The Conversation (0)
Ur-Energy’s President, CEO and Director, Wayne Heili, took some time to speak with Uranium Investing News about the company’s work in Wyoming and what investors can expect moving forward.
With Ur-Energy (TSX:URE) working on bringing the Lost Creek in situ mine located in Wyoming into production in just a few short weeks, perhaps U.S. utilities won’t have to look too far from home.
Ur-Energy has been working hard to meet its near-term production start date in Q3 of 2013. After a site visit to the Ur-Energy facility, Rob Chang, analyst at Cantor Fitzgerald, told Uranium Investing News that it is clear the company’s “management team came from different operations and effectively put in the best of everything that they saw and put it into one plant. On top of that they had a few innovations of their own which when compared with other things I’ve seen are definitely improvements.”
Ur-Energy’s President, CEO and Director, Wayne Heili, took some time to speak with Uranium Investing News about the company’s work in Wyoming and what investors can expect moving forward.
UIN: Lately, the uranium market has been very focused on the Athabasca Basin. But Ur-Energy is working on a near-production project in Wyoming. Could you talk a little bit more about uranium in Wyoming?
WH: In the United States, Wyoming has produced more uranium than any other state historically. It’s been home to uranium production by open pit and underground methods but it’s also the birthplace of in-situ mining. Technology and the sandstone deposits here align themselves to solution mining or in situ mining. The sandstone deposits tend to be permeable and it’s a uranium roll front deposit which is a little different than a hard rock deposit like in the Athabasca Basin. It’s sand coated with uranium rather than the original base rock that they are finding elsewhere.
The Athabasca Basin is obviously an exception because there is not a lot of places where you find uranium in such concentrations.
Wyoming’s uranium grades are definitely low compared to Athabasca Basin, but they are very amenable to the in situ mining technique. It’s a very low cost way to extract uranium when we don’t put it in open pits; we don’t have to do all that earth moving. Nor do we have to process ore through a mill. It is a pump and treat style of mining where we pump ground water enhanced with oxygen and baking soda into the ground, dissolve uranium into that ground water, and then recover the ground water and subsequently the uranium from the ground water.
Ground water itself is our miner and we employ it in a quite different way than conventional miners. What used to take 200 to 1,000 people to produce a million pounds a year in conventional operations, we can do with under 100 people.
UIN: What advantages does in situ mining have over conventional forms of uranium mining for the Lost Creek deposit?
WH: In a lot of ways in situ mining has really been the mining industry’s answer to some of the environmental concerns of mining. Nevertheless it still falls into the category of mining so you’ll always find somebody who would prefer that we didn’t mine uranium.
In order to mine using this method, the formations need to be permeable and porous so we can move ground water in to make contact with the ore. Hard rock deposits are not amenable to in situ technology.
UIN: How will in situ mining work to Ur-Energy’s advantage?
WH: Because our deposits are amenable to in situ, we can exploit much lower grade deposits due to the cost of mining; the capital costs of the process facilities is lower. I think nowadays you’re looking at a $150 million to $250 million to put in a conventional mill to process ore. The Lost Creek processing facility is capitalizing around $32 million. The access to upfront capital is much lower and the access to bank cash for the requirements for reclamation are at a much more reasonable cost.
When we’re done with solution mining, we can return the property to its original use, unrestricted. The surface can be grazed by cattle or if it was an agricultural area, they can resume agricultural activities on the surface. In situ mining only uses the land temporarily, which really contrasts with an open pit where you dig a giant hole in the ground. For open pit you’re going to have to remove a lot of dirt and then back fill the land. A lot of open pit mines are never really conceived because the land will never be returned to unrestricted use.
We’re looking at a deposit here that is less than one tenth of one percent eU308 and we’ll be able to produce uranium off of this project, lowest quartile of uranium production costs in the world.
UIN: Rob Chang from Cantor Fitzgerald recently sent out a note to investors about the mine site, calling it a state of the art facility. Can you tell us a little about it?
WH: Well I think he saw it pretty clearly when he was here. We’ve done a lot of work. Our staff is operationally minded and we’ve all come to this company with past operations experiences. It’s a really good chemistry on the team that has led us to be able to rather innovative and improve on past practices and take best practices from other facilities around the country.
I think it’s going to be our strength. I’ve told people when I’ve met with them, “If you like what you’ve seen coming to this point, you’re really going to like our company in the future because our real strength today is in our operational team.”
With us at the advent of production for the company, I really believe that this is the time that we’ll shine above and beyond, for a number of reasons.
UIN: You were saying you have a good operational team. Is this a team that’s been with the company for a long time or has it got a lot of experience in the uranium space?
WH: We started putting this team together in 2007; the core, the heart of the operations team. You can only grow so big while you’re doing permitting but we were able to attract a number of people that I knew and people that we recognized in the industry as the up and comers, the ones who have been contributing significantly to the success of the operations they were at. It showed during our regulatory process that this group really knew what it was doing.
UIN: There aren’t many companies these days that are so close to production. What has helped move the company this far in these markets?
WH: It’s been years of effort. You mentioned Athabasca and that’s really what is getting the attention of the marketplace today. I think that’s true. High grade drilling results in companies that can generate those consistently are performing well in the marketplace. Also true is that nothing beats low cost, efficient production. That’s really where we’ve been positioning ourselves for a long time is to be a low cost and efficient producer.
The uranium markets are not really doing us any favors, right? We’ve worked hard and it’s taken us the better part of six years to permit and bring this project into readiness for production. During that timeframe we watched the uranium price go up to $130 and back down to $40, but along the way we secured contracts for the sales. I know you recognize that but we’ve probably done that better than any of our peers.
UIN: Yes. Most recently, UR-Energy closed another uranium sales agreement with a U.S. nuclear company, bringing the total number of contracts to date to 6. What do secure sales agreements mean for the company?
WH: For us, it means that we have a secure future revenue. We have been able to secure our contracts and the nature of the contracts we’ve sold. There is a base price on them and it escalates with inflation. Those are the types of contracts that we’ve been interested in signing and have secured for us. That means that we have a secure revenue stream.
Our company’s strategy has been to secure revenue to ensure that our operations can continue after we get started. The worst thing you can do is build a project on an up cycle and find it going into production on a down cycle and shut it down. We’ve protected against that. We now have contracts extending out to the rest of this decade that are going to secure our revenue streams with, and thus we can secure our operation. We can ensure that we’re incentivized to produce.
UIN: Now, these agreements, have they been facilitated through your affiliation with NuCore?
WH: It’s very important. Jim Cornell of NuCore is a top notch guy in the industry he’s in. He’s been the president of Nukem in the past. Nukem now has been absorbed by Cameco (TSX:CCO). Jim is very knowledgeable about the marketplace. He stays fully abreast of where the uranium market is moving and provides assistance to us in obtaining these contracts.
It’s a small world. It’s a small fraternity of people who are fuel buyers and fuel sellers. We’ve put a concerted effort into becoming a part of that fraternity to get to know the people who buy, build those relationships, and to tell our story, to tell of our ambitions and our expectations. The next phase for us is to deliver on those contracts, to build on those relationships which have been established with contracts by being a reliable supplier to those utilities.
Jim is a strong supporter of our company. He knows our management team and he knows what we’re doing and he believes in it. His confidence in us is important when he conveys that to people he’s known and dealt with all his life.
UIN: That’s great. So overall for Lost Creek, what is the life of mine expected to be?
WH: Lost Creek is an interesting project because we’re starting on a piece of the total land package that we have. From the resources we have today, we have about a seven- to ten-year mine life. However, Lost Creek is a very expandable property or project. We’ve only permitted about 10% of the total land package that we hold around Lost Creek.
If you look at our presentation, you’ll see a map of our Lost Creek project and the surrounding areas (LC East, LC North, South, and West and EN). All told, that’s over 40,000 acres and we only permitted about 4,200 of them.
Over time, our company has done exploration and delineation drilling in some of the outlying properties �— LC East notably and LC North as well — and are following the minimal trends off of the Lost Creek project area proper. We believe Lost Creek will provide us with a project that can be grown hopefully to a 20-year mine life, or greater over time as we systematically explore the property that we hold.
UIN: Once Lost Creek is in production, where will Ur-Energy be focusing its attention?
WH: With positive cash flow from production, we will start to focus even more attention to the resource expansion of the greater property. Until now, we’ve been very narrowly focused on putting the project into production.
For us this is the culmination of our efforts from the past, really, six or seven years. It’s a very exciting time for Ur-Energy and its shareholders.
UIN: The market for uranium is going to be undersupplied due to a variety of factors. How will these factors play into Ur-Energy’s plans, considering it is moving into production very soon?
WH: Supply and demand fundamentals in the U.S. are really what we’ve always focused on. When you look at the United States, for the last 15 or 16 years, we’ve rarely produced more than four million pounds a year. I’m proud to say I’ve been a part of that and I will be again very shortly. We consume 55 million pounds a year so we are somewhere on that order.
The U.S. utilities are under supplied in the first place by the domestic production market. Uranium is a very global commodity. As a company with a very strong U.S. presence, we’ve just looked at the U.S. market and that’s why you saw that our six contracts are with U.S. utilities.
We would sell to global consumers, but we found that the domestic market is he largest market in the world. If you look at the United States utility market, over a quarter of the nuclear reactors are in the United States. While I do enjoy traveling, I like being home. I’ll do my marketing in my neighborhood rather than go across the seas to sell uranium.
We’ve looked at that as a really important part of our corporate marketing strategy. I see, as you do, that undersupplied days are coming and we’re going to have a really strong relationship in the United States with the U.S. utilities. We’ll have established ourselves as a reliable source of material. As supply and demand fundamentals strengthen in our favor, we’ll bring additional projects online and grow our presence in the United States to be a larger percentage of domestic production.
UIN: Can you talk a little bit about Ur-Energy’s acquisition of Pathfinder Mines (PMC)?
WH: Pathfinder Mines is AREVA’s remaining U.S. mining operations which have been successfully reclaimed from the historic open pit operations. As we’ve discussed, open pit mining is much more expensive than solution mining and it turns out that there is quite a bit of stranded ore from the days that these projects were shut down because open pit was uneconomic then and it’s still uneconomic now. Lucky for us, the ore is amenable to in situ recovery. We’ve acquired some excellent projects that have a good resource basis for in situ mining.
As for what is next for Ur-Energy, our corporate strategy will be to begin putting our second production center online which will come from properties that we acquire in the PMC transaction.
The areas that AREVA had planned to move into were left behind as they shut down and decommissioned their properties and projects. They are well delineated uranium resources that are very suitable to in situ mining. Our plan is to take the techniques that we use, go back to these brownfields projects, and open up new facilities to mine delineated ore, previously delineated ore that has been waiting to be mined.
We believe that the Shirley Basin Project, which is for us a big portion of this acquisition, will be our next mining center.
Furthermore, as a mining company, Pathfinder has legacy or history that goes all the way back to the early ‘60s. They have a U.S. exploration database with project areas in over 23 states and over 15,000 exploration drill hole logs or data from over 15,000 exploration holes. We will be acquiring that database as a part of this transaction.
We really look forward to having that exploration database. We think we’ll be able to mine project areas out of the database for years to come. The good folks that explored these areas in the ‘60s and in the ‘70s are really no longer in the business and these project areas, many of them, have been forgotten by today’s miners. There are a lot of projects in there that I was not aware of.
UIN: That sounds like having an answer key to a test you are taking.
WH: It is and you’ve got the only copy.
UIN: Well, good luck with the database. And we look forward to the start of production at Lost Creek. Thank you very much for speaking with us today.
WH: Thank you.