Westwater Resources Inc (WWR) 2010 Q3 法說會逐字稿

Greetings, and welcome to the Uranium Resources, Incorporated, third quarter update conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Uranium Resources, Incorporated. Thank you, Ms. Pawlowski, you may begin.

Thank you, Tanya, and good afternoon, everyone. We appreciate your time today, and your interest in Uranium Resources. President and CEO, Don Ewigleben, will discuss recent events, and the outlook for the Company, and he will be joined by Tom Ehrlich, Chief Financial Officer. Also on the call with us today are Rick Van Horn, Vice President of Operations, and Mark Pelizza, Senior Vice President of Environmental Affairs. We will conclude the call with an opportunity for Q&A. If you don't have today's news release, it can be found on our website at www.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 news release, as well as in documents filed by the Company with the Securities and Exchange Commission. You can find those on our website, where we regularly post information about the Company, as well as the SEC's website, sec.gov. So please review our forward-looking statements in conjunction with these precautionary factors.

With that, let me turn the call over to Don to begin the discussion. Don?

Thank you, Debbie, and thank you to all of our listeners today, our shareholders, and those in the industry who are observing our activities. We're very pleased to be talking about what has occurred in the third quarter for Uranium Resources, and the advancements that have been made on behalf of our shareholders. First and foremost, we have measurable progress on all fronts. We are moving in the direction of achievement on all of our strategic objectives for 2010. As you know, we've recently had a very successful offering. I will talk about that in more detail in a few minutes.

Last week, we had an announcement of a letter of intent to do a joint venture arrangement for exploration activities in Texas. And we'll speak to that in detail. We're pleased to have settled the Saenz case, a Texas case that we'll describe in a bit more detail. We've made progress on lease advancement in Texas.

We've made additional progress on the feasibility study that is now underway, and will be completed by the end of 2011. We've been advancing our NRC license update activities. And we've continued to meet all of our restoration activities in Texas, and mostly we're very pleased with what's been happening on the uranium press.

Let me start with the capital raise setting. Within the past two weeks, we've done the second of two capital raise activities in 2010. In this particular quarter, we raised approximately $9 million. We've been describing publicly that we had uses for the June raise. These activities in the third quarter, were in addition to our needs for the capital raise in June.

This particular capital raise over the past two weeks, proceeds will be used in part for the settlement of the Saenz case. That's approximately $1.4 million. We have a requirement to fund some additional collateral for bonding activities in Texas. That's approximately $2.5 million that we're going pay out in [$500,000] installments over the next five quarters. As you're aware, we've been working on exploration activities in Texas. We have a potential land lease that would cost us $2 million.

We previously had said we wanted to continue on the feasibility study, and our estimated costs are $1.5 million. So we're very pleased to have had this additional raise. It was at $1.16 priced, and as we all know today we're established at a price considerably higher than that.

The shelf registration that previously was in place, that we used for the June capital raise, as well as the September -- excuse me, October capital raise- was for an amount of $25 million. We have now used approximately $19.5 million of that amount.

I'm going to ask Tom to speak to details in just a few minutes, but basically our liquidity position is very strong. We had $10.5 million at the end of the third quarter. And as of today, it is presently at $18.8 million, and that, of course, includes the approximate $9 million that we raised in the recent offering.

We have previously been working very hard to maintain our costs at lowest possible levels. And in the course of this year, we indicated that would be increasing our core burn rate slightly, but we have met that objective. The increases are largely for the additional staff that was hired for the feasibility study and engineering studies, as well as some of the capital expended that we previously had discussed for our exploration activities in New Mexico.

I want to focus on Texas for just a moment. I know a lot of folks have had some interest in the press release we put out last week about the letter of intent with Cameco. We will be working with Cameco in south Texas as their junior partner for exploration and development of any potential uranium exploration leases that we come forward with. In particular, we have been working on a lease that I believe has excited them, but I must emphasize this is a Letter of Intent. It does not bind Cameco or URI to the extent of a specific lease at this point. We will bring to the table a lease, then they will consider it.

But we are very pleased because this is one of the objectives that we set for ourselves at the beginning of the year. When you have over 30 years experience in south Texas as an explorer, a developer, an operator, and as importantly, one of the few companies that can say they have closed properties, and had their release, we think we bring something to the table for a multinational company like Cameco. And fortunately they have agreed with us.

Our thought going forward is that we would have commitments in the future that would lead to an industry standard type arrangement, with ownership split between the two entities, as Cameco's power resources company, its subsidiary, earns into the agreement over time. It is our expectation that we can have a joint venture agreement in place within about 30 to 60 days from the time of obtaining the lease. We hope to do that before year's end.

We know that we bring value to our shareholders in many ways. And we do believe that we have the capability for the next lease with the funds that we have recently raised. We're looking towards Texas as being a much larger part of our exploration resource base in the future. Having 101 million pounds in New Mexico, puts us in a position of having the eighth largest deposit in the world. And certainly the largest in the US.

But that doesn't get us the value that we believe we should be bringing to our shareholders for the sunk capital for the two existing fully licensed facilities in the state of Texas. So, additional exploration needs to be done, and we wanted to bring in a partner who could not only bring financial resources, but bring strong marketing skills, technical understanding, and basically avoid us going outside for third-party consulting costs when we can get them from an inside joint venture partner. We hope that this will be the first of many of these type of arrangements that we'll have in all future areas, but let me stress that we're sticking with our strategic plan, which as said all along, we must fully exploit the assets that we have in both Texas and New Mexico before we begin to look beyond those two states.

Before I move to New Mexico, I wanted to speak to the Saenz case. We mentioned in a press release that we had a settlement. We previously had booked about $700,000 plus, as royalties that were already owed in this case. We also knew from talking with counsel that we would have a setting in which we could have additional expenses for litigation that would drive the price of this overall case to a point greater than what we were able to settle it for.

Now, that said, we fully believed that we would be exonerated in a courtroom. But we came with a new strategic plan that said, let's put all of this behind us. We want to be saying to our shareholders what we've done to move forward. To the extent that we don't have to look backward towards the activities of litigation, we're going to do that.

And in this particular case, settling this case for about $1.4 million was about what we had expected if we would have just had expenses and not lost the case. The point being, it was a reasonable settlement for both sides, and it gives us an opportunity to have additional exploration lands in our nearby area, where we already have historic information.

From a standpoint of production, we have been asked recently about the significant rise in the price of uranium, and what that might mean for us with regard to our Texas setting. Well, as uranium price has moved beyond $50 a pound on the short-term spot pricing, we've had to begun rethinking about our closure in mid-2009 of our operating facilities. So we're rethinking those Texas opportunities at this point, but we are not prepared to give any guidance as to a potential opening of those properties.

We previously mentioned that we have some work to do before we would enter into a setting where we would be in operation again. That's primarily some work with some ponds to give us maximum amount of opportunity to bring in the ore. The point being that this is not a longtime decision. We can reinvigorate the property, and operate in a relatively short period of time, within one quarter's time. However, we are not going to make that decision until we see a stabilization of the price. We believe that's in the offing.

As for our existing uranium that exists there, there is something a little less than a million pounds available to us of identified mineralized material, uranium material in place, and we know that there's probably 50,000 pounds, approximately, in our retention pond as we do some of that work. In previous production areas that we know we can reenter, there's another 180,000 pounds in place. Additionally, if we seek additional permits, we know there's 1.1 million pounds that we can reach to. That's with our existing operating facilities. The point here is, there's a good million pounds plus available to us in the near term when we decide to reopen the operations at Kingsville and at Rosita.

Now I would like to move to New Mexico. I mentioned that we have the eighth largest resource base in the world for uranium. And certainly the largest in the US. But we have some work that's yet to be done. We're extremely pleased with what's occurred this year. As you all know, in June, the Court of Appeals upheld our position with regard to the UIC permit. Also, we had a decision in the US 10th Circuit Court of Appeals that determined our NRC license was appropriate. We've been following up with the advancement to have that license reactivated, and we must do so in accordance with our plan for feasibility.

We've been working on the feasibility study now for a few months, and we will continue on that activity throughout 2011, with our expectations of having the available construction decision by the end of 2011. And the thought process at the moment, certainly dependent on what that feasibility study shows us, is that Crown Point and Church Rock would be available for construction in 2012, and operation in 2013.

With our understanding of what is likely to be the disappearance of the secondary markets related to the HEU agreement in 2013, we want to be able to time this construction and operation as closely to the rise in the price of uranium as we possibly can. But much work must be done on the feasibility study. I mentioned this is a $1.5 million study. We have multiple mile posts in this process, where we will be looking at what needs to change from our prior conceptual studies. Most importantly, we will determine of the 40 million to 45 million pounds in Church Rock and Crown Point, how much of that is ISR amenable. And if it is non-amenable to ISR, it would go into the remainder of our conventional resource base.

We did some exploration activity in New Mexico. In particular, we drilled three holes, primarily for confirmation drilling, and hopefully by the end of this quarter, the fourth quarter, we'll have some final information, and we'll be able to update our geologic studies for use in the feasibility study. It will help us to develop field mining plans, well field plans, and estimate our appropriate well field costs.

We must decide what we're going to do, however, in New Mexico with regard to the conventional mining. So our feasibility study will help us also consider other entities up and down the New Mexico district, and what they may be considering with regard to a central mill. We have had conversations with our competitors in the area, seeking their information and insight and input, and we expect those conversations to continue, because it is our firm belief that by 2013, when the price has risen sufficiently to allow for conventional mining to begin, we must have had some further direction, both out of our feasibility study and from an understanding of our competitors' positions about whether there will be central milling facility, or I should say facilities, because there could be more than one, and how that would fit into our operating plans. It is our expectation that we will be the next entity to produce uranium in New Mexico, vis-a-vis our Church Rock and Crown Point property, but we must have a pipeline available to bring forward the conventional pounds as quickly as possible, as the short-term and long-term prices for uranium increase.

Staying in New Mexico for just a moment, I want to mention that no petitions were filed as of the September 13, 2010 deadline, regarding the June United States Court of Appeals 10th Circuit en banc ruling that said our Section Eight property at Church Rock was not Indian country. That is that ruling that said our UIC permit was properly issued by the State of New Mexico.

Secondarily, ENDAUM and the Southwest Research Information Center did petition the United States Supreme Court for review of the March 2010, 10th Circuit decision out of the Appeals Court, that upheld our NRC license. That would have allowed us to conduct institute recovery uranium mining at Church Rock, Crown Point. We believe the 10th Circuit correctly analyzed these issues when it upheld the NRC's process for issuance of our license. There is no deadline by which the Supreme Court must act on the petition.

The petition, however, does not -- and I must emphasize this -- it does not impede our progress on the development of this project. First and foremost, the Supreme Court will look to see if there is a jurisdictional dispute that is worthy of its consideration. We don't believe one exists.

Secondarily, if they do take up the case, there is no reason to believe they would take up the case in this particular term. So we must continue to move forward to benefit our shareholders on the development of Church Rock and Crown Point. And because we have our license in force, all we must do at this point is provide the additional updates required by the NRC. That has been done.

On July 28, a public meeting was held at the offices of the NRC in Rockville, Maryland, where URI stated our intent to file the necessary documents to put the Crown Point uranium project, source materials license, as it's known, in an active status. And we outlined our plans for the license renewal. That meeting was based on the US 10th Circuit Appeals Court ruling. We've been following up on those activities, and we're pleased to say that it's moving forward. So, we have no reason to believe that the petition that was filed by ENDAUM and the Southwest Research Information Center will be heard, and therefore we're moving forward with the understanding that our license is to become active, and is definitely valid.

I've already mentioned Section 13 drilling, and how it would enter into this. It is not a question of whether we have resource. It is a question of delineating the type of resource.

We've also been asked whether we would do additional exploration, or whether we have sites on other properties in New Mexico. At this stage, we have not planned for an additional exploration program in 2011. But that could easily change depending upon opportunities for acquisition.

Strategically, we've always felt that it was critical for the assets in New Mexico to be consolidated. We know that part of this is related to the need for a conventional mill that can support the entire district. We also think it would not be economically feasible to mine all of the smaller quantities of uranium held by several of our competitors in the district. In many cases, there are situations where either data that we hold, or shafts that we have would make it more logical for their projects to be developed. Ultimately, New Mexico could end up belonging to just one or two major players. We want to make sure that URI sits at that table.

So I cannot speak today towards any particular acquisition. I can simply say we're very pleased that one of our objectives to consolidate the district in New Mexico is underway, and moving forward.

With that, I'm going to turn it over to Tom Ehrlich, our CFO, to speak to the financials. Tom?

Don, thank you very much. This is Tom Ehrlich, as Don said, the Chief Financial Officer for URI. Our financials for the second -- I'm sorry, the third quarter of 2010 compared to where we were at the end of the second quarter, our balance sheet remained fairly stable. Our current assets went down by about $800,000, and our current liabilities went up by $1.4 million. The largest component of that increase in current liabilities was an accrual for the legal settlement that Don had mentioned in the Saenz lawsuit.

During the quarter, our operations again were fairly stable compared to where they were in the previous quarter, with the exception of that same provision that we had for the Saenz lawsuit. Our general and administrative costs went up by about $200,000, again, as Don had indicated, related to increased activities for personnel, increased activities for consulting work, and items related to the higher activities both in south Texas and in New Mexico.

Our cash used in operations was about $1.8 million for the quarter. Again, the primary reasons for that were the restoration activities that are ongoing down in south Texas at our Kingsville, our Rosita, and our Vasquez locations, the general and administrative costs that we had incurred during the quarter. Our cash used in investing activity was just over a $0.25 million, and that related to increases to our property, in south Texas as well as the drilling activity that Don had mentioned at our Section 13 property in New Mexico.

As Don had mentioned, the most significant event that has occurred recently, was the capital raise that we had done. While Don had spoken to the most recent capital raise that was closed last week, obviously those numbers do not show up in our financials since we're talking about the September 30 quarter end, and all of that activity transpired in November. However, we did have a capital raise that was done in June with an over-allotment portion that did occur in July, which is reflected in our financials, showing about a $1.4 million proceeds that came in related to the July closing.

Again, the most significant piece of that is our ability to raise capital. The emphasis that our shareholders are showing in us, and the ability for us to move forward.

Don?

Thank you, Tom. Debbie, at this point I believe we're ready for questions.

Tanya?

Thank you. (Operator Instructions). Our first question comes from Rudy Mueller with Winchester Group. Please proceed with your question.

Yes, the question is, what's the distance from this new property that you are going to explore jointly with Cameco from your existing processing facilities?

Actually, Rudy, there's a number of properties that we have our eye on, but I would have to say the most advanced opportunity for us is within 50 miles. A relatively close property, from a transport standpoint.

And besides our two processing facilities, who else has processing facilities in Texas?

Well, there are four that are licensed. One is on the private property of the Jones Ranch, and run by the Mestena Uranium Company. They have been active on the Jones Ranch, of course. We have the two facilities, Rosita and Kingsville Dome. We also have in the neighborhood the Hopson Property run by UEC, and they're working diligently to get that property ready to go for their own areas.

We are pleased to point out that one of the advantages we have in having two of the four licensed facilities is they're both set up for two separate circuits for operations purposes. So it gives us a great level of accountability, and that's a real plus when we talk to the large ranch owners in the area, in that they don't particularly care to have commingled resource. So we can offer up not only a separate circuit out of each plant, but if need be, and the size prevails in an exploration play as to what we think it might be, we may be able to dedicate an entire plant. So having two there in the local area is a very significant plus for us. Thanks for the question.

Our next question comes from Jack Salzman with Kings Point. Please proceed with your question.

Thank you. I actually have a number of questions. First is, what would be the earliest that you folks envision going back into production?

The earliest would likely be a first quarter decision. We may be able to move that up in the sense of making the decision by our Board to reenter production at the south Texas facilities, but we are presently looking for an opportunity in the first quarter dependent on, as I mentioned earlier, the stability of the short-term and long-term uranium prices.

Okay. Has there been any thought to recapitalization, or perhaps before we even get to recapitalization, if you want to ramp up production in the future, or affect whatever strategy you have in mind, will there be another equity raise that is likely to be preceding all these events?

Well, the first question as to recapitalization, is there are no present plans to do so, having had two successful financial raises this year, we're presently setting in a position where we will have no need, until it's time for the construction decision for Church Rock and Crown Point. Our conceptual studies had indicated somewhere between $30 million and $50 million to fully construct those properties. We must take it from conceptual study to bankable feasibility study throughout our 2011 year, and determine exactly what that price will be, and of course, some of that is driven by how much is ISR minimal versus those pounds that may need to go to a conventional mill.

Would you be looking for a partner to help finance that expansion, or do you expect to try and tackle those numbers by yourself?

We have said all along, that one of our strategic initiatives is to find successful joint venture relationships, not unlike the one that we announced for Texas, and we would hope that that would be an option for consideration. But we are fully prepared to be able to raise the necessary capital to build that project on our own if it comes to that.

The mere fact that this is ISR, and doesn't include a significant amount of capital for a milling facility, allows us to do it on our own, but we must always look and see what brings the most value to our shareholders. So if in the short term, there is a joint venture partner setting that makes more sense to bring value to shareholders, we will clearly consider it.

I wonder if you could share with us your thoughts about uranium pricing. Where do you think it will settle in, or do you think prices will continue to go up?

Our belief at the moment is that what we're seeing today is a recognition of what is about to occur in an ever increasing uranium price setting. What I mean by that is, we used internally a $50 short-term spot price by year-end 2010. We've obviously attained that. We have used internally a $70 price by year-end 2011. That will tell that you we have some strong belief in the return of the uranium price on the spot basis.

Part of this is driven by what I mentioned earlier, that the HEU agreement that's going to go away, will remove this secondary supply source that has artificially depressed the price. When we look at the number of facilities under construction worldwide, and the number of applications before the NRC in the United States, we have the belief that the demand is going to be far greater than the supply in the course of 2012 and 2013, driving the price up considerably higher. Conventional properties in New Mexico will need to have something north of $75 a pound, in our estimation, but our feasibility study is going to tell us under various price scenarios, when can we go in and do a conventional property for our existing resource base.

That was very helpful. One other last quick question, if I may. Can you tell me what your current burn rate is, and the expectations of your burn rate once you start production.

I'm going to let Tom speak to the current burn rate. I'll come back to the other one. Tom?

Sure. For the current quarter, our burn rate was about $650,000 a month for the July, August, September timeframe.

Don, in terms of production burn rates, do you want to handle that?

Well, our production costs per pound in 2008 were fairly high, at $47 a pound. In 2009, before we shut it down, it was $43 a pound. Those prices are still relatively valid for the particular resource that we had at the time. So if we operated again, we know that our operating costs would be somewhere in the neighborhood of the $40s a pound, and therefore leaving us some rate of return, but that's why we're looking for a stabilized price.

If you are asking for the specific burn rate increase to reopen, we don't have an internal number. But I can say to that you what we're primarily talking about is a pond, or refurbishment to give us additional head room. We've mentioned that it has a number of pounds available to us. In fact, we believe it will be a cost offset. But we'll approximately need about $2 million to restart. We have that available now. That will be recovered from that resource that sits in the pond.

And Rick is on the phone. Rick, what number of individuals would you need to bring back to get into production in the first quarter, and therefore that can give us a general idea of what additional burn rate might be?

You mean for the pond project, or what?

For the pond project and for operation.

It's seven people.

You would need to add seven?

Yes.

So, we're talking some individual salaries, overhead, et cetera, but this is a fairly minimal amount to get back into production.

That was very helpful. Thank you very much, and good luck, guys.

Thank you.

(Operator Instructions). Our next question comes from George Walsh with Gilford Securities. Please proceed with your question.

Don, could you review -- you mentioned the June raise of the $25 million. And I believe you said you used $19.5 million of that. Could you just review the use of proceeds?

Certainly. We have used $19.5 million of the shelf registration that we did in the first part of the year. So that does leave some additional funds there, but we, as I mentioned, don't have any present plans to bring down anything else on the shelf. But where those proceeds have primarily been used, is a combination of things in Texas and New Mexico. For our continuing activities in Texas, it's important to note that we are meeting all of our restoration obligations. That costs us approximately $125,000 a month, and that's primarily water pumping. But we must continue to maintain all of our activities in restoration, and the significance of that is that once we prove we can restore, and we already have done so, our license in New Mexico allows us to go from the initial year of one million pounds per year to three million pounds per year.

And if you will just let me take a second to mention why that's important, this country only produced a little over three million pounds last year in 2009. So we will be able to double the production. So we're using the proceeds to get to that position. That is the $1.5 million for the feasibility study, $150,000 for the exploration activities that occurred this past quarter. We have spent -- or will spend, I should say, approximately $1.4 million in the Saenz case. And for those that have asked, has that actually been paid, we paid it into a trust position with counsel as the lease gets rewritten, and then we'll pay it to the other side as the lease is rewritten.

We have also used funds from those two finance opportunities to conduct activities towards acquisition and/or other M&A possibilities. We've brought in some investment banking support to help us do valuations on various properties, and that will help us in the future make a decision about acquisition opportunities, as well as tell us more through our feasibility study about this possibility of a central mill in New Mexico.

I believe that outlines the majority of the issues. Tom, did I miss anything?

Let me just clarify one thing, Don, you mentioned that we had $19.5 million that was used. That includes the June and July raise, as well as the initial overnight that we did enclose last week. We also closed the over-allotment on Friday of last week, which was another $1.4 million. So the total amount that we've used under our shelf is not the $19.5 million, but including the $1.4 million is actually $20.9 million.

Thanks for the correction, Tom, because that does go into the fourth quarter, but it's appropriate for response to the question.

Don, it sounds like -- have you reached a phase here where primarily your expenses are now related to development, and a lot less is going to litigation? And could you quantify that in the way in terms of what litigation type of costs you're looking at going forward?

Well, the only litigation that we have going forward relates to a case in Kleberg County, Texas, that we expect to have further discussions towards settlement on here in the near term. It's a relatively small case, regarding an agreement for how many gallons on a regular basis are pumped. That, I don't have an estimate. Tom, do you have an estimate of what those continuing litigation expenses are, because that's the last of our litigations.

Again, we've incurred fairly substantial legal fees in connection with the Saenz case. It was a very high profile case. With the Kleberg County case, we're not anticipating, maybe something approaching high five-figures, maybe $100,000, if this case goes to court. As Don said, we're looking to resolve the case short of that, but again, if we take it to court, we're looking at maybe up to $100,000.

Okay, now, in litigation I'm trying to include legal challenges to properties, or other things that may come up. But are we really moving into a phase where you're a lot more focused on development of properties, CapEx type of spending, joint ventures, et cetera?

Absolutely. The setting at the beginning of this quarter, we had resolved the question of who had jurisdiction for the UIC permit, but not the question of continuing litigation on the Indian lands. That has now been decided. There will be no additional litigation costs.

So it resolves major matters, and it just leaves one minor matter for us to put behind us, and we hope to do that in the fourth quarter. At that point, you're spending all of your money on two primary activities, growth, and continued maintenance of the facilities in Texas, which includes restoration.

Okay. Very good. Thank you, Don.

Thank you.

(Operator Instructions). Our next question comes from David Snow with Energy Equities Incorporated. Please proceed with your question.

Yes, hi, I'm wondering what is a typical joint venture deal if you go into production? The company, the senior partner would end up with 80%, or what would you be left with at the end of the day in a deal such as the Texas one?

David, first let me say hello to you. I don't think we've met yet. I know you've followed the Company, and I appreciate your question.

Thank you.

Having been with the Company for about a year plus, I can look back at my past history where I have been on the other end where I have always been with the larger multinational, and most of the joint ventures that I have conducted in the past, ended in a setting where it was either a 60/40 or a 70/30 split. I would expect that would be in that range going forward once the joint venture agreement is put in place. But remember, that's after earn-in periods, when the senior has earned in their position, which typically can take three to five years.

We use typically what's known as form five, which is simply the Rocky Mountain Mineral Law Foundation's basic joint venture agreement. That's kind of a starting point for any negotiation on a joint venture agreement. It usually results in that 60/40 to 70/30 split at the end of the day.

What that does for a junior mining entity, such as ours, that's striving to get to a mid-level position, is it puts a portion of that risk, and of course a portion of that capital, on the balance sheet of the other entity. But I do need to stress, one of the reasons we're looking for these kinds of settings, is we bring localized talent to that particular area, and we would, of course, in New Mexico as well, where the larger entity may not have had a position. Our expertise is what they're looking for, and our people on the ground, and that's why we've been able to enter into this LOI with Cameco.

Would a deal of that type entail the capital, the heavy lifting of the capital spending for going into production to be borne entirely by the senior partner, or would it be kind of heads up?

Typically, you will move from a joint setting where there is cash calls to both sides, until there is an appropriate earn-in position maintained by the larger entity, and then you settle in that 60/40, 70/30 range. At this present time, we would have a setting where we would have shared expenses over some of the activities, remembering that we're moving forward if we should be able to obtain this lease on our own, with or without our joint venture partner. But it will be the first of many opportunities to have with Cameco, and we would necessarily put down the initial $1 million to start the lease, and a $1 million commitment for 2011 activities.

Then those monies could be recovered through the joint venture at the relative rate that gets worked out. I mention this because people have asked us about the use of proceeds, and I wanted to make it very clear that that is one of the intended use of proceeds from our June capital raise activities.

In the promote here for your expertise that I'm hearing --.

I'm sorry, David?

There's not a promote for your expertise that I'm hearing, though.

I'm sorry, you'd have to explain that to me. I don't understand the question.

You ought to get a disproportional carry cost-wise in return for your expertise, I would think, if the expertise is really worth it.

Well, I would have to say to you that because it is still prospective, I couldn't speak to the details. I can only say to you that we would not enter into an LOI with a company with a stature such as Cameco, unless we felt that it was absolutely beneficial to the shareholders, and yes, sir, we will be getting the value for the expertise that we as a company bring to the table.

Okay. And I'm just wondering, you say the consolidation is -- I think your expression was, underway in New Mexico. You've had some talks, but isn't that about it? Or can you elaborate on --?

I would not be in a position to discuss anything specific, but what I actually meant was, if I didn't say it clearly, we set out with a new strategic objective at the beginning of this year, that our Board approved, that said, we will strive to seek consolidation in the district largely driven by this issue of too many smaller entities all have the same need for a centralized milling facility. So whether it is going to be a discussion that multiple parties come together for a joint venture to build a facility, or we look at M&A activities to combine assets, so that we can bring stronger values to bear, and pay for the appropriate costs and capital of a central milling facility, one of those two ultimate scenarios will play out. We're in conversation with anyone and everyone who is in that district, who will visit with us about one of those two concepts. A joint venture relationship or potential M&A activity that means the sum of one plus one is more than two.

I guess Strathmore has a mill already 60% under its preliminary feasibility study. Is that kind of high on the list of ones that are advanced, or more advanced, or are they all kind of looking about the same?

I don't have any specific details with regard to where they sit in their plans for their facility. I will simply say to you that they are one of the companies in the district that has significant assets, and as a result, we have open conversation, just as we have with everyone up and down the district, asking the same question. How do you intend to deal with significant capital costs for a milling facility? They, like everyone else, will develop a plan to do it on their own, and try to permit it. We would like to see that some of those activities get consolidated in some fashion, so that we don't all reinvent the wheel, so to speak, as it relates to the permitting and the capital costs necessary to get that central mill going.

Is there some likelihood or possibility of doing the project financing bit based on a mill?

At this stage of the game, we don't have that as a plan, because recall, our next step will be ISR mining at Church Rock, Crown Point. But within the confines of our feasibility study, we will look at every possible scenario for the capital structure for a milling facility.

Okay. Thank you very much.

Thanks, David.

There are no further questions in queue at this time. I would like to turn the call back over to management for closing comments.

Thank you all for listening. It's been a longer call this quarter than it has been in prior quarters. We expected that because this has been a very energetic quarter for us. In the first nine months, we are very, very pleased to announce that we have met so many of our objectives in this short period of time. But we have much more work to attend to. We have a senior management team that's second to none in this business, and I'm not talking about me. I'm talking about the people that I joined when I joined this Company a year ago. And I cannot tell you how happy I am that they have met their objectives, and are working towards the strategic plan that we announced at the beginning of the year.

As you have questions in the future, do not hesitate to contact any of the senior management team, or key advisors who represents us on all shareholders matters. Thank you, Debbie, and thank you to the operator for your assistance today.

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