Ur-Energy Inc. (URE) Earnings Call Transcript & Summary

[Audio Gap] Director and Head of Research at Red Cloud Securities, and I'm delighted to host a Red Cloud webinar on uranium today. And we are going to hear from you, Ur-Energy CEO, John Cash. Now during today's webinar, he will provide an overview and outlook and then we will take some questions. You can type your questions into the chat box at any time, and we'll get to as many as we can. But before we kick things off, first, we need to discuss the fine print. During this Ur-Energy webinar, forward-looking statements may be made. I direct listeners to its forward-looking statements outlined on Page 2 of Ur-Energy's corporate presentation, and that can be found on the company's website, ur-energy.com. For Red Cloud Securities, I'd highlight this webinar is for information purposes only. It should not be considered a solicitation or recommendation of Red Cloud Securities. We know that this call does not consider the particular situation or needs of individual investors. Participants should rely on their own investigation and seek their own professional advice before investing. So please see our most recent research on -- located on the Red Cloud website for specific disclosures on Ur-Energy. So with that said, why don't I turn the floor over to John Cash to speak about the company. John?

All right. Thank you. I appreciate that. So yes, we'll just jump right into the presentation. I'm sure many of the viewers here are familiar with our story. So I'll run through our typical corporate presentation, which we've updated recently and also give you a bit of an update on how things are progressing out at Lost Creek. So we always like to start off with the picture of the Lost Creek plant. It's up and operating now. We're at commercial flow rates coming from Header House 2-4. So glad to be able to report that. It's been a while since we've been in commercial production. So that's exciting. And we're happy to see some pounds start coming out at the back end of the plant here in a few weeks. As was mentioned, I might make some forward-looking statements during the presentation. Please be aware of that. We encourage you to read the risk statements that we put out in annual reports, quarterly reports, proxy and other places. We take those very seriously, and we encourage you to review those and be very familiar with the risks of investing. So we have 2 flagship properties at Ur-Energy that we talk about a lot. We have other exploration and development properties that are kind of further back into the production pipeline, but we focus on Lost Creek and Shirley Basin. At Lost Creek, which is in the photograph there on the top right, we've been in production since -- well, 2013 really. So it's been over 9 years we've been producing in that time. We've produced nearly 3 million pounds of U3O8 and sold most of that into long-term contracts with U.S. utilities. We have -- as I have indicated, we started commercial production in Header House 2-4. We've got very good flow rates coming through the processing plant now and we are seeing breakthrough of the pounds as the oxygen and the CO2 make their way through the aquifer, through the ore body and begin to liberate those pounds. So we are seeing that coming into the processing plant now. We've got a very good resource at Lost Creek. We've defined 11.9 million pounds of measured and indicated resource and 6.6 million pounds of inferred resource. Those are the known resources. We also believe we have a lot of opportunity to explore and locate additional resources. Now there are a lot of roll fronts out there that we know are there but we've not chased them on the ends. And so a lot of opportunity there in the coming years to grow that resource. So the return to commercial operations, we believe will be a return to low-cost operations. And I'll talk about this a little bit more and actually present the cost of production from previous years, but we've done it a revised technical report, and we believe we'll be able to return to nearly those low-cost production pounds that we've had back in 2013, '14, '15, '17, those years. And so that's a great part of our story is we are well known as a low-cost producer globally. We have a very good mine life, a 14-year mine life as outlined in our most recent technical report. But again, that does not include or assume anything as far as exploration, and we're confident that we have some good opportunity to grow the resource based on that. Lost Creek, the license that we have for that property, the mine part of the license is a capacity of 1.2 million pounds per year. And then the processing plant is licensed at 2.2 million pounds per year. And the delta there between the mine and the plant is very intentional, and that allows us to bring in pounds from other facilities for toll processing for a competitor or from one of our other properties. In this case, we intend to bring pounds over from our second property at Shirley Basin, which is also in Wyoming and bring that resin over to Lost Creek for processing. That allows us to build out just a minimal processing plant at Shirley Basin and really minimize the capital cost going forward. So going to Shirley Basin, that property now has all of the major licenses and permits in place, it's construction-ready. It has a licensed capacity of 1 million pounds per year from the mine and 2 million pounds a year from the processing plant. At this time, we only intend to build out a satellite facility that's capable of producing 1 million pounds per year. But if the market conditions allow, and contracting allows, we can bump that up to 2 million pounds per year in the processing plant. We don't need to go back to the regulators for approval. We can simply do that on our own since the approval has already been granted. But at Shirley Basin, all of the resources are in the measured and indicated categories, 8.8 million pounds at a very good grade of 0.23%. One of the things that's really interesting about Shirley Basin is we believe it was probably the first commercial in situ uranium mine in the world, starting back in 1963, 1964, in that era. They ran an experiment, and the experiment was very successful. They actually produced well over 1 million pounds of uranium with this new technology called in situ. And of course, since that time, in situ has become one of the most prevalent techniques for recovering uranium globally. So moving away from the 2 flagship properties. I just mentioned very briefly that we do have a very good contract book. Already this year, we have sold 100,000 pounds to the Department of Energy as part of the uranium reserve program, and we realized a price there of $64.47 a pound. After that sale, we still have a remaining inventory of pounds that we produced at Lost Creek of 224,000 pounds. It's our intention right now to hold on to those pounds. We may decide to sell that into our long-term contracts. And if not, we may just hold on to it for a buffer for right now. But ultimately, we also have the option of selling that into the spot market if we desire. So that can be converted into cash pretty readily if and when we decide to do that. We have announced that we have 2 long-term contracts with leading nuclear companies of the total is 600,000 pounds a year beginning in 2024. Those go through 2028 with opportunities to extend those beyond that as well. And for this calendar year, our remaining contract book beyond the Department of Energy sale is 180,000 pounds. So we have some good sales this year. We're looking at revenues this year of a little over $17 million. So both Lost Creek and Shirley Basin are in situ mines. Of course, Lost Creek is built out and its photographed here. It's up and running. Shirley Basin is still to be built out. But you can see that the footprint here in the operating mine is very small. And when we get done mining, we will restore the groundwater, pull up the wellheads here as seen. And within a few years, you won't even be able to tell that we were on the ground. So that's one of the reasons why we utilize the in situ technology is because the footprint is very light and the property can be returned to any use. Moving away from Ur-Energy, taking a look at the nuclear thesis, why invest in the nuclear industry? First off, the world really began to recognize that nuclear power is green a few years ago, and there has been a strong push that seems to be gathering steam with the understanding that nuclear is green and if we really want to go to carbon-free within a reasonable amount of time, it has to be a part of the solution. In the U.S., we already get about 20% of our electricity from nuclear power plants and that represents about 50% of our carbon-free electricity. Globally, it's about 10%, but we expect that number to grow fairly dramatically in the coming years. And I'll get into that in a bit further. We have 437 reactors up and running right now in the world, 60 in construction. And beyond that, there are a lot of reactors that have been planned. The World Nuclear Association is projecting that global demand for nuclear fuel will grow by 4.2% annually through 2040. That's in their base case. If you take a look at their more aggressive or optimistic case, that's at 7.9% annual growth through 2040. That report now is a little bit outdated. They will update it, I believe, in September of this calendar year, and we expect those numbers to grow fairly dramatically. Keep in mind that this report came out before Russia invaded Ukraine, so the implications of that are not reflected in the report. But beyond electric generation, nuclear has a lot of other attributes that are being recognized and being deployed, one of which is for hydrogen production, utilizing the high temperature and the energy generation from nuclear. It makes it less expensive to generate hydrogen fuel. And so companies like Duke Constellation and others are moving toward hydrogen production with support from the Inflation Reduction Act. And those companies are finding that, that increases their profit margins going forward. We're also seeing a tremendous growth in the interest of small modular reactors. Those are being developed and constructed in 11 countries. They're already operating in 3 countries. And even in the last few weeks, it seems like we're seeing more and more interest in SMRs because of their low capital cost, potentially reduced cost of production, and they're quick and easy to build. They'll be factory-built. And so that seems to be the trend in the nuclear space. We're seeing a tremendous increase in acceptance of nuclear all over the world. China, for example, they are looking to build 150 reactors in 15 years. They have 24 reactors under active construction and they continue to say that they are on track to reach that goal of 150 new reactors in 15 years. But there are so many other countries around the world. And I won't go through the entire list here, but that are moving toward nuclear in a very aggressive manner. Even here in the U.S., we had a reactor -- new reactor come online just a few weeks ago. And we have another reactor, also by Southern company down in Georgia that will be coming online later this year. So even in the U.S., there's growth. Looking at the legislation in the U.S. Congress, we have seen tremendous support from both Republicans and Democrats when it comes to nuclear energy. Some of the recent legislation includes the uranium reserve that we benefited from. We've also got the civil nuclear credit program and the Inflation Reduction Act. Those programs in combination are leading to lifetime extensions on a number of nuclear reactors across the U.S. They're moving them into profitable operations. And so it's a great time to be a nuclear utility operator. And we're seeing growing support beyond that legislation of Senator Manchin and Barrasso are tremendous supporters. And ironically, one is a Democrat, one is a Republican. Those 2 parties don't seem to agree on much, but they do agree on nuclear power and its importance to energy security going forward. So very recently, subcommittees in the House and the Senate have approved bills that are designed to cut off Russian imports. Those bills are continuing to move through the process. I wish they would move more quickly, but it looks like it will probably be this fall before there's an opportunity for them to be considered on the full floors of both the House and the Senate. We believe the likelihood of passage on those is improving and increasing and we think that, that's likely to happen. We're also seeing very strong support out of the White House. They recognize the carbon-free attributes of nuclear and they've then become very strong advocates. But beyond the recognition of green energy, some of the financial players have really begun to understand that there's a real opportunity here. And so they are moving into the market, hedge funds, ETFs and even some of the miners have been out there being involved with purchasing uranium, but the real game changer was the Sprott Physical Uranium Trust. They have acquired greater than 60 million pounds of inventory. And I suspect over time that, that's going to continue to grow. What's the effect of that? Really, what's happening is this they buy mobile inventory. They're taking those off of the market, off the SPUT market, and that's driving prices upward whenever they're on the market. So they are a really good support. Beyond that, we're seeing other funds come in to hold physical pounds of uranium, including the Zuri mechanism, and they are looking to raise over $100 million and deploy that in the purchasing of more pounds. That's putting pressure on the market. We've also seen the Kazakh Physical Uranium Trust form. And their goal is to raise $400 million and deploy that through purchasing physical pounds. So moving beyond that, looking at geopolitics, you really can't have a discussion of nuclear power and uranium without talking about geopolitics. Russia's attack on Ukraine changed a lot. And it's likely that, that will be a very long-term impact. And that's because Russia is a big refiner of uranium, not a big miner, but a big refiner. When it comes to conversion and enrichment, they dominate the global supply. And so Congress right now is looking at cutting off those supplies coming into the U.S. of that enriched and converted material. It's shocking to a lot of people that even though the war has been ongoing in Ukraine for well over a year that we're still importing uranium product from Russia, but it's true. They continue to ship material. We continue to accept it in the U.S. perhaps Congress will be cutting that off. More important than that, though, is Kazakhstan. They supply about 46% of primary mine supply. We believe that Russia has tremendous influence over the production coming out of Kazakhstan. As evidence of that, just take a look at the Budenovskoye, Unit 6 and 7 project. That is now -- 49% ownership of that is in the hands of Russia. And so I think that's a good indication that Russia has a lot of influence there on where those pounds end up. Also, there's been a recent announcement of an agreement between China and Kazatomprom, indicating that a lot of the production coming out of Kazakhstan is going to be headed to China and potentially not to the West -- to Europe and to the U.S. for those reactors. A lot of details are lacking on that deal. We hope to see more information come to the floor as we move forward. But nonetheless, it does appear to be a very significant sales contract between Kazatomprom and the Chinese. So moving beyond Kazakh production. If you take a look globally, it's pretty challenging. If you take a look at Africa, a lot of the production there is owned by the Chinese. So those pounds may not be coming West. They may be going East. If you take a look at Canada, McArthur River and Cigar Lake, 2 really good Tier 1 properties that are being placed into production. Cameco is doing a great job there, but it's nowhere near enough to replace any supply disruption that may come out of Russia and Kazakhstan. And so we have to be very aware of that. The story is very similar in Australia as well, some couple of very good mines there, Olympic Dam and Four Mile. But nonetheless, that production is limited, and there's not a lot of room for expansion in Canada or in Australia in the very near term. So there's a very limited amount of new production that could come on that would come West. The story is very similar here in the U.S. Right now, we are 100% dependent on imports for -- to fuel our reactors and U.S. reactors, they typically will acquire between 40 million and 50 million pounds of uranium per year. And you can see from the chart there that U.S. mine production right now is at near historic lows. It's negligible. It's not enough to supply even a single reactor. But that's where Ur-Energy comes back into the story. We are ramping up commercial production right now as we speak. Good flow rate going through our processing plant. Our head grade is coming up nicely. Historically, we've had very good recoveries at Lost Creek, about 90% on average over 9 years, that's setting the industry standard. Typically, in U.S. mines, we see between 60% and 80% recovery, but that 90% recovery we see at Lost Creek, that helps dramatically with our economics. Something new that we've added to our slide is our royalty burden is very low at Lost Creek in the surrounding project areas. It averages less than 1%. That really sets us apart from some of our peers who have a dramatically higher royalty burden. So we're very happy about that. Again, it helps us keep our costs very low. On the map on the left, you'll see that Lost Creek is in the blue. That's the area that is licensed and permitted right now and that we are mining from. We are working on extending that permitted area into LC East. That has been drug out and slow, not because of any problems, but simply because the regulators have been short on manpower, but we are getting assurances that, that is coming to an end. And so in the -- I'd say, in the next month or 2, we'll be near the end of that. We also have tremendous opportunity to grow the resource through exploration not only within Lost Creek, that blue area, but in all of that surrounding area. Throughout those areas, we know that there is mineralization and we have a lot of opportunity to pursue that, not just laterally, but also with depth. So 3 dimension. Right now, we're mining just in the HJ geologic horizon. We know we've got potential in the KM, L, M and N horizons. So a tremendous opportunity throughout the property to explore. Going back to the cost of production. We like to show this. It's a bit of a busy chart, but I'll draw your attention to 2015, where we produced nearly 800,000 pounds that year, and our average cash cost was $16.27 a pound. The all-in mine site cost was about $33 that year that included taxes and royalties. So we believe we can get back close to these numbers going forward. Obviously, because of inflation, we're going to be just a few dollars higher. But if you want to do a deep dive into the economics, I would encourage you to take a look at the technical report that we put out in September of last year, and that's linked on our website. It's also on SEDAR and EDGAR, if you'd like to do a deep dive into the economics but we have historically been a low-cost producer, and we believe we can get back there again. So just one more quick look at Shirley Basin, 8.8 million pounds of M&I resources. One of the reasons we acquired it is it's not the biggest property in the world, but it has a lot of attributes that will make it a relatively low-cost source of production. The pounds are very shallow, the ore body is drilled out and it's high grade. And a lot of the infrastructure is already there. For example, the roads are already there. We'll need to upgrade them, but they're there. We have 2 really nice buildings to operate out of already. The power lines are there, we'll need to do some upgrading, but so much of the infrastructure is there, and we know precisely where the mineralization is at. We don't need to go out and explore or do delineation drilling. We can move straight into production drilling. Also the royalty burden, as I mentioned on Lost Creek, similar story with Shirley Basin, the royalty burden is very low. It's going to be less than 1% throughout the entire property. So we do have our ramp-up ongoing. Header House 2-4 is online at full flow. We are working on constructing the next header house, which we'll be bringing it on in a few weeks. We're also working right now on drilling our next deep disposal well. I was out at the site just a few days ago, and the pad is being installed, and we are continuing doing some delineation drilling in the next 3 header houses beyond that. We are well aware of supply chain problems. We are very fortunate at Lost Creek that we are able to recycle materials from previous production areas and simply advance them forward. It helps keep our costs lower and it also prevents any delays. We've also been able to keep our key staff, and I'm very happy to report that our hiring is essentially complete at this point. We have about 4 or 5 more positions to hire, but we have our staff needed right now to be in full production. Looking at the Green Revolution, which is an important part of the investment story. The pounds we will produce at Lost Creek and at Shirley Basin compared to the same -- our same energy generated from a coal-fired power plant is the equivalent of taking 67 million cars off the road for a year. It will offset about 312 million metric tons of CO2. That's an incredible number. Now I've given this presentation many times. And every time I read that, it's just -- it's mind boggling the positive impact that our operations will have. We have completed our Casper headquarters operations. And looking at my left shoulder here out the window, I can see our new shop building in lab and we are moving tools and personnel into that right now, and we'll be doing our lab work and construction here in town that enables us to retain some really good quality people and it improves our safety as well. They don't have to make the long drive out to the mine site every day. We do use the in situ technology, which minimizes our footprint, and we've been making very good strides at reducing our groundwater usage and we intend to continue to make strides on that going forward. Our goal is to recycle 99.8% of the water that we use. Here's a photograph of our office in Casper that we own. We're not renting it, so we don't have the cost of rent and our new shared services building, where we house our construction and our laboratory. We also like to talk about the -- really the efforts we've been making on research and development. We've been making very good strides there with well casing and installation techniques. We've been -- our attention has been taken away from that for a while because we're in ramp-up, but as we get through ramp up, we'll turn our attention back to the injection well-casing methodologies that we've been developing and have applied for a patent for, so it's protected at this point. But our Phase I testing went extremely well. We now need to move on to Phase II testing and prove out the technology. And as I mentioned already, we are continuing to work on ways to reduce our water consumption. So taking a look at our market position, our fully diluted shares, $302 million. We have a very strong cash position, $73 million at the last quarter's report. Market cap since this slide was produced, has actually improved some. We are now just under $300 million on our market cap. And I'd like to point out that when you take a look at our share ownership, our shareholders, we have some of the most sophisticated uranium ETF funds and large shareholders out there. A company like Lloyd Harbor Capital, which is a part of Sachem Cove. [ Zebra ], Lazarus, Sprott and Global XU, all of those are very sophisticated shareholders, and we're glad to have them as part of our registry. Share price has been around USD 0.91 has been improving recently. So we've been above $1. 52-week range has been $0.82 to $1.50, and our average daily volume has been very good, very liquid, and that's actually been improving as well beyond that. We've got great coverage in the U.S. and Canada. And we're just well financed, ramping up commercial production to sell into those long-term contracts. Our goal is to sign additional long-term contracts as the price continues to improve. And so we're looking ultimately to get up to a 2 million-pound a year run rate when you combine both Lost Creek and Shirley Basin. So we believe we're incredibly well positioned with cash with really good quality projects going forward. So with that, David, I'll turn it back over to you. And if we've got time for questions, I'd be glad to try to answer any questions that the listeners have.

Absolutely, John. So thank you very much. Great presentation as always. So now we're going to kick off the Q&A portion of the webinar. So a reminder to everybody online, you can type your questions into the chat box, and we will get to them if we can. So I already have a few questions here, John. So I guess let's start off big picture. Do you believe the nuclear has really turned the corner globally with the masses starting to consider it as being part of the solution when it comes to, let's say, environmental stewardship or security of supply?

Yes, absolutely. I think that's the case. Take a look at China, I think they are the leading example, 150 new reactors over the next few years is mind boggling and they're not alone. You've got countries like Finland and England and France, South Korea, the U.S. that are looking at building reactors. And that's before we even get into the discussion of small modular reactors. And there's tremendous opportunity there. I don't think we're going to see it for just a few years, but as those are developed, designed and proven out, that is going to be a tremendous new source of energy. Read a very good article this morning about how companies are looking at using SMRs to generate synthetic fuel. And so they'll generate hydrogen, use that hydrogen for synthetic fuels for applications where batteries don't work very well. So the applicability of SMRs, I think, is tremendous, and we'll see that evolve going forward.

Right. Okay. And the U.S., it's been very supportive towards nuclear in the past couple of years. Do you find the Biden Administration as being as supportive as the prior administration?

Yes, absolutely. They clearly have different objectives that they want to reach depending on the administration, but both the Trump administration and the Biden administration have been incredibly supportive to the industry especially for the utilities and the processors. They've provided a lot of assistance there. There's a lot of trickle-down benefit to the U.S. producers in regard to that. It gives us security, and we appreciate that.

Yes, security is something that you've been talking about a long time. Who knew you would be so right when we opened up that -- I want to say can of worms a few years back, at least, with the nuclear utility. So do you believe that now it's coming to the point where legislation is running through the house? Do you believe that shutting off Russian uranium into the U.S., a, what's it going to do to uranium industry? And b, is there a potential that the Russians cut off the taps even more quickly than the U.S. might be ready for?

Yes, that's a difficult conversation because right now, we simply don't have the conversion and enrichment in the West to probably backstop that if Russian supplies are cut off. And I think if the U.S. government is going to cut off that supply, which I believe they should, on one side, they need to do that. But immediately, they need to provide that support to the enrichers and converters so that they know that they've got the support of the government that they can make the investment to bring on that capacity and they can do that. We've got the people. We've got the technology. It can be done, but it's going to take the finance and the support of the U.S. government to do that. So we can't just cut it off and hope for the best. If we're going to cut it off, there has to be additional government support for the sake of national security, physical security but also for energy security going forward.

Are there any real backup plans to deal with the fact that conversion and enrichment might be cut off?

Yes, there are. The Congress is looking at that very seriously right now. We'll see what they come up with. Certainly, there are certain senators that believe that it should be -- the supply should be cut off. But at the same time, there has to be support for the domestic industry. And they've commented that if there's not support for the domestic industry, then we can't cut it off. So we'll see how those conversations go this fall. I think September, October is really where the rubber is going to meet the road in Congress when it comes to that particular issue.

Great. Okay. Wyoming, it disappeared from the latest Fraser Institute Rankings of Mining Jurisdictions. Apparently, according to this user, just not enough surveys that were returned to Fraser. So is that what you have heard as well? Do you still believe that Wyoming is an outstanding jurisdiction for mining?

Yes. It's absolutely an outstanding jurisdiction. I mean I'll stick with uranium mining. That's where my expertise is at, and I'll stay out of the coal arena, although Wyoming is the largest producer of coal in the U.S. by far. But when it comes to the nuclear space in Wyoming, we've got great regulators, 2018, I believe it was. The state of Wyoming took over jurisdiction of uranium mining from the Nuclear Regulatory Commission. They stood up a program called the Uranium Recovery Program. So they've been actively involved with direct oversight for quite some time now. They have very sophisticated staff. They have long-standing regulations and they know what they're doing. Their inspections are timely. They're thorough. They do a great job, and the regulations are stringent, but they're reasonable and well defined. We know what they are and we can live with that. Beyond the regulatory, we have tremendous public support in Wyoming. Wyoming is a resources state. No two ways about it. If you're not involved in oil and gas and mining, that means you're a rancher almost by default or you provide services to those industries. So the public is, by and large, very supportive in the state of Wyoming, local to our 2 properties, they are very supportive of our operations.

Okay. And let's stay on the topic of uranium mining. Obviously, Lost Creek is an ISR mine and plant, and Shirley Basin will be. Can you tell our viewers why ISR is really your production method of choice? And what are the benefits?

Yes. So a couple of reasons. Primarily, it's cost-driven. In situ mining allows you to go after uranium resources that would not be profitable using conventional techniques. For example, at Lost Creek, the mineralization starts near surface, it goes down to -- we know it goes down to at least 1,000 feet. It probably goes much deeper than that. But if you're trying to build an open pit that was 1,000 feet deep, it simply wouldn't be economic and you would waste a tremendous amount of groundwater by dewatering that deep. So using the in situ technique allows us to address those pounds economically and it also dramatically reduces the environmental footprint. So for those reasons, that's why we employ the in-situ technology in Wyoming. Honestly, throughout the world, about 50% of the world's uranium right now has recovered using in-situ technology.

Yes. And Lost Creek's just returning to production just now. As you mentioned, you're back up to full flow rates. What sort of uranium concentrations are you seeing right now? And when should we expect full production capacity?

So I spoke with our plant manager, our mine manager, this morning. I've got those numbers. That's not something that we typically disclose, but they are coming up very nicely, very happy with that. And as far as production rates go, calendar year 2023, our contract book is for 180,000 pounds. So that's what we expect to produce this calendar year to sell into those contracts. Next year, that goes up to 600,000 pounds. So we'll jump it to 600,000 pounds for next year. That assumes we don't sign any more contracts. We hope that's not the case. We are in active discussions right now with utilities looking to sign up additional sales contracts. But as we sign those contracts, we will ramp up commercial production to match that. We typically don't like to sell our production into the SPUT market. It's too ephemeral, too risky. We really like the stability and frankly, quite often higher prices that we can enjoy in long-term contracts.

Okay. So you jumped up a couple of questions on me here. So I'm going to look at that for a second. Your contracts 600,000 pounds next year, you're probably targeting the same amount of reduction. Is there any desire to target higher than that? You showed us what your costs were when you were producing an 800,000 and they were lower than running, let's say, half production rates is would you ramp up production significantly, try to save money on costs and then hold that material for future sales down the road, like you said, at higher prices?

So we run pretty conservatively. So would we produce more than our contract book? Yes, but probably not dramatically. We would rather keep the cash in our piggy bank, cash is precious. So we don't like to spend that until we know we've got sales contracts. So yes, we may go exceed it by 10%, 15%. I can't imagine we would intentionally go 20%, greater. So a little bit of a buffer there for ourselves. But no, we do appreciate the economies of scale. It is very important in our industry, but it doesn't really overwhelm the greater cost equation. So we'll stick with our contract book on production maybe slightly more.

And have you looked at maybe signing any long-term contracts or having discussions becoming a strategic supplier of uranium or, let's say, [indiscernible] or the anything like that?

Yes. Right now, the DOE is actively engaged in the [indiscernible] process effectively riding the procedures and the regulations toward that program. Certainly, we're interested in being a part of that story. We believe that there is a desire to really have U.S. production, U.S. conversion and U.S. enrichment as part of the [indiscernible] story, and we would love to be a part of that story. So we're actively looking into that. Beyond that, I can't say much more about it at this time.

Okay. So stepping back to Lost Creek for a second, what steps would it take to increase your mining license above the 1 million pounds considering plant capacity is at 2 million?

Yes. So the mine capacity is at 1.2 million, that's what we're licensed at and what we've constructed at. So to increase that the physical capacity, we would need to install some additional ion exchange columns. We certainly have a plant footprint that we can do that within and if we wanted to expand the plant, we certainly have the area that we could do that. And the cost to do that would be very negligible. We have the design work done, we can do that. From a regulatory perspective, what would be required is a rerun of what's called the mil dose program, and that calculates radon emissions to make sure you are in compliance with regulations. So that would be a desktop exercise that would take probably a couple of months to run through to get regulatory approval, we're probably looking at 6 months to a year to be able to do that, maybe less than that. So it could happen very quickly and largely within the existing footprint of the plant. So it is something we have in the back of our minds. We've not taken any solid action toward it. But certainly, it's something that's very doable.

Okay. And when do you need to become a little bit more aggressive on the exploration from, let's say, expanding Lost Creeks' resource either at depth or in the 3 to 4 horizons below your existing mine horizons?

Yes. No, that's a good question. It's something we think about quite a bit. Right now, the mine life at Lost Creek is 14 years. One of the reasons why we've not done much exploration in the last few years is we don't really affect the NPV calculation by adding mine life. Once you get beyond 10 years on an NPV calculation, it doesn't help much. Also, we've been looking to conserve capital. Capital has been so precious, but as the market is loosening up, as we're signing contracts, we're getting more and more interested in utilizing some of that capital to go out into exploration. And we really believe in our heart of hearts that we've got tremendous opportunity there. And I did mention that we've got a good strong cash position $73 million as of the last report. On top of that, we've got nearly 0.25 million pounds of inventory that we can convert into cash at $56 a pound, $57 a pound. So we're well cashed up, lot of opportunity there to explore going forward. I think you'll hear more from us on exploration here over the next 1 to 2 years.

Yes. So that's your opportunity for growth at Lost Creek. At Shirley Basin, you're licensed, you're construction-ready. What do you really need to get that to decide to build that project? And would you started really is a Lost Creek satellite? Or would you attempt to build the well field and the ISR plant right way, keeping everything on the site?

Yes. Our intention is to start it as a satellite. So we would build just the ion exchange portion of that plant. So the footprint would be very small. To build out the satellite and the first few header houses and ramp it up, we're looking at a total capital expenditure of around $35 million to do that. So it's pretty small. The time period for doing that, we've been saying 18 months. I'm going to hedge on that just a little bit. So it may take a little bit longer because of supply chain issues. But nonetheless, we can do it fairly quickly and for not much capital. The decision-making process is really predicated on long-term contracts. As we layer in additional sales contracts, first off, we will fill up capacity at Lost Creek as we begin to encroach on the limit will have contract for Shirley, and that will be our signal to go ahead and build it out.

Okay. So long-term contracts are really the key for expansion?

They are the driver.

Yes. Okay. And do you spend a lot of time trying to contract that? And is your target audience really just American utilities?

So historically, our target has been U.S. utilities. I would say since the war in Ukraine, we've had a lot more expressions of interest from European utilities. So right now, I would say any Western utility is fair gain. There is interest there. They are looking for diversity of supply. They really like Canada. They really like the U.S. for those pounds. So we have ongoing discussions, spent a good deal of my time talking to utilities, I would say, we talk to pretty much every utility 2 to 4 times a year. So they know us very well. We know them very well. We utilized Jim Cornell for our marketing services. Jim has been around for many decades in the industry. He's well known. He's an expert at what he does. So that helps us maintain outstanding relationships with the utilities.

Excellent. Good. And your company right now is moving towards having more ISR capacity than many of your peers. Would you consider doing any toll milling for others that might have ISR amenable well fields in Wyoming or something -- anywhere nearby?

Yes, absolutely. We have intentionally licensed Lost Creek and Shirley Basin. So we've got that opportunity. We have spare capacity on both of those licenses for processing. We've been approached by 2 companies for toll processing at Lost Creek and Shirley Basin. We've announced one of those, and in fact, had an agreement with a company called Strathmore Plus. We're looking at what we can do to assist them for toll processing. The other company, we've not made an announcement on who they are. And quite honestly, it's too early for them. They're at very early stage, but they've got some reasonable properties and it would make a lot of sense for those pounds to come through our processing plan. So yes, there's opportunity there. I don't think there's anything in the very near future. But when we start looking out maybe 4 or 5 years, there's some good opportunity.

Okay. Now when talking about Shirley Basin timing a second ago, you mentioned supply chain issues. So last year, Ur-Energy, you announced the results from ongoing R&D project. You're really targeting injection wells, delineation equipment and methods. Part of that, I think, was to deal with supply chain issues and essentially speed things up. What did you find and what have you been able to implement? Have you been able to implement any of those changes?

Yes. We've made really good progress on R&D on the well casing and also on water recycling. We are doing great until about January. That's when weather got in our business and then subsequently ramp up got in our business. So I would say give us a few more weeks, maybe a couple of months in to ramp up, we'll be able to revert our attention back to those. So as far as implementation in the field of those technologies, we have not done so yet, but we would like to. There have been a number of other R&D projects that we have implemented, and we've announced those. They were in the presentation but well abandonment techniques. We've fostered that. And now the technology we've helped develop is used throughout. Also some permitting methodologies are used throughout the industry now. So yes, we've been a leader in R&D. We intend to continue that. We never know where the uranium market is going to go. So it's incumbent upon us to get good contracts, but at the same time, reduce our cost. So we are always aggressively looking at ways to reduce our cost and R&D is a good way to do that.

Right. Okay. I guess one last question on up here. Have you considered in any of the Wind River formation as a Uranium ISR reservoir in addition to the Battle Spring formation, which is actually producing. So I guess that sounds like to me like an exploration question.

Yes. So yes, absolutely, especially in Shirley Basin, we're looking a little deeper at the White River but the Wind River has possibilities as well. When we drill through it on occasion, we do get some kicks. We keep an eye on that. But so far, we've not seen anything in the Wind River that's of economic interest to us. I can tell you that some of our environmental sampling of shallow aquifers that are in the Wind River, they have some of the highest concentrations in the native groundwater that we see. And so that always picks our attention. It's coming from somewhere and so we do watch that. But yes, it is of interest.

Okay. Last question before we wrap it up here. John, do you have any plans for beyond Lost Creek and beyond Shirley Basin? Maybe anything you can tell us about your own project pipeline or any M&A considerations? And when you were specifically wanted to know if you ever had any eyes on the Karu Basin or Franceville Basins in Africa?

Yes. So I'll start with Africa, not terribly interested in Africa. That would be a big jump for us. We don't have country expertise and a lot of the projects in Africa lend themselves more to conventional than in situ, there are exceptions to that. But really, our focus would be North America, potentially Australia, but only if they're the right assets. But that gets into M&A. We are an in situ mining company. We've been fishing very hard on the M&A front, but we're very disciplined. If we reel in any fish that don't look like they're going to be very tasty, not very profitable, those fish are going to go back in the lake. We're only going to keep fish that -- our mines that we believe we can put into production economically and I insist on that. That's who we are as a company. We tend to be more -- leaned more toward mining than promotional. So any acquisition or merger that we make, it has to be with someone that's equal to us, that has properties that we can put into economic production. So -- but as far as our existing properties right now, yes, we've got opportunity there as well beyond exploration at Lost Creek. We also have a number of other properties within the Great Divide Basin that have tremendous opportunities. Lost Soldier is one, also North Honsel. We don't talk about that a lot, but we know we have mineralization there from some historic data, and we'll be looking more carefully at those going forward. Working within the Great Divide Basin provides us some great opportunities because the plant at Lost Creek is already built out. So anything else we bring into production would be very close to that. We've got the opportunity to perhaps pipeline it in or build a small, low-cost satellite and have very low trucking cost of that resin from the satellite to Lost Creek. So we like the Great Divide Basin. We intend to continue working there and also looking for other opportunities.

Okay. Great. I think we'll have to get back to fishing on the Platte River in Wyoming.

Yes, absolutely.

Okay. Well, I'd like to thank you, John, for joining us today. John Cash from Ur-Energy, everyone.

Thank you. Really appreciate the time.

Thank you, everybody else for tuning in. A reminder that Red Cloud Securities will be back tomorrow morning. So that's a different time. Tim is going to sit down with Flying Nickel. So that's June 21, 09:00 a.m. Eastern. So have a good day, everyone. Thank you very much.