Westwater Resources Inc (WWR) 2010 Q4 法說會逐字稿

Greetings and welcome to the Uranium Resources, Inc., 2010 year-end update. 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, Ms. Deborah Pawlowski, IR for Uranium Resources, Inc. Thank you, Ms. Pawlowski, you may begin.

Thank you, Christine, and good afternoon, everyone. We appreciate your time today and your interest in Uranium Resources. On the call I have with me President and CEO, Don Ewigleben, who will discuss recent events over the last year, and what the outlook and strategic initiatives for the Company are as we move forward. He will be joined by Tom Ehrlich, Chief Financial Officer, and Rick Van Horn, Senior Vice President of Operations/Exploration, as well as Mark Pelizza, Senior Vice President of Environment, Safety, and Public Affairs. We'll conclude the call with an opportunity for questions and answers.

If you don't have today's news release, it can be found on our web site 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 risk 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 web site, where we regularly post information about the Company, as well as on the SEC's web site, sec.gov. So, please review our forward-looking statements in conjunction with these precautionary factors.

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

Thank you, Debbie. Well first, I hope that everyone listening today has a wonderful Valentine's Day, and it's warmer wherever you are than it was a week or two ago. If you have a chance to spend a few moments today with your friends and your family and your loved ones on this special day, and enjoy the fact that we have some warmth in this country once again.

Secondly, we do appreciate you taking the time to listen to our brief review of URI's activities from last year, and what was a very exciting year for us. And the outlook for the Company in 2011 is equally strong. I'll begin by reviewing what we believe were the significant accomplishments in 2010 and then we'll discuss our plans for 2011 and beyond.

Under that heading of significant accomplishments over the last year, you have to start with what we started with, and that was a 2010 revised strategic plan that set a course for basically a recovery of stability for URI. All of our corporate objectives were met for the year in 2010, and it included a maintenance of a very important aspect of our business. We maintained the previous record of having zero violations of safety or environmental regulations, something we're very proud of in this Company.

We implemented a financing plan to ensure that URI had a solid footing and a very strong runway for future growth.

There were two successful offerings, raising a total of $19.4 million for the year, and this enabled the Company to continue to pursue our strategy toward building the asset base in both Texas and New Mexico, while advancing our properties in New Mexico towards production.

I'll start with Texas. We obtained a very large uranium lease. We announced a letter of intent with Cameco Resources for exploration of that lease, and we've been developing a joint venture with Cameco for future activities throughout Texas. I'm going to touch on this in more detail later, but we clearly made excellent progress on our strategy to capture opportunities to explore for and develop uranium in Texas, and capitalize on the license processing facilities we already had there, as well as a highly trained workforce and a strong working relationship with the regulatory agencies. I'll come back to this topic here in a minute and provide more detail.

But we also made solid progress on one of our key objectives for Texas. That is our restoration plans at all three projects. At Kingsville Dome, we treated over 250 million gallons of groundwater, completing restoration in two of the three production areas, that being PA1 and PA2. After some baseline polishing, we should begin stability sampling in these two areas in the second quarter of 2011. Full-scale restoration is under way at the remaining Kingsville Dome production area, and is expected to be completed in 2013.

At Rosita, we completed restoration for PA1 and PA2 production areas, which we mined out in 2009. They remained in stabilization all year, and we filed with the state for restoration table amendments, which provides for release of the properties.

At Vasquez, we completed groundwater restoration in PA2, and are now in stabilization-sampling phase there as well. We've now moved restoration operations to PA1, which we'd expect to complete during 2012, and progress that property towards stabilization as well.

The next aspect of our Texas plan was to sort of, get behind us, problems that were going to be in the way for further development. One of those was the settlement of the Saenz case. Now, as we've previously announced, we settled this case effective October 1, 2010. It was about licensing and royalty agreements, and it had gone on for quite a few years. Well, it's taken since October 1 for the plaintiffs to obtain all of the required signatures, so that we just sent the check for $1.375 million to the plaintiffs about a week ago.

We're very, very pleased with this settlement, as it offset a potential liability of what could have been upwards of $730,000 in back royalties. We had estimated an additional $500,000 in potential legal costs to take it to trial. And as well, we had a risk of an award that might be higher if it went to a South Texas jury, where there would have likely been a new judge hearing the case. We'll also now have a chance to consider certain properties that otherwise wouldn't have been available. All in all, the settlement of this case puts behind us those settings that would have cost to be expended on areas that didn't have anything to do with production.

In brief, in New Mexico in 2010, we look and ask, while we made this progress in Texas, you have to say it doesn't hold a candle to the positive movement that we experienced in New Mexico last year. We had two major wins in court, after decades of battle, on both the Indian lands issue surrounding our Section 8 of our Church Rock property, and our NRC license.

The resolution of the 10th Circuit Court case clarified that our underground injection control, or UIC permit, is under the authority of the State of New Mexico, which had previously issued that permit. The resolution of the second case by the 10th Circuit, which the plaintiffs did request a hearing by the Supreme Court, was denied, and that upheld the validity of our NRC license. What that meant is, all the litigation regarding our permits and licenses for Church Rock/Crownpoint projects were in place, and we could move forward with the development.

So, that progress being made, we started the feasibility study in the fourth quarter. We retained an engineering firm, Lintech out of Denver, to provide assistance in the areas of water retention, concrete, structural design, as well as some drafting support.

URI's also filled three internal technical positions to provide engineering services in the areas of geology, reservoir engineering and electrical engineering. These positions are located in our Kingsville office, but we've also opened up a small feasibility study office in Albuquerque, so that we have a location for our contractors and our internal staff to meet and work on the feasibility study. It's being conducted in several phases, and it's based on our priorities for our New Mexico properties, and I'll review that in greater detail when I talk about our plans for 2011.

The NRC license update is that it is advancing. Certain technical filings were required pursuant to the litigation before we could activate our URI NRC license. Those filings are now complete. We're just awaiting the activation from the NRC, and we'll announce that event as it happens.

The NRC license has been placed in what is called timely renewal status. This status allows URI to pursue development of the project until the renewed license has been approved. So we plan to move forward to develop the project under our activated license.

When we look back on 2010 on the uranium price, with a spot price last week at $73 per pound, and a long-term contract price at $73 per pound, we find ourselves in a very interesting set of times. Rarely has the price for long-term contracts been the same as the spot price, but we don't expect that phenomenon to continue, as we believe the long-term price will increase as new contracts are put in place in 2011 and beyond. But looking back on the uranium price in 2010, we saw a direct correlation of our share price rise to the increasing spot price for uranium, and that has historically been the case for this Company.

Our internal projections were that we would see a spot price of about $50 by the end of 2010 and $65 by the end of 2011. Well, obviously, we are re-thinking those projections for use in our feasibility studies and other conceptual work. Most importantly, a sustained price above $70 allows us to reconsider certain assets in Texas, but I'll speak to that in just a moment when we look at 2011.

Our liquidity position -- $15.4 million at the end of 2010. That included approximately $9 million raised from the November offering. The core cash burn rate for the second half of 2010 was approximately $720,000 per month. That reflected planned budget increases over the first half of the year so that we could grow this Company and bring assets to production.

The core cash burn rate for the first half of 2011 is expected to be slightly higher at $770,000 per month, and that includes approximately $80,000 per month for engineering studies and additional staff for the feasibility study. Bottom line is, we are in excellent financial position from one year ago today.

The sum of these activities in 2010 -- while we think the market has acknowledged the significance of these accomplishments, our stock price has gone from around $0.80 at the beginning of 2010, to where we were trading at over $3 at the end of 2010 -- almost a four-fold increase. And, at $3.30 and rising today, we continue to see the correlation to not only the uranium price, but to the accomplishments that we publicly stated we would reach.

Let's look at 2011 and beyond. First and foremost in Texas, that new lease agreement. In order to develop the agreements for the joint venture with Cameco, we had to first lease the property in South Texas. That was under that LOI that we had announced, and putting that in place at the very end of 2010, we reported on it on January 3.

That agreement allowed us to explore 53,500 acres in Kennedy County, Texas, for three years, with an option to lease the acreage for uranium production after that. While this is a green field exploration site, the property appears to be an excellent prospect, with potential for one or more uranium deposits that can be produced by the institute technology method, and this is based on previous water sampling tests that we completed from existing wells on the site.

The property's located within the prolific South Texas Uranium District, which has been a major producer for uranium for at least a half-century, situated near uranium mining operations which produced from the Goliad Formation. The property also has several oil and gas fields, and it's bisected by a major depositional channel system. These provide the geologic, stratographic, and geochemical components for uranium deposition and water-saturated host sands with good rock permeability.

Locally, water samples taken from a number of wells on the property contain levels of uranium or uranium decay products, that indicate anomalously high concentrations of uranium in the nearby rock. The lease option agreement requires a minimum exploration obligation of 100 exploration wells, or $1 million in investment in the first year, an additional 200 exploration wells, or $1.5 million investment in the second year, and in the third year an additional 200 exploration wells, or $2 million investment in that third year. Investment or drilling in excess of the minimum requirements in any year counts towards the following year's requirements.

Our exploration plans -- we'll be able to discuss our specific plans more fully once we have the final agreements in place for Cameco, and once they've reviewed and approved all of the budgets and plans. One thing I do want to note is that we already have filed for an exploration permit with the Texas Railroad Commission to ensure that we can progress quickly with our plans. That filing is currently under review, and we anticipate approval in sufficient time to be able to begin our exploration drilling later this Spring.

Well let me speak to the JV with Cameco more specifically. This has been a very time-consuming effort, due to the need for a total of three interrelated agreements for this joint venture. There is an exploration agreement, there is a prospective operating joint venture agreement, and a prospective toll milling agreement.

I've been asked by many shareholders -- why is it taking so long? You put out the announcement back in the Fall about the LOI? -- But I think if you consider the depth and detail required for these types of long-term agreements, and that we could only really start working on the details after the lease agreement was completed at the very end of December, I would say that being six weeks into them and nearly completed, is actually quite a feat at this point.

In my past life I worked on many, many a joint venture. I think this one is going to be one of the best we've ever worked on, but all the detail has to be in those agreements. And at this stage of the game, those agreements are relatively close for execution, and they're under review by the corporate powers-that-be for Cameco, so we have an expectation that we'll be able to meet our Spring exploration plans.

While all the major business terms have been agreed upon, the lawyers are still working out some details, and because of the number of people involved, I'm not going to say when I expect this thing to be completed. What I will say, is that it will be completed, and it will be in keeping with that Letter of Intent that we executed in November, and we fully expect to be under way with the exploration activities of the JV this Spring.

Well, what's the value of the JV to our investors? What our investors need to recognize, is that the fundamental tenet for the agreement is the fact that both Cameco and URI believe these properties which we've just leased represent an excellent opportunity to explore for and develop uranium in Texas. We believe that Cameco's involvement substantiates our expectations of the uranium potential that still remains in Texas, largely on the Big Ranch. It also provides an opportunity to capitalize on our existing processing facilities, at one or both, and these are fully permitted processing facilities.

We also want to develop working relationships with partners, as in Cameco, who are interested expanding their US production. As stated in the LOI, URI will have the ability to participate in other exploration projects in Texas with our partner. But this is a Step 1 in what we hope to be more joint venture relationships, where an experienced Company like URI can be the entrepreneur, or spirited junior mining house, for the more senior mining company like a Cameco.

Why did they choose URI? Well, I won't put words in their mouth, but I can tell you generally speaking, one of our objectives was to partner with a large multi-national mining house to use our on-the-ground expertise to advance future exploration and development in the US.

Fortunately, I think our partner recognizes that we bring that to the table. We've got proven experience in Texas in both ISR technology and in restoration. We're one of the few companies in the US that can state it has explored, developed, constructed, operated, and most importantly, closed projects. We've got an established Company. This is a 33 year old Company with very deep experience in uranium mining, strong management team, and a very, very positive reputation in the regulated community.

One of the things we were lacking in the past, but we've now put ourselves back in a strong position, is that we were not as financially capable. Now we have the ability to deal either on our own, or in a joint venture setting, and meet cash call commitments.

So what are our Texas production plans outside of the joint venture? Well, our objectives with regard to Texas production are to explore for, and develop, a larger reserve base. We want to advance our current properties through additional licensing and permitting, we want to lease additional targeted properties, and work with our customers to redefine the terms of some existing agreements, so that when we begin to produce again in Texas, we can sustain production with strong margins. The last thing I want to do is talk to a shareholder about opening again, only to find that we don't have adequate margins for staying open.

So we'll advance certain properties in Texas to our production. Although given our current sales contracts, and the present uranium pricing under those contracts, and considering that it's a less-than-lucrative nature of the resource that is left. And what I mean by that is, there's only about 400,000 recoverable pounds, and they are relatively costly to produce. They were about $48 a pound when we were producing.

We do not presently plan to return to production in 2011 on that production base, on that asset. Should we start up production now, it would take about three to four months to do it ,and there would be less than 50,000 pounds of fully permitted producible uranium with a small margin in 2011, so we're targeting those resources for production in 2012 and 2013, when we can have increased margins, better contract provisions, and better opportunities to bring in more assets to the base, so we have a continuous sustainable production rate in Texas.

We've targeted an additional 700,000 recoverable pounds that would have to be leased and permitted, and would potentially be in a production base in 2013. Those pounds are expected to be more costly, and require new sales agreements with our customers, but we're pursuing the properties with an expectation of higher uranium prices, so that we can sustain operations in Texas.

Obviously the key to our success in Texas is centered on uncovering additional reserves through exploration, which supports the logic behind our decision to pursue the joint venture with Cameco. It's very important to note that the new large ranch lease in Kennedy County is not encumbered by any existing sales contracts, so assuming an exploration plan that goes forward in 2011, 2012, and 2013, production from that property would be at considerably stronger margins than our existing asset base.

Well, I want to move to 2011 and beyond, and I'll start with New Mexico. It is clearly the strongest of our asset base, so we need to look at it first.

The feasibility study objectives are very clear. We want it to be completed in phases, with the highest priority properties looked at first, that being Church Rock and Crownpoint, and then our other ISR-amenable properties, and then our conventional properties.

We should be able to disclose in the early part of the second half of 2011 our plans and details associated with Church Rock and Crownpoint. Our project concept development cost analysis is under way. That study is going to provide project parameters, costs, equipment, and personnel requirements to begin production at Church Rock Section 8, including the well field, satellite plant, central processing plant at Crownpoint. The outcome will also include the definition of project timeliness and milestones. We'll be looking to optimize every aspect of Church Rock and Crownpoint.

Now, the first priority being Church Rock and Crownpoint, we want to do an initial well field at Section 8 Church Rock. The rough estimate to date in that cost per well field is between $8 million and $10 million. We'll want to develop project parameters and cost equipment personnel requirements, permitting and licensing, local reaction to the processing facility at Crownpoint, and then we'll estimate the cost of that processing facility. Its been roughly $20 million to $30 million in our conceptual studies, and we'll evaluate the alternative of trucking resins to our Texas facilities, or for that matter, any other facility. The study will determine required uranium prices for various expected levels of rate of return on investment. The time for production to restoration will be considered and the time for restoration. All that with regard to Church Rock and Crownpoint.

Then we'll prioritize the production beyond Church Rock to develop a pipeline of supply. We'll determine which resources are better mined using conventional methods. You probably recall roughly 55% of our reserve base is conventional. That includes our Roca Honda property, our West Largo property and our Nose Rock. And in addition, parts of Crownpoint may have to be mined using underground techniques, because of encroachment by the town of Crownpoint.

The viability of these reserves are dependent on the availability of a conventional mill facility in the district. We're fond of talking about that, because we believe that a central milling facility, or maybe two milling facilities in that district, is a likely outcome when all of the mining houses look at their plans.

We hold the necessary NRC license, the EPA aquifer exemption, the State of New Mexico water rights, and ground injection control permit, to allow Church Rock Section 8 development to begin as early as January 2012. That means we need to be prepared for construction decision, take to our Board of Directors for early 2012, and we'll need to raise the capital necessary to build the Church Rock/Crownpoint project, as I've stated, somewhere on the order of $30 million to $40 million. We'll firm up the specifics, and then we'll make that decision for construction in 2012, and production in 2013.

Looking on the NRC license going forward, I mentioned that the resolution in the 10th Circuit case upheld our license. But there were technical filings that were required pursuant to that litigation that would allow us to activate the NRC license, and we've done that. Those filings are complete. The NRC activation of the license is expected at any time. The NRC license has been placed in this timely renewal status. In other words, it can be used until the renewed license has been approved. URI will develop this project under the activated license and we'll announce, of course, once we get the renewed license approved.

As for the UIC permit, the resolution of the 10th Circuit clarified that our UIC permit is under the authority of the State of New Mexico. URI currently holds that New Mexico underground injection control permit, and its been placed in timely renewal status as well, so it may be used until a renewed permit has been approved. We're about to file an updated supplementary information for the renewal by March 1, and the renewed UIC permit is expected by year-end 2011, and in the meantime, we can work under the timely renewal status.

We did some drilling in Section 13 in 2010. We put out an announcement about it on Friday. I won't go through any great detail, but our initial assessment has been completed, an outside laboratory evaluated the core samples, and confirmed that the property is suitable for ISR mining. Some further leasing studies will be required to better establish recovery percentages and a full scale mining scenario, and the property will need some additional permitting for ISR, and an amendment to our NRC license. It is not as high a priority as Church Rock, but nonetheless, we wanted to continue our activities. We had the drill permit, we had the funds to do it, so we completed that drilling to better understand our asset base in New Mexico.

I frequently talked about consolidation in New Mexico -- mentioned it a second ago. Strategically, we've just always felt that it was critical for the assets in New Mexico to be consolidated. It would not be economically feasible, in our minds, to mine the many smaller quantities of uranium held by several other junior mining companies. And in many cases, there are situations where either data, or shafts, or any other aspects from a synergistic basis, make it more logical for various projects to emerge.

Ultimately, New Mexico could end up belonging to just one or two major players. We're not sure but we're prepared to hold those conversations. We're prepared to have direct discussions about assets in the synergistic valuation, putting apples-to-apples and trying to determine, is it better in a joint venture setting? Is it better in a merged setting? But clearly, there won't be five or more mills in that singular district.

We think our involvement with Cameco in Texas could be a precursor to a similar opportunity with them, or any other joint venture partner, in New Mexico, so we're open for that joint venture opportunity. But I do need to note our primary asset base is New Mexico. We're focused on getting Church Rock and Crownpoint up and running. We're focused on the new exploration opportunities in Texas, and we will re-open Texas when we know we can sustain it at a profitable margin to bring shareholder value.

I'm going to now open it up to questions and see if there are a number of questions that we can answer today on any of the things that we've discussed, or any other matters regarding URI.

Thank you, we will now be conducting a question-and-answer session.

(Operator Instructions)

One moment please, while we poll for questions. Thank you. Our first question is from Peter Homans with Parkman.

Hi, Don. Good press release, lots of stuff going on. If I could ask you sort of three or four questions, which are related -- if you could write them down so I could ask them one by one. The Kennedy property, do you have, from some studies, or from knowledge of the surrounding geology, as to the probable or possible recovery from that area? So the Kennedy property, what could that be in total? Second, in Section 13 in New Mexico, one -- if I understand it correctly, that's Ambrosia Lake, is that right?

Correct.

Which I gather is fairly large, or theoretically, from studies done in the 70's, it's a fairly large potential resource. How did the -- not only the amenability to ISL, but the quantities of mineralized uranium that you found in those two logs, equate with your expectations? And do you have an estimate of what that area, even though if not your first priority, to produce? In the Kennedy section, do you have a sense of what your -- since you won't be burdened by low-cost contracts, do you also have any sense of what the probable production costs are?

And then finally, have you been having conversations with the Navajos, now that it's either gone, or sort of in the wind so to speak? And they have 75 million pounds on their property, and were turned down in getting a coal production operation going, which is certainly environmentally as bad or worse than uranium. Do you have any sense of where your conversations are with them, in terms of your being the producer, of miller, or processor, or whatever with the Indians? So that's Kennedy, New Mexico Section 13, quantities, etc., and then the Indians.

Well thanks, Peter. Those are all great questions, and perfect for today as to where we look forward. I'm going to break them down to Texas and New Mexico. We'll start with Texas, and then move to New Mexico, and when we come to Section 13, I'll ask Rick to respond specifically to the Ambrosia Lake questions, about how we saw those logs as they came out.

Okay.

The property in Kennedy County, and I should have been a bit more forthcoming in one regard, we've actually just named the project [Los Fennados]. It's an historic reference to the Spanish land grant for that particular location, and we've not got any new logos out or anything of that nature. But the project in Kennedy County -- in our initial studies looking at three 1000-acre parcels, gave us an initial belief of an estimate of somewhere in the 3 million to 5 million pounds, but since that time, and going to a 53,000-plus acre large-scale ranch with our partners, we would likely believe there is something stronger than that.

That's one of the reasons to bring in a larger mining house, and we'll look to see whether there's a way to accelerate some of our plans in the exploration, so we can further define this quicker. But certainly there is an expectation that will be beyond those three 1000-acre target areas within the three-year exploration period.

Staying with that topic, we don't have a cost estimate at this time of what those potential pounds will cost us. What we do have is a guess based on other similarly graded areas. Recall that while we're at the very tail end, having already produced 8 million pounds of our prior existing asset base, let's just put it where it is. The low hanging fruit was already gone. That's why we had a $48 cost in 2008 for those pounds, but this is a green field exploration play that should be sub-$30 per pound in production costs. Well, it's too early to tell --

Is it part of the same trend?

It is in the same trend, and recall that many of our pounds were produced in the teens in that trend. So it's too early to say. That is one of the reasons that we would hope to have some extra technical advice and support from our partner. So while we are the operator on the project for the initial period of years, we'll be looking to optimize that exploration plan to answer those questions as early as possible.

I'm going to switch to New Mexico, and before we talk about Section 13, and I'll hand that to Rick, let me address the question you raised about the Navajo. I think everyone is aware that Ben Shelly was elected as President of the Navajo Nation back in November of last year. He has been putting his cabinet together, and I will say that I am extremely pleased with the opportunity that the uranium mining industry has to talk to the Navajo openly about our technologies, our plans, our long-term view of the district, and some day, the question about whether or not they would be willing to have a viable partner come in and look at their uranium assets.

What do we know at the moment? The so-called uranium ban, which actually was never a uranium ban -- it said there would be no uranium mined on Indian lands, or native lands of the Navajo, unless a set of criteria was acceptable to the Navajo community.

What we're hoping to do is through our Church Rock and Crownpoint property, get it in construction, get it in production, show the restoration capability. We will be the closest entity -- we will be the only entity at this time, that has the appropriate licenses. And we're very close by, so that we could open up this dialogue over the course of the next few years with the new President, his newly named council, and look towards this discussion of how to create a scientifically approved set of criteria to allow uranium mining, particularly ISR technology, on native land.

Is he much more open minded than Shirley was?

I wouldn't want to characterize what his open mindedness is. I will say from what he's demonstrated, they have been willing to have an opening conversation. And I'm very pleased to say that they allowed us to begin a discussion by telling them what our plans were in New Mexico, and why we believed our technology was safe. It also does include the conversation about their historic concerns, both on the ground and to their people, and we believe the industry has already stepped up to the plate, so to speak, on legislative matters in the past, and we're willing to look at that again as an industry.

So we think the dialogue is now open, and we'll be able to have a good conversation in the very near term with the new President and his staff. So we're very pleased. I'll turn it over to Rick now to speak on the Section 13 drill results.

Peter, the Ambrosia Lake district has been a prolific producer, that produces a significant amount of the 350 million pounds that had been produced in the past out of the (inaudible). We hold four separate properties where we have known reserves on them. Section 13 is one of them. It's got about 160 drill holes on it, and we show a reserve of about just over 800,000 pounds in place.

We were looking for an alternative when we mired in the court cases on Church Rock, to Church Rock, someplace where we could use ISR. This, along with other properties in the trend owned by us and by competitors, look like it might be a good candidate.

So we applied for and got a drilling permit, we drilled three holes last year. We took -- we pulled core on those. We got some 70 feet out of 95-foot total cored and that core was sent up to the Hazen Research in Golden, Colorado, where it was microscopically analyzed, using an electronic microscope, and we took sections of the core, we quartered the core, took sections of the core, and actually did chemical analysis on it.

What the chemical analysis showed us was that we had low carbon values. That's one thing that had concerned us to start with, and the core is very dark to look at it -- it looked like there were flecks of carbon in it. When we actually ran the chemistry on the cores, we had low organic carbon levels that were in some cases, and most cases, under a tenth of a percent.

Why is this significant? It's significant because carbon will preferentially go after the oxygen and give us very low recoveries using the oxygen based leach feed that we can use. So what we found was that yes, there was no carbon. It looks like it really is leachable. The uranium occurs in and amongst the sand grains, so we can probably contact it, but there's a lot more work that needs to be done on this, and when you look at what we need to do on this, versus what we have up with Church Rock, and the fact that we have licensed properties at Church Rock, that puts this on the back burner, and that's where it is right now.

And I'm sorry, I lied. I have one more question, and that is sort of a double question. Cameco, if I understand correctly, as have Rio Tinto and a number of the other players -- over-sold their production, which is one of the reasons the spot is going up, because the producers are actually in the spot market. If you were to find in this Kennedy property, say, 8 million pounds, 70% of 8 million is 5.6 million pounds, which frankly is not going to do a whole lot for Cameco in terms of their strategic shortfall.

However, shouldn't one presume that their real interest in -- or isn't it reasonable to presume -- without putting words in Jerry Grande's mouth -- isn't it reasonable to assume that's the principal reason for them partnering with you in Texas, is to kind of get your feet on the ground and see if you can move together into New Mexico? Because only 100 million pounds there wouldn't really have any serious effect on their reserves, and given that they're the largest in the world, the most experienced by several orders of magnitude, is there any reason why, if things go well in Texas, why you would be looking for other kinds of partners? Because it's a pretty small group and they have 25% of the market.

Well, Peter, it would be silly for me to try to speculate as to what their intentions are, as to why they wanted to be in a joint venture with us, and if it had anything beyond Texas. It presently only involves Texas, and the good news is, it does allow for us to participate up to 40% in projects other than the Los Fennados project, if they should acquire them, and it allows us to bring them in. And yes, on that particular property, after they earn in the full potential -- and this is standard for a Form 5 joint venture in the US -- they would have 70%, and we would have 30%. But if we look at that and try to speculate, is that a stepping stone to New Mexico? I'd have to say no.

They were very, very serious about looking at the potential of South Texas. They have people who spent some time there in the past. They have people who came there and looked very diligently at the potential that was left, and when we talk about these large ranches, we do have to understand that several of them are untapped resources still within the district, So, our belief is that they joined forces with us because we were on the ground. We offered an experiential level that they didn't have people to do on the ground. And then secondarily, they must have believed that this potential is far greater than what we originally thought it would be, in that 3 million to 5 million range. If it turns out to be something more than that, we're always open for a discussion, as I've said.

We certainly are happy to be their partner in Texas. We don't have at present any discussions under way about a partnership on Crownpoint and Church Rock, because frankly, we have the financial wherewithal to build it, to operate it, and to close it all on our own, at a 15-year mine life project of that nature. You know, it's just a great project for URI, and we'll see whether or not it would make sense at some point in time, and whether or not it brings value to our shareholders, if we do it in a joint venture setting. But for now, the joint venture is just Texas, and we'll keep moving forward on that 100 million pounds in New Mexico.

That's great.

Thanks for the questions.

Thank you.

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

Yes, hi. Just wondering if you can give us some ballpark of a timeline on the New Mexico ISR? Which areas would you do, and what quantity, and what time you would obviously start with Section 8 and -- mid '13 I guess, and how does it go from there?

Thanks, David for the question. As I've stated, our number one objective at the moment is to get Section 8 up and running, but let me turn to Rick and ask if he could speak to how he sees that feasibility study defining that pipeline going forward, as to what might be the next steps. Rick?

The feasibility study should be complete by the end of March. It's not going to be on Section 8 -- Section 8, only -- because it's our license facility and we'll be going forward with that. Assuming that the feasibility says that this is economic and we want to proceed with it, we would start work on the ground the first of 2012, for a start-up production some time mid-2013. There are 6.5 million pounds on that section. We will get about 4 million pounds, 4.5 million pounds, out of that. That will operate for five years and then we will move to the south to Section 17.

Remember that we are constrained by our license in that we have to demonstrate commercial restoration somewhere within the first 3 million pounds, and that's obviously one of the things we're looking at in the feasibility study. After that commercial restoration has been demonstrated, we are then free to increase from the million pounds a year that we are limited to at Church Rock, to utilize our full license amount of 3 million pounds a year, and after we're done with Church Rock, we could then move to other properties in the -- on the license, and the next one would then be Crownpoint.

Do you feel that you could do the 3 million -- the full license 3 million pounds before you move out of the, I mean -- what internally timing would you see in getting up to the 3 million pounds?

David, we could go increase, you're talking about increase into Church Rock, right?

Well, yes, any place, to get to the 3 million pounds versus one.

We could, but we would have to put more remote IX plants, because the original IX plant is going to be sized for a million pounds a year. If we feel like we want to increase that, fine, but I think it might be better, and this will be subject of other feasibilities, but it might be better to take that money and put another plant at another site someplace.

Well, when would you have the license ability to go to 3 million pounds?

We have the license ability to go to 3 million pounds as soon as we demonstrate commercial restoration, and that has to be some time within the first three years.

So when would that be likely?

That will be likely probably somewhere after year two.

Okay, good. Thank you very much.

Oh, let me ask one more if I could. You're looking at the Texas -- if you looked at that entire trend, I mean, it just would dwarf the ability to explore it in three years, wouldn't it? Would you high-grade it, or have you looked at all of the well water along it, and have some high grading? How could you get your hands around that in a three-year time frame?

Rick?

Oh,, there are a lot of targets on the Texas trend that certainly haven't been mined out. No, we haven't looked at all of the water. Yes, it's something we can look at. There's no way we're going to mine it out in three years. All we're looking at, and I assume you're talking about what we plan on mining if we go forward, are what we currently have, what we currently own. And if we go past what we currently own and acquire new leases, that's going to increase that out past three years.

I was thinking about the Kennedy ranch, the Kennedy County, the 53,500 acres.

The Kennedy County would probably be -- we're limited at Kingsville to a million pounds a year, if you put another dryer in, so we would, depending on the size of the ore body, it would be mined out in three, five, 10 years, depending on whether we got three, five or 10 million pounds there.

Okay, I'm not asking the question right. How can you explore the potential of the 53,500 acres in a three-year period? It seems --

Oh, okay. First thing we're going to do is drill it on a mile-by-mile grid looking for redox fronts -- oxidation reduction fronts -- which show us where the uranium could be, if it's going to be there at all. We would then close in on that, and drill it on about a 2000 by 2000-foot grid, and that's in Phase II and in Phase III, we'd close in on that and drill it on a -- drill the targets on about a 500 by 500 grid or even a 200 by 200 grid. So we're not going to drill the whole 54,000 acres.

What we're going to do is find areas of interest at the end of Phase I, concentrate on those in Phase II, find areas of interest there, and in Phase III we would close it up even more. And then at the end of the three-year exploration period, we would then find -- or we would then pick -- the thousand-acre minimum sites that we would want to take the license.

Okay, so you're limited to how much to -- thousand acre minimum sites, can you take as many of those as you want?

Yes, sir.

Would you have to do additional closer-space drilling before you actually went into production?

Yes.

Okay, and so all you got to do is really pick your sites, you don't have to really have them all teed up for production?

That's correct.

And David, it's important to note that those numbers that I said earlier are the requirements of the existing exploration lease for 100 holes, for example, or a million dollars expenditure in the first year. That's a minimum, so depending upon how we work with our partner here and develop a budget, there could be accelerated exploration activity on that property to draw some conclusions sooner about the size and the nature of that exploration play.

Would you have the wherewithal to go to the acceleration when you're also trying to move forward as fast as you are in New Mexico, though?

Well, as you can imagine, joint ventures are structured such that you've got some people on the ground doing the activities, and then you've got people trying to earn in, so the majority of those expenditures in the Texas exploration play would be made by our joint venture partner.

Okay. I had one more question and it keeps eluding me. Oh, yes. Would you make a profit on the toll milling?

The answer is yes.

Okay, how about on the operating role?

Well, while we're operating, we get a percent before we're operating.

You get a what?

We get an add-on percentage for operating. It's an essential management fee like most joint ventures.

Okay, all right. And would that cover costs, approximately, for the operating?

Yes, because it's a cost-plus, yes.

Okay. All right, thank you very much.

Thank you, David.

Mr. Ewigleben, there are no further questions in the queue at this time. I would now like to turn the floor back over to you for closing comments.

Thank you, Christine.

Well, thank you all for your time, for your interest, and particularly for the continued investment in Uranium Resources, Inc. I hope that you come away from this call as excited as I am about our future. We've had tremendous growth in 2010, and it would seem it would be hard to top the progress that was made. But the reality is that we're poised for an equally strong year in 2011.

There's very much to be done, but looking back on what this strong management team that I inherited when I joined in late 2009 -- what they accomplished in 2010, I believe that we've got the people, we now have the resources, and we've got the appropriate plans in place to successfully implement the strategic plan and bring significant value to shareholders by growth in URI.

I look forward to speaking with you all again in the near future and as always, you can contact key Advisors through Deborah Pawlowski, or myself, or Rick, or any of the Management team at any time, and get questions answered. We will always be open to your questions and try to learn from what you ask of us. Thank you very much for the call today.

Ladies and Gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.