The Conversation (0)
Sluggish uranium prices haven’t stopped US uranium producer Ur-Energy. This week, the company released its Q3 production and operational results, and according to Raymond James analyst David Sadowski, they reaffirm his belief in the company.
In the second-to-last quarter of 2014, Ur-Energy’s production rate at Lost Creek increased and was maintained at a level that allowed the company to meet its sales obligations. The company captured 131.3 thousand pounds of U3O8 in Q3, bringing its year-to-date total to 446.6 thousand pounds. Meanwhile, on the dried and drummed uranium front, Ur-Energy said that “plant operations matched the wellfield productivity as 125,915 pounds U3O8 were packaged in drums and 126,500 pounds U3O8 of drummed inventory were shipped” from the processing plant.
On the sales side, the company met its contractual product sales requirement of 100 thousand pounds of U3O8, selling it at an average price of $59.96 per pound. For the quarter, Ur-Energy’s total sales revenue was $6 million.
The company’s press release highlights that production was sourced from six header houses in the first mine unit. Of the six, header house number six was the only new production area activated in Q3. “Plant head grades continued to be significantly higher than projected while production flow rates were deliberately curtailed to manage uranium production rates and waste water generation,” according to Ur-Energy.
Premier vehicle for exposure to the uranium space
In a note to clients, Sadowski identifies Ur-Energy as one of the “premier vehicles for exposure to the uranium space.” The company deserves that title because its high fixed-price contract and low operating cost base together provide bottom-line support in a less-than-favorable market. Those qualities also leverage the operational and financial side, underpinning significant torque to what the firm sees as an inevitable improvement in commodity prices.
Looking at the company’s Q3 production, Sadowski notes that the wellfield performed nicely, with flow rates holding steady. However, dried and drummed uranium missed the firm’s expectation of 161 thousand pounds. According to Sadowski, that’s because the plant was throttled back more than anticipated, bringing output more in line with contracted sales. On a more positive note, uranium head grades have remained strong, averaging 135 mg/l.
More to come
Having only commissioned one new header house this quarter, Ur-Energy aims to match its production with contracted sales while sheltering itself from the weak spot price. This strategy, Sadowski believes, should keep a lid on wellfield development costs. However, drilling on a deep disposal well could push outlay capital upwards.
While the company’s operational results are indeed positive, Sadowski will be keeping an eye out for Ur-Energy’s financial results, expected towards the end of the month.
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.