enCore Energy(EU) - 2025 Q1 - Quarterly Report

PART I Financial Statements The unaudited consolidated financial statements for Q1 2025 show a net loss of $25.4 million and decreased total assets, reflecting the company's transition to U.S. GAAP - As of January 1, 2025, the Company became a U.S. Domestic Issuer and prepared its consolidated financial statements in accordance with U.S. GAAP[38] Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $54,038 | $87,414 | | Total Assets | $362,607 | $392,722 | | Total Current Liabilities | $18,361 | $30,080 | | Total Liabilities | $62,683 | $74,180 | | Total Equity | $299,924 | $318,542 | Consolidated Statement of Operations Highlights (in thousands) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $18,239 | $30,394 | | Gross Loss | $(23) | $(469) | | Operating Loss | $(15,626) | $(12,278) | | Net Loss | $(25,387) | $(7,742) | | Net Loss per Share (Basic & Diluted) | $(0.13) | $(0.04) | Consolidated Statement of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,735) | $(3,049) | | Net cash used in investing activities | $(7,710) | $(5,092) | | Net cash provided by financing activities | $5,422 | $89,793 | | Net (decrease) increase in cash | $(10,023) | $81,652 | Notes to the Consolidated Unaudited Financial Statements Key notes detail the company's Exploration Stage Issuer status, the sale of Alta Mesa and New Mexico assets, ongoing lawsuits, and 8.315 million pounds of uranium sales commitments - The Company is classified as an Exploration Stage Issuer under SEC regulations due to the absence of proven or probable mineral reserves[36][48] - In February 2024, Boss Energy acquired a 30% equity interest in the Alta Mesa Project for $60 million, with enCore retaining a 70% interest and management control[118] - In April 2025, the company completed the sale of its Crownpoint and Hosta Butte projects in New Mexico to Verdera Energy Corp[117][175] - The company is a defendant in a federal securities class action lawsuit filed in March 2025, alleging ineffective internal controls and improper cost capitalization[128][129] - The company's former CEO filed a demand for arbitration in April 2025, alleging breach of employment agreement and seeking damages[176] Uranium Sales Commitments (in thousands of pounds) | Year | Volume (lbs) | | :--- | :--- | | Remainder of 2025 | 365 | | 2026 | 900 | | 2027 | 850 | | 2028 | 1,000 | | 2029 | 1,500 | | Thereafter | 3,700 | | Total | 8,315 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's domestic ISR uranium extraction focus, Q1 2025 revenue of $18.2 million, a net loss of $25.4 million, and sufficient liquidity for the next twelve months Business Overview and Strategy enCore Energy, an exploration-stage issuer, focuses on domestic ISR uranium extraction, aiming to expand capacity from South Texas to become a leading U.S. supplier - The company focuses on extracting domestic uranium in the United States using proven ISR technology[180] - Despite commencing uranium extraction, the company remains an exploration stage issuer due to the absence of proven or probable mineral reserves[179] - The company's strategy involves developing uranium extraction facilities, starting in South Texas, to meet growing demand for clean nuclear energy[180] Industry and Market Update The global uranium market faces demand exceeding supply, supported by nuclear reactor extensions and U.S. government policies, while global events like Kazatomprom's suspension and Saudi Arabia's entry plans create uncertainty - Global uranium demand, approximately 175.2 million lbs U3O8 annually, continues to exceed primary production, with the deficit met by diminishing stockpiles[181] - Executive Orders in early 2025 designated uranium as a 'critical mineral' and 'energy resource', directing federal agencies to advance permitting and production[183] - The U.S. implemented tariffs on goods from Canada, Mexico, and China in March 2025, creating trade tensions, though some USMCA-related tariffs were delayed[185] - Kazakhstan's Kazatomprom announced a temporary production suspension, while Saudi Arabia intends to enrich and sell uranium[188] Operations and Corporate Update In Q1 2025, enCore sold 290,000 lbs of U3O8, expanded its South Texas drilling fleet, doubled Alta Mesa's capacity, and advanced permitting for projects in South Dakota and Wyoming Q1 2025 Uranium Sales | Metric | Value | | :--- | :--- | | Volume Sold | 290,000 lbs U3O8 | | Average Sales Price | $62.89 per lb U3O8 | - The company increased its active drill rigs in South Texas from 17 at year-end 2024 to 22 as of March 31, 2025[193][206] - A second Ion Exchange (IX) Circuit at the Alta Mesa CPP doubled its total flow capacity from 2,500 to 5,000 gallons per minute (GPM)[193] - The company is advancing its Dewey-Burdock project in South Dakota and has initiated permitting and exploration for the Gas Hills Project in Wyoming[210][211] Results of Operations Q1 2025 revenue decreased 40% to $18.2 million due to lower volumes and prices, resulting in a net loss of $25.4 million, primarily from an unrealized loss on marketable securities, with extracted uranium costing $45.62 per pound Q1 2025 vs Q1 2024 Operational Comparison | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $18.2M | $30.4M | -40% | | Volumes Sold (lbs) | 290,000 | 320,000 | -9% | | Realized Sales Price ($/lb) | $62.89 | $94.98 | -34% | | Net Loss | $(25.4M) | $(7.7M) | -230% | | Loss per Share | $(0.13) | $(0.04) | -225% | - The increase in net loss was primarily driven by a $9.9 million unrealized loss on marketable securities due to unfavorable market conditions in Q1 2025[215] Cost of Extracted Uranium Sold (Q1 2025) | Cost Component | Cost per Pound | | :--- | :--- | | Cash Costs | $31.26 | | Non-Cash Costs | $14.36 | | Total Extracted Cost | $45.62 | Liquidity and Capital Resources As of March 31, 2025, the company reported $29.7 million in cash and $35.7 million in working capital, a decrease from year-end 2024, but believes its liquidity is sufficient for the next twelve months Liquidity Position (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $29,704 | $39,701 | | Working capital | $35,677 | $57,334 | - The company believes its available cash, expected operating cash flows, and potential financing will be sufficient for operations for the next twelve months[226] - Net cash used in operating activities increased to $7.7 million in Q1 2025 from $3.0 million in Q1 2024, largely due to payments on the uranium loan[230][231] - Net cash provided by financing activities decreased significantly to $5.4 million in Q1 2025 from $89.8 million in Q1 2024, due to prior period proceeds from the Alta Mesa JV minority interest sale[230][234] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to equity price, uranium price, and foreign currency risks, with no derivative hedging used for uranium price or foreign currency exposure - The company is exposed to equity price risk, as common share price volatility could impact its ability to raise capital through equity financing[238] - The company faces uranium price risk, with future sales based on spot and fixed pricing, and does not use derivative instruments to hedge this exposure[240] - The company is subject to foreign currency risk from Canadian Dollar transactions but does not hedge this exposure[241][242] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to material weaknesses in IT and process-level controls, with remediation efforts ongoing - The Acting CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2025[243] - Ineffectiveness stems from ongoing material weaknesses: ineffective general information technology controls (GITCs) and poorly designed process-level control activities for financial reporting[244][248] - Remediation activities are underway, including recruiting key personnel, developing a risk assessment framework, and establishing a comprehensive GITC evaluation and monitoring program[246][247][253] PART II - OTHER INFORMATION Legal Proceedings The company is involved in a securities class action lawsuit and an arbitration demand from its former CEO, with management currently deeming a loss not probable or estimable for either case - The company and certain officers are defendants in a securities class action lawsuit alleging failure to disclose ineffective internal controls and improper cost capitalization under U.S. GAAP[251] - On April 23, 2025, the company's former CEO filed a demand for arbitration, alleging breach of employment agreement and seeking damages for termination without cause[252] Risk Factors The company highlights key risks, including the potential economic impact of tariffs on uranium and other minerals, and the costly, time-consuming nature of ongoing and future litigation - The potential imposition of tariffs on uranium could disrupt supply chains and increase costs, materially and adversely affecting business operations[255] - The company is subject to litigation risk, including the current securities class action, which could be costly, time-consuming, and negatively affect the business regardless of outcome[256] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, the company issued 271,333 common shares from warrant and stock option exercises, generating $377,000 in gross proceeds under Securities Act exemptions - In Q1 2025, the company issued 90,000 common shares from warrant exercises for gross proceeds of $236,000[257] - In Q1 2025, the company issued 181,333 common shares from stock option exercises for gross proceeds of $141,000[257] Defaults Upon Senior Securities None - None[258] Mine Safety Disclosures The company's operations are not subject to regulation by the Federal Mine Safety and Health Administration - The company's operations are not subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977[258] Other Information None - None[259] Exhibits This section lists filed exhibits, including various agreements, officer certifications, and Interactive Data Files (iXBRL) - Lists filed exhibits, including a Share Purchase Agreement, a Registration Rights Agreement, an amendment to the Uranium Loan Agreement, and CEO/CFO certifications[260]