Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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 MD&A contained in our Annual Report on Form 10-K for the year ended December 31, 2017.
Incorporated on March 22, 2004, Ur-Energy is an exploration stage mining company, as that term is defined in SEC Industry Guide 7. We are engaged in uranium mining, recovery and processing activities, including the acquisition, exploration, development and operation of uranium
mineral properties in the U.S.. We are operating our first in situ recovery uranium mine at our Lost Creek Project in Wyoming. Ur-Energy is a corporation continued under the
Canada Business Corporations Act
on August 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 the State of Colorado. Ur-Energy USA Inc. has three wholly-owned subsidiaries: NFU Wyoming, LLC, a limited liability company formed under the laws of the State of Wyoming which acts as our land holding and exploration entity; Lost Creek ISR, LLC, a limited liability company formed under the laws of the State of Wyoming to operate our Lost Creek Project and hold our Lost Creek properties and assets; and Pathfinder Mines Corporation (“Pathfinder”), incorporated under the laws of the State of Delaware, which holds, among other assets, the Shirley Basin and Lucky Mc properties in Wyoming. Our U.S. subsidiaries remain unchanged since the filing of our Annual Report on Form 10-K, dated March 2, 2018.
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 U
3
O
8,
for shipping to a third-party conversion facility to be weighed, assayed and stored until sold.
Our Lost Creek processing facility, which includes all circuits for the production, drying and packaging of uranium for delivery into sales, is designed and anticipated to process up to one million pounds of U
3
O
8
annually from the Lost Creek mine. The processing facility has the physical design capacity to process two million pounds of U
3
O
8
annually, which provides additional capacity to process material from other sources. We expect that the Lost Creek processing facility may be utilized to process captured U
3
O
8
from our Shirley Basin Project. However, the Shirley Basin permit application contemplates the construction of a full processing facility, providing greater construction and operating flexibility as may be dictated by market conditions.
We have multiple U
3
O
8
sales agreements in place into 2021 with various U.S. utilities for the sale of U
3
O
8
at term contract pricing. Historically, the multi-year sales agreements represented a portion of our planned production. Individually, term sales agreements do not represent a substantial portion of our operational budget, and our business is therefore not substantially dependent upon any one of the agreements. More recently, in 2017 and 2018, we purchased U
3
O
8
and delivered the product into our sales contracts. With commitments in place to purchase product for delivery into our 2019 sales contracts, our Lost Creek production inventory is expected to increase unless market or other conditions warrant sales at spot pricing or we reach agreement for additional term agreements.
Trade Action
In response to the challenges of uranium market conditions, primary among them imports to the U.S. emanating from state-sponsored producers in Russia, Kazakhstan, and Uzbekistan, in January 2018, Ur-Energy USA and Energy Fuels Resources (USA) Inc. (Energy Fuels) initiated a trade action with the U.S. Department of Commerce (DOC) pursuant to Section 232 of the Trade Expansion Act with the filing of a petition for relief (the “Petition”). We chose this statutory framework for relief because we recognized that the current imbalance in the U.S. uranium market has created a very real threat to our national security.
The Petition describes how uranium and nuclear fuel from state-owned and state-subsidized enterprises in Russia, Kazakhstan, Uzbekistan, and China represent a threat to U.S. national security. The Petition seeks a remedy which will set a quota to limit imports of uranium into the U.S., effectively reserving 25% of the U.S. nuclear market for U.S. uranium production. Additionally, the Petition suggests implementation of a requirement for U.S. federal utilities and agencies to buy U.S. uranium in accordance with the Administration's Buy American Policy.
On July 18, 2018, DOC announced it initiated an “investigation into whether the present quantity and circumstances of uranium ore and product imports into the United States threaten to impair national security.” Thereafter, the DOC announced a public comment period which subsequently closed on September 25, 2018. Other aspects of the investigation are proceeding; the investigation must be complete by April 15, 2019. Thereafter, the President has 90 days (until July 15, 2019) to act on the DOC’s recommendations and, if necessary, to take action to “adjust the imports” and/or pursue other lawful, non-trade related actions necessary to address the import threat. There can be no certainty of the outcome of the DOC investigation or the recommendation of the Secretary of Commerce, and therefore the outcome of this process and its effects on the U.S. uranium market is uncertain.
Equity Financing
In September, the Company announced a US$10 million public offering of common shares. The offering of 12,195,122 common shares and accompanying warrants to purchase up to 6,097,561 common shares, at a combined public offering price of $0.82 per common share and accompanying warrant, closed on September 25, 2018. Ur-Energy also granted the underwriters a 30-day option to purchase up to 1,829,268 additional common shares and warrants to purchase up to an aggregate of 914,634 common shares on the same terms. The 30-day option period has now expired. The underwriters exercised a portion of their option to purchase additional securities at closing, acquiring 867,756 additional warrants to purchase an aggregate of 433,878 common shares. The underwriters made no further exercise of the option to purchase additional securities after closing. Including the partial exercise of the option, Ur-Energy issued a total of 12,195,122 common shares and 13,062,878 warrants to purchase up to 6,531,439 common shares. Net proceeds from the offering was approximately $9.2 million. We anticipate that proceeds from the offering will be used to maintain and enhance operational readiness; additionally, proceeds may be used for working capital and general corporate purposes.
Mineral Rights and Properties
Eleven of our thirteen U.S. uranium properties are located in the Great Divide Basin, Wyoming, including Lost Creek. Currently we control nearly 1,900 unpatented mining claims and three State of Wyoming mineral leases for a total of approximately 37,500 acres (15,530 hectares) in the area of the Lost Creek Property, including the Lost Creek permit area (the “Lost Creek Project” or “Project”), and certain adjoining properties referred to as LC East, LC West, LC North, LC South and EN Project areas (collectively, with the Lost Creek Project, the “Lost Creek Property”). In the Shirley Basin, Wyoming, our Shirley Basin Project comprises more than 3,700
Company-controlled acres. Our Lucky Mc Project holds 1,800 acres in Fremont County, Wyoming. Additionally, we have approximately 2,100 acres of federal lode mining claims in the Excelsior Mountains in Nevada, at our Excel gold project.
Lost Creek Property
For the three months ended September 30, 2018, we made no sales of U
3
O
8
. Production during the third quarter continued from Mine Unit 1 (MU1) as well as Mine Unit 2 (MU2).
80,604
pounds of U
3
O
8
were captured within the Lost Creek plant, 78,441 pounds of U
3
O
8
were packaged in drums and 72,902 pounds of U
3
O
8
drummed inventory were shipped out of the Lost Creek processing plant to the conversion facility. The foregoing consistent production, processing, drying and shipping allowed us to continue to build inventory at the convertor which totaled approximately 308,762 at September 30, 2018. The
Results of Operations
are detailed further below.
Regulatory Update
Applications for amendment to the Lost Creek licenses and permits were submitted in 2014. The amendments seek to include recovery from the uranium resource in the LC East project immediately adjacent to the Lost Creek project. Reviews by WDEQ and the cooperating agencies, led by the BLM, continue to progress, including the routine exchange of comments and responses. The BLM issued a draft environmental impact statement (DEIS) in July, and invited public comment on the DEIS. The public comment period closed on October 15, 2018. We anticipate that permits and authorizations will be completed in H1 2019.
Effective September 30, 2018, Wyoming became the 38th state to assume responsibility from the NRC for the regulation of radiation safety at uranium recovery facilities like Lost Creek. The Wyoming State Uranium Recovery Program (URP), a part of the Wyoming Department of Environmental Quality, will oversee the licensing process for source material licenses as well as the operations of licensees in Wyoming. We welcome the change as it will streamline the process of licensing, should offer greater consistency in authorizations, and represents savings in the licensing phase which are estimated at approximately $2 million per project.
S
hirley Basin Project
WDEQ continues with its technical review of our application for a permit to mine at Shirley Basin, which was submitted in December 2015.
Our application for a source material license for Shirley Basin will proceed with the State URP. Work is well underway on initial engineering evaluations, designs and studies.
Results of Operations
U
3
O
8
Production and Sales
During the three months ended September 30, 2018, a total of 80,604 pounds of U
3
O
8
were captured within the Lost Creek plant. 78,441 pounds were packaged in drums and 72,902 pounds of the drummed inventory were shipped to the conversion facility. Inventory, production and sales figures for the Lost Creek Project are presented in the following tables. We are presenting the data in the tables for the last four quarters because the nature of our operations is not regularly based on the calendar year. We therefore feel that presenting the last four quarters is a more meaningful representation of operations than comparing comparable periods in the previous year and enables the reader to better perform trend analysis.
The cash cost per pound and non-cash cost per pound for produced uranium presented in the following Production Costs and U
3
O
8
Sales and Cost of Sales tables are non-US GAAP measures. These measures 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. Please see the tables, below, for reconciliations of these measures to the US GAAP compliant financial measures. Production figures for the Lost Creek Project are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production and Production Costs
|
|
Unit
|
|
2018 Q3
|
|
2018 Q2
|
|
2018 Q1
|
|
2017 Q4
|
|
2018 YTD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds captured
|
|
lb
|
|
|
80,604
|
|
|
89,209
|
|
|
84,047
|
|
|
67,982
|
|
|
253,860
|
|
Ad valorem and severance tax
|
|
$000
|
|
$
|
81
|
|
$
|
133
|
|
$
|
179
|
|
$
|
160
|
|
$
|
393
|
|
Wellfield cash cost
(1)
|
|
$000
|
|
$
|
422
|
|
$
|
516
|
|
$
|
671
|
|
$
|
686
|
|
$
|
1,609
|
|
Wellfield non-cash cost
(2)
|
|
$000
|
|
$
|
400
|
|
$
|
400
|
|
$
|
403
|
|
$
|
575
|
|
$
|
1,203
|
|
Ad valorem and severance tax per pound captured
|
|
$/lb
|
|
$
|
1.00
|
|
$
|
1.49
|
|
$
|
2.13
|
|
$
|
2.35
|
|
$
|
1.55
|
|
Cash cost per pound captured
|
|
$/lb
|
|
$
|
5.24
|
|
$
|
5.78
|
|
$
|
7.98
|
|
$
|
10.09
|
|
$
|
6.34
|
|
Non-cash cost per pound captured
|
|
$/lb
|
|
$
|
4.96
|
|
$
|
4.48
|
|
$
|
4.79
|
|
$
|
8.44
|
|
$
|
4.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds drummed
|
|
lb
|
|
|
78,441
|
|
|
74,302
|
|
|
79,961
|
|
|
60,461
|
|
|
232,704
|
|
Plant cash cost
(3)
|
|
$000
|
|
$
|
1,109
|
|
$
|
1,230
|
|
$
|
1,226
|
|
$
|
1,210
|
|
$
|
3,565
|
|
Plant non-cash cost
(2)
|
|
$000
|
|
$
|
485
|
|
$
|
493
|
|
$
|
492
|
|
$
|
493
|
|
$
|
1,470
|
|
Cash cost per pound drummed
|
|
$/lb
|
|
$
|
14.14
|
|
$
|
16.57
|
|
$
|
15.33
|
|
$
|
20.01
|
|
$
|
15.32
|
|
Non-cash cost per pound drummed
|
|
$/lb
|
|
$
|
6.18
|
|
$
|
6.64
|
|
$
|
6.15
|
|
$
|
8.15
|
|
$
|
6.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds shipped to conversion facility
|
|
lb
|
|
|
72,902
|
|
|
74,416
|
|
|
73,515
|
|
|
73,367
|
|
|
220,833
|
|
Distribution cash cost
(4)
|
|
$000
|
|
$
|
36
|
|
$
|
34
|
|
$
|
19
|
|
$
|
48
|
|
$
|
89
|
|
Cash cost per pound shipped
|
|
$/lb
|
|
$
|
0.49
|
|
$
|
0.46
|
|
$
|
0.26
|
|
$
|
0.65
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds purchased
|
|
lb
|
|
|
-
|
|
|
100,000
|
|
|
370,000
|
|
|
-
|
|
|
470,000
|
|
Purchase costs
|
|
$000
|
|
$
|
-
|
|
$
|
2,225
|
|
$
|
9,251
|
|
$
|
-
|
|
$
|
11,476
|
|
Cash cost per pound purchased
|
|
$/lb
|
|
$
|
-
|
|
$
|
22.25
|
|
$
|
25.00
|
|
$
|
-
|
|
$
|
24.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
1
|
|
Wellfield cash costs include all wellfield operating costs. Wellfield construction and development costs, which include wellfield drilling, header houses, pipelines, power lines, roads, fences and disposal wells, are treated as development expense and are not included in wellfield operating costs.
|
|
2
|
|
Non-cash costs include the amortization of the investment in the mineral property acquisition costs and the depreciation of plant equipment, and the depreciation of their related asset retirement obligation costs. The expenses are calculated on a straight-line basis, so the expenses are typically constant for each quarter. The cost per pound from these costs will therefore typically vary based on production levels only.
|
|
3
|
|
Plant cash costs include all plant operating costs and site overhead costs.
|
|
4
|
|
Distribution cash costs include all shipping costs and costs charged by the conversion facility for weighing, sampling, assaying and storing the U
3
O
8
prior to sale.
|
Production levels during the current quarter decreased as the MU2 header houses exhibited the anticipated production decline which was reflected in the total site production. Generally, our production was limited, reflecting our deliberate restriction of production in light of the persistently weak uranium market. Total production costs decreased 10% in 2018 Q3 compared to 2018 Q2 and 15% compared to 2018 Q1. The decrease resulted from a combination of certain non-recurring charges not being repeated and the previously announced cost reduction efforts.
Pounds captured decreased 8,605 pounds from 2018 Q2 as there were no new header houses added during the quarter. Total wellfield costs decreased $146 during the quarter. Ad valorem and severance taxes decreased due to a change in the projected sales price to be used in the annual calculations. Wellfield cash costs decreased during the quarter due to the reduction in labor costs after completion of the third header house and lower licensing costs. Because of the lower costs, the wellfield cash cost per pound captured decreased $0.54 per pound in 2018 Q3. Wellfield non-cash costs are generally fixed although they have been declining as various reclamation and smaller assets are becoming fully depreciated. The related wellfield non-cash cost per pound captured therefore increased $0.48 per pound.
Pounds drummed increased 4,139 pounds in 2018 Q3 over 2018 Q2 due to processing inventory which had been delayed in processing in the previous quarter due to maintenance at the plant. Total plant costs decreased $129 during the quarter due to lower fuel and labor expenses. Combined with the increase in pounds drummed, the plant cash cost per pound drummed decreased $2.43 per pound during the quarter. Plant non-cash costs are fixed so the related plant non-cash cost per pound drummed also decreased $0.46 per pound because of the increase in pounds drummed.
Pounds shipped remained relatively constant as two shipments totaling 72,902 pounds were shipped in 2018 Q3. Distribution costs in 2018 Q2 were slightly higher than the current quarter as the converter completed weighing and sampling on four deliveries. The distribution cash cost per pound increased $0.03 per pound shipped during the current quarter.
|
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|
|
|
|
|
|
Sales and cost of sales
|
|
Unit
|
|
2018 Q3
|
|
2018 Q2
|
|
2018 Q1
|
|
2017 Q4
|
|
2018 YTD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds sold
|
|
lb
|
|
|
-
|
|
|
100,000
|
|
|
380,000
|
|
|
-
|
|
|
480,000
|
|
U3O8 sales
|
|
$000
|
|
$
|
-
|
|
$
|
3,790
|
|
$
|
19,663
|
|
$
|
-
|
|
$
|
23,453
|
|
Average contract price
|
|
$/lb
|
|
$
|
-
|
|
$
|
37.90
|
|
$
|
52.50
|
|
$
|
-
|
|
$
|
49.39
|
|
Average spot price
|
|
$/lb
|
|
$
|
-
|
|
$
|
-
|
|
$
|
23.75
|
|
$
|
-
|
|
$
|
23.75
|
|
Average price per pound sold
|
|
$/lb
|
|
$
|
-
|
|
$
|
37.90
|
|
$
|
51.74
|
|
$
|
-
|
|
$
|
48.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U3O8 cost of sales
(1)
|
|
$000
|
|
$
|
170
|
|
$
|
2,225
|
|
$
|
9,758
|
|
$
|
376
|
|
$
|
12,153
|
|
Ad valorem and severance tax cost per pound sold
|
|
$/lb
|
|
$
|
-
|
|
$
|
-
|
|
$
|
2.30
|
|
$
|
-
|
|
$
|
3.90
|
|
Cash cost per pound sold
|
|
$/lb
|
|
$
|
-
|
|
$
|
-
|
|
$
|
31.20
|
|
$
|
-
|
|
$
|
39.30
|
|
Non-cash cost per pound sold
|
|
$/lb
|
|
$
|
-
|
|
$
|
-
|
|
$
|
17.20
|
|
$
|
-
|
|
$
|
24.50
|
|
Cost per pound sold - produced
|
|
$/lb
|
|
$
|
-
|
|
$
|
-
|
|
$
|
50.70
|
|
$
|
-
|
|
$
|
67.70
|
|
Cost per pound sold - purchased
|
|
$/lb
|
|
$
|
-
|
|
$
|
22.25
|
|
$
|
25.00
|
|
$
|
-
|
|
$
|
24.42
|
|
Average cost per pound sold
|
|
$/lb
|
|
$
|
-
|
|
$
|
22.25
|
|
$
|
25.68
|
|
$
|
-
|
|
$
|
25.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U3O8 gross profit
|
|
$000
|
|
$
|
(170)
|
|
$
|
1,565
|
|
$
|
9,905
|
|
$
|
(376)
|
|
$
|
11,300
|
|
Gross profit per pound sold
|
|
$/lb
|
|
$
|
-
|
|
$
|
15.65
|
|
$
|
26.06
|
|
$
|
-
|
|
$
|
23.54
|
|
Gross profit margin
|
|
%
|
|
|
0.0%
|
|
|
41.3%
|
|
|
50.4%
|
|
|
0.0%
|
|
|
48.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Inventory Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-process inventory
|
|
lb
|
|
|
14,588
|
|
|
43,733
|
|
|
28,937
|
|
|
26,796
|
|
|
|
|
Plant inventory
|
|
lb
|
|
|
20,944
|
|
|
15,391
|
|
|
15,504
|
|
|
9,043
|
|
|
|
|
Conversion facility inventory
|
|
lb
|
|
|
308,762
|
|
|
233,712
|
|
|
159,296
|
|
|
94,077
|
|
|
|
|
Total inventory
|
|
lb
|
|
|
344,294
|
|
|
292,836
|
|
|
203,737
|
|
|
129,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-process inventory
|
|
$000
|
|
$
|
359
|
|
$
|
518
|
|
$
|
416
|
|
$
|
315
|
|
|
|
|
Plant inventory
|
|
$000
|
|
$
|
665
|
|
$
|
548
|
|
$
|
538
|
|
$
|
369
|
|
|
|
|
Conversion facility inventory
|
|
$000
|
|
$
|
11,143
|
|
$
|
8,738
|
|
$
|
6,044
|
|
$
|
3,831
|
|
|
|
|
Total inventory
|
|
$000
|
|
$
|
12,167
|
|
$
|
9,804
|
|
$
|
6,998
|
|
$
|
4,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost per pound
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-process inventory
|
|
$/lb
|
|
$
|
24.61
|
|
$
|
11.84
|
|
$
|
14.38
|
|
$
|
11.76
|
|
|
|
|
Plant inventory
|
|
$/lb
|
|
$
|
31.75
|
|
$
|
35.61
|
|
$
|
34.70
|
|
$
|
40.81
|
|
|
|
|
Conversion facility inventory
|
|
$/lb
|
|
$
|
36.09
|
|
$
|
37.39
|
|
$
|
37.94
|
|
$
|
40.72
|
|
|
|
|
Notes:
|
1
|
|
Cost of sales include all production costs (notes 1, 2, 3 and 4 in the previous Production and Production Cost table) adjusted for changes in inventory values.
|
There were no U
3
O
8
sales during the quarter.
We recognized a lower of cost or net realizable value (“NRV”) adjustment of $170 during the quarter. Those costs are included in our nine-month, year to date cost of sales and reduced the reported gross profit for the nine-month period by $269. The adjustment lowered our gross profit percentage for the year to 48.2% or a per pound reduction of $0.36 per pound.
At the end of the quarter, we had approximately 308,762 pounds of U
3
O
8
at the conversion facility at an average cost per pound of $36.09. With commitments in place to purchase product for delivery into our 2019 sales contracts, our Lost Creek production is not expected to increase unless market or other conditions warrant sales at spot pricing or we reach an agreement for additional term agreements. As such, we may hold our existing inventory and sell it into our 2020 term contracts. However, it remains available for sale under spot prices if it is advantageous to do so.
The following table shows the average cost per pound of the conversion facility pounds.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Conversion Facility Inventory
Cost Per Pound Summary
|
|
Unit
|
30-Sep-18
|
|
30-Jun-18
|
|
31-Mar-18
|
31-Dec-17
|
Ad valorem and severance tax cost per pound
|
|
$/lb
|
|
$
|
1.60
|
|
$
|
1.73
|
|
$
|
1.66
|
|
$
|
1.65
|
Cash cost per pound
|
|
$/lb
|
|
$
|
22.83
|
|
$
|
23.66
|
|
$
|
23.88
|
|
$
|
25.31
|
Non-cash cost per pound
|
|
$/lb
|
|
$
|
11.66
|
|
$
|
12.00
|
|
$
|
12.40
|
|
$
|
13.76
|
Total cost per pound
|
|
$/lb
|
|
$
|
36.09
|
|
$
|
37.39
|
|
$
|
37.94
|
|
$
|
40.72
|
The cost per pound in ending inventory at the conversion facility has fluctuated during recent quarters, but the fluctuation is primarily the result of the changes in production rate. As it takes time for the prices to move through the in-process, plant and conversion facility inventories, a change in production may not affect the conversion facility inventory valuation for several months. Our costs per pound have been higher than in previous years which reflects our deliberate restriction of production considering the persistently weak uranium market. While the cost per pound is higher than the current spot market price, it is projected to be sold into existing term contracts at prices greater than the current carrying amount.
Reconciliation of Non-GAAP sales and inventory presentation with US GAAP statement presentation
As discussed above, the cash costs, non-cash costs and per pound calculations are non-US GAAP measures we use to assess business performance. To facilitate a better understanding of these measures, the tables below present a reconciliation of these measures to the financial results as presented in our financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Price Per Pound Sold Reconciliation
|
|
Unit
|
|
2018 Q3
|
|
2018 Q2
|
|
2018 Q1
|
|
2017 Q4
|
|
2018 YTD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales per financial statements
|
|
$000
|
|
$
|
3
|
|
$
|
3,807
|
|
$
|
19,672
|
|
$
|
26
|
|
$
|
23,482
|
Less disposal fees
|
|
$000
|
|
$
|
(3)
|
|
$
|
(17)
|
|
$
|
(9)
|
|
$
|
(26)
|
|
$
|
(29)
|
U
3
O
8
sales
|
|
$000
|
|
$
|
-
|
|
$
|
3,790
|
|
$
|
19,663
|
|
$
|
-
|
|
$
|
23,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds sold - produced
|
|
lb
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
|
-
|
|
|
10,000
|
Pounds sold - purchased
|
|
lb
|
|
|
-
|
|
|
100,000
|
|
|
370,000
|
|
|
-
|
|
|
470,000
|
Total pounds sold
|
|
lb
|
|
|
-
|
|
|
100,000
|
|
|
380,000
|
|
|
-
|
|
|
480,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average price per pound sold
|
|
$/lb
|
|
$
|
-
|
|
$
|
37.90
|
|
$
|
51.74
|
|
$
|
-
|
|
$
|
48.86
|
The Company delivers U
3
O
8
to a conversion facility and receives credit for a specified quantity measured in pounds once the product is confirmed to meet the required specifications. When a delivery is approved, the Company notifies the conversion facility with instructions for a title transfer to the customer. Revenue is recognized once a title transfer of the U
3
O
8
is confirmed by the conversion facility.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cost Per Pound Sold
Reconciliation
|
|
Unit
|
|
2018 Q3
|
|
2018 Q2
|
|
2018 Q1
|
|
2017 Q4
|
|
2018 YTD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ad valorem & severance taxes
|
|
$000
|
|
$
|
81
|
|
$
|
133
|
|
$
|
179
|
|
$
|
160
|
|
$
|
393
|
Wellfield costs
|
|
$000
|
|
$
|
822
|
|
$
|
916
|
|
$
|
1,074
|
|
$
|
1,260
|
|
$
|
2,812
|
Plant and site costs
|
|
$000
|
|
$
|
1,594
|
|
$
|
1,723
|
|
$
|
1,718
|
|
$
|
1,703
|
|
$
|
5,035
|
Distribution costs
|
|
$000
|
|
$
|
36
|
|
$
|
34
|
|
$
|
19
|
|
$
|
48
|
|
$
|
89
|
Inventory change
|
|
$000
|
|
$
|
(2,364)
|
|
$
|
(2,806)
|
|
$
|
(2,483)
|
|
$
|
(2,795)
|
|
$
|
(7,653)
|
Cost of sales - produced
|
|
$000
|
|
$
|
170
|
|
$
|
—
|
|
$
|
507
|
|
$
|
376
|
|
$
|
677
|
Cost of sales - purchased
|
|
$000
|
|
$
|
—
|
|
$
|
2,225
|
|
$
|
9,251
|
|
$
|
—
|
|
$
|
11,476
|
Total cost of sales
|
|
$000
|
|
$
|
170
|
|
$
|
2,225
|
|
$
|
9,758
|
|
$
|
376
|
|
$
|
12,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds sold produced
|
|
lb
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
—
|
|
|
10,000
|
Pounds sold purchased
|
|
lb
|
|
|
—
|
|
|
100,000
|
|
|
370,000
|
|
|
—
|
|
|
470,000
|
Total pounds sold
|
|
lb
|
|
|
—
|
|
|
100,000
|
|
|
380,000
|
|
|
—
|
|
|
480,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average cost per pound sold - produced
(1)
|
|
$/lb
|
|
$
|
-
|
|
$
|
-
|
|
$
|
50.70
|
|
$
|
-
|
|
$
|
67.70
|
Average cost per pound sold - purchased
|
|
$/lb
|
|
$
|
-
|
|
$
|
22.25
|
|
$
|
25.00
|
|
$
|
-
|
|
$
|
24.42
|
Total average cost per pound sold
|
|
$/lb
|
|
$
|
-
|
|
$
|
22.25
|
|
$
|
25.68
|
|
$
|
-
|
|
$
|
25.32
|
|
1
|
|
The cost per pound sold reflects both cash and non-cash costs, which are combined as cost of sales in the statement of operations included in this filing. The cash and non-cash cost components are identified in the above inventory, production and sales table.
|
The cost of sales includes ad valorem and severance taxes related to the extraction of uranium, all costs of wellfield, plant and site 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 and the resulting inventoried cost per pound is compared to the estimated sales prices based on the contracts or spot sales anticipated for the distribution of the product. Any costs in excess of the calculated market value are charged to cost of sales.
Three and nine months ended September 30, 2018 compared to the three and nine months ended September 30, 2017
The following tables summarize the results of operations for the three and nine months ended September 30, 2018 and 2017 (in thousands of U.S. dollars):
|
|
|
|
|
Three months ended September 30,
|
|
2018
|
|
2017
|
|
$
|
|
$
|
Sales
|
3
|
|
11,693
|
Cost of sales
|
(170)
|
|
(11,157)
|
Gross profit (loss)
|
(167)
|
|
536
|
Exploration and evaluation expense
|
(588)
|
|
(560)
|
Development expense
|
(522)
|
|
(1,454)
|
General and administrative expense
|
(1,169)
|
|
(1,070)
|
Accretion
|
(128)
|
|
(135)
|
Net loss from operations
|
(2,574)
|
|
(2,683)
|
Interest expense (net)
|
(241)
|
|
(332)
|
Warrant mark to market gain
|
11
|
|
-
|
Loss from equity investment
|
-
|
|
(5)
|
Foreign exchange loss
|
(5)
|
|
(40)
|
Other income
|
-
|
|
57
|
Net loss
|
(2,809)
|
|
(3,003)
|
|
|
|
|
Loss per share – basic and diluted
|
(0.02)
|
|
(0.02)
|
|
|
|
|
Revenue per pound sold
|
-
|
|
40.39
|
|
|
|
|
Total cost per pound sold
|
-
|
|
38.61
|
|
|
|
|
Gross profit per pound sold
|
-
|
|
1.78
|
|
|
|
|
|
Nine months ended September 30,
|
|
2018
|
|
2017
|
|
$
|
|
$
|
|
|
|
|
Sales
|
23,482
|
|
38,342
|
Cost of sales
|
(12,153)
|
|
(24,025)
|
Gross profit
|
11,329
|
|
14,317
|
Exploration and evaluation expense
|
(1,959)
|
|
(2,162)
|
Development expense
|
(1,394)
|
|
(3,499)
|
General and administrative expense
|
(4,190)
|
|
(3,748)
|
Accretion expense
|
(380)
|
|
(401)
|
Net profit from operations
|
3,406
|
|
4,507
|
Net interest expense
|
(790)
|
|
(1,063)
|
Warrant mark to market gain
|
11
|
|
-
|
Loss from equity investment
|
(5)
|
|
(5)
|
Foreign exchange loss
|
5
|
|
(57)
|
Other income
|
3,573
|
|
120
|
Net income
|
6,200
|
|
3,502
|
|
|
|
|
Income per share – basic
|
0.04
|
|
0.02
|
|
|
|
|
Income per share – diluted
|
0.04
|
|
0.02
|
|
|
|
|
Revenue per pound sold
|
48.86
|
|
49.09
|
|
|
|
|
Total cost per pound sold
|
25.32
|
|
30.80
|
|
|
|
|
Gross profit per pound sold
|
23.54
|
|
18.29
|
Sales
We sold no U
3
O
8
during the three months ended September 30, 2018. We sold a total of 480,000 pounds of U
3
O
8
during the nine months ended September 30, 2018 for an average price of $48.86 per pound. We sold 289,000 and 780,000 pounds of U
3
O
8
during the three and nine months ended September 30, 2017 for an average price of $40.39 and $49.09 per pound, respectively. The 2018 sales included term contract sales of 470,000 pounds, all from purchased inventory at an average price of $49.39 and one spot sale of 10,000 pounds of produced inventory for $23.75 per pound.
Cost of Sales
For the nine months ended September 30, 2018, our cost per pound sold for produced inventory increased $18.11 compared to the same period in 2017. This increase is a function of the low volume of sales of produced inventory in 2018 combined with $279 in NRV adjustments which are reflected in our produced cost per pound sold. The NRV adjustments increased the cost per pound of produced inventory by $27.90 per pound. In 2018, we purchased 470,000 pounds of uranium for the nine month period at an average cost of $24.42 per pound. Our overall average cost per pound sold was $25.32 for the nine months ended September 30, 2018, which represents a decrease of $5.48 per pound as compared to the same nine month period in 2017.
Gross Profit
Our gross profit from the sale of uranium totaled $11.3 million for the nine months ended September 30, 2018 and represented a gross profit of $23.52 per pound or 48% gross profit margin. This compares to three and nine months ended September 30, 2017 where our gross profits totaled $0.5 million and $14.3 million for the three and nine months and represented gross profit margins of 4% and 37%, respectively.
We have limited our development activities and thereby reduced production in light of the current depressed spot market, as discussed in previous filings. While we have taken measures to reduce operating costs, most of our costs are relatively fixed at all production levels, so the reduced production directly relates to the increase in our cost per pound for produced product. One of the largest costs we cannot reduce is our non-cash costs for depreciation and amortization. As we do not have reserves and are therefore an exploration company under the guidelines of the U.S. Securities and Exchange Commission, we cannot use production or mineralization as a basis for calculating depreciation or amortization. As a result, our expenses for those items are the same now as they were when our production rate was significantly higher. Currently, these non-cash costs total $0.9 million and $2.7 million for the three and nine months ended September 30, 2018, respectively.
Because of the fixed nature of our costs, our inventory cost exceeded the net realizable value of the inventory in the first and third quarter of the year. Accordingly, we reduced the inventory cost by $0.3 million for the nine months. As there were no sales during the quarter, these costs represent an expense for the quarter and are included in our cost of sales and gross profit calculations for the nine month period.
The net result is that while our overall production cost per pound has increased, much of that increase is due to the fixed nature of our costs such as the non-cash amortization of plant and mineral assets, and the inability to adjust the amortization to reflect current production.
Operating Expenses
Total operating expense for the three and nine months ended September 30, 2018 was $2.4 million and $7.9 million, respectively. Operating expenses include exploration and evaluation expense, development expense, and G&A expense. These expenses decreased by $0.8 million and $1.9 million compared to the same respective periods in 2017.
Exploration and evaluation expense consists of labor and associated costs of the exploration and evaluation departments as well as land holding and costs including drilling and analysis on properties which have not reached the permitting or operations stage. These expenses were $0.6 million and $2.0 million for the three and nine month periods ended September 30, 2018 and $0.6 million and $2.2 million for the same respective periods in 2017. All costs associated with the geology and geographic information systems departments, as well as the costs incurred on exploration-stage projects as described above, are reflected in this category. These costs are lower due to prior reductions in staff in these departments.
Development expense includes costs incurred at the Lost Creek Project not directly attributable to production activities, including wellfield construction, drilling and development costs. It also includes costs associated with the Shirley Basin and Lucky Mc properties as they are in a more advanced stage. Development expenses decreased by $0.9 million and $2.1 million during the three and nine months ended September 30, 2018, respectively, compared to the same periods in 2017. The decrease was primarily related to the drilling and other development in MU2 during 2017 which was offset by an increase in professional and governmental fees.
G&A expense relates to the administration, finance, investor relations, land and legal functions of the Company and consists principally of personnel, facility and support costs. Total G&A expense increased $0.1 million and $0.4 million for the three and nine months ended September 30, 2018 compared to the respective amounts in 2017. The increase was mainly attributable to increased consulting and legal costs primarily related to the trade action.
Other Income and Expenses
Net interest expense declined $0.1 million and $0.3 million during the three and nine months ended September 30, 2018, respectively, compared to the prior year. The expense decline was directly attributable to principal payments reducing the outstanding note balances of the Wyoming State Bond Loan.
In June 2018, we monetized the present value from portions of agreements with one of our utility customers related to 165,000 pounds of U
3
O
8
to be delivered in 2021. We received proceeds of $3.5 million when the transaction was executed.
Earnings (loss) per Common Share
The basic earnings (loss) per common share for the three and nine months ended September 30, 2018 was ($0.02) and $0.04 compared to basic earnings of ($0.02) and $0.02 for 2017, respectively. The diluted loss per common share for the three months ended September 30, 2018 and the three months ended September 30, 2017 were equal to the basic loss per common share due to the anti-dilutive effect of all convertible securities outstanding given that net losses were experienced. For the nine months ended September 30, 2018, there were 1,358,227 RSUs and 1,558,151 options included in the diluted earnings per share calculations. For the nine months ended September 30, 2017, there were 909,956 RSUs included in the diluted earnings. The result was diluted earnings per share of $0.04 for the nine months ended September 30, 2018 and $0.02 in 2017. Dilution from warrants was not included as the strike price exceeded the then current market price of the Common Shares.
Liquidity and Capital Resources
As of September 30, 2018, we had cash resources consisting of cash and cash equivalents of $11.6 million, an increase of $7.7 million from the December 31, 2017 balance of $3.9 million. The cash resources consist of Canadian and U.S. dollar denominated deposit accounts and money market funds. We used $1.7 million for operating activities during the nine months ended September 30, 2018. During the same period, we generated $3.4 million from investing activities and $6.0 million for financing activities.
On October 23, 2013, we closed a $34.0 million Sweetwater County, State of Wyoming, Taxable Industrial Development Revenue Bond financing program (“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 commenced January 1, 2014. The principal is payable in 28 quarterly installments which commenced January 1, 2015 and continue through October 1, 2021. The State Bond Loan is secured by all of the assets at the Lost Creek Project. As of September 30, 2018, the balance of the State Bond Loan was $18.7 million.
On August 19, 2014, we filed a universal shelf registration statement on Form S-3 in order that 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 our senior and subordinated debt securities. The registration statement became effective September 12, 2014. The registration was renewed in 2017.
We entered into an At Market Issuance Sales Agreement with MLV & Co. LLC and B Riley FBR, Inc. (May 27, 2016, as amended August 2017), under which 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 distribution agents for aggregate sales proceeds of up to $10,000,000. We have not used the facility in 2018. During 2017, we sold 1,536,169 Common Shares under the sales agreement at an average price of $0.76 per share for gross proceeds of $1.2 million. After deducting transaction fees and commissions we received net proceeds of $1.1 million.
In September, the Company announced a US$10 million public offering of common shares. The offering of 12,195,122 common shares and accompanying warrants to purchase up to 6,097,561 common shares, at a combined public offering price of US$0.82 per common share and accompanying warrant, closed on September 25, 2018. We also granted the underwriters a 30-day option to purchase up to 1,829,268 additional common shares and warrants to purchase up to an aggregate of 914,634 common shares on the same terms. The 30-day option period has now expired. The underwriters exercised a portion of their option to purchase additional securities at closing, acquiring 867,756 additional warrants to purchase an aggregate of 433,878 common shares. The underwriters made no further exercise of the option to purchase additional securities after closing. Including the partial exercise of the option, the Company issued a total of 12,195,122 common shares and 13,062,878 warrants to purchase up to 6,531,439 common shares. As the warrants are priced in US$ and the functional currency of Ur-Energy Inc. is C$, this created a derivative financial liability. The liability created and adjusted quarterly is a calculated fair value using the Black-Scholes technique described below as there is no active market for the warrants. Any income or loss is reflected in net income for the period. We anticipate that the public offering proceeds will be used to maintain and enhance operational readiness; additionally, proceeds may be used for working capital and general corporate purposes.
During 2018, a total of 420,344 stock options were exercised, which generated $0.2 million.
Collections from U
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sales for the nine months ended September 30, 2018 totaled $23.5 million.
Operating activities used cash of $1.7 million during the nine months ended September 30, 2018 as compared to generating $6.7 million during the same period in 2017. The net income for the nine months ended September 30, 2018 was $0.3 million less than the corresponding income in 2017 but included a $3.5 million gain from the monetization of contracts which was not considered an operating activity. In addition, $4.3 million was used to increase inventory balances, primarily at the conversion facility.
Investing activities included receiving $3.5 million from monetization of 2021 offtake deliveries. Investing cash outflows during 2018 were minimal and related primarily to the acquisition of a man lift.
During the first nine months of 2018, the Company raised net proceeds of $9.5 million from the sale of common shares and warrants. We used $3.6 million for principal payments on the State Bond Loan.
Liquidity Outlook
As at October 24, 2018, our unrestricted cash position was $10.7 million. We have no additional contract sales scheduled in 2018.
We expect that any major capital projects will be funded by operating cash flow, cash on hand or additional financing as required. If these cash sources are not sufficient, certain capital projects could be delayed, or alternatively we may need to pursue additional debt or equity financing to which there is no assurance that such financing will be available at all or on terms acceptable to us. We have no immediate plans to issue additional
securities or obtain funding other than that which may be required due to the uneven nature of cash flows generated from operations; however, we may issue additional debt or equity securities at any time.
Looking ahead
At the end of the third quarter of 2018, the average spot price of U
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, as reported by Ux Consulting Company, LLC and TradeTech, LLC, had increased to approximately $27.50 per pound. Market fundamentals have not changed sufficiently to warrant further development of MU2. We anticipate meeting our projected production level of 250,000 to 300,000 pounds drummed for the year.
Through September 30, 2018, we sold 470,000 pounds of U
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under term contracts at an average price of approximately $49.39 per pound and 10,000 pounds of U
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under a spot sale for $23.75 per pound. We purchased 470,000 pounds at an average cost of $24.42 per pound. The remaining 10,000 pounds were delivered from our produced inventory. We have no more contract sales scheduled in 2018.
No additional new production areas are currently planned for the remainder of the year. Production guidance for Q4 is between 40,000 and 60,000 pounds U
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dried and drummed. Full year 2018 guidance, similar to 2017, estimates production of between 250,000 and 300,000 pounds, but our production rate may be adjusted based on operational matters and other indicators in the market.
As at October 24, 2018, our unrestricted cash position was $10.7 million.
Transactions with Related Parties
There were no transactions with related parties during the quarter.
Proposed Transactions
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 U
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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, 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.
As of September 30, 2018, the average current spot and long-term prices of U
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were $27.50 and $31.75, respectively. This compares to prices of $23.75 and $31.00 as of December 31, 2017. The prices increased during the quarter shortly after the announcement of the Section 232 filing. Whether or not the filing had a direct impact on the prices, we have no way to measure, but they seem to have stabilized at a level higher than what we have seen in recent years.
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.
Inventory and Cost of Sales
Our inventories are valued at the lower of cost and 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
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 warrants are recalculated quarterly 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.
New accounting pronouncements which may affect future reporting
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, which requires lessees to recognize all leases on the balance sheet, including operating leases, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018. As at September 30, 2018, the Company’s only leases are for vehicles, equipment, and office space in one location. The Casper office and copier leases are the only leases currently remaining in effect as of the date of implementation of the standard. We have gathered the necessary information for proper disclosure of that lease once the ASU is effective. We will continue to monitor any new leases to ensure that we have all the information necessary to handle the transition to the new standard and properly report the transactions. We do not anticipate the new standard will affect our net income materially, but will result in additional fixed assets and the related lease liabilities.
New accounting pronouncements which were implemented this year
In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “
Revenue from Contracts with Customers (Topic 606)
.” The amendments in ASU 2014-09 affect any entity that either enters into contracts
with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts are within the scope of other standards (
e.g.,
insurance contracts or lease contracts). This ASU superseded the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic 606, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of the promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted Topic 606 effective January 1, 2018. The Company purchases and produces U
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and recognizes revenue at point of sale so revenue will continue to be recognized at that point under the new standard. The adoption of the new standard had no impact on either our current or prior revenue recognition processes or reporting, which, electing the retrospective basis for implementing the standard, results in no changes to prior financial reporting. In addition, there is no change in our revenue recognition treatment in the current period.
Our revenues are primarily derived from the sale of U
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under either long-term (delivery in typically two to five years) or spot (immediate delivery) contracts with our customers. The contracts specify the quantity to be delivered, the price or specific calculation method of the price, payment terms and the year(s) of the delivery. There may be some variability in the dates of the delivery or the quantity to be delivered depending on the contract, but those issues are addressed before the delivery date. On the date of the delivery, we receive notice from the storage facility of the transfer of material at which point we invoice the customer and record the sale.
We also receive a small amount of revenue from disposal fees. We have contracts with our customers which specify the type and volume of material which can be disposed. Monthly, we invoice those customers based on deliveries of material to the disposal site by the customer. Materials are measured and categorized at the time of delivery and verified by the customer. We recognize the revenue when the invoice is prepared at the end of the month in which the material was received.
In January 2016, the FASB issued ASU 2016-1,
Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)
. The amendments in this ASU supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. The amendments improve financial reporting by providing relevant information about an entity’s equity investments and reducing the number of items that are recognized in other comprehensive income. The Company adopted the amended Topic 825 effective January 1, 2018. The adoption of this guidance had no effect on our financial statements or other financial reporting.
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 October 24, 2018, we had outstanding 159,147,399 Common Shares and 9,625,371 options to acquire Common Shares.