Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ur-Energy Inc (URG, Financial) reported a significant increase in production, drumming 64,170 pounds in Q2 compared to 39,229 pounds in Q1, representing a 64% increase.
- The company successfully completed an underwritten public offering, grossing approximately $69 million, which will fund continued ramp-up at Lost Creek, support development at Shirley Basin, and be available for possible acquisitions.
- Ur-Energy Inc (URG) has strong revenue projections, expecting to realize $33.1 million in 2024 from sales of 570,000 pounds at an average price of $58 per pound.
- The company has a robust cash position, ending the first six months of 2024 with $61.3 million, up $1.6 million from December.
- Ur-Energy Inc (URG) is making significant progress at its Shirley Basin project, with plans to complete construction by late 2025 and encountering very good uranium grades consistent with technical reports.
Negative Points
- The cost per pound at the conversion facility has increased significantly, from $28 at the end of 2023 to $48 at the end of Q2 2024.
- Despite the increase in production, the company faces challenges in reducing the cost per pound shipped to the conversion facility, which only decreased slightly from $53 in Q1 to $51 in Q2.
- Operating costs remain high, with $26 million spent during the quarter, including $21 million on development costs.
- The company has not announced any new sales contracts recently, indicating potential challenges in securing long-term agreements with utilities.
- Supply chain issues, particularly with electrical equipment and industrial instrumentation, continue to pose challenges, requiring orders to be placed 12 to 18 months in advance.
Q & A Highlights
Q: Production through the first half of the year has totaled 109,000 pounds, indicating that you will need to see a pretty steep ramp-up to hit the low end of full-year guidance. Can you provide some color on how this is going so far in Q3, including flow rates, grades, and drying capacity?
A: The wellfield is running very well with exceptional head grades. The addition of more drill rigs has allowed for better spacing between construction and drilling crews, leading to more efficient operations. We are now able to bring a new header house online every 30 to 35 days, which is helping with flow rates. Our focus is now on improving plant efficiency through maintenance and training.
Q: In the discussion provided as part of your recent equity raise, you indicated that URG is currently bidding on an acquisition opportunity on a significant asset in the US. Can you provide more details on the timing of that?
A: We can't comment much on M&A specifics. We felt it necessary to indicate this as a possible use of funds during the equity raise. When we have something definitive to report, we will do so. Currently, there is nothing definitive to report.
Q: Given the current sales outlook and available cash, will Ur-Energy need additional public offerings in the foreseeable future?
A: No, we believe we have the necessary cash moving forward. However, if there is an opportunity on the M&A front that requires additional funding, we may consider it. Any acquisition would need to be accretive and add to the Ur-Energy story through a quality asset.
Q: Why has the share price been volatile recently?
A: Several factors contribute to this, including announcements from major producers like Kazatomprom and Cameco, which affect equities across the board. The equity raise we did also impacted the share price. Additionally, uranium prices have seen some volatility, particularly in the spot market, which has traded slowly over the summer. We expect market activity to pick up after the early September WNA meeting in London.
Q: Which presidential candidate would be better for the US nuclear industry?
A: Both the Biden-Harris and Trump administrations have shown support for the nuclear industry. The Biden-Harris administration has passed significant legislation like the Inflation Reduction Act and the ADVANCE Act, which have been beneficial. The Trump administration had also been supportive, particularly for the mining industry. The differences between the two are likely around the edges rather than being significant.
Q: How do you plan to grow the company over the next few years?
A: Growth will come from M&A, greenfield exploration, and brownfield exploration. We are looking at opportunities at Lost Creek, LC East, and other projects in the Great Divide Basin. We are also considering exploration at Lost Soldier and other Wyoming projects.
Q: Are there any supply chain issues that could delay the ramp-up of production at Shirley Basin?
A: We are not seeing any supply chain issues that would delay our schedule for Shirley Basin. We are well ahead in ordering necessary equipment and materials. The main concern is electrical equipment, but our engineering team is aware and is working to stay ahead of any potential issues.
Q: What is Ur-Energy's perspective on fuel production for SMRs?
A: There is significant interest in SMRs, and we expect demand for fuel to grow. Currently, no US enrichers are producing HALEU, but Urenco is willing to build out their plant to produce it. We expect this bottleneck to be resolved in the near future.
Q: Can you provide some color on what you're seeing with longer-term contracts with your utility customers?
A: It is now more of a seller's market. We are seeing less insistence on flex and optionality from buyers. Utilities are more willing to accept contracts linked to market prices, sometimes with floors and ceilings. We expect more RFPs late this year and early next year as utilities look to fill their books for 2028 and beyond.
Q: What are you seeing regarding premiums for lower-risk origins for your material?
A: There is a preference for Western supply, and utilities are willing to pay a premium for it. We are also seeing interest in low carbon emissions, and companies are willing to pay a premium for uranium with lower CO2 emissions. We plan to post a sustainability page on our website to highlight our low emissions as an in-situ miner.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
