as follows: 10% at the date of grant; 22% four and one-half months after grant; 22% nine months after grant; 22% thirteen and one-half months after grant; and the balance of 24% eighteen months after the date of grant.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

Activity with respect to stock options is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

Options

 

average

 

 

 

#

 

exercise price

 

 

 

 

 

$

 

 

 

 

 

 

Outstanding, December 31, 2014

 

 

8,468,614 

 

1.12 

 

 

 

 

 

 

Exercised

 

 

(468,082)

 

0.65 

Forfeited

 

 

(18,261)

 

0.86 

Expired

 

 

(10,810)

 

0.65 

 

 

 

 

 

 

Outstanding, March 31, 2015

 

 

7,971,461 

 

1.05 

 

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, 2015 was $0.1 million.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

As of March 31, 2015, outstanding stock options are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding

 

Options exercisable

 

 

 

 

 

 

Weighted-

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

average

 

Aggregate

 

 

 

average

 

Aggregate

 

 

Exercise

 

 

 

remaining

 

Intrinsic

 

 

 

remaining

 

Intrinsic

 

 

price

 

Number

 

contractual

 

Value

 

Number

 

contractual

 

Value

 

 

$

 

of options

 

life (years)

 

$

 

of options

 

life (years)

 

$

 

Expiry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.27

 

1,227,034 

 

0.8

 

 -

 

1,227,034 

 

0.8

 

 -

 

January 28, 2016

1.24

 

545,000 

 

1.3

 

 -

 

545,000 

 

1.3

 

 -

 

July 7, 2016

0.93

 

657,782 

 

1.4

 

11 

 

657,782 

 

1.4

 

11 

 

September 9, 2016

0.92

 

200,000 

 

1.6

 

 

200,000 

 

1.6

 

 

October 24, 2016

0.72

 

956,382 

 

1.8

 

189 

 

956,382 

 

1.8

 

189 

 

January 12, 2017

1.10

 

200,000 

 

1.8

 

 -

 

200,000 

 

1.8

 

 -

 

February 1, 2017

0.93

 

100,000 

 

1.9

 

 

100,000 

 

1.9

 

 

March 1, 2017

0.60

 

1,310,758 

 

2.7

 

395 

 

1,310,758 

 

2.7

 

395 

 

December 7, 2017

0.61

 

587,059 

 

3.1

 

172 

 

587,059 

 

3.1

 

172 

 

April 25, 2018

0.98

 

100,000 

 

3.3

 

 -

 

100,000 

 

3.3

 

 -

 

August 1, 2018

0.95

 

956,232 

 

3.7

 

 -

 

726,950 

 

3.7

 

 -

 

December 27, 2018

1.33

 

100,000 

 

4.0

 

 -

 

54,000 

 

4.0

 

 -

 

March 31, 2019

0.81

 

1,031,214 

 

4.7

 

124 

 

103,678 

 

4.7

 

12 

 

December 12, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.05

 

7,971,461 

 

2.5

 

898 

 

6,768,643 

 

2.2

 

786 

 

 

 

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$1.20 as of the last trading day in the period ended March 31, 2015, that would have been received by the option holders had they exercised their options as of that date. The total number of in-the-money stock options outstanding as of March 31, 2015 was 4,843,195. The total number of in-the-money stock options exercisable as of March 31, 2015 was 3,915,659.

 

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 plan was approved most recently, as amended, on April 25, 2013. 

 

Eligible participants under the RSU Plan include directors and employees of the Company. Under the terms of the original RSU Plan, RSUs vested with participants as follows: 50% on the first anniversary of the date of the grant and 50% on the second anniversary of the date of the grant.  In March 2015, the Board approved amendments to the plan that (a) extend the redemption period so that, going forward, all RSUs in a grant are not redeemed until the second anniversary of the grant; (b) provide for redemption, instead of cancellation, of outstanding RSUs at the date of redemption for retiring directors and executive officers, which is defined as a threshold of combined service and age of

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

65 years, and a minimum of five years of service to the Company; and (c) update the RSU Plan for compliance with applicable laws.  The amendments are the subject of a shareholder vote at our upcoming annual meeting of shareholders.

 

Activity with respect to RSUs is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted

 

 

 

of

 

average grant

 

 

 

RSUs

 

date fair value

 

 

 

 

 

$

Unvested, December 31, 2014

 

 

379,435 

 

0.89 

 

 

 

 

 

 

Granted

 

 

274,574 

 

0.99 

Forfeited

 

 

(2,370)

 

0.87 

 

 

 

 

 

 

Unvested, March 31, 2015

 

 

651,639 

 

0.90 

 

As of March 31, 2015, outstanding RSUs are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate

 

 

Number of

 

Remaining

 

Intrinsic

 

 

unvested

 

life

 

Value

Grant date

 

RSUs

 

(years)

 

$

December 27, 2013

 

119,419 

 

0.74

 

113 

December 12, 2014

 

257,646 

 

1.70

 

245 

March 13, 2015

 

274,574 

 

1.95

 

261 

 

 

 

 

 

 

 

 

 

651,639 

 

1.60

 

619 

 

Upon RSU vesting, the holder of an RSU will receive one common share, for no additional consideration, for each RSU held.

 

Warrants

 

There was no warrant activity during the period ended March 31, 2015.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

As of March 31, 2015, outstanding warrants are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate

 

 

Exercise

 

 

 

Remaining

 

Intrinsic

 

 

price

 

Number

 

contractual

 

Value

 

 

$

 

of warrants

 

life (years)

 

$

 

Expiry

 

 

 

 

 

 

 

 

 

0.92

 

50,000 

 

0.4

 

 

September 4, 2015

1.12

 

100,000 

 

0.6

 

 -

 

November 1, 2015

0.93

 

25,000 

 

0.9

 

 

March 5, 2016

1.35

 

2,354,545 

 

1.7

 

 -

 

December 19, 2016

1.12

 

4,294,167 

 

3.2

 

 -

 

June 24, 2018

1.17

 

1,550,400 

 

3.4

 

 -

 

August 27, 2018

 

 

 

 

 

 

 

 

 

1.19

 

8,374,112 

 

2.8

 

13 

 

 

 

Share-based compensation expense

 

Share-based compensation expense was $0.2 million and $0.3 million for the three months ended March 31, 2015 and 2014, respectively.

 

As of March 31, 2015, there was approximately $0.4 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 $0.6 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 1.0 years and 1.7 years, respectively.

 

Cash received from stock options exercised during the three months ended March 31, 2015 and 2014 was $0.3 million and $0.8 million, respectively.  

 

Fair value calculations

 

The fair value of RSUs granted during the three months ended March 31, 2015 was determined using the intrinsic value method using a forfeiture rate of 7.81% based on historical dataThe initial fair value of options granted during the

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

three months ended March 31, 2014 was determined using the Black-Scholes option pricing model.  The following assumptions were used in the calculations:

 

 

 

 

 

 

 

Three months ended
March 31, 2014

 

 

 

Expected option life (years)

 

3.49 

Expected volatility

 

66.00%

Risk-free interest rate

 

1.40%

Expected dividend rate

 

0%

Forfeiture rate (Options)

 

4.5%

 

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.

 

There were no options granted in the three months ended March 31, 2015.  There were no RSUs granted in the three months ended March 31, 2014.

 

17.  Sales

 

Sales have been primarily derived from U3O8 being sold to domestic utilities under contracts.

 

Sales consist of:

 

 

 

 

 

 

 

 

 

 

 

Three months ended  March 31,

 

2015

 

2014

 

$

 

 

 

$

 

 

Company A

6,098 

 

82.5% 

 

3,675 

 

59.8% 

Company B

1,282 

 

17.4% 

 

 -

 

0.0% 

Company C

 -

 

0.0% 

 

2,312 

 

37.6% 

 

7,380 

 

99.9% 

 

5,987 

 

97.4% 

Disposal fees

 

0.1% 

 

160 

 

2.6% 

 

 

 

 

 

 

 

 

 

7,387 

 

100.0% 

 

6,147 

 

100.0% 

 

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

 

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2015

 

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

 

 

18.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 deposits, money market accounts and demand deposits. They bear interest at annual rates ranging from 0.18% to 0.6% and mature at various dates up to February 5, 2016. These instruments are maintained at financial institutions in Canada and the United States. Of the amount held on deposit, approximately $0.6 million is covered by the Canada Deposit Insurance Corporation, the Securities Investor Protection Corporation or the United States Federal Deposit Insurance Corporation, leaving approximately $9.1 million at risk at March 31, 2015 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, 2015.

 

Liquidity risk (see note 2)

 

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

 

The Company has financed its operations from its inception primarily through the issuance of equity securities and debt instruments. Production commenced in August 2013 after receiving final operational clearance from the NRC.  Product sales commenced in December 2013.

 

As at March 31, 2015, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $2.5 million which are due within normal trade terms of generally 30 to 60 days, notes payable which will be payable over periods of 0 to 6.5 years, and asset retirement obligations with estimated completion dates until 2033.

 

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 nominal effect on either the three months ended March 31, 2015 or the three months ended March 31, 2014. 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.

 

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Table of Contents

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, 2014. The financial statements have been prepared in accordance with US GAAP.

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 United States. We are operating of our first in situ recovery (“ISR”) 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 MKT 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 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, incorporated under the laws of the State of Delaware, which holds, among other assets, the Shirley Basin and Lucky Mc properties in Wyoming. Our other U.S. subsidiaries remain unchanged since the filing of our Annual Report on Form 10-K, dated March 2, 2015.

We utilize in situ recovery 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 U3O8, for shipping to a third-party storage and conversion facility.

Our Lost Creek processing facility, which includes all circuits for the production, drying and packaging of uranium for delivery into sales, is designed to process 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 will be utilized to process captured U3O8 from our Shirley Basin Project.

Currently, we have nine  U3O8  sales agreements in place with various U.S. utilities for the sale of U3O8 at mid- and long-term contract pricing. The multi-year sales agreements represent a portion of our anticipated production through 2020.  These agreements individually do not represent a substantial portion of our annual projected production, and our business is therefore not substantially dependent upon any one of the agreements. The balance of our Lost Creek production will be sold through spot sales and through additional multi-year agreements.

Changes in Management

On April 10, 2015, it was announced that the employment agreement with the Company’s President and CEO, Wayne Heili, will end on May 1, 2015 and that Mr. Heili’s employment with the Company will conclude following the completion of that term. Effective as of May 2, 2015, Jeffrey T. Klenda, will formally assume the

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title of acting Chief Executive Officer of Ur-Energy.  Mr. Klenda has served as the Chairman of the Board of Directors and Executive Director of the Company since 2006.

Mineral Rights and Properties

 

Lost Creek Property

Ten of our U.S. properties are located in the Great Divide Basin, Wyoming, including Lost Creek. Currently we control a total of more than 2,100 unpatented mining claims and four State of Wyoming mineral leases for a total of approximately 42,000 acres (16,997 hectares) in the area of the Lost Creek Property, including the Lost Creek permit area (the “Lost Creek Project” or “Project”), and certain adjoining properties which we refer to as LC East, LC West, LC North, LC South and EN Project areas (collectively, with the Lost Creek Project, the “Lost Creek Property”). 

The following is a summary of significant activities by project for the three months ended March 31, 2015:

 

During the quarter, production rates at Lost Creek were slowed slightly during the latter part of the quarter while maintenance was conducted on several process circuits.  Still, captured pounds increased 29% over the previous quarter. Production flow increased by 47% quarter-over-quarter by sourcing from nine header houses in the first mine unit. Header houses 8 and 9 were brought on line during the first quarter. A tenth header house in the first mine unit is under construction. Plant head grades continue to be significantly higher than projected. For the quarter, 192,280 pounds of U3O8 were captured within the Lost Creek plant. 177,057 pounds U3O8  were packaged in drums and 171,505 pounds U3O8  of drummed inventory were shipped out of the Lost Creek processing plant.

 

In addition to the plant maintenance and refinements which were completed during the period, Lost Creek water management practices continue to improve: the third deep disposal well and the reverse osmosis circuits became operational during the period.

 

For a sixth straight quarter, the Company’s Lost Creek Project made sales to meet its contractual commitments. This included product sales of 146,000 pounds U3O8, which were sold at an average price of $50.55 per pound. Quarterly product sales revenues totaled $7.4 million.    The Results of Operations are detailed further below.

 

During the quarter, an exploration drill program commenced immediately south and adjacent to the production area. The purpose of this drilling was to characterize three previously identified mineralized sand horizons.   Preliminary results are encouraging and are currently being analyzed. Thus far, the program has included 91 holes, of which 34 holes encountered strong uranium intercepts with a grade-thickness (GT) of 0.20 or higher.  We anticipate completing the 150-hole program during third quarter.

 

Shirley Basin Project

We commissioned and issued an independent, NI 43-101 technical report on Shirley Basin, “Technical Report

on Resources Shirley Basin Uranium Project Carbon County, Wyoming” dated August 27, 2014 (the “Shirley

Basin Technical Report”). This was the first technical report on mineral resources issued for Shirley Basin. Subsequently, on January 27, 2015, we commissioned and issued a second independent, NI 43-101 report on Shirley Basin: the “Preliminary Economic Assessment Shirley Basin Uranium Project Carbon County, Wyoming,” (“Shirley Basin PEA”). The Shirley Basin PEA suggests the possible viability of the project, based

upon analyses of metallurgy and recoverability, engineering, and economics including costs of capital expenditures and operating costs. The Shirley Basin Technical Report was based primarily on analyses of historic drill hole data acquired with the purchase of the property. Additionally, we drilled 14 confirmation

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holes prior to the preparation of the report. The mineral resources for the Shirley Basin Project were estimated in the Technical Report, and considered for economics and recoverability in the Shirley Basin PEA.

 

Environmental baseline studies are nearing completion.  Data from the studies will be included in the applications for permits and licenses for Shirley Basin, which are currently anticipated to be filed with regulators later this year.

 

Results of Operations

 

U3O8 Sales and Production

 

During the three months ended March 31, 2015, 192,280 pounds of U3O8 were captured within the Lost Creek plant. 177,057 of those pounds were packaged in drums and 171,505 pounds of the drummed inventory were shipped to the conversion facility where 146,000 pounds were sold to utility customers.  Inventory, production and sales figures for the Lost Creek Project are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Inventory, Production and Sales Analysis

    

Unit

    

 

2015 Q1

    

 

2014 Q4

    

 

2014 Q3

    

 

2014 Q2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds captured

 

lb

 

 

192,280 

 

 

149,564 

 

 

131,331 

 

 

116,708 

 

Ad valorem and severance tax

 

$000

 

$

150 

 

$

1,163 

 

$

313 

 

$

212 

 

Wellfield cash cost (1)

 

$000

 

$

1,080 

 

$

881 

 

$

1,012 

 

$

912 

 

Wellfield non-cash cost (1)(2)

 

$000

 

$

1,335 

 

$

1,350 

 

$

1,349 

 

$

1,350 

 

Ad valorem and severance tax per pound captured

 

$/lb

 

$

0.78 

 

$

7.78 

 

$

2.38 

 

$

1.82 

 

Cash cost per pound captured

 

$/lb

 

$

5.62 

 

$

5.89 

 

$

7.71 

 

$

7.81 

 

Non-cash cost per pound captured

 

$/lb

 

$

6.94 

 

$

9.02 

 

$

10.28 

 

$

11.56 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds drummed

 

lb

 

 

177,057 

 

 

117,160 

 

 

125,915 

 

 

133,684 

 

Plant cash cost (3)

 

$000

 

$

1,718 

 

$

1,553 

 

$

1,703 

 

$

1,625 

 

Plant non-cash cost (2)(3)

 

$000

 

$

497 

 

$

507 

 

$

504 

 

$

502 

 

Cash cost per pound drummed

 

$/lb

 

$

9.70 

 

$

13.26 

 

$

13.53 

 

$

12.15 

 

Non-cash cost per pound drummed

 

$/lb

 

$

2.81 

 

$

4.33 

 

$

4.00 

 

$

3.76