Uranium Resources, Inc. (Nasdaq:URRE) (ASX:URI),
an energy metals exploration and development company, announced
today its results for the first quarter of fiscal year 2017, and
also discussed its business outlook and its energy metals business
development in 2017.
Christopher M. Jones, President and Chief
Executive Officer, said, “Improvements in our working capital to a
positive $11.4 million at March 31, elimination of all outstanding
debt and closing the business transaction with Laramide Resources
have put us in a position of strength as we start 2017. At
the same time, we have been able, once again, to reduce G&A
costs. Coupled with favorable geophysical results on our
Columbus Basin Project in Nevada, we can now pull forward our
lithium exploration efforts, with drilling now scheduled to start
in Q3.”
Business Highlights for 1Q-2017 and to
Date
- Lithium business. During Q1, the Company expanded its
lithium property holdings to over 14,000 acres at its Columbus
Basin project by entering into an option agreement to purchase a
block of unpatented placer mining claims covering an area of
approximately 3,040 acres which adjoin a portion of the Company’s
current property holdings. This brings the Company’s total lithium
property holdings to over 27,000 acres in Nevada and Utah. In
addition, the Company submitted two water rights applications to
the State of Nevada for the Columbus Basin project, acquired
geophysical data from a major mining company and engaged a
geophysical consultant to review, integrate and reinterpret the
historical geophysical survey data. The key results of this
work were: (1) the indicated depth of the Columbus Salt Marsh basin
is greater than expected and in excess of 6,500ft (2,000m) which
increases the probability of intersecting favorable geology for
lithium brines at depth and (2) the combined presence of
hypersaline brines and shallow low density geologic horizons, as
indicated by resistivity modelling, present excellent targets for
lithium brine exploration. The new geophysical data interpretation
will be coupled with the Company’s geochemical sampling results to
finalize geologic targets and drill hole locations for a 3rd
quarter drill campaign at the Columbus Basin Project.
- Uranium operations. During Q1, the Company continued to
maintain its uranium properties on standby, awaiting improved
uranium prices. Activities included continued restoration and
reclamation activities in South Texas, continued standby activities
at the Company’s Temrezli property in Turkey, while in New Mexico,
the Company has been in discussions with Cebolleta Land Grant
(“CLG”) and Juan Tafoya Land Corporation (“JTLC”) representatives
about revised terms on the respective mining leases to reflect
current uranium market price conditions. Subsequent to
quarter end, the Company and JTLC executed an amendment to the JTLC
Mining Lease (“Lease”) whereby the annual rent was reduced from
$307,000 to $175,000 for each of the next three years, the
production royalty was fixed at 4% versus a variable rate ranging
from 4.65% to 6.5%, the royalty for non-property uranium
concentrates that are milled, transported over, stored or processed
at, but not mined on, the land covered by the Lease was increased
from 0.5% to 2% and JTLC was granted the right to utilize certain
water rights covered by the Lease until required by the Company for
exploration or development activities on the Lease
properties. Discussions with CLG representatives are
ongoing.
- Laramide asset sale. On January 5, 2017, the Company closed the
sale of its Crownpoint and Churchrock properties in New Mexico to
Laramide Resources Ltd. (“Laramide”). At the closing, the
Company transferred its wholly-owned subsidiary Hydro Resources,
Inc. to Laramide and in exchange received $2.25 million in cash,
common stock and warrants from Laramide valued at $0.5 million, a
three-year secured promissory note in the amount of $5.0 million,
and other consideration. The Company had received a
non-refundable payment of $250,000 from Laramide in October
2016.
- Equity capital raises. In 2017 to date, the Company has
raised net proceeds of $13.4 million, comprised of a registered
direct offering of $4.5 million which closed on February 16, 2017,
and $8.9 million from the sale of common stock and pre-funded
warrants in a confidentially marketed public offering which closed
on January 19, 2017. All warrants have been exercised.
- RCF loan retired. On February 9, 2017, the Company paid
$5.7 million out of treasury to repay the remaining principal and
interest amounts due and outstanding under the loan agreement with
Resource Capital Fund V L.P. (“RCF”), and the loan agreement was
thereby terminated. In connection with the termination of the
loan agreement, all security interests and pledges granted to RCF
by the Company and certain of its subsidiaries were terminated and
in due course will be released.
Key Financial Highlights
Table 1: Financial Summary
(unaudited)
|
|
|
|
($ and Shares in 000, Except Per Share) |
31-Mar-17 |
31-Mar-16 |
Variance |
Net Cash Used in Operations |
$ |
(3,287 |
) |
$ |
(2,205 |
) |
49 |
% |
Mineral Property Expenses |
|
(769 |
) |
|
(731 |
) |
5 |
% |
General and Administrative, including Non-cash Stock
Compensation |
|
(1,668 |
) |
|
(2,145 |
) |
-22 |
% |
Net Income (Loss) |
$ |
1,845 |
|
$ |
(4,273 |
) |
-143 |
% |
Net Income (Loss) per Share |
$ |
0.09 |
|
$ |
(0.86 |
) |
-110 |
% |
Avg. Weighted Shares Outstanding |
|
21,602 |
|
|
4,968 |
|
335 |
% |
|
|
|
|
- Net cash used in operations. Net cash used in operating
activities was $3.3 million for the three months ended March 31,
2017, as compared with $2.2 million for the same period in 2016.
The increase of $1.1 million in cash used is primarily due to an
increase in cash used to reduce accounts payable of $1.6 million,
which was partially offset by a decrease in cash expenditures
related to general and administrative expenses of $0.3
million.
- Operating expenses. Mineral property expenses were
slightly increased from the corresponding period during 2016,
mostly the result of an increase of $0.1 million as a result of our
acquisition of an option to purchase additional claims at the
Columbus Basin project for $75,000 and the purchase of exploration
data for the Columbus Basin project for $15,000. General and
administrative charges decreased by $0.5 million as compared with
the corresponding period in 2016 due to a decrease in stock
compensation expense of $0.2 million and a decrease in legal,
accounting, public company, consulting and professional expenses of
$0.3 million which was mostly because of fewer M&A related
activities during 2017 versus 2016.
- Net income. Consolidated net income for the three months
ended March 31, 2017 was $1.8 million or $0.09 per share, as
compared with a consolidated net loss of $4.2 million, or $0.86 per
share for the same period in 2016. The increase in
consolidated net income of $6.0 million from the respective prior
period was mostly the result of a gain on the disposal of the
Churchrock and Crownpoint projects of $4.4 million and decreases in
interest expense of $0.8 million, general administrative expenses
of $0.5 million and commitment fees of $0.3
million.
- Cash and working capital. Continued working capital
improvements resulted in an improved cash balance of $9.9 million
at March 31, 2017 and working capital of $11.4 million compared to
a working capital deficit of $4.3 million at December 31,
2016. The increase in working capital of $15.6 million for
the three months ended March 31, 2017 was primarily due to the
completion of two equity offerings in January 2017 and February
2017 for net proceeds of $8.9 million and $4.5 million,
respectively, the completion of the sale of the Churchrock and
Crownpoint properties to Laramide on January 5, 2017 wherein the
Company received $2.2 million in cash, a $5.0 million promissory
note, of which $1.5 million is due within 12 months and 2,218,333
shares of Laramide’s common stock which had a fair value of $1.0
million at March 31, 2017, reduced by the repayment of the
remaining $5.7 million outstanding under the RCF Loan. As of
May 5, 2017, the Company held cash and cash equivalents totaling
approximately $8.2 million. The Company’s current cash and
working capital is expected to provide necessary liquidity through
March 31, 2018.
- Shares outstanding. Total shares outstanding at May 5,
2017 are 24,513,787.
Industry Update
Lithium Industry
The primary use for lithium is a key ingredient
in rechargeable batteries for electronic devices and electric
vehicles. Lithium ion batteries, as they are known, have been
adopted as the standard method of powering electronic devices such
as smart phones and small, portable computers for some time, but it
is the transportation market that is expected to drive growth for
the next decade. Growth in consumption of lithium is expected
to average over 6% annually between now and 2025, according to CRU
International Limited, with the transportation sector accounting
for much of this growth. This major component is expected to
rise from 20% to 39% of total demand over the next seven years.
At the same time, lithium prices have risen in
response to increased demand. Lithium Carbonate (“LCE”) is
one form of lithium used for battery manufacturing, and prices have
risen from $5,792 per metric ton in 2015 to $7,300 per metric ton
in just over a year. Lithium Hydroxide, a second form of the
material, prices have risen from $6,974 per metric ton to over
$23,000 per metric ton during the same period.
URI’s new business targets production of lithium
carbonate from lithium salts brines. This is typically the
lowest cost type of processing. While the technologies
are well known in some respects, it takes time for deposits to be
discovered and developed, which should result in a supply deficit
over the next few years. We believe that expected higher
prices should encourage investment in the sector and bring new
sources of production online over time. CRU International
Limited expects long term lithium prices to stabilize at
approximately $6,400 per metric ton and $9,400 per metric ton for
lithium carbonate and lithium hydroxide, respectively. These
are considerably higher than the historic prices for these
products.
URI is targeting exploration and development of
lithium brines because they are characteristically in the lowest
operating cost quartile of production, and would be more likely to
be profitable in the markets described above.
Uranium Industry
The significant commercial use for uranium is as
a fuel for nuclear power plants for the generation of electricity.
According to the World Nuclear Association (“WNA”), as of January
2017, there were 406 nuclear reactors operable worldwide with
annual requirements of about 138 million pounds of uranium,
excluding Japan and its 41 operable but idled reactors. Thirty
countries including Japan utilized nuclear power in 2016. In
addition, world-wide the WNA lists 60 reactors under construction,
164 being planned and 347 being proposed.
While global nuclear power generation is
expected to increase driving demand through 2030, especially in
China, Russia, India and South Korea, UxC Consulting projects
continued oversupply and low uncovered demand over the
near-to-medium term due to higher inventory levels at utilities.
During 2016, term contracting was weak and focused on shorter
period mid-term contracts. This restrained the spot market as
discretionary buying was also weak. UxC projects that global
nuclear power generation will expand to 518 reactors in 36
countries by 2030.
Worldwide uranium production or primary supply
in 2016 is estimated by UxC Consulting in its Q4 2016 report at 160
million pounds of U3O8. This is compared with 158 million pounds of
primary supply in 2015. Total supply in 2016, including secondary
supplies, is expected to total 206 million pounds. Secondary
supplies are derived from sales from governments, including the US
government, enricher services and commercial inventories.
During the first quarter of 2017, the average
weekly spot price of uranium was $23.96 per pound compared with
$32.77 in 2016. During Q1 2017, the weekly spot price of uranium
reached a high of $26.50 in February and a low of $20.25 in
January. The quarter-end spot price was $24.50. As of May 8, 2017,
the weekly spot price was $22.50 per pound.
Some analysts project that uranium prices may
have bottomed and expect gradually recovering uranium prices from a
supply deficit as uranium market fundamentals for supply and demand
improve over time. Secondary supply inventories continue to
weigh on the uranium market in the near term but are expected to
reduce from depleted government inventories and a rebalancing of
the enrichment sector, according to UxC. Demand for uranium is
expected to improve from an increase of nuclear power generation in
China and other countries.
Outlook
The Company’s current cash is expected to fund
critical operations through year-end 2017 and into the first
quarter of 2018. As an exploration and development company
with no current production, the Company expects to obtain
additional capital market financing, including the possible further
sale of non-core assets, to fund its lithium exploration program
and to operate the Company through 2018.
The Company’s goals for the remainder of 2017
are as follows:
- Lithium: Continue to develop and implement
exploration plans for the Company’s lithium assets in Nevada and
Utah.
- Uranium: Maintain our low-cost uranium
portfolio and continue reclamation work in Texas.
- Ongoing Cost Rationalization Efforts: Continue
to reduce operating and general and administrative expenditures in
2017.
- M&A Efforts Continue. Maintain an
opportunistic posture in mergers and acquisitions by focusing on
low-cost development opportunities in energy metals.
About Uranium Resources
URI is focused on expanding its energy metals
strategy, which includes developing its new lithium business while
maintaining optionality on the future rising uranium price.
The Company has developed a dominant land position of over
27,000 acres in two prospective lithium brine basins in Nevada and
Utah in preparation for exploration and potential development of
any lithium resources that may be discovered there. In
addition, URI remains focused on advancing the Temrezli in-situ
recovery (ISR) uranium project in Central Turkey when uranium
prices permit economic development of this project. URI controls
extensive exploration properties in Turkey under eight exploration
and operating licenses covering approximately 39,000 acres (over
16,000 ha) with numerous exploration targets, including the
potential satellite Sefaatli Project, which is 30 miles (48 km)
southwest of the Temrezli Project. In Texas, the Company has two
licensed and currently idled uranium processing facilities and
approximately 11,000 acres (4,400 ha) of prospective ISR uranium
projects. In New Mexico, the Company controls mineral rights
encompassing approximately 186,000 acres (75,300 ha) in the
prolific Grants Mineral Belt, which is one of the largest
concentrations of sandstone-hosted uranium deposits in the world.
Incorporated in 1977, URI also owns an extensive information
database of historic drill hole logs, assay certificates, maps and
technical reports for uranium properties located in the Western
United States.
Cautionary Statement
This news release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are subject to
risks, uncertainties and assumptions and are identified by words
such as “expects,” “estimates,” “projects,” “anticipates,”
“believes,” “could,” and other similar words. All statements
addressing events or developments that the Company expects or
anticipates will occur in the future, including but not limited to
statements relating to developments at the Company’s projects,
including future exploration costs and results, future demand for
and price of uranium and lithium, and the Company’s liquidity are
forward-looking statements. Because they are forward-looking,
they should be evaluated in light of important risk factors and
uncertainties. These risk factors and uncertainties include,
but are not limited to, (a) estimated or expected net cash used in
operations, mineral property expenses, general and administrative
expenses, net loss, and cash and working capital positions for the
twelve months ended December 31, 2017, (b) the Company’s ability to
raise additional capital in the future; (c) spot price and
long-term contract price of uranium and lithium; (d) risks
associated with our foreign operations, (e) operating conditions at
the Company’s projects; (f) government and tribal regulation of the
uranium industry, the lithium industry, and the power industry; (g)
world-wide uranium and lithium supply and demand, including the
supply and demand for lithium-based batteries; (h) maintaining
sufficient financial assurance in the form of sufficiently
collateralized surety instruments; (i) unanticipated geological,
processing, regulatory and legal or other problems the Company may
encounter in the jurisdictions where the Company operates,
including in Texas, New Mexico, Utah, Nevada and Turkey; (j) the
ability of the Company to enter into and successfully close
acquisitions or other material transactions; (k) the results of the
Company’s lithium brine exploration activities at the Columbus
Basin and Sal Rica Projects, (l) the ability of the Company to
negotiate an extension on the Cebolleta lease and (m) other factors
which are more fully described in the Company’s Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, and other filings with
the Securities and Exchange Commission. Should one or more of these
risks or uncertainties materialize, or should any of the Company’s
underlying assumptions prove incorrect, actual results may vary
materially from those currently anticipated. In addition, undue
reliance should not be placed on the Company’s forward-looking
statements. Except as required by law, the Company disclaims any
obligation to update or publicly announce any revisions to any of
the forward-looking statements contained in this news release.
Uranium Resources Contact:
Christopher M. Jones, President and CEO
303.531.0472
Email: Info@uraniumresources.com
Website: www.uraniumresources.com
Jeff Vigil, VP Finance and CFO
303.531.0473
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