Ur-Energy(URG) - 2022 Q4 - Annual Report

Part I Items 1 and 2. Business and Properties Ur-Energy is a US-based uranium mining company focused on ISR operations at its Lost Creek and Shirley Basin projects, currently ramping up production to fulfill new sales agreements Overview and Corporate Structure Ur-Energy, a Canadian corporation operating through US subsidiaries, specializes in ISR uranium mining at its Lost Creek and Shirley Basin projects, with production ramping up to meet new sales commitments - The company engages in uranium mining, recovery, and processing, with its first ISR mine, the Lost Creek Project, commencing operations in 2013[26] - In December 2022, the company decided to ramp up production to fulfill new sales commitments of 600,000 pounds of U3O8 annually, starting in 2024[27][34] - Despite commencing production in 2013, the company is classified as an "exploration stage issuer" due to the absence of established proven or probable mineral reserves[28] - The Lost Creek processing facility has a licensed capacity of up to 2.2 million pounds of U3O8 per year, with approximately 1.2 million pounds from its own wellfields, providing excess capacity for future projects[42] Our Mineral Properties Ur-Energy's primary mineral properties, Lost Creek and Shirley Basin in Wyoming, hold significant Measured, Indicated, and Inferred uranium resources Mineral Resources Summary (as of 12/31/2021) | Project | Category | Avg Grade (% eU3O8) | Short Tons (X 1000) | Pounds (X 1000) | | :--- | :--- | :--- | :--- | :--- | | Lost Creek Property | Measured | 0.048 | 7,115 | 6,887 | | | Indicated | 0.046 | 5,523 | 5,027 | | | M&I Total | | 12,638 | 11,914 | | | Inferred | 0.044 | 7,512 | 6,607 | | Shirley Basin Project | Measured | 0.275 | 1,367 | 7,521 | | | Indicated | 0.118 | 549 | 1,295 | | | M&I Total | | 1,916 | 8,816 | | | Inferred | - | - | - | - The Lost Creek Property comprises the operational Lost Creek Project and five adjoining projects, encompassing approximately 35,400 acres[45][66] - The Shirley Basin Project is fully permitted for construction and operation, with plans to install the first monitor well ring in H1 2023[36][102] Competition, Mineral Prices, and Regulations The uranium industry is highly competitive with volatile prices, and the company's operations are subject to extensive and costly environmental and mining regulations Uranium Year-End Prices (US$/lb U3O8) | Price Type | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | Spot Price | $30.20 | $42.05 | $47.68 | | Long-Term Price | $35.00 | $42.75 | $52.00 | - Competition includes larger, more established, and state-owned companies, posing challenges in securing sales agreements and property acquisitions[125] - Operations are subject to extensive laws and regulations from multiple authorities, imposing substantial costs and potential liabilities[130][131][135] Human Resources and Corporate Information As of December 31, 2022, Ur-Energy employed 40 staff across its US corporate and operational offices, with ongoing hiring to support the Lost Creek production ramp-up - As of December 31, 2022, Lost Creek ISR, LLC employed 26 full-time staff at the Lost Creek Project, and Ur-Energy USA had 14 employees (10 full-time, 4 part-time)[145] - Hiring has been ongoing since Q4 2021 to support construction, development, and the production ramp-up at Lost Creek[146] Item 1A. Risk Factors The company faces significant market, operational, regulatory, financial, and share-related risks, including price volatility, competition, and the need for additional capital - Market risks include volatile uranium prices, competition from state-owned enterprises, and reliance on a limited number of customers for sales contracts[155][157][158] - Operational risks arise from commencing production without established mineral reserves, increasing economic and technical uncertainty, and the inherent hazards of mining[167][166] - Regulatory risks include extensive and evolving environmental laws that can delay projects and increase costs[164][174][177] - Financial risks include the need to raise additional capital, restrictive covenants in its State Bond Loan, and potential default if unable to service debt[187][188][189] - The company may be classified as a Passive Foreign Investment Company (PFIC), potentially resulting in adverse U.S. federal income tax consequences for U.S. shareholders[198] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments - None Item 3. Legal Proceedings The company reports no legal proceedings - None Item 4. Mine Safety Disclosure The company's Lost Creek operations are not subject to Federal Mine Safety and Health Administration (MSHA) regulation - The company's operations are not subject to regulation by the Federal Mine Safety and Health Administration (MSHA)[219] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Ur-Energy's common shares trade on the NYSE American and TSX, with 264.7 million shares outstanding as of March 1, 2023, and no dividends paid or planned - Common shares are listed on the NYSE American (URG) and Toronto Stock Exchange (URE)[220] - As of March 1, 2023, 264,726,804 common shares were issued and outstanding[220] - The company has not paid dividends and has no current plans to do so[222] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In 2022, Ur-Energy secured new sales contracts, prompting a production ramp-up at Lost Creek, resulting in a $17.1 million net loss, with liquidity significantly boosted by a $46.1 million equity offering in early 2023 2022 Developments Key 2022 developments included securing multi-year sales agreements for 600,000 lbs U3O8 annually, initiating a production ramp-up at Lost Creek, and completing a $46.1 million equity financing post-year-end - Secured new multi-year sales agreements for annual delivery of 600,000 pounds of U3O8 beginning in 2024, plus a 2023 delivery of 180,000 pounds[235][241][242] - Awarded a contract to sell 100,000 pounds of U3O8 to the DOE National Nuclear Security Administration at $64.47 per pound, delivered in January 2023[243] - Continued construction and development in Mine Unit 2 at Lost Creek, installing wells for the fourth and fifth header houses to facilitate the production ramp-up[237] - Subsequent to year-end, closed an underwritten public offering in February 2023, raising gross proceeds of approximately $46.1 million[254] Results of Operations In 2022, Ur-Energy reported a net loss of $17.1 million, an improvement from $22.9 million in 2021, primarily due to a $1.8 million gain on warrant liability revaluation and increased operating costs from Lost Creek development Consolidated Results of Operations (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Sales | $19 | $16 | $3 | | Gross loss | $(6,842) | $(6,984) | $142 | | Loss from operations | $(19,794) | $(16,757) | $(3,037) | | Net loss | $(17,140) | $(22,938) | $5,798 | | Loss per common share | $(0.08) | $(0.12) | $0.04 | U3O8 Production and Inventory | Metric | Unit | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | :--- | | Pounds captured | lb | 325 | 251 | 10,789 | | Ending Inventory | lb | 325,147 | 284,859 | 284,661 | | Ending Inventory Value | $000 | $9,903 | $7,923 | $7,814 | | Avg. Cost/lb (Total) | $/lb | $30.46 | $27.81 | $27.45 | - Operating costs increased by $3.2 million in 2022, primarily due to a $2.8 million increase in development expenses for drilling and supplies at Lost Creek's Mine Unit 2[272][273][274] - The company recognized a $1.8 million gain on warrant liability revaluation in 2022, compared to a $6.0 million loss in 2021, significantly impacting the net loss comparison[277] Liquidity and Capital Resources Cash resources decreased to $33.0 million by December 31, 2022, primarily due to operating activities, but were significantly boosted to $79.0 million by March 1, 2023, following a $46.1 million equity offering - Cash resources were $33.0 million at December 31, 2022, down from $46.2 million at the end of 2021[281] - Financing activities in 2022 provided $5.9 million, including $3.7 million from the At Market facility and $2.9 million from warrant exercises[283] - The outstanding balance on the Wyoming State Bond Loan was $11.1 million as of December 31, 2022, with principal repayments resuming in October 2022[284][285] - As of March 1, 2023, the company's unrestricted cash position was $79.0 million, bolstered by a February 2023 equity financing[294][301] Item 7A. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to significant commodity price risk due to volatile uranium prices, while interest rate and currency risks are considered low - The company is subject to commodity price risk from fluctuations in uranium spot and long-term prices, influenced by factors beyond its control[313] - Interest rate risk from cash and debt is not considered material, with a hypothetical 10% change in rates having a negligible effect[311] - Currency risk is considered low, as the company maintains a small balance of approximately $2.0 million Canadian dollars for local expenses[312] Item 9A. Controls and Procedures As of December 31, 2022, management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[335] - Based on the COSO framework, management concluded that the company maintained effective internal control over financial reporting as of December 31, 2022[338] Part III Items 10-14 Information for Items 10 through 14 is incorporated by reference from the company's definitive proxy statement for the 2023 Annual Meeting of Shareholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the registrant's definitive proxy statement for the 2023 Annual Meeting of Shareholders[6][344][346] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits filed with the 10-K report, including corporate documents, agreements, certifications, and technical reports, with consolidated financial statements referenced from page F-1 - The Consolidated Financial Statements are filed as part of the Form 10-K and begin on page F-1[352] - Filed exhibits include technical reports for the Lost Creek and Shirley Basin properties, financing agreements, employment agreements, and required CEO/CFO certifications[353][354] Consolidated Financial Statements Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements, identifying the assessment of impairment indicators for long-lived assets as a critical audit matter - The auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion, stating the financial statements are fairly presented in conformity with US GAAP[363] - A critical audit matter was identified regarding the assessment of impairment indicators for long-lived assets, involving significant management judgment and a high degree of auditor subjectivity[367][369] Financial Statements The consolidated financial statements show a decrease in total assets to $107.9 million and total liabilities to $45.4 million in 2022, with a net loss of $17.1 million Consolidated Balance Sheet Summary (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $43,944 | $48,623 | | Total Non-Current Assets | $63,951 | $72,216 | | Total Assets | $107,895 | $120,839 | | Total Current Liabilities | $6,603 | $6,224 | | Total Non-Current Liabilities | $38,793 | $45,229 | | Total Shareholders' Equity | $62,499 | $69,386 | | Total Liabilities & Equity | $107,895 | $120,839 | Consolidated Statement of Operations Summary (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Sales | $19 | $16 | $8,316 | | Gross loss | $(6,842) | $(6,984) | $(4,652) | | Net loss | $(17,140) | $(22,938) | $(14,785) | | Loss per share (Basic & Diluted) | $(0.08) | $(0.12) | $(0.09) | Notes to Consolidated Financial Statements The notes detail accounting policies, confirming the company's exploration stage status, with key financial figures including $35.7 million in mineral properties, $11.1 million State Bond Loan, and a $46.1 million equity financing post-year-end - The company remains an exploration stage issuer, having not established proven or probable reserves for its projects, including the producing Lost Creek Property[379][381] - As of December 31, 2022, mineral properties were valued at $35.7 million and capital assets at $20.1 million, with no impairment indicators identified[372][416][417] - The outstanding balance of the State Bond Loan was $11.1 million as of December 31, 2022, with scheduled payments through October 2024[429][430] - Asset Retirement Obligations (ARO) for future reclamation were estimated at $30.7 million[433] - Subsequent to year-end, the company raised gross proceeds of approximately $46.1 million from an underwritten public offering in February 2023 and received $6.4 million from a uranium sale to the DOE in January 2023[487][488]