Westwater Resources Inc (WWR) 2008 Q4 法說會逐字稿

Greetings, and welcome to the Uranium Resources, Inc. fourth quarter and year end 2008 earnings release conference call. At this time, all participants are in a listen-only mode and a brief question and answer session will follow the formal presentation. (Operator Instructions)

It is now my pleasure to introduce your house, Ms. Debra Pawlowski, IR for Uranium Resources. Thank you. Ms. Pawlowski, you may begin.

Thank you, Jackie. Good morning, everyone. We appreciate your time today and your interest in Uranium Resources. With me on the call is President and CEO, Dave Clark, Rick Van Horn, Executive Vice President and Chief Operating Officer, and Tom EhrlicH, Chief Financial Officer. Dave is going to provide some comments regarding the company and the release, information in the release, as well as the outlook, and Tom will then do a brief review of the financials. After that, we'll open it up for Q&A. If you don't have the news, it can be found at our website, which is uraniumresources.com.

As you are aware, we may make some forward-looking statements during the formal presentation and the Q&A portion of this teleconference. Those statements apply to future events, which are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in the release, as well as in documents filed by the company with the Securities and Exchange Commission. You can find those at our website, where we regularly post information, as well as the SEC's website, which is www.SEC.gov. So please review our forward-looking statements in conjunction with these cautionary factors.

With that, let me turn it over to Dave to begin the discussion.

Thanks, Debbie. Good morning, everybody, and as Debbie said, thank you for your continued interest and your time in URI.

I know this is advertised as a look back of the fourth quarter of 2008, but given what kind of a year that was, what I really want to spend my time with today is looking forward, where are we going from here? I think this is going to be a very important year for URI and I think it has a decent chance of being a good year. I want to spend the next couple minutes really sharing what my vision is and how I expect this year to unfold. As normal, we'll start with a general market analysis and outlook and then discuss our strategy in Texas and our objective there and how we expect the industry to consolidate in Texas here. Then I'll go into a discussion of all that's happening in New Mexico, including what I see as the driving force that's going to help us get into production. As far as the market itself, I've been in the uranium industry for more than 30 years and it's always been a market that's trade zones economic cycles. Nuclear power plants or base load plants need uranium to fuel those. Uranium's always had its own market. As many of you have heard me say in the past, the market has never been in balance and it's a history of extreme moves and I don't see anything that's going to change that.

Demand for uranium's still growing, secondary supplies are still being depleted and it's all being driven by the concerns about global warming, so I think the future of nuclear power itself is still very bright. But what we have seen over the last year certainly is a closer tie between the economic cycle and the stock market as a whole and uranium market. First we had the hedge funds come in, buy 20 million pounds or more that certainly threw the market to the upside. Then as the economic woes started to come in, they liquidated and drove the market down. The bigger economic question is will this economy, and what may happen, is there going to be any kind of threat to nuclear renaissance. That really is a big question as far as I'm concerned. And I have to say so far, I think the answer is surprisingly, it hasn't had an effect. If anything, I see nuclear power accelerating. We're seeing moves in Italy to bring back nuclear power after closing down their reactor 20 years ago. The same thing with Sweden, to remove the restrictions on not only continuing operations of existing plants, but building new ones and Germany may be soon to follow. As I discussed in the past, China and India are definitely leading the way and there's nothing to change their rapid deployment.

So even with economic uncertainty, nuclear power seems to be going ahead. And I think there's, there's two reasons for that as far as I see. The first is there's definitely an outright war on coal. Candidate Obama said "go ahead and build your coal plants, they will bankrupt you". And as now President Obama, I think we'll be seeing the EPA declare CO2 a pollutant. He's already put in his proposed budget a cap and trade. The cost of coal is going up. The problem is nobody knows how much. So there's a lot of uncertainty in coal. The other aspect of nuclear power, which I have heard nothing about, is, comes in what's going to happen with the economy and the threat of inflation. Warren Buffett came out two days ago and said we might return to the inflation rates of 1970s. Certainly with loose money, high inflation could be down the road. Nuclear has a definite built-in inflation hedge versus coal. If that's the environment you get. And that's mainly because the cost of nuclear power, 80% of it is the upfront CapEx cost to build the plant. Then 20% of the cost is the operating and maintenance moving forward. It's the exact opposite with coal. 20% is to build a plant. 80% is the fuel. If you're moving into an environment with rapid inflation, higher coal prices, cap and trade, carbon as a pollutant, coal could have a problem moving down the line.

Obviously the big economic question is where are we in the world right now? Are we simply in a deep recession that's going to have recovery in 2009 and 2010, or is it something significantly worse than that? And how that affects our market, will that impact electro-unit demand down the line? Will it impact a slowdown in nuclear renaissance? Frankly the jury's still out. As a uranium mining company, we have to determine and make predictions on where things are going to go in the future, so with the macroeconomic uncertainty, how do we move forward? As I said at the opening, I think the uranium market still has very strong fundamentals, demand is rising, secondary supplies are being depleted. We are going to need additional production under any scenario and the world prices are leading to delays in cancellations. Dominion of uranium, one was basically put on hold and may not operate.

You may not see Olympic Dam go to the original plan to go up to 66 million pounds. Those were pounds in the out years that were being counted on, but given the high cost and low prices for copper and uranium they may not move forward this that. If that continues, (inaudible). If you look at the supply curve moving forward, most forecasts are based on the marginal cost of production may come in at $50. I think in a $40 market, which is where we are now, that's certainly the low end of what I think needs to be paid for uranium to get the supply that you need. On the top end, you have $70 a pound in long-term price and that is said to reflect long-term fundamentals. So the reality of the current market, you're looking at a price of $40 to $70.

Moving forward, and this is not a prediction, it is done in the premise that you hope for the best and plan for the worst. The assumption I make moving forward is you have to plan as if you're going to put this into a $40 market. And that's what we -- how we will adjust our strategy to do that, and then position the company for the next price hike when it comes. I think given conditions, that can be sooner versus later. The central question for URI is how we build a company of great value on a $40 market. Can we do that? I think the answer is definitely yes. So that's the general market outlook.

Now I want to talk a little bit about Texas and then I'll move on to New Mexico. Looking at our Texas operations, it is something that has generated positive cash flow for us over the last several years. We have had limited reserves there. We've known that. We've made the decision in October to shut down production, not take the risk of putting money in the ground. Basically because it makes no economic sense to deplete our reserves at breakeven prices. So we want to conserve the remaining reserves we have, so when the market turns around, we reserves to start those plants up with. We continue to mine. We thought originally that might end at the end of February. We still have two well fields operating. They will continue to go as long as they are on a break-even cash basis. We expect the production could go a couple weeks more and end up in the range of 25 to 30,000 pounds.

The important consideration for us for shutting down the production is it allows us now to really focus on restoration, ground level restoration projects. To do that, you generally circulate fixed poor volume of what happens through a reverse osmosis unit and that's how you clean up the ground water. You go and fill the parameters that take you back towards baseline. The restoration of ground water is the key issue for us in our mining, obviously it's what's left after you're done, what's the condition of the ground water? So it's important not only in Texas, but also in New Mexico. So we want to focus on doing the best job we can in restoring ground water in the most effective manner we can in Texas.

We want to become leaders in that field of ISR restoration technology. We have started a project with Texas A&M where they are coming in to Kingsville dome and on a mined out well field, trying to use hydrogenated water to enhance bioremediation. What that means is you feed anaerobic bacteria into the ground water, or hydrogen, and that helps consume the oxygen. Once the oxygen's gone, the uranium precipitates out of water, so it's a promising technology that Texas A&M is leading. We should be injecting, beginning injection was to be supposed to be this week. I'm not sure if it is or not. You can ask later. We're also working with other ISR operating companies, because it's a common interest to develop the best technology you can to restore the ground water. And we're doing this not just because that is our obligation, but because it also has strategic purposes. The objective is to demonstrate that we can clean up ground water in Texas because that will help us demonstrate to people in New Mexico that it can be done safely and well.

As far as the Texas uranium industry itself, the way I see it, there's a lot of valuable pieces in Texas that can be pulled together to form a very profitable company. But that's going to require consolidation of the industry there. There's several companies that have reserves, but they don't have any licensed plants. URI has two of the four licensed processing plants. We have limited reserves. But what does that mean for us? Frankly, we can either be buyers or sellers. In other words, we can look to monetize assets or rebuild our capacity to generate profits and cash flow out of Texas. All the companies in Texas are in the same situation, we're all looking to survive this market, this economy. You basically rely on the best assets you have and I think that's what's going to drive the consolidation efforts in Texas, so stay tuned.

Turning to New Mexico, the big picture in New Mexico, you have a state that has 600 million pounds or more of uranium reserves, has great exploration potential. That's the good side. The bad side is it has no production. It has had little, relatively little activity and has had no clarity on the issues that need to be resolved. Those two main issues are the Navajo Band, which has effectively blocked us from starting up our Church Rock project and the fact there's no uranium conventional mill in New Mexico, which does not help the people with conventional reserves, including us. It has left investors trying to handicap the potential in New Mexico against all the challenges that are there. And there really has not been a road map that can be offered to help you analyze that. But I do think that's all changing now. I think there's clear signs of how we can move forward.

So what I would really like to do is give you how we see this all unfolding over the next year or two. From our perspective, the market assumptions is a $40 market, so can we build our assets based on $40 a market in New Mexico? For us the answer is yes and that's based on our ISR technology. Our focus has always been that first project, which is Church Rock. Everything we've said publicly really talks about Church Rock. It's 1a 5 million pound a month, producing a million pounds a year. We have had Itochu as a partner and we've been waiting for a ruling from the court of appeals. The fact is Church Rock itself is only the first piece of the Crown Point Uranium Project. The main asset of that is the NRC license that gives us the ability to build a plant. We could do that today if we chose. It could process up to 3 million pounds per year. Church Rock and Crown Point is 34 million pounds of in-place reserves that would be put through that plant. The license also includes 27 million pounds of Unit 1 where we don't have a lease because of the Navajo Band. But put together, those two, those three projects add up to 61 million pounds of reserves to go through this plant.

When you look at other reserves that not only we own, but others own in the area and are not leased, like Unit 1, it adds up to more than 200 million pounds that go through this plant. This project is the largest project in the US, which is the largest uranium consuming country in the world. It is a project of national importance and that's what we intend to focus on now, build the demand for that project and we think that helps us give the help we need to resolve local issues. When you look at New Mexico, the opportunity this year is, it is a resource state. The bad economy is really hurting in New Mexico. The effect of that is really opening up mines. People all over, not just politicians, but people who have been in opposition want to be educated about uranium issues. They don't want to just reject the economic benefits uranium mining can bring out of hand because there's people opposed to it. But what the economy, the bad economy has brought is new opportunity for us to make our case.

When you look at the main issues in New Mexico, there's basically two. There's the legacy problem with the past mining. And there's the safety concerns of future mining. The Navajos have a nexus between the two. They simply say that we -- until you clean up the problems in the past, we're against future mining. The industry's always talked about the science is on our side. At the same time, our opposition has given you gut wrenching stories about how bad uranium mining can be. The fact is, there are legacy issues out there that are real and must be dealt with. Because if they are not dealt with, it just feeds the story that the anti-uranium group gives you. And that story goes something like this. Before the uranium mining companies came, everything was great. We had no problems. Ground water was fine. And then uranium companies came and they promised us good paying jobs and they promised to pay taxes and they were going to sponsor the building but they never really told us about the risks. They never told us that they knew the dangers. And then after they mined, the boom was over, the jobs were lost, the animals started to die, people started to get cancer and we're left with this huge mess in the ground that's going to take generations to clean up.

Now, when you look at the legacy problem, some of that is true. When uranium mines started in the 1950s, there were no environmental restrictions. You were allowed to smoke in the mines, as you've heard ad nauseum in the past. And they did leave a mess, there was nothing to prevent that. A lot of the cleanup has been done. I think the -- what is said needs to be done is overexaggerated, but this story does ring true for the past. It has no bearing on the future because it's based on lies and mistrust when you're talking about future mining. Now, what we need to do as an industry and what we have been doing, again, we have a population that wants to be educated. We need to tell a story that is equally compelling of why science is on our side, that deals with the issues. And that story goes something like this. As uranium mining companies, we explore for poison water. It's laden with heavy metals and the silent killer, radiation.

The fact is if it isn't poisoned before we find it, it isn't economic, so we're only interested in finding and developing poisoned aquifers that in many cases are being used by the local population before the uranium mining without any thought that it was dangerous. We then take that poison water and we create jobs and we pay taxes and we support the Little League, and we add millions of dollars in local economies, in the case of our projects, all rural areas that need economic development and that includes the Navajo Nation itself. And what more is we -- before we mine one pound of uranium, we have cash bonding to cover the ground water restoration and the reclamation of the surface facilities before we start, it's paid for, and we put in security, financial security before we ever start mining.

But when we're done, what happens? Yes, the jobs are gone, but there's still poison water. We haven't changed the utilities. We've given economic benefits to the local area and the fact is, nothing is going to change that poison water being at the same natural process as we deposit in the first place, and the same things are going to keep it there. The fact is, in 40-plus years of ISR mining, there's never been an excursion offsite from an ISR facility. So that is the story that we need to tell. That is the story I think the people are very receptive to, and it's based on fact, not just fears. And we're getting valuable help in that area. Sandee and Los Alamos lab are studying the use of monitored natural attenuation, which is a theory that is used for the cleanup of weapons plants and old uranium mill sites. There's a fancy word, monitor natural attenuation, but you already know what it means because I just told you. What it basically means is the natural process to put the uranium there in the first place will keep it there once we're done mining. And this is helpful because it is what's happened. It is what we say when we talk about the science being on our side.

So when you look at New Mexico and how it effects our strategy, the economy is giving us this new opportunity to make our case. The election cycle, along with term limits, is also giving us the chance to see new political leadership in New Mexico. So it gives us a chance to educate new people and new leaders coming in of the economic benefit, how this can be done safely, begin with safety, and then we talk about economic benefits and how we move forward. From our strategic standpoint, our goal has been to build 200 million to 300 million pounds of reserves, we will do that. We will focus on the Crown Point uranium projects, which gives us the lowest cost production and then we work to resolve the issues. Now, if we can do all of those things, production will return to New Mexico and Uranium Resources will be the one leading the charge there, because we do already have the largest reserve base, which we are looking to increase. We have the only NRC license from New Mexico and with the ISR technology, we can produce in this market.

Just like in Texas, I expect a lot of things to be happening in New Mexico this year. We're going to be looking for every opportunity we can to enhance the value of what we have and we began that with the announcement last night and this morning that we've terminated the agreement with, joint venture agreement with the Itochu for the development of the Church Rock projects. That agreement was entered into in December of 2006. It called for the preliminary investment decision two years ago. We have continued to extend that because we had economic benefit from that in getting $2.10 a pound more from parts of our Texas production. It's given us close to 600,000 pounds of revenue. But the fact that we are cutting down production, we've had a lot of discussions with the Itochu, their interest was to extend the PID for several years. Our interest was to have -- get something in return for basically granting them a free option. They came up with a lot of ideas. We worked closely with Itochu, had a lot of meetings. Fact is at the end of the day, we couldn't come up with something that basically compensated us fairly for the free option they were having.

So in this timeframe, we expect to resolve the issues in New Mexico. We think that if we're going to spend the money and make the effort to resolve the issues and win the day, we should get 100% of benefit at the end. So that's the reason that agreement was terminated. We continue to have a lot of discussions with the Itochu in both Texas and New Mexico. They are a company we're close to and hopefully we can work something out moving forward. Now with 100% of the project back, if there is a ruling in our favor with the Tenth Circuit Court, then we have 100% of that project back. Oral arguments were last May 12, so we're coming up on a year on that decision. Your guess is as good as mine when that gets ruled. The story really hasn't changed. We expect either side who did not prevail at the Appeals Court to take it to the Supreme Court. So my perspective, as I've said in the past, the big picture is this. It's not just winning the right to mine 8 million pounds at Church Rock where we have more than 100 million pounds in New Mexico that can be developed if we resolve the Navajo issue. The main objective for me is to resolve that issue. If we can get a small victory in the meantime, that would be good, but we really want to work to resolve that issue.

Now, that's a lot of information, but it boils down to this. As a company, as I said on the last call, we need to make do with what we have. We have sufficient cash, we believe to get through 2010. There's a lot of changes that could come by the end of 2010 in New Mexico just because of the election and the changing of public perception of uranium. We have the decision in Texas whether we're going to be a buyer or seller and that really flows in New Mexico. Having the assets we need to resolve the issues for 2010 and beyond. So as I said at the opening, I think it's going to be a very important year for us and I hope you agree that I think it would be a very decent year indeed, a very good year for us. So with that, I'll turn it over to Tom to review the financials. Tom?

Thank you, Dave. I'm getting an echo here. Does everyone hear me okay?

Yeah, I think you're fine, Tom.

Okay, good. In reviewing our recent results, I'll start with production. We produced 41,200 pounds in the fourth quarter, bringing our total production for the year to just over 300,000 pounds. The majority, or 254,000 of those were produced from our Kingsville Dome project. 37,000 pounds were from Vasquez and about 10,000 from Rosita. As Dave said, the production in the fourth quarter was lower than what we had seen in the prior three quarters as a result of our winding down production and not bringing on new well fields, not putting on new capital development. Our direct production costs for the quarter, fourth quarter was about $33 a pound, with direct production costs for the year just under $48 a pound.

At the end of the year, we had just over 36,000 pounds of uranium inventory, which was carried at an average cost per pound of about $33.50. Of the inventory that we had at year end, almost 28,000 of those pounds were sold in January of 2009 to our two customers at an average price of just over $51. Our sales revenue for the fourth quarter of 2008 was about $2.2 million, just under 39,000 pounds at an average sales price of $56.76 per pound. Sales for the entire year were about $18.6 million on roughly 285,000 pounds, which saw us realize an average sales price of just under $65.

Looking at our cost of sales, specifically our cost to produce uranium sales for the quarter in the full year, our direct cost of uranium sold in Q4 '08 was $2.1 million, or just over $53 a pound. For the full year, our cost, similar costs were $13.8 million, or just under $49 a pound. The direct operating cost sales for 2008 related to -- again, our operating costs were about $23 a pound where our DD&A costs were about $25 a pound.

During 2008, we also incurred exploration expenses of roughly $1.6 million. These were incurred primarily for activities related to our South Texas exploration projects for the Marshall and the Mosser and certain exploration activities we had at Kingsville Dome. Our cost of sales for the year included a significant impairment provision of $16 million that related to carrying value of the company's uranium properties. This charge resulted from our reviewing the net book value of the properties at the end of the year and comparing them to the estimated fair value at that same time. Fair value for each project was calculated by looking at the future cash flows based on the projections for current and future production costs, sales prices and the full economic estimates for the life of each project and we determined that at the -- again, in the third quarter and in the fourth quarter determined that the net book value of those projects was above what the realizable value, which resulted in the writedowns.

Based upon the analysis of the net property values, Kingsville Dome, Rosita and Vasquez were written down by roughly $6 million, $8 million and $2 million respectively for '08. The other major component of cost of sales were our royalties and commissions, which were about $1.7 million for the year, just under $6 a pound, or roughly 9.2% of sales. Going down to our G&A costs, our corporate expenses including G&A were about $11.4 million for 2008. Now, this number is relatively flat compared to our G&A in 2007 of $11.7 million. However, our 2008 results include $1.4 million related to the write-off of the target acquisition costs for the proposed Rio Algo acquisition. During the latter stages of 2008, we've implemented significant cost cutting strategies, which we expect to reduce our G&A costs in 2009. Kind of a breakdown of the major categories for the 2008 G&A expenditures for the year were noncash compensation expense of approximately $2.2 million. Personnel costs, salary and benefits of $3.2 million, consulting and professional services of $1.5 million, legal, accounting and other public company expenses of $1.4 million, and as I said previously, the write-off of the acquisition costs related to the Rio Algo potential acquisition was $1.4 million.

Moving into our cash and cash flows, as Dave said, our cash balance at the end of 2008 was about $12 million. During the year we generated cash flow from operations of about $1 million. We had capital expenditures primarily for uranium property and plant equipment of $10.5 million during the year and that was primarily used at Kingsville Dome for well field development and evaluation drilling of just under $4 million and development costs at our Rosita and Rosita South projects of about $5 million. In addition, we had additional investing activities where we increased our restricted cash by about $600,000 during the year, related to collateral to support financial surety obligations for our South Texas projects.

Finally, our finance activities, in 2008, we raised about $13 million, primarily in May from the private placement where we sold just about 3.3 million shares at a gross price of $4.34 and we also had certain financing activities where we raised some capital through the exercise of stock options during the year. Dave?

Okay. I think we're ready for questions.

(Operator Instructions) Thank you. Our first question's coming from David Snow of Energy Equities.

Good morning. I'm trying to remember, historic contracts at $14 a pound, your release says this action eliminated the potential for reinstatement of the original 2003 delivery contracts. I'm trying to recall, how did that go away, if you reverse this joint venture?

There were certain conditions, I'm going to elaborate if you don't remember those, that if in the preliminary investment decision, if we didn't want to go forward and they did want to go forward or something of that degree, that you could revert it back to those original contracts.

That's precisely it. If Itochu were to make a positive investment decision and we were going to make a negative investment decision, meaning the joint venture did not go forward, then the terms and conditions of the original sales contracts would have been reinstated from that point going forward.

But you didn't reinstate the original contracts, right?

That is correct. We did not.

And the chance to do that is now gone.

Correct.

So are you out of the $14 contracts and the fixed delivery obligations?

Well, we've been out of those since we renegotiated the contracts. However, pending the outcome of the joint venture decisions, they are allowed for the opportunity for us to step back into those. With this decision, it eliminates the opportunity for us to be required to step back into those old contract terms.

So you're out of the old contracts all together?

Yes.

Okay, and part of that, the renegotiation was renegotiating that $14 contract with the new pricing structure in Texas and the joint venture at Church Rock. The two were tied together.

Okay, and I was trying to remember, and I couldn't. So you're basically benefiting twice. You got out of any of those contracts and you're 100% in New Mexico?

Correct.

Now, David, remember, we were not under the conditions of those old contracts. The specter of them being reinstated is what we got out under.

Right. You were still under that specter of being reinstated.

Correct, correct.

So you won twice and lost--

Correct.

Then I'm trying to ask also about, did I hear in New Mexico you would also be a buyer or seller? I wasn't sure if I heard that right.

What you heard me say is we'll enhance what we have. Our objective is to build our reserve base from 100 million to 200 million to 300 million.

Okay, and then one last question, your alma mater TradeTech and maybe your own website had your talk in South Africa where you thought the price might go to $80 a pound, but your base modeling case is in the $40 range. Can you give us the upside synopsis there again?

Again, to give clarity to planning, it's the assumption that nothing may change in your $40 market. Again, I think that's the low end of what the market may be. Let's proceed forward on that basis, given all of the uncertainty in the uranium market and the economy as a whole. Proceed on that basis, it's not my prediction where the market goes. Again, I think the longer the price is at $40, the more cancellations and delays you're going to see at the same time the reactors are coming online and the demand is going up and the secondary supplies are being depleted. I think that's all the formula for another price hike. But when that comes, I don't know. Where we are as a company right now, it's not important. What is important is to take advantage of the current conditions, which allows us to advance our strategic plans.

Now, are you totally in spot prices? I'm still trying to go back to the old contracts and figure it out.

What we have is the blended prices around $50, and part of that is UG contract is based on 650 off the long-term price, which is at $70. And the other is a 750 off the spot price with Itochu.

Okay. Thank you very much. I was trying to remember those. Thank you very much.

No problem.

(Operator Instructions) There are no further questions at this time. I would like to hand the floor back over to Dave for any closing comments.

Thank you again for your time. I hope what we were able to discuss this morning gives you clarity and that you look forward to 2009--

Operator, I just noticed -- I'm sorry, Dave, but we just have somebody else that queued in for a question.

Yes, we do have someone that has just jumped in. I'll go ahead and join you.

Sorry, Dave.

No problem.

Sorry about that. Our next question will be coming from [Linda Heddegard], a private investor.

Yes, I would like to know if you considered any options for acquisitions or being acquired?

That's not usually something we comment on. I think, again, given the economy and the market, you can make a case that all companies are evaluating that at this point in time. If from our perspective laid out where I think we build value in this company and we'll follow that strategy.

But are there any partnerships that you are entertaining at this point? Do you have any letters of intent?

Yes, we wouldn't comment on that. The way I view -- I think it's a great question because the way we view it we are close to having what we need to resolve the issues in New Mexico on our own. There will come a question of timing, do we want to bring in partners just to give us additional security, or do we resolve the issue ourselves, which I think is the maximum value for the projects. That's, that's something you play by ear as you move forward, but at this point in time, as I discussed in Texas and New Mexico, I think there's consolidation of industry in both places and we expect to be a participant in that.

One last question, you mentioned technology you're developing for cleaning up the ground water.

Correct.

Do you see that as a product or service that you can monetize and actually gain revenue from?

I'm not sure -- it's a possibility, but I wouldn't -- I'm not leading to that. I think we are working with other ISR companies now because it's in our interest to do that. And in doing it that way, since we all have different operating parameters and different experience, I would rather share the information and lower the costs for all of us than each of us working separately and finding something and then charging somebody else for use of that technology. It is in all of our interests, there's a lot of interest on the national laboratories and government agencies to resolve this issue. So moving to the patent side, I would rather have a free exchanges of information to do the best we can because everybody's interested--

Are there any companies, either private or public, that are working to develop a service that they would intend to bring to market?

On reclamation technology?

Yes.

There's -- again, it's different technologies. We're trying hydrogen with Texas A&M. There's other substrates that other companies are trying and again, the principal is to increase anaerobic bacteria activity so it consumes oxygen. There may be other ways, now that we have laboratories involved, and there's government financing to do this. It's just really getting a good, hard look on seeing what can be done. What generally happens is you have to take water back to baseline, but the bigger issue, you have to leave with the same utility you already had before you started. As I said earlier, the water is already poisoned, it can't be used, so we have to leave it in the condition where it's poisoned, it can't be used, which is one thing. You want to make sure that that does not migrate off site and the natural attenuation, that tends to be what happens, so we need to demonstrate that's what happens. When you get into the restoration parameters themselves, it gets into very, very small numbers and it's a lot of times it's a distinction without a difference. But if you cannot get all the way down to 0.001 or whatever and you can get down to 0.0015, the opposition says you didn't get it good enough. Well, we want to get is as good as we can and we want to make sure it has the same utility, and if there's private companies that are looking into that technology, that helps. But you're really looking at your three operating ISR producers in the US, you might double or triple that amount, given activity in New Mexico and Texas and Wyoming and Nebraska so it will be those companies that are dealing with and if those companies are leading in the technology like we're trying to do, I think it will probably more come from us than the private sector, other companies developing it. Does that answer your question?

Yeah, I -- one other question, is are Ariba or any of the other global concerns involved in any of this?

Ariba has properties in Wyoming, which they have restored. So they have done a lot of work in the technology of it. When you look at the US, - the substance to put the oxygen in the water or use oxygen to put the uranium, dissolve the uranium in water. In Kazakhstan, you use acid, in other countries, in Australia they also use acid in some of the projects. We can't use acid here, so it's a different mining technology and therefore different restoration factors for other companies. So the option's pretty much what you use in the US, it's our market.

Thank you.

You're welcome.

Thank you. We have a follow-up question coming from David Snow of energy equities.

Yeah, getting back in queue as long as nobody else is here. Just to understand these contracts go in Texas as long as you have any production there, or what's the duration?

They both, both UG and Itochu contracts were for 3 million pounds apiece.

And how much--

Half the production -- they are not production contracts, so the fact that we're shutting down production, there's no obligation to deliver.

How much did you deliver versus the 3 million each?

We can get you that number, David, but it's -- rough offhand, it's probably a million, 1.5 million pounds, what we produced in 2004.

You mean each one?

Total.

Oh, and if you were to resume operations in the future, would you still have that 3 million-pound, 1.5 million, 2 million left at those prices?

We will have that unless we renegotiate the contracts.

Well, sounds like that would give you an advantage of acquiring in Texas. You no only have a mill, prices right now above the market.

I think, again, we are looking at everything we have and get value out of everything we have and I'll leave it at that.

And then the other thing I wanted to ask about, you were thinking that if Bill Richardson went to Washington, it would put a deputy under him in charge and unfortunately he didn't pay his taxes or whatever happened, and I wondered if -- why do you say that -- what political faces are going to help you, if any, in changing--

Well, Governor Richardson is term limited, so he will be gone at the end of 2010.

Okay. That's a long way away, though. And is there new faces around that would help you in addition to that?

There's a Lieutenant Governor -- is very pro-business. She's a democrat. I think she tends to run for the governor. She was preparing to take over at Richardson's seat. She understands it. She's got a mining background. Her family's got a mining background. It can go a long way. Governor Richardson hasn't come out against uranium mining, so it's not that he has hurt us. It has slowed things down in New Mexico to some degree, but what we need is just a very pro-business environment and a re-look at it. It's a political issue, along with the Navajo.

So it's pretty much in that 2010 election that you're focusing on and the change of the guard down there?

Correct.

Okay, thank you very much.

Thank you. There are no further questions. I would like to hand the floor back over to Mr. Clark for any closing comments.

Well, as I was saying, thank you again for your time and we hope you look forward to an important and I think what can be a very important year this year. So thank you very much.

This conclude's today's teleconference. You may disconnect your lines at this time. Thank you for your participation.