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

Greetings. Welcome to the Ur-Energy Second Quarter 2026 Earnings and Operations Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Ur- Energy's General Counsel and Corporate Secretary, Alex Ritchie. You may begin.

Thank you. Today's discussion and clicking statements within the meaning of applicable securities laws. Forward-looking statements are based on management's current expectations and assumptions and involve known and unknown risks, and uncertainties that could cause actual results to differ materially. We do not undertake to update or revise any forward-looking statements, except as required by law. Today's presentation includes disclaimers related to forward-looking statements, risk factors and projections along with cautionary notes to investors. Please review these carefully. Together with the risk factors described in our Form 10-K, our Form 10-Q and other public filings with the SEC and Canadian securities regulators. I will now turn the call over to our CEO and President, Matt Gili.

Thank you, Alex. Thank you, everyone, for joining us today. In addition to Alex, giving me on the call today are Roger Smith, CFO; and Steve Hatten, COO; Ryan Chairman, VP of Regulatory Affairs; and Jay Wally, VP Finance. We continue to believe the uranium market is supported by durable long-term fundamentals. More and more, nuclear energy is recognized as an essential source of reliable baseload generation. Global capacity is projected to nearly double by 2040. Governments, including the U.S. government, are prioritizing secured domestic fuel supplies and initiatives in Washington, D.C. are expected to put a premium on U.S. produced uranium. At the same time, there is a structural gap in the industry between expected demand for uranium and primary mine supply. We are positioned right in the center of that gap because we are one of the very few companies that for due uranium, and we are poised to produce a lot more. We are doing this by building America's first district scale ISR uranium operation through disciplined capital efficient growth. Now let's talk about our operations. In the second quarter, we drowned 141,000 pounds of Yellow Cake at Loss Street. That is 47% more than we drummed in the first quarter of this year and 26% more than the second quarter of last year. We shipped 150,000 pounds. Again, that is 44% more than the first quarter and 42% more than the second quarter of last year. In other words, we are executing on our production strategy. We met our delivery commitments, selling 215,000 pounds under our contracts, which brought in $14.4 million in sales revenue. We maintained our low-cost production profile. Another reason why Ur Energy is positioned as a leading U.S. ISR producer. Our cash cost per pound sold, excluding ad valorem and severance taxes, stayed low at $40.20 per pound. With $95.3 million in unrestricted cash, we ended the quarter with significant liquidity. This means we have the financial flexibility to continue advancing our production growth strategy. And we still had a healthy GBP 348,000 of finished inventory at the conversion facility for contracted deliveries. We also proactively deferred GBP 300,000 pounds of 2026 deliveries to 2027 and 2029 to decrease ramp-up risk and increased flexibility relating to our remaining 2026 delivery commitments. Overall, we believe that our second quarter shows the type of operational execution and solid financial foundation to continue to increase production and create long-term value for our shareholders. Now I'm going to talk a little bit about our flagship ISR mine at Lost Creek. To grow production at Lost Creek, we worked during the quarter on various optimization efforts. This work included installing it and filtration system to address fine particles from the well field that impact flow rates and production. But consider that we drum more pounds of uranium in the second quarter than any quarter since we started to ramp up in 2022 without the sand filtration system. Although the system was installed in the second quarter, it wasn't fully commissioned and online until July. We've been making great progress on other projects as well. We broke ground on our wastewater treatment facility in July. We are on track to finish our reverse osmosis upgrades and a new maintenance program by year-end. Our infrastructure investments are enhancing operational capacity and reliability at Loss treat support higher sustained production levels. We had 17 active drill rigs at Lost Creek that kept our well field expansion plans on track. We made progress on delineation drilling in our fourth and fifth mine units. Subject to regulatory approval of our wellfield patent. We expect to start oilfield construction in Mine Unit 5 by year-end. This additional drilling is accelerating well field development to ensure a steady pipeline of production areas to support future output. Together, these initiatives are expanding Loss Creek's production capacity and reinforcing the operational foundation for sustainable long-term growth.Turning to Shirley Basin. We reached some important milestones in our growth strategy since the end of the first quarter to expand our production platform beyond Lost Creek. Purley Basin is designed as a satellite facility with uranium captured on resin transported to Lost Creek for further processing and drumming. In the second quarter, we began capturing uranium at a yearly basis. And with just limited operations, captured 10,634 pounds. Operations were limited because we needed regulatory authorization from the state to commence full operations and start shipments to -- last Street and we received that authorization in late can. Today, I'm excited to share the plant at Shirley is now in full operation and 6 of the 10 production columns in the plant are online. All the production and processes are in place to transport uranium to Lost Creek. So we are ready. The only work left is to finish commissioning and inspecting the specialty trailers for hauling resin, and that first shipment is imminent. Operating Shirley Basin as a spoke to the Lost Creek hub allows us to increase production while leveraging existing processing infrastructure. That said, -- we also have processing optionality. We are employing the hub-and-spoke model to improve capital efficiency and accelerate cash flow. But surely Basin is fully licensed to operate as an independent production hub in the future. That gives us strategic flexibility as we continue to grow in the -- great Divide Basin and continue to advance our growth pipeline. We have optimization activities at Shirley Basin planned through 2027 including wastewater treatment using engineering from the Lost Creek wastewater treatment project. And the Shirley Basin ramps up production we expect it to become a large contributor to our long-term production profile. Now I want to talk for a minute about our growth pipeline. We are an operating uranium mining company. We are not limited by our existing operations. We have an exploration and development portfolio with multiple opportunities to add resource and expand production. Later in the third quarter, we are planning to start an exploration program with 120 holes at our Lost Creek South project. This 16 square mile project offers strong potential to leverage our existing loss treat plant infrastructure with shorter development time lines and lower capital requirements. Our Lost Soldier project is another potential spoke for the Lost Creek hub. Baseline environmental studies are underway at Lost Soldier to support a potential permitting decision as we continue to derisk the project. We have also started work on a take report for Lost Soldier that we plan to complete by year-end. Our North Paso project also remains an encouraging exploration opportunity following our first quarter drilling results. where 13 of 33 drill holes intersected uranium mineralization. Together, these projects strengthen our long-term organic growth pipeline. They provide multiple opportunities to expand production while leveraging our established Wyoming District ISR platform and our significant license passive. So we are producing today while advancing a district scale Wyoming pipeline. We are positioning the company to benefit from a structural domestic uranium bull market. We are executing our strategy. This includes growing the scalable 2 asset ISR production platform by further optimizing Lost Creek and ramping up Shirley Basin. Advancing low-capital organic growth opportunities to extend our hub-and-spoke production model across Wyoming. We're leveraging our ISR operating expertise, our permitted assets and our processing capacity to efficiently convert resource into future production. We're capitaling on the growing strategic importance of U.S. uranium production and maintaining disciplined operational execution and capital allocation to support sustainable production growth and shareholder returns. We have a unique advantage with our expertise and proven success permitting projects efficiently and without long delays. We also have the operating expertise and are building the scale to become the partner of choice in the consolidation and development of Wyoming's uranium districts. With that, I'll turn the call back to the operator and open it up for Q&A.

[Operator Instructions] Your first question comes from Anthony Taglieri from Concord Genuity.

Maybe first on production. So now that we've seen operations been ramping up at Shirley Basin, you guys have the sand filter installed at Lost Creek. Can you give us any color on what we might see for production in the second half of the year? And is there a potential for you guys to not have to dip into any of the non-produced inventory to hit, call it, GBP 700,000 of deliveries for the rest of the year?

Okay. Any -- thank you for the call. So look, we're not providing clear like production guidance. But we are providing that guidance with regards to our contracted deliveries. So we originally started the year with GBP 1.3 million of contracted deliveries for the year. We elected in July to defer GBP 300,000 of those areas, the classic risk management. a good opportunity for us in a very controlled fashion proactively to reduce the amount of the contracted deliveries for the year to give us flexibility is for execution. So I'm not going to provide -- the color I'll provide is that we are absolutely on track to meet our deliveries for this year. and we will have the opportunity and the flexibility now with the deferral to look at different ways to allocate the panels.

Okay. Great. Maybe as a follow-up. Correct me if I'm wrong, I don't think you guys have signed a new contract recently, any new long-term contracts recently. What are you seeing that's changed maybe, call it, over the last 6 months in terms of what's available, terms, pricing, appetite for new contracts, that sort of thing.

All right, Anthony. Okay. That's a very good question. So what I've seen in my 6 months from when I started now, when we first started this, we were still very much in a let's call it, a buyer's world, we spend a lot of time talking about the price per pound, and we negotiated the terms we had already gotten to the stage where we were doing a hybrid contract. We were doing a mismarket and fixed pricing. What I can tell you from my position, my point of view, is that we seem to be entering into a series of discussions with buyers that are much more focused on surety of supply as opposed to negotiating the last $0.50 per pound off of a price. So that's the general flavor. The market is very willing and eager to engage in contracts for surety of supply, the informal conversations we have with many of the utilities are -- we need to wait for have pounds you want to commit that is no, we'll talk. We have not entered into more contracts as choice, right? So we've turned out RFPs. We have a good, solid contract book. We're not looking to add more to it this year. Next year, we'll reevaluate the book and reevaluate the continued production ramp up and make that decision next year on how we want to how we want you to add to the book. We do have a couple of discussions in play that could add some commitments this year for future years, of course. But we're not being aggressive right now. We see very focused on products. Look at every month, we seem to get an indication that the both term price and the future prices are going.

Your next question is coming from Jeff Grampp from Northland Capital Markets.

On the sand filtration system at Lost Creek, it looks like that was completed last month kind of fully not trying to get you the guy for anything too explicit, but just wondering kind of early time results or benefits you're seeing from that in terms of flow rates and I guess just trying to contextualize how big of a of an impact or restriction was that over the last couple of quarters relative to what you're maybe seeing in real time now?

So Jeff, good question. Prepared for your question, Jeff. I am going to get some just indicative numbers, okay? We averaged just over 200 gallons per minute last quarter fall through the plan. after the sand filter. Last period, we've been averaging around 32 to 330. So just that inclusion of the sand filters has had a statistical meaningful increase in flow rates. To the point now where the constraint is now moving to other aspects. We now have enough flow that we need to get more clever and how we run our production and injection wells. So this is just a classic theory of constraints. -- we had a constraint with sand on top of our ion exchange columns. We've removed that constraint and now we're moving on to the next constraint and that next constraint will be bringing on more and more of our wells.

Got it. Super helpful detail. I appreciate that. On -- shifting to the exploration side at Lost Creek South -- can you touch on the, I guess, relative benefits or streamlining, if you will, of potentially moving that forward, assuming you have some good drill results there. Like how much of a benefit do you get from that being basically right on top of your existing assets there relative to something like Shirley Basin or some of the other satellite projects. Is there a meaningful benefit there in terms of accelerating time line to bring in like something like that online?

Well, certainly. I mean, so the impact of permitting the effort that's required to permit another property immediately to the south of an existing property is just less. And it's also just less when you are dealing with a property in the same hydrologic basin that you're currently in. So look, I mean, Lost Creek South is just the south edge of our existing line of operation. So the closer we can get to Lost Creek and find more bounds, the easier life is going to be that adds more flexibility, has more optionality. And it will -- anytime you can increase the denominator, you're looking at lower cost, you're looking at more pounds.

Your next question is coming from Andrew Wong from RBC Capital Markets.

This is Ali McClain for Andrew Wong. Andrew can make it is taking it. Just a question on the cash cost. So cash costs were $40 a pound in the quarter. I guess, what's the cadence for production costs going down when do you anticipate going down to a run rate level with the ramp-up of Shirley Basin, I guess, just for the model, how do you project these costs going down and when it could reach a steady state, I think you mentioned previously like $20 to $25 a pound.

Yes. Okay. Our costs are so fixed are so controlled in a fixed manner. Much more than I'm used to in Golden copper. So we model 80% fixed costs to what we're doing. It's all about the production denominated. So the costs go down as the pounds go up. We spend almost the same amount of money every day regardless of how many pounds we produce. So you can model the cost decline exactly as you would model the production increase.

No, that's really helpful. And just 1 more for me on the well field development costs. Can you bring some color on the breakdown between the sites going forward and how much is remaining for '26 and then '27?

I'm not sure -- Jay, do you have that breakdown. Look, we spend between $12 million and $15 million. per quarter -- quarter on -- pardon me, third quarter on development costs. And that's broken out between Loss Creek and surely. We moved drills between loss truly to maximize our efforts and to maximize our flexibility. But you can model between million a quarter for our development costs for the next at least year as we go forward. I'm getting a note here from Jade. So Jay, do you want to talk?

Sure, sure. And those development costs, we don't anticipate those to change much because we're always staying 1 to 2 to 3 years ahead, so we can be ready for the next pattern.

Yes. I mean you did see a whole lot of development costs at surely Basin ahead of production as you would expect, right? You've got to develop ahead of your production. But that will all -- we're into the stage now we're starting to levelize out that development cost per quarter. And as we move forward, then when you start seeing our development cost decrease, were either at the end or you should be concerned.

Your next question is coming from Joseph Rager from Roth Capital Partners.

Matt and team, thanks for taking the questions. Thank you. most stuff I wanted to touch on was already asked. But just one bigger picture thing, have you seen any change in the M&A market for development or nonoperating assets in the U.S., anything we're not naming assets, but just any more willingness by other holders to come to the table and potentially sell something that help you guys grow faster?

Absolutely, Joe. Always a tough question I'll be very purposefully vague in my response. I would say that there is a growing appetite for consolidation in the Western United States. We all recognize our position both in the domestic production as well as in the global production. Growth is imperative for all of us. There is -- with the eagerness, we really all work together very well. We know each other very well. And we're always looking for those opportunities where we can create shareholder value. however that shareholder value is created through consolidation. I have to be purposely pad, Joe.

Yes. Fair enough. -- totally. And then just with these deferrals that you guys have made, is there any chance you guys would make any spot sales? Or at this point, it's protecting your inventory for future sales more important?