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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 JUNE 30, 2018

 

 

 

 

 

 

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: 001-33905

 

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, smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

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

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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 July 26, 2018,  there were 146,715,824 shares of the registrant’s no par value Common Shares (“Common Shares”), the registrant’s only outstanding class of voting securities, outstanding.

 



 


 

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UR-ENERGY INC.

 

TABLE OF CONTENTS

 

22

34

34

36

 

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1. 

Financial Statements

3

Item 2. 

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

21

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

37

Item 4. 

Controls and Procedures

37

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1. 

Legal Proceedings

38

Item 1A. 

Risk Factors

38

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3. 

Defaults Upon Senior Securities

38

Item 4. 

Mine Safety Disclosures

38

Item 5. 

Other Information

38

Item 6. 

Exhibits

39

 

 

 

SIGNATURES 

40

 

 

 

 

 


 

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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 below 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 (“U.S.”) 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) the ability to maintain controlled, steady-state operations at Lost Creek; (ii) the outcome of our forecasts and production projections, including the anticipated production of Lost Creek for 2018; (iii) the timing and outcome of permitting and regulatory approvals of the amendment for uranium recovery at the LC East project; (iv) the ability to complete additional favorable uranium sales agreements including spot sales if the market warrants and production inventory is available; (v) the potential of our exploration and development projects; (vi) the timing and outcome of applications for regulatory approval to build and operate an in situ recovery mine at Shirley Basin; (vii) resolution of the continuing challenges within the uranium market, including supply and demand projections;  (viii) the outcome of the Department of Commerce Section 232 investigation, including whether the Secretary of Commerce will make a recommendation to the U.S. President, and the nature of the recommendation, whether the President will act on the recommendation and, if so, the nature of the action and remedy; (ix) the expected benefits of the proposed remedies in the trade action; and (x) the expected impacts of any remedial measures from the Section 232 action on U.S. production and the U.S. uranium mining industry. Additional factors include, among others, the following: future estimates for production; capital expenditures; operating costs; mineral resources; recovery rates; grades; market 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 and other authorizations in the U.S.; risks associated with current variable economic conditions; challenges presented by current inventories and largely unrestricted imports of uranium products into the U.S.; our ability to service our debt and maintain compliance with all restrictive covenants related to the debt facility and security documents; the possible impact of future debt or equity 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 potential litigation; uncertainties associated with changes in law, 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; sufficiency of insurance coverages; uncertainty regarding the fluctuations of quarterly results; foreign currency exchange risks; ability to enforce civil liabilities under U.S. securities laws outside the U.S.; ability to maintain our listing on the NYSE American 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 our investments and other risks and

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uncertainties described under the heading “Risk Factors” in our Annual Report on Form 10-K, dated March 2, 2018.

 

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

 

Unless otherwise indicated, all resource estimates included in this Form 10-Q 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.

 

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

 

NI 43-101 Review of Technical Information: James A. Bonner, Ur-Energy Vice President Geology, P.Geo. and Qualified Person as defined by NI 43-101, reviewed and approved the technical information contained in this Form 10-Q.

 

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PART I

Item 1. FINANCIAL STATEMENTS

 

Ur-Energy Inc.

Unaudited Interim Consolidated Balance Sheets

 

(expressed in thousands of U.S. dollars)

 

 

 

 

 

 

June 30,

 

December 31,

 

2018

 

2017

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents (note 3)

7,530

 

3,879

Accounts receivable

37

 

33

Inventory (note 4)

 -

 

4,515

Prepaid expenses

777

 

741

 

8,344

 

9,168

Long-term inventory (note 4)

9,804

 

 -

Restricted cash (note 5)

7,459

 

7,558

Mineral properties (note 6)

43,871

 

44,677

Capital assets (note 7)

26,072

 

26,961

 

87,206

 

79,196

 

95,550

 

88,364

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities (note 8)

2,654

 

3,039

Current portion of notes payable (note 9)

4,916

 

4,774

Environmental remediation accrual

72

 

72

 

7,642

 

7,885

Notes payable (note 9)

12,167

 

14,662

Asset retirement obligations (note 10)

27,322

 

27,036

 

47,131

 

49,583

Shareholders' equity (note 11)

 

 

 

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: 146,715,824 at June 30, 2018 and 146,531,933 at December 31, 2017

177,221

 

177,063

Warrants

1,006

 

4,109

Contributed surplus

19,061

 

15,454

Accumulated other comprehensive income

3,630

 

3,663

Deficit

(152,499)

 

(161,508)

 

48,419

 

38,781

 

95,550

 

88,364

 

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 Income

 

(expressed in thousands of U.S. dollars except for share data)

 

 

 

 

 

 

 

 

 

Three months ended  June 30,

 

Six months ended June 30,

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

Sales (note 12)

3,807

 

11,821

 

23,479

 

26,649

Cost of sales

(2,225)

 

(6,573)

 

(11,983)

 

(12,868)

Gross profit

1,582

 

5,248

 

11,496

 

13,781

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

Exploration and evaluation

(606)

 

(691)

 

(1,372)

 

(1,603)

Development

(440)

 

(1,829)

 

(872)

 

(2,045)

General and administrative

(1,098)

 

(963)

 

(3,020)

 

(2,677)

Accretion of asset retirement obligations (note 10)

(126)

 

(134)

 

(252)

 

(266)

Income (loss) from operations

(688)

 

1,631

 

5,980

 

7,190

Net interest expense

(261)

 

(353)

 

(549)

 

(731)

Loss on equity investment

(4)

 

 -

 

(5)

 

 -

Foreign exchange gain

 4

 

(25)

 

10

 

(17)

Other income

3,540

 

63

 

3,573

 

63

Net income for the period

2,591

 

1,316

 

9,009

 

6,505

 

 

 

 

 

 

 

 

Income  per common share

 

 

 

 

 

 

 

Basic

0.02

 

0.01

 

0.06

 

0.04

Diluted

0.02

 

0.01

 

0.06

 

0.04

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

Basic

146,699,582

 

145,873,898

 

146,634,457

 

145,502,117

Diluted

148,495,249

 

151,669,010

 

148,430,124

 

151,297,229

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME

 

 

 

 

 

 

 

Net income for the period

2,591

 

1,316

 

9,009

 

6,505

Other Comprehensive loss, net of tax

 

 

 

 

 

 

 

Translation adjustment on foreign operations

(12)

 

29

 

(33)

 

18

Comprehensive income  for the period

2,579

 

1,345

 

8,976

 

6,523

 

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, 2017

146,531,933

 

177,063

 

4,109

 

15,454

 

3,663

 

(161,508)

 

38,781

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

183,891

 

162

 

 -

 

(49)

 

 -

 

 -

 

113

Common shares issued for cash, net

 

 

 

 

 

 

 

 

 

 

 

 

 

  of $4 of ATM renewal costs

 -

 

(4)

 

 -

 

 -

 

 -

 

 -

 

(4)

Redemption of vested RSUs

 -

 

 -

 

 -

 

(13)

 

 -

 

 -

 

(13)

Expiry of warrants

 -

 

 -

 

(3,103)

 

3,103

 

 -

 

 -

 

 -

Non-cash stock compensation

 -

 

 -

 

 -

 

566

 

 -

 

 -

 

566

Net income and comprehensive loss

 -

 

 -

 

 -

 

 -

 

(33)

 

9,009

 

8,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

146,715,824

 

177,221

 

1,006

 

19,061

 

3,630

 

(152,499)

 

48,419

 

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)

 

 

 

 

 

 

Six months ended June 30,

 

2018

 

2017

Cash provided by

 

 

 

Operating activities

 

 

 

Net income for the period

9,009

 

6,505

Items not affecting cash:

 

 

 

Stock based expense

566

 

506

Depreciation and amortization

1,805

 

2,538

Accretion of asset retirement obligations

252

 

266

Amortization of deferred loan costs

60

 

60

Provision for reclamation

 -

 

(6)

Gain on monetization of contract

(3,540)

 

 -

Gain on disposition of assets

(2)

 

 -

Gain on foreign exchange

(11)

 

18

Other loss

 5

 

 -

Change in non-cash working capital items:

 

 

 

Accounts receivable

(4)

 

 2

Inventory

(5,289)

 

(3,342)

Prepaid expenses

(186)

 

(45)

Accounts payable and accrued liabilities

(252)

 

235

 

2,413

 

6,737

 

 

 

 

Investing activities

 

 

 

Mineral property costs

(15)

 

(6)

Proceeds from monetization of contract

3,540

 

 -

Funding of equity investment

(4)

 

 -

Purchase of capital assets

(44)

 

(107)

 

3,477

 

(113)

 

 

 

 

Financing activities

 

 

 

Issuance of common shares for cash

 -

 

1,169

Share issue costs

(4)

 

(43)

Proceeds from exercise of stock options

113

 

348

RSUs redeemed to pay withholding or paid in cash

(13)

 

(52)

Repayment of debt

(2,413)

 

(2,279)

 

(2,317)

 

(857)

 

 

 

 

Effects of foreign exchange rate changes on cash

(21)

 

 1

 

 

 

 

Net change in cash, cash equivalents and restricted cash

3,552

 

5,768

Beginning cash, cash equivalents and restricted cash

11,437

 

9,109

Ending cash, cash equivalents and restricted cash (note 13)

14,989

 

14,877

 

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

June 30, 2018

 

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

 

1.Nature of Operations

 

Ur-Energy Inc. (the “Company”) was incorporated on March 22, 2004 under the laws of the Province of Ontario. The Company was continued under the Canada Business Corporations Act on August 8, 2006. Headquartered in Littleton, Colorado, the Company is an exploration stage mining company, as defined by U.S. Securities and Exchange Commission (“SEC”) Industry Guide 7. The Company is engaged in uranium mining and recovery operations, with activities including the acquisition, exploration, development and production of uranium mineral resources located in Wyoming. As of August 2013, the Company commenced uranium production at its Lost Creek Project in Wyoming.

 

Due to the nature of the uranium mining methods used by the Company on the Lost Creek Property, and the definition of “mineral reserves” under National Instrument 43-101 (“NI 43-101”), which uses the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards, the Company has not determined whether the properties contain mineral reserves. However, the Company’s “Amended Preliminary Economic Assessment of the Lost Creek Property, Sweetwater County, Wyoming,” February 8, 2016 (“Lost Creek PEA”), outlines the potential viability of the Lost Creek Property. 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.Summary of Significant Accounting Policies

 

Basis of presentation

 

These unaudited interim consolidated financial statements do not conform in all respects to the requirements of United States generally accepted accounting principles (“US GAAP”) 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, 2017.  We apply the same accounting policies as in the prior year other than as noted below.  The year-end balance sheet data were derived from the audited financial statements and certain information and footnote disclosures required by US GAAP have been condensed or omitted.

 

New accounting pronouncements which may affect future reporting

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize all leases on the balance sheet, including operating leases, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018. As at June 30, 2018, the Company’s only leases are for vehicles, equipment, and office space in one location. 
Based on the Company’s current leases, the Casper office and copier leases are the only leases that will remain in effect as of the date of implementation of the standard. We have gathered the necessary

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

information for proper disclosure of the office lease once the ASU is effective.  We will continue to monitor any new leases to ensure that we have all the information necessary to handle the transition to the new standard and properly report the transactions. We do not anticipate the new standard will affect our net income materially, but will result in additional fixed assets and related lease liabilities. 

 

New accounting pronouncements which were implemented this year

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606).” The amendments in ASU 2014-09 affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU superseded the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic 606, Revenue from Contracts with Customers.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of the promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted Topic 606 effective January 1, 2018. .  The Company purchases and produces  U3O8 and recognizes revenue at point of transfer of control so revenue will continue to be recognized at that point under the new standard.  The adoption of the new standard had no impact on either our current or prior revenue recognition processes or reporting, which, electing the retrospective basis for implementing the standard, results in no changes to prior financial reporting.  In addition, there is no change in our revenue recognition treatment in the current period. 

 

Our revenues are primarily derived from the sale of U3O8 under either long-term (delivery in typically two to five years) or spot (immediate delivery) contracts with our customers. The contracts specify the quantity to be delivered, the price or specific calculation method of the price, payment terms and the year(s) of the delivery. There may be some variability in the dates of the delivery or the quantity to be delivered depending on the contract, but those issues are addressed before the delivery date.  When a delivery is approved, the Company notifies the conversion facility with instructions for a title transfer to the customer. Revenue is recognized once a title transfer of the U3O8 is confirmed by the conversion facility. 

We also receive a small amount of revenue from disposal fees. We have contracts with our customers which specify the type and volume of material which can be disposed. Monthly, we invoice those customers based on deliveries of material to the disposal site by the customer. Materials are measured and categorized at the time of delivery and verified by the customer. We recognize the revenue at the end of the month in which the material was received.

In January 2016, the FASB issued ASU 2016-1, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825). The amendments in this ASU supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. The amendments improve financial reporting by providing relevant information about an entity’s equity investments and reducing the number of items that are recognized in other comprehensive income. The Company adopted the amended Topic 825 effective January 1, 2018.  The adoption of this guidance had no effect on our financial statements or other financial reporting.

 

 

3.Cash and Cash Equivalents

 

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

 

 

 

 

 

 

 

As at

 

June 30, 2018

 

December 31, 2017

 

$

 

$

Cash on deposit at banks

2,649

 

1,667

Money market funds

4,881

 

2,212

 

 

 

 

 

7,530

 

3,879

 

 

 

 

4.  Inventory

 

The Company’s inventory consists of the following:

 

 

 

 

 

 

 

As at

 

June 30, 2018

 

December 31, 2017

 

$

 

$

In-process inventory

518

 

315

Plant inventory

548

 

369

Conversion facility inventory

8,738

 

3,831

 

 

 

 

 

9,804

 

4,515

 

The Company’s classification of its inventory as either short or long-term inventory requires it to estimate the portion of on-hand inventory that will be realized over the next 12 months and does not include inventories which are not expected to be both purchased and realized in cost of sales over the next 12 months.  As the Company has purchase contracts as of June 30, 2018 to acquire sufficient inventory to fulfill their contract deliveries in the next 12 months, the inventory as of June 30, 2018 is considered long-term.

 

In conjunction with our lower of cost or net realizable value calculations, the Company reduced the inventory valuation by $98 for the six months ended June 30, 2018.

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

 

5.    Restricted Cash

 

The Company’s restricted cash consists of the following:

 

 

 

 

 

 

 

As at

 

June 30, 2018

 

December 31, 2017

 

$

 

$

 

 

 

 

Money market account

7,459

 

7,458

Certificates of deposit

 -

 

100

 

 

 

 

 

7,459

 

7,558

 

The bonding requirements for reclamation obligations on various properties have been agreed to by the Wyoming Department of Environmental Quality (“WDEQ”), the Bureau of Land Management (“BLM”) and the Nuclear Regulatory Commission (“NRC”) as applicable.  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 $27.1 million of coverage towards specific reclamation obligations are collateralized by $7.4 million of the restricted cash at June 30, 2018. 

 

6Mineral Properties

 

The Company’s mineral properties consist of the following:

 

 

 

 

 

 

 

 

 

 

 

Lost Creek

 

Pathfinder

 

Other U.S.

 

 

 

Property

 

Mines

 

Properties

 

Total

 

$

 

$

 

$

 

$

Balance, December 31, 2017

11,810

 

19,701

 

13,166

 

44,677

 

 

 

 

 

 

 

 

Acquisition costs

 -

 

 -

 

31

 

31

Change in estimated reclamation costs (note 10)

34

 

 

 

 -

 

34

Amortization

(871)

 

 -

 

 -

 

(871)

 

 

 

 

 

 

 

 

Balance, June 30, 2018

10,973

 

19,701

 

13,197

 

43,871

 

 

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

Lost Creek Property

 

The Company acquired certain Wyoming properties in 2005 when Ur-Energy USA Inc. 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, LC East and EN Projects. Currently, there are no royalties on the mining claims in the Lost Creek, LC North 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”) to acquire additional mineral properties. Assets acquired in this transaction include the Shirley Basin mine, portions of the Lucky Mc mine, machinery and equipment, vehicles, office equipment and development databases. Pathfinder was acquired for aggregate consideration of $6.7 million, a 5% production royalty under certain circumstances and the assumption of $5.7 million in estimated asset reclamation obligations.   At June 30, 2016, the royalty expired and was terminated.

 

7.Capital Assets

 

The Company’s capital assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

June 30, 2018

 

December 31, 2017

 

 

 

Accumulated

 

Net Book

 

 

 

Accumulated

 

Net Book

 

Cost

 

Depreciation

 

Value

 

Cost

 

Depreciation

 

Value

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Rolling stock

3,432

 

3,239

 

193

 

3,388

 

3,184

 

204

Enclosures

32,991

 

7,705

 

25,286

 

32,991

 

6,880

 

26,111

Machinery and equipment

1,237

 

696

 

541

 

1,237

 

663

 

574

Furniture, fixtures and leasehold improvements

119

 

107

 

12

 

119

 

104

 

15

Information technology

1,121

 

1,081

 

40

 

1,120

 

1,063

 

57

 

 

 

 

 

 

 

 

 

 

 

 

 

38,900

 

12,828

 

26,072

 

38,855

 

11,894

 

26,961

 

 

 

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

8.Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities consist of the following:

 

 

 

 

 

 

 

 

 

 

As at

 

June 30, 2018

 

December 31, 2017

 

$

 

$

Accounts payable

642

 

840

Payroll and other taxes

1,317

 

1,224

Severance and ad valorem tax payable

695

 

975

 

 

 

 

 

2,654

 

3,039

 

 

 

 

 

9.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.

 

Deferred loan fees include legal fees, commissions, commitment fees and other costs associated with obtaining the financing. Those fees amortizable within 12 months of June 30, 2018 are considered current.

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

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

 

 

 

 

 

 

 

As at

 

June 30, 2018

 

December 31, 2017

 

$

 

$

Current debt

 

 

 

Sweetwater County Loan

5,037

 

4,895

Less deferred financing costs

(121)

 

(121)

 

4,916

 

4,774

 

 

 

 

Long term debt

 

 

 

Sweetwater County Loan

12,441

 

14,996

Less deferred financing costs

(274)

 

(334)

 

12,167

 

14,662

 

Schedule of payments on outstanding debt as of June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt

Total

 

2018

 

2019

 

2020

 

2021

 

Maturity

 

$

 

$

 

$

 

$

 

$

 

 

Sweetwater County Loan

 

 

 

 

 

 

 

 

 

 

 

Principal

17,478

 

2,482

 

5,183

 

5,487

 

4,326

 

01-Oct-21

Interest

1,809

 

485

 

752

 

447

 

125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

19,287

 

2,967

 

5,935

 

5,934

 

4,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.Asset Retirement and Reclamation Obligations

 

Asset retirement obligations ("ARO") relate to the Lost Creek mine and Pathfinder projects 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 of the mines, processing plants, infrastructure, aquifer restoration, waste dumps and ongoing post-closure environmental monitoring and maintenance costs.

 

At June 30, 2018, the total undiscounted amount of the future cash needs was estimated to be $27.0 million. The schedule of payments required to settle the ARO liability extends through 2033.

 

The restricted cash as discussed in note 5 is related to the surety bonds which provide security to the governmental agencies on these obligations.

 

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

 

 

 

 

 

For the period ended

 

June 30, 2018

 

December 31, 2017

 

 

 

 

 

$

 

$

Beginning of period

27,036

 

26,061

Change in estimated liability

34

 

448

Accretion expense

252

 

527

 

 

 

 

End of period

27,322

 

27,036

 

 

 

 

 

 

11.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”). The Option Plan was most recently approved by the shareholders, including certain amendments, on May 18, 2017. Eligible participants under the Option Plan include directors, officers, employees and consultants of the Company. Under the terms of the Option Plan, stock options granted prior to the May 2017 amendment 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. Following the May 2017 amendment of the Option Plan, future grants of options will vest over a three-year period: 33.3% on the first anniversary, 33.3% on the second anniversary, and 33.4% on the third anniversary of the grant. The term of options remains unchanged.

 

Activity with respect to stock options is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

average

 

 

 

Options

 

exercise price

 

 

 

#

 

$

Balance, December 31, 2017

 

 

9,459,401

 

0.70

 

 

 

 

 

 

Granted

 

 

200,000

 

0.60

Exercised

 

 

(183,891)

 

0.61

Forfeited

 

 

(184,548)

 

0.74

Expired

 

 

(336,060)

 

0.59

 

 

 

 

 

 

Outstanding, June 30, 2018

 

 

8,954,902

 

0.67

 

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 six months ended June 30, 2018 was $0.5 million.

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

 

As of June 30, 2018, outstanding stock options are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding

 

Options exercisable

 

 

 

 

 

 

Weighted-

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

average

 

 

 

 

 

average

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

intrinsic

 

Number

 

contractual

 

intrinsic

 

 

price

 

of options

 

life (years)

 

value

 

of options

 

life (years)

 

value

 

Expiry

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.94

 

100,000

 

0.1

 

 -

 

100,000

 

0.1

 

 -

 

01-Aug-18

0.91

 

702,761

 

0.5

 

 -

 

702,761

 

0.5

 

 -

 

27-Dec-18

1.28

 

100,000

 

0.8

 

 -

 

100,000

 

0.8

 

 -

 

31-Mar-19

0.77

 

742,162

 

1.5

 

 -

 

742,162

 

1.5

 

 -

 

12-Dec-19

0.87

 

200,000

 

1.9

 

 -

 

200,000

 

1.9

 

 -

 

29-May-20

0.65

 

604,782

 

2.1

 

16

 

604,782

 

2.1

 

16

 

17-Aug-20

0.61

 

1,021,690

 

2.5

 

61

 

1,021,690

 

2.5

 

61

 

11-Dec-20

0.55

 

2,667,859

 

3.5

 

298

 

2,667,859

 

3.5

 

298

 

16-Dec-21

0.77

 

300,000

 

3.7

 

 -

 

228,000

 

3.7

 

 -

 

02-Mar-22

0.55

 

200,000

 

4.2

 

22

 

 -

 

 

 

 -

 

07-Sep-22

0.68

 

2,115,648

 

4.5

 

 

 

120,000

 

4.5

 

 

 

15-Dec-22

0.58

 

200,000

 

4.7

 

17

 

 -

 

 

 

 -

 

30-Mar-23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.67

 

8,954,902

 

3.0

 

414

 

6,487,254

 

2.5

 

375

 

 

 

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$0.89 as of the last trading day in the period ended June 30, 2018, 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 June 30, 2018 was 4,694,331. The total number of in-the-money stock options exercisable as of June 30, 2018 was 4,294,331.

 

We elect to estimate the number of awards expected to vest in lieu of accounting for forfeitures when they occur.   

 

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 RSU Plan was approved by our shareholders most recently on May 5, 2016.

 

Eligible participants under the RSU Plan include directors and employees of the Company. RSUs in a grant redeem on the second anniversary of the grant.  Upon RSU vesting, the holder of an RSU will receive one common share, for no additional consideration, for each RSU held.

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

 

Activity with respect to RSUs is summarized as follows:

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted

 

 

 

of

 

average grant

 

 

 

RSUs

 

date fair value

 

 

 

 

 

$

Unvested, December 31, 2017

 

 

1,175,952

 

0.65

 

 

 

 

 

 

Vested

 

 

(80,514)

 

0.63

Forfeited

 

 

(12,434)

 

0.63

 

 

 

 

 

 

Unvested, June 30, 2018

 

 

1,083,004

 

0.61

 

As of June 30, 2018, outstanding RSUs are as follows:

 

 

 

 

 

 

 

 

 

 

Number of

 

Remaining

 

Aggregate

 

 

unvested

 

life

 

intrinsic

Grant date

 

RSUs

 

(years)

 

value

 

 

 

 

 

 

$

December 16, 2016

 

584,096

 

0.46

 

397

December 15, 2017

 

498,908

 

1.46

 

339

 

 

 

 

 

 

 

 

 

1,083,004

 

0.95

 

736

 

As of March 30, 2018, one of our directors retired.  Under the terms of our RSU Plan, his 62,000 outstanding RSUs automatically vest.  The compensation committee will determine if he will receive stock or cash for the units redeemed in accordance with the redemption dates as set forth in the Plan. 

 

Warrants

 

The following represents warrant activity during the period ended June 30, 2018:

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted-

 

 

 

of

 

average

 

 

 

warrants

 

exercise price

 

 

 

 

 

$

Outstanding, December 31, 2017

 

 

5,844,567

 

0.97

 

 

 

 

 

 

Expired

 

 

(4,294,167)

 

0.94

 

 

 

 

 

 

Outstanding, June 30, 2018

 

 

1,550,400

 

0.95

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

 

As of June 30, 2018, outstanding warrants are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

Intrinsic

 

 

price

 

of warrants

 

life (years)

 

Value

 

Expiry

$

 

 

 

 

 

$

 

 

0.95

 

1,550,400

 

0.2

 

 -

 

27-Aug-18

 

 

 

 

 

 

 

 

 

0.95

 

1,550,400

 

0.2

 

 -

 

 

 

Share-based compensation expense

 

Share-based compensation expense was $0.4 million and $0.6 million for the three and six months ended June 30, 2018 and $0.4 million and $0.7 million for the three and six months ended June 30, 2017, respectively.

 

As of June 30, 2018, there was approximately $0.7 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 $0.4 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 2.4 years and 1.2 years, respectively.

 

Cash received from stock options exercised totaled $0.1 million for the three and six months ended June 30, 2018 and $Nil and $0.3 million for the three and six months ended June 30, 2017, respectively.  

 

Fair value calculations

 

The initial fair value of options and RSUs granted is determined using the Black-Scholes option pricing model for options and the intrinsic pricing model for RSUs.  There were no RSUs granted in either the six months ended June 30, 2018 or the six months ended June 30, 2017.  The assumptions used for the options granted during the six months ended June 30, 2018 and June 30, 2017 were as follows:

 

 

 

 

 

Six months ended June 30,

Six months ended June 30,

 

2018

2017

Expected option life (years)

 3.74

3.70

Expected volatility

54.59%

57.45%

Risk-free interest rate

1.90%

1.00%

Expected dividend rate

0%

0%

Forfeiture rate

6.0%

5.4%

 

 

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

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

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.

 

12.  Sales

 

Sales have been derived from U3O8 being sold to domestic utilities, primarily under term contracts, as well as to a trader through spot sales.

 

Disaggregation of Revenues

 

The following table presents our revenues disaggregated by revenue source and type of revenue for each revenue source:

 

Sales consist of:

 

 

 

 

 

 

 

 

 

 

Six months ended June 30,

 

2018

 

2017

 

$

 

 

 

$

 

 

Sale of produced inventory

 

 

 

 

 

 

 

Company A

237

 

1.0%

 

 -

 

0.0%

Company B

 -

 

0.0%

 

3,141

 

11.8%

Company C

 -

 

0.0%

 

1,777

 

6.7%

 

237

 

1.0%

 

4,918

 

18.5%

Sales of purchased inventory

 

 

 

 

 

 

 

Company C

15,636

 

66.6%

 

15,340

 

57.6%

Company B

7,580

 

32.3%

 

6,358

 

23.8%

 

23,216

 

98.9%

 

21,698

 

81.4%

 

 

 

 

 

 

 

 

Total sales

23,453

 

99.9%

 

26,616

 

99.9%

 

 

 

 

 

 

 

 

Disposal fee income

26

 

0.1%

 

33

 

0.1%

 

 

 

 

 

 

 

 

 

23,479

 

100.0%

 

26,649

 

100.0%

 

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

 

 

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2018

 

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

 

13.Supplemental Information for Statement of Cash Flows

 

Cash per the Statement of Cash Flows consists of the following: