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| | the accuracy of various mandated economic assumptions, all of which may vary considerably from actual results.
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All estimates are, to some degree, uncertain. For these reasons, estimates of the recoverable mineral resources prepared by different professionals or by the same professionals at different times, may vary substantially. As such, there is significant uncertainty in any mineral resource estimate and actual deposits encountered and the economic viability of a deposit may differ materially from our estimates.
Our mining operations are subject to numerous environmental laws, regulations and permitting requirements and bonding requirements that can delay production and adversely affect operating and development costs. Our business is subject to extensive federal, state and local laws governing all stages of exploration, development and operations at our mineral properties, taxes, labor standards and occupational health, mine and radiation safety, toxic substances, endangered species protections, and other matters. Exploration, development, and production operations are also subject to various federal, state and local laws and regulations relating to the protection of the environment. These laws impose high standards on the mining industry, particularly with respect to uranium recovery, to monitor the discharge of wastewater and report the results of such monitoring to regulatory authorities, to reduce or eliminate certain effects on or into land, water or air, to progressively restore mine properties, to manage hazardous wastes and materials and to reduce the risk of worker accidents. A violation of these laws may result in the imposition of substantial fines and other penalties and potentially expose us to operational restrictions, suspension, administrative proceedings or litigation. Many of these laws and regulations have tended to become more stringent over time, which appears will continue to be the trend in coming years. Any change in such laws could have a material adverse effect on our financial condition, cash flow or results of operations. There can be no assurance that we will be able to meet all the regulatory requirements in a timely manner or without significant expense or that the regulatory requirements will not change to delay or prohibit us from proceeding with certain exploration, development or operations. Further, there is no assurance that we will not face new challenges by third parties to regulatory decisions when made, which may cause additional delay and substantial expense, or may cause a project to be permanently halted. Our operations require licenses and permits from various governmental authorities. We believe we hold all necessary licenses and permits to carry on the activities which we are currently conducting or propose to conduct under applicable laws and regulations. Such licenses and permits are subject to changes in regulations and changes in various operating circumstances. There can be no guarantee that we will be able to obtain all necessary licenses and permits that may be required to maintain our exploration and mining activities (or amendments to expand or alter existing operations), including constructing mines, milling or processing facilities and commencing or continuing exploration or mining activities or operations at any of our properties. In addition, if we proceed to production on any other property or new geologic horizon, we must obtain and comply with permits and licenses which will contain specific operating conditions. There can be no assurance that we will be able to obtain such permits and licenses or that we will be able to comply with any and all such conditions. The ability to timely obtain all required authorizations may become more of an issue with regulatory agencies facing staffing challenges similar to those our industry is encountering, as experienced staff retire or leave government, including those with highly specialized knowledge specific to uranium recovery and radiation safety. As well, because we are now in operation and are depleting our known resource at Lost Creek, we must continue to conduct exploration and develop additional mineral resources. While there remain large areas of our Lost Creek Property which require additional exploration, and we have identified mineral resources at our Shirley Basin Project, we will need to continue to explore other areas of the Lost Creek Property and our other mineral properties in Wyoming, or acquire additional, known mineral resource properties to replenish our mineral resources and sustain continued operations. We estimate life of mine when we prepare our mineral resource estimates, but such estimates may not be correct.
Restrictive covenants in agreements governing our indebtedness may restrict our ability to pursue our business strategies. If we are unable to service our indebtedness, we could lose the assets securing our indebtedness.
Our State Bond Loan, under which we originally received approximately $34 million in debt financing, includes restrictive covenants that, among other things, limit our ability to sell the assets securing our indebtedness (which include our Lost Creek Project and other related assets). Our ability to make scheduled payments and satisfy other covenants in the State Bond Loan depends on our financial condition and operating performance, which are subject to prevailing economic, competitive, legislative and regulatory conditions beyond our control. We may be unable to generate a level of cash flow from operating activities sufficient to permit us to pay the principal, interest and other fees on our indebtedness.
If we cannot make scheduled payments on our debt, we will be in default which, if not addressed or waived, could require accelerated repayment of our indebtedness and the enforcement by the lender against the assets securing our indebtedness. The secured collateral for the State Bond Loan includes the Lost Creek Project and other related assets. These are key assets on which our business is substantially dependent and as such, the enforcement against any one or all of these assets would have a material adverse effect on our operations and financial condition.
Our mining operations are subject to numerous environmental laws, regulations and permitting requirements and bonding requirements that can delay production and adversely affect operating and development costs.
Our business is subject to extensive federal, state, provincial and local laws governing prospecting and development, taxes, labor standards and occupational health, mine and radiation safety, toxic substances, environmental protection, endangered species protections, and other matters. Exploration, development and production operations are also subject to various federal, state and local laws and regulations relating to the protection of the environment. These laws impose high standards on the mining industry, and particularly standards with respect to uranium recovery, to monitor the discharge of waste water and report the results of such monitoring to regulatory authorities, to reduce or eliminate certain effects on or into land, water or air, to progressively restore mine properties, to manage hazardous wastes and materials and to reduce the risk of worker accidents. A violation of these laws may result in the imposition of substantial fines and other penalties and potentially expose us to operational restrictions, suspension, administrative proceedings or litigation. Many
Possible amendments to the General Mining Law could make it more difficult or impossible for us to execute our business plan. Members of the U.S. Congress have repeatedly introduced bills which would materially amend or replace the provisions of the General Mining Law. Such bills have proposed, among other things, to (i) significantly alter the laws and regulations relating to uranium mineral development and recovery from patented or unpatented mining claims; (ii) impose a federal royalty on production from unpatented mining claims and/or impose other taxes or additional fees on the use or occupancy of federal lands; (iii) impose time limits on the effectiveness of plans of operation that may not coincide with mine life; (iv) convert in part or in whole the existing land holdings program, requiring unpatented mining claims to become more stringent over time. Any change in such laws could have a material adverse effect on our financial condition, cash flow or results of operations. There can be taken to lease in a new program under certain circumstances and imposing other circumstances in which the unpatented mining claim would have to be abandoned; (v) limit the mineral property holdings of any single person or company under various stages from prospecting through operations; (vi) impose more stringent environmental compliance and reclamation requirements on activities on unpatented mining claims; (vii) allow states, localities and Native American tribes to petition for the withdrawal of identified tracts of federal land from the operation of the U.S. mining laws; (viii) eliminate or greatly limit the right to a mineral patent; and (ix) allow for administrative determinations that mining would not be allowed in situations where undue degradation of the federal lands in question could not be prevented. If enacted, such legislation could, among other effects, change the cost of holding unpatented mining claims or leases or the duration for which the claims or leases could be held without development, and could significantly impact our ability to develop locatable mineral resources on our patented and unpatented mining claims. Although it is impossible to predict what any legislated royalties might be, implementation could adversely affect the potential for development of mineral properties, as well as the economics of existing operating mines. Passage of such legislation could adversely affect our financial performance, including that proposals imposing a royalty or otherwise impacting holding and operational costs of mining claims, if passed, could render mineral projects or existing mines uneconomic. Although certain of the proposed amendments have included provisions to ‘grandfather’ permitted projects, there is no assurance that any new legislation will necessarily contain such provisions or that such legislation will not otherwise have a significant financial impact on our operations and business. Additionally, there continue to be proposals for withdrawal of federal lands for the purposes of mineral location and development. No proposal to date directly affects the areas of Wyoming and Nevada in which we have land holdings; however, such actions could have an adverse effect on our financial performance if they are broadened in scope to directly affect the areas in which we have properties. The reasons for withdrawals have also been broadened in certain legislative proposals.
We depend on services of our management, and key personnel, contractors and service providers, and the timely availability of such individuals and providers cannot be assured during ramp-up or into the future. Successful implementation of our business plan and operations is dependent upon our management team and experienced staff, some of whom are approaching retirement age. From time to time, we may need to recruit additional qualified employees, contractors and service providers to supplement existing management and personnel. Currently, we are in the process of hiring employees as we ramp-up Lost Creek operations and we will need to hire additional staff as we develop and construct the Shirley Basin Project. Timely availability of staffing and retention of contractors cannot be assured in our industry, many aspects of which are highly specialized. This is particularly true in the current labor markets in which we recruit our employees and contractors, including where we compete with higher paying energy jobs, and because of the remote locations for which employees and contractors are needed. As well, the skilled professionals with expertise in geologic, engineering and process aspects of uranium in situ recovery, radiation safety and other facets of our business are currently in high demand, as there are relatively few professionals with both expertise and experience. The sustained downturn of the uranium production industry in the past several years makes these challenges even more pronounced. Even with return to higher levels of production operations, we will be able to meet all the regulatory requirements in a timely manner or without significant expense or that the regulatory requirements will not change to delay or prohibit us from proceeding with certain exploration, development or operations. Further, there is no assurance that we will not face new challenges by third parties to regulatory decisions when made, which may cause additional delay and substantial expense, or may cause a project to be permanently halted. Many of our operations require licenses and permits from various governmental authorities. We believe we hold all necessary licenses and permits to carry on the activities which we are currently conducting or propose to conduct under applicable laws and regulations. Such licenses and permits are subject to changes in regulations and changes in various operating circumstances. There can be no guarantee that we will be able to obtain all necessary licenses and permits that may be required to maintain our exploration and mining activities including constructing mines or milling facilities and commencing or continuing exploration or mining activities or operations at any of our properties. In addition, if we proceed to production on any other exploration property, we must obtain and comply with permits and licenses which will contain specific operating conditions. There can be no assurance that we will be able to obtain such permits and licenses or that we will be able to comply with any such conditions.
Lack of acceptance of nuclear energy and deregulation of the electrical utility industry could impede our business.
Our future prospects are tied directly to the electrical utility industry worldwide. Deregulation of the utility industry, particularly in the United States and Europe, is expected to affect the market for nuclear and other fuels for years to come, and may result in a wide range of outcomes including the expansion or the premature shutdown of nuclear reactors. Maintaining the demand for uranium at current levels and future growth in demand will depend upon the continued acceptance of the nuclear technology as a means of generating electricity. Lack of continued public acceptance of nuclear technology would adversely affect the demand for nuclear power and potentially increase the regulation of the nuclear power industry. Following the events of March 2011 in Fukushima Japan, a reaction worldwide called into question the public’s confidence in nuclear energy and technology, the effects of which are still apparent in many countries around the world.
The results of exploration and ultimate production are highly uncertain.
The exploration for, and development of, mineral deposits involves significant risks which a combination of careful evaluation, experience and knowledge may not eliminate. Few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish mineral resources or reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that our current exploration and development programs will result in profitable commercial operations.
Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are the particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as uranium prices, which are highly cyclical, and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of uranium and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital.
The uranium industry is highly competitive and is competitive with other energy sources.
The international uranium industry is highly competitive. Our activities are directed toward the search for, evaluation, acquisition and development of uranium deposits into production operations. There is no certainty that the expenditures to be made by us will result in discoveries of commercial quantities of uranium deposits. There is aggressive competition within the mining industry for the discovery and acquisition of properties considered to have commercial potential. We will compete with other interests, many of which have greater financial resources than we have, for the opportunity to participate in promising projects. Significant capital investment is required to achieve commercial production from successful exploration and development efforts.
Nuclear energy competes with other sources of energy, including oil, natural gas, coal, hydro-electricity and renewable energy sources. These other energy sources are to some extent interchangeable with nuclear energy, particularly over the longer term. Lower prices of oil, natural gas, coal and hydro-electricity may result in lower demand for uranium concentrate and uranium conversion services. Furthermore, the growth of the uranium and nuclear power industry beyond its current level will depend upon continued and increased acceptance of nuclear technology as a means of generating electricity. Because of unique political, technological and environmental factors that affect the nuclear industry, the industry is subject to public opinion risks which could have an adverse impact on the demand for nuclear power and increase the regulation of the nuclear power industry.
Our property title may be uncertain and could be challenged.
Although we have obtained title opinions with respect to certain of our properties, there is no guarantee that title to any of our properties will not be challenged or impugned. Third parties may have valid claims underlying portions of our interests. Our mineral properties in the United States consist of leases to private mineral rights, leases covering state lands, unpatented mining claims and patented mining claims. Many of our mining properties in the United States are unpatented mining claims to which we have only possessory title. Because title to unpatented mining claims is subject to inherent uncertainties, it is difficult to determine conclusively ownership of such claims. These uncertainties relate to such things as sufficiency of mineral discovery, proper posting and marking of boundaries and possible conflicts with other claims not determinable from descriptions of record. The present status of our unpatented mining claims located on public lands allows us the exclusive right to mine and remove valuable minerals. We are allowed to use the surface of the public lands solely for purposes related to mining and processing the mineral-bearing ores. However, legal ownership of the land remains with the United States. We remain at risk that the mining claims may be forfeited either to the United States or to rival private claimants due to failure to comply with statutory requirements. We have taken or will take appropriate curative measures to ensure proper title to our properties where necessary and where possible.
Possible amendments to the General Mining Law could make it more difficult or impossible for us to execute our business plan.
Members of the United States Congress have repeatedly introduced bills which would supplant or alter the provisions of the United States Mining Law of 1872, as amended. Such bills have proposed, among other things, to (i) either eliminate or greatly limit the right to a mineral patent; (ii) significantly alter the laws and regulations relating to uranium mineral development and recovery from unpatented and patented mining claims; (iii) impose a federal royalty on production from unpatented mining claims; (iv) impose time limits on the effectiveness of plans of operation that may not coincide with mine life, (v) impose more stringent environmental compliance and reclamation requirements on activities on unpatented mining claims, (vi) establish a mechanism that would allow states, localities and Native American tribes to petition for the withdrawal of identified tracts of federal land from the operation of the U.S. general mining laws, and (vii)
allow for administrative determinations that mining would not be allowed in situations where undue degradation of the federal lands in question could not be prevented.
If enacted, such legislation could, among other effects, change the cost of holding unpatented mining claims and could significantly impact our ability to develop locatable mineral resources on our patented and unpatented mining claims. Although it is impossible to predict at this point what any legislated royalties might be, enactment could adversely affect the potential for development and the economics of existing operating mines. Passage of such legislation could adversely affect our financial performance.
Additionally, as noted in other risk factors, there are ongoing withdrawals of federal lands for the purposes of mineral location and development. While certain of these proposals have been withdrawn, and others are not final and, as yet, none directly affects the areas of Wyoming and Nevada in which we currently have land holdings, they could have an adverse effect on our financial performance if they are broadened in scope to directly affect the areas in which we have properties.
We do not have an established earnings record, and we have never paid dividends.
We do not have an established earnings record. We have not paid dividends on our Common Shares since incorporation and do not anticipate doing so in the foreseeable future. Payments of any dividends will be at the discretion of our Board after taking into account many factors, including our financial condition and current and anticipated cash needs.
We depend on the services of our management, key personnel, contractors and service providers.
Shareholders will be relying on the good faith, experience and judgment of our management and advisors in supervising and providing for the effective management of the business and our operations and in selecting and developing new investment and expansion opportunities. We may need to recruit additional qualified employees, contractors and service providers to supplement existing management and personnel, the timely availability of which cannot be assured, particularly in the current labor markets in which we recruit our employees and the somewhat remote locations for which employees are needed. As well, the skilled professionals with expertise in engineering and process aspects of in situ recovery, radiation safety and other facets of our business are currently in high demand, as there are relatively few such professionals with both expertise and experience. We will need to hire additional employees as we develop the Shirley Basin Project. We will continue to be dependent on the continued service of a relatively small number of key persons, including key contractors, the loss of any one or several of whom could have an adverse effect on our business and operations. We do not hold key man insurance in respect of any of our executive officers.
Our insurance coverage could be insufficient.
We currently carry insurance coverage for general liability, directors’ and officers’ liability and other matters. We intend to carry insurance to protect against certain risks in such amounts as we consider adequate. Certain insurances may be cost prohibitive to maintain, and even if we carried all such insurances, the nature of the risks we face in our exploration and uranium production operations is such that liabilities could exceed policy limits in any insurance policy or could be excluded from coverage under an insurance policy. The potential costs that could be associated with any liabilities not covered by insurance or in excess of insurance coverage or compliance with applicable laws and regulations may cause substantial delays and require significant capital outlays, adversely affecting our business and financial position. Additionally, we utilize a bonding surety program for our regulatory, reclamation and restoration obligations at Lost Creek Project and the Pathfinder
| | 39 | | Table of ContentsMines sites. Availability of and terms for such surety arrangements may change in the future, resulting in adverse effects to our financial condition.
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The SEC’s adoption of S-K 1300 results in changes to our technical reports and will continue to result in increased compliance costs and uncertainty of interpretation. S-K 1300 requires us to disclose specific information related to our material mining operations, including concerning our reported mineral resources at Lost Creek and Shirley Basin in existing NI 43-101 technical reports. We conformed our technical reports to comply with both S-K 1300 and NI 43-101, which results in revisions to certain aspects of our prior reports and adds to our compliance costs. Disclosures under S-K 1300 continue to be subject to largely unknown interpretations. We are unable to predict the nature of any future enforcement, interpretation, or application of S-K 1300 by the SEC. Any additional revisions to, or interpretations of, S-K 1300 could also result in additional time and possibly unforeseen compliance costs. Our results of exploration and ultimate production are highly uncertain. The exploration for, and development of, mineral deposits involve significant risks which a combination of careful evaluation, experience and knowledge may not eliminate. Few properties which are explored are ultimately developed into producing mines, and for those which are developed, there may be longer timelines, delays and greater than estimated costs to advance to production. Major expenses may be required to establish mineral resources or reserves, to develop metallurgical processes and to construct mining and processing facilities at a site. It is impossible to ensure that our current exploration and development programs will result in profitable commercial operations; this is true for our Excel gold project as well as our uranium properties. Whether a mineral deposit will be commercially viable depends on many factors, including the attributes of the deposit, such as size, grade and proximity to infrastructure, as well as uranium and gold prices, which are highly cyclical. Government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of uranium and environmental protection also are factors in determining commercial viability of a mineral project. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital. Our proprietary data, technology and intellectual property may be compromised or lost, which could result in decreased competitive advantage and/or loss to the value of such assets. With the ever-increasing reliance on technology throughout our operations, including developments of proprietary technology and intellectual property by the Company and/or it consultants, risks of theft, appropriation or other loss of such technology and assets and/or our proprietary data pose a risk to our competitive advantage and business and financial results. We take what we believe to be reasonable steps to protect these proprietary technologies and intellectual property, including contractually and by efforts to obtain patents or trade rights where possible. but there can be no assurance that all such measures will be sufficient or successful. Climate change and climate change legislation or regulations could impact our operations. Although we play an important role in addressing climate change with our production of uranium to fuel carbon-free nuclear power, we, too, may be subject to risks associated with climate change which could harm our results of operations and increase our costs and expenses. The occurrence of severe adverse weather conditions may have a potentially serious impact on our operations. Adverse weather may result in physical damage to our operations, instability of our infrastructure and equipment, or alter the supply of electricity to our Lost Creek Property. Impacts of such events may affect worker productivity at our projects. Should any impacts of climate change be material in nature or occur for lengthy periods of time, our financial condition or results of operations would be adversely affected. As an ISR uranium producer, we maintain a comparatively light environmental footprint. Nonetheless, certain environmental impacts are inevitable from all mineral exploration and development. U.S., Canadian, and other international legislative and regulatory action intended to ensure the protection of the environment are continually changing and evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability, and potentially increased capital expenditures and operating costs. Transitioning our business to meet regulatory, societal and investor expectations may cause us to incur lower economic returns than originally estimated for new projects and development plans of existing operations. While we continue to monitor and assess all new policies, legislation and regulations regarding such matters, we currently believe that the impact of any such legislation on our business is unlikely to be material. We cannot, however, assure that our efforts to mitigate the impact of such laws or regulations will be successful and/or without significant attendant costs. We are subject to risks associated with regulatory investigations or challenges, litigation and other legal proceedings.
Defense and settlement costs of legal claims can be substantial, even with respect to claims that have no merit. From time to time, we may be involved in disputes with other parties which may result in litigation or other proceedings. Additionally, it is not unlikely that we may find ourselves involved directly or indirectly in legal proceedings, in the form of regulatory investigations, administrative proceedings or litigation, arising from challenges to regulatory actions as described elsewhere in this annual report. Such investigations, administrative proceedings and litigation related to regulatory matters may delay or halt exploration or development of our projects. The results of litigation or any other proceedings cannot be predicted with certainty. If we are unable to resolve any such disputes favorably, it could have a material adverse effect on our financial position, ability to operate, results of operations or our property development.
Acquisitions and integration may disrupt our business.
From time to time, we examine opportunities to acquire additional mining assets and businesses. Any acquisition that we may choose to complete may be of significant size, may change the scale of our business and operations, and/or may expose us to new geographic, political, operating, financial and geological risks. Any acquisitions would be accompanied by risks. For example, there may be a significant change in commodity prices after we have committed to complete the transaction and established the purchase price or share exchange ratio; a material ore body may prove to be below expectations; we may have difficulty integrating and assimilating the operations and personnel of any acquired company, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls across the organization; the integration of the acquired business or assets may disrupt our ongoing business and relationships with employees, customers, suppliers and contractors; and the acquired business or assets may have unknown liabilities which may be significant. There can be no assurance that we would be successful in overcoming these risks or any other problems encountered in connection with such acquisitions.
We are dependent on information technology systems, which are subject to certain risks.
We depend upon information technology systems in a variety of ways throughout our operations. Any significant breakdown of those systems, whether through virus, cyber-attack, security breach, theft, or other destruction, invasion or interruption, or unauthorized access to our systems, could negatively impact our business and operations. To the extent that such invasion, cyber-attack or similar security breach results in disruption to our operations, loss or disclosure of, or damage to, our data and particularly our confidential or proprietary information, our reputation, business, results of operations and financial condition could be materially adversely affected. Our systems, internal controls and insurance for protecting against such cyber security risks may be insufficient. Although to date we have experienced no such attack resulting in material losses, we may suffer such losses at any time in the future. We may be required to expend significant additional resources to continue to modify and enhance our protective measures or to investigate, restore or remediate any information technology security vulnerabilities.
| | 40 | | Table of ContentsU.S. Federal Income Tax Consequences to U.S. Shareholders under the Passive Foreign Investment Company Rules
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Risks Factors Related to our Financial Circumstances The uranium mining industry is capital intensive, and we may be unable to raise necessary additional funding. Additional funds will be required for working capital and exploration and development activities at our properties including Lost Creek and the adjoining projects at the Lost Creek Property, as well as the development of our Shirley Basin Project. Potential sources of future funds available to us, in addition to the proceeds from sales of current inventory and future production, include the sale of additional equity capital, proceeds from the exercise of outstanding convertible equity instruments, borrowing of funds or other debt structure, project financing, or the sale of our interests in assets. Continued volatility in the equity markets, particularly the commodities and energy markets, as well as current interest rates, may increase the costs attendant to either equity or debt financing. There is no assurance that such funding will be available to us to renew full production operations or to fund continued development or future exploration. Further, even if such financing is successfully completed, there can be no assurance that it will be obtained on terms favorable to us or will provide us with sufficient funds to meet our objectives, which may adversely affect our business and financial position.
Restrictive covenants in the agreements governing our indebtedness may restrict our ability to pursue our business strategies. Our State Bond Loan, under which we currently owe approximately $11.1 million in principal, includes restrictive covenants that, among other things, limit our ability to sell the assets securing our indebtedness (which include our Lost Creek Project and related assets). If we are unable to service our debt, we could lose the assets securing our indebtedness. Our ability to make scheduled payments and satisfy other covenants in the State Bond Loan depends on our financial condition and operating performance, which are subject to prevailing economic, competitive, legislative and regulatory conditions beyond our control. We may be unable to generate a level of cash flow from operating activities sufficient to permit us to pay the principal, interest and other fees on our indebtedness. If we cannot make scheduled payments on our debt, we will be in default which, if not addressed or waived, could require accelerated repayment of our indebtedness and enforcement by the lender against the assets securing our indebtedness. The secured collateral for the State Bond Loan includes the Lost Creek Project and assets related to it and other projects of the Lost Creek Property. These are key assets on which our business is substantially dependent and, as such, the enforcement against any one or all these assets would have a material adverse effect on our operations and financial condition. Production, capital and operating cost estimates may be inaccurate. We prepare estimates of annual and future production, the attendant production and operational costs and required working capital for such levels of production, but there is no assurance that we will achieve those estimates. These types of estimates are inherently uncertain and may change materially over time. Operational cost estimates are affected by changes in production levels and may be affected by current inflation and cost-of-goods due to supply chain issues as well as the possible need to utilize a greater level of contractor services if required staffing is unavailable or cannot timely be hired and trained. Availability and consistent pricing of materials necessary in the installation of wells, surface production equipment, associated infrastructure, chemicals for processing and, expendable materials related to operations, can be variable depending on economic conditions locally and worldwide and may force changes in operations and timing of resource production. Under current supply chain circumstances, this is particularly true. In addition, we rely on certain contractors related to the installation of wells and technical services associated with that installation. Their availability or cost of service can change depending on other local market conditions and may therefore affect the installation and production rates of mining. | | 41 | Investors in the Common Shares
| Table of Ur-Energy that are U.S. taxpayers (referred to as a U.S. shareholder) should be aware that we may be a “passive foreign investment company” (a “PFIC”) for the period ended December 31, 2017 and may be a PFIC in subsequent years. If we are a PFIC for any year during a U.S. shareholder’s holding period, then such U.S. shareholders generally will be subject to a special, highly adverse tax regime with respect to so-called “excess distributions” received on our Common Shares. Gain realized upon a disposition of our Common Shares (including upon certain dispositions that would otherwise be tax-free) also will be treated as an excess distribution. Excess distributions are punitively taxed and are subject to additional interest charges. Additional special adverse rules also apply to U.S. shareholders who own Common Shares of Ur-Energy if we are a PFIC and have a non-U.S. subsidiary that is also a PFIC (a “lower-tier PFIC”).A U.S. shareholder may make a timely "qualified electing fund" election (“QEF election”) or a "mark-to-market" election with respect to our Common Shares to mitigate the adverse tax rules that apply to PFICs, but these elections may accelerate the recognition of taxable income and may result in the recognition of ordinary income. To be timely, a QEF election generally must be made for the first year in the U.S. shareholder’s holding period in which Ur-Energy is a PFIC. A U.S. shareholder may make a QEF election only if the U.S. shareholder receives certain information (known as a “PFIC annual information statement”) from us annually. A U.S. shareholder may make a QEF election with respect to a lower-tier PFIC only if it receives a PFIC annual information statement with respect to the lower tier PFIC. The mark-to-market election is available only if our Common Shares are considered regularly traded on a qualifying exchange, which we cannot assure will be the case for years in which it may be a PFIC. The mark-to-market election is not available for a lower-tier PFIC.
We will use commercially reasonable efforts to make available to U.S. shareholders, upon their written request: (a) timely and accurate information as to our status as a PFIC and the PFIC status of any subsidiary in which Ur-Energy owns more than 50% of such subsidiary’s total aggregate voting power, and (b) for each year in which Ur-Energy determines that it is a PFIC, upon written request, a PFIC annual information statement with respect to Ur-Energy and with respect to each such subsidiary that we determine is a PFIC.
Special adverse rules that impact certain estate planning goals could applyContents
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Risks Related to our Common Shares
We have never paid dividends and do not currently expect to do so in the near future. Therefore, if our share price does not appreciate, our investors may not gain and could potentially lose on their investment in our shares. We have not paid dividends on our common shares since incorporation and do not anticipate doing so in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the growth of our business. Payments of any dividends will be at the discretion of our Board after considering many factors, including our financial condition and current and anticipated cash needs. As a result, capital appreciation, if any, of our shares will be an investor’s sole source of gain for the foreseeable future. Failure to meet the listing maintenance criteria of the NYSE American may result in the delisting of our common shares, which could result in lower trading volumes and liquidity, lower prices of our common shares and make it more difficult for us to raise capital. Our common shares are listed on the NYSE American and we are subject to its continued listing requirements, including maintaining certain share prices and a minimum level of shareholder equity. The market price of our common shares has been and may continue to be subject to significant fluctuation. If we are unable to comply with the NYSE American continued listing requirements, including its trading price requirements, our common shares may be suspended from trading on and/or delisted from the NYSE American. Although we have not been notified of any delisting proceedings, there is no assurance that we will not receive such notice in the future or that we will be able to then comply with NYSE American listing standards. The delisting of our common shares from the NYSE American may materially impair our shareholders’ ability to buy and sell our common shares and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common shares. In addition, the delisting of our common shares could significantly impair our ability to raise capital. Further, if our common shares were delisted from the NYSE American, they might be subject to the so-called “penny stock” rules. The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange. For any transaction involving a “penny stock,” unless exempt pursuant to SEC regulations, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our common shares were determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common shares and an investor may find it more difficult to acquire or dispose of our common shares on the secondary market. These factors could also significantly negatively affect the market price of our common shares and our ability to raise capital. The trading price of our common shares may experience substantial volatility. The market price of our common shares has experienced and may continue to experience substantial volatility that is unrelated to the Company’s financial condition or operations. The trading price of our common shares may also be significantly affected by short-term changes in the price of uranium. The market price of the Company’s securities is affected by many other variables which may be unrelated to our success and are, therefore, not within our control. These include other developments that affect the market for all resource sector-related securities, the breadth of the public market for the shares and the attractiveness of alternative investments; market reaction to the estimated fair value of our portfolio; rumors or dissemination of false information; changes in coverage or earnings estimates by analysts; our ability to meet analysts’ or market expectations; and sales of common shares by existing shareholders. The effect of these and other factors on the market price of the common shares is expected to make the price of the common shares volatile in the future, which may result in losses to investors. You may experience future dilution as a result of additional equity offerings. To raise additional capital, we may in the future offer additional common shares or other securities convertible into or exchangeable for our common shares at prices that may not be the same as the price per share as the shares an investor has previously purchased, and investors purchasing shares or other securities in the future could have rights superior to existing shareholders.
We may be a passive foreign investment company and there may be adverse U.S. federal income tax consequences to U.S. shareholders under the passive foreign investment company rules. Investors in our common shares that are U.S. taxpayers (referred to as a U.S. shareholder) should be aware that we may be a “passive foreign investment company” (a “PFIC”) for the period ended December 31, 2022, and may be a PFIC in subsequent years. If we are a PFIC for any year during a U.S. shareholder’s holding period, then such U.S. shareholders generally will be subject to a special, highly adverse tax regime with respect to so-called “excess distributions” received on our common shares. Gain realized upon a disposition of our common shares (including upon certain dispositions that would otherwise be tax-free) also will be treated as an excess distribution. Excess distributions are punitively taxed and are subject to additional interest charges. Additional special adverse rules also apply to U.S. shareholders who own our common shares if we are a PFIC and have a non-U.S. subsidiary that is also a PFIC (a “lower-tier PFIC”). A U.S. shareholder may make a timely “qualified electing fund” election (“QEF election”) or a “mark-to-market” election with respect to our common shares to mitigate the adverse tax rules that apply to PFICs, but these elections may accelerate the recognition of taxable income and may result in the recognition of ordinary income. To be timely, a QEF election generally must be made for the first year in the U.S. shareholder’s holding period in which Ur-Energy is a PFIC. A U.S. shareholder may make a QEF election only if the U.S. shareholder receives certain information (known as a “PFIC annual information statement”) from us annually. A U.S. shareholder may make a QEF election with respect to a lower-tier PFIC only if it receives a PFIC annual information statement with respect to the lower tier PFIC. The mark-to-market election is available only if our common shares are considered regularly traded on a qualifying exchange, which we cannot assure will be the case for years in which it may be a PFIC. The mark-to-market election is not available for a lower-tier PFIC. We will use commercially reasonable efforts to make available to U.S. shareholders, upon their written request for each year in which the Company may be a PFIC, a PFIC annual information statement with respect to the Company and with respect to each such subsidiary that we determine may be a PFIC. Special adverse rules that impact certain estate planning goals could apply to our common shares if we are a PFIC. Each U.S. shareholder should consult its own tax advisor regarding the U.S. federal, state and local consequences of the PFIC rules, and regarding the QEF and mark-to-market elections. General Risk Factors Certain of the impacts to the economy and supply chain resulting from the COVID pandemic and resulting global recovery are likely to continue for much of 2023, and other impacts to the health of our staff remain uncertain. The COVID pandemic has had a significant negative impact generally on the global economy and commodity and equity markets, and the outlook remains uncertain with variants of the virus evolving and continuing to affect many parts of the world. While many of the direct impacts to our business arising from our employees, regulators and suppliers being unable to conduct routine operations due to illness or exposure to COVID have decreased, direct and indirect effects of the pandemic may continue to be experienced. The ongoing impacts to supply chain and available labor and contractors may continue to pose risk to our operations, particularly as we ramp up production operations at Lost Creek and if a decision is made to construct and operate Shirley Basin. We are a highly regulated industry and while the regulators are available to address operational impacts from illness, governmental restrictions and other effects, it remains uncertain whether all impacts can be timely addressed with our operations and with the regulators. We are and will remain fully engaged with our employees in our efforts to protect their health and safety. To the extent the COVID pandemic may adversely affect our business and financial results, it may also have the effect of heightening many of the other risks described throughout this Item 1A, such as timely and economically available labor and supplies, and those relating to our ability to access additional capital, which could negatively affect our business. It continues to be difficult to estimate the continuing or future effects of the pandemic on our business. Our insurance coverage, bonding surety arrangements and indemnifications for our inventory could be insufficient or change in adverse ways in the future. We currently carry insurance coverage for general liability, property and casualty, directors’ and officers’ liability and other matters. We intend to carry insurance to protect against certain risks in amounts we consider adequate. Certain insurances may be cost prohibitive to maintain, and even if we carried all such insurances, the nature of the risks we face in our exploration and uranium production operations is such that liabilities could exceed policy limits in any insurance policy or could be excluded from coverage under an insurance policy. The potential costs that could be associated with any liabilities not covered by insurance or which exceed insurance coverage, or compliance with applicable laws and regulations, may cause substantial delays or interruption of operations and require significant capital outlays, adversely affecting our business and financial position. We cannot assure that even our current coverages will continue to be available at acceptable cost or that coverage limits will remain at current levels, any of which could result in adverse effects upon our business and financial condition. We may be required to obtain additional types of insurance or increase existing coverage amounts due to changes in regulation of the mining and nuclear fuel cycle industries. Additionally, we utilize a bonding surety program for our regulatory, reclamation and restoration obligations at Lost Creek and Shirley Basin. Availability of and terms for such surety arrangements may change in the future, resulting in adverse effects to our financial condition. Also, we have contractual arrangements with the licensed uranium conversion facility for weighing and storage of our product inventory. Possible loss of or damage to our inventory may not be fully covered by our agreements, indemnification obligations or insurance. And, with relation to the conversion facility, the storage arrangements may not be extended indefinitely, creating greater costs or other impact to our product inventory. Any loss or damage of the uranium may not be fully covered or absolved by contractual arrangements with the conversion facility. We are subject to risks associated with litigation, governmental or regulatory investigations or challenges, and other legal proceedings. Defense and settlement costs of legal claims can be substantial, even with respect to claims that have no merit. From time to time, we may be involved in disputes with other parties which may result in litigation, arbitration, or other proceedings. Additionally, it is possible that the Company may become involved directly or indirectly in legal proceedings, in the form of governmental or regulatory investigations, administrative proceedings or litigation, arising from challenges to regulatory actions. Such investigations, administrative proceedings and litigation related to regulatory matters may delay or halt exploration or development of our projects. The results of litigation or any other proceedings cannot be predicted with certainty. If we are unable to resolve any such disputes favorably, it could have a material adverse effect on our financial position, results of operations or our property development. We are dependent on information technology systems, which are subject to certain risks, including cybersecurity risks and data leakage risk associated with implementation and integration. We depend upon information technology systems in a variety of ways throughout our operations. While we have not experienced any material incident, any significant breakdown of those systems, whether through virus, cyber-attack, security breach, theft, or other destruction, invasion or interruption, or unauthorized access to our systems, by employees, others with authorized access to our systems or unauthorized persons, could negatively impact our business and operations. These threats are increasing in number and severity and broadening in type of risk, including most recently with the Russian declaration of war against the Ukraine and cyber attacks ongoing in that context, which may broaden. To the extent that such invasion, cyber-attack or similar security breach results in disruption to our operations, loss or disclosure of, or damage to, our data and particularly our confidential or proprietary information, our reputation, business, results of operations and financial condition could be materially adversely affected. We have implemented various measures to manage our risks related to information technology systems and network disruptions. However, given the unpredictability of the timing, nature and scope of information technology disruptions, we potentially could be subject to production downtimes, operational delays, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations. Our systems, internal controls and insurance for protecting against such cyber security risks may be insufficient and it is increasingly difficult to fully mitigate against these threats as they are ever changing. Additionally, we assess possible threats to our third-party providers when they may be provided confidential and proprietary information to complete work in our behalf. While we seek assurances from those parties that they will maintain such confidential and proprietary information in confidence, including by virtue of having systems and processes in place to protect such data, those service providers may also be subject to data compromise. Any compromise of our confidential data or that of our customers, suppliers, employees or others with whom we do business, whether in our possession or that of our service providers, could substantially disrupt our operations, harm our customers, suppliers, employees and others with whom we do business, damage our reputation, violate applicable law, subject us to potentially significant cost and liabilities which could be material. Although to date we have experienced no such attack resulting in material losses, we may suffer such losses at any time in the future. We may be required to expend significant additional resources to continue to modify and enhance our protective measures or to investigate, restore or remediate any information technology security vulnerabilities. We may also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into our operations. If we are unable to successfully implement system upgrades or modifications, we may have to rely on manual reporting processes and controls over financial reporting that have not been planned, designed or tested. Various measures have been implemented to manage our risks related to the system upgrades and modifications, but system upgrades and modification failures could have a material adverse effect on our business, financial condition and results of operations and could, if not successfully implemented, adversely impact the effectiveness of our internal controls over financial reporting.
We may develop conflicts of interest with other mining or natural resource companies with which one of our directors may be affiliated. Our directors may allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. Certain of our directors are also directors of other companies that are engaged in similar mining or natural resources businesses, namely the acquisition, exploration, and development of mineral properties. Such other associations may give rise to conflicts of interest from time to time. One of the possible consequences will be that corporate opportunities presented to a director may be offered to another company with which the director is associated and may not be made available to us. Conflicts of interest may also include decisions on how much time to devote to the business of our company. Our Code of Conduct provides guidance on conflicts of interest and our directors are required to act in good faith, to make certain disclosures and to abstain from voting on decisions in which they may have a conflict of interest. Acquisitions and integration may disrupt our business, and we may not obtain full anticipated value of certain acquisitions due to the condition of the markets. From time to time, we examine opportunities to acquire additional mining assets and businesses. Any acquisition that we may choose to complete may be of significant size, may change the scale of our business and operations, and/or may expose us to new geographic, political, operating, financial and geological risks. Any acquisition would be accompanied by risks, including a significant change in commodity prices after we commit to complete a transaction and establish the purchase price or share exchange ratio; a material mineral deposit may prove to be below expectations; difficulty integrating and assimilating the operations and personnel of an acquired company, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls across the organization; the integration of the acquired business or assets may disrupt our ongoing business and relationships with employees, customers, suppliers and contractors; and the acquired business or assets may have unknown liabilities which may be significant. There can be no assurance that we would be able to conclude any acquisition successfully, or that we would be successful in overcoming these risks or other problems encountered in connection with such an acquisition. The war in Ukraine continues to have implications to the global economy, energy supplies, and the impact to the uranium and nuclear fuel market remains uncertain but may prove to negatively impact our operations. The short and long-term implications of Russia’s invasion of Ukraine remain difficult to predict. The war may result in impacts to the nuclear fuel industries and uranium producers, through the imposition of additional sanctions and counter sanctions. The war is likely to continue to have an adverse effect on energy and economic markets generally. Because of the vast reliance by the U.S. and other nations on uranium exported from Russia and Russian-controlled or influenced sources including Kazakhstan and Uzbekistan, an even greater impact related to global supply and pricing of uranium may result. While in the shorter-term such a reordering of global supply may result in higher uranium prices, the long-term impact on the global demand for uranium remains uncertain and may be negative. To the extent the war in Ukraine may adversely affect our business as discussed, it may also have the effect of heightening many of the other risks described in this Item 1A such as those relating to cyber-security, supply chain, inflationary and other volatility in prices of goods and materials, and the condition of the markets including as related to our ability to access additional capital, any of which could negatively affect our business. Because of the highly uncertain and dynamic nature of the war and related geopolitics, it remains difficult to estimate the impact of the Ukraine war on our business. China In light of continuing and increased tension in the relations between U.S. and China, it is difficult to assess and predict the impact that further developments may have, including sanctions, further supply disruption and increased prices of materials, and cyber-security threats. While we do not currently purchase goods and materials directly from China for our Lost Creek operations and ramp up, our suppliers of electronics and instrumentation components may purchase necessary materials from China, and/or our suppliers and we may be indirectly affected if the market for Chinese products is further disrupted by sanctions, countersanctions or other events. Additionally, if a decision is made to construct and develop Shirley Basin, the direct or indirect exposure to these market uncertainties may be greater or more direct. Item 1B. UNRESOLVED STAFF COMMENTS None. Item 3. LEGAL PROCEEDINGS None. Item 4. MINE SAFETY DISCLOSURE Our operations and other activities at Lost Creek are not subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). PART II Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Since July 24, 2008, Ur-Energy’s Common Shares have been listed for trading on the NYSE American exchange under the trading symbol “URG.” Since November 29, 2005, Ur-Energy’s Common Shares have been listed and posted for trading on the Toronto Stock Exchange under the trading symbol “URE.” Holders The authorized capital of Ur-Energy consists of an unlimited number of Common Shares and an unlimited number of Class A Preference Shares. As of March 1, 2023, we had 264,726,804 Common Shares issued and outstanding; no preferred shares are issued and outstanding. We estimate that we have approximately 7,825 beneficial holders of our Common Shares. The holders of the Common Shares are entitled to one vote per share at all meetings of our shareholders. The holders of Common Shares are also entitled to dividends, if and when declared by our Board and the distribution of the residual assets of the Company in the event of a liquidation, dissolution or winding up. Our Class A Preference Shares are issuable by the Board in one or more series and the Board has the right and obligation to fix the number of shares in, and determine the designation, rights, privileges, restrictions and conditions attaching to the shares of, each series. The rights of the holders of Common Shares will be subject to, and may be adversely affected by, the rights of the holders of any Class A Preference Shares that may be issued in the future. The Class A Preference Shares, may, at the discretion of the Board, be entitled to a preference over the Common Shares and any other shares ranking junior to the Class A Preference Shares with respect to the payment of dividends and distribution of assets in the event of liquidation, dissolution or winding up. Dividends To date, we have not paid any dividends on our outstanding Common Shares and have no current intention to declare dividends on the Common Shares in the foreseeable future. Any decision to pay dividends on our Common Shares in the future will depend upon our financial requirements to finance future growth, the general financial condition of the Company and other factors which our Board may consider appropriate in the circumstances. Recent Sales of Unregistered Securities During the fiscal years ended December 31, 2022 and 2021, we did not have any sales of securities in transactions that were not registered under the Securities Act. Issuer Purchases of Equity Securities The Company did not purchase its own equity securities during the fiscal year ended December 31, 2022. Item 6. RESERVED Item 5. MARKET FOR registrant’s COMMON EQUITY, RELATED STOCKHOLDER MATTERS and issuer purcHases of equity securities
Market Information
Since July 24, 2008, Ur-Energy’s Common Shares have been listed for trading on the NYSE American exchange under the trading symbol “URG.” The following table sets forth the price range per share and trading volume for the Common Shares:
| | | | | NYSE | | Common Shares | | Volume | High | Low | Quarter Ending | | US$ | 31-Mar-16 | 19,405,444 | 0.70 | 0.44 | 30-Jun-16 | 28,373,457 | 0.73 | 0.45 | 30-Sep-16 | 15,562,319 | 0.64 | 0.47 | 31-Dec-16 | 23,271,636 | 0.59 | 0.41 | | | | | 31-Mar-17 | 49,931,758 | 0.91 | 0.52 | 30-Jun-17 | 18,653,638 | 0.72 | 0.50 | 30-Sep-17 | 13,464,210 | 0.72 | 0.53 | 31-Dec-17 | 24,662,934 | 0.73 | 0.50 | | | | | January 1, 2018 to February 28, 2018 | 15,167,873 | 0.78 | 0.64 |
Since November 29, 2005, Ur-Energy’s Common Shares have been listed and posted for trading on the Toronto Stock Exchange under the trading symbol “URE.” The following table sets forth the price range per share and trading volume for the Common Shares:
| | | | | TSX | | Common Shares | | Volume | High | Low | Quarter Ending | | CDN$ | 31-Mar-16 | 4,531,828 | 0.98 | 0.61 | 30-Jun-16 | 4,164,964 | 0.92 | 0.60 | 30-Sep-16 | 2,301,377 | 0.82 | 0.63 | 31-Dec-16 | 4,330,226 | 0.78 | 0.55 | | | | | 31-Mar-17 | 10,638,938 | 1.19 | 0.70 | 30-Jun-17 | 2,432,867 | 0.97 | 0.67 | 30-Sep-17 | 2,437,686 | 0.90 | 0.67 | 31-Dec-17 | 4,731,380 | 0.93 | 0.62 | | | | | January 1, 2018 to February 28, 2018 | 2,326,642 | 0.98 | 0.80 |
Item 7. 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 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 accompanying audited consolidated financial statements and related notes. The financial statements have been prepared in accordance with US GAAP. Industry and Market Update The increased support for nuclear energy experienced over the past several years has been sustained as more governments understand it is a critical energy source to successfully address climate change. Growing numbers of countries are making commitments to net-zero emissions, including on more accelerated schedules than previously targeted. In the process, many nations, environmental groups and large companies are endorsing nuclear energy to meet such objectives, recognizing the safety, reliability, and economic advantages nuclear power presents. Supply-demand fundamentals also continue to strengthen with the supply gap widening as secondary inventories decline while projections are for sustained growth of nuclear power through traditional uses and the construction of advanced reactors of various types. Additionally, projections for sustained growth of nuclear power globally in coming years has incentivized investment in the fuel cycle industries, through legislative programs and private and industrial capital. In the U.S., in late 2020, Congress approved the appropriation of $75 million for the establishment of a new national uranium reserve through which the Department of Energy (“DOE”), National Nuclear Security Administration (“NNSA”) was directed to purchase domestically produced uranium. In June 2022, NNSA issued a solicitation for proposals to purchase from uranium producers qualified under the solicitation up to one million pounds U3O8. We were awarded a contract to supply 100,000 pounds of U3O8 at a price of $64.47 per pound. Several other U.S. uranium companies and the sole U.S. uranium convertor were also awarded contracts. Although the initial funding authorization and bid process were for one-time purchases, Congress is actively considering additional legislation and funding to support the domestic nuclear fuel cycle. The Biden Administration continues to prioritize climate change initiatives and its senior leaders, including DOE Secretary Granholm, have expressed an understanding that clean, carbon-free nuclear energy must be an integral part of those initiatives. Several pieces of federal legislation have been proposed which will support nuclear energy and the nuclear fuel cycle industries. We continue to see signs of increased bipartisan support for nuclear energy in Washington, including the passage of the Infrastructure Investment and Jobs Act (November 2021) which is designed to prevent the premature closure of nuclear power plants and extend the life of others. In addition, under the Inflation Reduction Act, a number of tax credits were authorized that further subsidize nuclear generated power and hydrogen production to put it on a level playing field with renewables. In response to the Inflation Reduction Act, several nuclear utilities are advancing efforts to renew licenses for extended periods, uprate power output, and adjust refueling cycles to minimize down time. Each of these activities will increase the demand for uranium over time. Proposed U.S. legislation this year includes efforts to further restrict or preclude imports from Russia; and establishment of an Executive Office for Nuclear Energy Policy to promote engagement with ally and partner nations to develop a civil nuclear export strategy and offset China and Russia’s growing influence on international nuclear energy development. Most recently, Senators Manchin, Risch and Barrasso attached a provision to the National Defense Authorization Act (“NDAA”) that proposes expansion of the Uranium Reserve Program. While this legislation did not proceed to either the NDAA or the Omnibus Bill as passed, efforts are ongoing to ban uranium imports from China and Russia, as well as to provide funding for HALEU that would include major support for domestic uranium production. The authorized capital of Ur-Energy consists of an unlimited number of Common Shares and an unlimited number of Class A Preference Shares. As of March 1, 2018, 145,616,297Common Shares are issued and outstanding and no preferred shares are issued and outstanding. We estimate that we have approximately 8,000 beneficial holders of our Common Shares. The holders of the Common Shares are entitled to one vote per share at all meetings of our shareholders. The holders of Common Shares are also entitled to dividends, if and when declared by our Board and the distribution of the residual assets of the company in the event of a liquidation, dissolution or winding up.
Our Class A Preference Shares are issuable by the directors in one or more series and the directors have the right and obligation to fix the number of shares in, and determine the designation, rights, privileges, restrictions and conditions attaching to the shares of each series. The rights of the holders of Common Shares will be subject to, and may be adversely affected by, the rights of the holders of any Class A Preference Shares that may be issued in the future. The Class A Preference Shares, may, at the discretion of the Board, be entitled to a preference over the Common Shares and any other shares ranking junior to the Class A Preference Shares with respect to the payment of dividends and distribution of assets in the event of liquidation, dissolution or winding up.
Shareholder Rights Plan
Ur-Energy maintains a shareholder rights plan (the “Rights Plan”) designed to encourage the fair and equal treatment of shareholders in connection with any take-over bid for the Company's outstanding securities. The Rights Plan is intended to provide the Board with adequate time to assess a take-over bid, to consider alternatives to a take-over bid as a means of maximizing shareholder value, to allow competing bids to emerge, and to provide our shareholders with adequate time to properly assess a take-over bid without undue pressure. The Rights Plan was last reconfirmed by shareholders at Ur-Energy’s annual and special meeting of shareholders on May 28, 2015.
Dividends
To date, we have not paid any dividends on our outstanding Common Shares and have no current intention to declare dividends on the Common Shares in the foreseeable future. Any decision to pay dividends on our Common Shares in the future will be dependent upon our financial requirements to finance future growth, the general financial condition of the Company and other factors which our Board may consider appropriate in the circumstances.
| | 49 | | Table of ContentsSecurities Authorized for Issuance under Equity Compensation Plans
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Globally, several countries including China, Japan, France, Germany and England are ramping up power plant construction, reactor life extensions and/or research activities. As a result of these and other developments in the U.S. and abroad, uranium price increases have been largely sustained over the past year. Spot market prices continue to experience volatility, but through 2022 per-pound prices continued in the upper $40s and $50s. While generally more stable than spot market prices, earlier increases to term pricing have been sustained. The Sprott Physical Uranium Trust continues to periodically put pressure on the spot price when it is a purchaser of additional inventory as permitted by its mandate. The short- and long-term worldwide implications of the Russian invasion of Ukraine remain difficult to predict as the war continues. In addition to the adverse economic and other effects felt beyond the borders of Ukraine, the war may result in impacts felt more directly by the nuclear fuel industries and uranium producers specifically. The imposition of sanctions on Russia by the U.S. and other countries has resulted in counter measures by Russia and may result in additional counter sanctions including the possible termination of exports of enriched uranium from Russia to the U.S. Most importantly, the ongoing conflict has drawn attention to the West’s dependence on Russian conversion and enrichment. The immediate consequence has been a shift from underfeeding to overfeeding by enrichers that has resulted in an approximate 20-24 million pound annual increase in spot U3O8 demand. It has also become apparent that Western utilities are committed to reducing their reliance on Russian nuclear fuel supply over the long term which has very positive implications for the U.S. uranium production industry. Logistics of shipping uranium from both Kazakhstan and Russia have been challenged by a lack of ocean carriers and insurance. Delays in shipment from Russia are being experienced in early 2023. Kazakhstan is also experiencing difficulties moving uranium through Russia and the port at St. Petersburg and has started testing the Trans-Caspian International Route as an alternative. Transportation issues have created uncertainty that Western utilities are said to becoming increasingly uncomfortable with and is leading many to seek security and certainty through diversity in their supply contracts. The following table sets forth certain summary information concerning our equity compensation plans as at December 31, 2017. Directors, officers, employees, and consultants are eligible to participate in the Option Plan. Directors and employees, including executive officers, are eligible to participate in the RSU Plan.
| | | | | Number of Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (4) | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (2) (C$) | Number of Common Shares Remaining for Future Issuance (Excluding Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights) (3) | Equity compensation plans approved by securityholders (1) | 16,479,920 | $ 0.70 | 639,424 | Equity compensation plans not approved by security-holders | - | - | - |
| | 50 | | (1)
| | Our shareholders have approved both the Ur-Energy Inc. Amended and Restated Stock Option Plan 2005, as amended, and the Ur-Energy Inc. Amended Restricted Share Unit Plan.
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| (2)
| | The exercise price represents the weighted exercise price of the 9,459,401 outstanding stock options under the Ur‑Energy Inc. Amended and Restated Stock Option Plan 2005.
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| (3)
| | Represents 48,050 Common Shares remaining available for issuance under the Ur-Energy Inc. Amended and Restated Stock Option Plan 2005 and 591,374 Common Shares available under the Ur-Energy Amended Restricted Share Unit Plan.
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| (4)
| | The warrants included represent only those which form a portion of compensation for certain consultants and our commercial lender.
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Recent Sales of Unregistered Securities
On August 19, 2014, we filed a universal shelf registration statement on Form S-3 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 securities, and rights to purchase our Common Shares and/or our senior and subordinated debt securities. The registration statement became effective September 12, 2014. The 12,921,000 Common Shares offered in the February 2016 financing were sold for $0.50 per share raising $5.7 million (net of issue costs of $0.8 million) under the shelf registration statement.
On May 27, 2016, we entered into an At Market Issuance Sales Agreement with MLV & Co. LLC and FBR Capital Markets & Co. 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. During 2017, we sold 1,536,169 Common Shares under the sales agreement at an average price of $0.76 per share for gross proceeds of $1.2 million. After deducting transaction fees and commissions and all other costs we received net proceeds of $1.1 million.
During the fiscal years ended December 31, 2017 and 2016, we did not have any sales of securities in transactions that were not registered under the Securities Act.
Table of ContentsIssuer Purchases of Equity Securities
| 2022 Developments Status of Lost Creek Operations Due to persistent low uranium prices, we continued to limit our production operations during 2022, capturing 325 pounds of U3O8 at our Lost Creek plant. Our last sale of produced inventory was in 2019 Q2. All sales made in 2020 were of purchased inventory. We made no sales of U3O8 in 2021 or in 2022. In 2022 H2, we secured sales agreements for deliveries of U3O8 beginning in 2023 and continuing through 2028. In December 2022, we announced the Company’s decision to immediately ramp up production at Lost Creek to levels sufficient to deliver into sales commitments totaling 600,000 pounds U3O8 annually beginning in 2024. Lost Creek Property – Great Divide Basin, Wyoming Lost Creek Operations Since commencement of operations in 2013, we have captured approximately 2.735 million pounds of U3O8 at Lost Creek through December 31, 2022. Following our reduction in production operations in 2020 Q3, we maintained controlled, reduced level production operations throughout 2022. The reduced operations have allowed us to sustain operating cost reductions at Lost Creek, while conducting preventative maintenance and optimizing processes in preparation for ramp up to full production rates. During 2022, we captured 325 pounds of U3O8 at our Lost Creek plant. We made no sales of U3O8 in 2022. Our construction and development programs in the second mine unit (MU2) continued throughout 2022. Development of the fourth header house in MU2 (HH 2‑4) progressed substantially with all wells installed. Surface construction is ongoing. Additionally, we are installing wells related to the fifth header house (HH 2‑5) and have ordered all necessary equipment to construct and equip the header house. Long-lead items for the sixth and seventh header houses in MU2 have been ordered. We completed the planned delineation drill program to assist with wellfield design of HHs 2-5 through 2-9. Together with our optimization of plant processes, these wellfield programs have significantly facilitated our 2023 return to production. The Wyoming winter of 2022-2023 has been particularly harsh, impeding certain of our planned construction activities at Lost Creek. Notwithstanding, because we implemented an advanced development program in late 2021 to enhance our ability to quickly return to production when our ramp-up decision occurred, we remain on track for return to timely production levels of approximately 600,000 pounds U3O8 annually. Lost Creek Regulatory Proceedings The first two mine units at Lost Creek (MU1 and MU2) have all permits necessary for our return to operations, including production resulting from the ongoing MU2 advance development program. We have received Wyoming Uranium Recovery Program (“URP”) approval of the amendment to the Lost Creek source material license to include recovery from the LC East Project (HJ and KM horizons) immediately adjacent to the Lost Creek Project and additional HJ horizons at the Lost Creek Project. This license approved access to six planned mine units in addition to the already licensed three mine units at Lost Creek. The approval also increased the license limit for annual plant production to 2.2 million pounds U3O8 which includes wellfield production of up to 1.2 million pounds U3O8 and toll processing up to one million pounds U3O8. Currently, we await only approval by the Wyoming Department of Environmental Quality, Land Quality Division (“LQD”) of the amendment to the Lost Creek permit to mine adding HJ and KM horizons at LC East and HJ mine units at Lost Creek. We anticipate the LQD review will be complete in 2023 H1. Our request for extension of our Lost Creek source material license, submitted in 2021, is currently in timely review by URP. The Company did not purchase its own equity securities during the fiscal year ended December 31, 2017.
Performance Graph
The following information in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the liabilities of Section 8 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such a filing.
The following graph illustrates the period from December 31, 2012 to December 31, 2017 and reflects the cumulative shareholder return of an investment in our Common Shares compared to the cumulative return of an investment in (a) the Russell 3000 Index, (b) the NYSE American Composite Index, and (c) the average of a peer group consisting of Denison Mines Corp., Uranium Energy Corp., Energy Fuels, Inc. and Westwater Resources, Inc. since December 31, 2012, assuming that $100 was invested and, where applicable, includes the reinvestment of dividends.
Sales Agreements and Ramp-up Decision During 2022 Q3, we completed a multi-year sales agreement with a leading U.S. nuclear utility to supply uranium produced from projects owned and operated by the Company’s U.S. subsidiaries, including Lost Creek. This initial agreement calls for the annual delivery of a base amount of 200,000 pounds of uranium concentrates over a six-year period beginning in the second half of 2023. Sale prices are anticipated to be profitable on a Company-wide, all-in cost basis and are escalated annually from the initial pricing in 2023. Subsequently, in Q4, we announced the amendment of this agreement to increase the annual delivery, starting in 2024, by 100,000 pounds U3O8 at the same pricing levels. The sales agreement permits the purchaser the customary election to flex the delivery quantity up or down by as much as ten percent. We completed an additional sales agreement in 2022 Q4 which calls for annual deliveries of 300,000 pounds U3O8 over a five-year period, beginning in 2024, together with the possibility of additional deliveries of up to 300,000 pounds U3O8 in 2029. Sale prices under this agreement are also anticipated to be profitable on a Company-wide, all-in cost basis and are escalated annually from initial pricing in 2024. In December 2022, we were awarded a contract to sell to the DOE NNSA uranium reserve 100,000 pounds of domestically produced U3O8 at a sales price of $64.47 per pound. That delivery was made in January 2023 and sales proceeds of $6.4 million were received shortly thereafter. Including the DOE NNSA sale, we anticipate selling 280,000 pounds at an average price of $61.89 for revenues of $17.3 million in 2023. As described, the multi-year sales agreements call for deliveries beginning in 2023 and continuing through 2028, with the possible additional delivery in 2029. Together, the 280,000 pounds to be sold in 2023 and the base amount of 600,000 pounds to be sold annually from 2024 – 2028, will provide total anticipated revenues to the Company of approximately $205 million. During 2022, hiring of staff and engagement of contractors steadily progressed for our planned development activities and, subsequent to our December 2022 decision to ramp-up Lost Creek production, recruitment and hiring for operations staff is ongoing. | | | | | | | | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | Ur-Energy Inc. | 100 | 168 | 111 | 92 | 74 | 92 | NYSE American Index | 100 | 103 | 104 | 91 | 98 | 113 | Russell 3000 | 100 | 131 | 145 | 143 | 157 | 187 | Peer Average | 100 | 84 | 70 | 36 | 38 | 43 |
Item 6. SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from our audited consolidated financial statements for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, and should be read in conjunction with those financial statements and the notes thereto. The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”). Reference should also be made to “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.”
Summary of Financial Condition
(Amounts in thousands of U.S. Dollars except per share data)
| | | | | | | As of December 31 | | 2017 | 2016 | 2015 | 2014 | 2013 | Working capital (deficiency) | 1,283 | (1,706) | (7,510) | (2,645) | (242) | Current assets | 9,168 | 6,506 | 5,713 | 9,346 | 10,432 | Total assets | 88,364 | 89,940 | 95,757 | 104,451 | 105,336 | Current liabilities | 7,885 | 8,212 | 13,223 | 11,991 | 10,674 | Long-term liabilities | 41,698 | 45,496 | 50,033 | 60,359 | 55,998 | Shareholders' equity | 38,781 | 36,232 | 32,501 | 32,101 | 38,664 |
| | | | | | | Year ended December 31 | | 2017 | 2016 | 2015 | 2014 | 2013 | Revenue | 38,368 | 27,305 | 41,877 | 29,349 | 7,616 | Net income (loss) for the year | 76 | (3,010) | (795) | (8,749) | (30,353) | | | | | | | Income (loss) per common share: Basic | 0.00 | (0.02) | (0.01) | (0.07) | (0.25) | Diluted | 0.00 | (0.02) | (0.01) | (0.07) | (0.25) | | | | | | | Cash dividends per common share | Nil | Nil | Nil | Nil | Nil |
No dividends were paid during these five years.
| | 52 | | Table of ContentsItem 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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Shirley Basin Project Our Shirley Basin Project stands construction ready, having received the source material license, permit to mine, plan of operations, and aquifer exemption for the project. These approvals represent the major permits required to begin construction of the Shirley Basin Project. Situated in an historic mining district, the project has existing access roads, power, waste disposal facility and shop buildings onsite. Delineation and exploration drilling were completed historically, and wellfield, pipeline and header house layouts are finalized. Additional, minor on-the-ground preparations have been completed since the authorizations were received. A drilling program at Shirley Basin is planned for 2023 H1 to complete the monitor well ring for the first mine unit. The Company plans three relatively shallow mining units at the project, where we have the option to build out a complete processing plant with drying facilities or a satellite plant with the ability to send loaded ion exchange resin to Lost Creek for processing. Currently, we are planning a satellite plant. As permitted and licensed, a complete processing facility at Shirley Basin is approved and is allowed to recover up to one million pounds U3O8 annually from the wellfield. The annual production of U3O8 from wellfield production and toll processing of loaded resin or yellowcake slurry will not exceed two million pounds equivalent of dried U3O8 product. The tailings facility at the Shirley Basin site is one of the few remaining facilities in the U.S. that is licensed by the NRC to receive and dispose of by-product waste material from other in situ uranium mines. We assumed operation of the byproduct disposal site in 2013 and continue to accept deliveries under several existing contracts. Research and Development Throughout 2022, we continued to pursue several research and development (“R&D”) projects with an objective to introduce new methods of cost-effective technology to our Lost Creek Project, and to Shirley Basin when it is constructed. Our R&D projects are at varying stages of development and include a new material for injection wells and related well installation process, for which we recently converted our provisional patent application with the U.S. Patent Office to a non-provisional patent application. Following receipt of WDEQ authorization to proceed with field testing the materials and engineering, Phase One field testing was successfully completed in 2022 Q3-Q4. Although the technology will not be used for production wells, if the technology is proven out, it will be used for injection wells which generally represent approximately 65% of the wells throughout wellfields designed with traditional “five-spot” recovery patterns. The proposed method utilizes lower-cost materials which are generally available, even during current supply chain challenges. Field tests demonstrated a reduction in drill rig time on injection wells of approximately 75% compared with conventional methods, which also reduces environmental impacts. It is anticipated that the cost savings from reduced drill rig time will be partially offset by the need for additional in-house labor. Based on testing to date, it is anticipated that as much as a 49% savings on well installation costs may be realized on injection wells. Phase Two testing will be initiated in 2023 Q2. We continue to progress work on engineering of an advanced water treatment system. Beyond water recycling gains already achieved with our industry-leading Class V circuit, the new system may allow an additional 90% reduction of disposed water. This project is in advanced-stage analyses and planning. The value of increasing the water recycling rate is an increased reduction in required wastewater disposal, and thus the need for multiple additional (and costly) deep disposal wells. An added benefit will be the recycling of the majority of bleed and process water which would have historically been disposed of as waste. As contemplated, the system will also provide enhanced water filtration of injection fluids which will allow for removal of existing and future header house filtration systems. Business Overview
The following discussion is designed to provide information that we believe 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 accompanying audited consolidated financial statements and related notes. The financial statements have been prepared in accordance with US GAAP.
Industry Update and Trends
The uranium industry continues to be characterized by persistently low pricing. In 2017, several uranium miners, including Lost Creek, implemented reductions in planned construction and development as well as lower rates of production operations. Both early and late in the year, announcements of such reductions were made by leading producers, including Cameco’s November 2017 plan to shut-in production at McArthur River, the world’s largest uranium mine for at least ten months in 2018. As discussed elsewhere in this report, we determined to proceed with a moderated level of development in Lost Creek’s second mine unit to initiate operations in only the first three header houses, while controlling annual production rates at a modest target of 250,000 to 300,000 pounds. Production at Lost Creek in 2017 totaled 265,391 pounds captured in the plant. While U.S. miners lowered production rates, foreign imports continued to dominate the U.S. market in 2017, with U.S. miners accounting for less than five percent of domestic uranium needs.
In response to the challenges of the market conditions, primary among them foreign imports to the U.S. emanating from state-sponsored producers in Russia, Kazakhstan and Uzbekistan, in January 2018, Ur-Energy USA and Energy Fuels Resources (USA) Inc. (Energy Fuels) initiated a trade action with the U.S. Department of Commerce pursuant to Section 232 of the Trade Expansion Act. We chose this statutory framework for relief because we recognized that the current imbalance in the U.S. uranium market has created a very real threat to our national security.
On January 16, 2018, we announced the filing of a Petition for Relief with the U.S. Department of Commerce under Section 232 of the Trade Expansion Act of 1962 (as amended) From Imports of Uranium Products that Threaten U.S. National Security. The Petition, which was filed jointly with Energy Fuels, describes how uranium and nuclear fuel from state-owned and state-subsidized enterprises in Russia, Kazakhstan, Uzbekistan, and China represent a threat to U.S. national security. The Petition seeks a remedy which will set a quota to limit imports of uranium into the U.S., effectively reserving 25% of the U.S. nuclear market for U.S. uranium production. Additionally, the Petition suggests implementation of a requirement for U.S. federal utilities and agencies to buy U.S. uranium in accordance with the Administration's Buy American Policy. There can be no certainty of the outcome of the Department of Commerce investigation or the recommendation of the Secretary of Commerce, and therefore the outcome of this process and its effects on the U.S. uranium market is uncertain
2017 Developments
Lost Creek Property – Great Divide Basin, Wyoming
Following receipt of the final regulatory authorization in October 2012, we commenced construction at Lost Creek. Construction included the plant facility and office building, installation of all process equipment, installation of two access roads, additional power lines and drop lines, deep disposal wells, construction of two
| | 53 | | Table of Contentsholding ponds, warehouse building, and drill shed building. In August 2013, the Company was given operational approval by the NRC and commenced production operation activities.
Production operations in MU1 within the HJ Horizon began on August 2, 2013 and, through December 31, 2017, 2,334,611 pounds of uranium have been captured from this mine unit, and an additional 38,875 pounds recovered from the first header house in MU2, which came online in August 2017.
All of the original planned wells and 13 header houses (“HHs”) in MU1 as well as one header house and the related wells in MU2 have been completed and were in operation at year end 2017. In January 2018, the second header house in MU2 came online; the third of three MU2 houses developed in 2017 will come online in Q1 2018. Additional work in MU2 had been completed earlier, allowing for submittal of the appropriate operating permits. The main trunkline which has been installed services the first five header houses, and the entirety of MU2 has been fenced. All of these activities will allow for a quick turn-around to production once market fundamentals change.
After more than four years of operations, MU1 still produced 226,516 pounds during 2017 with a yearly average head grade of 25 ppm. Together with the first of the MU2 production coming online in Q3, the annual average head grade for Lost Creek was 28 ppm. The lower head grade during this period of operation, as well as varying month-to-month grades, is a typical result as a mine matures and older operating patterns remain in the flow regime.
During 2017, the Company sold 780,000 pounds under contract at an average price of $49.09. From production, Lost Creek sold a total of 261,000 pounds U3O8 during 2017 at an average price of $48.81 per pound. The balance was purchased for resale, at an average price of $21.35 per pound. During 2017, 265,391 pounds of U3O8 were captured within the Lost Creek plant; 254,012 pounds U3O8 were packaged in drums; and 257,213 pounds U3O8 of drummed inventory were shipped from the Lost Creek processing plant to the converter. At December 31, 2017, inventory at the conversion facility was approximately 94,077 pounds U3O8.
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Corporate Organization and Financing Developments
Changes in Senior Leadership On June 2, 2022, Jeffrey T. Klenda, the Company’s Chairman and President retired. John W. Cash, who was named Chief Executive Officer and was appointed to serve as a member of the Board of Directors effective March 1, 2022, was elected as a Director at the Company’s annual shareholders meeting on June 2, 2022. Thereafter, the Board of Directors named Mr. Cash the Chairman of the Board. Following Mr. Klenda’s retirement, Mr. Cash assumed the role of President of the Company. Steven M. Hatten was promoted to the position of Ur-Energy Chief Operating Officer in 2022 Q4. Previously, Mr. Hatten served as the Company’s Vice President Operations, since 2011, and prior to that in senior engineering and management positions. Mr. Hatten has 30 years’ experience in uranium production with a strong background in ISR uranium design and operations. Before joining Ur-Energy in 2007, Mr. Hatten worked as a Project Engineer for Power Resources, Inc., as Manager Wellfield Operations for Rio Algom Mining Corp., and Operations Manager at Cameco’s Smith Ranch – Highland Facility. Equity Financing Subsequent to year-end, on February 21, 2023, we announced the closing of an underwritten public offering of 39,100,000 common shares and accompanying warrants to purchase up to 19,550,000 common shares, which includes the full exercise of the underwriters’ option to purchase up to 5,100,000 additional common shares and accompanying warrants to purchase up to 2,550,000 common shares, at a combined public offering price of $1.18 per common share and accompanying warrant. The warrants have an exercise price of $1.50 per whole common share and will expire three years from the date of issuance. The gross proceeds to the Company from the offering were approximately $46.1 million, before deducting the underwriting discounts and commissions and other estimated offering expenses payable by Ur-Energy. Casper Operations Headquarters Construction is progressing on a new multipurpose building at our Casper, Wyoming operations headquarters. In 2021 we purchased a new operations headquarters in Casper to serve our current and future Wyoming operations and mineral exploration and development projects. The three-acre site includes a fully furnished 14,000 sq. ft. office building, and a significant parking area for our operations rideshare and Casper staff vehicles. We are completing construction of a multi-purpose industrial facility, which will house both centralized construction activities and our shared services chemistry laboratory. We anticipate construction of the facility will be complete in 2023 H1. The additional building will allow us to construct header houses for Lost Creek and, when built and operational, Shirley Basin, for years to come. Building, wiring and automating header houses in Casper will provide numerous safety, environmental and financial advantages to our operations. Due to the distant and remote location of Lost Creek, our staff have been provided rideshare arrangements by the Company to consolidate the commuter vehicles required for the operation. We anticipate that the new facility will remove several of those vehicles from the routine daily commuter list with increased development and production operations at Lost Creek, and that the facility will similarly benefit the Shirley Basin Project when it is constructed and operating. Fewer miles traveled by our staff and fewer vehicles on the road equates to a significantly lower risk of accident or injury, a smaller carbon footprint for Lost Creek, and considerably lower vehicle and labor costs. COVID Pandemic COVID-19 (Coronavirus) (“COVID”) was declared a pandemic in March 2020. Since then, we have monitored state, federal, and public health guidance as it has evolved with respect to the safety and wellbeing of our staff and operations. We have experienced no material impact on operations as a result of precautions taken, including staff absences related to COVID. Lost Creek Regulatory Proceedings
After receiving notice of final operational clearance from the NRC, we commenced production activities at Lost Creek in August 2013. Subsequent to those final approvals, we have made necessary additional filings for approvals of ongoing operations at Lost Creek (e.g., wellfield development; authorizations related to the new deep disposal well; permits and authority for new Class V wells). In September 2014, we filed applications for amendment of all Lost Creek permits and licenses to include recovery from the KM horizon and LC East operations. In 2015, the BLM issued a notice of intent to complete an environmental impact statement for the application. The NRC is participating in this review as a cooperating agency. A permit amendment requesting approval to mine at the LC East Project and within the KM Horizon at the Lost Creek Project was also submitted to the WDEQ. Approval will include an aquifer exemption. At this time, all of those applications continue through the regulatory process, except we have recently withdrawn the application insofar as it relates to two of the eleven projected mine units – those for the KM Horizon at Lost Creek. This change should not delay the completion of the permitting process with respect to the LC East Project (nine mine units total). It is anticipated that permits and authorizations will be completed in 2018.
By the end of 2016, all general regulatory authorizations for Underground Injection Control (UIC) Class V wells were completed for Lost Creek. Following pre-operational analyses and final testing, final operational approvals were received from regulators in December 2016. These relatively shallow Class V wells, which are the first of their kind at an ISR uranium facility, allow for the onsite recirculation of up to 200 gpm of fresh permeate (i.e., clean water) from operations. The wells and the reverse osmosis (“RO”) system were brought online in early 2017 and were operational for much of the year. Site operators use the RO circuits, which were installed during initial construction of the plant, to process waste water into brine and permeate streams. The
| | 54 | | Table of Contentsbrine stream will continue to be disposed of in the UIC Class I deep wells while the clean, permeate stream will be injected into the UIC Class V wells. The system ultimately reduces injection requirements in our Class I deep disposal wells and extends the life of those valuable assets.
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Results of Operations Reconciliation of Non-GAAP measures with US GAAP financial statement presentation The U3O8 and cost per pound measures included in the following table 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. U3O8 Production and Ending Inventory | | Unit | | | 2020 | | | 2021 | | | 2022 | | | | | | | | | | | | | | | U3O8 Production | | | | | | | | | | | | | | | | | | | | | | | | | | Pounds captured | | lb | | | | 10,789 | | | | 251 | | | | 325 | | Pounds drummed | | lb | | | | 15,873 | | | | - | | | | - | | Pounds shipped | | lb | | | | - | | | | 15,873 | | | | - | | Pounds purchased | | lb | | | | 200,000 | | | | - | | | | 40,000 | | | | | | | | | | | | | | | | | | U3O8 Ending Inventory | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pounds | | | | | | | | | | | | | | | | In-process inventory | | lb | | | | 303 | | | | 1,069 | | | | 1,357 | | Plant inventory | | lb | | | | 15,873 | | | | - | | | | - | | Conversion inventory - produced | | lb | | | | 219,735 | | | | 267,049 | | | | 267,049 | | Conversion inventory - purchased | | lb | | | | 48,750 | | | | 16,741 | | | | 56,741 | | | | lb | | | | 284,661 | | | | 284,859 | | | | 325,147 | | | | | | | | | | | | | | | | | | Value | | | | | | | | | | | | | | | | In-process inventory | | $ | 000 | | | | - | | | | - | | | | - | | Plant inventory | | $ | 000 | | | | 463 | | | | - | | | | - | | Conversion inventory - produced | | $ | 000 | | | | 6,083 | | | | 7,488 | | | | 7,488 | | Conversion inventory - purchased | | $ | 000 | | | | 1,268 | | | | 435 | | | | 2,415 | | | | $ | 000 | | | | 7,814 | | | | 7,923 | | | | 9,903 | | | | | | | | | | | | | | | | | | | Cost per Pound | | | | | | | | | | | | | | | | | In-process inventory | | $/lb | | | | - | | | | - | | | | - | | Plant inventory | | $/lb | | | | 29.17 | | | | - | | | | - | | Conversion inventory - produced | | $/lb | | | | 27.68 | | | | 28.04 | | | | 28.04 | | Conversion inventory - purchased | | $/lb | | | | 26.01 | | | | 25.98 | | | | 42.56 | | | | $/lb | | | | 27.45 | | | | 27.81 | | | | 30.46 | | | | | | | | | | | | | | | | | | | Produced conversion inventory detail: | | | | | | | | | | | | | | | | | Ad valorem and severance tax | | $/lb | | | | 0.75 | | | | 0.59 | | | | 0.59 | | Cash cost | | $/lb | | | | 17.50 | | | | 18.60 | | | | 18.60 | | Non-cash cost | | $/lb | | | | 9.43 | | | | 8.85 | | | | 8.85 | | | | $/lb | | | | 27.68 | | | | 28.04 | | | | 28.04 | |
Shirley Basin Project
Baseline studies necessary for the permitting and licensing of the project commenced in 2014 and were completed in 2015. Subsequently, in December 2015, our application for a permit to mine was submitted to the WDEQ. While the Shirley Basin PEA contemplates that the Lost Creek processing facility may be utilized for the drying and packaging of uranium from Shirley Basin, which would mean we would only anticipate the need only for a satellite plant, 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.
In addition to the WDEQ application for permit to mine, work is well underway on other applications for all necessary authorizations to mine at Shirley Basin. We have worked cooperatively with others in our industry to assist with the development of the Wyoming “agreement state” program, by which the NRC will delegate its authority for source material licensure and other radiation safety issues to the WDEQ. We understand that the development of the Wyoming URP remains on schedule for full implementation and transition likely occurring in 2018. Based upon that timing, we currently anticipate submitting our application for a source material license for Shirley Basin to the State URP in 2018.
The Bootheel Project, LLC
In April 2017, the Management Committee of the Bootheel Project determined to continue the ownership and maintenance on the Bootheel property for the fiscal year ending March 31, 2018, which is the fiscal year end of The Bootheel Project, LLC. No additional exploration or development activities are expected at this time for 2018. Due to the continuing decline in the spot price of uranium combined with the reduction in minerals when the related lease was not renegotiated, the Company examined the valuation of the investment and determined that as a standalone investment, it had an insignificant value and was therefore fully impaired during 2016 resulting in a loss on investment of $1.1 million.
Excel Gold Project
In January 2018, we announced the acquisition of a gold exploration project in west-central Nevada, comprising 102 federal lode mining claims (approximately 2,100 acres) currently. The Excel Project is located within the Excelsior Mountains, in proximity to the Camp Douglas and Candelaria Mining Districts. We became aware of the mineral potential of this project area from exploration data contained within the large geologic database acquired as a part of our 2013 purchase of Pathfinder. Compiled over several decades of exploration work by major mining companies, the database contains valuable information on hundreds of mineral deposits and historical exploration and development programs in more than 20 states in the U.S. In this instance, we identified an exploration program in the area of the Excel Project which encountered high-grade gold and silver assays from trenching activities. Company geologists conducted geologic literature research and field examinations, resulting in the initiation of land acquisition activities in March 2017. Once a land position was obtained, rock sampling and geochemical soil sampling programs were conducted. We continue to review and analyze the assay results from the sampling programs, and are considering all alternatives to advance this new exploration project, including drilling the project, identifying a venture partner, or through a sale process.
Corporate Transactions and Financing Developments
During 2022 and 2021, we continued to operate Lost Creek at reduced production rates in response to the depressed state of the uranium markets. As a result, production rates at Lost Creek remained low during the past two years and no pounds were drummed in 2022 or 2021. Positive developments in the uranium markets continued to occur in 2022 and we were able to put in place new, multi-year, sales contracts. As previously announced, the Company made the decision to ramp up operations in 2023 and production rates are expected to increase throughout the year. As new production is added to inventory, the average cost per pound produced is likely to increase until production rates approach targeted levels. At the end of the 2022, we had 323,790 pounds of U3O8 at the conversion facility including 267,049 produced pounds at an average cost per pound of $28.04, and 56,741 purchased pounds at an average cost of $42.56 per pound. During 2022, we purchased 40,000 pounds U3O8 at $49.50 per pound, which increased the average cost per pound purchased as compared to 2021. The pounds were purchased with the intention of selling them to the U.S. DOE uranium reserve purchase program. In December 2022, we were notified by the DOE that our bid was accepted, and 100,000 pounds U3O8 were delivered to the DOE on January 31, 2023. Year Ended December 31, 2022, Compared to Year Ended December 31, 2021 The following table summarizes the results of operations for the years ended December 31, 2022, and 2021:
| | Year Ended December 31, | | | | 2022 | | | 2021 | | | Change | | | | | | | | | | | | Sales | | | 19 | | | | 16 | | | | 3 | | Cost of sales | | | (6,861 | ) | | | (7,000 | ) | | | 139 | | Gross loss | | | (6,842 | ) | | | (6,984 | ) | | | 142 | | | | | | | | | | | | | | | Operating costs | | | (12,952 | ) | | | (9,773 | ) | | | (3,179 | ) | Loss from operations | | | (19,794 | ) | | | (16,757 | ) | | | (3,037 | ) | | | | | | | | | | | | | | Net interest expense | | | (463 | ) | | | (733 | ) | | | 270 | | Warrant mark to market gain (loss) | | | 1,835 | | | | (5,998 | ) | | | 7,833 | | Foreign exchange gain (loss) | | | 27 | | | | (355 | ) | | | 382 | | Other income | | | 1,255 | | | | 905 | | | | 350 | | Net loss | | | (17,140 | ) | | | (22,938 | ) | | | 5,798 | | | | | | | | | | | | | | | Foreign currency translation adjustment | | | 123 | | | | 435 | | | | (312 | ) | Comprehensive loss | | | (17,017 | ) | | | (22,503 | ) | | | 5,486 | | | | | | | | | | | | | | | Loss per common share: | | | | | | | | | | | | | Basic | | | (0.08 | ) | | | (0.12 | ) | | | 0.04 | | Diluted | | | (0.08 | ) | | | (0.12 | ) | | | 0.04 | |
In May 2016, we entered into an At Market Issuance Sales Agreement with MLV & Co. LLC and FBR Capital Markets & Co. 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. During 2017, we sold 1,536,169 Common Shares under the sales agreement. In conjunction with filing for a renewed shelf registration statement in 2017, the At Market Issuance Sales Agreement was amended and remains in place. See discussion below under Material Changes in Financial Condition, Liquidity and Capital Resources.
Off Take Sales Agreements
As of December 31, 2017, we have multiple off take sales agreements with various U.S. utilities. These agreements were completed between 2012 and 2015, and now provide for deliveries between 2018 and 2021 as follows:
| | | 56 | SUMMARY OF OFF TAKE SALES AGREEMENTS
| Production Year
| Total Pounds Uranium Concentrates Contractually Committed
| 2018
| 470,000 pounds
| 2019
| 540,000 pounds
| 2020
| 390,000 pounds
| 2021
| 190,000 pounds
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Corporate Organization and Management
In September 2017, Kathy E. Walker was appointed to our Board. The appointment expanded the size of the Board to seven. Ms. Walker is the president and chief executive officer of Elm Street Resources Inc., an energy marketing company based in Paintsville, Kentucky. She brings more than 30 years’ experience in various energy-related business endeavors to our Board.
In January 2018, one of our founding directors, Paul Macdonell provided notice of his retirement from our Board after more than 13 years of service. Originally projected to become effective March 1, 2018, Mr. Macdonell has agreed to extend the effective date of his retirement.
In March 2017, reductions in workforce were implemented due to continuing depressed uranium market conditions. Eight employees were laid off, and several other employees were asked to change job responsibilities or carry additional responsibilities. Operations at Lost Creek proceeded uninterrupted. A further reduction in force was implemented in February 2018, in which nine employees were laid off, following our Board’s decision to defer any further development at Lost Creek while the uranium market remains at its current depressed levels. Because of the deferral of construction and development, the focus of the layoffs was on positions in the construction and development teams, with additional positions eliminated in departments where the absence of field work will affect workload. Additionally, several employees were asked to change job responsibilities and/or team assignments. We anticipate that Lost Creek operations, at the controlled levels of production will continue uninterrupted.
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Sales We had no U3O8 sales in 2022 or 2021. As previously announced, we put in place new, multi-year, sales contracts in 2022. We expect to realize revenues of $17.3 million from the sale of 280,000 pounds of U3O8 in 2023 through sales to the DOE and into the new term agreements. Deliveries in 2023 are expected to be made from existing conversion facility inventory. Cost of Sales Cost of sales included $6.9 million and $7.0 million of NRV adjustments for the years ended December 31, 2022, and 2021, respectively. Because of intentionally low production rates, inventory valuations, which include on-going production costs, were reduced by the NRV adjustments, effectively expensing the production costs to cost of sales during those years. Cost of sales in 2023 are expected to increase as the Company expects to deliver 280,000 pounds of U3O8 into the new sales contracts from existing conversion facility inventory. Because the average cost per pound produced is likely to increase until production rates approach targeted levels, the average cost per pound in inventory may increase during 2023, which could increase the average cost per pound sold. Gross Loss Including NRV cost of sales adjustments, the gross loss was $6.8 million and $7.0 million for the years ended December 31, 2022, and 2021, respectively. The Company anticipates returning to positive gross profits from uranium sales in 2023. However, the average cost per pound produced and added to inventory is likely to increase until production rates approach targeted levels. As a result, the average cost per pound sold and removed from inventory may increase as described above. Operating Costs The following table summarizes the operating costs for the years ended December 31, 2022, and 2021: (expressed in thousands of U.S. dollars)
| | Year Ended December 31, | | Operating Costs | | 2022 | | | 2021 | | | Change | | | | | | | | | | | | Exploration and evaluation | | | 1,769 | | | | 2,037 | | | | (268 | ) | Development | | | 4,686 | | | | 1,922 | | | | 2,764 | | General and administration | | | 6,037 | | | | 5,328 | | | | 709 | | Accretion | | | 460 | | | | 486 | | | | (26 | ) | | | | | | | | | | | | | | | | | 12,952 | | | | 9,773 | | | | 3,179 | |
Total operating costs increased $3.2 million in 2022. The increase was primarily related to expanded development activities intended to accelerate future ramp up activities at Lost Creek. Drilling and related supply costs accounted for $2.8 million of the increase. The remainder of the increase was primarily related to increased labor costs. Exploration and evaluation expense consists of labor and the associated costs of the exploration, evaluation, and regulatory departments, as well as land holding and exploration costs on properties that have not reached the development or operations stage. The $0.3 million decrease in 2022 was primarily due to the movement of the Vice President Regulatory Affairs into the Chief Executive Officer position. The Vice President position was not replaced. U3O8 Production Costs
During 2017, 265,391 pounds of U3O8 were captured within the Lost Creek plant. A total of 254,012 pounds were packaged in drums and 257,213 pounds of the drummed inventory were shipped to the conversion facility where 261,000 produced pounds were sold to utility customers. 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 | | 2017 Q4 | | 2017 Q3 | | 2017 Q2 | | 2017 Q1 | | 2017 YTD | | | | | | | | | | | | | | | | | | | | | Pounds captured | | lb | | | 67,982 | | | 52,812 | | | 65,257 | | | 79,340 | | | 265,391 | | Ad valorem and severance tax | | $000 | | $ | 160 | | $ | 119 | | $ | 227 | | $ | 241 | | $ | 747 | | Wellfield cash cost (1) | | $000 | | $ | 686 | | $ | 743 | | $ | 599 | | $ | 889 | | $ | 2,917 | | Wellfield non-cash cost (2) | | $000 | | $ | 574 | | $ | 730 | | $ | 780 | | $ | 776 | | $ | 2,860 | | Ad valorem and severance tax per pound captured | | $/lb | | $ | 2.35 | | $ | 2.25 | | $ | 3.48 | | $ | 3.04 | | $ | 2.81 | | Cash cost per pound captured | | $/lb | | $ | 10.09 | | $ | 14.07 | | $ | 9.18 | | $ | 11.20 | | $ | 10.99 | | Non-cash cost per pound captured | | $/lb | | $ | 8.44 | | $ | 13.82 | | $ | 11.95 | | $ | 9.78 | | $ | 10.78 | | | | | | | | | | | | | | | | | | | | | Pounds drummed | | lb | | | 60,461 | | | 48,336 | | | 70,833 | | | 74,382 | | | 254,012 | | Plant cash cost (3) | | $000 | | $ | 1,210 | | $ | 1,120 | | $ | 1,267 | | $ | 1,488 | | $ | 5,085 | | Plant non-cash cost (2) | | $000 | | $ | 493 | | $ | 494 | | $ | 491 | | $ | 491 | | $ | 1,969 | | Cash cost per pound drummed | | $/lb | | $ | 20.01 | | $ | 23.17 | | $ | 17.93 | | $ | 20.00 | | $ | 20.02 | | Non-cash cost per pound drummed | | $/lb | | $ | 8.15 | | $ | 10.20 | | $ | 6.93 | | $ | 6.61 | | $ | 7.75 | | | | | | | | | | | | | | | | | | | | | Pounds shipped to conversion facility | | lb | | | 73,367 | | | 36,797 | | | 74,406 | | | 72,643 | | | 257,213 | | Distribution cash cost (4) | | $000 | | $ | 48 | | $ | 24 | | $ | 26 | | $ | 47 | | $ | 145 | | Cash cost per pound shipped | | $/lb | | $ | 0.65 | | $ | 0.65 | | $ | 0.35 | | $ | 0.65 | | $ | 0.56 | | | | | | | | | | | | | | | | | | | | | Pounds purchased | | lb | | | - | | | 109,000 | | | 210,000 | | | 200,000 | | | 519,000 | | Purchase costs | | $000 | | $ | - | | $ | 2,196 | | $ | 4,870 | | $ | 4,015 | | $ | 11,081 | | Cash cost per pound purchased | | $/lb | | $ | - | | $ | 20.15 | | $ | 23.19 | | $ | 20.08 | | $ | 21.35 | | | | | | | | | | | | | | | | | | | | |
Notes:
| | 57 | | 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 expense and are not included in wellfield operating costs.
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| 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.
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| 3.
| | Plant cash costs include all plant operating costs and site overhead costs.
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Table of Contents | 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.
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In total, wellfield, plant and distribution cash costs were very consistent quarter on quarter during 2017. The respective cash costs per pound increased overall during the year primarily driven by decreasing levels of production.
Development expenses include costs not directly attributable to production activities, including wellfield construction, drilling, and development costs. It also includes costs associated with the Shirley Basin and Lucky Mc Projects, which are at a more advanced stage. The $2.8 million increase in 2022 was primarily related to drilling and supply costs for the development of Mine Unit 2 at Lost Creek and additional labor costs as we added more employees at the mine site. General and administration expenses relate to the administration, finance, investor relations, land, and legal functions, and consist principally of personnel, facility, and support costs. The $0.7 million increase in 2022 was primarily related to higher labor costs ($0.4 million), higher professional service costs ($0.2 million), and increases in stock compensation expenses ($0.1 million). Higher labor and stock compensation costs were largely due to overlapping costs related to the transition of the Chief Executive Officer position. Other Income and Expenses Net interest expense decreased $0.3 million in 2022 reflecting higher interest income received on our bank accounts and lower interest expense following the resumption of principal payments on the Company’s long-term loan. For the year ended December 31, 2022, the warrant liability decreased significantly due to all 2020 warrants being exercised before their expiry in August 2022 and changes in the factors associated with the related Black-Scholes calculations used to determine the warrant liability. The warrant liability revaluation resulted in a gain of $1.8 million in 2022 as compared to a loss of $6.0 million in 2021. As a result of the February 2021 underwritten public offering, Ur-Energy Inc. received approximately $13.9 million in net proceeds. Because the functional currency of Ur‑Energy Inc., the parent company, is Canadian dollars, the U.S. dollar funds were revalued into Canadian dollars, which resulted in a $0.4 million foreign exchange loss in 2021. The U.S. dollar funds were moved into the Company’s U.S. subsidiary company shortly after the underwritten public offering, which greatly reduced the magnitude of any subsequent revaluations. There was no similar foreign exchange loss in 2022. During March 2022, we sold a royalty interest related to Strata Energy’s Lance Uranium ISR Project for $1.3 million. There were no assets related to the royalty on our balance sheet, therefore the entire amount was recognized as other income. In 2021, we received notifications that our two Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans were forgiven. This was treated as a forgiveness of debt and a $903 thousand gain on debt forgiveness was recognized in other income. Earnings (loss) per Common Share The basic and diluted loss per common share was $0.08 and $0.12 for the years ended December 31, 2022, and 2021, respectively. The diluted loss per common share is equal to the basic loss per common share due to the anti-dilutive effect of all convertible securities in periods of loss. Liquidity and Capital Resources As of December 31, 2022, we had cash resources of $33.0 million, which was a decrease of $13.2 million from the $46.2 million balance on December 31, 2021. Cash resources consist of Canadian and U.S. dollar denominated deposit accounts and money market funds. During 2022, we generated $5.9 million from financing activities and used $18.1 million for operating activities, $0.7 million for investing activities, and increased restricted cash by $0.2 million. Ad valorem and severance taxes fluctuate based on pounds extracted and the related sales value of those pounds.
Wellfield cash costs in 2017 Q1 were somewhat elevated due to some non-recurring expenses and the annual labor bonus in Q1. They were again elevated in Q3 due to increased activity related to the development of MU2 but declined in Q4 as most of the drilling for the three planned header houses in MU2 was complete in Q3. The average cash cost per pound captured increased to $10.09 in 2017 Q4 and averaged $10.99 for the year, as compared to $6.66 in 2016. The increase was due to lower average production levels during the year. As previously discussed, production levels were deliberately maintained at levels sufficient to satisfy our expected contract sales in light of the depressed uranium market. Wellfield non-cash costs were relatively fixed until Q4 when a portion of the capitalized ARO costs became fully depreciated. The resulting non-cash cost per pound captured was $8.44 in Q4 and averaged $10.78 for the year, as compared to $5.70 in 2016. Again, the increase for the year was due to lower production levels.
Plant cash costs generally decreased during the year with the higher costs in 2017 Q1 being driven by the annual labor bonus. Despite the lower cash costs, the resulting cash cost per pound drummed increased to $20.01 in 2017 Q4 as a result of lower production and averaged $20.02 for the year, as compared to $10.87 in 2016. Plant non-cash costs did not change during the year. The non-cash cost per pound drummed increased to $8.15 in 2017 Q4 and averaged $7.75 for the year, as compared to $3.53 in 2016. The increase was again due to lower production rates.
With the exception of 2017 Q4, distribution costs decreased during the year, as did pounds shipped. The resulting cash cost per pound shipped in 2017 Q4 increased to $0.65 and averaged $0.56 per pound for the year, as compared to $0.63 in 2016. Distribution costs are closely tied to volume, and the resulting cash cost per pound did not change significantly.
| | 58 | | Table of ContentsU3O8 Sales and Cost of Sales
| | | | | | | | | | | | | | | | | | | Sales and cost of sales | | Unit | | 2017 Q4 | | 2017 Q3 | | 2017 Q2 | | 2017 Q1 | | 2017 YTD | | | | | | | | | | | | | | | | | | | | | Pounds sold | | lb | | | - | | | 289,000 | | | 241,000 | | | 250,000 | | | 780,000 | | U3O8 sales | | $000 | | $ | - | | $ | 11,674 | | $ | 11,797 | | $ | 14,819 | | $ | 38,290 | | Average contract price | | $/lb | | $ | - | | $ | 40.39 | | $ | 48.95 | | $ | 59.28 | | $ | 49.09 | | Average price per pound sold | | $/lb | | $ | - | | $ | 40.39 | | $ | 48.95 | | $ | 59.28 | | $ | 49.09 | | | | | | | | | | | | | | | | | | | | | U3O8 cost of sales (1) | | $000 | | $ | 376 | | $ | 11,157 | | $ | 6,573 | | $ | 6,295 | | $ | 24,401 | | Ad valorem and severance tax cost per pound sold | | $/lb | | $ | - | | $ | 3.15 | | $ | 4.26 | | $ | 4.00 | | $ | 3.60 | | Cash cost per pound sold | | $/lb | | $ | - | | $ | 29.11 | | $ | 31.54 | | $ | 26.12 | | $ | 29.51 | | Non-cash cost per pound sold | | $/lb | | $ | - | | $ | 17.52 | | $ | 19.13 | | $ | 15.48 | | $ | 17.92 | | Cost per pound sold - produced | | $/lb | | $ | - | | $ | 49.78 | | $ | 54.93 | | $ | 45.60 | | $ | 51.03 | | Cost per pound sold - purchased | | $/lb | | $ | - | | $ | 20.15 | | $ | 23.19 | | $ | 20.08 | | $ | 21.35 | | Average cost per pound sold | | $/lb | | $ | - | | $ | 38.61 | | $ | 27.26 | | $ | 25.18 | | $ | 31.28 | | | | | | | | | | | | | | | | | | | | | U3O8 gross profit | | $000 | | $ | (376) | | $ | 517 | | $ | 5,224 | | $ | 8,524 | | $ | 13,889 | | Gross profit per pound sold | | $/lb | | $ | - | | $ | 1.78 | | $ | 21.68 | | $ | 34.10 | | $ | 17.81 | | Gross profit margin | | % | | | 0.0% | | | 4.4% | | | 44.3% | | | 57.5% | | | 36.3% | | | | | | | | | | | | | | | | | | | | | Ending Inventory Balances | | | | | | | | | | | | | | | | | | | Pounds | | | | | | | | | | | | | | | | | | | In-process inventory | | lb | | | 26,796 | | | 22,306 | | | 19,010 | | | 28,164 | | | | | Plant inventory | | lb | | | 9,043 | | | 21,948 | | | 10,446 | | | 14,019 | | | | | Conversion facility inventory | | lb | | | 94,077 | | | 17,813 | | | 160,094 | | | 113,528 | | | | | Total inventory | | lb | | | 129,916 | | | 62,067 | | | 189,550 | | | 155,711 | | | | | | | | | | | | | | | | | | | | | | | | Total cost | | | | | | | | | | | | | | | | | | | In-process inventory | | $000 | | $ | 315 | | $ | 221 | | $ | 352 | | $ | 712 | | | | | Plant inventory | | $000 | | $ | 369 | | $ | 824 | | $ | 479 | | $ | 670 | | | | | Conversion facility inventory | | $000 | | $ | 3,831 | | $ | 675 | | $ | 6,620 | | $ | 4,379 | | | | | Total inventory | | $000 | | $ | 4,515 | | $ | 1,720 | | $ | 7,451 | | $ | 5,761 | | | | | | | | | | | | | | | | | | | | | | | | Cost per pound | | | | | | | | | | | | | | | | | | | In-process inventory | | $/lb | | $ | 11.76 | | $ | 9.92 | | $ | 18.46 | | $ | 25.28 | | | | | Plant inventory | | $/lb | | $ | 40.81 | | $ | 37.53 | | $ | 45.85 | | $ | 47.79 | | | | | Conversion facility inventory | | $/lb | | $ | 40.72 | | $ | 37.89 | | $ | 41.35 | | $ | 38.57 | | | | |
Note:
| 1.
| | Costs of sales include all production costs (notes 1, 2, 3 and 4 in the previous Production and Production Costs table) adjusted for changes in inventory values.
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There were no U3O8 sales in Q4. For the year, we sold 780,000 pounds all of which were under contract at an average price per pound of $49.09 for total uranium sales of $38.3 million. There were no spot sales during the year. A total of 261,000 pounds were sold from Lost Creek production. Additionally, we sold 519,000 purchased pounds into our contractual obligations.
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Operating activities used $18.1 million of cash in 2022. We received $1.3 million from the sale of a royalty interest and $0.2 million of interest income. We spent $3.9 million on production related cash costs and $2.0 million to purchase uranium. Operating cash costs consumed $11.3 million of cash, and we paid $0.7 million in interest payments on our state bond loan. Working capital and other items, including a severance payment to the former Chief Executive Officer, used $1.7 million of cash. Investing activities used $0.7 million of cash in 2022. We spent $0.4 million on the Casper, Wyoming shop and lab building currently under construction, $0.2 million on plant related equipment at Lost Creek, and $0.1 million on IT equipment. Financing activities provided $5.9 million of cash in 2022. We received net proceeds of $3.7 million through our At Market facility, $2.9 million from the exercise of warrants, and $0.9 million from the exercise of stock options. We spent $1.3 million on principal payments for our state bond loan and $0.2 million RSU redemption related costs. Wyoming State Bond Loan On October 23, 2013, we closed a $34.0 million Sweetwater County, State of Wyoming, Taxable Industrial Development Revenue Bond financing program loan (“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 was to be payable in 28 quarterly installments, which commenced January 1, 2015. The State Bond Loan is secured by all the assets of the Lost Creek Project. As of December 31, 2022, the balance of the State Bond Loan was $11.1 million. On October 1, 2019, the Sweetwater County Commissioners and the State of Wyoming approved an eighteen-month deferral of principal payments beginning October 1, 2019. On October 6, 2020, the State Bond Loan was again modified to defer principal payments for an additional eighteen months. Quarterly principal payments were resumed on October 1, 2022, and the last payment will be due on October 1, 2024. Universal Shelf Registration and At Market Facility On May 15, 2020, we filed a universal shelf registration statement on Form S-3 with the SEC through which 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 securities, and rights to purchase our common shares and/or senior and subordinated debt securities. The registration statement became effective May 27, 2020, for a three-year period. On May 29, 2020, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley Securities”), relating to our Common Shares. On June 7, 2021, we amended and restated the Sales Agreement to include Cantor Fitzgerald & Co. (“Cantor,” and together with B. Riley Securities, the “Agents”) as a co-agent. Under the Sales Agreement, as amended, 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 agents for aggregate sales proceeds of up to $50 million. On November 23, 2021, we filed a new universal shelf registration statement on Form S-3 with the SEC through which 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 securities, and rights to purchase our common shares and/or senior and subordinated debt securities. The registration statement became effective December 17, 2021, for a three-year period. | | 59 | | Table of ContentsIn 2017 Q4, our cost of sales totaled $0.3 million. This is the result of lower of cost or net realizable value inventory adjustments which are included in our cost of sales, recorded during the quarter. For the year, our average cost per pound sold was $31.28, as compared to $28.20 in 2016. In 2017, we purchased 519,000 pounds at an average price of $21.35 per pound. The average cost of the 261,000 pounds we sold from production was $51.03 per pound. As previously discussed, our produced costs per pound were substantially higher than in 2016 due to lower volumes. This, combined with the write down of $2.6 million from lower of cost or net realizable value adjustments, increased our cost of produced product sold by $10.34 per pound.
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On December 17, 2021, we entered into an amendment to the Sales Agreement (“Amendment No. 1” and together with the Sales Agreement, the “Amended Sales Agreement”) with the Agents to, among other things, reflect the new registration statement under which we may sell up to $50 million from time to time through or to the Agents under the Amended Sales Agreement, in addition to amounts previously sold under the Sales Agreement. As of the date of this annual report, we have issued and sold 2,622,930 common shares having aggregate gross proceeds of approximately $4.3 million since December 17, 2021, under the Amended Sales Agreement. In 2022, we utilized the Amended Sales Agreement for gross proceeds of $3.8 million. 2020 Registered Direct Offering On August 4, 2020, the Company closed a $4.68 million registered direct offering of 9,000,000 common shares and accompanying one-half common share warrants to purchase up to 4,500,000 common shares, at a combined public offering price of $0.52 per common share and accompanying warrant, with gross proceeds to the Company of $4.68 million. After fees and expenses of $0.4 million, net proceeds to the Company were $4.3 million. The warrants were all exercised prior to expiry in August 2022. 2021 Underwritten Public Offering On February 4, 2021, the Company closed a $15.2 million underwritten public offering of 16,930,530 common shares and accompanying one-half common share warrants to purchase up to 8,465,265 common shares, at a combined public offering price of $0.90 per common share and accompanying one-half common share warrant. The gross proceeds to Ur‑Energy from this offering were approximately $15.2 million. After fees and expenses of $1.3 million, net proceeds to the Company were approximately $13.9 million. The warrants expire in February 2024. Liquidity Outlook As of March 1, 2023, our unrestricted cash position was $79.0 million. During 2022, we were able to put in place new, multi-year, sales contracts and expect to realize revenues of $17.3 million from the sale of 280,000 pounds of uranium in 2023. We had 323,790 pounds of conversion facility inventory on December 31, 2022. Deliveries into the new contracts in 2023 are expected to be made from existing conversion facility inventory. We delivered 100,000 pounds to the DOE NNSA on January 31, 2023. As of March 1, 2023, we had 223,790 pounds U3O8 in our conversion facility inventory. Looking Ahead Greater acceptance of nuclear energy’s role in clean energy policies, renewed investor interest, increasing concerns over the possibility of supply shortages and disruptions, and a multitude of other factors have all contributed to resurging demand for secure domestically produced uranium. Increasing demand in 2022 was evidenced by increased contracting activity and higher uranium pricing, with average spot and long-term prices increasing 13% and 22%, respectively. Uranium prices exceeded $50 per pound on multiple occasions during the year and again in January and February 2023. On a combined basis, the total average cost per pound sold of $31.28 was composed of $1.20 per pound for ad valorem and severance taxes, $24.08 per pound of cash costs from production and purchases, and $6.00 per pound of non-cast costs related to production.
The gross profit from uranium sales for 2017 was $13.9 million, which represents a gross profit margin of approximately 36%. This compares to a gross margin of $6.3 million or 29% in 2016.
At the end of the year, we had approximately 94,077 pounds of U3O8 at the conversion facility at an average cost per pound of $40.72. The following table shows the average cost per pound of the conversion facility pounds.
| | | | | | | | | | | | | | | Ending Conversion Facility Inventory Cost Per Pound Summary | | Unit | 31-Dec-17 | | 30-Sep-17 | | 30-Jun-17 | 31-Mar-17 | Ad valorem and severance tax cost per pound | | $/lb | | $ | 1.65 | | $ | 2.41 | | $ | 2.82 | | $ | 2.74 | Cash cost per pound | | $/lb | | $ | 25.31 | | $ | 22.47 | | $ | 24.62 | | $ | 23.48 | Non-cash cost per pound | | $/lb | | $ | 13.76 | | $ | 13.01 | | $ | 13.91 | | $ | 12.35 | Total cost per pound | | $/lb | | $ | 40.72 | | $ | 37.89 | | $ | 41.35 | | $ | 38.57 |
Generally, the cost per pound in ending inventory at the conversion facility increased during the year. The increase was directly related to the lower production figures as production costs were relatively consistent, or decreasing slightly, during the year.
Increasing demand for domestic uranium and higher pricing enabled us to obtain two new off-take sales contracts in 2022 with deliveries beginning in 2023. Armed with these new contracts and the prospects of obtaining additional sales commitments, we made the decision to ramp up production operations in 2023, taking advantage of the advanced preparations and development work already begun in our fully permitted MU2. Work continues today, although unusually harsh winter conditions have hindered our efforts. Nonetheless, new production of uranium is expected to commence in late Q1 or early Q2 of this year. Deliveries in 2023 are anticipated to be made from our existing conversion facility inventory. New production will be delivered to the conversion facility in quantities sufficient to meet 2024 delivery requirement as they occur. In 2021 Q4, we commenced a drilling and construction program to further heighten our readiness to return to production operations at Lost Creek. The program was supplemented by purchases of mid- and long-lead items for additional development in MU2. Currently, the construction of the next header house (HH2-4) is nearly complete. Ordering of materials for HH2-5 is complete and long-lead items for HH2-6 and HH2-7 have been ordered. Staffing at Lost Creek has been increased to levels sufficient to commence operations when production resumes. Our current and planned development initiatives include further development work in the first two mine units, followed by the ten additional mining areas as defined in the Lost Creek Report. The Lost Creek facility now has the constructed and licensed capacity to process up to 2.2 million pounds of U3O8 per year and sufficient mineral resources to feed the processing plant for many years to come. Construction of a shop and lab building continues at our operations headquarters in Casper, Wyoming. The building is adjacent to our recently acquired office building. The shop and lab will be used to consolidate our header house construction and lab analysis activities in support of the Lost Creek operation, and to support the development and future operation of the Shirley Basin Project. With all major permits and authorizations for our Shirley Basin Project now in hand, we stand ready to construct the mine when market conditions support the placement of new off-take sales contracts for the project. Our cash position as of March 1, 2023, was $79.0 million. As noted above, we have sufficient conversion facility inventory on hand to meet 2023 deliveries and anticipate selling 280,000 pounds at an average price of $61.89 for proceeds of $17.3 million this year. We will continue to closely monitor the uranium market, the impact and possible expansion of the uranium reserve program, and other developments in the markets or from Congress, which may positively affect the uranium production industry and provide the opportunity to put in place additional off-take contracts at pricing sufficient to justify expanded production. As always, we will focus on maintaining safe and compliant operations while continuing to enhance and leverage our production operations. The following table presents and annual comparison of a portion of the above information for the years ended December 31, 2017, 2016 and 2015:
| | | | | | | | | | | | Comparison of annual results | | Unit | | 2017 | | 2016 | | 2015 | Sales | | | | | | | | | | | | Sales per financial statements | | $000 | | $ | 38,371 | | $ | 27,297 | | $ | 41,877 | Less disposal fees | | $000 | | $ | (80) | | $ | (20) | | $ | (69) | Less gain from sale of deliveries under contract | $000 | | $ | - | | $ | (5,086) | | $ | - | U3O8 sales | | $000 | | $ | 38,291 | | $ | 22,191 | | $ | 41,808 | | | | | | | | | | | | | Cost of sales | | | | | | | | | | | | Ad valorem & severance taxes | $000 | | $ | 747 | | $ | 1,523 | | $ | 1,604 | Wellfield costs | $000 | | $ | 5,777 | | $ | 6,645 | | $ | 8,291 | Plant and site costs | $000 | | $ | 7,054 | | $ | 8,079 | | $ | 9,202 | Distribution costs | $000 | | $ | 145 | | $ | 365 | | $ | 494 | Inventory change | $000 | | $ | (405) | | $ | (763) | | $ | 1,823 | Cost of sales - produced | $000 | | $ | 13,318 | | $ | 15,849 | | $ | 21,414 | Cost of sales - purchased | $000 | | $ | 11,081 | | $ | - | | $ | 7,878 | Total cost of sales | $000 | | $ | 24,399 | | $ | 15,849 | | $ | 29,292 | | | | | | | | | | | | | Gross profit from U3O8 sales | | $000 | | $ | 13,892 | | $ | 6,342 | | $ | 12,516 | | | | | | | | | | | | | Production | | | | | | | | | | | | Pounds extracted | | lb | | | 265,391 | | | 538,004 | | | 783,547 | Pounds drummed | | lb | | | 254,012 | | | 561,094 | | | 727,245 | Pounds shipped | | lb | | | 257,213 | | | 579,179 | | | 717,125 | | | | | | | | | | | | | Pounds sold - produced | | lb | | | 261,000 | | | 562,000 | | | 725,000 | Pounds sold - purchased | | lb | | | 519,000 | | | - | | | 200,000 | | | | | | | | | | | | | Per Pound Sold | | | | | | | | | | | | Average contract price | | $/lb | | $ | 49.09 | | $ | 41.38 | | $ | 49.42 | Average spot price | | $/lb | | $ | - | | $ | 30.75 | | $ | 36.18 | Average price | | $/lb | | $ | 49.09 | | $ | 39.49 | | $ | 45.20 | | | | | | | | | | | | | Ad valorem and severance tax | $/lb | | $ | 3.60 | | $ | 2.86 | | $ | 3.14 | Cash cost | | $/lb | | $ | 29.51 | | $ | 17.15 | | $ | 16.27 | Non-cash cost | | $/lb | | $ | 17.92 | | $ | 8.19 | | $ | 10.12 | Cost - Produced | | $/lb | | $ | 51.03 | | $ | 28.20 | | $ | 29.53 | Cost - Purchased | | $/lb | | $ | 21.35 | | $ | - | | $ | 39.39 | | | | | | | | | | | | | Average cost | | $/lb | | $ | 31.28 | | $ | 28.20 | | $ | 31.67 | | | | | | | | | | | | | Gross profit (1) | | $/lb | | $ | 17.81 | | $ | 11.29 | | $ | 13.53 |
Outstanding Share Data As of December 31, 2022, and December 31, 2021, the Company’s capital consisted of the following: Share Data | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | Common shares | | | 224,699,621 | | | | 216,782,694 | | | | | | | | | | | Shares issuable upon the exercise or redemption of: | | | | | | | | | Stock options | | | 8,574,904 | | | | 10,064,024 | | Restricted share units | | | 305,530 | | | | 1,011,660 | | Warrants | | | 8,365,265 | | | | 12,184,265 | | | | | | | | | | | | | | 241,945,320 | | | | 240,042,643 | |
Off Balance Sheet Arrangements We have not entered 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. Financial Instruments and Other Instruments As of December 31, 2022, and December 31, 2021, the Company’s cash, cash equivalents, and restricted cash are composed of: (expressed in thousands of U.S. dollars) Cash, Cash Equivalents, and Restricted Cash | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | Cash and cash equivalents | | | 33,003 | | | | 46,189 | | Restricted cash | | | 8,137 | | | | 7,966 | | | | | | | | | | | | | | 41,140 | | | | 54,155 | |
Quarterly financial data (unaudited and expressed in thousands except per share data)
| | Quarter Ended | | | | 2022 | | | 2021 | | | | 12/31 | | | 9/30 | | | 6/30 | | | 3/31 | | | 12/31 | | | 9/30 | | | 6/30 | | | 3/31 | | | | | | | | | | | | | | | | | | | | | | | | | | | Sales | | | - | | | | - | | | | 19 | | | | - | | | | - | | | | 9 | | | | 7 | | | | - | | Net income (loss) | | | (4,897 | ) | | | (4,962 | ) | | | (353 | ) | | | (6,928 | ) | | | 421 | | | | (9,108 | ) | | | (6,879 | ) | | | (7,372 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income (loss) per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic | | | (0.02 | ) | | | (0.03 | ) | | | - | | | | (0.03 | ) | | | - | | | | (0.04 | ) | | | (0.04 | ) | | | (0.04 | ) | Diluted | | | (0.02 | ) | | | (0.03 | ) | | | - | | | | (0.03 | ) | | | - | | | | (0.04 | ) | | | (0.04 | ) | | | (0.04 | ) |
Note:
| | 62 | | 1.
| | For comparative purposes, gross profit and gross profit per pound for the year 2016 excludes the profit recognized on the assignment of deliveries.
|
In 2017, our production levels decreased as we reacted to a continuing weak market. Based on spot prices in effect, we were able to purchase uranium at prices that were less than our cost of production. We therefore felt that rather than reducing our resources, it was prudent to purchase pounds to complement our current production, which was based on existing wellfield assets in MU1 as well as a limited number of new header houses in MU2. The above analysis shows that we reduced some of our costs reflecting the reduced production, but not at the same rate we decreased production. This is consistent with what we have previously reported, in that most of our costs are fixed so that when our production increases, our cost per pound declines and where production is scaled back, as in 2017, our cost per pound will increase. Compounding this is the fact that as our cost per pound increases, the carrying cost of our inventories may be subject to lower of cost or net realizable value adjustments which are reflected in our cost of goods sold and push the cost per pound of produced product sold higher. As we allocate these adjustments to taxes, cash costs and non-cash costs, all cost types show increases. Probably the most profound is in non-cash costs as all of our depletion and amortization expenses are calculated on a straight-line basis per SEC guidelines so if production is decreased by half, the related cost per pound will double. As many of our costs are fixed costs, we are not able to reduce their impact on the overall cost per pound of our products.
As discussed previously, we are continuously surveying the market for opportunities to create future, long-term, contracts at favorable rates. However, long-term pricing remained weak in 2017 and we did not enter into any new contracts. But as previously shown, the Company maintains a good book of contracts into 2021. The average contract price in 2017 was close to $50 per pound for the 780,000 pounds we sold under contract.
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.
| | | | | | | | | | | | | | | | | | Average Price Per Pound Sold Reconciliation | | Unit | | 2017 Q4 | | 2017 Q3 | | 2017 Q2 | | 2017 Q1 | | 2017 YTD | | | | | | | | | | | | | | | | | | | Sales per financial statements | | $000 | | $ | 26 | | $ | 11,693 | | $ | 11,821 | | $ | 14,828 | | $ | 38,368 | Less disposal fees | | $000 | | $ | (26) | | $ | (18) | | $ | (24) | | $ | (9) | | $ | (77) | U3O8 sales | | $000 | | $ | - | | $ | 11,675 | | $ | 11,797 | | $ | 14,819 | | $ | 38,291 | | | | | | | | | | | | | | | | | | | Pounds sold - produced | | lb | | | - | | | 180,000 | | | 31,000 | | | 50,000 | | | 261,000 | Pounds sold - purchased | | lb | | | - | | | 109,000 | | | 210,000 | | | 200,000 | | | 519,000 | Total pounds sold | | lb | | | - | | | 289,000 | | | 241,000 | | | 250,000 | | | 780,000 | | | | | | | | | | | | | | | | | | | Average price per pound sold | | $/lb | | $ | - | | $ | 40.40 | | $ | 48.95 | | $ | 59.28 | | $ | 49.09 |
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 instruction for a title transfer to the customer. Revenue is recognized once a title transfer of the U3O8 is confirmed by the conversion facility.
| Table of Contents | 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 $0.6 million is covered by the Canada Deposit Insurance Corporation, the Securities Investor Protection Corporation, or the U.S. Federal Deposit Insurance Corporation, leaving approximately $40.6 million at risk on December 31, 2022, 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 December 31, 2022. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. As of December 31, 2022, the Company’s current financial liabilities consisted of accounts payable and accrued liabilities of $1.2 million, and the current portion of notes payable of $5.4 million. As of December 31, 2022, we had $33.0 million of cash and cash equivalents. Item 7A. 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 because 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 financings. Our objectives for managing our cash and cash equivalents are to always maintain sufficient funds on hand to meet day-to-day requirements and to place any amounts that are considered more than day-to-day requirements on short-term deposit with the Company’s financial institutions to earn interest. Currency risk As of December 31, 2022, we maintained a balance of approximately $2.0 million Canadian dollars. The funds will be used to pay Canadian dollar expenses and are considered to be a low currency risk to the Company. A hypothetical 10% weakening in the exchange rate of the Canadian dollar to the U.S. dollar as of December 31, 2022 would not have a material effect on our results of operations, financial position, or cash flows. Commodity Price Risk The Company is subject to market risk related to the market price of uranium. Future sales would be impacted by both spot and long-term uranium price fluctuations. Historically, uranium prices have been subject to fluctuation, and the price of uranium has been and will continue to be affected by numerous factors beyond our control, including the demand for nuclear power, political and economic conditions, governmental legislation in uranium producing and consuming countries, and production levels and costs of production of other producing companies. The average spot market price was $50.85 per pound as of March 1, 2023. | | | | | | | | | | | | | | | | | | Total Cost Per Pound Sold Reconciliation 1 | | Unit | | 2017 Q4 | | 2017 Q3 | | 2017 Q2 | | 2017 Q1 | | 2017 YTD | | | | | | | | | | | | | | | | | | | Ad valorem & severance taxes | | $000 | | $ | 160 | | $ | 119 | | $ | 227 | | $ | 241 | | $ | 747 | Wellfield costs | | $000 | | $ | 1,260 | | $ | 1,473 | | $ | 1,379 | | $ | 1,665 | | $ | 5,777 | Plant and site costs | | $000 | | $ | 1,703 | | $ | 1,614 | | $ | 1,761 | | $ | 1,979 | | $ | 7,057 | Distribution costs | | $000 | | $ | 48 | | $ | 24 | | $ | 26 | | $ | 47 | | $ | 145 | Inventory change | | $000 | | $ | (2,795) | | $ | 5,731 | | $ | (1,690) | | $ | (1,652) | | $ | (406) | Cost of sales - produced | | $000 | | $ | 376 | | $ | 8,961 | | $ | 1,703 | | $ | 2,280 | | $ | 13,320 | Cost of sales - purchased | | $000 | | $ | — | | $ | 2,196 | | $ | 4,870 | | $ | 4,015 | | $ | 11,081 | Total cost of sales | | $000 | | $ | 376 | | $ | 11,157 | | $ | 6,573 | | $ | 6,295 | | $ | 24,401 | | | | | | | | | | | | | | | | | | | Pounds sold produced | | lb | | | — | | | 180,000 | | | 31,000 | | | 50,000 | | | 261,000 | Pounds sold purchased | | lb | | | — | | | 109,000 | | | 210,000 | | | 200,000 | | | 519,000 | Total pounds sold | | lb | | | — | | | 289,000 | | | 241,000 | | | 250,000 | | | 780,000 | | | | | | | | | | | | | | | | | | | Average cost per pound sold - produced (1) | | $/lb | | $ | - | | $ | 49.78 | | $ | 54.93 | | $ | 45.60 | | $ | 51.03 | Average cost per pound sold - purchased | | $/lb | | $ | - | | $ | 20.15 | | $ | 23.19 | | $ | 20.08 | | $ | 21.35 | Total average cost per pound sold | | $/lb | | $ | - | | $ | 38.61 | | $ | 27.27 | | $ | 25.18 | | $ | 31.28 |
Note:
| | 63 | | 1.
| | The cost per pound sold reflects both cash and non-cash costs, which are combined as cost of sales in the statement of operations included in this filing. The cash and non-cash cost components are identified in the above production cost table.
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The cost of sales 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 market value are charged to cost of sales.
Table of ContentsYear Ended December 31, 2017 Compared to Year Ended December 31, 2016
The following table summarizes the results of operations for the years ended December 31, 2017 and 2016 (in thousands of U.S. dollars):
| | | | | Year ended December 31, | | 2017 | | 2016 | | $ | | $ | | | | | Sales | 38,368 | | 27,305 | Cost of sales | (24,401) | | (15,848) | Gross profit | 13,967 | | 11,457 | Exploration and evaluation expense | (2,623) | | (2,964) | Development expense | (4,340) | | (2,886) | General and administrative expense | (5,090) | | (4,740) | Accretion expense | (527) | | (534) | Write-off of mineral properties | - | | (62) | Net profit (loss) from operations | 1,387 | | 271 | Interest expense (net) | (1,377) | | (1,977) | Warrant mark to market gain | - | | 36 | Loss from equity investment | (5) | | (5) | Write-off of equity investments | - | | (1,089) | Foreign exchange loss | (50) | | (278) | Other income | 121 | | 15 | Income (loss) before income taxes | 76 | | (3,027) | Income tax recovery (net) | - | | 17 | Net income (loss) | 76 | | (3,010) | | | | | Income (loss) per share – basic | 0.00 | | (0.02) | | | | | Income (loss) per share – diluted | 0.00 | | (0.02) | | | | | Revenue per pound sold | 49.09 | | 39.49 | | | | | Total cost per pound sold | 31.28 | | 28.20 | | | | | Gross profit per pound sold | 17.81 | | 11.29 |
Sales
We sold a total of 780,000 pounds of U3O8 during the year ended December 31, 2017 for an average price of $49.09 per pound as compared to 2016 when we sold 562,000 pounds for an average price of $39.49. The fluctuation in sales prices relates primarily to lower priced spot sales made in 2016 as well as the fulfillment of some lower-priced, shorter-term contracts in 2016. In 2016, we assigned two contract deliveries totaling 200,000 pounds of U3O8 to a third-party trader. The deliveries were made during 2016 and we recognized $5.1 million in sales from those contracts.
For the year ended December 31, 2017, we recognized $80 thousand from disposal fees compared to $29 thousand during 2016.
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
| Transactions with Related Parties During the fiscal year ended December 31, 2022, we did not participate in any reportable transactions with related parties. 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. New Accounting Pronouncements Which were Implemented this Year None. 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. The development of the wellfield includes injection, production and monitor well drilling and completion, piping within the wellfield and to the processing facility and 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. 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. Exploration, Evaluation, and Development Costs Exploration and evaluation expenses consist of labor, annual 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 market value are charged to expense. As compared to 2016, our cost per pound sold increased $3.08 to $31.28 in 2017. The increase for the year was mitigated by the purchase of 519,000 pounds at an average price of $21.35. The cost per pound of produced product was $51.03.
Gross Profit
The gross profit from uranium sales was $13.9 million for the year ended December 31, 2017, which represents a gross profit margin of approximately 36%. Gross profits of $6.3 million in 2016 represents a gross profit margin of approximately 29%. The primary reason for the increase in the gross profit margin was the higher average sales price per pound in 2017.
Operating Expenses
Total operating expenses for the year ended December 31, 2017 were $12.6 million. Operating expenses include exploration and evaluation expense, development expense, G&A expense and mineral property write-offs. These expenses increased by $1.4 million compared to 2016.
Exploration and evaluation expense consists of labor and the associated costs of the exploration and evaluation departments as well as land holding and exploration costs including drilling and analysis on properties which have not reached the permitting or operations stage. These expenses decreased $0.3 million for the year ended December 31, 2017 compared to 2016. All costs associated with the geology and geological information systems departments as well as the costs incurred on specific projects as described above are reflected in this category. A reduction in labor and related costs was the primary reason for the decline.
Development expense includes $3.9 million of costs incurred at the Lost Creek Project not directly attributable to production activities, including wellfield construction, drilling and development costs. This is an increase of $1.9 million from 2016 and was related to the construction of the first three header houses in MU2 including the structures, wells and infrastructure. It also includes $0.4 million of costs associated with the Shirley Basin and Lucky Mc properties which are considered development properties as they previously reached the permitting stage or operations stage.
G&A expense relates to administration, finance, investor relations, land and legal functions and consists principally of personnel, facility and support costs. Expenses increased by $0.4 million for the year ended December 31, 2017 compared to 2016. The increase was due to increased external consulting and legal expenses of $0.4 million, a substantial portion of which relates to the trade action filed in early January 2018.
Other Income and Expenses
Net interest expense declined $0.6 million during 2017 compared to the prior year. The decline was due to principal payments on outstanding debt.
In December 2013, the Company sold equity units which included one Common Share and one-half warrant for the purchase of stock at $1.35 per Common Share. As the warrants were priced in U.S. dollars and not Canadian dollars, which is the currency of the Company’s Common Shares, these warrants are considered a derivative and are therefore treated as a liability. The gain for 2016 represents the balance of the liability at December 31, 2015 which was written off in 2016 as the warrants expired without being exercised in 2016.
In April 2017, the Management Committee of the Bootheel Project determined to continue the ownership and maintenance on the Bootheel property for the fiscal year ending March 31, 2018, which is the fiscal year end of The Bootheel Project, LLC. No additional exploration or development activities are expected at this time for 2018. Due to the continuing decline in the spot price of uranium combined with the reduction in minerals when a related lease was not renegotiated, the Company examined the valuation of the investment and determined that as a standalone investment, it had an insignificant value and was therefore fully impaired during 2016 resulting in a loss on investment of $1.1 million.
Income tax recovery
Income tax refunds in 2016 relates to the refund of alternative minimum taxes paid in prior years.
Income (Loss) per Common Share
The basic earnings per common share for the year 2017 was $Nil. Basic and diluted loss per common share was $0.02 for 2016. The diluted loss per common share for the year 2016 was 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 year ended December 30, 2017, there were a net of 539,620 options using the treasury method and 1,175,952 RSUs included in the diluted earnings per share calculations. The result was diluted earnings per share of $Nil for the year.
Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
The following table summarizes the results of operations for the years ended December 31, 2016 and 2015 (in thousands of U.S. dollars):
| | | | Year ended December 31, | | 2016 | 2015 | | $ | $ | Revenue | 27,305 | 41,877 | Cost of revenues | (15,848) | (29,292) | Gross profit | 11,457 | 12,585 | Exploration and evaluation expense | (2,964) | (2,853) | Development expense | (2,886) | (5,358) | General and administrative expense | (4,740) | (5,715) | Accretion expense | (534) | (515) | Write-off of mineral properties | (62) | - | Net loss from operations | 271 | (1,856) | Interest income (expense) (net) | (1,977) | (2,557) | Mark to market loss | 36 | 307 | Loss from equity investment | (5) | (8) | Write-off of equity investments | (1,089) | - | Foreign exchange gain (loss) | (278) | (1) | Other income (loss | 15 | 5 | Loss before income taxes | (3,027) | (4,110) | Income tax expense | 17 | 3,315 | Net loss | (3,010) | (795) | | | | Loss per share – basic and diluted | (0.02) | (0.01) | | | | Revenue per pound sold | 39.49 | 45.20 | | | | Total cost per pound sold | 28.20 | 31.67 | | | | Gross profit per pound sold | 11.29 | 13.53 |
Sales
We sold a total of 562,000 pounds of U3O8 from production during the year ended December 31, 2016 for an average price of $39.49 per pound as compared to 2015 when we sold 925,000 pounds for an average price of $45.20. The fluctuation in sales prices relates primarily to lower priced spot sales made in 2016. In 2016, we assigned two contract deliveries totaling 200,000 pounds of U3O8 to a third-party trader. The deliveries were made during the year and we recognized $5.1 million in sales from those contracts. The sales in 2015 included the sale of 200,000 pounds of U3O8 which were purchased from athird-party trader.
For the year ended December 31, 2016, we recognized $29 thousand compared to $69 thousand from disposal fees during 2015.
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 market value are charged to expense.
As compared to 2015, our cost per pound sold decreased $3.47 to $28.20 in 2016. The year 2015 includes one sale of purchased product, which was at a cost of $39.39 per pound. Excluding this sale, the 2015 cost per pound sold from produced inventory was $29.53, which adjusts the 2016 cost per pound sold to a decrease of $1.33 per pound from 2015.
The reduction in our cost per pound sold from produced inventory is primarily a function of decreased non-cash costs in 2016 as compared to 2015 resulting from the accelerated depreciation of capitalized reclamation costs attributable to MU1. As stated in previous filings, most of our production costs are relatively fixed. Therefore, decreased production in 2016 yielded higher cash costs per pound.
Gross Profit
The gross profit from uranium sales was $6.3 million for the year ended December 31, 2016, which represents a gross profit margin of approximately 29%. Gross profits of $12.5 million in 2015 represents a gross profit margin of approximately 30%. The primary reason for the decrease in the gross profit margin was the lower-priced spot sales in 2016, which more than offset the decrease in the cost per pound sold.
Operating Expenses
Total operating expenses for the year ended December 31, 2016 were $11.2 million. Operating expenses include exploration and evaluation expense, development expense, G&A expense and mineral property write-offs. These expenses decreased by $3.2 million compared to 2015.
Exploration and evaluation expense consists of labor and the associated costs of the exploration and evaluation departments as well as land holding and exploration costs including drilling and analysis on properties which have not reached the permitting or operations stage. These expenses increased $0.1 million for the year ended December 31, 2016 compared to 2015. All costs associated with the geology and geological information systems departments as well as the costs incurred on specific projects as described above are reflected in this category. Costs increased due to higher labor related costs.
Development expense includes $2.4 million of costs incurred at the Lost Creek Project not directly attributable to production activities, including wellfield construction, drilling and development costs. It also includes $0.5 million of costs associated with the Shirley Basin and Lucky Mc properties which are considered development properties as they previously reached the permitting stage or operations stage. Development expenses decreased by $2.5 million in the year ended December 31, 2016 compared to 2015. The decrease was primarily related to the deferral of development activities at Lost Creek in response to depressed uranium prices.
G&A expense relates to administration, finance, investor relations, land and legal functions and consists principally of personnel, facility and support costs. Expenses decreased by $1.0 million for the year ended
December 31, 2016 compared to 2015. The decrease was due to reduced external consulting and legal expenses of $0.3 million combined with $0.6 million in lower labor costs due to reductions in force.
Other Income and Expenses
Net interest expense declined $0.6 million during 2016 compared to the prior year. The decline was due to a reduction in the outstanding principal which was slightly offset by increases in the interest rate on the RMB debt, which was tied to the quarterly LIBOR rate.
In December 2013, the Company sold equity units which included one Common Share and one-half warrant for the purchase of stock at $1.35 per Common Share. As the warrants were priced in U.S. dollars and not Canadian dollars, which is the currency of the Company’s Common Shares, these warrants are considered a derivative and are therefore treated as a liability. The gain for 2016 represents the balance of the liability at December 31, 2015 which was written off in 2016 as the warrants expired without being exercised in 2016.
In April 2016, the Management Committee of the Bootheel Project determined to continue the ownership and maintenance on the Bootheel property for the fiscal year ending March 31, 2017, which is the fiscal year end of The Bootheel Project, LLC. No additional exploration or development activities are expected at this time for 2017. Due to the continuing decline in the spot price of uranium combined with the reduction in minerals when the related lease was not renegotiated, the Company examined the valuation of the investment and determined that as a standalone investment, it had an insignificant value and was therefore fully impaired during 2016 resulting in a loss on investment of $1.1 million.
Income tax recovery
When we acquired Pathfinder in 2013, we recorded a deferred income tax liability as the Pathfinder assets had no tax basis and accounting guidance indicated that the potential liability should be recorded due to Pathfinder not being integrated into our operations and the likelihood that Pathfinder would have a going concern issue as a stand-alone entity. The costs were capitalized as a part of the mineral property acquisition costs and will be amortized for reporting purposes once production commences. The amortization will not be deductible for tax reporting, therefore creating a permanent book versus tax difference.
We did preliminary drilling and baseline testing in 2014, and we filed our permit application with the WDEQ in 2015, therefore demonstrating the intent of incorporating uranium recovery operations at Shirley Basin into our other ongoing operations within the next few years pending the approval of the permit application. As Pathfinder was integrated into our operations, the guidance was no longer applicable and we used a portion of our accumulated net operation losses to offset the liability in 2015. The filing of the permit is an indication that the offset will be used within a few years and is therefore more probable than not that it will be used.
Loss per Common Share
The basic and diluted losses per Common Share for the year ended December 31, 2016 was $0.02 compared to a loss of $0.01 in 2015. The diluted loss per Common Share is 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.
Material Changes in Financial Condition, Liquidity and Capital Resources
As at December 31, 2017, we had cash resources, consisting of cash and cash equivalents, of $3.9 million, an increase of $2.3 million from the December 31, 2016 balance of $1.6 million. The cash resources consist of Canadian and U.S. dollar denominated deposit accounts, money market funds and certificates of deposit. We generated $5.6 million from operations during the year ended December 31, 2017. During the same period, we used $0.2 million for investing activities and $3.0 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 December 31, 2017, the balance of the State Bond Loan was $19.9 million.
On August 19, 2014, we filed a universal shelf registration statement on Form S-3 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 securities, and rights to purchase our Common Shares and/or our senior and subordinated debt securities. The registration statement became effective September 12, 2014 for a three-year period and was extended for a subsequent three-year term on July 27, 2017. The 12,921,000 Common Shares offered in the February 2016 financing were sold for $0.50 per share raising $5.7 million (net of issue costs of $0.8 million) under the shelf registration statement.
On May 27, 2016, we entered into an At Market Issuance Sales Agreement with MLV & Co. LLC and FBR Capital Markets & Co. 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. During 2017, we sold 1,536,169 Common Shares under the sales agreement at an average price of $0.76 per share for gross proceeds of $1.2 million. After deducting transaction fees and commissions and all other costs, we received net proceeds of $1.1 million.
Collections for the year from U3O8 sales totaled $38.3 million.
Operating activities generated $5.5 million of cash resources during the year ended December 31, 2017 as compared to $3.3 million in 2016. The change is due primarily to an increase in net income and smaller increases in inventory and decreases in current liabilities.
During 2017, the Company invested $0.3 million in equipment. The Lost Creek Project does not require significant capital expenditures and its sustaining capital expenditures have generally been less than $0.5 million per year.
During 2017, the Company used $3.0 million for financing activities including principal payments on debt of $4.6 million, which was partially offset by net proceeds from the sale of common shares of $1.1 million and proceeds from stock option exercises of $0.5 million.
Liquidity Outlook
As at February 28, 2018, our unrestricted cash position was $7.5 million. We expect that any major capital projects will be funded by operating cash flow, cash on hand and 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 and 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 additional 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.
Outlook for 2018
In 2017, the average spot price per pound of U3O8, as reported by Ux Consulting Company, LLC and TradeTech, LLC, increased approximately 17% from $20.25 in December 2016 to about $23.75 per pound in December 2017. In early 2017, spot pricing moved higher on news of supply-side reductions, only to retreat to the $20 level, where it remained until November 2017. In November, spot prices again increased following several new supply-side announcements. Thus far in 2018, the average spot price per pound of U3O8 decreased to $21.63 as of February 26, indicating the fundamentals of market pricing have not changed sufficiently to warrant further development of MU2.
In response to this persistently weak uranium market, we took aggressive measures in 2016 and 2017, and will again do so in 2018. In 2016, we deliberately slowed development activities at MU2, reduced costs, and focused on enhancing production efficiencies from our operating MU1 header houses. In 2017, we continued to employ this limited-development strategy, implemented further cost reductions, and supplemented existing mine production with favorably priced uranium purchases to meet our 2017 contractual commitments. For 2018, we have suspended further MU2 development activities, implemented further cost reductions, and secured purchase contracts for nearly 100% of our 2018 delivery obligations.
For 2018, we expect to sell 470,000 pounds under term contracts at an average price of approximately $49 per pound. We have entered into purchase contracts to cover 460,000 pounds at an average price of approximately $24 per pound. Production from our operating MU1 and MU2 header houses, expected to be between 250,000 and 350,000 pounds, will be used to build an inventory position of finished, ready-to-sell, product at the conversion facility.
We recently implemented a limited reduction in force to further streamline our operations and reduce costs. This is the third reduction in force in force in two years; the layoffs since 2016 have affected personnel in all three company locations. The most recent reduction was focused on those departments not directly related to production and is expected to reduce our labor costs by approximately $0.6 million per year.
Together, these actions will give the Company the additional flexibility necessary to quickly react to changing market conditions and easily re-start development activities in MU2 when warranted. With future development and construction in mind, the staff who were retained had the greatest level of experience and adaptability allowing for an easier transition back to full operations.
Although we made a small (10,000 pound) spot sale in January 2018, we are not forecasting any further spot sales for 2018 at this time; we may, however, choose to do so if market conditions improve. We expect our average gross profit in 2018 to be between $10 and $12 million, which represents a cash-basis gross profit margin of between 45% and 50%.
Operating costs in 2018 are expected to be lower than 2017 because of the suspended MU2 development activities. Other costs including capital expenditures and loan repayments will be similar to 2017.
As at February 28, 2018, our unrestricted cash position was $7.5 million. Given our current cash resources, contracted sales positions, and expected margins, we do not anticipate the need for additional funding in the near term unless it is advantageous to do so.
As discussed above, the Company has contractual sales commitments of 470,000 pounds during 2018, at an average price of approximately $49 per pound. We have established the schedule for those commitments and determined that an effective model for dealing with the current pricing environment is to continue production from our fully operational header houses in MU1 and MU2, and purchase uranium at favorable low-prices in order to meet our sales commitments. This operating strategy for Lost Creek will allow us to control production costs, minimize development expenditures, maximize cash flows and maintain the flexibility to respond to market conditions.
Table of Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2017:
| | | | | | | Payments due (by period) in thousands | | | Less than | | 3 to 5 | More than | | Total | 1 year | 1 to 3 years | years | 5 years | | | | | | | Notes payable | $ 19,891 | $ 4,895 | $ 10,670 | $ 4,326 | $ - | Interest on notes payable | $ 2,363 | $ 1,039 | $ 1,199 | $ 125 | $ - | Operating leases | $ 447 | $ 352 | $ 95 | $ - | $ - | Environmental remediation | $ 72 | $ 72 | $ - | $ - | $ - | Asset retirement obligations | $ 27,036 | $ - | $ 3,558 | $ 3,558 | $ 19,920 | | | | | | | | $ 49,809 | $ 6,358 | $ 15,522 | $ 8,009 | $ 19,920 |
Outstanding Share Data
As of December 31, 2017 and 2016, the Company’s capital consisted of the following:
| | | | | December 31, 2017 | December 31, 2016 | Change | | | | | Common shares | 146,531,933 | 143,676,384 | 2,855,549 | Warrants | 5,844,567 | 5,844,567 | - | RSUs | 1,175,952 | 1,273,990 | (98,038) | Stock options | 9,459,401 | 9,748,934 | (289,533) | | | | | Fully diluted shares outstanding | 163,011,853 | 160,543,875 | 2,467,978 |
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.
Financial Instruments and Other Instruments
The Company’s cash and cash equivalents are composed of:
| | | | As at | | December 31, 2017 | December 31, 2016 | | $ (thousands) | $ (thousands) | | | | Cash on deposit at banks | 1,667 | 580 | Money market funds | 2,212 | 972 | | | | | 3,879 | 1,552 |
Quarterly financial data (unaudited) (in thousands except for per share data)
| | | | | | | | | 2017 | | Quarter ended | | Dec. 31 | | Sep. 30 | | Jun. 30 | | Mar. 31 | | | | | | | | | Revenue | $ 26 | | $ 11,693 | | $ 11,821 | | $ 14,828 | Net income (loss) for the period | $ (3,426) | | $ (3,004) | | $ 1,317 | | $ 5,189 | | | | | | | | | Income (loss) per share – basic and diluted | $ (0.02) | | $ (0.02) | | $ 0.01 | | $ 0.03 |
| | | | | | | | | 2016 | | Quarter ended | | Dec. 31 | | Sep. 30 | | Jun. 30 | | Mar. 31 | | | | | | | | | Revenue | $ 5,776 | | $ 12,068 | | $ 6,747 | | $ 2,714 | Net income (loss) for the period | $ 104 | | $ 1,803 | | $ (1,928) | | $ (2,989) | | | | | | | | | Income (loss) per share – basic and diluted | $ 0.00 | | $ 0.01 | | $ (0.01) | | $ (0.02) |
Credit risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents, deposits and restricted cash, which together totaled approximately $11.4 million at December 31, 2017. 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 United States. Of the amount held on deposit, approximately $0.6 million is covered by the Canada Deposit Insurance Corporation, the Securities Investor Protection Corporation or the United States Federal Deposit Insurance Corporation which leaves approximately $10.8 million at risk at December 31, 2017 should the financial institutions with which these amounts are invested be rendered insolvent. We do not consider any of our financial assets to be impaired as of December 31, 2017.
Liquidity risk
Liquidity risk is the risk that we will not be able to meet our financial obligations as they come due.
As at December 31, 2017, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $1.2 million which are due within normal trade terms of generally 30 to 60 days, notes payable which will be payable over periods of 0 to 5 years, and asset retirement obligations with estimated completion dates until 2033.
Item 7A. Quantitative AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk
Market risk is the risk to the Company of adverse financial impact due to changes in the fair value or future cash flows of financial instruments as a result of fluctuations in interest rates and foreign currency exchange rates. As the US$ is now the functional currency of our U.S. operations, the currency risk has been significantly reduced.
Interest rate risk
Financial instruments that expose the Company to interest rate risk are its cash equivalents, deposits, restricted cash and debt financings. 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
We maintain a balance of less than $0.3 million in foreign currency resulting in a low currency risk.
Commodity Price Risk
The Company is subject to market risk related to the market price of uranium. We have multiple uranium 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 uranium price fluctuations. Historically, uranium prices have been subject to fluctuation, and the price of uranium 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 uranium producing and consuming countries and production levels and costs of production of other producing companies. The spot market price for uranium 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 June 2007. The spot market price was $21.63 per pound as of February 26, 2018.
Transactions with Related Parties
During the fiscal year ended December 31, 2017, we did not participate in any reportable transactions with related parties.
Proposed Transactions
As is typical of the mineral exploration and development industry, we will consider and review potential merger, acquisition, investment and venture transactions and opportunities that could enhance shareholder value.
New accounting pronouncements which may affect future reporting
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The amendments in ASU 2014-09 affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenuerecognition requirements in Topic 605, RevenueRecognition, and most industry-specific guidance, and creates a Topic 606 Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of the promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. We have reviewed our contracts as well as our procedures and do not anticipate any changes in the manner or timing with which we reflect our revenues.
In January 2016, the FASB issued ASU 2016-1, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825). The amendments in this ASU supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. The amendments improve financial reporting by providing relevant information about an entity’s equity investments and reducing the number of items that are recognized in other comprehensive income. This guidance is effective for annual reporting beginning after December 15, 2017, including interim periods within the year of adoption, and calls for prospective application, with early application permitted. Accordingly, the standard is effective for us beginning in the first quarter of fiscal 2018. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize all leases, including operating leases, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. Now, the only leases we hold are for equipment, office space in one location and a limited number of leases on selected mineral properties. We do not anticipate the additional disclosures to reflect those leases will have an impact on our statement of financial position, as the total future lease payments are not material.
New accounting pronouncements which were implemented this year
In July 2015, the FASB issued ASU No. 2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU2015-11 requires that inventory within the scope of this ASU be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to all inventory, measured using average cost which is how the Company measures inventory. For all entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. This is consistent with our past policies and had no financial or reporting impact when implemented during the first quarter.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation - Improvements to Employee Share-Based Payment Accounting (Topic 718), which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. Regarding forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. This ASU is effective for fiscal years beginning after December 15, 2016 including interim periods within that reporting period. We currently recognize no income tax expense or benefit due to significant income tax credits and net operating losses which are fully reserved under a valuation allowance. There was therefore no effect on our accounting or reporting at the time of implementation earlier this year. We have made the election to continue to recognize losses from forfeitures at inception rather than when they vest or occur.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows – Restricted Cash a consensus of the FASB Emerging Task Force (Topic 230), which addresses the presentation of restricted cash in the statement of cash flows. Under the new standard, restricted cash will be presented with cash and cash equivalents in the statement of cash flows instead of being reflect as non-cash investing or financing activities. A reconciliation of the make-up of the end ending cash, cash equivalent and restricted cash balance will be required for entities who reflect restricted cash as separate items on the statement of financial position. In addition, a description of the restrictions on the cash will be required. This ASU is effective for fiscal years beginning after December 15, 2017 including interim periods within that reporting period, however early adoption is permitted. We elected to adopt this standard as of the first quarter. Accordingly, the cash balances reflected in the Statement of Cash Flows have been increased by $7.6 million which has been the restricted cash balance since December 31, 2015. In addition, we have added note 14 – Supplemental Information to the Statement of Cash Flows which reconciles the cash balances shown on the Statement of Cash Flows with the appropriate balances on the Balance Sheet.
Critical Accounting Policies and Estimates
We have established the existence of mineral resources at the Lost Creek Project, 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.
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 December 31, 2017, the current and long-term prices of uranium were $23.75 and $31.00, respectively. This compares to prices of $20.25 and $30.00 as of December 31, 2016. Senior management updates production, revenue and cash projections on a regular basis, in some cases weekly, but at least monthly. The Company reviews the impairment indicators outlined in US GAAP guidance. The sole indication of possible impairment was the decline in industry-wide reported sales price. While this has no immediate effect on the Company since it has sales contracts until 2021, a cash flow analysis for each of Lost Creek and Shirley Basin was performed. The mine life used was consistent with that reported in the respective NI 43‑101 Preliminary Economic Assessment for each property. Cash flows were calculated on a sales price of $31.00 per pound which was the long-term quoted price in industry periodicals as of December 31, 2017. Based on these undiscounted cash flow models, no impairments were indicated for any of the respective properties.
For other properties which have reported mineral resources supported by NI 43-101 Technical Reports, we applied the estimated market pricing to the mineral resource estimates as well as realization percentages which were taken from a previous valuation completed by a third party with respect to the Lost Creek Project in conjunction with obtaining our Wyoming bond.
Our remaining properties, which have no established mineral resource, continue to be carried at their acquisition cost.
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.
Exploration, evaluation and development costs
Exploration and evaluation expenses consist of labor, annual exploration lease and maintenance fees and associated costs of the exploration geology department as well as land holding and exploration costs including drilling and analysis on properties which have not reached the permitting or operations stage. Development expense relates to the Company’s Lost Creek, LC East, Lucky Mc and Shirley Basin projects, which are more advanced in terms of permitting and preliminary economic assessments. Development expenses include all costs associated with exploring, delineating, and permitting new or expanded mine units, the costs associated with the construction and development of permitted mine units including wells, pumps, piping, header houses, roads and other infrastructure related to the preparation of a mine unit to begin extraction operations as well as the cost of drilling and completing disposal wells.
Capital assets
Property, plant and equipment assets, including machinery, processing equipment, enclosures, vehicles and expenditures that extend the life of such assets, are recorded at cost including acquisition and installation costs. The enclosure costs include both the building housing and the processing equipment necessary for the extraction of uranium from impregnated water pumped in from the wellfield to the packaging of uranium yellowcake for delivery into sales. These enclosure costs are combined as the equipment and related installation associated with the equipment is an integral part of the structure itself. The costs of self-constructed assets include direct construction costs, direct overhead and allocated interest during the construction phase. Depreciation is calculated using a declining balance method for most assets with the exception of the plant enclosure and related
Capital Assets Property, plant, and equipment assets, including machinery, processing equipment, enclosures, vehicles, and expenditures that extend the life of such assets, are recorded at cost including acquisition and installation costs. The enclosure costs include both the building housing and the processing equipment necessary for the extraction of uranium from impregnated water pumped in from the wellfield to the packaging of uranium yellowcake for delivery into sales. These enclosure costs are combined as the equipment and related installation associated with the equipment is an integral part of the structure itself. The costs of self-constructed assets include direct construction costs, direct overhead, and allocated interest during the construction phase. Impairment of Long-lived Assets The Company assesses the possibility of impairment in the net carrying value of its long-lived assets when events or circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. When potential impairment is indicated, management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, recoverable resources, and operating, capital, and reclamation costs. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is determined using discounted future net cash flows, or other measures of fair value. Depreciation Depreciation is calculated using a declining balance method for most assets except for the plant enclosure and related equipment. Depreciation on the plant enclosure and related equipment is calculated on a straight-line basis. Estimated lives for depreciation purposes range from three years for computer equipment and software to 20 years for the plant enclosure and the name plate life of the related equipment. The depreciable life of the Lost Creek plant, equipment, and enclosure was determined to be the nameplate life of the equipment housed in the processing plant as plans exist to continue to process materials from other sources, such as Shirley Basin, beyond the estimated production at the Lost Creek Property. Inventory and Cost of Sales Our inventories are measured at the lower of cost or 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 except for wellfield construction 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. Asset Retirement Obligations For mining properties, various federal and state mining laws and regulations require the Company to reclaim the surface areas and restore groundwater quality to the pre-existing quality or class of use after the completion of mining. The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs an obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. Asset retirement obligations consist of estimated final well abandonments, plant closure and removal and associated reclamation and restoration costs to be incurred by the Company in the future. The estimated fair value of the asset retirement obligation is based on the current cost escalated at an inflation rate and discounted at a credit adjusted risk-free rate. This liability is capitalized as part of the cost of the related asset and amortized over its remaining productive life. The liability accretes until it reaches the estimated future reclamation cost and remains until the Company settles the obligation. Depreciation
The depreciable life of the Lost Creek plant, equipment and enclosure was determined to be the nameplate life of the equipment housed in the processing plant as plans exist to continue to process materials from other sources such as Shirley Basin beyond the estimated production at the Lost Creek Project.
Inventory and Cost of Sales
Our inventories are measured 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.
Because of the nature of in situ operations, it is not economically feasible to accurately measure the amount of in-process inventory at any given time. We use a combination of calculating estimated uranium captured per sampling applied to total water processing flow to determine the estimated pounds captured.
Share-Based Compensation
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. 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.
Income taxes
The Company accounts for income taxes under the asset and liability method which requires the recognition of future income tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities. The Company provides a valuation allowance on future tax assets unless it is more likely than not that such assets will be realized.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements following the signature page of this Form 10-K.
| | 65 | | Table of ContentsItem 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. Controls and Procedures
| (a)
| | Evaluation of Disclosure Controls and Procedures
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As of the fiscal year ended December 31, 2017, 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
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Share-Based Compensation 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. 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. The fair value of the restricted share units is based on the intrinsic method, which uses the closing price of the common shares on the trading day immediately preceding the date of the grant. Income taxes The Company accounts for income taxes under the asset and liability method which requires the recognition of future income tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities. The Company provides a valuation allowance on future tax assets unless it is more likely than not that such assets will be realized. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements required by this Item 8 are set forth in Item 15. Our Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm (PCAOB ID 271) appear beginning on Page F-1. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Item 9A. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures As of the fiscal year ended December 31, 2022, 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)Management’s Report on Internal Control over Financial Reporting
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, the Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2017, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment using those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2017. The effectiveness of the Company’s internal control over financial reporting at December 31, 2017, has been audited by PricewaterhouseCoopers LLP, as stated in their report.
(c)Attestation Report of Registered Public Accounting Firm
PricewaterhouseCoopers LLP’s attestation report on our internal control over financial reporting is included as part of Item 8. Financial Statements and Supplementary Data herein.
| | 66 | | Table of Contents
(d)Changes inInternal Controls over Financial Reporting
No changes in our internal control over financial reporting occurred during the year ended December 31, 2017
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(b) Management’s Report on Internal Control over Financial Reporting Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, the Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As of December 31, 2022, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment using those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2022. (c) Attestation Report of Registered Public Accounting Firm This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to law, rules and regulations that permit us to provide only management’s report in this annual report. (d) Changes inInternal Controls over Financial Reporting No changes in our internal control over financial reporting occurred during the year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. OTHER INFORMATION None. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. Item 9B. Other Information
None.
| | 67 | | Table of ContentsPART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2018
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PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2023 Annual Meeting of Shareholders and is incorporated by reference in this report. Code of Ethics We have adopted a Code of Ethics (“Code”) which applies to all employees, officers, and directors. The full text of the Code is available on our website at https://www.ur‑energy.com/investors/corporate-governance/governance-documents/. We will post any amendments to, or waivers from, the Code on our corporate website or by filing a Current Report on Form 8‑K. Item 11. EXECUTIVE COMPENSATION Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2023 Annual Meeting of Shareholders and is incorporated by reference in this report. Item 12. SECURITY OWNERSHIP OF Certain BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2023 Annual Meeting of Shareholders and is incorporated by reference in this report. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2023 Annual Meeting of Shareholders and is incorporated by reference in this report. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2023 Annual Meeting of Shareholders and is incorporated by reference in this report. Code of Ethics
We have adopted a Code of Ethics (“Code”) which applies to all employees, officers and directors. The full text of the Code is available on our website at http://www.ur-energy.com/corporate-governance/. We will post any amendments to, or waivers from, the Code on our corporate website or by filing a Current Report on Form 8‑K.
Item 11. EXECUTIVE COMPENSATION
Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2018 Annual Meeting of Shareholders and is incorporated by reference in this report.
Item 12. SECURITY OWNERSHIP OF Certain BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2018 Annual Meeting of Shareholders and is incorporated by reference in this report.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2018 Annual Meeting of Shareholders and is incorporated by reference in this report.
Item 14. PRINCIPAL ACCOUNTing FEES AND SERVICES
Information relating to this item will be included in an amendment to this report or in the proxy statement for our 2018 Annual Meeting of Shareholders and is incorporated by reference in this report.
PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Financial Statements and Financial Statement Schedules
The Consolidated Financial Statements filed as part of this Form 10-K begin on page F-1. | | | | Incorporated by Reference | | | Exhibit Number | | Exhibit Description | | Form | | Filing Date of Report | | Exhibit | | Filed Herewith | 3.1 | | Articles of Continuance and Articles of Amendment | | S-3 | | 1/10/2014 | | 3.1 | | | | | | | | | | | | | | 3.2 | | Amended By-Law No. 1 | | S-3 | | 1/10/2014 | | 3.2 | | | | | | | | | | | | | | 3.3 | | By-Law No. 2 (Advance Notice) | | 8-K | | 2/25/2016 | | 3.1 | | | | | | | | | | | | | | 4.1 | | Warrant Agreement, dated September 25, 2018, between the Company and Computershare Trust Company, N.A. | | 8-K | | 9/25/2018 | | 4.1 | | | | | | | | | | | | | | 4.2 | | Description of Registrant Securities | | | | | | | | X | | | | | | | | | | | | 4.3 | | Warrant Agreement, dated February 4, 2021, between the Company, Computershare Inc and Computershare Trust Company, N.A. | | 8-K | | 2/4/2021 | | 4.1 | | | | | | | | | | | | | | 10.1 | | Financing Agreement and Mortgage (State of Wyoming Industrial Revenue Bond Loan) | | 6-K | | 10/29/2013 | | 99.1 | | | | | | | | | | | | | | 10.2 | | Share Purchase Agreement and Registration Rights Agreement (Private Placement) | | 6-K | | 12/19/2013 | | | | | | | | | | | | | | | | 10.3 | | Employment Agreement with Jeffrey T. Klenda, as amended | | 10-K | | 3/3/2014 | | 10.7 | | | | | | | | | | | | | | 10.4 | | Employment Agreement with Roger L. Smith, as amended | | 10-K | | 3/3/2014 | | 10.9 | | | | | | | | | | | | | | 10.5 | | Employment Agreement with Steven M. Hatten, as amended | | 10-K | | 3/3/2014 | | 10.10 | | | | | | | | | | | | | | 10.6 | | Employment Agreement with John W. Cash, as amended | | 10-K | | 3/3/2014 | | 10.11 | | | | | | | | | | | | | | 10.7 | | Employment Agreement with Penne A. Goplerud, as amended | | 10-K | | 3/3/2014 | | 10.12 | | |
Item 15. Exhibits, Financial statement schedules
Financial Statements and Financial Statement Schedules
See “Index to Consolidated financial statements” on page F-1.
10.8 | | Ur-Energy Inc. Amended and Restated Stock Option Plan | | 8-K | | 4/17/17 | | 10.1 | | | | | | | | | | | | | | 10.9 | | Amended and Restated Restricted Share Unit & Equity Incentive Plan | | 8-K | | 4/16/2021 | | 10.1 | | | | | | | | | | | | | | 10.10 | | At Market Issuance Sales Agreement | | 8-K | | 5/29/2020 | | 1.1 | | | | | | | | | | | | | | 10.11 | | Amended and Restated At Market Issuance Sales Agreement | | 8-K | | 6/9/2021 | | 1.1 | | | | | | | | | | | | | | 10.12 | | Amendment No. 1 to the Amended and Restated At Market Issuance Sales Agreement | | 8-K | | 12/21/2021 | | 1.2 | | | | | | | | | | | | | | 10.13 | | Amendment to Financing Agreement and Third Amendment to Mortgage | | 10-K | | 2/26/2021 | | 10.12 | | | | | | | | | | | | | | 10.14 | | Form of Securities Purchase Agreement dated July 31, 2020, among Ur-Energy Inc. and purchasers named therein | | 8-K | | 8/4/2020 | | 10.1 | | | | | | | | | | | | | | 10.15 | | Amendment to Employment Agreement with Jeffrey T. Klenda | | 10-K | | 2/26/2021 | | 10.16 | | | | | | | | | | | | | | 10.16 | | Amendment to Employment Agreement with Roger L. Smith | | 10-K | | 2/26/2021 | | 10.17 | | | | | | | | | | | | | | 10.17 | | Amendment to Employment Agreement with Steven M. Hatten | | 10-K | | 2/26/2021 | | 10.18 | | | | | | | | | | | | | | 10.18 | | Amendment to Employment Agreement with John W. Cash | | 10-K | | 2/26/2021 | | 10.19 | | | | | | | | | | | | | | 10.19 | | Amendment to Employment Agreement with Penne A. Goplerud | | 10-K | | 2/26/2021 | | 10.20 | | | | | | | | | | | | | | 21.1 | | Subsidiaries of the Registrant | | | | | | | | X | | | | | | | | | | | | 23.1 | | Consent of PricewaterhouseCoopers LLP | | | | | | | | X | | | | | | | | | | | | 23.2 | | Consent of WWC Engineering with regard to the Technical Report Summary on the Lost Creek ISR Uranium Property, Sweetwater County, Wyoming, USA (as amended September 19, 2022) and the Technical Report Summary on Shirley Basin Project, Carbon County, Wyoming, USA (as amended September 19, 2022) | | | | | | | | X | | | | | | | | | | | | 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 |
| | 70 | | (1)
| | Filed herewith under Items 1 and 2. Business and Properties.
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ITEM 16. FORM 10-K SUMMARY
| Table of Contents | 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 | | | | | | | | | | | | 96.1 | | Technical Report Summary on the Lost Creek ISR Uranium Property, Sweetwater County, Wyoming, USA (as amended September 19, 2022) | | 10-K/A | | 9/21/2022 | | 96.1 | | | | | | | | | | | | | | 96.2 | | Technical Report Summary on the Shirley Basin ISR Uranium Property, Carbon County, Wyoming, USA (as amended September 19, 2022) | | 10-K/A | | 9/21/2022 | | 96.2 | | | | | | | | | | | | | | 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 | | | | | | | | | | | | 99.1 | | Location maps (1) | | 10-K | | 3/3/2015 | | | | |
(1) Filed herewith under Items 1 and 2. Business and Properties. Item 16. FORM 10-K SUMMARY None. None.
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. | | | | | UR-ENERGY INC.
| | | | Date: March 1, 2018
| By:
| /s/ Jeffrey T. Klenda
| | | Jeffrey T. Klenda
| | | Chief Executive Officer
| | | | | Date: March 6, 2023 | By: | /s/ John W. Cash | | | | John W. Cash | | | | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 6, 2023 | By: | /s/ John W. Cash | | | | John W. Cash | | | Date: March 1, 2018
| By:
| /s/ Jeffrey T. Klenda
| | | Jeffrey T. Klenda
| | | Chief Executive Officer (Principal Executive Officer) | | | | Date: March 1, 2018
| By:
| /s/ Roger L. Smith
| | | Roger L. Smith
| | | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
| | | | Date: March 1, 2018
| By:
| /s/ W. William Boberg
| | | W. William Boberg
| | | Director
| | | | Date: March 1, 2018
| By:
| /s/ James M. Franklin
| | | James M. Franklin
| | | Director
| | | | Date: March 1, 2018
| By:
| /s/ Paul Macdonell
| | | Paul Macdonell
| | | Director
| | | | Date: March 1, 2018
| By:
| /s/ Thomas Parker
| | | Thomas Parker
| | | Director
| | | | | | | Date: March 1, 2018
| By:
| /s/ Gary C. Huber
| | | Gary C. Huber
| | | Director
| | | | | | | Date: March 1, 2018
| By:
| /s/ Kathy E. Walker
| | | Kathy E. Walker
| | | Director
| | | |
Date: March 6, 2023 | 75By:
| | /s/ Roger L. Smith | | | | Roger L. Smith | | | | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | | | | | |
Date: March 6, 2023 | By: | /s/ James M. Franklin | | Ur-Energy Inc.
| | Headquartered in Littleton, ColoradoJames M. Franklin
| Consolidated Financial Statements
| | December 31, 2017
| Director | | | | | | Date: March 6, 2023 | By: | /s/ W. William Boberg | | | | W. William Boberg | | | | Director | | | | | | Date: March 6, 2023 | By: | /s/ Thomas Parker | | | | Thomas Parker | | | | Director | | | | | | Date: March 6, 2023 | By: | /s/ Gary C. Huber | | | | Gary C. Huber | | | | Director | | | | | | Date: March 6, 2023 | By: | /s/ Kathy E. Walker | | | | Kathy E. Walker | | | | Director | | | | | | Date: March 6, 2023 | By: | /s/ Rob Chang | | | | Rob Chang | | | | Director | | Ur-Energy Inc. Headquartered in Littleton, Colorado Consolidated Financial Statements December 31, 2022 (expressed in thousands of U.S. dollars unless otherwise indicated) Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Ur-Energy Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Ur-Energy Inc. and its subsidiaries (together, the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity and cash flow for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of impairment indicators of long-lived assets As described in Notes 2, 6 and 7 to the consolidated financial statements, the carrying value of long-lived assets (consisting of mineral properties and capital assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable (impairment indicators). The carrying amounts of the Company’s mineral properties and capital assets were $35.7 million and $21.1 million, respectively, as of December 31, 2022. Management applies significant judgment to assess whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable giving rise to the requirement to conduct an impairment test. Events or changes in circumstances that could trigger an impairment test include: (i) significant adverse changes in the business climate including significant decreases in uranium prices or significant adverse changes in legal factors; (ii) significant changes in expected capital, operating or reclamation costs; and (iii) significant decreases in the market price of the assets. No impairment indicators were identified by management as of December 31, 2022. The principal considerations for our determination that performing procedures relating to the assessment of impairment indicators of long-lived assets is a critical audit matter are that there was significant judgment by management when assessing whether there were indicators of impairment related to the Company’s long-lived assets, specifically related to assessing whether there were: (i) significant adverse changes in the business climate including significant decreases in uranium prices or significant adverse changes in legal factors; (ii) significant changes in expected capital, operating or reclamation costs; and (iii) significant decreases in the market price of the assets. This in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate audit evidence relating to the judgments made by management in their assessment of any event or changes in circumstances that could give rise to the requirement to conduct an impairment test. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others: (i) evaluating whether there were significant adverse changes in the business climate related to significant decreases in uranium prices by considering external market and industry data; (ii) evaluating whether there were significant adverse changes in legal factors by obtaining on a sample basis evidence to support the rights to the mineral properties; (iii) assessing whether there were significant decreases in the market price of the assets by considering any prolonged declines in the Company’s share price; and (iv) evaluating whether there were significant changes in expected capital costs, operating costs or reclamation costs, or other factors that may indicate that the carrying amounts of the long-lived asset may not be recoverable, through consideration of evidence obtained in other areas of the audit. /s/PricewaterhouseCoopers LLP To the Shareholders and Directors of Ur-Energy Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ur-Energy Inc. and its subsidiaries,(together, the Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive loss, consolidated statements of cash flows and consolidated statements of shareholder’s equity for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and their results of operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in note 3 to the consolidated financial statements, the Company had changed its presentation of restricted Cash.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Pricewaterhouse Coopers LLP
Chartered Professional Accountants Vancouver, Canada March 2, 20186, 2023 We have served as the Company'sCompany’s auditor since 2004. Ur-Energy Inc.
Consolidated Balance Sheets
(expressed in thousands of U.S. dollars)
Ur-Energy Inc. | Consolidated Balance Sheets | (expressed in thousands of U.S. dollars) | (the accompanying notes are an integral part of these consolidated financial statements) |
| | | | | December 31, | | December 31, | | 2017 | | 2016 | Assets | | | | Current assets | | | | Cash and cash equivalents (note 4) | 3,879 | | 1,552 | Accounts receivable | 33 | | 16 | Inventory (note 5) | 4,515 | | 4,109 | Prepaid expenses | 741 | | 829 | | 9,168 | | 6,506 | Restricted cash (note 6) | 7,558 | | 7,557 | Mineral properties (note 7) | 44,677 | | 47,029 | Capital assets (note 8) | 26,961 | | 28,848 | | 79,196 | | 83,434 | | 88,364 | | 89,940 | Liabilities and shareholders' equity | | | | Current liabilities | | | | Accounts payable and accrued liabilities (note 9) | 3,039 | | 3,625 | Current portion of notes payable (note 10) | 4,774 | | 4,502 | Environmental remediation accrual | 72 | | 85 | | 7,885 | | 8,212 | Notes payable (note 10) | 14,662 | | 19,435 | Asset retirement obligations (note 12) | 27,036 | | 26,061 | | 49,583 | | 53,708 | Shareholders' equity (note 13) | | | | Share Capital | | | | Class A preferred shares, without par value, unlimited shares authorized; no shares issued and outstanding | - | | - | Common shares, without par value, unlimited shares authorized; shares issued and outstanding: 146,531,933 at December 30, 2017 and 143,676,384 at December 31, 2016 | 177,063 | | 174,902 | Warrants | 4,109 | | 4,109 | Contributed surplus | 15,454 | | 15,201 | Accumulated other comprehensive income | 3,663 | | 3,604 | Deficit | (161,508) | | (161,584) | | 38,781 | | 36,232 | | 88,364 | | 89,940 |
| | Note | | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | | | | Assets | | | | | | | | | | Current assets | | | | | | | | | | Cash | | | 3 | | | | 33,003 | | | | 46,189 | | Accounts receivable | | | | | | | 8 | | | | 4 | | Inventory | | | 4 | | | | 9,903 | | | | - | | Prepaid expenses | | | | | | | 1,030 | | | | 894 | | Assets held for sale | | | 6 | | | | - | | | | 1,536 | | Total current assets | | | | | | | 43,944 | | | | 48,623 | | | | | | | | | | | | | | | Non-current assets | | | | | | | | | | | | | Non-current portion of inventory | | | 4 | | | | - | | | | 7,923 | | Restricted cash | | | 5 | | | | 8,137 | | | | 7,966 | | Mineral properties | | | 6 | | | | 35,682 | | | | 35,067 | | Capital assets | | | 7 | | | | 20,132 | | | | 21,260 | | Total non-current assets | | | | | | | 63,951 | | | | 72,216 | | Total assets | | | | | | | 107,895 | | | | 120,839 | | | | | | | | | | | | | | | Liabilities and shareholders’ equity | | | | | | | | | | | | | Current liabilities | | | | | | | | | | | | | Accounts payable and accrued liabilities | | | 8 | | | | 1,168 | | | | 2,864 | | Current portion of notes payable | | | 9 | | | | 5,366 | | | | 1,262 | | Current portion of warrant liability | | | 11 | | | | - | | | | 2,027 | | Environmental remediation accrual | | | | | | | 69 | | | | 71 | | Total current liabilities | | | | | | | 6,603 | | | | 6,224 | | | | | | | | | | | | | | | Non-current liabilities | | | | | | | | | | | | | Notes payable | | | 9 | | | | 5,694 | | | | 11,060 | | Lease liability | | | | | | | 16 | | | | 18 | | Asset retirement obligations | | | 10 | | | | 30,701 | | | | 29,915 | | Warrant liability | | | 11 | | | | 2,382 | | | | 4,236 | | Total non-current liabilities | | | | | | | 38,793 | | | | 45,229 | | | | | | | | | | | | | | | Shareholders’ equity | | | | | | | | | | | | | Share capital | | | 12 | | | | 258,646 | | | | 248,319 | | Contributed surplus | | | | | | | 19,843 | | | | 20,040 | | Accumulated other comprehensive income | | | | | | | 4,265 | | | | 4,142 | | Accumulated deficit | | | | | | | (220,255 | ) | | | (203,115 | ) | Total shareholders’ equity | | | | | | | 62,499 | | | | 69,386 | | Total liabilities and shareholders’ equity | | | | | | | 107,895 | | | | 120,839 | |
Ur-Energy Inc. | Consolidated Statements of Operations and Comprehensive Loss | (expressed in thousands of U.S. dollars, except per share data) | (the accompanying notes are an integral part of these consolidated financial statements) |
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | | Year Ended December 31, | | | | Note | | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | | | | Sales | | | 13 | | | | 19 | | | | 16 | | | | 8,316 | | Cost of sales | | | 14 | | | | (6,861 | ) | | | (7,000 | ) | | | (12,968 | ) | Gross loss | | | | | | | (6,842 | ) | | | (6,984 | ) | | | (4,652 | ) | | | | | | | | | | | | | | | | | | Operating costs | | | 15 | | | | (12,952 | ) | | | (9,773 | ) | | | (8,689 | ) | Loss from operations | | | | | | | (19,794 | ) | | | (16,757 | ) | | | (13,341 | ) | | | | | | | | | | | | | | | | | | Net interest expense | | | | | | | (463 | ) | | | (733 | ) | | | (710 | ) | Warrant liability revaluation gain (loss) | | | 11 | | | | 1,835 | | | | (5,998 | ) | | | (680 | ) | Foreign exchange gain (loss) | | | | | | | 27 | | | | (355 | ) | | | (72 | ) | Other income | | | 13 | | | | 1,255 | | | | 905 | | | | 18 | | Net loss | | | | | | | (17,140 | ) | | | (22,938 | ) | | | (14,785 | ) | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | | | | | | 123 | | | | 435 | | | | 53 | | Comprehensive loss | | | | | | | (17,017 | ) | | | (22,503 | ) | | | (14,732 | ) | | | | | | | | | | | | | | | | | | Loss per common share: | | | | | | | | | | | | | | | | | Basic | | | | | | | (0.08 | ) | | | (0.12 | ) | | | (0.09 | ) | Diluted | | | | | | | (0.08 | ) | | | (0.12 | ) | | | (0.09 | ) | | | | | | | | | | | | | | | | | | Weighted average common shares: | | | | | | | | | | | | | | | | | Basic | | | | | | | 220,496,862 | | | | 195,691,842 | | | | 164,257,092 | | Diluted | | | | | | | 220,496,862 | | | | 195,691,842 | | | | 164,257,092 | |
Ur-Energy Inc. | Consolidated Statements of Changes in Shareholders’ Equity | (expressed in thousands of U.S. dollars, except share data) | (the accompanying notes are an integral part of these consolidated financial statements) |
| | | | | Shares | | | Share Capital | | | Contributed Surplus | | | Accumulated Other Comprehensive Income | | | Accumulated Deficit | | | Shareholders Equity | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | | | | | 160,478,059 | | | | 185,754 | | | | 20,317 | | | | 3,654 | | | | (165,392 | ) | | | 44,333 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Shares issued for cash | | | | | | | 9,259,640 | | | | 4,805 | | | | - | | | | - | | | | - | | | | 4,805 | | Less share issue costs | | | 12 | | | | - | | | | (431 | ) | | | - | | | | - | | | | - | | | | (431 | ) | Less amount assigned to warrant liability | | | 12 | | | | - | | | | (860 | ) | | | - | | | | - | | | | - | | | | (860 | ) | Exercise of stock options | | | 11 & 12 | | | | 159,982 | | | | 141 | | | | (42 | ) | | | - | | | | - | | | | 99 | | Redemption of RSUs | | | 12 | | | | 356,071 | | | | 211 | | | | (280 | ) | | | - | | | | - | | | | (69 | ) | Stock compensation | | | | | | | - | | | | - | | | | 951 | | | | - | | | | - | | | | 951 | | Comprehensive income (loss) | | | | | | | - | | | | - | | | | - | | | | 53 | | | | (14,785 | ) | | | (14,732 | ) | December 31, 2020 | | | | | | | 170,253,752 | | | | 189,620 | | | | 20,946 | | | | 3,707 | | | | (180,177 | ) | | | 34,096 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Shares issued for cash | | | 12 | | | | 36,081,987 | | | | 48,672 | | | | - | | | | - | | | | - | | | | 48,672 | | Less share issue costs | | | 12 | | | | - | | | | (2,188 | ) | | | - | | | | - | | | | - | | | | (2,188 | ) | Less amount assigned to warrant liability | | | 11 & 12 | | | | - | | | | (2,604 | ) | | | - | | | | - | | | | - | | | | (2,604 | ) | Exercise of warrants | | | 11 & 12 | | | | 7,025,460 | | | | 11,337 | | | | - | | | | - | | | | - | | | | 11,337 | | Exercise of stock options | | | 12 | | | | 2,929,101 | | | | 2,549 | | | | (764 | ) | | | - | | | | - | | | | 1,785 | | Redemption of RSUs | | | | | | | 492,394 | | | | 933 | | | | (1,221 | ) | | | - | | | | - | | | | (288 | ) | Stock compensation | | | | | | | - | | | | - | | | | 1,079 | | | | - | | | | - | | | | 1,079 | | Comprehensive income (loss) | | | | | | | - | | | | - | | | | - | | | | 435 | | | | (22,938 | ) | | | (22,503 | ) | December 31, 2021 | | | | | | | 216,782,694 | | | | 248,319 | | | | 20,040 | | | | 4,142 | | | | (203,115 | ) | | | 69,386 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Shares issued for cash | | | 12 | | | | 2,231,930 | | | | 3,775 | | | | - | | | | - | | | | - | | | | 3,775 | | Less share issue costs | | | 12 | | | | - | | | | (94 | ) | | | - | | | | - | | | | - | | | | (94 | ) | Exercise of warrants | | | 11 & 12 | | | | 3,819,000 | | | | 4,654 | | | | - | | | | - | | | | - | | | | 4,654 | | Exercise of stock options | | | 12 | | | | 1,308,625 | | | | 1,227 | | | | (369 | ) | | | - | | | | - | | | | 858 | | Redemption of RSUs | | | | | | | 557,372 | | | | 765 | | | | (970 | ) | | | - | | | | - | | | | (205 | ) | Stock compensation | | | | | | | - | | | | - | | | | 1,142 | | | | - | | | | - | | | | 1,142 | | Comprehensive income (loss) | | | | | | | - | | | | - | | | | - | | | | 123 | | | | (17,140 | ) | | | (17,017 | ) | December 31, 2022 | | | | | | | 224,699,621 | | | | 258,646 | | | | 19,843 | | | | 4,265 | | | | (220,255 | ) | | | 62,499 | |
Ur-Energy Inc. | Consolidated Statements of Cash Flow | (expressed in thousands of U.S. dollars) | (the accompanying notes are an integral part of these consolidated financial statements) |
| | | | | Year Ended December 31, | | | | Note | | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | | | | Cash provided by (used for): | | | | | | | | | | | | | | | | | | | | | | | | | | Operating activities | | | | | | | | | | | | | Net loss for the period | | | | | | (17,140 | ) | | | (22,938 | ) | | | (14,785 | ) | | | | | | | | | | | | | | | | | Items not affecting cash: | | | | | | | | | | | | | | | | Stock based compensation | | | | | | 1,142 | | | | 1,080 | | | | 951 | | Net realizable value adjustments | | | | | | 6,861 | | | | 7,000 | | | | 7,802 | | Amortization of mineral properties | | | | | | 1,247 | | | | 2,045 | | | | 2,445 | | Depreciation of capital assets | | | | | | 1,768 | | | | 1,789 | | | | 1,818 | | Accretion expense | | | | | | 460 | | | | 486 | | | | 576 | | Amortization of deferred loan costs | | | | | | 43 | | | | 46 | | | | 71 | | Gain on loan forgiveness | | | | | | - | | | | (903 | ) | | | - | | Provision for reclamation | | | | | | (2 | ) | | | (5 | ) | | | 4 | | Mark to market loss (gain) | | | | | | (1,835 | ) | | | 5,998 | | | | 680 | | Gain on sale of assets | | | | | | 67 | | | | - | | | | (16 | ) | Unrealized foreign exchange loss (gain) | | | | | | (25 | ) | | | 353 | | | | - | | Accounts receivable | | | | | | (4 | ) | | | (4 | ) | | | 22 | | Inventory | | | | | | (8,841 | ) | | | (7,109 | ) | | | (8,190 | ) | Prepaid expenses | | | | | | (136 | ) | | | (80 | ) | | | 71 | | Accounts payable and accrued liabilities | | | | | | (1,696 | ) | | | 544 | | | | 108 | | | | | | | | (18,091 | ) | | | (11,698 | ) | | | (8,443 | ) | | | | | | | | | | | | | | | | | Investing activities | | | | | | | | | | | | | | | | Proceeds from sale of capital assets | | | | | | - | | | | - | | | | 18 | | Purchase of capital assets | | | | | | (709 | ) | | | (1,190 | ) | | | (43 | ) | | | | | | | (709 | ) | | | (1,190 | ) | | | (25 | ) | | | | | | | | | | | | | | | | | Financing activities | | | | | | | | | | | | | | | | Issuance of common shares and warrants for cash | | | 12 | | | | 3,775 | | | | 48,841 | | | | 4,805 | | Share issue costs | | | 12 | | | | (94 | ) | | | (2,188 | ) | | | (431 | ) | Proceeds from exercise of warrants and stock options | | | 12 | | | | 3,722 | | | | 8,507 | | | | 99 | | RSU redeemed for cash | | | | | | | (205 | ) | | | (289 | ) | | | (39 | ) | Proceeds from debt financing | | | 13 | | | | - | | | | - | | | | 893 | | Repayment of debt | | | | | | | (1,305 | ) | | | - | | | | - | | | | | | | | | 5,893 | | | | 54,871 | | | | 5,327 | | | | | | | | | | | | | | | | | | | Effects of foreign exchange rate changes on cash | | | | | | | (108 | ) | | | 45 | | | | 53 | | | | | | | | | | | | | | | | | | | Increase (decrease) in cash, cash equivalents, and restricted cash | | | | | | | (13,015 | ) | | | 42,028 | | | | (3,088 | ) | Beginning cash, cash equivalents, and restricted cash | | | | | | | 54,155 | | | | 12,127 | | | | 15,215 | | Ending cash, cash equivalents, and restricted cash | | | 16 | | | | 41,140 | | | | 54,155 | | | | 12,127 | |
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | /s/ Jeffrey T. Klenda, Chairman(expressed in thousands of U.S. dollars unless otherwise indicated)
| | /s/ Thomas H. Parker, Director
|
Ur-Energy Inc.
Consolidated Statements of Operations and Comprehensive Loss
(expressed in thousands of U.S. dollars except for share data)
| | | | | | | Year ended December 31, | | 2017 | | 2016 | | 2015 | | | | | | | Sales (note 14) | 38,368 | | 27,305 | | 41,877 | Cost of sales | (24,401) | | (15,848) | | (29,292) | Gross profit | 13,967 | | 11,457 | | 12,585 | | | | | | | Operating Expenses | | | | | | Exploration and evaluation | (2,623) | | (2,964) | | (2,853) | Development | (4,340) | | (2,886) | | (5,358) | General and administrative | (5,090) | | (4,740) | | (5,715) | Accretion of asset retirement obligations (note 12) | (527) | | (534) | | (515) | Write-off of mineral properties (note 7) | - | | (62) | | - | Income (loss) from operations | 1,387 | | 271 | | (1,856) | Interest expense (net) | (1,377) | | (1,977) | | (2,557) | Warrant mark to market adjustment | - | | 36 | | 307 | Loss on equity investment | (5) | | (5) | | (8) | Write-off of equity investments | - | | (1,089) | | - | Foreign exchange loss | (50) | | (278) | | (1) | Other income | 121 | | 15 | | 5 | | | | | | | Income (loss) before income taxes | 76 | | (3,027) | | (4,110) | | | | | | | Income tax recovery (net) (note 11) | - | | 17 | | 3,315 | Net income (loss) for the period | 76 | | (3,010) | | (795) | | | | | | | Income (loss) per common share | | | | | | Basic | 0.00 | | (0.02) | | (0.01) | Diluted | 0.00 | | (0.02) | | (0.01) | Weighted average number of common shares outstanding | | | | | | Basic | 145,818,394 | | 141,999,537 | | 130,056,932 | Diluted | 147,533,966 | | 141,999,537 | | 130,056,932 | | | | | | | COMPREHENSIVE INCOME (LOSS) | | | | | | Net income (loss) for the period | 76 | | (3,010) | | (795) | Other Comprehensive income (loss), net of tax | | | | | | Translation adjustment on foreign operations | 59 | | 247 | | 20 | Comprehensive income (loss) for the period | 135 | | (2,763) | | (775) |
The accompanying notes are an integral part of these consolidated financial statements.
Ur-Energy Inc.
Consolidated Statements of Shareholders’ Equity
(expressed in thousands of U.S. dollars except for share data)
| | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | Other | | | | | | Capital Stock | | | | Contributed | | Comprehensive | | | | Shareholders' | | Shares | | Amount | | Warrants | | Surplus | | Income | | Deficit | | Equity | | | | | | | | | | | | | | | | # | | $ | | $ | | $ | | $ | | $ | | $ | | | | | | | | | | | | | | | Balance, December 31, 2014 | 129,365,076 | | 168,118 | | 4,175 | | 14,250 | | 3,337 | | (157,779) | | 32,101 | | | | | | | | | | | | | | | Exercise of stock options | 608,531 | | 626 | | - | | (216) | | - | | - | | 410 | Redemption of vested RSUs | 215,168 | | 167 | | - | | (295) | | - | | - | | (128) | Non-cash stock compensation | - | | - | | - | | 893 | | - | | - | | 893 | Net loss and comprehensive income | - | | - | | - | | - | | 20 | | (795) | | (775) | | | | | | | | | | | | | | | Balance, December 31, 2015 | 130,188,775 | | 168,911 | | 4,175 | | 14,632 | | 3,357 | | (158,574) | | 32,501 | | | | | | | | | | | | | | | Exercise of stock options | 16,620 | | 13 | | - | | (4) | | - | | - | | 9 | Common shares issued for cash, net | | | | | | | | | | | | | | of $884 of issue costs | 13,085,979 | | 5,684 | | - | | - | | - | | - | | 5,684 | Redemption of vested RSUs | 385,010 | | 294 | | - | | (350) | | - | | - | | (56) | Expiry of warrants | - | | - | | (66) | | 66 | | - | | - | | - | Non-cash stock compensation | - | | - | | - | | 857 | | - | | - | | 857 | Net loss and comprehensive income | - | | - | | - | | - | | 247 | | (3,010) | | (2,763) | | | | | | | | | | | | | | | Balance, December 31, 2016 | 143,676,384 | | 174,902 | | 4,109 | | 15,201 | | 3,604 | | (161,584) | | 36,232 | | | | | | | | | | | | | | | Exercise of stock options | 871,717 | | 795 | | - | | (253) | | - | | - | | 542 | Common shares issued for cash, net | | | | | | | | | | | | | | of $93 of issue costs | 1,536,169 | | 1,076 | | - | | - | | - | | - | | 1,076 | Redemption of vested RSUs | 447,663 | | 290 | | - | | (385) | | - | | - | | (95) | Non-cash stock compensation | - | | - | | - | | 891 | | - | | - | | 891 | Net income and comprehensive income | - | | - | | - | | - | | 59 | | 76 | | 135 | | | | | | | | | | | | | | | Balance, December 31, 2017 | 146,531,933 | | 177,063 | | 4,109 | | 15,454 | | 3,663 | | (161,508) | | 38,781 |
The accompanying notes are an integral part of these consolidated financial statements
Ur-Energy Inc.
Consolidated Statements of Cash Flow
(expressed in thousands of U.S. dollars)
| | | | | | | Year ended December 31, | | 2017 | | 2016 | | 2015 | | | | (Restated - note 2) | | (Restated - note 2) | Cash provided by (used in) | | | | | | Operating activities | | | | | | Net income (loss) for the period | 76 | | (3,010) | | (795) | Items not affecting cash: | | | | | | Stock based expense | 891 | | 857 | | 893 | Depreciation and amortization | 4,890 | | 5,144 | | 6,504 | Accretion of asset retirement obligations | 527 | | 534 | | 515 | Amortization of deferred loan costs | 120 | | 152 | | 177 | Provision for reclamation | (13) | | - | | - | Write off of equity investments | - | | 1,089 | | - | Write-off of mineral properties | - | | 62 | | - | Warrants mark to market gain | - | | (36) | | (307) | Gain on disposition of assets | (2) | | (14) | | (5) | Loss on foreign exchange | 53 | | 280 | | - | Other loss | 4 | | 5 | | 9 | Income tax recovery | - | | (17) | | (3,345) | Change in non-cash working capital items: | | | | | | Accounts receivable | (17) | | (7) | | 19 | Inventory | (406) | | (765) | | 1,823 | Prepaid expenses | 109 | | (111) | | 125 | Accounts payable and accrued liabilities | (606) | | (773) | | (101) | | 5,626 | | 3,390 | | 5,512 | | | | | | | Investing activities | | | | | | Mineral property costs | (18) | | - | | 1 | Funding of equity investment | (5) | | (5) | | (8) | Proceeds from sale of property and equipment | - | | 91 | | 26 | Purchase of capital assets | (181) | | (296) | | (79) | | (204) | | (210) | | (60) | | | | | | | Financing activities | | | | | | Issuance of common shares for cash | 1,169 | | 6,568 | | - | Share issue costs | (93) | | (884) | | - | Proceeds from exercise of stock options | 542 | | 9 | | 410 | RSUs redeemed to pay withholding or paid in cash | (94) | | (56) | | (142) | Repayment of debt | (4,623) | | (8,679) | | (7,374) | | (3,099) | | (3,042) | | (7,106) | | | | | | | Effects of foreign exchange rate changes on cash | 5 | | (28) | | (7) | | | | | | | Net change in cash, cash equivalents and restricted cash | 2,328 | | 110 | | (1,661) | Beginning cash, cash equivalents and restricted cash | 9,109 | | 8,999 | | 10,660 | Ending cash, cash equivalents and restricted cash (note 15) | 11,437 | | 9,109 | | 8,999 |
The accompanying notes are an integral part of these consolidated financial statements
Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
1.Nature of Operations Ur-Energy Inc. (the “Company”) was incorporated on March 22, 2004 under the laws of the Province of Ontario. The Company continued under the Canada Business Corporations Act on August 8, 2006. The Company is an exploration stage mining company,issuer, as defined by United StatesU.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 primarily in Wyoming. As of August 2013, theThe Company commenced uranium production at its Lost Creek Project in Wyoming.Wyoming in 2013. Due to the nature of the uranium miningrecovery methods used by the Company on the Lost Creek Property, and the definition of “mineral reserves” under Subpart 1300 to Regulation S-K (“S-K 1300”), the Company has not determined whether the properties contain mineral reserves. This was true while the Company reported its mineral resources pursuant to National Instrument 43-101 (“NI 43-101”), which uses the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards, the Company has not determined whether the properties contain mineral reserves. However, theStandards. The Company’s “Amended Preliminary Economic Assessment of thereport The Lost Creek ISR Uranium Property, Sweetwater County, Wyoming,” March 7, 2022 and as amended in non-substantive ways, February 8, 2016 (“Loston September 19, 2022 (the “Lost Creek PEA”Report”) outlines the potential viability of the Lost Creek Property.Property as of December 31, 2021. 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, as we have done in the past, negotiating changes in delivery dates, purchasing inventory at favorable prices and raising capital.
As at December 31, 2017, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $1.2 million which are due within normal trade terms of generally 30 to 60 days, notes payable of $19.3 million of which $4.7 million is due within 1 year, and asset retirement obligations with estimated completion dates until 2033.
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 a minimum of three months to over a year 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, well in advance.
Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
Besides operational cash flows, and our cash flow management functions referred to above, The Company has financed its operations from its inception primarily through the issuance of equity securities and debt instruments
It is possible that additional funding might be sought. Although the Company has been successful in obtaining debt and raising equity financing in the past, there can be no guarantee that such funding will be available in the future.
3.SummarySummary of Significant Accounting Policies
Basis of presentation These financial statements have been prepared by management in accordance with United States generally accepted accounting principles (“US GAAP”) and include all the assets, liabilities and expenses of the Company and its wholly-ownedwholly owned subsidiaries Ur-Energy USA Inc.; NFU Wyoming, LLC; Lost Creek ISR, LLC; NFUR Bootheel, LLC; Hauber Project LLC; NFUR Hauber, LLC; and Pathfinder Mines Corporation. All inter-company balances and transactions have been eliminated upon consolidation. Ur-EnergyUr‑Energy Inc. and its wholly-ownedwholly owned subsidiaries are collectively referred to herein as the “Company.” Exploration Stage The Company has established the existence of uranium resources for certain uranium projects, including the Lost Creek Property. The Company has not established proven or probable reserves, as defined by the SEC under Industry Guide 7,S-K 1300, through the completion of a finalpre-feasibility or “bankable” feasibility study for any of its uranium projects, including the Lost Creek Property. Furthermore, the Company currently has no plans to establish proven or probable reserves for any of its uranium projects for which the Company plans on utilizing in situ recovery (“ISR”) mining, such as the Lost Creek Property or the Shirley Basin Project. As a result, and despite the fact thateven though the Company commenced recovery of uranium at the Lost Creek Project in August 2013, the Company remains in the Exploration Stagean exploration stage issuer, as defined under Industry Guide 7,in S-K 1300, and will continue to remain in the Exploration Stagean exploration stage issuer until such time as proven or probable mineral reserves have been established. Since
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Because the Company commenced recovery of uranium at the Lost Creek Project without having established proven and probable reserves, any uranium resources established or extracted from the Lost Creek Project should not be in any way associated with having established proven or probable mineral reserves. Accordingly, information concerning mineral deposits set forth herein may not be comparable to information made public by companies that have reserves in accordance with United StatesU.S. standards. Use of estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates management makes in the preparation of Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
these consolidated financial statements relate to potential impairment in the carrying value of the Company’s long-lived assets due to depressed uranium prices or other internal or external factors, the fair value of stock-based compensation and warrant liabilities using the factors associated with the Black-Scholes calculations, estimation of the amount of recoverable uranium included in the in-process inventory, estimation of factors surrounding asset retirement obligations such as interest rates, discount rates and inflation rates, total cost and the time until the asset retirement commences and the offset of future income taxes through deferred tax assets. Actual results could differ from those estimates. Cash and cash equivalents Cash and cash equivalents consistsconsist of cash balances and highly liquid investments with original maturities of three months or less that are considered to be cash equivalents.less. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Restricted cash is excluded from cash and cash equivalents and is included in other long-term assetsassets. Restricted cash Cash which is restricted contractually or whichthat secures various instruments includingrelated to surety bonds, and letters of credit securingwhich secure reclamation obligations, and a state lease is shown as restricted cash. Inventory In-process inventory represents uranium that has been extracted from the wellfield and captured in the processing plant and is currently being transformed into a saleable product. Plant inventory is U3O8 that is contained in yellowcake, which has been dried and packaged in drums, but not yet shipped to the conversion facility. The amount of U3O8 in the plant inventory is determined by weighing and assaying the amount of U3O8 packaged into drums at the plant. Conversion facility inventory is U3O8 that has been shipped to the conversion facility. The amount of U3O8 in the conversion facility inventory includes the amount of U3O8 contained in drums shipped to the conversion facility plus or minus any final weighing and assay adjustments per the terms of theour uranium supplier’s agreement with the conversion facility. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
The Company’s inventories are measured at the lower of cost or net realizable value and reflect the U3O8 content in various stages of the production and sales process including in-process inventory, plant inventory, and conversion facility inventory. Operating supplies are expensed when purchased. Mineral properties Acquisition costs of mineral properties are capitalized. When production is attained, amortization is calculated on a straight-line basis. The original estimated life for the Lost Creek projectProject was 10 years which is being used to amortize the mineral property acquisition costs. If properties are abandoned or sold, they are written off. If properties are considered to be impaired in value, the costs of the properties are written down to their estimated fair value at that time. Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
Exploration, evaluation, and development costs Exploration and evaluation expensescosts consist of labor, annual lease and claim maintenance fees, and the associated costs of the exploration, geology departmentevaluation, and regulatory departments as well as exploration costs including drilling and analysis on properties whichthat have not reached the permitting or operations stage. Development expense relates to the Company’s Lost Creek, LC East, Lucky Mc and Shirley Basin projects, which are more advanced in terms of permitting and preliminary economic assessments.assessment work. Development expenses include all costs associated with exploring, delineating, and permitting, within those projects, the costs associated with the construction and development of permitted mine units including wells, pumps, piping, header houses, roads, and other infrastructure related to the preparation of a mine unit to begin extraction operations as well as the cost of drilling and completing disposal wells. Capital assets Property, plant, and equipment assets, including machinery, processing equipment, enclosures, and vehicles are recorded at cost including acquisition, installation costs, and expenditures that extend the life of such assets, are recorded at cost including acquisition and installation costs.assets. The enclosure costs include both the building housingenclosure and the processing equipment necessary for the extraction of uranium from impregnated water pumped in from the wellfield to the packaging of uranium yellowcake for delivery into sales. These enclosure costs are combined as the equipment and related installation associated with the equipment is an integral part of the structure itself.The costs of self-constructed assets include direct construction costs, direct overhead, and allocated interest during the construction phase. Depreciation is calculated using a declining balance method for most assets, with the exception ofexcept the plant enclosure and related equipment. Depreciation onof the plant enclosure and related equipment is calculated on a straight-line basis. Estimated lives for depreciation purposes range from three years for computer equipment and software to 20 years for the plant enclosure and the name platenameplate life of the related equipment. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Impairment of long-lived assets The Company assesses the possibility of impairment in the net carrying value of its long-lived assets when events or circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. When potential impairment is indicated, management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, recoverable resources, and operating, capital, and reclamation costs. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is determined using discounted future net cash flows, or other measures of fair value. Right of Use Assets and Liabilities Right of use assets include storage facility and office equipment leases. We recognize an asset and corresponding liability, which are included in non-current assets and other liabilities in the consolidated balance sheet, based on the present value of the remaining minimum rental payments of the leases. The discount rates used 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. Debt Long-term debt is carried at amortized cost. Debt issuance costs, debt premiums and discounts and annual fees are included in the long-term debt balance and amortized using the effective interest rate over the contractual terms of the long-term debt. Asset retirement obligations For mining properties, various federal and state mining laws and regulations require the Company to reclaim the surface areas and restore groundwater quality to the pre-existing quality or class of use after the completion of mining. The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs an obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
Asset retirement obligations consist of estimated final well closures,abandonments, plant closure and removal, and the associated reclamation and restoration costs to be incurred by the Company in the future. The estimated fair value of the asset retirement obligation is based on the current estimated reclamation cost escalated at an inflation rate and then discounted at a credit adjusted risk-free rate. This liability is recorded, and a corresponding asset is capitalized as part of the cost of the related asset. The asset andis amortized over its usefulremaining productive life. The liability accretes until it reaches the estimated future reclamation cost and remains until the Company settles the obligation. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Revenue recognition The recognition of revenueOur revenues are primarily derived from the sale of U3O8 is under either long-term (deliveries typically in accordancetwo to five years) or spot (immediate delivery) contracts with our customers. The contracts specify the guidelines outlinedquantity to be delivered, the price or specific calculation method of the price, payment terms, and the year(s) of the delivery. There may be some variability in ASC Section 605-10-25, Revenue Recognition. The Company delivers U3O8 to a conversion facility and receives credit forthe dates of the delivery quantity, measured in pounds, less a reserve for variances inor the quantity and quality ofto be delivered depending on the product delivered. Oncecontract, but those issues are addressed before the product is assayed, the credit is adjusted to the full amount calculated.delivery date. When a delivery is approved, the Company notifies the conversion facility with instructions for a title transfer to the customer. Revenue is recognized once a title transfer of the U3O8is confirmed by the conversion facility.
Occasionally,We also receive a small amount of revenue from disposal fees. We have contracts with our customers that specify the Company sellstype and volume of disposal material we accept. Monthly, we invoice those customers based on deliveries of material to the disposal site by the customer. Materials are measured and categorized at the time of delivery commitments to an independent trader. The proceeds are recorded as deferredand verified by the customer. We recognize the revenue untilat the trader or purchaser acknowledges the deliveries had been made, at which time the portionend of the sale relating to those deliveries is taken into sales revenue. The Company sold two delivery commitments to an independent trader in 2016. The corresponding deliveries were made in 2016 andmonth that the income recognized in that year.material was received.
Stock-based compensation Stock-based compensation cost from the issuance of stock options and restricted share units (“RSUs”) is measured at the grant date based on the fair value of the award and is recognized over the related service period. Stock-based compensation cost iscosts are charged to construction,mine operations, exploration and evaluation, development, and general and administrative expense on the same basis as other compensation costs. Income taxes The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities. The Company provides a valuation allowance on deferred tax assets unless it is more likely than not that such assets will be realized. Earnings and loss per share calculations Diluted earnings per common share are calculated by including all options whichthat are in-the-money based on the average stock price for the period as well as RSUs which were outstanding at the end of the quarter.that are outstanding. The treasury stock method was applied to determine the dilutive number of options. Warrants are included only if the exercise price is less than the average stock price for the quarter. In periods of loss, the diluted loss per common share is equal to the basic loss per common share due to the anti-dilutive effect of all convertible securities. Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Classification of financial instruments The Company’s financial instruments consist of cash, short-term investments, accounts receivable, restricted cash, deposits, accounts payable and accrued liabilities, other liabilities, and notes payable. The Company has made the following classifications for these financial instruments: | · | | Cash, accounts receivable, restricted cash, and deposits are recorded at amortized cost. Interest income is recorded using the effective interest rate method and is included in income for the period. |
| · | | Accounts payable and accrued liabilities, and notes payable, are measured at amortized cost. |
| · | | Other liabilities, which relatedrelate to the derivative on the warrantwarrants issued in U.S. dollars, are adjusted to the market value using the Black-Scholes valuation method at the end of0of each reporting period. |
New accounting pronouncements which may affect future reporting
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The amendments in ASU 2014-09 affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenuerecognition requirements in Topic 605, RevenueRecognition, and most industry-specific guidance, and creates a Topic 606 Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of the promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. We have reviewed our contracts as well as our procedures and do not anticipate any changes in the manner or timing with which we reflect our revenues.
In January 2016, the FASB issued ASU 2016-1, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825). The amendments in this ASU supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. The amendments improve financial reporting by providing relevant information about an entity’s equity investments and reducing the number of items that are recognized in other comprehensive income. This guidance is effective for annual reporting beginning after December 15, 2017, including interim periods within the year of adoption, and calls for prospective application, with early application permitted. Accordingly, the standard is effective for us beginning in the first quarter of fiscal 2018. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize all leases, including operating leases, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. Now, the only leases we hold are for equipment, office space in one location and a limited number of leases on select mineral properties. We do not anticipate the additional disclosures to reflect those leases will have an impact on our statement of financial position, as the total future lease payments are not material.
New accounting pronouncements which were implemented this year
In July 2015, the FASB issued ASU No. 2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU2015-11 requires that inventory within the scope of this ASU be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to all inventory, measured using average cost which is how the Company measures inventory. For all entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. This is consistent with our past policies and had no financial or reporting impact when implemented during the first quarter of 2017.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation - Improvements to Employee Share-Based Payment Accounting (Topic 718), which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. Regarding forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. This ASU is effective for fiscal years beginning after December 15, 2016 including interim periods within that reporting period. We currently recognize no income tax expense or benefit due to significant income tax credits and net operating losses which are fully reserved under a valuation allowance. There was therefore no effect on our accounting or reporting at the time of implementation earlier this year. We have made the election to continue to recognize losses from forfeitures at inception rather than when they vest or occur.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows – Restricted Cash a consensus of the FASB Emerging Task Force (Topic 230), which addresses the presentation of restricted cash in the statement of cash flows. Under the new standard, restricted cash will be presented with cash and cash equivalents in the statement of cash flows instead of being reflected as non-cash investing or financing activities. A reconciliation of the make-up of the ending cash, cash equivalent and restricted cash balance will be required for entities who reflect restricted cash as separate items on the statement of financial position. In addition, a description of the restrictions on the cash will be required. This ASU is effective for fiscal years beginning after December 15, 2017 including interim periods within that reporting period, however early adoption is permitted. We elected to adopt this standard as of the first quarter of 2017. Accordingly, the cash balances
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
reflected in the Statement of Cash Flows have been increased by $7.8 million for the year ended December 31, 2017 and $7.7 million for the years ended December 31, 2016 and 2015. In addition, we have added note 15 – Supplemental Information for the Statement of Cash Flows which reconciles the cash balances shown on the Statement of Cash Flows with the appropriate balances on the Balance Sheet.
4.3. Cash and cash equivalents
The Company’s cash and cash equivalents consistsconsist of the following: Cash and cash equivalents | | | December 31, 2022 | | December 31, 2021 | | | | | | | | | | | | As at | | | December 31, 2017 | | December 31, 2016 | | | $ | | $ | | Cash on deposit at banks | 1,667 | | 580 | | Cash on deposit | | | 2,560 | | 9,068 | | Money market funds | 2,212 | | 972 | | | 30,443 | | | | 37,121 | | | | | | | | 33,003 | | | | 46,189 | | | 3,879 | | 1,552 | |
5.4. Inventory
The Company’s inventory consists of the following: | | | | | As at | | December 31, 2017 | | December 31, 2016 | | $ | | $ | In-process inventory | 315 | | 897 | Plant inventory | 369 | | 461 | Conversion facility inventory | 3,831 | | 2,751 | | | | | | 4,515 | | 4,109 |
Inventory by Type | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | Conversion facility inventory | | | 9,903 | | | | 7,923 | | | | | 9,903 | | | | 7,923 | |
Inventory by Duration | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | Current portion of inventory | | | 9,903 | | | | - | | Non-current portion of inventory | | | - | | | | 7,923 | | | | | 9,903 | | | | 7,923 | |
AsUsing lower of December 31, 2017, inventory was carried at net realizable value. The cost of inventory is recognized as an expense when the corresponding sale is made and the costs are included in Cost of Sales. Adjustments to inventory to reflect theor net realizable value are also includedcalculations, the Company reduced the inventory valuation by $6,861 in Cost of Sales. For the year 2017, there was a write down of $2.6 million.2022 and $7,000 in 2021.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
(expressed in thousands of U.S. dollars unless otherwise indicated)
6.5. Restricted Cash
The Company’s restricted cash consists of the following: | | | | | | | | | As at | | December 31, 2017 | | December 31, 2016 | | $ | | $ | | | | | Money market account | 7,458 | | 7,457 | Certificates of deposit | 100 | | 100 | | | | | | 7,558 | | 7,557 |
Restricted Cash | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | Cash pledged for reclamation | | | 8,137 | | | | 7,966 | | | | | 8,137 | | | | 7,966 | |
The Company’s restricted cash consists of money market accounts and short-term government bonds. The bonding requirements for reclamation obligations on various properties have been reviewed and approved by the Wyoming Department of Environmental Quality (“WDEQ”), the Wyoming Uranium Recovery Program (“URP”), and the Bureau of Land Management (“BLM”) as applicable. The restricted cash is pledged as collateral against performance surety bonds, which secure the estimated costs of reclamation related to the properties. Surety bonds providing $28.3 million and $27.6 million of coverage towards reclamation obligations were collateralized by the restricted cash as of December 31, 2022, and December 31, 2021, respectively. (a)Ur-Energy Inc.
| Notes to Consolidated Financial Statements | The bonding requirements for reclamation obligations on various properties have been agreed to by the Wyoming Department of Environmental Quality, United States Department of the Interior and United States Nuclear Regulatory Commission. The restricted money market accounts are pledged as collateral against performance surety bonds which are used to secure the potential costs of reclamation related to those properties. Surety bonds providing $27,081 of coverage towards specific reclamation obligations are collateralized by $7,444 of the restricted cash at December 31, 2017.2022
| | (expressed in thousands of U.S. dollars unless otherwise indicated) |
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
7. 6. Mineral Properties and Assets Held for Sale
The Company’s mineral properties consist of the following: Mineral Properties | | Lost Creek Property | | | Shirley Basin Project | | | Other U.S. Properties | | | Total | | | | | | | | | | | | | | | December 31, 2019 | | | 10,184 | | | | 17,437 | | | | 15,591 | | | | 43,212 | | | | | | | | | | | | | | | | | | | Change in estimated reclamation costs | | | (1,463 | ) | | | (120 | ) | | | - | | | | (1,583 | ) | Depletion and amortization | | | (2,445 | ) | | | - | | | | - | | | | (2,445 | ) | | | | | | | | | | | | | | | | | | December 31, 2020 | | | 6,276 | | | | 17,317 | | | | 15,591 | | | | 39,184 | | | | | | | | | | | | | | | | | | | Change in estimated reclamation costs | | | 296 | | | | 45 | | | | (877 | ) | | | (536 | ) | Reclassify assets held for sale | | | - | | | | - | | | | (1,536 | ) | | | (1,536 | ) | Depletion and amortization | | | (2,045 | ) | | | - | | | | - | | | | (2,045 | ) | | | | | | | | | | | | | | | | | | December 31, 2021 | | | 4,527 | | | | 17,362 | | | | 13,178 | | | | 35,067 | | | | | | | | | | | | | | | | | | | Reclassify assets no longer held for sale | | | - | | | | - | | | | 1,536 | | | | 1,536 | | Change in estimated reclamation costs | | | - | | | | 326 | | | | - | | | | 326 | | Depletion and amortization | | | (1,247 | ) | | | - | | | | - | | | | (1,247 | ) | | | | | | | | | | | | | | | | | | December 31, 2022 | | | 3,280 | | | | 17,688 | | | | 14,714 | | | | 35,682 | |
United States | | | | | | | | | Lost Creek | | Pathfinder | | Other U.S. | | | | Property | | Mines | | Properties | | Total | | $ | | $ | | $ | | $ | Balance, December 31, 2015 | 16,662 | | 20,738 | | 13,210 | | 50,610 | | | | | | | | | Change in estimated reclamation costs (note 12) | 338 | | (872) | | - | | (534) | Property write-offs | - | | - | | (62) | | (62) | Amortization | (2,985) | | - | | - | | (2,985) | | | | | | | | | Balance, December 31, 2016 | 14,015 | | 19,866 | | 13,148 | | 47,029 | | | | | | | | | Acquisition costs | - | | - | | 18 | | 18 | Change in estimated reclamation costs (note 12) | 613 | | (165) | | - | | 448 | Amortization | (2,818) | | - | | - | | (2,818) | | | | | | | | | Balance, December 31, 2017 | 11,810 | | 19,701 | | 13,166 | | 44,677 |
United States
Lost Creek Property The Company acquired certain Wyoming properties in 2005 when Ur-Energy USA Inc. entered into the Membership Interest Purchase Agreement (“MIPA”) with New Frontiers Uranium, LLC in 2005. Under the terms of the MIPA, the Company purchased 100% of NFU Wyoming, LLC. Assets acquired in this transaction include the Lost Creek Project, other Wyoming properties, and development databases. NFU Wyoming, LLC was acquired for aggregate consideration of $20 million plus interest. Since 2005, the Company has increased its holdings adjacent to the initial Lost Creek acquisition through staking additional claims and making 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. We are not recovering U3O8 within the State section under lease at Lost Creek and are therefore not subject to royalty payments currently. Other royalties exist on certain mining claims at the LC South, LC East and EN Projects. There are no royalties on the mining claims in the Lost Creek, LC North, or LC West Projects. In September 2013, after the Company commenced mineral extraction and production at the Lost Creek
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Shirley Basin Project it began amortizing the related mineral properties on a straight-line basis. Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
Pathfinder Mines Corporation
The Company acquired additional Wyoming properties in 2013 when Ur-Energy USA Inc. closed a Share Purchase Agreement (“SPA”) with an AREVA Mining affiliate in December 2013. Under the termspurchased 100% 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 equipmentProject, other Wyoming properties, and development databases. Pathfinder was acquired for aggregate consideration of $6.7 million, a 5% production royalty under certain circumstances and the assumption of $5.7 million in estimated asset reclamation obligations. The purchase price allocation attributed $5.7 million to asset retirement obligations, $3.3 million to deferred tax liabilities, $15.3 million to mineral properties and the balance to the remaining assets and liabilities. The royalty expired on June 30, 2016.other consideration. Other U.S. Properties Other U.S. properties The other U.S. properties include the acquisition costcosts of several potentialprospective mineralized properties, includingwhich the Lost Soldier Project. The Company continues to maintain those properties through claim payments, lease payments, insurance, and other holding costs in anticipation of future exploration efforts.
In June 2016,Impairment testing
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the Company decidedcarrying amount of an asset may not be recoverable. Management applies significant judgment to abandon its claimsassess mineral properties and capital assets for impairment indicators that could give rise to the requirement to conduct a formal impairment test. Circumstances that could trigger a review include, but are not limited to: significant decreases in the Hauber Projectmarket price of the asset; significant adverse changes in the business climate or legal factors; significant changes in expected capital, operating, or reclamation costs; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and wrote off $62 thousand beingcurrent expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. The recoverability of these assets is measured by comparison of the carrying valueamounts to the future undiscounted net cash flows expected to be generated by the assets. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. Management did not identify impairment indicators that would require a formal impairment test. Lost Creek has been the Company’s sole source for the uranium concentrates sold to generate sales revenues since 2013. The economic viability of the investment in that project. Impairment testing
The Company reviewsCompany’s mining activities, including the impairment indicators outlined in US GAAP guidance. In 2017, the sole indication of possible impairment was the continuing weakness in industry-wide reported sales prices despite a slight increase in prices for the year. While this price has no immediate effect on the Company since it has sales contracts until 2021, a cash flow analyses for eachexpected duration and profitability of Lost Creek and of any future ISR mines, such as Shirley Basin, was performed. The mine life used was consistent with that reportedhas many risks and uncertainties. These include, but are not limited to: (i) a significant, prolonged decrease in the respective NI 43-101 Preliminary Economic Assessment for each property. Cash flows were calculated using a salesmarket price of $31 per pounduranium; (ii) difficulty in marketing and/or selling uranium concentrates; (iii) significantly higher than expected capital costs to construct the mine and/or processing plant; (iv) significantly higher than expected extraction costs; (v) significantly lower than expected uranium extraction; (vi) significant delays, reductions or stoppages of uranium extraction activities; and (vii) the introduction of significantly more stringent regulatory laws and regulations.
Our mining activities may change because of any one or more of these risks and uncertainties and there is no assurance that any mineral deposit from which we extract uranium or other minerals from will result in profitable mining activities. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Assets Held for Sale A non-core, unpermitted, non-operating property held by Pathfinder Mines Corporation was considered to be an asset held for sale in 2021. In 2022, active discussions for the long-term quoted price in industry periodicalssale of the property were terminated. The property was therefore reclassified to mineral properties and was no longer considered an asset held for sale as of December 31, 2017. Based on these undiscounted cash flow models, the assets will be recovered and no impairments were indicated for any of the respective properties. For other properties which have reported mineral resources supported by NI 43-101 Technical Reports, we applied the estimated market pricing to the mineral resource estimates as well as realization percentages which were taken from a previous valuation completed by a third party with respect to the Lost Creek Project in conjunction with obtaining our Wyoming bond loan.
Our remaining properties, which have no estimated mineral resource, continue to be carried at their acquisition costs.2022.
The Company’s accounting policy is to expense development costs including, but not limited to, production wells, header houses, pipingfollowing table summarizes the values associated with the asset held for sale as of December 31, 2022, and power as we have no proven and probable reserves.December 31, 2021. Assets held for sale | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | Mineral property cost of the asset held for sale | | | - | | | | 1,536 | | Liabilities associated with the asset held for sale | | | - | | | | - | | | | | - | | | | 1,536 | |
Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
8.7. Capital Assets
The Company’s capital assets consist of the following: | | | | | | | | | | | | | December 31, 2022 | | December 31, 2021 | | | As of | | As of | | | December 31, 2017 | | December 31, 2016 | | | | | Accumulated | | Net Book | | | | Accumulated | | Net Book | | | Cost | | Depreciation | | Value | | Cost | | Depreciation | | Value | | | $ | | $ | | $ | | $ | | $ | | $ | | Capital Assets | | | Cost | | Accumulated Depreciation | | Value | | Cost | | Accumulated Depreciation | | Net Book Value | | | | | | | | | | | | | | | | | | | | | | | | | | | Rolling stock | 3,388 | | 3,184 | | 204 | | 3,251 | | 2,966 | | 285 | | 3,486 | | (3,437 | ) | | 49 | | 3,450 | | (3,413 | ) | | 37 | | Enclosures | 32,991 | | 6,880 | | 26,111 | | 32,991 | | 5,229 | | 27,762 | | 34,379 | | (15,164 | ) | | 19,215 | | 33,949 | | (13,488 | ) | | 20,461 | | Machinery and equipment | 1,237 | | 663 | | 574 | | 1,262 | | 599 | | 663 | | 1,659 | | (1,007 | ) | | 652 | | 1,489 | | (946 | ) | | 543 | | Furniture, fixtures and leasehold improvements | 119 | | 104 | | 15 | | 119 | | 98 | | 21 | | Furniture and fixtures | | | 265 | | (144 | ) | | 121 | | 266 | | (121 | ) | | 145 | | Information technology | 1,120 | | 1,063 | | 57 | | 1,153 | | 1,036 | | 117 | | 1,114 | | (1,035 | ) | | 79 | | 1,177 | | (1,121 | ) | | 56 | | Right of use assets | | | | 33 | | | | (17 | ) | | | 16 | | | | 36 | | | | (18 | ) | | | 18 | | | | | | | | | | | | | | | | 40,936 | | | | (20,804 | ) | | | 20,132 | | | | 40,367 | | | | (19,107 | ) | | | 21,260 | | | 38,855 | | 11,894 | | 26,961 | | 38,776 | | 9,928 | | 28,848 | |
Total depreciation expense was $3.5 million, $3.8 million and $5.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.
9.8. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following: | | | | | | | | | As at | | December 31, 2017 | | December 31, 2016 | | $ | | $ | Accounts payable | 840 | | 725 | Payroll and other taxes | 1,224 | | 1,251 | Severance and ad valorem tax payable | 975 | | 1,649 | | | | | | 3,039 | | 3,625 |
Accounts Payable and Accrued Liabilities | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | Accounts payable | | | 660 | | | | 854 | | Accrued payroll liabilities | | | 449 | | | | 1,927 | | Accrued severance, ad valorem, and other taxes payable | | | 59 | | | | 83 | | | | | 1,168 | | | | 2,864 | |
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
9.Notes Payable 10.Notes Payable
On October 15, 2013, the Sweetwater County Commissioners approved the issuance of a $34.0$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% Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
per annum on a quarterly basis commencing January 1, 2014. The principal is payablewas to be paid in 28 quarterly installments commencing January 1, 2015 and continuing through2015. On October 1, 2021. Deferred loan fees include legal fees, commissions, commitment fees2019, the Sweetwater County Commissioners and other costs associated with obtaining the various financings. Those fees amortizable within 12 monthsState of December 31, 2017 are considered current.Wyoming approved an eighteen-month deferral of principal payments beginning October 1, 2019. On October 6, 2020, the State Bond Loan was again modified to defer principal payments for an additional eighteen months. Quarterly principal payments were resumed on October 1, 2022, and the last payment will be due on October 1, 2024.
The following table listssummarizes the Company’s current and long-term portion of the Company’s debt instrument at December 31, 2017 and December 31, 2016:debts. | | | | | As at | | December 31, 2017 | | December 31, 2016 | | $ | | $ | Current debt | | | | Sweetwater County Loan | 4,895 | | 4,623 | Less deferred financing costs | (121) | | (121) | | 4,774 | | 4,502 | | | | | Long term debt | | | | Sweetwater County Loan | 14,996 | | 19,891 | Less deferred financing costs | (334) | | (456) | | 14,662 | | 19,435 |
Current and Long-term Debt | | December 31, 2022 | | | December 31, 2021 | | | | | | | | | Current | | | | | | | State Bond Loan | | | 5,409 | | | | 1,305 | | Deferred financing costs | | | (43 | ) | | | (43 | ) | | | | 5,366 | | | | 1,262 | | | | | | | | | | | Long-term | | | | | | | | | State Bond Loan | | | 5,727 | | | | 11,136 | | Deferred financing costs | | | (33 | ) | | | (76 | ) | | | | 5,694 | | | | 11,060 | |
ScheduleThe schedule of remaining payments on outstanding debt as of December 31, 2017:2022 is presented below.
| | | | | | | | | | | | Debt | Total | | 2018 | | 2019 | | 2020 | | 2021 | | Maturity | | $ | | $ | | $ | | $ | | $ | | | Sweetwater County Loan | | | | | | | | | | | | Principal | 19,891 | | 4,895 | | 5,183 | | 5,487 | | 4,326 | | 01-Oct-21 | Interest | 2,363 | | 1,039 | | 752 | | 447 | | 125 | | | | | | | | | | | | | | | Total | 22,254 | | 5,934 | | 5,935 | | 5,934 | | 4,451 | | |
Remaining Payments | | Total | | | 2023 | | | 2024 | | | Final payment | | | | | | | | | | | | | | | State Bond Loan | | | | | | | | | | | | | Principal | | | 11,136 | | | | 5,409 | | | | 5,727 | | | Oct-2024 | | Interest | | | 732 | | | | 525 | | | | 207 | | | | | | | | 11,868 | | | | 5,934 | | | | 5,934 | | | | |
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
10. Asset Retirement Obligations Asset retirement obligations (“ARO”) relate to the Lost Creek mine and Shirley Basin and are equal to the current estimated reclamation cost escalated at inflation rates ranging from 0.74% to 2.44% and then discounted at credit adjusted risk-free rates ranging from 0.33% to 9.05%. Current estimated reclamation costs include costs of closure, reclamation, demolition and stabilization of the well fields, processing plants, infrastructure, aquifer restoration, waste dumps, and ongoing post-closure environmental monitoring and maintenance costs. The schedule of payments required to settle the future reclamation extends through 2033. The present value of the estimated future closure estimate is presented in the following table. Asset Retirement Obligations | | Total | | | | | | December 31, 2019 | | | 30,972 | | | | | | | Change in estimated reclamation costs | | | (1,583 | ) | Accretion expense | | | 576 | | | | | | | December 31, 2020 | | | 29,965 | | | | | | | Change in estimated reclamation costs | | | (536 | ) | Accretion expense | | | 486 | | | | | | | December 31, 2021 | | | 29,915 | | | | | | | Change in estimated reclamation costs | | | 326 | | Accretion expense | | | 460 | | | | | | | December 31, 2022 | | | 30,701 | |
The restricted cash discussed in note 5 relates to the surety bonds provided to the governmental agencies for these and other reclamation obligations. 11. Warrant Liabilities In August 2020, we issued 9,000,000 warrants as part of a registered direct offering with two warrants redeemable for one common share of the Company’s stock at a price of $0.75 per full share. The warrants were all exercised prior to expiry in August 2022. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
In February 2021, we issued 16,930,530 warrants as part of an underwritten public offering with two warrants redeemable for one common share of the Company’s stock at a price of $1.35 per full share. The warrants expire in February 2024. Because the warrants are priced in US. dollars and the functional currency of Ur-Energy Inc. is Canadian dollars, a derivative financial liability was created. Using Level 2 inputs of the fair value hierarchy under US GAAP, the liability created is measured and recorded at fair value, and adjusted monthly, using the Black-Scholes model described below as there is no active market for the warrants. Any gain or loss from the adjustment of the liability is reflected in net income for the period. Activity with respect to the warrant liabilities is presented in the following tables. Warrant Liability Activity | | September 2018 Warrants | | | August 2020 Warrants | | | February 2021 Warrants | | | Total | | | | | | | | | | | | | | | December 31, 2019 | | | 575 | | | | - | | | | - | | | | 575 | | | | | | | | | | | | | | | | | | | Warrants issued | | | - | | | | 860 | | | | - | | | | 860 | | Mark to market revaluation loss (gain) | | | 161 | | | | 519 | | | | - | | | | 680 | | Effects for foreign exchange rate changes | | | (7 | ) | | | 36 | | | | - | | | | 29 | | | | | | | | | | | | | | | | | | | December 31, 2020 | | | 729 | | | | 1,415 | | | | - | | | | 2,144 | | | | | | | | | | | | | | | | | | | Warrants issued | | | - | | | | - | | | | 2,604 | | | | 2,604 | | Warrants exercised | | | (3,961 | ) | | | (388 | ) | | | (97 | ) | | | (4,446 | ) | Mark to market revaluation gain | | | 3,227 | | | | 1,020 | | | | 1,751 | | | | 5,998 | | Effects for foreign exchange rate changes | | | 5 | | | | (20 | ) | | | (22 | ) | | | (37 | ) | | | | | | | | | | | | | | | | | | December 31, 2021 | | | - | | | | 2,027 | | | | 4,236 | | | | 6,263 | | | | | | | | | | | | | | | | | | | Warrants exercised | | | - | | | | (1,790 | ) | | | - | | | | (1,790 | ) | Mark to market revaluation gain | | | - | | | | (215 | ) | | | (1,620 | ) | | | (1,835 | ) | Effects for foreign exchange rate changes | | | - | | | | (22 | ) | | | (234 | ) | | | (256 | ) | | | | | | | | | | | | | | | | | | December 31, 2022 | | | - | | | | - | | | | 2,382 | | | | 2,382 | |
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Warrant Liability Duration | | February 2021 Warrants | | | | | | Current portion of warrant liability | | | - | | Long-term warrant liability | | | 2,382 | | | | | | | | | | 2,382 | |
11.Income Taxes
The fair value of the warrant liabilities on December 31, 2022, was determined using the Black-Scholes model with the following assumptions: Black-Scholes Assumptions as of December 31, 2022 | | February 2021 Warrants | | | | | | Expected forfeiture rate | | | 0.0 | % | Expected life (years) | | | 1.1 | | Expected volatility | | | 70.5 | % | Risk free rate | | | 4.0 | % | Expected dividend rate | | | 0.0 | % | Exercise price | | $ | 1.35 | | Market price | | $ | 1.15 | |
12.Shareholders’ Equity and Capital Stock Common shares The Company’s share capital consists of an unlimited amount of Class A preferred shares authorized, without par value, of which no shares are issued and outstanding; and an unlimited amount of common shares authorized, without par value, of which 224,699,621 shares and 216,782,694 shares were issued and outstanding as of December 31, 2022, and December 31, 2021, respectively. In August 2020, the Company closed a $4.68 million registered direct offering of 9,000,000 common shares and accompanying one-half common share warrants to purchase up to 4,500,000 common shares, at a combined public offering price of $0.52 per common share and accompanying warrant, with gross proceeds to the Company of $4.68 million. After fees and expenses of $0.4 million, net proceeds to the Company were $4.3 million. The warrants had an exercise price of $0.75 per whole common share and were all exercised prior to expiry in August 2022. Because the warrants were priced in U.S. dollars and the functional currency of Ur-Energy Inc. is Canadian dollars, this created a derivative financial liability. The fair value of the liability was recorded and adjusted monthly using the Black-Scholes technique described herein as there is no active market for the warrants. Any gain or loss was reflected in net income for the period. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
During the year ended December 31, 2020, the Company sold 259,640 common shares through its At Market facility for $0.1 million, net of issue costs. The Company also received $0.1 million from the exercise of 159,982 stock options and exchanged 356,071 common shares for vested RSUs. On February 4, 2021, the Company closed an underwritten public offering of 14,722,200 common shares and accompanying warrants to purchase up to 7,361,100 common shares, at a combined public offering price of $0.90 per common share and accompanying warrant. Ur-Energy also granted the underwriters a 30-day option to purchase up to an additional 2,208,330 common shares and warrants to purchase up to 1,104,165 common shares on the same terms. The option was exercised in full. Including the exercised option, Ur-Energy issued a total of 16,930,530 common shares and 16,930,530 warrants to purchase up to 8,465,265 common shares. The gross proceeds to Ur‑Energy from this offering were approximately $15.2 million. After fees and expenses of $1.3 million, net proceeds to the Company were approximately $13.9 million. The warrants have an exercise price of $1.35 per whole common share and will expire in February 2024. Because the warrants are priced in U.S. dollars and the functional currency of Ur-Energy Inc. is Canadian dollars, this creates a derivative financial liability. The fair value of the liability is recorded and adjusted monthly using the Black-Scholes technique described herein as there is no active market for the warrants. Any gain or loss is reflected in net income for the period. During the year ended December 22, 2017,31, 2021, the U.S. government enacted comprehensive tax legislation commonly referredCompany sold 19,151,457 common shares through its At Market facility for $33.4 million. After issue costs of $0.8 million, net proceeds to the Company were $32.6 million. The Company also received $6.9 million from the exercise of 14,050,920 warrants for 7,025,460 underlying common shares, and $1.8 million from the exercise of 2,929,101 stock options. The Company also exchanged 492,394 common shares for vested RSUs. During the year ended December 31, 2022, the Company sold 2,231,930 common shares through its At Market facility for $3.8 million. After issue costs of $0.1 million, net proceeds to the Company were $3.7 million. The Company also received $2.9 million from the exercise of 7,638,000 warrants for 3,819,000 underlying common shares, and $0.9 million from the exercise of 1,308,625 stock options. The Company also exchanged 557,372 common shares for vested RSUs. 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 7, 2020. Eligible participants under the Option Plan include directors, officers, employees, and consultants of the Company. Under the terms of the Option Plan, grants of options will vest over a three-year period: one-third on the first anniversary, one-third on the second anniversary, and one-third on the third anniversary of the grant. The term of the options is five years. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Activity with respect to stock options outstanding is summarized as follows: Stock Option Activity | | Outstanding Options | | | Weighted-average Exercise Price | | | | # | | | $ | | December 31, 2019 | | | 11,076,583 | | | | 0.64 | | | | | | | | | | | Granted | | | 2,950,180 | | | | 0.48 | | Exercised | | | (159,982 | ) | | | 0.63 | | Forfeited | | | (534,425 | ) | | | 0.64 | | Expired | | | (1,421,932 | ) | | | 0.66 | | | | | | | | | | | December 31, 2020 | | | 11,910,424 | | | | 0.61 | | | | | | | | | | | Granted | | | 1,322,164 | | | | 1.14 | | Exercised | | | (2,929,101 | ) | | | 0.62 | | Forfeited | | | (219,055 | ) | | | 0.56 | | Expired | | | (20,408 | ) | | | 0.57 | | | | | | | | | | | December 31, 2021 | | | 10,064,024 | | | | 0.68 | | | | | | | | | | | Granted | | | 175,000 | | | | 1.74 | | Exercised | | | (1,308,625 | ) | | | 0.66 | | Expired | | | (355,495 | ) | | | 0.66 | | | | | | | | | | | December 31, 2022 | | | 8,574,904 | | | | 0.66 | |
The exercise price of a new grant is set at the closing price for the stock 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. We received $0.9 million, $1.8 million, and $0.1 million from options exercised in the years ended December 31, 2022, 2021, and 2020, respectively. Stock-based compensation expense from stock options was $0.8 million, $0.7 million, and $0.6 million for the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, there was approximately $0.6 million unamortized stock-based compensation expense related to the Option Plan. The expenses are expected to be recognized over the remaining weighted-average vesting period of 1.6 years under the Option Plan. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
As of December 31, 2022, outstanding stock options were as follows: | | | Options Outstanding | | | Options Exercisable | | | | Exercise Price | | | Number of options | | | Weighted-average remaining contractual life (years) | | | Aggregate intrinsic value | | | Number of options | | | Weighted-average remaining contractual life (years) | | | Aggregate intrinsic value | | | Expiry | $ | | | # | | | | | | $ | | | # | | | | | | $ | | | | | 0.57 | | | | 200,000 | | | | 0.2 | | | | 116,348 | | | | 200,000 | | | | 0.2 | | | | 116,348 | | | 2023-03-30 | | 0.69 | | | | 807,997 | | | | 0.6 | | | | 374,636 | | | | 807,997 | | | | 0.6 | | | | 374,636 | | | 2023-08-20 | | 0.67 | | | | 716,674 | | | | 1.0 | | | | 342,871 | | | | 716,674 | | | | 1.0 | | | | 342,871 | | | 2023-12-14 | | 0.58 | | | | 2,528,579 | | | | 1.8 | | | | 1,433,654 | | | | 2,528,579 | | | | 1.8 | | | | 1,433,654 | | | 2024-11-05 | | 0.46 | | | | 2,824,490 | | | | 2.9 | | | | 1,934,945 | | | | 2,036,611 | | | | 2.9 | | | | 1,395,201 | | | 2025-11-13 | | 1.06 | | | | 1,322,164 | | | | 3.7 | | | | 115,398 | | | | 566,911 | | | | 3.7 | | | | 49,480 | | | 2026-08-27 | | 1.65 | | | | 175,000 | | | | 4.2 | | | | - | | | | - | | | | - | | | | - | | | 2027-03-14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 0.66 | | | | 8,574,904 | | | | 2.3 | | | | 4,317,852 | | | | 6,856,772 | | | | 2.0 | | | | 3,712,190 | | | |
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 CAD$1.57 (approximately US$1.15) as of the last trading day in the year ended December 31, 2022, that would have been received by the option holders had they exercised their options on that date. There were 8,399,904 in-the-money stock options outstanding and 6,856,772 in-the-money stock options exercisable as of December 31, 2022. The fair value of the options on their respective grant dates was determined using the Black-Scholes model with the following assumptions: Stock Options Fair Value Assumptions | | 2022 | | | 2021 | | | | | | | | | Expected forfeiture rate | | | 5.6 | % | | | 6.1 | % | Expected life (years) | | | 3.9 | | | | 3.9 | | Expected volatility | | | 72.7 | % | | | 69.5 | % | Risk free rate | | | 1.9 | % | | | 0.7 | % | Expected dividend rate | | | 0.0 | % | | | 0.0 | % | Weighted average exercise price (CAD$) | | $ | 2.23 | | | $ | 1.44 | | Black-Scholes value (CAD$) | | $ | 1.22 | | | $ | 0.74 | |
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
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”). Amendments to the RSU Plan were approved by our shareholders on June 3, 2021, and the plan is now known as the Tax CutAmended and Jobs ActRestated Restricted Share Unit and Equity Incentive Plan (the “Tax Act”“RSU&EI Plan”). The Tax Act makes broadRSU&EI Plan was approved most recently by our shareholders on June 2, 2022. Eligible participants under the RSU&EI Plan include directors and complex changesemployees of the Company. Granted RSUs are redeemed on the second anniversary of the grant. Upon an RSU vesting, the holder of the RSU will receive one common share, for no additional consideration, for each RSU held. Activity with respect to RSUs outstanding is summarized as follows: Restricted Share Unit Activity | | Outstanding RSUs | | | Weighted-average grant date fair value | | | | # | | | $ | | December 31, 2019 | | | 1,155,928 | | | | 0.65 | | | | | | | | | | | Granted | | | 737,553 | | | | 0.48 | | Released | | | (475,086 | ) | | | 0.70 | | Forfeited | | | (13,433 | ) | | | 0.61 | | | | | | | | | | | December 31, 2020 | | | 1,404,962 | | | | 0.54 | | | | | | | | | | | Granted | | | 305,530 | | | | 1.14 | | Released | | | (638,989 | ) | | | 0.63 | | Forfeited | | | (59,843 | ) | | | 0.56 | | | | | | | | | | | December 31, 2021 | | | 1,011,660 | | | | 0.69 | | | | | | | | | | | Released | | | (706,130 | ) | | | 0.47 | | | | | | | | | | | December 31, 2022 | | | 305,530 | | | | 1.14 | |
Stock-based compensation expense from RSUs was $0.3 million, $0.4 million, and $0.3 million for the years ended December 31, 2022, 2021, and 2020, respectively. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
As of December 31, 2022, there was approximately $0.1 million of unamortized stock-based compensation expense related to the U.S. tax code that affects 2017.RSU&EI Plan. The Tax Act reducesexpenses are expected to be recognized over the U.S. federal corporate tax rate from 35% to 21% for taxremaining weighted-average vesting periods of 0.7 years beginning afterunder the RSU&EI Plan. As of December 31, 2017. 2022, outstanding RSUs were as follows: RSUs Outstanding | | Number of RSUs | | | Weighted- Average Remaining contractual life (years) | | | Aggregate intrinsic value | | | Redemption Date | | # | | | | | | $ | | | | | | 305,530 | | | | 0.7 | | | | 351,360 | | | 2023-08-27 | | | | | | | | | | | | | | | | | 305,530 | | | | 0.7 | | | | 351,360 | | | | |
The fair value of restricted share units on their respective grant dates was determined using the Intrinsic Value model with the following assumptions: Restricted Share Unit Fair Value Assumptions | | 2021 | | | | | | Expected forfeiture rate | | | 4.4 | % | Grant date fair value (CAD$) | | $ | 1.44 | |
Warrants In addition,September 2018, the Tax Act makes certain changesCompany issued 13,062,878 warrants to purchase 6,531,439 of our common shares at $1.00 per whole common share. In August 2020, the depreciation rulesCompany issued 9,000,000 warrants to purchase 4,500,000 of our common shares at $0.75 per whole common share. In February 2021, the Company issued 16,930,530 warrants to purchase 8,465,265 of our common shares at $1.35 per whole common share. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Activity with respect to warrants outstanding is summarized as follows: Warrant Activity | | Outstanding Warrants | | | Number of shares to be issued upon exercise | | | Per share exercise price | | | | # | | | # | | | $ | | | | | | | | | | | | December 31, 2019 | | | 13,062,878 | | | | 6,531,439 | | | | 1.00 | | | | | | | | | | | | | | | Issued | | | 9,000,000 | | | | 4,500,000 | | | | 0.75 | | | | | | | | | | | | | | | December 31, 2020 | | | 22,062,878 | | | | 11,031,439 | | | | 0.90 | | | | | | | | | | | | | | | Issued | | | 16,930,530 | | | | 8,465,265 | | | | 1.35 | | Exercised | | | (14,050,920 | ) | | | (7,025,460 | ) | | | 0.98 | | Expired | | | (573,958 | ) | | | (286,979 | ) | | | 1.00 | | | | | | | | | | | | | | | December 31, 2021 | | | 24,368,530 | | | | 12,184,265 | | | | 1.16 | | | | | | | | | | | | | | | Exercised | | | (7,638,000 | ) | | | (3,819,000 | ) | | | 0.75 | | | | | | | | | | | | | | | December 31, 2022 | | | 16,730,530 | | | | 8,365,265 | | | | 1.35 | |
We received $2.9 million and implements new limits$6.9 million from warrants exercised in the years ended December 31, 2022, and 2021, respectively. No warrants were exercised in the year ended December 31, 2020. The unexercised portion of the 2018 warrants expired in 2021. As of December 31, 2022, the outstanding warrants were as follows: Exercise price | | | Number of warrants | | | Weighted- average remaining contractual life (years) | | | Aggregate intrinsic value | | | Expiry | | $ | | | # | | | | | | $ | | | | | | 1.35 | | | | 16,730,530 | | | | 1.1 | | | | - | | | 2024-02-04 | | | | | | | | | | | | | | | | | | | | | 1.35 | | | | 16,730,530 | | | | 1.1 | | | | - | | | | |
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Fair value calculations of stock options, restricted share units, and warrants The Company estimates expected future volatility based on daily historical trading data of the deductibility of certain executive compensation.Company’s common shares. The risk-free interest rates are determined by reference to Canadian Benchmark Bond Yield rates with maturities that approximate the expected life. The Company has evaluated these changesnever paid dividends and currently has recordedno plans to do so. Forfeitures and expected lives were estimated based on actual historical experience. Share-based compensation expense related to stock options and restricted share units is recognized net of estimated pre-vesting forfeitures, which results in expensing the awards that are ultimately expected to vest over the expected life. 13.Sales and Other Income Revenue is primarily derived from the sale of U3O8 under multi-year agreements or spot sales agreements. Revenue consists of:
| | Year Ended December 31, | | | | 2022 | | | 2021 | | | 2020 | | Revenue Summary | | $ | | | % | | | $ | | | % | | | $ | | | % | | | | | | | | | | | | | | | | | | | | | Company A | | | - | | | | 0.0 | % | | | - | | | | 0.0 | % | | | 8,300 | | | | 99.8 | % | Product sales | | | - | | | | 0.0 | % | | | - | | | | 0.0 | % | | | 8,300 | | | | 99.8 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Disposal fees | | | 19 | | | | 100.0 | % | | | 16 | | | | 100.0 | % | | | 16 | | | | 0.2 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19 | | | | 100.0 | % | | | 16 | | | | 100.0 | % | | | 8,316 | | | | 100.0 | % |
During March 2022, we sold a provisional decreaseroyalty interest related to net deferred tax assets of $16.5 million with a corresponding decreaseStrata Energy’s Lance Uranium ISR Project for $1.3 million. There was no carrying value related to the related valuation allowance.royalty on our balance sheet, therefore the entire amount was recognized as other income. TableIn 2020, the Company received proceeds of Contents
Ur-Energy Inc.
Notes to$893 thousand from the SBA PPP. In 2021 Q2, the Company received notifications that the principal amount of $893 thousand and accrued interest of approximately $10 thousand were forgiven under the terms of the SBA PPP. This was treated as a forgiveness of debt on the Consolidated Financial Statements
of Operations for the year ended December 31, 20172021, and a $903 thousand gain on debt forgiveness was recognized in other income. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
14. Cost of Sales (expressed in thousandsCost of U.S. dollars unlesssales includes ad valorem and severance taxes related to the extraction of uranium, all costs of wellfield and plant operations including the related depreciation and amortization of capitalized assets, reclamation, and mineral property costs, plus product distribution costs. These costs are also used to value inventory. The resulting inventoried cost per pound is compared to the NRV of the product, which is based on the estimated sales price of the product, net of any necessary costs to finish the product. Any inventory value more than the NRV is charged to cost of sales.
Cost of sales consists of the following: | | Year Ended December 31, | | Cost of Sales | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | Cost of product sales | | | - | | | | - | | | | 5,166 | | Lower of cost or NRV adjustments | | | 6,861 | | | | 7,000 | | | | 7,802 | | | | | | | | | | | | | | | | | | 6,861 | | | | 7,000 | | | | 12,968 | |
15. Operating Costs Operating expenses include exploration and evaluation expense, development expense, general and administration (“G&A”) expense, and mineral property write-offs. Exploration and evaluation expense consists of labor and the associated costs of the exploration and evaluation departments as well as land holding and exploration costs including drilling and analysis on properties which have not reached the permitting or operations stage. Development expense relates to properties that have reached the permitting or operations stage and include costs associated with exploring, delineating, and permitting a property. Once permitted, development expenses also include the costs associated with the construction and development of the permitted property that are otherwise indicated) not eligible to be capitalized. G&A expense relates to the administration, finance, investor relations, land, and legal functions, and consists principally of personnel, facility, and support costs. A reconciliation
Operating costs consist of the following: | | Year Ended December 31, | | Operating Costs | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | Exploration and evaluation | | | 1,769 | | | | 2,037 | | | | 1,816 | | Development | | | 4,686 | | | | 1,922 | | | | 1,097 | | General and administration | | | 6,037 | | | | 5,328 | | | | 5,200 | | Accretion | | | 460 | | | | 486 | | | | 576 | | | | | | | | | | | | | | | | | | 12,952 | | | | 9,773 | | | | 8,689 | |
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
16. Supplemental Information for Statement of Cash Flows Cash and cash equivalents, and restricted cash per the Statement of Cash Flows consists of the following: | | As of December 31, | | Cash, Cash Equivalents, and Restricted Cash | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | Cash and Cash Equivalents | | | 33,003 | | | | 46,189 | | | | 4,268 | | Restricted cash | | | 8,137 | | | | 7,966 | | | | 7,859 | | | | | | | | | | | | | | | | | | 41,140 | | | | 54,155 | | | | 12,127 | |
Interest expense paid was $0.7 million, $0.8 million, and $0.8 million for the years ended December 31, 2022, 2021, and 2020, respectively. 17. Income Taxes Income (loss) before provision for income taxes atconsisted of the statutory Canadianfollowing: | | Year Ended December 31, | | Income (Loss) before Income Tax Provision | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | United States | | | (15,638 | ) | | | (13,438 | ) | | | (11,164 | ) | Canada | | | (1,481 | ) | | | (9,470 | ) | | | (3,561 | ) | | | | | | | | | | | | | | | | | (17,119 | ) | | | (22,908 | ) | | | (14,725 | ) |
There was no federal or state income tax rate to net income taxes includedprovision (benefit) in the accompanying statements of operations is as follows:years presented above. | | | | | | | Year ended December 31, | | 2017 | | 2016 | | 2015 | | $ | | $ | | $ | Income (loss) before income taxes | 76 | | (3,027) | | (4,110) | | | | | | | Statutory rate | 26.50% | | 26.50% | | 26.50% | Expected recovery of income tax | 20 | | (804) | | (1,089) | Effect of foreign tax rate differences | 355 | | (28) | | (212) | Non-deductible amounts | 91 | | 154 | | 57 | Effect of changes in enacted future rates from Tax Reform | 16,493 | | - | | - | Effect of changes in enacted future rates | (499) | | 66 | | 76 | Effect of change in foreign exchange rates | - | | - | | (155) | Effect of stock based compensation | 1,127 | | (149) | | - | Effect of prior year true-ups and other | (6) | | (317) | | - | Expiration of prior year NOLs | - | | 290 | | - | Change in valuation allowance | (17,581) | | 771 | | (1,992) | | - | | (17) | | (3,315) | Recovery of deferred income taxes | | | | | (3,345) | | - | | (17) | | 30 |
Deferred tax assets and liabilitiesincome taxes reflect the net tax effects of net operating losses, credit carryforwards and(a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. purposes, and (b) operating losses and tax credit carryforwards. Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
The componentstax effects of significant items comprising the Company’s deferred tax assets are as follows:
| | As of December 31, | | Deferred Tax Assets | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | Deferred tax assets | | | 13,243 | | | | 12,841 | | | | 11,184 | | Net operating losses - non-current | | | 42,074 | | | | 38,800 | | | | 35,366 | | Total deferred tax assets | | | 55,317 | | | | 51,641 | | | | 46,550 | | | | | | | | | | | | | | | Valuation allowance | | | (55,317 | ) | | | (51,641 | ) | | | (46,550 | ) | | | | | | | | | | | | | | Net deferred taxes | | | - | | | | - | | | | - | |
ASC 740 requires that the tax benefit of net operating losses, temporary differences and liabilitiescredit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by $3,676, $5,090, and $6,017 during 2022, 2021, and 2020 respectively. Net operating losses and tax credit carryforwards as of December 31, 2022, are as follows: | | | | | | | As at December 31, | | 2017 | | 2016 | | 2015 | | $ | | $ | | $ | Future income tax assets | | | | | | Deferred tax assets | 9,617 | | 15,344 | | 8,386 | Net operating loss carry forwards | 30,250 | | 41,634 | | 41,647 | Less: valuation allowance | (39,867) | | (56,978) | | (50,033) | Net future income tax assets | - | | - | | - |
Based upon the level of historical taxable loss, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences and accordingly has established a full valuation allowance as of December 31, 2017, 2016 and 2015. No deferred tax assets are therefore recognized at this point.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
| | | | | | Income tax recovery (expense) | 2017 | | 2016 | | 2015 | | $ | | $ | | $ | Recovery of deferred tax liability stemming from Pathfinder acquisition | - | | - | | 3,345 | Current income tax recovery (expense) | - | | 17 | | (30) | | | | | | | | - | | 17 | | 3,315 |
In 2013, we acquired Pathfinder as a corporate entity. In terms for the acquisition, there were no net operating losses or other tax attributes that carried forward to the Company with the acquisition. In addition, the assets acquired had no tax basis within the corporation. The seller also did not make the Sec. 338(h)(10) election to allow us to push the purchase price down to the asset level for tax purposes. As a result, it was determined that the acquisition should not be treated as a business combination since Pathfinder was not a going concern. A tax of $3.3 million was calculated as a potential liability of the acquisition and was recorded as a deferred tax liability and an increase in basis. For accounting/reporting purposes, this value was added to the accounting basis in the assets acquired.
In early 2015, we completed and filed the Shirley Basin PEA based on drilling data purchased as a part of the acquisition combined with data gathered during the exploration / confirmation program undertaken in 2014. After filing the Shirley Basin PEA, we continued to do baseline and confirmation work at Shirley Basin and in late 2015 we submitted a permit application to the state of Wyoming to begin construction and operations at the project. Based on the filing of those permits, we anticipate that we will be in a position to commence construction of a plant facility and the related wellfields within several years. Once operations commence, the cost of the property will be amortized over the anticipated productive life of the property for accounting and reporting purposes. At that point, the asset now has an identifiable life and the associated DTL is available to offset the DTA recorded before the application of the valuation allowance. We therefore applied a portion of the valuation allowance to the DTL arising from the Pathfinder acquisition.
As of December 31, 2017, the Company had the following net operating loss carryforwards available:
Income Tax Loss Carryforwards | | Amount | | | Expiration Years | | | | | | | | | Income tax loss carry forwardsNet operating losses, federal (Pre-January 1, 2018)
| | | 79,699 | | | 2029 - 2035 | | Canadian (expiring 2011 - 2031)Net operating losses, federal (Post December 31, 2017)
| | | 36,860 | | | 34,520,023No expirations
| | United States (expiring 2017 - 2031)Net operating losses, state
| | | 116,127 | | | 87,851,252Varies by state
| | Net operating losses, Canada | | | 43,243 | | | 2026 - 2040 | |
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows: | | Year Ended December 31, | | Income Tax Rate Reconciliation | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | Canadian Statutory rate | | | 26.5 | % | | | 26.5 | % | | | 26.5 | % | State tax | | | -2.1 | % | | | 4.2 | % | | | 18.2 | % | Permanent differences | | | 1.1 | % | | | -5.1 | % | | | -2.0 | % | True-ups and other | | | 0.2 | % | | | - | | | | 0.8 | % | Effect of U.S. Federal Tax Rate Differential | | | -5.0 | % | | | -3.2 | % | | | -4.2 | % | Share issuance costs | | | 3.4 | % | | | - | | | | - | | Change in valuation allowance | | | -25.6 | % | | | -22.4 | % | | | -39.3 | % | ITC credits | | | 1.5 | % | | | - | | | | - | | | | | 0.0 | % | | | 0.0 | % | | | 0.0 | % |
The Company follows a comprehensive model for recognizing, measuring, presenting, and disclosing uncertain tax positions taken or expected to be taken on a tax return. Tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company currently has no uncertain tax positions and is therefore not reflecting any adjustments for such in its deferred tax assets. Table of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
There are open statutes of limitations for tax authorities in the U.S., Canada and state jurisdictions to audit the Company’s tax returns for the years ended December 31, 2014, 2015 and 2016.
The Company’s policy is to account for income tax related interest and penalties in income tax expense in the accompanying statementsConsolidated Statements of operations.Operations. There have been no income tax related interest or penalties assessed or recorded. Other comprehensive loss was not subject to income tax effects and is therefore shown net of taxes. 12.Asset Retirement Obligations
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
18. Commitments Asset retirement obligations ("ARO") for the Lost Creek Project 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, using discount rates ranging from 0.1% to 3.2%. Included in this liability are the costs of closure, reclamation, demolition and stabilization of the mine, processing plant, infrastructure, groundwater restoration and ongoing post-closure environmental monitoring and maintenance costs. At December 31, 2017, the total undiscounted amount of the future cash needs was estimated to be $15.6 million. The schedule of payments required to settle the ARO liability extends through 2033.
Asset retirement obligations for the Pathfinder properties 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, using discount rates of 2.16% to 3.0%. Included in this liability are the costs of closure, reclamation, demolition and stabilization of the mines, processing plants, infrastructure, groundwater restoration, waste dumps and ongoing post-closure environmental monitoring and maintenance costs. At December 31, 2017, the total undiscounted amount of the future cash needs was estimated to be $11.4 million. The schedule of payments required to settle the ARO liability extends through 2033.
The undiscounted future cash needs are based on information provided to the State of Wyoming in conjunction with annual reclamation bonding renewals. Increases in the estimated future cash needs are normally based on increased disturbances projected for the upcoming year. In 2017, there was a small increase in the estimated liability on the Lost Creek Project.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
The restricted cash as discussed in note 6 is related to surety bonds and letters of credit which provide security to the related governmental agencies on these obligations.
| | | | | For the period ended | | Year ended | | December 31, 2017 | | December 31, 2016 | | | | | | $ | | $ | Beginning of period | 26,061 | | 26,061 | Change in estimated liability | 448 | | (534) | Accretion expense | 527 | | 534 | | | | | End of period | 27,036 | | 26,061 |
13.Shareholders’ Equity and Capital Stock
Common share issuances
On August 19, 2014, we filed a universal shelf registration statement on Form S-3 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 securities, and rights to purchase our common shares and/or our senior and subordinated debt securities. The registration statement became effective September 12, 2014. The 12,921,000 common shares offered in the February 2016 financing were sold for $0.50 per share raising $5.7 million (net of issue costs of $0.8 million) under the shelf registration statement.
On May 27, 2016, we entered into an At Market Issuance Sales Agreement with MLV & Co. LLC and FBR Capital Markets & Co. 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. During 2016, we sold 164,979 common shares under the sales agreement at an average price of $0.65 per share for gross proceeds of $108 thousand. After deducting transaction fees and commissions we received net proceeds of $105 thousand. After deducting all other costs associated with the completion of the agreement and filing the related prospectus supplement, we received $13 thousand. During 2017, we sold 1,536,169 common shares under the sales agreement at an average price of $0.76 per share for gross proceeds of $1.2 million. After deducting transaction fees, commissions and all other costs associated with the completion of the agreement and filing the related prospectus supplement, we received net proceeds of $1.1 million.
During the year ended December 31, 2017, the Company exchanged 447,663 common shares for vested RSUs. In addition, 871,717 stock options were exercised for proceeds of $0.5 million.
During the year ended December 31, 2016, the Company exchanged 385,010 common shares for vested RSUs. In addition, 16,620 stock options were exercised for proceeds of less than $0.1 million.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
During the year ended December 31, 2015, the Company exchanged 215,168 common shares for vested RSUs. In addition, 608,531 stock options were exercised for proceeds of $0.4 million.
Stock options
In 2005, the Company’s Board of Directors approved the adoption of the Company's stock option plan (the “Option Plan”). Eligible participants under the Option Plan include directors, officers, employees and consultants of the Company. Under the terms of its operating leases for storage and equipment, the Option Plan, stock options generally vest with Option Plan participantsCompany is committed to minimum annual lease payments as follows: 10% at the date of grant; 22% four and one-half months after grant; 22% nine months after grant; 22% thirteen and one-half months after grant; and the balance of 24% eighteen months after the date of grant. Following the May 2017 amendment of the Option Plan, grants of options will vest over a three-year period: 33.3% on the first anniversary, 33.3% on the second anniversary, and 33.4% on the third anniversary of the grant. The term of options remains unchanged.
Activity with respect to stock options is summarized as follows:Lease Payments
| | | | | | | | | | | Weighted- | | | | | | average | | | | Options | | exercise price | | | | # | | $ | Outstanding, December 31, 2014 | | | 8,468,614 | | 1.12 | | | | | | | Granted | | | 2,384,052 | | 0.67 | Exercised | | | (608,531) | | 0.66 | Forfeited | | | (258,918) | | 1.09 | Expired | | | (10,810) | | 0.64 | | | | | | | Balance, December 31, 2015 | | | 9,974,407 | | 0.88 | | | | | | | Granted | | | 3,062,542 | | 0.57 | Exercised | | | (16,620) | | 0.58 | Forfeited | | | (788,883) | | 0.70 | Expired | | | (2,482,512) | | 1.56 | | | | | | | Balance, December 31, 2016 | | | 9,748,934 | | 0.63 | | | | | | | Granted | | | 2,666,644 | | 0.69 | Exercised | | | (871,717) | | 0.62 | Forfeited | | | (536,178) | | 0.64 | Expired | | | (1,548,282) | | 0.71 | | | | | | | Outstanding, December 31, 2017 | | | 9,459,401 | | 0.70 |
Years | | Amount | | | | | | 2023 | | | 8 | | 2024 and after | | | 12 | | | | | | | | | | 20 | |
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
The exercise price of a new grant is set at the closing price for the stock 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 year ended December 31, 2017 was $0.7 million.
As of December 31, 2017, outstanding stock optionsPrincipal payments required under debt agreements 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 | $ | | | | | | $ | | | | | | $ | | | | | | | | | | | | | | | | | | 0.61 | | 452,656 | | 0.3 | | 31 | | 452,656 | | 0.3 | | 31 | | 25-Apr-18 | 0.99 | | 100,000 | | 0.6 | | - | | 100,000 | | 0.6 | | - | | 01-Aug-18 | 0.96 | | 739,976 | | 1.0 | | - | | 739,976 | | 1.0 | | - | | 27-Dec-18 | 1.34 | | 100,000 | | 1.2 | | - | | 100,000 | | 1.2 | | - | | 31-Mar-19 | 0.81 | | 777,896 | | 1.9 | | - | | 777,896 | | 1.9 | | - | | 12-Dec-19 | 0.91 | | 200,000 | | 2.4 | | - | | 200,000 | | 2.4 | | - | | 29-May-20 | 0.69 | | 640,969 | | 2.6 | | - | | 640,969 | | 2.6 | �� | - | | 17-Aug-20 | 0.64 | | 1,047,836 | | 2.9 | | 45 | | 1,047,836 | | 2.9 | | 45 | | 11-Dec-20 | 0.58 | | 2,733,424 | | 4.0 | | 259 | | 1,474,324 | | 4.0 | | 139 | | 16-Dec-21 | 0.81 | | 300,000 | | 4.2 | | - | | 162,000 | | 4.2 | | - | | 02-Mar-22 | 0.58 | | 200,000 | | 4.7 | | 19 | | 0 | | - | | - | | 07-Sep-22 | 0.72 | | 2,166,644 | | 5.0 | | - | | 0 | | - | | - | | 15-Dec-22 | | | | | | | | | | | | | | | | 0.70 | | 9,459,401 | | 3.3 | | 354 | | 5,695,657 | | 2.5 | | 215 | | |
Principal Payments Years | | Amount | | | | | | 2023 | | | 5,409 | | 2024 | | | 5,727 | | | | | | | | | | 11,136 | |
The aggregate intrinsic value19. Subsequent Events
Sale of Inventory to DOE NNSA Subsequent to year-end, on January 31, 2023, we delivered 100,000 pounds of domestically produced U3O8 to the DOE NNSA uranium reserve at a sales price of $64.47 per pound. We received proceeds of $6.4 million from the sale on February 8, 2023. Equity Financing Subsequent to year-end, on February 21, 2023, we announced the closing of an underwritten public offering of 39,100,000 common shares and accompanying warrants to purchase up to 19,550,000 common shares, which includes the full exercise of the options in the preceding table represents the total pre-tax intrinsic value for stock options withunderwriters’ option to purchase up to 5,100,000 additional common shares and accompanying warrants to purchase up to 2,550,000 common shares, at a combined public offering price of $1.18 per common share and accompanying warrant. The warrants have an exercise price less than the Company’s TSX closing stock price of CAD $0.86 as of the last trading day in the year ended December 31, 2017, that would have been received by the option holders had they exercised their options as of that date. There were 4,433,916 in-the-money stock options outstanding$1.50 per whole common share and 2,974,816 exercisable as of December 31, 2017. 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 most recently by our shareholders on May 5, 2016.
Eligible participants under the RSU Plan include directors and employees, including officers, of the Company. Under the terms of the RSU Plan, RSUs vest 100% on the second anniversary ofwill expire three years from the date of issuance. The gross proceeds to the grant. The RSU Plan also provides for redemption, instead of cancellation, of outstanding RSUs atCompany from were approximately $46.1 million, before deducting the date of redemption for retiring directorsunderwriting discounts and executive officers, which is defined as a threshold of combined servicecommissions and age of 65
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017other estimated offering expenses payable by Ur-Energy.
(expressed in thousands of U.S. dollars unless otherwise indicated)
years, and a minimum of five years of service to the Company. Upon RSU vesting, the holder of an RSU will receive one common share, for no additional consideration, for each RSU held.
Ur-Energy Inc. | Notes to Consolidated Financial Statements | December 31, 2022 | | (expressed in thousands of U.S. dollars unless otherwise indicated) |
Activity with respect to RSUs is summarized as follows:
| | | | | | | | | Number | | Weighted | | | | of | | average grant | | | | RSUs | | date fair value | | | | | | $ | Unvested, December 31, 2014 | | | 379,435 | | 0.89 | | | | | | | Granted | | | 795,592 | | 0.83 | Vested | | | (286,223) | | 0.91 | Forfeited | | | (28,709) | | 0.85 | | | | | | | Unvested, December 31, 2015 | | | 860,095 | | 0.82 | | | | | | | Granted | | | 715,638 | | 0.57 | Vested | | | (281,342) | | 0.81 | Forfeited | | | (20,401) | | 0.65 | | | | | | | Unvested, December 31, 2016 | | | 1,273,990 | | 0.60 | | | | | | | Granted | | | 541,658 | | 0.69 | Vested | | | (575,818) | | 0.69 | Forfeited | | | (63,878) | | 0.58 | | | | | | | Unvested, December 31, 2017 | | | 1,175,952 | | 0.65 |
As of December 31, 2017, outstanding RSUs are as follows:
| | | | | | | | | Number of | | Remaining | | Aggregate | | | unvested | | life | | Intrinsic | Grant date | | RSUs | | (years) | | Value | | | | | | | $ | December 16, 2016 | | 634,294 | | 0.96 | | 438 | December 15, 2017 | | 541,658 | | 1.96 | | 374 | | | | | | | | | | 1,175,952 | | 1.42 | | 812 |
As of December 31, 2016, 8,374 RSUs had been vested and redeemed but not issued due to the timing of transferring them to the brokers designated by the related employees. They were subsequently issued in January and February 2017.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
As of December 31, 2015, 212,803 RSUs had been vested but not redeemed. In January 2016, 197,374 were redeemed for common shares while the balance of 15,429 were retained and not redeemed to pay the related taxes due on redemption.
Warrants
The warrants were issued in Canadian dollars and have been converted to their US$ equivalent for presentation purposes. The First Loan Facility with RMB Australia Holdings account for the warrants.
Activity with respect to warrants is summarized as follows:
| | | | | | | | | Number | | Weighted- | | | | of | | average | | | | Warrants | | exercise price | | | | | | $ | Outstanding, December 31, 2014 | | | 8,374,112 | | 1.20 | | | | | | | Expired | | | (150,000) | | 0.89 | | | | | | | Outstanding, December 31, 2015 | | | 8,224,112 | | 1.71 | | | | | | | Expired | | | (2,379,545) | | 1.34 | | | | | | | Outstanding, December 31, 2016 | | | 5,844,567 | | 1.02 | | | | | | | Outstanding, December 31, 2017 | | | 5,844,567 | | 0.97 |
As of December 31, 2017, outstanding warrants are as follows:
| | | | | | | | | | | | | Remaining | | Aggregate | | | Exercise | | Number | | contractual | | Intrinsic | | | price | | of warrants | | life (years) | | Value | | Expiry | $ | | | | | | $ | | | 0.96 | | 4,294,167 | | 0.5 | | - | | 24-Jun-18 | 1.00 | | 1,550,400 | | 0.7 | | - | | 27-Aug-18 | | | | | | | | | | 0.97 | | 5,844,567 | | 0.5 | | - | | |
Share-based compensation expense
Stock-based compensation expense was $0.9 million, $0.9 million and $0.9 million for the years ended December 31, 2017, 2016 and 2015, respectively.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
As of December 31, 2017, there was approximately $1.1 million of total unrecognized compensation expense (net of estimated pre-vesting forfeitures) related to unvested share-based compensation arrangements granted under the Option Plan and $0.6 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 2.3 years and 1.4 years, respectively.
Cash received from stock options exercised during the years ended December 31, 2017, 2016 and 2015 was $0.5 million, less than $0.1 million and $0.4 million, respectively.
Fair Value Calculations
The initial fair value of RSUs, options and warrants granted during the years ended December 31, 2017, 2016 and 2015 was determined using the Black-Scholes option pricing model with the following assumptions:
| | | | | 2017 | 2016 | 2015 | | | | | Expected option life (years) | 3.73-3.74 | 3.72 | 3.6-3.67 | Expected volatility | 56-57% | 57% | 55-57% | Risk-free interest rate | 1.0%-1.6% | 1.0% | 0.5-0.7% | Forfeiture rate (options) | 5.3%-6.0% | 5.6% | 4.9-5.0% | Forfeiture rate (RSUs) | 6.1% | 6.2% | 7.2-8.3% | Expected dividend rate | 0% | 0% | 0% |
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.
The fair value used for each RSU issued in 2017 and 2016 was CAD$0.90 and CAD $0.73, respectively. Those issued in 2015 ranged from CAD $0.80 to CAD $1.22 per unit. Each of the issuance prices were the closing prices of the stock on the TSX as of the trading day immediately preceding the grant date.
14.Sales
Revenue is primarily derived from the sale of U3O8 to domestic utilities under contracts or spot sales. In 2016, the Company also sold deliveries under two of its contracts to a third-party trader. The income was deferred at the time and recognized when the respective deliveries were completed.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
Revenue consists of:
| | | | | | | | | Year ended December 31, | | 2017 | | 2016 | | $ | | | | $ | | | Sale of produced inventory | | | | | | | | Company A | 7,821 | | 20.4% | | - | | 0.0% | Company B | 3,141 | | 8.2% | | 12,741 | | 46.7% | Company C | 1,777 | | 4.6% | | - | | 0.0% | Company D | - | | 0.0% | | 6,375 | | 23.3% | Company E | - | | 0.0% | | 3,075 | | 11.2% | | 12,739 | | 33.2% | | 22,191 | | 81.3% | Sales of purchased inventory | | | | | | | | Company B | 10,212 | | 26.6% | | - | | 0.0% | Company C | 15,340 | | 40.0% | | - | | 0.0% | | 25,552 | | 66.6% | | - | | 0.0% | | | | | | | | | Total sales | 38,291 | | 99.8% | | 22,191 | | 81.3% | | | | | | | | | Disposal fee income | 77 | | 0.2% | | 29 | | 0.1% | Recognition of revenue from sale of deliveries under assignment | - | | 0.0% | | 5,085 | | 18.6% | | | | | | | | | | 38,368 | | 100.0% | | 27,305 | | 100.0% |
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
15. Supplemental Information for Statement of Cash Flows
Cash per the Statement of Cash Flows consists of the following:
| | | | | | | As at | | December 31, 2017 | | December 31, 2016 | | December 31,
2015 | | $ | | $ | | $ | Cash and cash equivalents | 3,879 | | 1,552 | | 1,442 | Restricted cash | 7,558 | | 7,557 | | 7,557 | | | | | | | | 11,437 | | 9,109 | | 8,999 |
16.20.Financial instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, restricted cash, deposits, accounts payable and accrued liabilities, notes payable, and notes payable.warrant liabilities. The Company is exposed to risks related to changes in foreign currency exchange rates, interest rates and management of cash and cash equivalents and short-term investments. Credit risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, accounts receivable, and restricted cash. These assets include Canadian dollar and U.S. dollar denominated certificates of deposits,deposit, money market accounts, and demand deposits. These instruments are maintained at financial institutions in Canada and the United States.U.S. Of the amount held on deposit, approximately $0.6 million is covered by the Canada Deposit Insurance Corporation, the Securities Investor Protection Corporation, or the United StatesU.S. Federal Deposit Insurance Corporation, leaving approximately $10.8$40.6 million at risk aton December 31, 20172022, 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 December 31, 2017.2022. Currency risk As of December 31, 2022, we maintained a balance of approximately $2.0 million Canadian dollars. The funds will be used to pay Canadian dollar expenses and are considered to be a low currency risk to the Company. A hypothetical 10% weakening in the exchange rate of the Canadian dollar to the U.S. dollar as of December 31, 2022 would not have a material effect on our results of operations, financial position, or cash flows. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company has financed its operations from its inception primarily through the issuance As of equity securities and debt instruments. Production commenced in August 2013 after receiving final operational clearance from the NRC. Product sales commenced in December 2013.
As at December 31, 2017,2022, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $1.3$1.2 million, which are due within normal trade termsand the current portion of generally 30 to 60 days,
Tablenotes payable of Contents
Ur-Energy Inc.
Notes to Consolidated Financial Statements
$5.4 million. As of December 31, 2017 (expressed in thousands2022, we had $33.0 million of U.S. dollars unless otherwise indicated)
notes payable which will be payable over periods of 0 to 5 years, and asset retirement obligations with estimated completion dates until 2033.
Market risk
Market risk is the risk to the Company of adverse financial impacts 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 financings. The Company’s objectives for managing its 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 considered in excess of day to day requirements on short-term deposit with the Company's financial institutions so that they earn interest.equivalents.
Currency risk
The Company maintains a balance of less than $0.3 million in foreign currency resulting in a low currency risk.
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 0.1 impact fora negligible effect on the yearyears ended December 31, 2017.2022, 2021, and 2020. 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.vary. 17.Commitments
Under the terms of its operating lease for vehicles and the office premises in Casper, Wyoming, the Company is committed to minimum annual lease payments as follows:
| | Year ended December 31, | $ | 2018 | 352 | 2019 | 95 | 2020 and thereafter | - | | 447 |
Rent expense under these agreements was $0.2 million, $0.2 million and $0.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.
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Ur-Energy Inc.
Notes to Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars unless otherwise indicated)
Principal payments required under debt agreements are as follows:
| 31-Dec-18
| 4,895
| 31-Dec-19
| 5,183
| 31-Dec-20
| 5,487
| 31-Dec-21
| 4,326
| | 19,891
| Off Take Sales Agreements
As of December 31, 2017, we have multiple off take sales agreements with various U.S. utilities. These agreements were completed between 2012 and 2015 for deliveries between 2018 and 2021 as follows:
| | SUMMARY OF OFF TAKE SALES AGREEMENTS
| Production Year
| Total Pounds Uranium Concentrates Contractually Committed
| 2018
| 470,000 pounds
| 2019
| 540,000 pounds
| 2020
| 390,000 pounds
| 2021
| 190,000 pounds
|
| |
