UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED |
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:
(Exact name of registrant as specified in its charter) |
|
| Not Applicable | |
State or other jurisdiction of incorporation or organization |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: |
| Trading Symbol |
| Name of each exchange on which registered: |
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|
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
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 | ☐ | ☒ | 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
As of October 26, 2023, there were
UR-ENERGY INC.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | |
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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 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 safe and compliant operations at Lost Creek as we continue to ramp up and operate at commercial production levels; (ii) the timing for ongoing hiring and training of staff at Lost Creek, and the related timing for construction and development work, including bringing additional header houses online; (iii) future development and construction priorities and timelines for Shirley Basin, including timing for a decision to commence construction-related activities and whether our current projections for buildout are able to be met; (iv) our ability to ramp-up to higher production levels at Lost Creek in a timely and cost-effective manner including timely delivery into our contracts and at what profit margins; (v) the timing and outcome of final regulatory approvals of the amendments for uranium recovery at the LC East Project; (vi) continuing effects of supply-chain disruption, and challenges in the labor market, and whether the Company will continue to anticipate and overcome such delays; (vii) the viability of our ongoing research and development efforts, including the timing and cost to permit, implement and operate one or more of them; (viii) whether the new centralized services facility will provide the operational, financial and environmental benefits currently foreseen; (ix) the ability to complete additional favorable uranium sales agreements, including whether fuel buyers will remain in the market and continue to focus on North American product; (x) the effects of the current evolving uranium market, including supply and demand, and whether increases in spot and term pricing will continue and be sustained; (xi) the impacts of global geopolitical events on the nuclear fuel industry and specifically U.S. uranium producers, including the war in Ukraine and other conflicts which may affect production, shipment and commitment of uranium and nuclear fuel supplies; (xii) whether new or continuing sanctions on Russia will affect imports of nuclear fuel to the U.S.; (xiii) whether proposals in Congress to support the nuclear industries will be made law and what effects they would have; and (xiv) impacts on the global markets of climate change initiatives of nations and multi-national companies. Additional factors include, among others, the following: challenges presented by current inventories and largely unrestricted imports of uranium products into the U.S.; future estimates for production; capital expenditures; operating costs; mineral resources, grade estimates and recovery rates; 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; 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 operations; compliance with environmental laws and regulations; wastewater management; 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; changes in size and structure; the effectiveness of management and our strategic relationships; ability to attract and retain key personnel and management; uncertainties regarding the need for additional capital; sufficiency of insurance coverages, bonding surety arrangements, and indemnifications for our inventory; 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 uncertainties described under the heading “Risk Factors” in our Annual Report on Form 10-K, dated March 6, 2023.
3 |
Table of Contents |
Cautionary Note to Investors Concerning Disclosure of Mineral Resources
Unless otherwise indicated, all mineral resource estimates included in this report on Form 10-Q have been prepared in accordance with U.S. securities laws pursuant to Regulation S-K, Subpart 1300 (“S-K 1300”). Prior to these estimates, we prepared our estimates of mineral resources in accord 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 public disclosure an issuer makes of scientific and technical information concerning mineral projects. We are required by applicable Canadian Securities Administrators to file in Canada an NI 43‑101 compliant report at the same time we file an S-K 1300 technical report summary. The NI 43‑101 and S-K 1300 reports (for each of the Lost Creek Property and Shirley Basin Project), as amended, September 19, 2022, are substantively identical to one another except for internal references to the regulations under which the report is made, and certain organizational differences.
Investors should note that the term “mineral resource” does not equate to the term “mineral reserve.” Mineralization may not be classified as a “mineral 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. 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 S-K 1300, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies. Additionally, as required under S-K 1300, our report on the Lost Creek Property includes two economic analyses to account for the chance that the inferred resources are not upgraded as production recovery progresses and the Company collects additional drilling data; the second economic analysis was prepared which excluded the inferred resources. The estimated recovery excluding the inferred resources also establishes the potential viability at the property, as detailed in the S-K 1300 report. Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally mineable.
4 |
Table of Contents |
PART I
Item 1. FINANCIAL STATEMENTS
Ur-Energy Inc. |
Interim Consolidated Balance Sheets |
(expressed in thousands of U.S. dollars) |
(the accompanying notes are an integral part of these consolidated financial statements) |
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Assets |
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Current assets |
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Cash |
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Accounts receivable |
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Inventory |
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Prepaid expenses |
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Total current assets |
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Non-current assets |
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Restricted cash |
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Mineral properties |
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Capital assets |
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Total non-current assets |
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Total assets |
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Liabilities and shareholders' equity |
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Current liabilities |
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Accounts payable and accrued liabilities |
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Current portion of notes payable |
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Current portion of lease liability |
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Current portion of warrant liability |
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Environmental remediation accrual |
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Total current liabilities |
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Non-current liabilities |
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Notes payable |
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Lease liability |
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Asset retirement obligations |
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Warrant liability |
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Total non-current liabilities |
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Shareholders' equity |
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Share capital |
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Contributed surplus |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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5 |
Table of Contents |
Ur-Energy Inc. |
Interim Consolidated Statements of Operations and Comprehensive Loss |
(expressed in thousands of U.S. dollars, except share data) |
(the accompanying notes are an integral part of these consolidated financial statements) |
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| Three Months Ended September 30, |
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Sales |
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Cost of sales |
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Gross profit (loss) |
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Operating costs |
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Operating profit (loss) |
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Net interest income (expense) |
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Warrant liability revaluation gain (loss) |
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Foreign exchange gain (loss) |
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Other income (loss) |
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Net income (loss) |
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Foreign currency translation adjustment |
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Comprehensive income (loss) |
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Earnings (loss) per common share: |
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Basic |
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Diluted |
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Weighted average common shares: |
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Basic |
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Diluted |
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6 |
Table of Contents |
Ur-Energy Inc. |
Interim Consolidated Statements of Changes in Shareholders' Equity |
(expressed in thousands of U.S. dollars, except share data) |
(the accompanying notes are an integral part of these consolidated financial statements) |
Nine Months Ended September 30, 2023 |
| Note |
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| Total Shareholders’ Equity |
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December 31, 2022 |
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Exercise of stock options |
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Shares issued for cash |
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Share issue costs |
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Stock compensation |
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Comprehensive income (loss) |
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March 31, 2023 |
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Share issue costs |
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Stock compensation |
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Comprehensive income (loss) |
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June 30, 2023 |
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Exercise of stock options |
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Redemption of RSUs |
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Comprehensive income (loss) |
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September 30, 2023 |
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7 |
Table of Contents |
Ur-Energy Inc. |
Interim Consolidated Statements of Changes in Shareholders' Equity |
(expressed in thousands of U.S. dollars, except share data) |
(the accompanying notes are an integral part of these consolidated financial statements) |
Nine Months Ended September 30, 2022 |
| Note |
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| Share Capital |
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December 31, 2021 |
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Exercise of warrants |
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Share issue costs |
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| 13 |
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| - |
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Stock compensation |
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| - |
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Comprehensive income (loss) |
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| - |
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March 31, 2022 |
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Exercise of stock options |
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| 13 |
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| ( | ) |
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Shares issued for cash |
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| 13 |
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Share issue costs |
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| 13 |
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| - |
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| ( | ) |
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Stock compensation |
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| - |
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Comprehensive income (loss) |
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| - |
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June 30, 2022 |
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Exercise of stock options |
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| 13 |
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| ( | ) |
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Exercise of warrants |
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| 13 |
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Stock compensation |
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| - |
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Comprehensive income (loss) |
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| - |
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September 30, 2022 |
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8 |
Table of Contents |
Ur-Energy Inc. |
Interim Consolidated Statements of Cash Flow |
(expressed in thousands of U.S. dollars) |
(the accompanying notes are an integral part of these consolidated financial statements) |
|
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| Nine Months Ended September 30, |
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| Note |
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| 2023 |
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| 2022 |
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Cash provided by (used for): |
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Operating activities |
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Net income (loss) for the period |
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Items not affecting cash: |
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Stock based compensation |
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Net realizable value adjustments |
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Amortization of mineral properties |
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Depreciation of capital assets |
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Accretion expense |
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Amortization of deferred loan costs |
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Provision for reclamation |
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Warrant liability revaluation loss (gain) |
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Unrealized foreign exchange loss (gain) |
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Changes in non-cash working capital: |
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Accounts receivable |
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Inventory |
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Prepaid expenses |
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Accounts payable and accrued liabilities |
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Investing activities |
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Purchase of capital assets |
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Financing activities |
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Issuance of common shares and warrants for cash |
|
| 13 |
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Share issue costs |
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| 13 |
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| ( | ) |
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| ( | ) |
Proceeds from exercise of warrants and stock options |
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RSU redeemed for cash |
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Repayment of debt |
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Effects of foreign exchange rate changes on cash |
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Increase (decrease) in cash, cash equivalents, and restricted cash |
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Beginning cash, cash equivalents, and restricted cash |
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Ending cash, cash equivalents, and restricted cash |
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| 17 |
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9 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(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 continued under the Canada Business Corporations Act on August 8, 2006. The Company is an exploration stage issuer, as defined by United States Securities and Exchange Commission (“SEC”). The Company is engaged in uranium mining and recovery operations, with activities including the acquisition, exploration, development, and production of uranium mineral resources located primarily in Wyoming. The Company commenced uranium production at its Lost Creek Project in Wyoming in 2013.
Due to the nature of the uranium recovery methods used by the Company on the Lost Creek Property, and the definition of “mineral reserves” under Subpart 1300 to Regulation S-K (“S-K 1300”), the Company has not determined whether the property contains mineral reserves. 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 interim consolidated financial statements do not conform in all respects to the requirements of U.S. generally accepted accounting principles (“US GAAP”) for annual financial statements. These interim consolidated financial statements reflect all normal adjustments which in the opinion of management are necessary for a fair presentation of the results for the periods presented. These interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2022. We applied the same accounting policies as in the prior year. Certain information and footnote disclosures required by US GAAP have been condensed or omitted in these interim consolidated financial statements.
3. Cash and Cash Equivalents
The Company’s cash and cash equivalents consist of the following:
Cash and cash equivalents | September 30, 2023 | December 31, 2022 | ||||||
Cash on deposit | ||||||||
Money market accounts | ||||||||
4. Accounts Receivable
The Company’s accounts receivable consists of the following:
Accounts Receivable |
| September 30, 2023 |
|
| December 31, 2022 |
| ||
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Trade receivables |
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Other receivables |
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10 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
Trade receivables included $
5. Inventory
The Company’s inventory consists of the following:
Inventory by Type |
| September 30, 2023 |
|
| December 31, 2022 |
| ||
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Plant inventory |
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Conversion facility inventory |
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Using lower of cost or net realizable value (“NRV”) calculations, the Company reduced the inventory valuation by $
6. Restricted Cash
The Company’s restricted cash consists of the following:
Restricted Cash |
| September 30, 2023 |
|
| December 31, 2022 |
| ||
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Cash pledged for reclamation |
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The Company’s restricted cash consists of money market accounts and short-term government bonds.
The bonding requirements for reclamation obligations on various properties have been reviewed and approved by the Wyoming Department of Environmental Quality (“WDEQ”), including the Wyoming Uranium Recovery Program (“URP”), and the Bureau of Land Management (“BLM”) as applicable. The restricted accounts are pledged as collateral against performance surety bonds, which secure the estimated costs of reclamation related to the properties. Surety bonds totaling $
7. Mineral Properties
The Company’s mineral properties consist of the following:
Mineral Properties |
| Lost Creek Property |
|
| Shirley Basin Property |
|
| Other U.S. Properties |
|
| Total |
| ||||
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| ||||
December 31, 2022 |
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Change in estimated reclamation costs |
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Depletion and amortization |
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| ( | ) |
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| - |
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September 30, 2023 |
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11 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(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
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. We are not recovering U3O8 within the State section under lease at Lost Creek and are therefore not subject to royalty payments currently. Other royalties exist on certain mining claims at the LC South, LC East and EN Projects. There are no royalties on the mining claims in the Lost Creek, LC North, or LC West Projects.
Shirley Basin Property
The Company acquired additional Wyoming properties in 2013 when Ur-Energy USA Inc. purchased
Other U.S. Properties
Other U.S. properties include the acquisition costs of several prospective mineralized properties, which the Company continues to maintain through claim payments, lease payments, insurance, and other holding costs in anticipation of future exploration efforts.
8. Capital Assets
The Company’s capital assets consist of the following:
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||
Capital Assets |
| Cost |
|
| Accumulated Depreciation |
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| Net Book Value |
|
| Cost |
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| Accumulated Depreciation |
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| Net Book Value |
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Rolling stock |
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Enclosures |
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Machinery and equipment |
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Furniture and fixtures |
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Information technology |
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Right of use assets |
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12 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
9. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
Accounts Payable and Accrued Liabilities |
| September 30, 2023 |
|
| December 31, 2022 |
| ||
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| ||
Accounts payable |
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Accrued payroll liabilities |
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Accrued severance, ad valorem, and other taxes payable |
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10. Notes Payable
On October 15, 2013, the Sweetwater County Commissioners approved the issuance of a $
On October 1, 2019, the Sweetwater County Commissioners and the State of Wyoming approved an eighteen-month deferral of principal payments beginning October 1, 2019. On October 6, 2020, the State Bond Loan was again modified to defer principal payments for an additional eighteen months. Quarterly principal payments resumed on October 1, 2022, and the last payment is due on October 1, 2024.
The following table summarizes the Company’s current and long-term debt.
Current and Long-term Debt |
| September 30, 2023 |
|
| December 31, 2022 |
| ||
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Current |
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State Bond Loan |
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Deferred financing costs |
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Long-term |
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State Bond Loan |
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Deferred financing costs |
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| ( | ) | |
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The schedule of remaining payments on outstanding debt as of September 30, 2023, is presented below.
Remaining Payments |
| Total |
|
| 2023 |
|
| 2024 |
|
| Final Payment | ||||
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State Bond Loan |
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Principal |
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Interest |
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13 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
11. Asset Retirement Obligations
Asset retirement obligations (“ARO”) relate to the Lost Creek mine and Shirley Basin project and are equal to the current estimated reclamation cost escalated at inflation rates ranging from
The present value of the estimated future closure estimate is presented in the following table.
Asset Retirement Obligations |
| Total |
| |
|
|
|
| |
December 31, 2022 |
|
|
| |
|
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|
Change in estimated reclamation costs |
|
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| |
Accretion expense |
|
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| |
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|
September 30, 2023 |
|
|
|
The restricted cash discussed in note 6 relates to the surety bonds provided to the governmental agencies for these and other reclamation obligations.
12. Warrant Liability
In February 2021, we issued
In February 2023, we issued
Because the warrants are priced in U.S. dollars and the functional currency of Ur-Energy Inc. is Canadian dollars, a derivative financial liability was created. The liability created, and adjusted monthly, is calculated using the Black-Scholes model described below as there is no active market for the warrants. Any gain or loss from the adjustment of the liability is reflected in net income for the period.
14 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
The Company’s warrant liabilities consist of the following:
Warrant Liability Activity |
| Feb-2021 Warrants |
|
| Feb-2023 Warrants |
|
| Total |
| |||
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| |||
December 31, 2022 |
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Warrants issued |
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| |||
Mark to market revaluation loss (gain) |
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| |||
Effects for foreign exchange rate changes |
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| ( | ) |
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| ( | ) | |
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September 30, 2023 |
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|
Warrant Liability Duration |
| Feb-2021 Warrants |
|
| Feb-2023 Warrants |
|
| Total |
| |||
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Current portion of warrant liability |
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Long-term warrant liability |
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The fair value of the warrant liabilities on September 30, 2023, was determined using the Black-Scholes model with the following assumptions:
|
| Feb-2021 |
|
| Feb-2023 |
| ||
Black-Scholes Assumptions as of September 30, 2023 |
| Warrants |
|
| Warrants |
| ||
|
|
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| ||
Expected forfeiture rate |
|
| % |
|
| % | ||
Expected life (years) |
|
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| ||
Expected volatility rate |
|
| % |
|
| % | ||
Risk free rate |
|
| % |
|
| % | ||
Expected dividend rate |
|
| % |
|
| % | ||
Exercise price |
| $ |
|
| $ |
| ||
Market price |
| $ |
|
| $ |
|
13. Shareholders’ Equity and Capital Stock
Common shares
The Company’s share capital consists of an unlimited amount of Class A preferred shares authorized, without par value, of which no shares are issued and outstanding; and an unlimited amount of common shares authorized, without par value, of which
On February 4, 2021, the Company closed an underwritten public offering of
15 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
On February 21, 2023, the Company closed an underwritten public offering of
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 on June 2, 2023. Eligible participants under the Option Plan include directors, officers, employees, and consultants of the Company. Under the terms of the Option Plan, grants of options will vest over a three-year period: one-third on the first anniversary, one-third on the second anniversary, and one-third on the third anniversary of the grant. The term of the options is five years.
Activity with respect to stock options is summarized as follows:
Stock Option Activity |
|
| Outstanding Options |
|
|
| Weighted-average Exercise Price |
|
|
| # |
|
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| $ |
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December 31, 2022 |
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Granted |
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Exercised |
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Forfeited |
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Expired |
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September 30, 2023 |
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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 and there is no intrinsic value as of the date of grant.
We received $
As of September 30, 2023, there was approximately $
16 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
As of September 30, 2023, outstanding stock options are as follows:
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| Options Outstanding |
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| Options Exercisable |
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| Exercise Price |
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| Number of Options |
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| Weighted-average Remaining Contractual Life |
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| Aggregate Intrinsic Value |
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| Number of Options |
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| Weighted-average Remaining Contractual Life |
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| Aggregate Intrinsic Value |
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| Expiry |
| $ |
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| # |
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| years |
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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 as of the last trading day in the nine months ended September 30, 2023 (approximately US$1.54), that would have been received by the option holders had they exercised their options on that date. There were
The fair value of stock options granted in the nine months ended September 30, 2023 was determined using the Black-Scholes model with the following assumptions:
Stock Options Fair Value Assumptions |
| 2023 |
| |
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| |
Expected forfeiture rate |
|
| % | |
Expected life (years) |
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Expected volatility |
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| % | |
Risk free rate |
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| | % |
Expected dividend rate |
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Weighted average exercise price (CAD$) |
| $ |
| |
Black-Scholes value (CAD$) |
| $ |
|
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”), as subsequently amended and now known as the Restricted Share Unit and Equity Incentive Plan (the “RSU&EI Plan”). The RSU&EI Plan was approved by our shareholders most recently on June 2, 2022.
Eligible participants under the RSU&EI Plan include directors and employees of the Company. Granted RSUs are redeemed on the second anniversary of the grant. Upon an RSU redemption, the holder of the RSU will receive one common share, for no additional consideration, for each RSU held.
17 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
Activity with respect to RSUs is summarized as follows:
Restricted Share Unit Activity |
|
| Outstanding RSUs |
|
|
| Weighted-average Grant Date Fair Value |
|
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| # |
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| $ |
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December 31, 2022 |
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Granted |
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Released |
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Forfeited |
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September 30, 2023 |
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Stock-based compensation expense from RSUs was $
As of September 30, 2023, there was approximately $
As of September 30, 2023, outstanding RSUs were as follows:
Number of RSUs |
|
| Weighted-average Remaining Contractual Life |
|
| Aggregate Intrinsic Value |
|
| Redemption Date | ||||
# |
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| years |
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The fair value of restricted share units granted in the nine months ended September 30, 2023 was determined using the Intrinsic Value Method with the following assumptions:
Restricted Share Unit Fair Value Assumptions |
| 2023 |
| |
|
|
|
| |
Expected forfeiture rate |
|
| % | |
Grant date fair value (CAD$) |
| $ |
|
18 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
Warrants
In February 2021, the Company issued
In February 2023, the Company issued
Activity with respect to warrants is summarized as follows:
Warrant Activity |
|
| Outstanding Warrants |
|
|
| Number of Shares to be Issued Upon Exercise |
|
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| Per Share Exercise Price |
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| # |
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| # |
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| $ |
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December 31, 2022 |
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Issued |
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September 30, 2023 |
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No warrants were exercised in the nine months ended September 30, 2023.
As of September 30, 2023, outstanding warrants were as follows:
| Exercise Price |
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| Number of Warrants |
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| Weighted-average Remaining Contractual Life |
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| Aggregate Intrinsic Value |
|
| Expiry |
| $ |
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| years |
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Fair value calculation assumptions for stock options, restricted share units, and warrants
The Company estimates expected future volatility based on daily historical trading data of the Company’s common shares. The risk-free interest rates are determined by reference to Canadian Treasury Note constant maturities that approximate the expected life. 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 expensing the awards that are ultimately expected to vest over the expected life. Estimated forfeitures and expected lives were based on actual historical experience.
19 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
14. Sales and Other Income
Revenue is primarily derived from the sale of U3O8 under multi-year agreements or spot sales agreements. The Company also receives disposal fee revenues, which are not related to the sale of U3O8.
Revenues for the nine months ended September 30, 2023 were as follows:
|
| Nine Months Ended September 30, |
| |||||||||||||
Revenue Summary |
| 2023 |
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| 2022 |
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| $ |
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| % |
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Customer A |
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Customer B |
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U3O8 sales |
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Disposal fees |
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During March 2022, we sold a royalty interest related to Strata Energy’s Lance Uranium ISR Project for $
15. Cost of Sales
Cost of sales includes ad valorem and severance taxes related to the extraction of uranium, all costs of wellfield and plant operations including the related depreciation and amortization of capitalized assets, reclamation, and mineral property costs, plus product distribution costs. These costs are also used to value inventory. The resulting inventoried cost per pound is compared to the NRV of the product, which is based on the estimated sales price of the product, net of any necessary costs to finish the product. Any inventory value in excess of the NRV is charged to cost of sales.
Cost of sales consists of the following:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
Cost of Sales |
| 2023 |
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| 2022 |
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| 2023 |
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| 2022 |
| ||||
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Cost of product sales |
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Lower of cost or NRV adjustments |
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16. Operating Costs
Operating expenses include exploration and evaluation expense, development expense, general and administration (“G&A”) expense, and mineral property write-offs. Exploration and evaluation expenses consist of labor and the associated costs of the exploration and evaluation departments as well as land holding and exploration costs including drilling and analysis on properties which have not reached the permitting or operations stage. Development expense relates to properties that have reached the permitting or operations stage and include costs associated with exploring, delineating, and permitting a property. Once permitted, development expenses also include the costs associated with the construction and development of the permitted property that are otherwise not eligible to be capitalized. G&A expense relates to the administration, finance, investor relations, land, and legal functions, and consists principally of personnel, facility, and support costs.
20 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
Operating costs consist of the following:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| |||||||||||
Operating Costs |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
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Exploration and evaluation |
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| ||||
Development |
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General and administration |
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Accretion |
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17. Supplemental Information for Statement of Cash Flows
Cash, cash equivalents, and restricted cash per the Statement of Cash Flows consists of the following:
Cash and Cash Equivalents, and Restricted Cash |
| September 30, 2023 |
|
| September 30, 2022 |
| ||
|
|
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| ||
Cash and cash equivalents |
|
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Restricted cash |
|
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Interest expense paid was $
18. Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, restricted cash, accounts payable and accrued liabilities, warrant liability 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, accounts receivable, and restricted cash. These assets include Canadian dollar and U.S. dollar denominated certificates of deposit, money market accounts, and demand deposits. These instruments are maintained at financial institutions in Canada and the U.S. Of the amount held on deposit, approximately $
21 |
Table of Contents |
Ur-Energy Inc. Condensed Notes to Consolidated Financial Statements September 30, 2023 |
(expressed in thousands of U.S. dollars unless otherwise indicated) |
Currency risk
As of September 30, 2023, we maintained a foreign currency balance of approximately CDN$
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due.
As of September 30, 2023, the Company’s current financial liabilities consisted of accounts payable and accrued liabilities of $
As of September 30, 2023, we had $
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 negligible effect on the nine months ended September 30, 2023. 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 vary.
22 |
Table of Contents |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Business Overview
The following discussion and analysis by management 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 and should be read in conjunction with the audited financial statements and MD&A contained in our Annual Report on Form 10-K for the year ended December 31, 2022.
Incorporated on March 22, 2004, Ur-Energy is an exploration stage issuer, as that term is defined by the SEC. We are engaged in uranium recovery and processing activities, including the acquisition, exploration, development, and operation of uranium mineral properties in the U.S. We are operating our first in situ recovery uranium facility 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 American 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 Inc. 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 Mines Corporation, incorporated under the laws of the State of Delaware, which holds, among other assets, the Shirley Basin Project in Wyoming. Our material U.S. subsidiaries remain unchanged since the filing of our Annual Report on Form 10-K, dated March 6, 2023.
We utilize in situ recovery (“ISR”) 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 uranium oxide (“U3O8”) for shipping to a third-party conversion facility to be weighed, assayed and stored until sold. After sale, when further processed, the uranium we have produced fuels carbon-free, emissions-free nuclear power which is a cost-effective, safe, and reliable form of electrical power. Nuclear power provides an estimated 50% of the carbon-free electricity in the U.S.
Our Lost Creek wellfield is permitted and licensed for annual recovery of up to 1.2 million pounds U3O8. The processing facility at Lost Creek, which includes all circuits for the production, drying and packaging of U3O8 for delivery into sales transactions, is designed and approved under current licensing to process up to 2.2 million pounds of U3O8 annually, which provides additional capacity of up to one million pounds U3O8 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 for which we anticipate only a satellite plant will be built. However, the Shirley Basin permit and license allow for the construction of a full processing facility, providing greater construction and operating flexibility as may be dictated by market conditions.
The year 2023 began with domestically produced U3O8 inventory being delivered to the national uranium reserve established by the U.S. Department of Energy (“DOE”), National Nuclear Security Administration (“NNSA”). We were among the contract awards made by the NNSA reserve program in December 2022, and we delivered 100,000 pounds U3O8 in January 2023 at a sales price of $64.47 per pound. Proceeds of $6.4 million were received by the Company shortly after delivery. During Q3, we made our first delivery into our term sales agreements, selling 90,000 pounds U3O8, and thereafter received proceeds of $5.4 million. A second delivery of 90,000 pounds U3O8 is scheduled to be made in Q4 2023. Currently, our sales deliveries in 2024 are projected to be 570,000 pounds U3O8 into two of our three previously announced sales agreements.
23 |
Table of Contents |
Our multi-year sales agreements, collectively, call for deliveries beginning in 2023 and continuing through 2028, with the possibility of deliveries continuing under one agreement into 2029. Including the January DOE NNSA sale, we expect to sell 280,000 pounds U3O8 in 2023 for $17.3 million. Our current anticipated revenues 2023 – 2028 will be approximately $220 million.
Uranium Market Update
Global and domestic support for carbon free nuclear power continues to grow, as it becomes more widely recognized as the only scalable source of reliable, baseload energy. Supply-demand fundamentals are strengthening with the supply gap widening as secondary inventories decline while projections are for sustained growth of nuclear power through traditional uses and the construction of advanced reactors of various types. Additionally, projections for sustained growth of nuclear power globally in coming years continue to incentivize investment in the fuel cycle industries.
Many nations have vowed to accelerate decarbonization efforts through renewable energy development and support for greater nuclear capacity, in recognition that nuclear energy provides clean baseload energy, high-quality long-term jobs, economic growth and energy security. The growing support for nuclear power is based not only on its carbon free attributes, but also on nations’ objective to have energy security through energy independence. After Russia’s invasion of Ukraine, some European nations expedited their nuclear buildout programs to reduce their reliance on natural gas sourced from an increasingly violent and unreliable neighbor.
Whether through federal legislation in the U.S., or sanctions and other geopolitical forces, any cessation of imports of nuclear fuel from Russia will create greater uncertainty into the supply chain as Russia is a major global supplier and the West has limited capacity to backfill any supply disruption.
During Q3, the coup in Niger increased concerns of secure uranium production and supply. Niger is estimated to produce approximately four percent of global uranium, but as much as 25% of European supply. These and other, more general, geopolitical tensions throughout the world have caused nuclear fuel purchasers to return to purchasing earlier than many projections, with a focus on North American production due to its geopolitical stability.
Other uranium supply risks (macroeconomics, weather, transportation, and supply chain disruption and the shortage of experienced and skilled labor affecting production operations) are also now being more thoughtfully considered by fuel purchasers. As producers have resumed production operations following the pandemic and in light of a stronger market, delays and shortfalls are being experienced because of these factors; similarly, there are reports that the conversion facilities are encountering challenges to their ramp-up and restart of processing.
Mineral Rights and Properties
We have 12 U.S. uranium properties. Ten of our uranium properties are in the Great Divide Basin, Wyoming, including Lost Creek. Currently, we control nearly 1,800 unpatented mining claims and three State of Wyoming mineral leases for a total of more than 35,000 acres in the area of the Lost Creek Property, including the Lost Creek permit area (the “Lost Creek Project”), and certain adjoining properties referred to as LC East, LC West, LC North, LC South and EN Project areas (collectively, with the Lost Creek Project, the “Lost Creek Property”). Our Shirley Basin Project permit area, also in Wyoming, comprises nearly 1,800 acres of Company-controlled mineral acres.
24 |
Table of Contents |
Lost Creek Property
Ramp-up of operations at Lost Creek progressed in Q3 with the first two new header houses in production in Mine Unit 2 (MU2): HH 2‑4 and, most recently, HH 2-5. During the quarter, we produced approximately 30,491 pounds U3O8 from HH 2‑4. Production rates are expected to continue to increase as additional header houses in MU2 come online, including houses planned to come into production 2023 Q4.
While the restart at Lost Creek has encountered both familiar and new challenges, operations staff continue to resolve start-up issues and refine our current recovery operations. Among the more significant new challenges has been recruitment and retention of employees and contractors. Turnover in this early stage of restaffing Lost Creek has hampered training and therefore efficient operations. The Wyoming labor market has similarly affected our contractors. Together with the record-setting winter of 2022-2023, these labor-related issues have resulted in initial work being slowed at Lost Creek. However, we are seeing steady improvement in production activities as our increasing number of core staff have more time on the job, and we expect these inefficiencies will be overcome. We also anticipate that as the Wyoming unemployment rate stabilizes our contractors will also find long-term employees.
Primary well casing installation is complete in HH 2-6, and completion work is nearly done in that area. Drilling and well installation continues in planned recovery areas in HHs 2-7 and 2-8. Delineation drilling is nearly complete in the recovery areas of HH 2-10 and will continue in order to support pattern design for the remaining areas of MU2 (HHs 2-11 through 2-14). Long-lead items continue to be ordered, with such items ordered for planned needs through 2024 H1. All procurement of construction materials is completed for activities planned into 2024 Q1. Surface construction of injection and production systems for upcoming recovery areas continues to advance including the installation of pipelines, powerlines, downhole equipment and the header house building including its primary motor control, piping and controls.
As previously disclosed, we began the drilling and construction of an additional deep disposal well at Lost Creek in early July, with the drilling phase completed in July. Well completion and testing continued throughout 2023 Q3, with final completion work planned for 2023 Q4. When this work is complete, we will obtain remaining regulatory approvals followed by specification of surface injection equipment. In advance of operation, procurement and installation of the powerline will be complete in 2023 Q4 enabling anticipated operation in late 2023 or 2024 Q1.
Supply chain disruption continues to be a global and uranium industry issue. While most in industry continue to face procurement challenges, our advanced ordering and recycling of old equipment at Lost Creek have allowed us to largely overcome the issue with minimal delays. We will continue to order equipment and materials well in advance and keep a close eye on lead times for critical items.
The first two mine units at Lost Creek have all appropriate permits necessary for commercial level operations. We have received Wyoming Uranium Recovery Program (“URP”) approval of the amendment to the Lost Creek source material license to include recovery from the LC East Project (HJ and KM horizons) immediately adjacent to the Lost Creek Project and additional HJ horizons at the Lost Creek Project. We await only the approval by the Wyoming Department of Environmental Quality (“WDEQ”), Land Quality Division (“LQD”) of the amendment to the Lost Creek permit to mine adding HJ and KM horizons at LC East and HJ mine units at Lost Creek. We anticipate the LQD review will be complete in 2023.
Shirley Basin
Based on our advanced negotiations with three nuclear fuel purchasers and the strengthening market, we are proceeding with additional tasks to advance Shirley Basin. Although a decision approving a move to construction has not been made, we are advancing procurement of long-lead items for the Shirley Basin Project, as well as other activities in the field. We anticipate these advance preparations will shorten the time for construction and ramp up when the “go” decision is made by our Board to proceed with construction.
25 |
Table of Contents |
Shirley Basin is fully permitted and licensed, with all major regulatory approvals for construction. The project has a licensed wellfield capacity of one million pounds U3O8 per year. We currently estimate it will take up to 24 months to complete all procurement, development activities and construction of the satellite facility and associated first mine unit to initiate production. This estimate is based on the long lead times we are seeing for critical equipment; especially for electrical equipment. The decision to proceed with construction of the satellite and first mine unit for production operations will be considered on an ongoing basis as the uranium market and our contract book evolve.
Research and Development
As priorities at Lost Creek and Shirley Basin allow, we continue to pursue several research and development projects with an objective to introduce new methods of cost-effective technology to our Lost Creek Project, and to Shirley Basin when it is constructed. Phase Two testing of our new injection well material and well installation technology is continuing.
We also continue to progress work on engineering of an advanced water treatment system. Beyond water recycling gains already achieved with our industry-leading Class V circuit, the new system may allow an additional 90% reduction of disposed water. This project is in advanced-stage planning, and design and construction plans will continue to progress through 2023 H2.
Casper Operations Headquarters
Our new multipurpose central services facility in Casper was completed earlier this year. We now have a fully staffed Casper construction team hard at work constructing, wiring and automating the next header houses for installation at Lost Creek. HHs 2-6 and 2-7 are nearing completion and work has begun on HH 2-8. Additionally, our chemistry laboratory is fully staffed.
Already we are realizing our plan for this centralized construction facility to provide numerous safety, environmental and financial advantages to our Lost Creek operation, including a reduction of commuting vehicles and related emissions. This facility will allow us to conduct these functions for Shirley Basin when it becomes our second production site.
26 |
Table of Contents |
Results of Operations
Reconciliation of Non-GAAP measures with US GAAP financial statement presentation
The following tables include measures such as U3O8 sales, U3O8 cost of sales, U3O8 gross profit, U3O8 pounds sold, U3O8 price per pound sold, U3O8 cost per pound sold, and U3O8 gross profit per pound sold. These measures do not have standardized meanings within US GAAP or a defined basis of calculation. These measures are used by management to assess business performance and determine production and pricing strategies. They may also be used by certain investors to evaluate performance. The following two tables provide a reconciliation of U3O8 price per pound sold and U3O8 cost per pound sold to the consolidated financial statements. U3O8 sales, U3O8 cost of sales, U3O8 gross profit, and the related cost per pound measures exclude disposal fees and lower of cost or NRV adjustments.
U3O8 Price per Pound Sold Reconciliation
|
| Unit |
|
| 2023 Q1 |
|
| 2023 Q2 |
|
| 2023 Q3 |
|
| YTD 2023 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Sales per financial statements |
| $ 000 |
|
|
| 6,447 |
|
|
| 39 |
|
|
| 5,752 |
|
|
| 12,238 |
| |
Disposal fees |
| $ 000 |
|
|
| - |
|
|
| (39 | ) |
|
| (312 | ) |
|
| (351 | ) | |
U3O8 sales |
| $ 000 |
|
|
| 6,447 |
|
|
| - |
|
|
| 5,440 |
|