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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 SEPTEMBER 30, 2019

 

 

 

 

 

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

                          Common stock

 

       URG (NYSE American); URE (TSX)

 

                      NYSE American; TSX

 

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 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).

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 October 31, 2019,  there were 160,053,021 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

 

25

37

37

39

 

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1. 

Financial Statements

3

Item 2. 

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

23

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

39

Item 4. 

Controls and Procedures

40

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1. 

Legal Proceedings

40

Item 1A. 

Risk Factors

40

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3. 

Defaults Upon Senior Securities

40

Item 4. 

Mine Safety Disclosures

40

Item 5. 

Other Information

41

Item 6. 

Exhibits

42

 

 

 

SIGNATURES 

43

 

 

 

 

 

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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 2019; (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 timing and outcome of applications for regulatory approval to build and operate an in situ recovery mine at Shirley Basin; (vi) resolution of the continuing challenges within the uranium market, including supply and demand projections;  (vii) the impact of the President’s announcement to not take any action to adjust trade to preserve the domestic uranium mining industry; (viii) what recommendations will be made by the United States Nuclear Fuel Working Group for the revival and expansion of domestic nuclear fuel production and the impact of those recommendations, if any; (ix) whether the cost-savings measures which have been and will be implemented will be sufficient; and (x) the ability and timing to ramp up when market conditions warrant. 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 uncertainties described under the heading “Risk Factors” in our Annual Report on Form 10-K, dated March 1, 2019.

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

 

Unless otherwise indicated, all resource estimates included in this Form 10-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: Michael Mellin, Ur-Energy / Lost Creek Mine Geologist, 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)

 

 

 

 

 

 

September 30,

 

December 31,

 

2019

 

2018

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents (note 4)

3,360

 

6,372

Accounts receivable (note 5)

1,142

 

31

Inventory (note 6)

 -

 

1,840

Prepaid expenses

1,102

 

847

 

5,604

 

9,090

Long-term inventory (note 6)

7,357

 

12,852

Restricted cash (note 7)

7,463

 

7,458

Mineral properties (note 8)

43,791

 

45,805

Capital assets (note 9)

24,018

 

25,158

 

82,629

 

91,273

 

88,233

 

100,363

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities (note 10)

2,475

 

2,343

Current portion of long term debt (note 11)

5,216

 

5,062

Environmental remediation accrual

77

 

77

 

7,768

 

7,482

Notes payable (note 11)

6,987

 

9,600

Lease liability (note 9)

 9

 

 -

Asset retirement obligations (note 12)

30,756

 

30,384

Other liabilities - warrants (note 13)

744

 

1,050

 

38,496

 

41,034

 

46,264

 

48,516

Shareholders' equity (note 14)

 

 

 

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: 159,947,625 at September 30, 2019 and 159,729,403 at December 31, 2018

185,424

 

185,221

Contributed surplus

20,390

 

19,930

Accumulated other comprehensive income

3,662

 

3,670

Deficit

(167,507)

 

(156,974)

 

41,969

 

51,847

 

88,233

 

100,363

 

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  September 30,

 

Nine months ended September 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Sales (note 15)

5,115

 

 3

 

21,406

 

23,482

Cost of sales

(7,515)

 

(170)

 

(23,824)

 

(12,153)

Gross profit (loss)

(2,400)

 

(167)

 

(2,418)

 

11,329

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

Exploration and evaluation

(822)

 

(588)

 

(2,084)

 

(1,959)

Development

(372)

 

(522)

 

(831)

 

(1,394)

General and administrative

(1,282)

 

(1,169)

 

(4,574)

 

(4,190)

Accretion of asset retirement obligations (note 12)

(144)

 

(128)

 

(431)

 

(380)

Write-off of mineral properties (note 8)

(11)

 

 -

 

(11)

 

 -

Income (loss) from operations

(5,031)

 

(2,574)

 

(10,349)

 

3,406

 

 

 

 

 

 

 

 

Net interest expense

(153)

 

(241)

 

(517)

 

(790)

Warrant mark to market adjustment

981

 

11

 

343

 

11

Loss on equity investment

 -

 

 -

 

 -

 

(5)

Foreign exchange gain (loss)

 4

 

(5)

 

(24)

 

 5

Other income

(1)

 

 -

 

14

 

3,573

 

 

 

 

 

 

 

 

Net income (loss) for the period

(4,200)

 

(2,809)

 

(10,533)

 

6,200

 

 

 

 

 

 

 

 

Income (loss) per common share

 

 

 

 

 

 

 

Basic

(0.03)

 

(0.02)

 

(0.07)

 

0.04

Diluted

(0.03)

 

(0.02)

 

(0.07)

 

0.04

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

Basic

159,946,969

 

147,483,434

 

159,833,116

 

146,920,559

Diluted

159,946,969

 

147,483,434

 

159,833,116

 

149,836,937

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

Net income (loss) for the period

(4,200)

 

(2,809)

 

(10,533)

 

6,200

Other Comprehensive income (loss), net of tax

 

 

 

 

 

 

 

Translation adjustment on foreign operations

15

 

11

 

(8)

 

(22)

Comprehensive income (loss) for the period

(4,185)

 

(2,798)

 

(10,541)

 

6,178

 

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

 

Surplus

 

Income

 

Deficit

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

#

 

$

 

$

 

$

 

$

 

$

Balance, December 31, 2018

159,729,403

 

185,221

 

19,930

 

3,670

 

(156,974)

 

51,847

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of vested RSUs

 -

 

 -

 

(6)

 

 -

 

 -

 

(6)

Non-cash stock compensation

 -

 

 -

 

188

 

 -

 

 -

 

188

Net income and comprehensive income

 -

 

 -

 

 -

 

 1

 

(4,302)

 

(4,301)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

159,729,403

 

185,221

 

20,112

 

3,671

 

(161,276)

 

47,728

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

206,160

 

190

 

(56)

 

 -

 

 -

 

134

Redemption of vested RSUs

 -

 

 -

 

(1)

 

 -

 

 -

 

(1)

Non-cash stock compensation

 -

 

 -

 

182

 

 -

 

 -

 

182

Net income and comprehensive income

 -

 

 -

 

 -

 

(24)

 -

(2,031)

 

(2,055)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

159,935,563

 

185,411

 

20,237

 

3,647

 

(163,307)

 

45,988

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

12,062

 

13

 

(4)

 

 -

 

 -

 

 9

Redemption of vested RSUs

 -

 

 -

 

(27)

 

 -

 

 -

 

(27)

Non-cash stock compensation

 -

 

 -

 

184

 

 -

 

 -

 

184

Net income and comprehensive income

 -

 

 -

 

 -

 

15

 

(4,200)

 

(4,185)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2019

159,947,625

 

185,424

 

20,390

 

3,662

 

(167,507)

 

41,969

 

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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

67,719

 

59

 

 -

 

(17)

 

 -

 

 -

 

42

Redemption of vested RSUs

 

 

 

 

 -

 

(13)

 

 -

 

 -

 

(13)

Non-cash stock compensation

 -

 

 -

 

 -

 

330

 

 -

 

 -

 

330

Net income and comprehensive income

 -

 

 -

 

 -

 

 -

 

(21)

 

6,418

 

6,397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

146,599,652

 

177,122

 

4,109

 

15,754

 

3,642

 

(155,090)

 

45,537

Exercise of stock options

116,172

 

103

 

 -

 

(32)

 

 -

 

 -

 

71

Common shares issued for

 

 

 

 

 

 

 

 

 

 

 

 

 -

  cash, net of $4 ATM renewal costs

 -

 

(4)

 

 -

 

 -

 

 -

 

 -

 

(4)

Expiry of warrants

 -

 

 -

 

(3,103)

 

3,103

 

 -

 

 -

 

 -

Non-cash stock compensation

 -

 

 -

 

 -

 

236

 

 -

 

 -

 

236

Net income and comprehensive income

 -

 

 -

 

 -

 

 -

 

(12)

 

2,591

 

2,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

146,715,824

 

177,221

 

1,006

 

19,061

 

3,630

 

(152,499)

 

48,419

Exercise of stock options

236,453

 

191

 

 -

 

(56)

 

 -

 

 -

 

135

Common shares issued for

 

 

 

 

 

 

 

 

 

 

 

 

 -

  cash, net of $857 of costs

12,195,122

 

7,447

 

 -

 

 -

 

 -

 

 -

 

7,447

Expiry of warrants

 -

 

 -

 

(1,006)

 

1,006

 

 -

 

 -

 

 -

Non-cash stock compensation

 -

 

 -

 

 -

 

161

 

 -

 

 -

 

161

Net income and comprehensive income

 -

 

 -

 

 -

 

 -

 

11

 

(2,809)

 

(2,798)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2018

159,147,399

 

184,859

 

 -

 

20,172

 

3,641

 

(155,308)

 

53,364

 

 

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)

 

 

 

 

 

 

Nine months ended September 30,

 

2019

 

2018

Cash provided by

 

 

 

Operating activities

 

 

 

Net income (loss) for the period

(10,533)

 

6,200

Items not affecting cash:

 

 

 

Stock based expense

554

 

727

Loss from net realizable value adjustments

8,189

 

268

Depreciation and amortization

3,306

 

2,701

Accretion of asset retirement obligations

431

 

380

Amortization of deferred loan costs

91

 

91

Write-off of mineral properties

11

 

 -

Warrants mark to market gain

(343)

 

(11)

Gain on assignment of contract

 -

 

(3,540)

Gain on disposition of assets

 -

 

(2)

Gain on foreign exchange

(23)

 

(6)

Other loss

 -

 

 5

Change in non-cash working capital items:

 

 

 

Accounts receivable

(1,111)

 

(11)

Inventory

(854)

 

(7,921)

Prepaid expenses

(58)

 

(117)

Accounts payable and accrued liabilities

(110)

 

(401)

 

(450)

 

(1,637)

 

 

 

 

Investing activities

 

 

 

Mineral property costs

(8)

 

(31)

Decrease (increase) in other deposits

19

 

(19)

Proceeds from assignment of contract

 -

 

3,540

Funding of equity investment

 -

 

(5)

Purchase of capital assets

(175)

 

(49)

 

(164)

 

3,436

 

 

 

 

Financing activities

 

 

 

Issuance of common shares for cash

 -

 

10,000

Share issue costs

 -

 

(731)

Proceeds from exercise of stock options

143

 

247

RSUs redeemed to pay withholding or paid in cash

(34)

 

(12)

Repayment of debt

(2,555)

 

(3,645)

 

(2,446)

 

5,859

 

 

 

 

Effects of foreign exchange rate changes on cash

53

 

(17)

 

 

 

 

Net change in cash, cash equivalents and restricted cash

(3,007)

 

7,641

Beginning cash, cash equivalents and restricted cash

13,830

 

11,437

Ending cash, cash equivalents and restricted cash (note 16)

10,823

 

19,078

 

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

September 30, 2019

 

(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. In 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 property contains 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.   Liquidity Risk

 

Our operations are based on a small number of large sales.  As a result, our cash flow and therefore our current assets and working capital may vary widely during the year based on the timing of those sales.  Virtually all of our sales are under contracts which specify delivery quantities, sales prices and payment dates. The only exceptions are spot sales which we are currently only making when advantageous. As a result, we are able to perform cash management functions over the course of an entire year and are less reliant on current commodity prices and market conditions. We monitor our cash projections on a weekly basis and have used various techniques to manage our cash flows including the assignment of deliveries, negotiating changes in delivery dates, purchasing inventory at favorable prices and raising capital.

 

As at September 30, 2019, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $0.7 million which are due within normal trade terms of generally 30 to 60 days, a note payable of $12.4 million, and asset retirement obligations with estimated completion dates until 2033. The payment schedule for the note was modified on October 1, 2019 to defer principal payments for eighteen months (see note 18).

 

In addition, most of our current assets except for prepaid expenses are immediately realizable, if necessary, while our current liabilities include a substantial portion that is not due for three months or more which, given the existence of our contracts and set prices, allows us to plan for those payments well in advance and address shortfalls, if any.

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

3.Summary of Significant Accounting Policies

 

Basis of presentation

 

These unaudited 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. The unaudited interim 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 unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2018.  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 were implemented this year

 

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 became effective for the Company as of January 1, 2019.    At January 1, 2019, we had two office equipment leases, and the office lease in Casper which expired in July 2019 and was renewed for only six months.  As a result of adoption of ASC 2016-02, we recognized a liability of $83.9 with a corresponding Right-Of-Use (“ROU”) assets of the same amount based on present value of the minimum rental payments of the leases which are included in non-current assets, current portion of long-term liabilities and long-term liabilities in the consolidated balance sheet. The discount rates used for leases are based on either the Company’s borrowing rate or the imputed interest rate based on the price of the equipment and the lease terms.

 

4.Cash and Cash Equivalents

 

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

 

 

 

 

 

 

 

As at

 

September 30, 2019

 

December 31, 2018

 

$

 

$

Cash on deposit at banks

884

 

1,936

Money market funds

2,476

 

4,436

 

 

 

 

 

3,360

 

6,372

 

 

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

5.  Accounts Receivable

 

The Company’s accounts receivable consists of the following:

 

 

 

 

 

 

As at

 

September 30, 2019

 

December 31, 2018

 

$

 

$

Trade accounts receivable

 

 

 

Company A

1,119

 

 -

Other Companies

 -

 

11

Total trade receivables

1,119

 

11

Other receivables

23

 

20

 

 

 

 

Total accounts receivable

1,142

 

31

 

 

6.  Inventory

 

The Company’s inventory consists of the following:

 

 

 

 

 

 

 

As at

 

September 30, 2019

 

December 31, 2018

 

$

 

$

In-process inventory

 -

 

160

Plant inventory

384

 

345

Conversion facility inventory

6,973

 

14,187

 

7,357

 

14,692

Inventory to be sold within 12 months

 -

 

1,840

Long term inventory

7,357

 

12,852

 

In conjunction with our lower of cost or net realizable value (“NRV”) calculations, the Company reduced the inventory valuation by $4,087 and $8,189 for the three and nine months ended September 30, 2019, respectively. 

 

7.    Restricted Cash

 

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 agreed to by the Wyoming Department of Environmental Quality (“WDEQ”), the Wyoming Uranium Recovery Program (“URP”) and the Bureau of Land Management (“BLM”) 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 $29.9 million of coverage towards

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

specific reclamation obligations are collateralized by $7.4 million of the restricted cash at September 30, 2019.  

 

8Mineral Properties

 

The Company’s mineral properties consist of the following:

 

 

 

 

 

 

 

 

 

 

 

Lost Creek

 

Pathfinder

 

Other U.S.

 

 

 

Property

 

Mines

 

Properties

 

Total

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

Balance, December 31, 2018

12,644

 

19,964

 

13,197

 

45,805

 

 

 

 

 

 

 

 

Acquisition costs

 -

 

 -

 

 8

 

 8

Change in estimated reclamation costs

 -

 

(59)

 

 -

 

(59)

Property write-offs

16

 

 -

 

(27)

 

(11)

Amortization

(1,952)

 

 -

 

 -

 

(1,952)

 

 

 

 

 

 

 

 

Balance, September 30, 2019

10,708

 

19,905

 

13,178

 

43,791

 

 

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

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

for aggregate consideration of $6.7 million, the assumption of $5.7 million in estimated asset reclamation obligations and other consideration.   

 

Other U.S. Properties

 

During the third quarter of 2019, the Company elected not to renew the claims included in the Red Rider acquisition. Accordingly, the Company wrote off a mineral asset of $27 and the related accumulated amortization of $16 for a net write off of $11.

 

9.Capital Assets

 

The Company’s capital assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

September 30, 2019

 

December 31, 2018

 

 

 

Accumulated

 

Net Book

 

 

 

Accumulated

 

Net Book

 

Cost

 

Depreciation

 

Value

 

Cost

 

Depreciation

 

Value

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Rolling stock

3,439

 

3,328

 

111

 

3,432

 

3,290

 

142

Enclosures

32,991

 

9,767

 

23,224

 

32,991

 

8,530

 

24,461

Machinery and equipment

1,417

 

787

 

630

 

1,237

 

728

 

509

Furniture, fixtures and leasehold improvements

119

 

113

 

 6

 

119

 

110

 

 9

Information technology

1,100

 

1,066

 

34

 

1,127

 

1,090

 

37

ROU Assets

83

 

70

 

13

 

 -

 

 -

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

39,149

 

15,131

 

24,018

 

38,906

 

13,748

 

25,158

 

 

 

 

 

 

 

 

As disclosed in note 3, the Company applied ASU 2016-02 to our existing leases. As of September 30, 2019, we currently include equipment leases of $13 in assets and liabilities. Of the $13 liability, $9 is included in long-term liabilities and the balance in the current portion of long term liabilities. 

 

 

 

 

 

 

 

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

10.Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities consist of the following:

 

 

 

 

 

 

 

 

 

 

As at

 

September 30, 2019

 

December 31, 2018

 

$

 

$

Accounts payable

646

 

620

Payroll and other taxes

1,523

 

1,218

Severance and ad valorem tax payable

306

 

505

 

 

 

 

 

2,475

 

2,343

 

 

 

 

 

11.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.

 

On October 1, 2019, the Sweetwater County Commissioners and the State of Wyoming approved a six-quarter deferral of principal payments beginning October 1, 2019. The next principal payment is therefore due April 1, 2021 and the last payment will be due in April 2023.

 

Deferred loan fees include legal fees, commissions, commitment fees and other costs associated with obtaining the financing.

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

(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

 

September 30, 2019

 

December 31, 2018

 

$

 

$

Current debt

 

 

 

Lease liabilities (note 9)

 4

 

 -

Sweetwater County Loan

5,333

 

5,183

Less deferred financing costs

(121)

 

(121)

 

5,216

 

5,062

 

 

 

 

Long term debt

 

 

 

Sweetwater County Loan

7,108

 

9,813

Less deferred financing costs

(121)

 

(213)

 

6,987

 

9,600

 

Schedule of payments on outstanding debt as of October 1, 2019 after amendment of loan payment schedule:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt

Total

 

2019

 

2020

 

2021

 

2022

 

2023

 

Final payment

 

$

 

$

 

$

 

$

 

$

 

$

 

 

Sweetwater County Loan

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

12,441

 

 -

 

 -

 

5,333

 

5,646

 

1,462

 

01-Apr-23

Interest

1,805

 

178

 

716

 

602

 

288

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

14,246

 

178

 

716

 

5,935

 

5,934

 

1,483

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.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 September 30, 2019, the total undiscounted amount of the future cash needs was estimated to be $29.7 million. The schedule of payments required to settle the ARO liability extends through 2033.

 

The restricted cash discussed in note 7 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

September 30, 2019

 

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

 

 

 

 

 

 

For the period ended

 

September 30, 2019

 

December 31, 2018

 

 

 

 

 

$

 

$

Beginning of period

30,384

 

27,036

Change in estimated liability

(59)

 

2,840

Accretion expense

431

 

508

 

 

 

 

End of period

30,756

 

30,384

 

 

 

 

 

 

13.Other Liabilities

 

As a part of the September 2018 public offering, we sold 13,062,878 warrants priced at $0.01 per warrant. Two warrants are redeemable for one Common Share of the Company’s stock at a price of $1.00 per full share. As the warrants are priced in US$ and the functional currency of Ur-Energy Inc. is Cdn$, this created a derivative financial liability. The liability created and adjusted quarterly is a calculated fair value using the Black-Scholes technique described below as there is no active market for the warrants. Any income or loss is reflected in net income for the period. The revaluation as of September 30, 2019 resulted in gains of  $981 and $343 for the three and nine month periods ended September 30, 2019 which are reflected on the statement of operations.

 

14.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 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 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 is five years.

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

Activity with respect to stock options is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

average

 

 

 

Options

 

exercise price

 

 

 

#

 

$

 

 

 

 

 

 

Balance, December 31, 2018

 

 

9,731,612

 

0.64

 

 

 

 

 

 

Exercised

 

 

(218,222)

 

0.66

Forfeited

 

 

(311,982)

 

0.70

Expired

 

 

(100,000)

 

1.26

 

 

 

 

 

 

Outstanding, September 30, 2019

 

 

9,101,408

 

0.65

 

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 nine months ended September 30, 2019 was less than  $0.1 million.

 

As of September 30, 2019, 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

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.75

 

712,212

 

0.2

 

 -

 

712,212

 

0.2

 

 -

 

12-Dec-19

0.84

 

200,000

 

0.7

 

 -

 

200,000

 

0.7

 

 -

 

29-May-20

0.63

 

538,912

 

0.9

 

 -

 

538,912

 

0.9

 

 -

 

17-Aug-20

0.59

 

928,408

 

1.2

 

16

 

928,408

 

1.2

 

16

 

11-Dec-20

0.54

 

2,411,930

 

2.2

 

145

 

2,411,930

 

2.2

 

145

 

16-Dec-21

0.75

 

300,000

 

2.4

 

 -

 

300,000

 

2.4

 

 -

 

02-Mar-22

0.54

 

200,000

 

2.9

 

12

 

132,000

 

2.9

 

 8

 

07-Sep-22

0.66

 

1,801,958

 

3.2

 

 -

 

654,608

 

3.2

 

 -

 

15-Dec-22

0.56

 

200,000

 

3.5

 

 9

 

66,000

 

3.5

 

 3

 

30-Mar-23

0.68

 

981,305

 

3.9

 

 -

 

344,905

 

3.9

 

 -

 

20-Aug-23

0.67

 

826,683

 

4.2

 

 -

 

8,277

 

4.2

 

 -

 

14-Dec-23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.65

 

9,101,408

 

2.4

 

182

 

6,297,252

 

1.9

 

172

 

 

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

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$0.81 as of the last trading day in the period ended September 30, 2019, 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 September 30, 2019 was 3,740,338. The total number of in-the-money stock options exercisable as of September 30, 2019 was 3,538,338

 

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 2, 2019.  

 

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.

 

Activity with respect to RSUs is summarized as follows:

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted

 

 

 

of

 

average grant

 

 

 

RSUs

 

date fair value

 

 

 

 

 

 

Unvested, December 31, 2018

 

 

955,496

 

0.67

 

 

 

 

 

 

Vested

 

 

(110,305)

 

0.68

 

 

 

 

 

 

Unvested, September 30, 2019

 

 

845,191

 

0.69

 

As of September 30, 2019, outstanding RSUs are as follows:

 

 

 

 

 

 

 

 

 

 

Number of

 

Remaining

 

Aggregate

 

 

unvested

 

life

 

intrinsic

Grant date

 

RSUs

 

(years)

 

value

 

 

 

 

 

 

$

December 15, 2017

 

428,114

 

0.21

 

261

August 20, 2018

 

212,470

 

0.90

 

130

December 14, 2018

 

204,607

 

1.21

 

125

 

 

 

 

 

 

 

 

 

845,191

 

0.62

 

516

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

As of March 30, 2018, one of our directors retired.  Under the terms of our RSU Plan, his 62,000 outstanding RSUs automatically vested. On December 17, 2018, 32,000 RSUs were redeemed for Common Shares.  The balance will be redeemed for cash or stock at the compensation committee’s discretion when the RSUs in that grant redeem on December 15, 2019.   

 

As of September 30, 2019, one of our officers retired. Under the terms of our RSU Plan, his 54,431 outstanding RSUs automatically vested. The RSUs will be redeemed for cash or stock at the compensation committee’s discretion in conjunction with the scheduled redemptionof those grants.   

 

Warrants

 

On September 25, 2018, the Company issued 13,062,878 warrants to purchase 6,531,439 of our Common Shares at $1.00 per full share (see note 13). The following represents warrant activity during the period ended September 30, 2019:

 

 

 

 

 

 

 

 

 

Number

Number of

 

 

 

 

of

shares to be issued

 

Per share

 

 

warrants

upon exercise

 

exercise price

 

 

 

 

 

$

Outstanding, December 31, 2018

 

13,062,878

6,531,439

 

1.00

 

 

 

 

 

 

Outstanding, September 30, 2019

 

13,062,878

6,531,439

 

1.00

 

 

As of September 30, 2019, outstanding warrants are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

Intrinsic

 

 

price

 

of warrants

 

life (years)

 

Value

 

Expiry

$

 

 

 

 

 

$

 

 

1.00

 

13,062,878

 

2.0

 

 -

 

25-Sep-21

 

Share-based compensation expense

 

Share-based compensation expense was $0.2 million and $0.6 million for the three and nine months ended September 30, 2019 and $0.1 million and $0.7 million for the three and nine months ended September 30, 2018, respectively.

 

As of September 30, 2019, 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 $0.2 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 1.7 years and 0.9 years, respectively.

 

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Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

We received less than $0.1 million and $0.1 million cash from the exercise of stock options for the three and nine months ended September 30, 2019 and $0.1 and $0.2 million for the three and nine months ended September 30, 2018, 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 options or RSUs granted during the nine months ended September 30, 2019. We have used assumptions for the mark to market calculations related to the warrant liability. The assumptions used for the options, RSUs and warrants granted during the nine months ended September 30, 2018 as well as the warrant valuation as of September 30, 2019 were as follows:

 

 

 

 

 

Nine months ended September 30,

Nine months ended September 30,

 

2019

2018

Expected option life (years)

 -

3.74-3.76

Expected warrant life (years)

1.99

3.00

Expected volatility

61.01%

53.8%-55.2%

Risk-free interest rate

1.57%

1.9%-2.2%

Expected dividend rate

0%

0%

Forfeiture rate options

 -

6.0%

Forfeiture rate (warrants)

 -

0.0%

Forfeiture rate (RSUs)

 -

5.9%

 

 

 

The Company estimates expected volatility using daily historical trading data of the Company’s Common Shares, because this is recognized as a valid method used to predict future volatility. The risk-free interest rates are determined by reference to Canadian Treasury Note constant maturities that approximate the expected option term. The Company has never paid dividends and currently has no plans to do so.

 

Share-based compensation expense is recognized net of estimated pre-vesting forfeitures, which results in recognition of expense on options that are ultimately expected to vest over the expected option term. Forfeitures were estimated using actual historical forfeiture experience.

 

15.  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.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

Disaggregation of Revenues

 

The following table presents our revenues disaggregated by source and type:

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

2019

 

2018

 

$

 

 

 

$

 

 

Sale of produced inventory

 

 

 

 

 

 

 

Company A

2,406

 

11.2%

 

 -

 

0.0%

Company B

7,482

 

35.0%

 

 -

 

0.0%

Company C

 -

 

0.0%

 

237

 

1.0%

 

9,888

 

46.2%

 

237

 

1.0%

Sales of purchased inventory

 

 

 

 

 

 

 

Company A

3,526

 

16.5%

 

 -

 

0.0%

Company D

7,990

 

37.3%

 

7,580

 

32.3%

Company E

 -

 

0.0%

 

15,636

 

66.6%

 

11,516

 

53.8%

 

23,216

 

98.9%

 

 

 

 

 

 

 

 

Total sales

21,404

 

100.0%

 

23,453

 

99.9%

 

 

 

 

 

 

 

 

Disposal fee income

 2

 

0.0%

 

29

 

0.1%

 

 

 

 

 

 

 

 

 

21,406

 

100.0%

 

23,482

 

100.0%

 

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

 

 

16.Supplemental Information for Statement of Cash Flows

 

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

 

 

 

 

 

 

As at

 

September 30, 2019

 

September 30, 2018

 

$

 

$

Cash and cash equivalents

3,360

 

11,621

Restricted cash

7,463

 

7,457

 

 

 

 

 

10,823

 

19,078

 

 

 

17.Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, restricted cash, deposits, accounts payable and accrued liabilities and notes payable. The Company is exposed to risks

20

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

related to changes in interest rates and management of cash and cash equivalents and short-term investments.

 

Credit risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and restricted cash. These assets include Canadian dollar and U.S. dollar denominated certificates of 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 $0.7 million is covered by the Canada Deposit Insurance Corporation, the Securities Investor Protection Corporation or the U.S. Federal Deposit Insurance Corporation, leaving approximately $10.1 million at risk at September 30, 2019 should the financial institutions with which these amounts are invested be rendered insolvent. The Company does not consider any of its financial assets to be impaired as of September 30, 2019.

 

All of the Company’s customers have Moody’s Baa or greater ratings and purchase from the Company under contracts with set prices and payment terms.

 

Liquidity risk

 

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

 

As at September 30, 2019, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $0.7 million which are due within normal trade terms of generally 30 to 60 days and a note payable which will be payable over a period of approximately three and a half years as a result of the amendment to the note (see note 11).

 

We entered into an At Market Issuance Sales Agreement with MLV & Co. LLC and B Riley FBR, Inc. (May 2016, as amended August 2017) under which we may, from time to time, issue and sell Common Shares at market prices on the NYSE American or other U.S. market through the distribution agents for aggregate sales proceeds of up to $10,000,000.  We have not used the facility in 2019. 

We expect that any major capital projects will be funded by operating cash flow, cash on hand or additional financing as required. If these cash sources are not sufficient, certain capital projects could be delayed, or alternatively we may need to pursue additional debt or equity financing to which there is no assurance that such financing will be available at all or on terms acceptable to us.

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

September 30, 2019

 

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

 

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 either the nine months ended September 30, 2019 or the comparable nine months in 2018. The financial position of the Company may vary at the time that a change in interest rates occurs causing the impact on the Company’s results to differ from that shown above.

 

18.    Subsequent Event

 

On October 1, 2019, the Sweetwater County Commissioners and the State of Wyoming approved a six-quarter deferral of principal payments beginning October 1, 2019. The next principal payment is therefore due April 1, 2021 and the final payment will be due in April 2023.

 

 

 

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Table of Contents

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

Business Overview

The following discussion is designed to provide information that we believe is necessary for an understanding of our financial condition, changes in financial condition and results of our operations. The following discussion and analysis should be read in conjunction with the MD&A contained in our Annual Report on Form 10-K for the year ended December 31, 2018.  

Incorporated on March 22, 2004, Ur-Energy is an exploration stage mining company, as that term is defined in SEC Industry Guide 7. We are engaged in uranium mining, recovery and processing activities, including the acquisition, exploration, development and operation of uranium mineral properties in the U.S. We are operating our first in situ recovery uranium mine at our Lost Creek Project in Wyoming. Ur-Energy is a corporation continued under the Canada Business Corporations Act on August 8, 2006. Our Common Shares are listed on the TSX under the symbol “URE” and on the NYSE 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 (“Pathfinder”), incorporated under the laws of the State of Delaware, which holds, among other assets, the Shirley Basin and Lucky Mc properties in Wyoming. Our material U.S. subsidiaries remain unchanged since the filing of our Annual Report on Form 10-K, dated March 1,  2019. As previously disclosed, we now own 100% of The Bootheel Project, LLC.

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 U3O8 for shipping to a third-party conversion facility to be weighed, assayed and stored until sold.

Our Lost Creek processing facility, which includes all circuits for the production, drying and packaging of uranium for delivery into sales, is designed and anticipated under current licensing to process up to one million pounds of U3O8 annually from the Lost Creek mine. The processing facility has the physical design capacity to process two million pounds of U3O8 annually, which provides additional capacity to process material from other sources. We expect that the Lost Creek processing facility may be utilized to process captured U3O8 from our Shirley Basin Project. However, the Shirley Basin permit application contemplates the construction of a full processing facility, providing greater construction and operating flexibility as may be dictated by market conditions.

We have multiple U3O8  sales agreements in place into 2021 with various U.S. utilities for the sale of U3O8 at term contract pricing. Historically, the multi-year sales agreements represented a portion of our planned production. Individually, term sales agreements do not represent a substantial portion of our operational budget, and our business is therefore not substantially dependent upon any one of the agreements. In recent years, we have purchased U3O8 and delivered the product into our sales contracts. With commitments in place to purchase product for delivery into our 2019 and, most recently, 2020 sales contracts, our Lost Creek production inventory is expected to increase unless market or other conditions warrant sales at spot pricing or we reach agreement for additional term agreements.

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Table of Contents

Trade Action and Resulting Actions by the Company

As previously disclosed, in January 2018 Ur-Energy USA Inc. and Energy Fuels Resources (USA) Inc. initiated a trade action with the U.S. Department of Commerce (DOC) pursuant to Section 232 of the Trade Expansion Act with the filing of a petition for relief.  Following the DOC statutorily-mandated investigation, DOC timely submitted its report to the White House. On July 12, 2019, the White House issued a “Memorandum on the Effect of Uranium Imports on the National Security and Establishment of the United States Nuclear Fuel Working Group” (the “President’s Memorandum”), through which it announced it would take no trade action in response to the DOC report.  

The President’s Memorandum cites the Secretary of Commerce finding that “…uranium is being imported in such quantities and under such circumstances as to threaten to impair the national security of the United States....” The President found that “…the United States uranium industry faces significant challenges in producing uranium domestically and that this is an issue of national security [and that] a fuller analysis of national security considerations with respect to the entire nuclear fuel supply chain is necessary at this time.”  

Through the President’s Memorandum, he established the United States Nuclear Fuel Working Group (the “Working Group”) to develop recommendations for reviving and expanding domestic uranium production. The Working Group was required to report its recommendations back to the President within 90 days. As the Trump Administration broadened its review of ways to revive and expand domestic uranium production, we have continued our work alongside the Administration and with our customers and other stakeholders to find solutions to correct the dysfunctional market. We have continued to examine all alternatives and possible remedies. On or about October 10, 2019, the Working Group sought and received an additional thirty days to complete its work and to submit its recommendations to the President.

There can be no certainty of the outcome of the Working Group’s findings and recommendations, if any, or the impact of actions taken in response to those findings and recommendation or the President’s Memorandum, and therefore the outcome of this continuing process and its effects on the U.S. uranium market is uncertain.

In light of the President’s decision in July, we implemented further cost reductions, including labor reductions of  12 employees, primarily at Lost Creek. We reduced staffing to the minimum levels necessary to maintain our facilities and meet regulatory compliance, while retaining core operational personnel who possess the critical knowledge necessary for the Company to ramp up when conditions warrant. These actions will enable the Company to maintain the Lost Creek facilities and preserve our ability to react to changing market conditions, while at the same time minimizing our need for additional funding during this protracted period of uncertainty.

In addition to other cost-cutting measures, we worked with the State of Wyoming and the Board of County Commissioners of Sweetwater County to obtain a six-quarter deferral of principal payments on the Lost Creek State Bond Loan, with all approvals being obtained October 1, 2019. Interest payments will continue during that 18-month period. The principal payment due on October 1, 2019 was the first deferred payment; principal payments will recommence in April 2021, and the final payment on the State Bond Loan will be due in April 2023.

24

Table of Contents

Changes in Management

Effective September 30, 2019, James Bonner, Ur-Energy Vice President Geology, retired, following a several decades long career as a Professional Geologist in uranium exploration and development, the last five years with Ur-Energy.    

Mineral Rights and Properties

 

We currently have twelve U.S. uranium properties –  ten of which are located in the Great Divide Basin, Wyoming, including Lost Creek. Currently, we control nearly 1,900 unpatented mining claims and three State of Wyoming mineral leases for a total of approximately 37,500 acres (15,530 hectares) in the area of the Lost Creek Property, including the Lost Creek permit area (the “Lost Creek Project” or “Project”), and certain adjoining properties 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”). In the Shirley Basin, Wyoming, our Shirley Basin Project comprises more than 3,700 Company-controlled acres. Our Lucky Mc Project holds 1,800 acres in Fremont County, Wyoming.  Additionally, we have approximately 2,100 acres of federal lode mining claims near the Excelsior Mountains in Nevada,  at our Excel gold project.

 

Lost Creek Property

For the three months ended September 30, 2019,  122,500 pounds U3O8 were delivered into scheduled 2019 term contract commitments. During the third quarter 7,256 pounds of U3O8 were captured within the Lost Creek plant and 9,367 pounds of U3O8 were packaged in drums. One shipment of Lost Creek product was made to the conversion facility during the quarter. Our inventory at the convertor totaled approximately 248,161 at September 30, 2019. During the quarter, Lost Creek recognized a two-year milestone with no lost-time accidents. The Results of Operations are detailed further below.

 

Regulatory Update

 

Applications for amendment to the Lost Creek licenses and permits were submitted in 2014. The amendments seek to include recovery from the uranium resource in the LC East Project immediately adjacent to the Lost Creek Project. In Q1 2019, the BLM, which led a group of cooperating agencies in the NEPA review of the federal application for amendment, issued its Record of Decision. Reviews by WDEQ continue to progress. We anticipate that all permits and authorizations for the modification of the Lost Creek licenses and permits to recover uranium in the LC East Project will be completed in 2020.

 

Shirley Basin Project 

 

WDEQ continues with its review of our applications for a permit to mine and for a source material license for our Shirley Basin Project. We anticipate the State processes to be complete, with necessary permits and authorizations received, in 2019. The BLM has initiated its review of the Plan of Operations for Shirley Basin. We expect this process to be complete in 2019 or early 2020. Additionally, work is well underway on initial engineering evaluations, designs and studies for the development of Shirley Basin operations.

 

 

 

 

 

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Table of Contents

Results of Operations

 

U3O8 Production and Sales

 

During the three months ended September 30, 2019, 7,256 pounds of U3O8 were captured within the Lost Creek plant and 9,367 pounds were packaged in drums. One shipment of Lost Creek product was made to the conversion facility during the quarter. Inventory, production and sales figures for the Lost Creek Project are presented in the following tables. We are presenting the data in the tables for the last four quarters because the nature of our operations is not regularly based on the calendar year. We therefore feel that presenting the last four quarters is a more meaningful representation of operations than comparing comparable periods in the previous year and enables the reader to better perform trend analysis. 

 

The cash cost per pound and non-cash cost per pound for produced uranium presented in the following Production Costs and U3O8 Sales and Cost of Sales tables are non-US GAAP measures. These measures do not have a standardized meaning 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. Please see the tables, below, for reconciliations of these measures to the US GAAP compliant financial measures. Production figures for the Lost Creek Project are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production and Production Costs

    

Unit

    

2019 Q3

    

2019 Q2

    

2019 Q1

    

2018 Q4

    

2019 YTD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds captured

 

lb

 

 

7,256

 

 

13,146

 

 

22,551

 

 

48,304

 

 

42,953

 

Ad valorem and severance tax

 

$000

 

$

(14)

 

$

17

 

$

57

 

$

30

 

$

60

 

Wellfield cash cost (1)

 

$000

 

$

210

 

$

264

 

$

250

 

$

459

 

$

724

 

Wellfield non-cash cost (2)

 

$000

 

$

611

 

$

612

 

$

612

 

$

400

 

$

1,835

 

Ad valorem and severance tax per pound captured

 

$/lb

 

$

(1.93)

 

$

1.29

 

$

2.53

 

$

0.62

 

$

1.40

 

Cash cost per pound captured

 

$/lb

 

$

28.94

 

$

20.08

 

$

11.09

 

$

9.50

 

$

16.86

 

Non-cash cost per pound captured

 

$/lb

 

$

84.21

 

$

46.55

 

$

27.14

 

$

8.28

 

$

42.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds drummed

 

lb

 

 

9,367

 

 

13,296

 

 

21,015

 

 

53,654

 

 

43,678

 

Plant cash cost (3)

 

$000

 

$

1,045

 

$

1,134

 

$

1,318

 

$

1,154

 

$

3,497

 

Plant non-cash cost (2)

 

$000

 

$

490

 

$

490

 

$

480

 

$

484

 

$

1,460

 

Cash cost per pound drummed

 

$/lb

 

$

111.56

 

$

85.29

 

$

62.72

 

$

21.51

 

$

80.06

 

Non-cash cost per pound drummed

 

$/lb

 

$

52.31

 

$

36.85

 

$

22.84

 

$

9.02

 

$

33.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds shipped to conversion facility

 

lb

 

 

37,710

 

 

 —

 

 

 —

 

 

67,040

 

 

37,710

 

Distribution cash cost (4)

 

$000

 

$

12

 

$

27

 

$

 6

 

$

47

 

$

45

 

Cash cost per pound shipped

 

$/lb

 

$

0.32

 

$

 -

 

$

 -

 

$

0.70

 

$

1.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds purchased

 

lb

 

 

122,500

 

 

100,000

 

 

97,500

 

 

 -

 

 

320,000

 

Purchase costs

 

$000

 

$

3,391

 

$

2,795

 

$

2,681

 

$

 -

 

$

8,867

 

Cash cost per pound purchased

 

$/lb

 

$

27.68

 

$

27.95

 

$

27.50

 

$

 -

 

$

27.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26

Table of Contents

Notes:

1

Wellfield cash costs include all wellfield operating costs. Wellfield construction and development costs, which include wellfield drilling, header houses, pipelines, power lines, roads, fences and disposal wells, are treated as development expenses and are not included in wellfield operating costs.

2

Non-cash costs include the amortization of the investment in the mineral property acquisition costs and the depreciation of plant equipment, and the depreciation of their related asset retirement obligation costs. The expenses are calculated on a straight-line basis, so the expenses are typically constant for each quarter. The cost per pound from these costs will therefore typically vary based on production levels only.

3

Plant cash costs include all plant operating costs and site overhead costs.

4

Distribution cash costs include all shipping costs and costs charged by the conversion facility for weighing, sampling, assaying and storing the U3O8 prior to sale.

 

Production levels during the current quarter decreased as the maturing MU2 header houses exhibited normal production curve declines. Production rates were in line with guidance for the quarter. We have intentionally restricted our production in light of the persistently weak uranium market. Total cash production costs decreased eleven percent in 2019 Q3 compared to 2019 Q2. The decrease resulted from lower repair costs in Q3 as compared to Q2, which included the annual road maintenance. In addition, fuel and energy costs decreased due to the season and fewer dryer loads. 

 

Pounds captured decreased 5,890 pounds from 2019 Q2 as there were no new header houses added since the addition of the third MU2 header house in May 2018. Ad valorem and severance taxes decreased due to a reduction in the factor used in the calculation of the taxes which was applied retroactively to 2018. Wellfield cash costs decreased slightly from 2019 Q2. Despite the decrease in cash costs, the cash cost per pound captured increased $8.86 per pound in 2019 Q3. Wellfield non-cash costs remained consistent with Q2 2019 and the related non-cash cost per pound captured increased $37.66 per pound due to the decrease in pounds captured.

 

Pounds drummed decreased 3,929 pounds from 2019 Q2 due to the reduction in captured pounds. Plant cash costs decreased $89 as compared to 2019 Q2, due to lower labor, fuel and energy, and repair costs in Q3. Despite the lower cash costs, the plant cash cost per pound drummed increased $26.27 per pound during the quarter because of the decrease in pounds drummed. Plant non-cash costs are fixed so the related plant non-cash cost per pound drummed also increased $15.46 per pound for the same reason.  

 

There was one shipment of 37,710 pounds during the quarter. Distribution costs in 2019 Q2 were related to the converter completing sampling assays on prior deliveries. The cost per pound was $0.32 which was lower than the previous shipment in 2018 Q4.

 

27

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and cost of sales

   

Unit

   

2019 Q3

   

2019 Q2

   

2019 Q1

   

2018 Q4

   

2019 YTD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds sold

 

lb

 

 

122,500

 

 

265,000

 

 

97,500

 

 

 -

 

 

485,000

 

U3O8 sales

 

$000

 

$

5,115

 

$

11,477

 

$

4,812

 

$

 -

 

$

21,404

 

Average contract price

 

$/lb

 

$

41.76

 

$

43.31

 

$

49.35

 

$

 -

 

$

44.13

 

Average spot price

 

$/lb

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

Average price per pound sold

 

$/lb

 

$

41.76

 

$

43.31

 

$

49.35

 

$

 -

 

$

44.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U3O8 cost of sales (1)

 

$000

 

$

7,515

 

$

11,163

 

$

5,146

 

$

50

 

$

23,824

 

Lower of cost or NRV adjustment

 

 

 

$

(4,087)

 

$

(2,137)

 

$

(1,965)

 

$

(50)

 

$

(8,189)

 

U3O8 cost of sales

 

 

 

$

3,428

 

$

9,026

 

$

3,181

 

$

 -

 

$

15,635

 

Ad valorem and severance tax cost per pound sold

 

$/lb

 

$

 -

 

$

1.52

 

$

1.52

 

$

 -

 

$

1.52

 

Cash cost per pound sold

 

$/lb

 

$

 -

 

$

23.95

 

$

23.86

 

$

 -

 

$

23.93

 

Non-cash cost per pound sold

 

$/lb

 

$

 -

 

$

12.38

 

$

12.36

 

$

 -

 

$

12.38

 

Cost per pound sold - produced

 

$/lb

 

$

 -

 

$

37.85

 

$

37.74

 

$

 -

 

$

37.83

 

Cost per pound sold - purchased

 

$/lb

 

$

27.98

 

$

27.80

 

$

27.50

 

$

 -

 

$

27.83

 

Total average cost per pound sold

 

$/lb

 

$

27.98

 

$

34.06

 

$

32.63

 

$

 -

 

$

32.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U3O8 gross profit

 

$000

 

$

1,687

 

$

2,451

 

$

1,631

 

$

 -

 

$

5,769

 

Gross profit per pound sold

 

$/lb

 

$

13.78

 

$

9.25

 

$

16.72

 

$

 -

 

$

11.89

 

Gross profit margin

 

%

 

 

33.0%

 

 

21.4%

 

 

33.9%

 

 

0.0%

 

 

26.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Inventory Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In-process inventory

 

lb

 

 

8,074

 

 

10,221

 

 

10,595

 

 

9,134

 

 

 

 

Plant inventory

 

lb

 

 

13,526

 

 

41,871

 

 

28,574

 

 

7,559

 

 

 

 

Conversion facility inventory produced

 

lb

 

 

199,411

 

 

161,700

 

 

327,053

 

 

375,803

 

 

 

 

Conversion facility inventory purchased

 

lb

 

 

48,750

 

 

48,750

 

 

48,750

 

 

 -

 

 

 

 

Total inventory

 

lb

 

 

269,761

 

 

262,542

 

 

414,972

 

 

392,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In-process inventory

 

$000

 

$

 -

 

$

 -

 

$

 -

 

$

160

 

 

 

 

Plant inventory

 

$000

 

$

384

 

$

1,638

 

$

1,259

 

$

345

 

 

 

 

Conversion facility inventory produced

 

$000

 

$

5,721

 

$

6,134

 

$

12,352

 

$

14,187

 

 

 

 

Conversion facility inventory purchased

 

$000

 

$

1,252

 

$

1,355

 

$

1,341

 

$

 -

 

 

 

 

Total inventory

 

$000

 

$

7,357

 

$

9,127

 

$

14,952

 

$

14,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost per pound

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In-process inventory

 

$/lb

 

$

 -

 

$

 -

 

$

 -

 

$

17.52

 

 

 

 

Plant inventory

 

$/lb

 

$

28.39

 

$

39.12

 

$

44.06

 

$

45.64

 

 

 

 

Conversion facility inventory produced

 

$/lb

 

$

28.69

 

$

37.93

 

$

37.77

 

$

37.75

 

 

 

 

Conversion facility inventory purchased

 

$/lb

 

$

25.68

 

$

27.80

 

$

27.50

 

$

 -

 

 

 

 

 

Note:

1

U3O8  cost of sales include all production costs (notes 1, 2, 3 and 4 in the previous Production and Production Cost table) adjusted for changes in inventory values and excludes NRV.

 

During the quarter, we sold 122,500 purchased pounds under term contracts at an average price of $41.76 per pound. 

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Table of Contents

 

For the quarter, our uranium cost of sales totaled $3.4 million which all related to purchased inventory. In 2019 Q3, we purchased 122,500 pounds at an average price of $27.68 per pound. As we already had some purchased inventory, the blended cost was $27.98 per pound sold. 

 

Excluding the NRV adjustment of $4.1 million, the gross profit from uranium sales for 2019 Q3 was $1.7 million, which represents a gross profit margin of approximately 33%.

 

At the end of the quarter, we had approximately 248,161 pounds of U3O8 at the conversion facility including 199,411 produced pounds at an average cost per pound of $28.69, and 48,750 purchased pounds at an average  cost of $25.68 per pound as adjusted for the net receivable value at the end of the quarter. The following table shows the average cost per pound of the conversion facility inventory.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Conversion Facility Inventory

 

Unit

30-Sep-19

 

30-Jun-19

 

31-Mar-19

31-Dec-18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Cost Per Pound Summary  (Produced)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ad valorem and severance tax cost per pound

 

$/lb

 

$

0.91

 

$

1.52

 

$

1.52

 

$

1.52

Cash cost per pound

 

$/lb

 

$

18.28

 

$

24.00

 

$

23.87

 

$

23.85

Non-cash cost per pound

 

$/lb

 

$

9.50

 

$

12.41

 

$

12.38

 

$

12.38

Total cost per pound

 

$/lb

 

$

28.69

 

$

37.93

 

$

37.77

 

$

37.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Cost Per Pound Summary  (Purchased)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cost per pound

 

$/lb

 

$

25.68

 

$

27.80

 

$

27.50

 

$

 -

 

The carrying amount of our inventories have been adjusted to reflect NRV adjustments using the projection of the sales into existing term contract and spot prices.  In early October 2019, we obtained purchase contracts for the delivery of inventory into our 2020 contracts. As a result, we could no longer use these contracts in valuing our inventory under the lower of cost or market and used the current spot rates as applicable instead. The result was a $2.3 million reduction in the conversion facility inventories. 

 

Reconciliation of Non-GAAP sales and inventory presentation with US GAAP statement presentation

 

As discussed above, the cash costs, non-cash costs and per pound calculations are non-US GAAP measures we use to assess business performance. To facilitate a better understanding of these measures, the tables below present a reconciliation of these measures to the financial results as presented in our financial statements.

 

 

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Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Price Per Pound Sold Reconciliation

 

Unit

 

2019 Q3

    

2019 Q2

    

2019 Q1

    

2018 Q4

    

2019 YTD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales per financial statements

 

$000

 

$

5,115

 

$

11,479

 

$

4,812

 

$

14

 

$

21,406

Less disposal fees

 

$000

 

$

 -

 

$

 2

 

$

 -

 

$

(14)

 

$

 2

U3O8 sales

 

$000

 

$

5,115

 

$

11,477

 

$

4,812

 

$

 -

 

$

21,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds sold - produced

 

lb

 

 

 -

 

 

165,000

 

 

48,750

 

 

 -

 

 

213,750

Pounds sold - purchased

 

lb

 

 

122,500

 

 

100,000

 

 

48,750

 

 

 -

 

 

271,250

Total pounds sold

 

lb

 

 

122,500

 

 

265,000

 

 

97,500

 

 

 -

 

 

485,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average price per pound sold

 

$/lb

 

$

41.76

 

$

43.31

 

$

49.35

 

$

 -

 

$

44.13

 

The Company delivers U3O8 to a conversion facility and receives credit for a specified quantity measured in pounds once the product is confirmed to meet the required specifications. 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.

 

30

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Cost Per Pound Sold
Reconciliation
(1)

    

Unit

 

2019 Q3

    

2019 Q2

    

2019 Q1

    

2018 Q4

    

2019 YTD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales per financial statements

 

 

 

$

7,515

 

$

11,163

 

$

5,146

 

$

50

 

$

23,824

Less adjustments reflecting the lower of cost or NRV

 

 

 

$

(4,087)

 

$

(2,137)

 

$

(1,965)

 

$

(50)

 

$

(8,189)

U3O8 cost of sales

 

 

 

$

3,428

 

$

9,026

 

$

3,181

 

$

 -

 

$

15,635

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ad valorem & severance taxes

 

$000

 

$

(14)

 

$

17

 

$

57

 

$

30

 

$

60

Wellfield costs

 

$000

 

$

821

 

$

876

 

$

862

 

$

859

 

$

2,559

Plant and site costs

 

$000

 

$

1,535

 

$

1,624

 

$

1,798

 

$

1,638

 

$

4,957

Distribution costs

 

$000

 

$

12

 

$

27

 

$

 6

 

$

47

 

$

45

Inventory change

 

$000

 

$

(2,354)

 

$

3,702

 

$

(883)

 

$

(2,574)

 

$

465

Cost of sales - produced

 

$000

 

$

 —

 

$

6,246

 

$

1,840

 

$

 —

 

$

8,086

Cost of sales - purchased

 

$000

 

$

3,428

 

$

2,780

 

$

1,341

 

$

 —

 

$

7,549

Total cost of sales

 

$000

 

$

3,428

 

$

9,026

 

$

3,181

 

$

 —

 

$

15,635

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pounds sold produced

 

lb

 

 

 —

 

 

165,000

 

 

48,750

 

 

 -

 

 

213,750

Pounds sold purchased

 

lb

 

 

122,500

 

 

100,000

 

 

48,750

 

 

 -

 

 

271,250

Total pounds sold

 

lb

 

 

122,500

 

 

265,000

 

 

97,500

 

 

 -

 

 

485,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average cost per pound sold - produced

 

$/lb

 

$

 -

 

$

37.85

 

$

37.74

 

$

 -

 

$

37.83

Average cost per pound sold - purchased

 

$/lb

 

$

27.98

 

$

27.80

 

$

27.50

 

$

 -

 

$

27.83

Total average cost per pound sold

 

$/lb

 

$

27.98

 

$

34.06

 

$

32.63

 

$

 -

 

$

32.24

 

Note:

1.

The cost of sales per the financial statements includes ad valorem and severance taxes related to the extraction of uranium, all costs of wellfield, plant and site 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 and the resulting inventoried cost per pound is compared to the estimated sales prices based on the contracts or spot sales anticipated for the distribution of the product. Any costs in excess of the calculated realizable value are charged to the cost of sales per the financial statements as adjustments reflecting the lower of cost or NRV. These adjustments are excluded from U3O8 cost of sales because they relate to the pounds of U3O8 in ending inventories and do not relate to the pounds of U3O8 sold during the period.

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Table of Contents

Three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018

 

The following tables summarize the results of operations for the three and nine months ended September 30, 2019 and 2018 (in thousands of U.S. dollars):

 

 

 

 

 

 

Three months ended  September 30,

 

2019

 

2018

 

$

 

$

Sales

5,115

 

 3

Cost of sales

(7,515)

 

(170)

Gross profit (loss)

(2,400)

 

(167)

Exploration and evaluation expense

(822)

 

(588)

Development expense

(372)

 

(522)

General and administrative expense

(1,282)

 

(1,169)

Accretion

(144)

 

(128)

Write off of mineral property

(11)

 

 -

Net loss from operations

(5,031)

 

(2,574)

Interest expense (net)

(153)

 

(241)

Warrant mark to market gain

981

 

11

Foreign exchange loss

 4

 

(5)

Other income

(1)

 

 -

Net loss

(4,200)

 

(2,809)

 

 

 

 

Loss per share – basic

(0.03)

 

(0.02)

 

 

 

 

Loss per share – diluted

(0.03)

 

(0.02)

 

 

 

 

Revenue per pound sold

41.76

 

 -

 

 

 

 

Total cost per pound sold

27.98

 

 -

 

 

 

 

Gross profit per pound sold

13.78

 

 -

 

 

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Table of Contents

 

 

 

 

 

Nine months ended September 30,

 

2019

 

2018

 

$

 

$

 

 

 

 

Sales

21,406

 

23,482

Cost of sales

(23,824)

 

(12,153)

Gross profit (loss)

(2,418)

 

11,329

Exploration and evaluation expense

(2,084)

 

(1,959)

Development expense

(831)

 

(1,394)

General and administrative expense

(4,574)

 

(4,190)

Accretion expense

(431)

 

(380)

Write-off of mineral properties

(11)

 

 -

Net profit from operations

(10,349)

 

3,406

Net interest expense

(517)

 

(790)

Warrant mark to market gain

343

 

11

Loss from equity investment

 -

 

(5)

Foreign exchange gain (loss)

(24)

 

 5

Other income

14

 

3,573

Net income

(10,533)

 

6,200

 

 

 

 

Income per share – basic

(0.07)

 

0.04

 

 

 

 

Income per share –  diluted

(0.07)

 

0.04

 

 

 

 

Revenue per pound sold

44.13

 

48.86

 

 

 

 

Total cost per pound sold

32.24

 

25.32

 

 

 

 

Gross profit per pound sold

11.89

 

23.54

 

Sales

 

We sold a total of 122,500 and 485,000 pounds of U3O8 during the three and nine months ended September 30, 2019 for an average price of $41.76 and $44.13, respectively, per pound. We sold no uranium during the three months ended September 30, 2018 and 480,000 pounds of U3O8 during the nine months ended September 30, 2018 for an average price of $48.86, per pound. The 2019 sales were all from term contracts. The 2018 sales were mostly from purchased inventory into term contracts at an average price of $49.39 and one spot sale of 10,000 pounds of produced inventory for $23.75 per pound.

 

Cost of Sales

 

The cost of sales includes all costs of wellfield operations and maintenance, severance and ad valorem taxes, plant operations and maintenance and mine site overhead including depreciation on the related capital assets, capitalized reclamation costs and amortization of mineral property costs, the cost of inventory purchased for resale and distribution costs. Wellfield costs, plant costs, site overhead costs and distribution costs are included in inventory and the resulting inventoried cost per pound is compared to the estimated sales prices based on the contracts or spot sales anticipated for the distribution of the product. Any costs in excess of the calculated net realizable value are charged to cost of sales.

 

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Table of Contents

As there were no sales in the three months ended September 30, 2018, there is no comparison of costs or gross profit. Compared to the nine months ended September 30, 2018, our cost per pound sold increased $6.92 to $32.24 in 2019. The increase for the period was driven by using produced inventory for 44% of our 2019 sales as opposed to about three percent in 2018. For the nine months the cost per pound of purchased inventory increased from $24.42 per pound to $27.83 per pound while the cost of produced inventory declined from $67.70 per pound to $37.83 per pound. 

 

In the three and nine months ended September 30, 2019, cost of sales included $4.1 and $8.2 million in lower of cost or NRV adjustments compared to $0.1 and $0.1 million in the comparable periods in 2018.

 

Gross Profit 

 

Excluding the $4.1 and $8.2 million in lower of cost or NRV adjustments for the three and nine months ended September 30, 2019, which is a non-GAAP measure, the gross profit was $1.7 and $5.8 million for the three and nine months ended September 30, 2019, which represents gross profit margins of approximately 33% and 27%, respectively. Gross profit of $11.5 million in the nine months ended September 30, 2018 represents a  gross profit margin of approximately 49%. The primary reason for the higher gross profit margin in 2018 was the purchase of most of the product sold.    

 

Operating Expenses

 

Total operating expenses for the three and nine months ended September 30, 2019 were $2.6 and $7.9 million, respectively. Operating expenses include exploration and evaluation expense, development expense and G&A expense. These expenses were slightly higher than the three month periods ended September 30, 2018 but were virtually identical for the nine month periods.

 

Exploration and evaluation expense consists of labor and associated costs of the exploration and evaluation departments as well as land holding and costs including drilling and analysis on properties which have not reached the permitting or operations stage. These expenses were $0.8 and $2.1 million for the three and nine month periods ended September 30, 2019 and $0.6 and $2.0 million for the comparable periods in 2018. All costs associated with the geology, regulatory compliance and evaluation departments, as well as the costs incurred on exploration-stage projects as described above, are reflected in this category. The increase for the quarter related to timing differences in paying annual claim maintenance which was recorded in Q3 in 2019 and Q2 in 2018.

 

Development expense includes costs incurred at the Lost Creek Project not directly attributable to production activities, including wellfield construction, drilling and development costs. It also includes costs associated with the Shirley Basin which is in a more advanced stage and Lucky Mc which is near the end of reclamation of the historic mine site. Development expenses decreased by $0.1 and $0.5 million during the three and nine months ended September 30, 2019, compared to the same periods in 2018. The decrease was primarily related to lower governmental fees of $0.3 million and professional and other contracting fees of $0.3 million and costs of completion of the two headers houses in 2018 of $0.1 million.  This was partially offset by labor costs arising from the reassignment of several staff members to the development department.

 

G&A expense relates to the administration, finance, investor relations, land and legal functions of the Company and consists principally of personnel, facility and support costs. Total G&A expense increased $0.1 and $0.4 million for the three and nine months ended September 30, 2019 compared to 2018. The increase was mainly attributable to severance accruals related to the reductions in force and the retirement of a corporate officer.

 

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Table of Contents

Other Income and Expenses

 

Net interest expense declined $0.1 and $0.3 million during the three and nine months ended September 30, 2019 compared to the prior year. The expense decline was directly attributable to principal payments reducing the outstanding note balance of the State Bond Loan.

 

As a part of the September 2018 public offering, we sold 13,062,878 warrants priced at $0.01 per warrant. Two warrants are redeemable for one Common Share of the Company’s stock at a price of $1.00 per full share. As the warrants are priced in US$ and the functional currency of the Ur-Energy Inc. is Cdn$, this created a derivative financial liability. The liability created and adjusted quarterly is a calculated fair value using the Black-Scholes technique described below as there is no active market for the warrants. Any income or loss is reflected in net income for the period. The revaluation as of September 30, 2019 resulted in gains of $0.9 and $0.3 million for the three and nine month periods ended September 30, 2019 which is reflected on the statement of operations.

 

Earnings (loss) per Common Share

 

The basic loss per common share for the three and nine months ended September 30, 2019 were $0.03 and $0.07 compared to basic earnings of ($0.02) and $0.04 per share for the same periods in 2018. The diluted loss per common share for the three and nine months ended September 30, 2019 as well as the three months ended September 30, 2018 were equal to the basic loss per common share due to the anti-dilutive effect of all convertible securities outstanding given that net losses were experienced.  For the nine months ended September 30, 2018, there were 1,358,227 RSUs and 1,558,151 options included in the diluted earnings per share calculations. The result was diluted earnings per share of $0.04 for the nine months ended September 30, 2018. Dilution from warrants was not included as the strike price exceeded the then current market price of the Common Shares.

 

Liquidity and Capital Resources

 

As of September 30, 2019, we had cash resources consisting of cash and cash equivalents of $3.4 million, a decrease of $3.0 million from the December 31, 2018 balance of $6.4 million. The cash resources consist of Canadian and U.S. dollar denominated deposit accounts and money market funds. We used $0.5 million for operating activities during the nine months ended September 30, 2019. During the same period, we used $0.2 million for investing activities and $2.4 million for financing activities.

 

On October 23, 2013, we closed a $34.0 million Sweetwater County, State of Wyoming, Taxable Industrial Development Revenue Bond financing program (“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 which commenced January 1, 2014. The principal is payable in 28 quarterly installments which commenced January 1, 2015 and continue through October 1, 2021. The State Bond Loan is secured by all of the assets at the Lost Creek Project. As of September 30, 2019, the balance of the State Bond Loan was $13.7 million. On October 1, 2019, the Sweetwater County Board of Commissioners and the State of Wyoming approved a six-quarter deferral of principal payments beginning October 1, 2019.  The next principal payment is therefore due April 1, 2021 and the final payment  is now due in April, 2023.

 

During 2017, we filed a universal shelf registration statement on Form S-3 with the SEC in order that we may offer and sell, from time to time, in one or more offerings, at prices and terms to be determined, up to $100 million of our Common Shares, warrants to purchase our Common Shares, our senior and subordinated debt

35

Table of Contents

securities, and rights to purchase our Common Shares and/or our senior and subordinated debt securities.  The registration statement became effective August 3, 2017 for a three-year period. 

 

We entered into an At Market Issuance Sales Agreement with MLV & Co. LLC and B Riley FBR, Inc. (May 27, 2016, as amended August 2017), under which we may, from time to time, issue and sell Common Shares at market prices on the NYSE American or other U.S. market through the distribution agents for aggregate sales proceeds of up to $10,000,000. There were no shares sold under this agreement in 2018 or 2019.

 

During the nine months ended September 30, 2019, we received $0.1 million from the exercise of stock options.

 

Collections from U3O8 sales for the nine months ended September 30, 2019 totaled $20.3 million.

 

Operating activities used cash of $0.5 million during the nine months ended September 30, 2019 as compared to $1.7 million during the same period in 2018. The net income for the nine months ended September 30, 2019 was $16.8 million less than the corresponding income in 2018, but the Company invested in $7.9 million in additional inventory in 2018 and recognized a $8.2 loss from NRV adjustments in 2019.

 

Investing activities consisted of additional claim staking, purchases of lab equipment and computers and costs related to developing a new method of concentrating and reducing waste water.  

 

During the first nine months of 2019, we used $2.6 million for principal payments on the State Bond Loan. 

 

Liquidity Outlook

 

We expect that any major capital projects will be funded by operating cash flow, cash on hand or additional financing as required. If these cash sources are not sufficient, certain capital projects could be delayed, or alternatively we may need to pursue additional debt or equity financing to which there is no assurance that such financing will be available at all or on terms acceptable to us. We have no immediate plans to issue additional securities or obtain funding other than that which may be required due to the uneven nature of cash flows generated from operations; however, we may issue additional debt or equity securities at any time.

 

Looking Ahead

 

In 2019, we expect to deliver 665,000 pounds related to term contracts at an average price of approximately $48 per pound. Through September 30, 2019, we have sold 485,000 pounds of U3O8 at an average price of $44.13 and in Q3 we sold 122,500 pounds at $41.76 for $5.1 million in gross sales. Our remaining 2019 contractual sales commitment is 180,000 pounds in Q4 at an expected average price of $60 per pound, of which 90,000 pounds were sold October 1, 2019.

 

For 2019, we put in place purchase contracts for 500,000 pounds at an average cost of $26 per pound. Our remaining 2019 purchase contract commitment is 180,000 pounds in Q4 at an expected average cost of $24 per pound.

 

Gross profits from uranium sales are expected to be approximately $6.3 million in Q4 excluding any net realizable value adjustments, which represent a gross profit margin of approximately 59%. 

 

As at October 31, 2019, our unrestricted cash position was $6.6 million after collection of the October 1, 2019 sales proceeds.

 

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Table of Contents

At the end of the third quarter of 2019, the average spot price of U3O8, as reported by UxC, LLC and TradeTech, LLC, had climbed slightly to approximately $25.68 per pound in a market lagging because of low volumes and uncertainty over the Working Group recommendations.

 

Clearly, market fundamentals have not changed sufficiently to warrant further development of MU2. As a result, we do not anticipate any additional development for the remainder of this year, and we have reduced our production guidance to between 40,000 and 50,000 pounds at Lost Creek. 

 

In response to the persistently weak uranium market, which continued as we awaited the outcome of the Section 232 Trade Action and, subsequently, as we await the outcome of the U.S. Nuclear Working Group, we took aggressive measures to control costs. 

 

In 2017, we deliberately slowed development activities at MU2, reduced costs, focused on enhancing production efficiencies from our operating MU1 header houses and complemented our production with cost-effective purchases of uranium. In 2018, we implemented further cost reductions, purchased 100% of the uranium necessary to meet our 2018 contractual commitments, and increased our ending inventory position.

 

In the first half of 2019, we suspended further MU2 development activities, secured purchase contracts for 500,000 pounds of uranium at favorable prices, and sold 165,000 pounds related to 2020 obligations under existing term agreements. More recently, in response to the President’s July 2019 decision regarding the Section 232 Trade Action, we once again took aggressive cost cutting measures in the form of additional staffing cuts and a renegotiation of the State Bond Loan to defer principal payments for 18 months. Additionally, we put in place purchase contracts for our 2020 contractual commitments, which leaves our nearly 250,000 pounds of finished inventory available for sale at our discretion.

 

The President’s Memorandum established a Working Group to develop recommendations for reviving and expanding domestic uranium production. Currently, the Working Group is slated to report its recommendations back to the President at or about November 9, 2019. As set forth above, there can be no certainty of the outcome of the Working Group’s findings and recommendations, if any, or the impact of actions taken in response to those findings and recommendations or the President’s Memorandum, and therefore the outcome of this continuing process and its effects on the U.S. uranium market is uncertain.

Transactions with Related Parties

 

There were no transactions with related parties during the quarter.

 

Proposed Transactions

As is typical of the mineral exploration, development and mining industry, we will consider and review potential merger, acquisition, investment and venture transactions and opportunities that could enhance shareholder value. Timely disclosure of such transactions is made as soon as reportable events arise.

Critical Accounting Policies and Estimates

 

We have established the existence of uranium resources at the Lost Creek Property, but because of the unique nature of in situ recovery mines, we have not established, and have no plans to establish, the existence of proven and probable reserves at this project. Accordingly, we have adopted an accounting policy with respect to the nature of items that qualify for capitalization for in situ U3O8 mining operations to align our policy to the accounting treatment that has been established as best practice for these types of mining operations.

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The development of the wellfield includes injection, production and monitor well drilling and completion, piping within the wellfield and to the processing facility, header houses used to monitor production and disposal wells associated with the operation of the mine.  These costs are expensed when incurred.

 

Mineral Properties

 

Acquisition costs of mineral properties are capitalized. When production is attained at a property, these costs will be amortized over a period of estimated benefit.

 

As of September 30, 2019, the average current spot and long-term prices of U3O8 were $25.65 and $32.00, respectively. This compares to prices of $27.75 and $32.00 as of December 31, 2018. The prices decreased with very little trading activity and uncertainty over the Section 232 Trade Action and, subsequently, the appointment of the Working Group. 

 

Development costs including, but not limited to, production wells, header houses, piping and power will be expensed as incurred as we have no proven and probable reserves.

 

Inventory and Cost of Sales

 

Our inventories are valued at the lower of cost and net realizable value based on projected revenues from the sale of that product. We are allocating all costs of operations of the Lost Creek facility to the inventory valuation at various stages of production with the exception of wellfield and disposal well costs which are treated as development expenses when incurred. Depreciation of facility enclosures, equipment and asset retirement obligations as well as amortization of the acquisition cost of the related property is also included in the inventory valuation. We do not allocate any administrative or other overhead to the cost of the product.

 

Share-Based Expense

 

We are required to initially record all equity instruments including warrants, restricted share units and stock options at fair value in the financial statements.

 

Management utilizes the Black-Scholes model to calculate the fair value of the warrants and stock options at the time they are issued.  In addition, the fair value of derivative warrants are recalculated quarterly using the Black-Scholes model with any gain or loss being reflected in the net income for the period.  Use of the Black-Scholes model requires management to make estimates regarding the expected volatility of the Company’s stock over the future life of the equity instrument, the estimate of the expected life of the equity instrument and the number of options that are expected to be forfeited. Determination of these estimates requires significant judgment and requires management to formulate estimates of future events based on a limited history of actual results.

 

New accounting pronouncements which were implemented this year

 

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 became effective for the Company as of January 1, 2019.  At January 1, 2019, we had two office equipment leases, and the office lease in Casper which expired in July 2019 and was renewed for only six months.  As a result of adoption of ASC 2016-02, we recognized a liability of $83 with a corresponding Right-Of-Use (“ROU”) assets of the same

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amount based on present value of the minimum rental payments of the leases which are included in non-current assets, current portion of long-term liabilities and long-term liabilities in the consolidated balance sheet. The discount rates used for leases are based on either the Company’s borrowing rate or the imputed interest rate based on the price of the equipment and the lease terms.

 

Off Balance Sheet Arrangements

 

We have not entered into any material off-balance sheet arrangements such as guaranteed contracts, contingent interests in assets transferred to unconsolidated entities, derivative instrument obligations, or with respect to any obligations under a variable interest entity arrangement.

Outstanding Share Data

As of October 31, 2019, we had outstanding 160,053,021 Common Shares and 8,996,012 options to acquire Common Shares.

 

 

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Market risk

 

Market risk is the risk to the Company of adverse financial impact due to changes in the fair value or future cash flows of financial instruments as a result of fluctuations in interest rates and foreign currency exchange rates.

 

Interest rate risk

 

Financial instruments that expose the Company to interest rate risk are its cash equivalents, deposits, restricted cash and debt financing. Our objectives for managing our cash and cash equivalents are to maintain sufficient funds on hand at all times to meet day-to-day requirements and to place any amounts which are considered in excess of day-to-day requirements on short-term deposit with the Company's financial institutions so that they earn interest.

 

Currency risk

 

At September 30, 2019, we maintained a balance of approximately $0.2 million in foreign currency resulting in a low currency risk which is our typical balance.

 

Commodity Price Risk

 

The Company is subject to market risk related to the market price of U3O8. We have U3O8 supply contracts with pricing fixed or based on inflation factors applied to a fixed base. Additional future sales would be impacted by both spot and long-term U3O8 price fluctuations. Historically, U3O8 prices have been subject to fluctuation, and the price of U3O8 has been and will continue to be affected by numerous factors beyond our control, including the demand for nuclear power, political and economic conditions, and governmental legislation in U3O8 producing and consuming countries and production levels and costs of production of other producing companies. The spot market price for U3O8 has demonstrated a large range since January 2001. Prices have risen from $7.10 per pound at January 2001 to a high of $136.00 per pound as of September 2007. The spot market price was $24.02 per pound as of October 30, 2019 as reported by TradeTech, LLC and UxC, LLC.

 

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Item 4. CONTROLS AND PROCEDURES

 

(a) Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this MD&A, under the supervision of the Chief Executive Officer and the Chief Financial Officer, the Company evaluated the effectiveness of its disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that information the Company is required to disclose in reports that are filed or submitted under the Exchange Act: (1) is recorded, processed and summarized effectively and reported within the time periods specified in SEC rules and forms, and (2) is accumulated and communicated to Company management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures include components of internal control over financial reporting. No matter how well designed and operated, internal controls over financial reporting can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.

 

(b) Changes in Internal Controls over Financial Reporting

 

No changes in our internal control over financial reporting occurred during the nine months ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II

 

Item 1. LEGAL PROCEEDINGS

 

No new legal proceedings or material developments in pending proceedings.

 

Item 1A. RISK FACTORS

 

There have been no material changes for the nine months ended September 30, 2019 from those risk factors set forth in our Annual Report on Form 10-K.

 

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

Item 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

Item 4. MINE SAFETY DISCLOSURE

 

Our operations and exploration activities at Lost Creek are not subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977.

 

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Item 5. OTHER INFORMATION

 

None

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Item 6. EXHIBITS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incorporated by Reference

Exhibit
Number

 

Exhibit Description

 

Form

 

Date of
Report

 

Exhibit

 

Filed
Herewith

 

 

 

 

 

 

 

 

 

 

 

31.1

 

Certification of CEO Pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Certification of CFO Pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

32.1

 

Certification of CEO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

32.2

 

Certification of CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

XBRL Schema Document

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

XBRL Calculation Linkbase Document

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

XBRL Definition Linkbase Document

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

XBRL Labels Linkbase Document

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

XBRL Presentation Linkbase Document

 

 

 

 

 

 

 

X

 

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

UR -ENERGY INC.

 

 

Date: November 1, 2019

By:

/s/ Jeffrey T. Klenda

 

 

Jeffrey T. Klenda

 

 

Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

 

Date: November 1, 2019

By:

/s/ Roger L. Smith

 

 

Roger L. Smith

 

 

Chief Financial Officer

 

 

(Principal Financial Officer and

 

 

Principal Accounting Officer)

 

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