Targeted Strategies for Today's Evolving Markets

MissionIR Blog

Uranium Energy Corp (UEC) Reports Fiscal 2012 Q1 Production Results and Provides Operations Update

Uranium Energy is pleased to report financial and production results for the first quarter ended October 31, 2011.  Major first quarter highlights include the following:

  • The Company completed its first uranium sale: UEC recorded revenue of $3.1 million resulting from the sale of 60,000 pounds of U3O8 at an average sales price of $52 per pound with an average cash cost per pound sold of $14;
  • Production for the Quarter: Production from Palangana totaled 67,000 pounds and the Hobson facility processed 69,000 pounds of U3O8 for a cumulative cash cost of $18 per pound;
  • Exploration and development activities at Palangana and Salvo continue;
  • Coronel Oviedo Uranium Project in Paraguay: The Company initiated a 10,000-meter drilling program at its Coronel Oviedo Project in Paraguay;
  • The acquisition of the Anderson Project in Arizona was completed;
  • The Workman Creek Project in Arizona was acquired; and
  • The Company’s balance sheet remains strong: As of October 31, 2011, UEC had $23.7 million of cash in the treasury and 134,000 lbs. of U3O8 available for sale in inventory with a market value of $7.0 million.

Palangana Mine – Production Update

During the three months ended October 31, 2011, the Palangana Mine produced 67,000 pounds of U3O8.  The Hobson facility processed 69,000 pounds of U3O8 for a cumulative cash cost(1) of $18 per pound, with a total of 194,000 pounds processed since the commencement of production to October 31, 2011.  The Company had 134,000 pounds of U3O8 available for sale in inventory produced at an average cash cost (1) of $16 per pound, with a market value of $7.0 million based on the average of the spot prices for uranium at October 31, 2011.

The three-phase startup of Production Area-1 at the Palangana Mine is continuing with the average depth of the wells at approximately 450 feet.  Production initially commenced at the Phase I wellfield (22 production and 27 injection wells) in November 2010, followed by the Phase II wellfield (32 production and 22 injection wells) in April 2011, with the final Phase III wellfield (21 production and 18 injection wells) having commenced production in early October 2011.

Field crews are continuing to address performance variations with some wells in the Phase I wellfield. A number of injection and production wells here are being recompleted, and new wells are being drilled to assist in extraction efficiencies. In Phase II, the wellfield is being evaluated to improve production from areas that have remaining resources yet to be recovered.  As noted above, the Phase III wellfield commenced operations in early October 2011 and is ramping up.

Production Area-2 wellfield drilling and casing commenced in November 2011. A total of 72 wells are planned (36 injection and 36 production wells). The first of two phases at PAA-2 is planned to start up in April 2012.

Palangana – Ongoing Exploration and Development

Exploration drilling continued throughout the first quarter at the Palangana Project, with four drill rigs targeting several lightly explored areas.  Three mineralized trends were further delineated by drilling 66 holes.  Ore-quality mineralization in these trends occurs between 300′ to 600′ in depth. Additional delineation drilling and coring are scheduled to be conducted in these areas in the near future.

Additionally, four drill rigs completed delineation of the future Production Area-3 wellfield during the first quarter.  Thirty-three delineation holes were drilled, followed by the installation of 18 perimeter monitor wells and 12 interior monitor wells in preparation for a pump test which was conducted in November, with analytical results anticipated in December.

Goliad Development Update

The Texas Commission on Environmental Quality (TCEQ) has continued to make progress with the one remaining license needed to initiate construction at the Goliad project, the Radioactive Materials License (RML). The Company expects to have an update on the status of this license before the end of the calendar year. Before the Company initiates in-situ recovery of uranium at Goliad’s Production Area One, the regional Environmental Protection Agency must complete its review of and concur with the Aquifer Exemption which has already been granted to the Company by TCEQ.

Salvo Exploration

Drilling resumed at the Salvo Project in October 2011 with two drill rigs completing four exploration holes offsetting known mineralization.  During the first quarter, six additional leases were acquired totaling 724 acres.  Drilling is scheduled to continue throughout the year, and metallurgical and other tests are also being performed to reaffirm ISR amenability at Salvo. Management anticipates releasing drill results by March 2012.

Paraguay Update

In addition to the recently acquired 247,000-acre uranium property located in the area of Coronel Oviedo, Paraguay, the Company entered into an agreement to acquire a further six prospecting permits covering 740,000 acres in the same area.  The Coronel Oviedo Project is geologically very similar to the Company’s projects in the South Texas uranium belt and is anticipated to be ISR-amenable as initially indicated through pump-test studies. With successful initial exploration here, the Company has initiated a 10,000-meter drill program on this regional-scale project.

Financial Review

The following is a financial review of the Company for the three months ended October 31, 2011, and should be read in conjunction with the consolidated financial statements and management’s discussion and analysis as contained in the Company’s Form 10-Q filing available at the Company’s website at www.uraniumenergy.com or on EDGAR at www.sec.gov.

Results of Operations

During the three months ended October 31, 2011, the Company recorded revenue of $3.1 million resulting from the sale of 60,000 pounds of U3O8 at an average sales price of $52.00 per pound.  Cost of sales, including royalties of $0.3 million, totaled $1.4 million or an average of $24.00 per pound sold  (cash cost (1) per pound sold of $14 excluding royalties).

During the three months ended October 31, 2011 (“2012 Q1”) and 2010 (“2011 Q1”), the Company recorded a net loss of $5.6 million or $0.07 per share compared to $8.9 million or $0.15 per share, respectively.  Expenses for 2012 Q1 totaled $6.9 million (2011 Q1: $8.9 million) and include $2.7 million (2011 Q1: $3.4 million) for mineral property expenditures, $3.9 million (2011 Q1: $5.2 million) for general and administrative and $0.3 million (2011 Q1: $0.3 million) for depreciation, depletion and accretion.

(1) Cash costs are key indicators not defined under U.S. GAAP and are non-GAAP measures.  Cash costs exclude non-cash components comprised of depreciation, depletion and stock-based compensation.

Liquidity

Net cash used in operating activities for 2012 Q1 was $4.8 million compared to $6.3 million for 2011 Q1.  Net cash used in financing activities for 2012 Q1 was $1.0 million compared to net cash provided of $25.9 million for 2011 Q1.  Net cash used in investing activities for 2012 Q1 was $1.3 million compared to $2.0 million for 2011 Q1. As of October 31, 2011, the Company had cash and cash equivalents of $23.7 million and working capital of $23.0 million.

Acquisitions Update

The downturn in the uranium market has provided the Company with an excellent opportunity to make strategic acquisitions at attractive discounts to historical valuations. The Company closed three transactions during and subsequent to the first quarter.

Anderson Project in Arizona

On September 9, 2011, the Company and Concentric Energy Corp. (“Concentric”) completed a stock-for-stock merger (the “Merger”) effected under the laws of Nevada. Under the Merger, UEC issued 1,253,440 common shares of the Company to the former Concentric stockholders to acquire Concentric. The purpose of the Merger was to acquire Concentric’s undivided 100% interest in the Anderson Project, a 7,581-acre mineral claim block located in Yavapai County, Arizona, with a previous history of small-scale, open-pit uranium production.

With the acquisition of the Anderson Project, UEC is now one of the leading uranium players in Arizona, a business and energy-friendly state. Three of the largest nuclear power plants in the U.S. are located there, with all three plants having recently received their 20-year license extensions.

South Texas Uranium Exploration Data

On September 7, 2011, the Company completed the acquisition of a major uranium exploration database covering the Goliad formation (the “Database”) from Uranium One Inc. for consideration comprised of a cash payment of $400,000 and the issuance of 159,326 restricted common shares of the Company. This strategic database is anticipated to significantly advance the Company’s ongoing exploration efforts in South Texas.

Workman Creek Project in Arizona

On November 30, 2011, the Company completed the acquisition of an undivided 100% interest in the highly prospective 3,520-acre Workman Creek Project located in Gila County, Arizona from Cooper Minerals, Inc. for consideration of a cash payment of $84,640 and the issuance of 300,000 restricted common shares of the Company.

Uranium Market Update

During the Company’s first quarter ending October 31, 2011, the spot price of uranium increased from $51.50/lb. to $52.00/lb. according to the Ux Consulting Company. The spot price is finding strong support in the low $50’s, and the longer term contract uranium price remains at $63.00/lb. The worldwide nuclear build-out continues and the number of reactors currently under construction totals 62 in 15 different countries.  China, India, Russia and South Korea continue to lead the global nuclear build-out, and these governments have reaffirmed their commitment to nuclear energy.

Let us hear your thoughts below.

This entry was posted in Uranium Energy Corp. UEC. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *