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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

 

 

 

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD OF _________ TO _________.

 

Commission File Number: 001-33905

 

UR-ENERGY INC.

(Exact name of registrant as specified in its charter)

 

 

 

Canada

Not Applicable

State or other jurisdiction of incorporation or organization

(I.R.S. Employer Identification No.)

 

10758 West Centennial Road, Suite 200
Littleton, Colorado 80127
(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code: 720-981-4588

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☑   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer ☐                     Accelerated filer ☑               Non-accelerated filer ☐             Smaller reporting company ☐

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐No ☑

 

As of October 25, 2017, there were 146,009,205 shares of the registrant’s no par value Common Shares (“Common Shares”), the registrant’s only outstanding class of voting securities, outstanding.

 



 


 

 


 

 

When we use the terms “Ur-Energy,” “we,” “us,” or “our,” or the “Company” we are referring to Ur-Energy Inc. and its subsidiaries, unless the context otherwise requires. Throughout this document we make statements that are classified as “forward-looking.” Please refer to the “Cautionary Statement Regarding Forward-Looking Statements” section of this document for an explanation of these types of assertions.

Cautionary Statement Regarding Forward-Looking Information

 

This report on Form 10-Q contains "forward-looking statements" within the meaning of applicable United States and Canadian securities laws, and these forward-looking statements can be identified by the use of words such as "expect," "anticipate," "estimate," "believe," "may," "potential," "intends," "plans" and other similar expressions or statements that an action, event or result "may," "could" or "should" be taken, occur or be achieved, or the negative thereof or other similar statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Such statements include, but are not limited to: (i) the ability to maintain controlled, steady-state operations at Lost Creek, and determinations of future development and construction priorities; (ii) anticipated production of Lost Creek for 2017 and timing for bringing on the additional header houses in Mine Unit 2; (iii) the timing and outcome of permitting and regulatory approvals of the amendment for LC East and the KM horizon; (iv) the ability to complete additional favorable uranium sales agreements including spot sales if the market warrants and production inventory is available; (v) the potential of our exploration and development projects, including Shirley Basin; (vi) the timing and outcome of applications for regulatory approval to build and operate an in situ recovery mine at Shirley Basin; (vii) the outcome of our forecasts and production projections; and (viii) resolution of the continuing challenges within the uranium market, including supply and demand projections. Additional factors include, among others, the following: future estimates for production, capital expenditures, operating costs, mineral resources, recovery rates, grades and market prices; business strategies and measures to implement such strategies; competitive strengths; estimates of goals for expansion and growth of the business and operations; plans and references to our future successes; our history of operating losses and uncertainty of future profitability; status as an exploration stage company; the lack of mineral reserves; risks associated with obtaining permits and other authorizations in the United States; risks associated with current variable economic conditions; challenges presented by current inventories and largely unrestricted imports of uranium products into the U.S.; our ability to service our debt and maintain compliance with all restrictive covenants related to the debt facility and security documents; the possible impact of future debt or equity financings; the hazards associated with mining production; compliance with environmental laws and regulations; uncertainty regarding the pricing and collection of accounts; the possibility for adverse results in potential litigation; uncertainties associated with changes in law, government policy and regulation; uncertainties associated with a Canada Revenue Agency or U.S. Internal Revenue Service audit of any of our cross border transactions; adverse changes in general business conditions in any of the countries in which we do business; changes in size and structure; the effectiveness of management and our strategic relationships; ability to attract and retain key personnel; uncertainties regarding the need for additional capital; sufficiency of insurance coverages; uncertainty regarding the fluctuations of quarterly results; foreign currency exchange risks; ability to enforce civil liabilities under U.S. securities laws outside the United States; ability to maintain our listing on the NYSE American and Toronto Stock Exchange (“TSX”); risks associated with the expected classification as a "passive foreign investment company" under the applicable provisions of the U.S. Internal Revenue Code of 1986, as amended; risks associated with our investments and other risks and uncertainties described under the heading “Risk Factors” in our Annual Report on Form 10-K, dated March 3, 2017.

 

1


 

Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources

 

Unless otherwise indicated, all resource estimates included in this Form 10-Q have been prepared in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves (“CIM Definition Standards”). NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. NI 43-101 permits the reporting of an historical estimate made prior to the adoption of NI 43-101 that does not comply with NI 43-101 to be disclosed using the historical terminology if the disclosure: (a) identifies the source and date of the historical estimate; (b) comments on the relevance and reliability of the historical estimate; (c) to the extent known, provides the key assumptions, parameters and methods used to prepare the historical estimate; (d) states whether the historical estimate uses categories other than those prescribed by NI 43-101; and (e) includes any more recent estimates or data available. 

 

Canadian standards, including NI 43-101, differ significantly from the requirements of the U.S. Securities and Exchange Commission (“SEC”), and resource information contained in this Form 10-K may not be comparable to similar information disclosed by U.S. companies. In particular, the term “resource” does not equate to the term “‘reserves.” Under SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. SEC Industry Guide 7 does not define and the SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral resources,” “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. U.S. investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category. Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures. Accordingly, information concerning mineral deposits set forth herein may not be comparable to information made public by companies that report in accordance with U. S. standards.

 

NI 43-101 Review of Technical Information: James A. Bonner, Ur-Energy Vice President Geology, P.Geo. and Qualified Person as defined by NI 43-101, reviewed and approved the technical information contained in this Form 10-Q.

 

2


 

PART I

Item 1. FINANCIAL STATEMENTS

 

Ur-Energy Inc.

Unaudited Interim Consolidated Balance Sheets

 

(expressed in thousands of U.S. dollars)

 

 

 

 

 

 

 

September 30,

 

December 31,

 

2017

 

2016

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents (note 3)

2,146

 

1,552

Accounts receivable (note 4)

7,897

 

16

Inventory (note 5)

1,720

 

4,109

Prepaid expenses

812

 

829

 

12,575

 

6,506

Restricted cash (note 6)

7,557

 

7,557

Mineral properties (note 7)

45,271

 

47,029

Capital assets (note 8)

27,428

 

28,848

 

80,256

 

83,434

 

92,831

 

89,940

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities (note 9)

3,391

 

3,625

Current portion of notes payable (note 10)

4,704

 

4,502

Environmental remediation accrual

79

 

85

 

8,174

 

8,212

Notes payable (note 10)

15,881

 

19,435

Asset retirement obligations (note 11)

26,910

 

26,061

 

50,965

 

53,708

Shareholders' equity (note 12)

 

 

 

Share Capital

 

 

 

Class A preferred shares, without par value, unlimited shares authorized; no shares issued and outstanding

 -

 

 -

Common shares, without par value, unlimited shares authorized; shares issued and outstanding: 146,009,205 at September 30, 2017, 2017 and 143,676,384 at December 31, 2016

176,653

 

174,902

Warrants

4,109

 

4,109

Contributed surplus

15,516

 

15,201

Accumulated other comprehensive income

3,670

 

3,604

Deficit

(158,082)

 

(161,584)

 

41,866

 

36,232

 

92,831

 

89,940

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

Approved by the Board of Directors

 

/s/ Jeffrey T. Klenda, Chairman of the Board/s/ Thomas Parker, Director

3


 

Ur-Energy Inc.

Unaudited Interim Consolidated Statements of Operations and Comprehensive Loss

 

(expressed in thousands of U.S. dollars except for share data)

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

Nine months ended September 30,

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

Sales (note 13)

11,693

 

12,068

 

38,342

 

21,529

Cost of sales

(11,157)

 

(5,818)

 

(24,025)

 

(12,767)

Gross profit

536

 

6,250

 

14,317

 

8,762

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

Exploration and evaluation

(560)

 

(828)

 

(2,162)

 

(2,370)

Development

(1,454)

 

(1,108)

 

(3,499)

 

(2,384)

General and administrative

(1,070)

 

(972)

 

(3,748)

 

(3,796)

Accretion of asset retirement obligations (note 11)

(135)

 

(134)

 

(401)

 

(399)

Write-off of mineral properties (note 7)

 -

 

 -

 

 -

 

(62)

Income (loss) from operations

(2,683)

 

3,208

 

4,507

 

(249)

Interest expense (net)

(332)

 

(474)

 

(1,063)

 

(1,543)

Warrant mark to market adjustment

 -

 

 5

 

 -

 

36

Loss on equity investment

(5)

 

(3)

 

(5)

 

(5)

Write-off of equity investments

 -

 

(900)

 

 -

 

(1,089)

Foreign exchange loss

(40)

 

(6)

 

(57)

 

(279)

Other income (expense)

57

 

(27)

 

120

 

15

Net income (loss) for the period

(3,003)

 

1,803

 

3,502

 

(3,114)

 

 

 

 

 

 

 

 

Income (loss) per common share

 

 

 

 

 

 

 

Basic

(0.02)

 

0.01

 

0.02

 

(0.02)

Diluted

(0.02)

 

0.01

 

0.02

 

(0.02)

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

Basic

145,918,020

 

143,605,552

 

145,707,532

 

141,324,039

Diluted

145,918,020

 

144,258,513

 

146,617,488

 

141,324,039

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

Net income (loss) for the period

(3,003)

 

1,803

 

3,502

 

(3,114)

Other Comprehensive income (loss), net of tax

 

 

 

 

 

 

 

Translation adjustment on foreign operations

48

 

 2

 

66

 

251

Comprehensive income (loss) for the period

(2,955)

 

1,805

 

3,568

 

(2,863)

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

4


 

 

Ur-Energy Inc.

Unaudited Interim Consolidated Statement of Shareholders’ Equity

 

(expressed in thousands of U.S. dollars except for share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Capital Stock

 

 

 

Contributed

 

Comprehensive

 

 

 

Shareholders'

 

Shares

 

Amount

 

Warrants

 

Surplus

 

Income

 

Deficit

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

#

 

$

 

$

 

$

 

$

 

$

 

$

Balance, December 31, 2016

143,676,384

 

174,902

 

4,109

 

15,201

 

3,604

 

(161,584)

 

36,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

549,952

 

518

 

 -

 

(169)

 

 -

 

 -

 

349

Common shares issued for cash, net

 

 

 

 

 

 

 

 

 

 

 

 

 

  of $88 of issue costs

1,536,169

 

1,081

 

 -

 

 -

 

 -

 

 -

 

1,081

Redemption of vested RSUs

246,700

 

152

 

 -

 

(221)

 

 -

 

 -

 

(69)

Non-cash stock compensation

 -

 

 -

 

 -

 

705

 

 -

 

 -

 

705

Net income (loss) and comprehensive income (loss)

 -

 

 -

 

 -

 

 -

 

66

 

3,502

 

3,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2017

146,009,205

 

176,653

 

4,109

 

15,516

 

3,670

 

(158,082)

 

41,866

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

5


 

Ur-Energy Inc.

Unaudited Interim Consolidated Statements of Cash Flow

 

(expressed in thousands of U.S. dollars)

 

 

 

 

 

 

Nine months ended September 30,

 

2017

 

2016

 

 

 

(Restated -
note 2)

Cash provided by (used in)

 

 

 

Operating activities

 

 

 

Net income (loss) for the period

3,502

 

(3,114)

Items not affecting cash:

 

 

 

Stock based expense

705

 

603

Depreciation and amortization

3,810

 

3,852

Accretion of asset retirement obligations

401

 

399

Amortization of deferred loan costs

91

 

114

Provision for reclamation

(6)

 

(1)

Write off of equity investments

 -

 

1,089

Write-off of mineral properties

 -

 

62

Warrants mark to market gain

 -

 

(36)

Gain on disposition of assets

 -

 

(14)

Loss on foreign exchange

59

 

281

Recognition of gain on deferred contract

 -

 

(2,588)

Other loss

 5

 

 5

RSUs redeemed to pay withholding or paid in cash

(68)

 

(9)

Proceeds from assignment of sales contract

 -

 

5,085

Change in non-cash working capital items:

 

 

 

Accounts receivable

(7,881)

 

(3,289)

Inventory

2,389

 

(60)

Prepaid expenses

120

 

(86)

Accounts payable and accrued liabilities

(361)

 

273

 

2,766

 

2,566

 

 

 

 

Investing activities

 

 

 

Mineral property costs

(10)

 

 -

Funding of equity investment

(5)

 

(5)

Proceeds from sale of property and equipment

 -

 

91

Purchase of capital assets

(173)

 

(281)

 

(188)

 

(195)

 

 

 

 

Financing activities

 

 

 

Issuance of common shares for cash

1,169

 

6,568

Share issue costs

(60)

 

(880)

Proceeds from exercise of stock options

349

 

 9

Repayment of debt

(3,443)

 

(6,486)

 

(1,985)

 

(789)

 

 

 

 

Effects of foreign exchange rate changes on cash

 1

 

(64)

 

 

 

 

Net change in cash, cash equivalents and restricted cash

594

 

1,518

Beginning cash, cash equivalents and restricted cash

9,109

 

9,000

Ending cash, cash equivalents and restricted cash (note 14)

9,703

 

10,518

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

6


 

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

1.Nature of Operations

 

Ur-Energy Inc. (the “Company”) was incorporated on March 22, 2004 under the laws of the Province of Ontario. The Company was continued under the Canada Business Corporations Act on August 8, 2006. Headquartered in Littleton, Colorado, the Company is an exploration stage mining company, as defined by U.S. Securities and Exchange Commission (“SEC”) Industry Guide 7. The Company is engaged in uranium mining and recovery operations, with activities including the acquisition, exploration, development and production of uranium mineral resources located in Wyoming. As of August 2013, the Company commenced uranium production at its Lost Creek Project in Wyoming.

 

Due to the nature of the uranium mining methods used by the Company on the Lost Creek Property, and the definition of “mineral reserves” under National Instrument 43-101 (“NI 43-101”), which uses the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards, the Company has not determined whether the properties contain mineral reserves. However, the Company’s “Amended Preliminary Economic Assessment of the Lost Creek Property, Sweetwater County, Wyoming,” February 8, 2016 (“Lost Creek PEA”), outlines the potential viability of the Lost Creek Property. The recoverability of amounts recorded for mineral properties is dependent upon the discovery of economic resources, the ability of the Company to obtain the necessary financing to develop the properties and upon attaining future profitable production from the properties or sufficient proceeds from disposition of the properties.

 

 

2.Summary of Significant Accounting Policies

 

Basis of presentation

 

These unaudited interim consolidated financial statements do not conform in all respects to the requirements of United States generally accepted accounting principles (“US GAAP”) for annual financial statements. The unaudited interim financial statements reflect all normal adjustments which in the opinion of management are necessary for a fair statement of the results for the periods presented. These unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2016. The year-end balance sheet data were derived from the audited financial statements and certain information and footnote disclosures required by US GAAP have been condensed or omitted.

 

Earnings and loss per share calculations

 

Diluted earnings per common share are calculated by including all options which are in-the-money based on the average stock price for the period as well as RSUs which were outstanding at the end of the quarter. The treasury stock method was applied to determine the dilutive number of options.  Warrants are included only if the exercise price is less than the average stock price for the quarter. In periods of loss, the diluted loss per common share is equal to the basic loss per common share due to the anti-dilutive effect of all convertible securities.

 

7


 

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

New accounting pronouncements which may affect future reporting

 

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 will supersede 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 amendments are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Early application is not permitted.  We have reviewed our contracts as well as our procedures and do not anticipate any changes in the manner or timing with which we reflect our revenues.

 

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. This guidance is effective for annual reporting beginning after December 15, 2017, including interim periods within the year of adoption, and calls for prospective application, with early application permitted. Accordingly, the standard is effective for us beginning in the first quarter of fiscal 2018. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize all leases, 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, and early application is permitted.  Now, the only leases we hold are for vehicles, equipment, and office space in one location.  The office lease is the only one which will be 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. 

8


 

Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

 

New accounting pronouncements which were implemented this year

 

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory.  ASU 2015-11 requires that inventory within the scope of this ASU be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to all inventory, measured using average cost which is how the Company measures inventory. For all entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. This is consistent with our past policies and had no financial or reporting impact when implemented during the first quarter.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation - Improvements to Employee Share-Based Payment Accounting (Topic 718), which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Under the new standard, income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur.  An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period.  Excess tax benefits should be classified along with other income tax cash flows as an operating activity.  Regarding forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. This ASU is effective for fiscal years beginning after December 15, 2016 including interim periods within that reporting period.  We currently recognize no income tax expense or benefit due to significant income tax credits and net operating losses which are fully reserved under a valuation allowance.  There was therefore no effect on our accounting or reporting at the time of implementation earlier this year.  We have made the election to continue to recognize losses from forfeitures at inception rather than when they vest or occur.

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows – Restricted Cash a consensus of the FASB Emerging Task Force (Topic 230), which addresses the presentation of restricted cash in the statement of cash flows.  Under the new standard, restricted cash will be presented with cash and cash equivalents in the statement of cash flows instead of being reflected as non-cash investing or financing activities.  A reconciliation of the make-up of the ending cash, cash equivalent and restricted cash balance will be required for entities who reflect restricted cash as separate items on the statement of financial position.  In addition, a description of the restrictions on the cash will be required.  This ASU is effective for fiscal years beginning after December 15, 2017 including interim periods within that reporting period, however early adoption is permitted.  We elected to adopt this standard as of the first quarter.  Accordingly, the cash balances reflected in the Statement of Cash Flows have been increased by $7.6 million which has been the restricted cash balance since December 31, 2015.  In addition, we have added note 14 – Supplemental Information to the Statement of Cash Flows which reconciles the cash balances shown on the Statement of Cash Flows with the appropriate balances on the Balance Sheet.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

3.Cash and Cash Equivalents

 

The Company’s cash and cash equivalents consist of the following:

 

 

 

 

 

 

 

As at

 

September 30, 2017

 

December 31, 2016

 

$

 

$

Cash on deposit at banks

1,704

 

580

Money market funds

442

 

972

 

 

 

 

 

2,146

 

1,552

 

 

4.Accounts Receivable

 

The Company’s accounts receivable consist of the following:

 

 

 

 

 

 

As at

 

September 30, 2017

 

December 31, 2016

 

$

 

$

Trade accounts receivable

 

 

 

Company A

7,821

 

 -

Other Companies

64

 

 9

Total trade receivables

7,885

 

 9

Other receivables

12

 

 7

 

 

 

 

Total accounts receivable

7,897

 

16

 

The names of the individual companies have not been disclosed for reasons of confidentiality.

 

5.  Inventory

 

The Company’s inventory consists of the following:

 

 

 

 

 

 

 

As at

 

September 30, 2017

 

December 31, 2016

 

$

 

$

In-process inventory

221

 

897

Plant inventory

824

 

461

Conversion facility inventory

675

 

2,751

 

 

 

 

 

1,720

 

4,109

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

In conjunction with our lower of cost or net realizable value calculations, the Company reduced the inventory valuation by $1,326 for the quarter and $2,219 for the nine months ended September 30, 2017.

 

6.    Restricted Cash

 

The Company’s restricted cash consists of the following:

 

 

 

 

 

 

 

As at

 

September 30, 2017

 

December 31, 2016

 

$

 

$

 

 

 

 

Money market account

7,457

 

7,457

Certificates of deposit

100

 

100

 

 

 

 

 

7,557

 

7,557

 

The bonding requirements for reclamation obligations on various properties have been agreed to by the Wyoming Department of Environmental Quality (“WDEQ”), the Bureau of Land Management (“BLM”) and the Nuclear Regulatory Commission (“NRC”) as applicable.  The restricted money market accounts are pledged as collateral against performance surety bonds which are used to secure the potential costs of reclamation related to those properties. Surety bonds providing $27.1 million of coverage towards specific reclamation obligations are collateralized by $7.5 million of the restricted cash at September 30, 2017. 

 

7Mineral Properties

 

The Company’s mineral properties consist of the following:

 

 

 

 

 

 

 

 

 

 

 

Lost Creek

 

Pathfinder

 

Other US

 

 

 

Property

 

Mines

 

Properties

 

Total

 

$

 

$

 

$

 

$

Balance, December 31, 2016

14,016

 

19,866

 

13,147

 

47,029

 

 

 

 

 

 

 

 

Acquisition costs

 -

 

 -

 

10

 

10

Change in estimated reclamation costs (note 11)

613

 

(165)

 

 -

 

448

Amortization

(2,216)

 

 -

 

 -

 

(2,216)

 

 

 

 

 

 

 

 

Balance, September 30, 2017

12,413

 

19,701

 

13,157

 

45,271

 

 

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

Lost Creek Property

 

The Company acquired certain Wyoming properties in 2005 when Ur-Energy USA Inc. purchased 100% of NFU Wyoming, LLC. Assets acquired in this transaction include the Lost Creek Project, other Wyoming properties and development databases.  NFU Wyoming, LLC was acquired for aggregate consideration of $20 million plus interest. Since 2005, the Company has increased its holdings adjacent to the initial Lost Creek acquisition through staking additional claims and additional property purchases and leases. 

 

There is a royalty on each of the State of Wyoming sections under lease at the Lost Creek, LC West and EN Projects, as required by law. Other royalties exist on certain mining claims at the LC South, LC East and EN Projects. Currently, there are no royalties on the mining claims in the Lost Creek, LC North or LC West Projects.

 

Pathfinder Mines

 

The Company acquired additional Wyoming properties when Ur-Energy USA Inc. closed a Share Purchase Agreement (“SPA”) with an AREVA Mining affiliate in December 2013. Under the terms of the SPA, the Company purchased Pathfinder Mines Corporation (“Pathfinder”) to acquire additional mineral properties. Assets acquired in this transaction include the Shirley Basin mine, portions of the Lucky Mc mine, machinery and equipment, vehicles, office equipment and development databases. Pathfinder was acquired for aggregate consideration of $6.7 million, a 5% production royalty under certain circumstances and the assumption of $5.7 million in estimated asset reclamation obligations.   At June 30, 2016, the royalty expired and was terminated.

 

8.Capital Assets

 

The Company’s capital assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

September 30, 2017

 

December 31, 2016

 

 

 

Accumulated

 

Net Book

 

 

 

Accumulated

 

Net Book

 

Cost

 

Depreciation

 

Value

 

Cost

 

Depreciation

 

Value

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Rolling stock

3,420

 

3,195

 

225

 

3,251

 

2,966

 

285

Enclosures

32,991

 

6,467

 

26,524

 

32,991

 

5,229

 

27,762

Machinery and equipment

1,262

 

669

 

593

 

1,262

 

599

 

663

Furniture, fixtures and leasehold improvements

119

 

103

 

16

 

119

 

98

 

21

Information technology

1,157

 

1,087

 

70

 

1,153

 

1,036

 

117

 

 

 

 

 

 

 

 

 

 

 

 

 

38,949

 

11,521

 

27,428

 

38,776

 

9,928

 

28,848

 

 

 

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

9.Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities consist of the following:

 

 

 

 

 

 

 

 

 

 

As at

 

September 30, 2017

 

December 31, 2016

 

$

 

$

Accounts payable

862

 

725

Severance and ad valorem tax payable

1,328

 

1,649

Payroll and other taxes

1,201

 

1,251

 

 

 

 

 

3,391

 

3,625

 

 

 

 

 

10.Notes Payable

 

On October 15, 2013, the Sweetwater County Commissioners approved the issuance of a $34.0 million Sweetwater County, State of Wyoming, Taxable Industrial Development Revenue Bond (Lost Creek Project), Series 2013 (the “Sweetwater IDR Bond”) to the State of Wyoming, acting by and through the Wyoming State Treasurer, as purchaser. On October 23, 2013, the Sweetwater IDR Bond was issued and the proceeds were in turn loaned by Sweetwater County to Lost Creek ISR, LLC pursuant to a financing agreement dated October 23, 2013 (the “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 commencing January 1, 2014. The principal is payable in 28 quarterly installments commencing January 1, 2015 and continuing through October 1, 2021.

 

Deferred loan fees include legal fees, commissions, commitment fees and other costs associated with obtaining the various financings. Those fees amortizable within 12 months of September 30, 2017 are considered current.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

The following table lists the current (within 12 months) and long term portion of the Company’s debt instrument:

 

 

 

 

 

 

 

As at

 

September 30, 2017

 

December 31, 2016

 

$

 

$

Current debt

 

 

 

Sweetwater County Loan

4,826

 

4,623

Less deferred financing costs

(122)

 

(121)

 

4,704

 

4,502

 

 

 

 

Long term debt

 

 

 

Sweetwater County Loan

16,245

 

19,891

Less deferred financing costs

(364)

 

(456)

 

15,881

 

19,435

 

Schedule of payments on outstanding debt as of September 30, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt

Total

 

2017

 

2018

 

2019

 

2020

 

2021

 

Maturity

 

$

 

$

 

$

 

$

 

$

 

$

 

 

Sweetwater County Loan

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

21,071

 

1,180

 

4,895

 

5,183

 

5,487

 

4,326

 

01-Oct-21

Interest

2,666

 

303

 

1,039

 

752

 

447

 

125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

23,737

 

1,483

 

5,934

 

5,935

 

5,934

 

4,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11.Asset Retirement and Reclamation Obligations

 

Asset retirement obligations ("ARO") relate to the Lost Creek mine and Pathfinder projects and are equal to the present value of all estimated future costs required to remediate any environmental disturbances that exist as of the end of the period discounted at a risk-free rate. Included in this liability are the costs of closure, reclamation, demolition and stabilization of the mines, processing plants, infrastructure, aquifer restoration, waste dumps and ongoing post-closure environmental monitoring and maintenance costs.

 

At September 30, 2017, the total undiscounted amount of the future cash needs was estimated to be $26.9 million. The schedule of payments required to settle the ARO liability extends through 2033.

 

The restricted cash as discussed in note 6 is related to the surety bonds which provide security to the governmental agencies on these obligations.

 

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

 

 

 

 

 

For the period ended

 

September 30, 2017

 

December 31, 2016

 

 

 

 

 

$

 

$

Beginning of period

26,061

 

26,061

Change in estimated liability

448

 

(534)

Accretion expense

401

 

534

 

 

 

 

End of period

26,910

 

26,061

 

 

 

 

 

 

12.Shareholders’ Equity and Capital Stock

 

Stock options

 

In 2005, the Company’s Board of Directors approved the adoption of the Company's stock option plan (the “Option Plan”). The Option Plan was most recently approved by the shareholders, including certain amendments, on May 18, 2017. Eligible participants under the Option Plan include directors, officers, employees and consultants of the Company. Under the terms of the Option Plan, stock options granted prior to the May 2017 amendment generally vest with Option Plan participants as follows: 10% at the date of grant; 22% four and one-half months after grant; 22% nine months after grant; 22% thirteen and one-half months after grant; and the balance of 24% eighteen months after the date of grant. Following the May 2017 amendment of the Option Plan, future grants of options will vest over a three-year period: 33.3% on the first anniversary, 33.3% on the second anniversary, and 33.4% on the third anniversary of the grant. The term of options remains unchanged.

 

Activity with respect to stock options is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

average

 

 

 

Options

 

exercise price

 

 

 

#

 

$

 

 

 

 

 

 

Balance, December 31, 2016

 

 

9,748,934

 

0.63

 

 

 

 

 

 

Granted

 

 

500,000

 

0.69

Exercised

 

 

(549,952)

 

0.64

Forfeited

 

 

(485,698)

 

0.64

Expired

 

 

(870,434)

 

0.81

 

 

 

 

 

 

Outstanding, September 30, 2017

 

 

8,342,850

 

0.69

 

The exercise price of a new grant is set at the closing price for the shares on the Toronto Stock Exchange (TSX) on the trading day immediately preceding the grant date so there is no intrinsic value as of the date

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

of grant. The fair value of options vested during the nine months ended September 30, 2017 was $0.7 million.

 

As of September 30, 2017, outstanding stock options are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options outstanding

 

Options exercisable

 

 

 

 

 

 

Weighted-

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

average

 

 

 

 

 

average

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

Intrinsic

 

Number

 

contractual

 

Intrinsic

 

 

price

 

of options

 

life (years)

 

Value

 

of options

 

life (years)

 

Value

 

Expiry

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.61

 

885,071

 

0.2

 

 -

 

885,071

 

0.2

 

 -

 

07-Dec-17

0.62

 

466,441

 

0.6

 

 -

 

466,441

 

0.6

 

 -

 

25-Apr-18

0.99

 

100,000

 

0.8

 

 -

 

100,000

 

0.8

 

 -

 

01-Aug-18

0.96

 

739,976

 

1.2

 

 -

 

739,976

 

1.2

 

 -

 

27-Dec-18

1.35

 

100,000

 

1.5

 

 -

 

100,000

 

1.5

 

 -

 

31-Mar-19

0.82

 

777,896

 

2.2

 

 -

 

777,896

 

2.2

 

 -

 

12-Dec-19

0.91

 

200,000

 

2.7

 

 -

 

200,000

 

2.7

 

 -

 

29-May-20

0.69

 

640,969

 

2.9

 

 -

 

640,969

 

2.9

 

 -

 

17-Aug-20

0.64

 

1,088,327

 

3.2

 

 -

 

1,088,327

 

3.2

 

 -

 

11-Dec-20

0.58

 

2,844,170

 

4.2

 

 -

 

1,534,590

 

4.2

 

 -

 

16-Dec-21

0.82

 

300,000

 

4.4

 

 

 

96,000

 

4.4

 

 

 

02-Mar-22

0.58

 

200,000

 

4.9

 

 -

 

0

 

0.0

 

 -

 

07-Sep-22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.69

 

8,342,850

 

3.0

 

 -

 

6,629,270

 

2.5

 

 -

 

 

 

The aggregate intrinsic value of the options in the preceding table represents the total pre-tax intrinsic value for stock options with an exercise price less than the Company’s TSX closing stock price of Cdn$0.72 as of the last trading day in the period ended September 30, 2017, that would have been received by the option holders had they exercised their options as of that date.  The total number of in-the-money stock options outstanding as of September 30, 2017 was nil. The total number of in-the-money stock options exercisable as of September 30, 2017 was nil.

 

We elect to estimate the number of awards expected to vest in lieu of accounting for forteitures when they occur.   

 

Restricted share units

 

On June 24, 2010, the Company’s shareholders approved the adoption of the Company’s restricted share unit plan (the “RSU Plan”).  The RSU Plan was approved by our shareholders most recently on May 5, 2016.

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

Eligible participants under the RSU Plan include directors and employees of the Company. RSUs in a grant redeem on the second anniversary of the grant.    Upon RSU vesting, the holder of an RSU will receive one common share, for no additional consideration, for each RSU held.

 

Activity with respect to RSUs is summarized as follows:

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted

 

 

 

of

 

average grant

 

 

 

RSUs

 

date fair value

 

 

 

 

 

$

Unvested, December 31, 2016

 

 

1,273,990

 

0.60

 

 

 

 

 

 

Vested

 

 

(337,380)

 

0.74

Forfeited

 

 

(26,654)

 

0.58

 

 

 

 

 

 

Unvested, September 30, 2017

 

 

909,956

 

0.60

 

As of September 30, 2017, outstanding RSUs are as follows:

 

 

 

 

 

 

 

 

 

 

Number of

 

Remaining

 

Aggregate

 

 

unvested

 

life

 

Intrinsic

Grant date

 

RSUs

 

(years)

 

Value

 

 

 

 

 

 

$

December 11, 2015

 

248,226

 

0.20

 

144

December 16, 2016

 

661,730

 

1.21

 

384

 

 

 

 

 

 

 

 

 

909,956

 

1.03

 

528

 

Warrants

 

The following represents warrant activity during the period ended September 30, 2017:

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted-

 

 

 

of

 

average

 

 

 

Warrants

 

exercise price

 

 

 

 

 

$

Outstanding, December 31, 2016

 

 

5,844,567

 

0.97

 

 

 

 

 

 

Outstanding, September 30, 2017

 

 

5,844,567

 

0.97

 

 

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

As of September 30, 2017, outstanding warrants are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

Aggregate

 

 

Exercise

 

Number

 

contractual

 

Intrinsic

 

 

price

 

of warrants

 

life (years)

 

Value

 

Expiry

$

 

 

 

 

 

$

 

 

0.96

 

4,294,167

 

1.0

 

 -

 

24-Jun-18

1.00

 

1,550,400

 

1.2

 

 -

 

27-Aug-18

 

 

 

 

 

 

 

 

 

0.97

 

5,844,567

 

1.0

 

 -

 

 

 

Share-based compensation expense

 

Share-based compensation expense was $0.2 million and $0.7 million, respectively, for the three and nine months ended September 30, 2017 and $0.2 million and $0.6 million for the three and nine months ended September 30, 2016, respectively.

 

As of September 30, 2017, there was approximately $0.5 million of total unrecognized compensation expense (net of estimated pre-vesting forfeitures) related to unvested share-based compensation arrangements granted under the Option Plan and $0.3 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 1.0 years and 1.1 years, respectively.

 

Cash received from stock options exercised during the three and nine months ended September 30, 2017 totalled $nil and $0.3 million, respectively, and less than $0.1 million for the three and nine months ended September 30, 2016.

 

Fair value calculations

 

The initial fair value of options and RSUs granted is determined using the Black-Scholes option pricing model for options and the intrinsic pricing model for RSUs.  There were no RSUs granted in either the nine months ended September 30, 2017 or the nine months ended September 30, 2016 nor were there any options

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Table of Contents

Ur-Energy Inc.

Condensed Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2017

 

(expressed in thousands of U.S. dollars unless otherwise indicated)

 

granted in the nine months ended September 30, 2016.  The assumptions used for the options granted during the nine months ended September 30, 2017 were as follows: