Business Overview
The following discussion is designed to provide information that we believe is necessary for an understanding of our financial condition, changes in financial condition, and results of our operations. The following discussion and analysis should be read in conjunction with the audited financial statements and MD&A contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Incorporated onMarch 22, 2004 ,Ur-Energy is an exploration stage issuer, as that term is defined by theSEC . We are engaged in uranium recovery and processing activities, including the acquisition, exploration, development and operation of uranium mineral properties in theU.S. We are operating our first in situ recovery uranium facility at ourLost Creek Project inWyoming .Ur-Energy is a corporation continued under the Canada Business Corporations Act onAugust 8, 2006 . Our Common Shares are listed on the TSX under the symbol "URE" and on the NYSE American under the symbol "URG."Ur-Energy has one wholly owned subsidiary,Ur-Energy USA Inc. , incorporated under the laws of theState of Colorado .Ur-Energy USA Inc. has three wholly-owned subsidiaries:NFU Wyoming, LLC , a limited liability company formed under the laws of theState of Wyoming which acts as our land holding and exploration entity;Lost Creek ISR, LLC , a limited liability company formed under the laws of theState of Wyoming to operate ourLost Creek Project and hold our Lost Creek properties and assets; andPathfinder Mines Corporation ("Pathfinder"), incorporated under the laws of theState of Delaware , which holds, among other assets, theShirley Basin andLucky Mc properties inWyoming . Our materialU.S. subsidiaries remain unchanged since the filing of our Annual Report on Form 10-K, datedMarch 9, 2022 . We utilize in situ recovery ("ISR") of the uranium at our flagship project, Lost Creek, and will do so at other projects where possible. The ISR technique is employed in uranium extraction because it allows for an effective recovery of roll front uranium mineralization at a lower cost. At Lost Creek, we extract and process uranium oxide ("U3O8") for shipping to a third-party conversion facility to be weighed, assayed and stored until sold. After sale, when further processed, the uranium we have produced fuels carbon-free, emissions-free nuclear power which is a cost-effective and reliable form of electrical power. Nuclear power is estimated to provide more than 50% of the carbon-free electricity in theU.S. Our Lost Creek processing facility, which includes all circuits for the production, drying and packaging of U3O8 for delivery into sales transactions, is designed and approved under current licensing to process up to 1.2 million pounds of U3O8 annually from the Lost Creek wellfield. The processing facility has the physical design capacity and is licensed to process 2.2 million pounds of U3O8 annually, which provides additional capacity of up to one million pounds U3O8, to process material from other sources. We expect that the Lost Creek processing facility will be utilized to process captured U3O8 from ourShirley Basin Project for which we anticipate the need only for a satellite plant. However, theShirley Basin permit and license allow for the construction of a full processing facility, providing greater construction and operating flexibility as may be dictated by market conditions. Uranium Market Update Increasing support for nuclear energy has been sustained as more governments understand it is a critical element 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 and large companies are endorsing nuclear energy to meet such objectives, recognizing the safety, reliability, and economic advantages nuclear power presents. Supply-demand fundamentals 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. 24 Table of Contents In theU.S. , in late 2020,Congress approved the appropriation of$75 million for the establishment of a new national uranium reserve through which theDepartment of Energy ("DOE"),National Nuclear Security Administration ("NNSA") is to purchase domestically produced uranium. A 2021DOE request for information was issued for stakeholders to respond with data and input to support and define the establishment of the uranium reserve. Subsequently, inJune 2022 , NNSA issued a solicitation for proposals to purchase from uranium producers qualified under the solicitation up to one million pounds U3O8. Bid proposals are due to DOE NNSA on or beforeAugust 1, 2022 . We have submitted a bid proposal to the NNSA. There can be no assurance that the Company will be a successful bidder.The Biden Administration continues to prioritize climate change initiatives and its leaders 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 inWashington . Also, it appears that theU.S. utilities are beginning to understand the need for supply diversity in light of supply disruptions, general market conditions and geopolitical realities.The Infrastructure Investment and Jobs Act ("Act"), signed into law inNovember 2021 , contains several provisions supporting nuclear energy including, most importantly, a$6 billion Civil Nuclear Credit Program designed to prevent the premature closure of nuclear power plants. Nuclear power plants utilizing domestically sourced uranium products will be given priority funding under this program. TheDOE issued guidance for submission of certifications and bids for the Program with submissions due inSeptember 2022 . The Act also supports the Advanced Reactor Demonstration Program, the demonstration of clean hydrogen hubs including hubs powered by nuclear, advanced reactor siting feasibility studies for isolated communities and other nuclear based programs. When successfully implemented, the Act will extend the life of existing reactors and potentially expand uses for nuclear technology, both of which will result in stronger demand for uranium-based fuel. InApril 2022 ,Senator Manchin (D-W.Va.), introduced a bipartisan bill titled The International Nuclear Energy Act of 2022 with the stated goal of establishing anExecutive Office for Nuclear Energy Policy to promote engagement with ally and partner nations to develop a civil nuclear export strategy and offsetChina andRussia's growing influence on international nuclear energy development. Also, numerous states in theU.S. have passed legislation supporting nuclear power. Globally, several countries includingChina ,Japan ,France andEngland are ramping up power plant construction, reactor life extensions and/or research activities. As a result of these and other developments in theU.S. and abroad, uranium pricing has increased significantly over the past year. Spot market prices continue to experience volatility, but through Q2 per-pound prices continued in the upper $40s and $50s. While generally lagging behind spot price increases, term pricing has also continued to strengthen. Although it is likely that all uranium producers returning to production may face challenges in today's inflationary and supply-chain driven world, we believe that the steps we have taken throughout the past several years to optimize our processes in both the Lost Creek wellfield and plant, conduct routine maintenance and further cross train our experienced staff will facilitate an orderly return to production when market conditions warrant. As described below, our advanced wellfield preparations and research and development work should assist to streamline the path to full production. 25 Table of Contents
The short- and long-term worldwide implications of the Russian invasion ofUkraine are difficult to predict. In addition to the adverse economic and other effects felt beyond the borders ofUkraine , the war may result in impacts felt more directly by the nuclear fuel industries and uranium producers specifically. The imposition of sanctions onRussia by theU.S. and other countries has resulted in counter measures byRussia and may result in additional counter sanctions including the possible termination of exports of enriched uranium fromRussia to theU.S. As described above, several pieces of legislation to prohibit Russian imports of uranium have been introduced inCongress .Russia has historically and very recently shown its willingness to utilize energy resources as foreign policy "tools" in its relations with European nations, creating supply disruptions and leveraging punitive pricing. Consistent with that practice,Russia may influenceKazakhstan andUzbekistan to halt uranium exports to theU.S. or otherwise interfere with the shipments to theU.S. Trade restrictions related to nuclear fuel, especially in the current market with limited sources of uranium, could result in a reordering of global supply and higher sales prices; especially in the short-term. The long-term impact on the market is equally unpredictable, however.Finland has halted construction of a reactor project led byRussia and other countries may follow suit. If sufficient new builds are cancelled, the long-term fuel demand could be adversely impacted. Conversely, some countries, especially those which are not energy independent, may find it desirable to move away from imported fossil fuels in favor of domestic nuclear power.
Mineral Rights and Properties
We have 12 U.S. uranium properties. Ten of our uranium properties are in theGreat Divide Basin , Wyoming, including Lost Creek. Currently, we control nearly 1,800 unpatented mining claims and threeState of Wyoming mineral leases for a total of more than 35,000 acres in the area of the Lost Creek Property, including the Lost Creek permit area (the "Lost Creek Project "), and certain adjoining properties referred to as LC East, LC West, LC North,LC South and EN Project areas (collectively, with theLost Creek Project , the "Lost Creek Property"). OurShirley Basin Project permit area, also inWyoming , comprises nearly 1,800 acres of Company-controlled mineral acres. Lost Creek Property Lost Creek continues to operate at reduced production levels, which have allowed us to sustain operating cost reductions at Lost Creek, while continuing to conduct preventative maintenance and optimize processes in preparation for
ramp up to full production rates.
An advance development program at Lost Creek was implemented in late 2021, with the intent to significantly improve our ability to quickly return to production when ramp-up occurs. Specifically, we commenced a drilling and construction program to complete the development of the fourth header house in MU2 (HH 24). The header house, and its associated drilling and wellfield development, is expected to be complete in 2022 and be ready for production. We have ordered all necessary equipment to construct the fifth header house (HH 25) and the long-lead items for the sixth header house in MU2. We are nearly finished with a delineation drill program to assist with further wellfield design within MU2. This includes delineation drilling for HHs 2-4 through 2-9. Together with our optimization of plant processes, these wellfield programs will significantly advance our readiness and shorten the time frame to production when ramp-up occurs. The first two mine units at Lost Creek (MU1 and MU2) have all appropriate permits necessary for a return to operations, including new production resulting from the ongoing MU2 advance development program, when ramp up occurs. We have received Wyoming Uranium Recovery Program ("URP") approval of the amendment to the Lost Creek source material license to include recovery from theLC East Project (HJ and KM horizons) immediately adjacent to theLost Creek Project and additional HJ horizons at theLost Creek Project . Currently, we await only approval by theWyoming 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 2022. 26 Table of ContentsShirley Basin Project OurShirley Basin Project stands construction ready, having received the source material license, permit to mine, and aquifer exemption for the project in 2021. These approvals represent the final major permits required to begin construction of theShirley 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. Research and Development We are actively engaged in several research and development ("R&D") projects with the overall objective to introduce new methods of cost-effective technology to ourLost Creek Project , and toShirley Basin when it is constructed. The technologic advances are at varying stages of development, although if analyses continue to be successful, we anticipate that one or more may be implemented in 2022. The development projects include a new material for injection wells and related well installation process, for which a provisional patent has been filed with theU.S. Patent Office. During 2022 Q2, we received WDEQ authorization to proceed with field testing the materials and engineering, and testing has commenced. Although the technology will not be used for production wells, it will be used for injection wells which generally represent approximately 65% of the wells throughout wellfields designed with traditional "five-spot" recovery patterns. In addition to its relatively low cost and availability of materials in the midst of current supply chain challenges, the proposed method, if proven out, is expected to reduce drill rig time on injection wells by about 70% and reduce 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. Work continues 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 expected to be completed by 2022 Q4. The value of increasing the rate of recycling is that less wastewater requiring disposal will be generated, which would allow us to minimize the number of additional deep disposal wells required at Lost Creek and, in turn, recycle the majority of that fluid as clean, Class V, injectate. 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.
Work continues on the development and construction of our new operations headquarters inCasper, Wyoming which will serve our ongoing and futureWyoming operations as well as mineral exploration and development projects. We are working with our contractor to advance the completed design work for a multipurpose building which will allow for centralized construction activities as well as housing our shared services chemistry laboratory. Construction is expected to commence summer 2022 and be complete in approximately seven to nine months. The additional facility will allow us to construct header houses for Lost Creek and, when built and operational,Shirley Basin . Building, wiring and automating header houses inCasper , as well as other construction activities, will provide numerous safety, environmental and financial advantages to our operations.
Changes in Senior Leadership
OnJune 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 effectiveMarch 1, 2022 , was elected as a Director at the Company's annual shareholders meeting onJune 2, 2022 . Thereafter, the Board of Directors namedMr. Cash the Chairman of the Board. FollowingMr. Klenda's retirement,Mr. Cash assumed the role of President of the Company. 27 Table of Contents 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.
The following table provides information on our production and ending inventory of U3O8 pounds.
U3O8 Production and Ending Inventory
Unit 2021 Q3 2021 Q4 2022 Q1 2022 Q2 YTD 2022 U3O8 Production Pounds captured lb 70 74 83 83 166 Pounds drummed lb - - - - - Pounds shipped lb - - - - - Pounds purchased lb - - - - - U3O8 Ending Inventory Pounds In-process lb inventory 999 1,069 1,146 1,223 Plant inventory lb - - - Conversion inventory - lb produced 267,049 267,049 267,049 267,049 Conversion inventory - lb purchased 16,741 16,741 16,741 16,741 lb 284,789 284,859 284,936 285,013 Value In-process inventory$000 $ - $ - $ - $ - Plant inventory$000 $ - $ - $ - $ - Conversion inventory - produced$000 $ 7,486 $ 7,488 $ 7,488 $ 7,488 Conversion inventory - purchased$000 $ 435 $ 435 $ 435 $ 435 $000 $ 7,921 $ 7,923 $ 7,923 $ 7,923 Cost per Pound In-process $/lb inventory $ - $ - $ - $ - Plant inventory $/lb $ - $ - $ - $ - Conversion inventory - $/lb produced$ 28.03 $ 28.04 $ 28.04 $ 28.04 Conversion inventory - $/lb purchased$ 25.98 $ 25.98 $ 25.98 $ 25.98 $/lb$ 27.81 $ 27.81 $ 27.81 $ 27.81 Produced conversion inventory detail: Ad valorem and $/lb severance tax$ 0.59 $ 0.59 $ 0.59 $ 0.59 Cash cost $/lb$ 18.59 $ 18.60 $ 18.60 $ 18.60 Non-cash cost $/lb$ 8.85 $ 8.85 $ 8.85 $ 8.85 $/lb$ 28.03 $ 28.04 $ 28.04 $ 28.04 28 Table of Contents During 2020, we intentionally reduced production operations at Lost Creek in response to the depressed state of the uranium market at that time. As a result, production rates declined significantly and will remain low until a decision to ramp up is made. Recent spot price improvements are encouraging and long-term contract pricing necessary to support a ramp up decision has slowly improved, although not to a point sufficient to support a decision to ramp up. As ofJune 30, 2022 , we had approximately 283,790 pounds of U3O8 at the conversion facility including 267,049 produced pounds at an average cost per pound of$28.04 , and 16,741 purchased pounds at an average cost per pound of$25.98 .
Three and six months ended
The following table summarizes the results of operations for the three and six
months ended
Three months ended Six months ended June 30, June 30, 2022 2021 Change 2022 2021 Change Sales 19 7 12 19 7 12 Cost of sales (1,662 ) (1,835 ) 173 (3,384 ) (3,508 ) 124 Gross profit (loss) (1,643 ) (1,828 ) 185 (3,365 ) (3,501 ) 136 Operating costs (3,460 ) (2,777 ) (683 ) (6,758 ) (4,589 ) (2,169 ) Loss from operations (5,103 ) (4,605 ) (498 ) (10,123 ) (8,090 ) (2,033 ) Net interest expense (163 ) (187 ) 24 (337 ) (376 ) 39 Warrant mark to market gain (loss) 4,888 (2,920 ) 7,808 1,915 (6,324 ) 8,239 Foreign exchange gain (loss) 21 (71 ) 92 10 (367 ) 377 Other income 4 904 (900 ) 1,254 906 348 Net loss (353 ) (6,879 ) 6,526 (7,281 ) (14,251 ) 6,970 Foreign currency translation adjustment 158 34 124 50 253 (203 ) Comprehensive loss (195 ) (6,845 ) 6,650 (7,231 ) (13,998 ) 6,767 Loss per common share: Basic - (0.04 ) 0.04 (0.03 ) (0.08 ) 0.05 Diluted - (0.04 ) 0.04 (0.03 ) (0.08 ) 0.05 Sales
There were no sales of U3O8 in the first six months of 2022 or 2021. We billed
disposal fees of
Cost of Sales Cost of sales per the financial statements includes ad valorem and severance taxes related to the extraction of uranium, all costs of wellfield and plant operations including the related depreciation and amortization of capitalized assets, reclamation, and mineral property costs, plus product distribution costs. These costs are also used to value inventory. The resulting inventoried cost per pound is compared to the NRV of the product, which is based on the estimated sales price of the product, net of any necessary costs to finish the product. Any inventory value in excess of the NRV is charged to cost of sales in the financial statements. NRV adjustments, if any, are excluded from the U3O8 cost of sales and U3O8 cost per pound sold figures because they relate to the pounds of U3O8 in ending inventory and do not relate to the pounds of U3O8
sold during the period.
In the three and six months endedJune 30, 2022 , andJune 30, 2021 , cost of sales per the financial statements included$1.7 million and$3.4 million for 2022 and$1.8 million and$3.5 million for 2021, respectively, in lower of cost or NRV adjustments. With production rates held to intentionally lower levels, virtually all production costs during 2022 and 2021 were charged to cost of
sales as NRV adjustments. 29 Table of Contents Gross Profit (Loss)
The gross losses per the financial statements for the three and six months endedJune 30, 2022 were$1.6 million and$3.4 million , respectively. For the three and six months endedJune 30, 2021 were$1.8 million and$3.5 million , respectively. The losses were composed of NRV adjustments less the disposal
fee revenue. Operating Costs
Operating costs include exploration and evaluation expense, development expense, general and administration expense, and accretion expense.
The following table summarizes the operating costs for the three and six months
ended
Three months ended Six months ended June 30, June 30, Operating Costs 2022 2021 Change
2022 2021 Change Exploration and evaluation 460 693 (233 ) 999 1,156 (157 )
Development 1,328 333 995 1,949 465 1,484 General and administration 1,559 1,628 (69 )
3,585 2,722 863 Accretion 113 123 (10 ) 225 246 (21 ) 3,460 2,777 683 6,758 4,589 2,169 Total operating costs of$3.5 million in 2022 Q2 were$0.7 million more than operating costs in 2021 Q2. Total operating costs for the six months endedJune 30, 2022 , andJune 30, 2021 were$6.8 million and$4.6 million respectively. The increase was primarily due to the MU2 advance development program being conducted at Lost Creek and the payment of bonuses in 2022. Bonuses paid were lower and there were no advance development costs incurred in the first six months endedJune 30, 2021 . 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. Total exploration and evaluation expense decreased approximately$0.2 million in 2022 Q2 and$0.2 million for the six months endedJune 30, 2022 , compared to the comparable periods in 2021. The difference was due to the transfer of a corporate officer to the general and administrative department when he assumed the role of Chief Executive Officer and timing differences related to bonus payments. Development expense includes costs incurred at theLost Creek Project not directly attributable to production activities, including wellfield construction, drilling, and development costs. It also includes costs associated with theShirley Basin Project , which is in a more advanced stageand has also been classified as a development project. The$1.0 million and$1.5 million increases in development expense for the three and six months endedJune 30, 2022 , respectively, relate to the MU2 advance development program currently underway. Drilling, drilling supplies, and related service costs accounted for most of the increase. 30 Table of Contents
General and administration expense relates to the administration, finance, investor relations, land, and legal functions, and consists principally of personnel, facility, and support costs. The$0.9 million increase for the six months endedJune 30, 2022 included an increase in labor related costs ($0.5 million ), stock based compensation ($0.2 million ), and increased professional services ($0.1 million ). Other Income and Expenses
Net interest expense remained consistent in 2022.
For the three months and six months endedJune 30, 2022 , the warrant liability mark to market gain was$4.9 million and$1.9 million , respectively. As a part of theSeptember 2018 underwritten public offering, theAugust 2020 registered direct offering, and theFebruary 2021 underwritten public offering, we sold warrants that were priced inU.S. dollars. Because the functional currency ofUr-Energy Inc. is Canadian dollars, a derivative financial liability was created. The liability was originally calculated, and is revalued monthly, using the Black-Scholes model as there is no active market for the warrants. Any gain or loss resulting from the revaluation of the liability is reflected in other income and expenses for the period. During Q2 2021, the Company's stock price, volatility, and other factors used in the Black-Scholes model rose significantly, leading to a significant increase in the warrant liability and corresponding mark to market losses. In 2022, these same factors decreased significantly as well as there being fewer outstanding warrants due to exercises and expirations which resulted in a gain in 2022. As a result of theFebruary 2021 underwritten public offering, the Company received approximately$13.9 million in net proceeds from the offering. Because the functional currency of the UrEnergy Inc. entity is Canadian dollars, the entity's USD bank account is revalued into Canadian dollars and any gain or loss resulting from changes in the currency rates is reflected in other income and expenses for the period. For the six months endedJune 30, 2021 , the average USD balance in the entity's bank accounts was substantially higher and resulted in a loss from the change in foreign exchange rates. For the six months endedJune 30, 2022 , there was substantial volatility in the exchange rate and resulted in a gain from the change in foreign exchange rates. DuringMarch 2022 , we sold a royalty interest related to StrataEnergy'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.
Earnings (loss) per Common Share
The basic and diluted losses per common share for the three and six months endedJune 30, 2022 , was nil and$0.03 , respectively. For the three and six months endedJune 30, 2021 , the loss per share was$0.04 and$0.08 , 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
Cash, cash equivalents, and restricted cash decreased from the
31 Table of Contents Operating activities used$6.4 million of cash for the six months endedJune 30, 2022 . We spent$1.9 million on production related cash costs and operating costs consumed$5.8 million of cash. This was partially offset by the$1.3 million received from the sale of the royalty interest.
Investing activities used less than
Financing activities provided
Wyoming State Bond Loan
OnOctober 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 commencedJanuary 1, 2014 . The principal was to be payable in 28 quarterly installments, which commencedJanuary 1, 2015 . The State Bond Loan is secured by all the assets at theLost Creek Project . As ofJune 30, 2022 , the balance of the State Bond
Loan was$12.4 million . OnOctober 1, 2019 , the Sweetwater County Commissioners and theState of Wyoming approved an eighteen-month deferral of principal payments beginningOctober 1, 2019 . OnOctober 6, 2020 , the State Bond Loan was again modified to defer principal payments for an additional eighteen months. Quarterly principal payments are scheduled to resume onOctober 1, 2022 , and the last payment will be due onOctober 1, 2024 .
Universal Shelf Registration and At Market Facility
OnMay 15, 2020 , we filed a universal shelf registration statement on Form S-3 with theSEC 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 effectiveMay 27, 2020 , for a three-year period. OnMay 29, 2020 , we entered into an At Market Issuance Sales Agreement (the "Sales Agreement") withB. Riley Securities, Inc. ("B.Riley Securities "), relating to our Common Shares. OnJune 7, 2021 , we amended and restated the Sales Agreement to includeCantor Fitzgerald & Co. ("Cantor," and together withB. 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 . OnNovember 23, 2021 , we filed a new universal shelf registration statement on Form S-3 with theSEC 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 effectiveDecember 17, 2021 , for a three-year period. OnDecember 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 ofAugust 1, 2022 , we have issued and sold 1,884,309 common shares having aggregate gross proceeds of approximately$3.3 million sinceDecember 17, 2021 , under the Amended Sales
Agreement. 32 Table of Contents
For the three and six months ended
2021 Underwritten Public Offering
OnFebruary 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 UrEnergy 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 . Liquidity Outlook
As ofAugust 1, 2022 , we had$42.2 million of cash and cash equivalents. In addition to our cash position, our finished, ready-to-sell, conversion facility inventory, worth approximately$15.7 million at recent spot prices, is immediately realizable, if necessary. We do not anticipate selling our existing finished-product inventory in the next 12 months unless it is advantageous
to do so. Looking Ahead The surge in interest by investors, policy- and lawmakers, and climate-change advocates in all things nuclear continues in 2022. Global recognition of nuclear energy's role in achieving net-zero carbon emissions continues to be more widely accepted.Japan , several member nations of theEuropean Union , and theUnited Kingdom have all recently made announcements of action plans making nuclear energy an integral part of the climate change solution.The Biden Administration also continues to voice support for clean energy and the nuclear industry. TheDOE uranium reserve has moved forward: inJune 2022 , DOE NNSA issued a solicitation for proposal to purchase qualified domestically produced uranium. We have submitted a bid proposal. Although there can be no assurance that the Company will be a successful bidder, our existing inventory has been classified as current, reflecting our intention to participate in the bidding process. The sustained support for nuclear energy has prompted financial funds and uranium ETFs to purchase uranium inventories thereby supporting the uranium spot price. It has been a year since the Sprott Physical Uranium Trust ("SPUT") began its purchases of uranium. SPUT established the means in the equity markets to raise more than$3 billion for such purchases and now holds more than 57 million pounds U3O8. While others have established the vehicles by which to make substantial purchases of uranium, SPUT remains the most prolific purchaser. The rally in uranium spot prices which began in 2021 continues in 2022, with price per-pound during the quarter remaining in the upper $40s and lower $50s. Moreover, nuclear utilities and other purchasers are back in the market, resulting in some strengthening of term pricing. Our cash position as ofAugust 1, 2022 , is$42.2 million . In addition to our strong cash position, we have nearly 324,000 pounds of finished,U.S. produced U3O8 inventory at the conversion facility, worth approximately$15.7 million at recent spot prices. Our financial position provides us with adequate funds to maintain and enhance operational readiness at Lost Creek, as well as having allowed us to preserve our existing inventory to sell into higher prices. To heighten our readiness to return to production operations at Lost Creek, we are advancing preparations in the fully permitted MU2 through a drilling and construction program, which is being supplemented by purchases of mid- and long-lead time items for additional development in MU2. When the advance work is complete, Lost Creek operations can increase to full production rates in as little as six months following a "go" decision. 33 Table of Contents
We continue to diligently work to optimize processes and refine production plans, supported by our experienced Lost Creek operational staff, who stand ready to expand Lost Creek production to an annualized run rate of up to 1.2 million pounds. We are prepared to ramp up and to deliver future Lost Creek production into new sales contracts. A production ramp up will include further development work in both of the first two mine units, followed by the ten additional mining areas as defined in the Lost Creek Technical Report Summary (March 7, 2022 ).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. We will continue to closely monitor the uranium market, the impact of the uranium reserve program, and other developments in the markets or fromCongress , which may positively impact the uranium production industry. Until market conditions signal a decision for the return to production operations, we will focus on maintaining safe and compliant operations while continuing to enhance and leverage our operational readiness.
Transactions with Related Parties
There were no reportable transactions with related parties during the quarter.
Proposed Transactions A non-core, unpermitted, non-operating property held by Pathfinder is presently considered to be an asset held for sale. The Company has a plan to sell the asset and is considering an offer consisting of cash and mineral properties. The asset's mineral property cost is shown in note 5 to the accompanying Interim Consolidated Financial Statements. Other than the proposed transaction, as is typical of the mineral exploration, development, and mining industry, we will consider and review potential merger, acquisition, investment and venture transactions and opportunities that could enhance shareholder value. Timely disclosure of such transactions is made as soon as reportable events arise.
Critical Accounting Policies and Estimates
We have established the existence of uranium resources at the Lost Creek Property, but because of the unique nature of in situ recovery mines, we have not established, and have no plans to establish, the existence of proven and probable reserves at this project. Accordingly, we have adopted an accounting policy with respect to the nature of items that qualify for capitalization for in situ U3O8 mining operations to align our policy to the accounting treatment that has been established as best practice for these types of mining operations.
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.
34 Table of Contents Inventory and Cost of Sales Our inventories are valued 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 with the exception of wellfield and disposal well costs which are treated as development expenses when incurred. Depreciation of facility enclosures, equipment and asset retirement obligations as well as amortization of the acquisition cost of the related property is also included in the inventory valuation. We do not allocate any administrative or other overhead to the cost of the product.
Share-Based Expense and Warrant Liability
We are required to initially record all equity instruments including warrants, restricted share units and stock options at fair value in the financial statements.
Management utilizes the Black-Scholes model to calculate the fair value of the warrants and stock options at the time they are issued. In addition, the fair value of derivative warrant liability is recalculated monthly using the Black-Scholes model with any gain or loss being reflected in the net income for the period. Use of the Black-Scholes model requires management to make estimates regarding the expected volatility of the Company's stock over the future life of the equity instrument, the estimate of the expected life of the equity instrument and the number of options that are expected to be forfeited. Determination of these estimates requires significant judgment and requires management to formulate estimates of future events based on a limited history of actual results.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Management applies significant judgment to assess 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 market 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 current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. Recoverability of these assets is measured by comparison of the carrying amounts 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.
Off Balance Sheet Arrangements
We have not entered into any material off balance sheet arrangements such as guaranteed contracts, contingent interests in assets transferred to unconsolidated entities, derivative instrument obligations, or with respect to any obligations under a variable interest entity arrangement. Outstanding Share Data
As of
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