Westwater Resources Inc (WWR) 2011 Q3 法說會逐字稿

Greetings and welcome to the Uranium Resources, Incorporated, third-quarter 2011 quarterly 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, Ms. Debbie Pawlowski, Investor Relations for Uranium Resources, Incorporated. Thank you, Ms. Pawlowski; you may begin.

Thank you, Jackie, and good morning, everyone. We appreciate your time today and your interest in Uranium Resources.

On the call I have President and CEO Don Ewigleben, who will discuss quarter and recent events as well as our strategy and outlook as we move forward. We also have Tom Ehrlich, Chief Financial Officer, who will discuss our liquidity position; Rick Van Horn, Senior Vice President of Operations and Exploration, as well as Mark Pelizza, our Senior Vice President of Environmental Safety and Public Affairs, will be available as well for Q&A. I will conclude the call with an opportunity for the Q&A.

If you don't have today's release it can be found on our website at 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 the 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 on the SEC's website at SEC.gov. So please review our forward-looking statements in conjunction with these cautionary factors.

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

Thank you, Debbie; and thanks to all of you that are joining us this morning and keeping your interest in URI. We appreciate it. I would like to start today's discussion with a bit of an industry overview and then move on to URI and our strategy to get to production in both New Mexico and Texas, while we are trying to enhance our uranium asset base through additional exploration and acquisition.

Although the uranium market continues to be out of favor for the most part with investors, there are some early rumblings of increasing confidence developing that begins to reembrace the opinion that many of us had on the long-term outlook for nuclear power and the expected imbalance of uranium supply to meet the growing demand. The M&A activity in our industry has resurrected of late. It's also good news in general for those of us who believe that this industry will survive the present pricing.

However, the near-term situation still reflects the seriousness of the incident at Fukushima, its impact on the current nuclear power marketplace, and its resulting impact to the uranium price. This, combined with the issues that uranium miners are facing with rising costs for equipment, difficulty in gaining personnel, and generally to get capital, are certainly making these times in our industry quite challenging. But I remain confident that the uranium industry will continue to rise to these challenges.

Current consensus on pricing still has most believing that reaching $60 to $65 per pound for spot is all that should be expected for the next few years. The reported weekly spot price was $52.25 a week ago.

But the daily broker price midpoint ended the week with an encouragingly increased price of $53.50. Long-term contract prices dropped a bit to about $63.00.

There are current overhangs that have been weighing down the price, which include the DOE's sales of its inventory that have not been in line with its filed plans, as well as the inventory building in Japan and Germany from the shutdown of reactors there. We believe, however, that these are short-term phenomena.

As we have discussed regularly, there still exist drivers for a supply-demand imbalance and overall support for an improvement in uranium prices. Let me recount a few of those.

As we all know, the Russian HEU contract comes to an end in 2013. Russia has its own needs for uranium to address its nuclear power plants.

Efforts by the DOE to sell its inventories have come under pressure recently from the GAO, the General Accounting Office. The DOE will be updating their plan, and this should help to remove that uncertainty from the marketplace.

Supply has become more concentrated, making the market more vulnerable to disruptions if there are any problems with a particular supply source. With many of the major producers reducing their production guidance, there are indications that supply could be tightening.

Let's just accept the fact that the likelihood of delays for certain mining projects expected in the next year are pretty good, and that it is possible it will change the nature of our pricing because it is the nature of mining.

World Nuclear Association is projecting demand from uranium to grow by 112% in the next 20 years, while production is expected to grow only to 69%. It's estimated that production was about 28 million pounds short of demand for the requirements in 2010.

Given this backdrop we believe we are advantaged with the significant assets we have to develop and the talented people we have to do so.

So let's turn from the macro to the micro with a look at our activities in Texas. We are nearing completion of Phase I of a three-phase exploration program in Kenedy County, Texas. Ours is commonly known as the Los Finados project. Rightly so, named after the original Spanish land grant for that area.

Let me give a brief background for folks that are new to the story. Our Los Finados project is comprised of the 54,867 acres that we have leased in Kenedy County under a three-year agreement that also includes an option to lease the acreage for uranium production. The exploration activity is being accomplished in a partnership with Cameco, who is funding the joint venture project. In return for their investment they can earn up to 70% of the property rights. The agreement also has a provision for us to provide toll milling when the project moves towards production -- assuming, of course, that we define a sufficient resource in our greenfield exploration efforts.

The first phase of the drilling program began in June and is expected to be completed by the end of November. This phase of the exploratory core drilling was done using a widely and evenly spaced program, covering a grid designed to test the potential for uranium mineralization over this very large 54,000-plus acreage project. As of the end of October, we completed 16 holes averaging about 1,300 feet each for a total cost of approximately $900,000.

As we mentioned on the last call, drilling conditions have not been ideal, so we did not get near as many holes drilled as we had planned. Nonetheless, we remain encouraged with the property's potential and are currently in discussions with Cameco on the potential start date of Phase II work. While we have encountered interesting sandy conditions, we note that we have made improvements with every drill hole as we begin to understand this area better.

Cameco does have 60 days from the completion of Phase I to opt in to Phase II to earn an additional 10% interest. Doing so will require an additional $1.5 million investment on their part in the exploration program. We are in discussions with them now on that Phase II project.

Let's not forget, we also have as part of this joint venture arrangement the opportunity to earn into 40% of future projects in the state of Texas in a certain region. We look forward to working with Cameco on this joint venture for many, many years to come.

I'll turn to Texas reclamation activities. We are building our record of successful restoration of ISR wellfields and believe this helps to substantiate our capabilities for our efforts in New Mexico.

From our past production activities we have two restored production areas at Rosita, where we have provided to the Texas Commission on Environmental Quality, or TCEQ, the results of our stability sampling in those areas. We expect the TCEQ will complete its review of those results and authorize final closure of these production areas so that we can complete their final closure in the latter half of 2012.

At Kingsville Dome, production areas 1 and 2 have achieved the levels required for restoration. Restoration has been terminated so that these areas may enter the required stability period for final sampling.

Our near-term plans do not call for a return to production in Texas unless we see some real improvement in uranium prices. However, in 2012 we expect to initiate a project to process are holding ponds. This will provide capacity and prepare us for an eventual return to production in Texas.

I'll move to New Mexico. Our priority in New Mexico is on the completion of the feasibility study by the end of 2011, which will determine the options available to advance our Churchrock/Crownpoint project and, more specifically, our Churchrock Section 8, which has 6.5 million pounds of in-place mineralized uranium material that falls under our NRC license and the Underground Injection Control Permit issued by the New Mexico Environmental Department, or NMED.

The study will also provide general direction for the rest of our New Mexico assets, including our conventional properties. Though we expect further engineering work in the early part of 2012 to complete our analysis of those properties, that type of detailed engineering work is always necessary after a feasibility study to get to a construction and production phase.

We can't change the uranium pricing environment. But thorough and complete analysis during this phase can focus capital investment requirements and control future operating costs. We have mentioned that costs for the total project are expected to be in a range of $30 million to $50 million, and given rising costs it could easily fall into the upper end of that range. This is a driving factor for our very deep dive on the various construction and design options for the processing facility.

The study will be bankable as we move forward and enable us to consider all options and combinations for financing, including a potential debt facility. It does not need to be bankable if we don't move forward for a debt facility; but we want to maintain all options. We'll continue to monitor the equity market conditions as well as joint venture opportunities to get this project built.

We still plan for New Mexico production in 2013. Production will be dependent upon availability of financing, the speed of construction activities, and access to required capital equipment. Of note, our Churchrock Section 8 will be the first uranium production in New Mexico in 20 years.

Let me speak specifically about our license and permit setting. There still seems to be some confusion. Every now and then we will get a question, so I'm going to be more specific.

As to our NRC license from the Nuclear Regulatory Commission, the license was reactivated in mid-October, which effectively allows for the production of up to 1 million pounds per year from Churchrock Section 8 until a successful commercial demonstration of restoration is made, after which mining on other properties can begin and the quantity of production can be increased to 3 million pounds per year.

URI is the only uranium company in New Mexico that possesses an NRC license authorizing current or new production. Of the 101.4 million pounds of-in place mineralized uranium material that we hold in New Mexico, 27.4 million pounds are amenable to in-situ recovery mining, or ISR, and they are covered under our NRC license.

With the UIC permit, which is known as the Underground Injection Control permit, the New Mexico Environment Department, NMED, confirmed in June that our permit is in timely renewal status. We have already submitted our renewal application, and additional documentation that required updating was submitted in April of this year. The NMED is currently conducting technical review of it, and we believe it is reasonable to expect the renewal in 2012.

With our announcement of the confirmation of our UIC permit being in timely renewal by NMED, we of course had a reaction. Eastern Navajo Dine Against Uranium Mining, commonly known in New Mexico as ENDAUM, filed a claim back in July that the NMED had misinterpreted its own regulations governing groundwater discharge permits in the timely renewal process.

We have intervened in the case. As of now a motion for summary judgment is scheduled for March 8 and a motion on a preliminary injunction on April 2.

With regard to legislative and administration attitude in New Mexico, contrary to popular belief, we believe the attitude toward mining in New Mexico is improving in the state legislature; and our relations with the Navajo Nation are strengthening as well. We have been particularly impressed with the new governor and her approach to resource development and bringing jobs to New Mexico.

I'm going to move towards our corporate development activities. We have been pursuing a variety of acquisition prospects or joint ventures, as we believe that consolidation in New Mexico can unlock the value of the measurable uranium assets the state holds, and we believe we can be the leader in this effort.

Nonetheless, these efforts take time. And given the market conditions since Fukushima, valuations have been a challenge relative to some unchanged expectations, I will say.

Our strategy regarding acquisition is quite simple. We will not acquire assets just for the sake of doing a deal. But we will do so when the acquired assets enhance our present position.

I would like to pause for a second and turn things over to Tom Ehrlich, our CFO, for a few comments on liquidity and on our financials. Tom?

Thank you, Don. I just want to take a little time to go over briefly the financial statements and operations for the quarter, and a little bit about our liquidity and where we expect to go from here. Our cash at the end of the quarter was about $5.4 million; that was down about $2.8 million from where we were on June 30.

$0.5 million of that was reclassified between cash and put into investment -- into our certificates of deposit as a collateral to support our financial surety requirements. So our net operating cash burn was about $2.3 million and on a monthly basis equated to about $770,000 per month.

Our receivables were up almost $250,000. That resulted from the Los Finados Cameco joint venture, whereby we extend the capital to do the exploratory drilling and Cameco reimburses us [based] on the next-month basis.

Moving over to our statement of operations, the biggest area that we look at on a real close basis is our corporate expenses. Our overall corporate expenses quarter-over-quarter from last year this year actually went down by $1 million. The biggest piece of that was the lack of rebooking a provision for legal settlement that was incurred in the last -- in the third quarter of 2010.

That was offset by about $350,000 of increased G&A expenses that we incurred this quarter compared to the same quarter last year. Those increases in general and administrative expenses were related primarily to legal and outside consulting costs.

The legal costs were extended to support attempted mediation and settlement of our Kleberg County litigation; legal work that was performed in connection with potential consolidation efforts in New Mexico; and the consulting fees were incurred related mostly to the work undertaken related to the Churchrock feasibility study.

One of the other exciting things that we were able to accomplish very recently was the agreement with BTIG LLC, where we entered into an at-the-market sales agreement that was signed on October 28. The ATM will provide us a low-cost and highly flexible financing tool that we think we can use as needed for our near-term requirements. It allows us to set the prices; the sales of our shares would be at-the-market, no discounts to market as are typically seen in certain equity deals. We can offer and sell shares of our common stock up to $5 million -- again at times and at our discretion.

Some of the proceeds or some of the uses that we will see for these is to continue to fund our feasibility studies, including the acceleration of potential engineering efforts and additional staffing to potentially bring the project into fruition as quickly as possible; to finance potentially some of the strategic initiatives that Don had mentioned; and also, as Don said, we are looking to bring -- to clean up the holding ponds in Texas which could cost as much as $2 million, but the proceeds from the uranium that would be recovered from that would look to offset that for a net neutral position overall related to the cash expended on that project. But again, the cash would be necessary upfront to perform those activities.

So again just a brief summary of our financials and our liquidity and, again, the ATM program that we now have in place. Don?

Well, I think now would be a good time to open it up for Q&A.

(Operator Instructions) David Snow, Energy Equities, Incorporated.

Good morning. On the macro, you mentioned that the GAO is pressuring DOE, which will update its plans. When are they going to -- what kind of pressure were they bringing? And when do you think the plans will be updated?

Well, the specifics of that GAO report, if you haven't seen it, are rather interesting, because first and foremost they have some difficulty with the bartering process that DOE we has been using. In fact, they are saying that it is illegal. And of course it circumvents the funds that are received from that HEU material going into the general coffers of the US government, and then they are bypassing the normal appropriations process. So that starts a question about how the whole process goes.

And then the next point is whether or not they have met the obligations that they set out so that they wouldn't impact industry in general. We don't believe that they have.

As far as the GAO's activities, they'd have to be considered inside the Department of Energy first and see if there will be an administrative response. And then if there isn't, there may need to be a Congressional response; and the industry is prepped for some discussion with DOE on that.

As to the specific timing, I am going to turn to Mark Pelizza, who is our Senior Vice President of Environment, Safety, Health and Public Affairs.

The Uranium Producers of America is very active monitoring this matter. We believe that over the course of the next year, the DOE will have to revisit its management plan. And we think that there will be some revisions that place further restrictions on their ability to liquidate their materials.

Okay. I am wondering -- you also mention that there is some guidance lowerings, and I am wondering which projects and guidances are you looking at that are being delayed over the next year.

We don't have any specifics, David, to look at that we can factor into particular models at this point. I think there are, as you well know, some people who spend quite a bit of time doing that; and we have been reviewing some of those documents that have just been out, the reports.

The point is we know we are headed for construction on our project. But we also know that some of our brethren, certainly in the US and in other parts of the world, are struggling to get to that point. They didn't make the permit schedules they thought they were going to do. They didn't have the capital necessary to move forward in exploration, development, and certainly construction.

We think that there will be quite a bit of pressure in Africa. And, frankly, there are lower grades being suggested out of some of these properties than what were previously expected.

So when you combine that with the concerns that normally happen in the mining cycle, where prices cause people to either build or not build projects, we believe that that pressure is going to eventually hit, and we want to time that appropriately. Our construction for 2012 and production in 2013, even though it won't be a full year's production of course, is certainly as quickly as we can bring this on efficiently. That is why we have taken so long in our feasibility study to ensure that we have got the proper scenarios reviewed to determine.

We are looking at in our feasibility study the marketing impacts of increased or decreased production, and what benefits or harm that might bring to our project overall. Because we know we are going to be a low-cost producer in the ISR facilities in New Mexico; we want to take advantage of that position, but we also want to be able to optimize the project to bring a maximum rate of return for shareholders.

You're talking about the feasibility study looked at your own impact or the industry's impact of increased or decreased production?

We are considering the external impacts, including whether or not there will be an increase in production as previously stated in a lot of the reports. Or in fact will it be a lesser number, and what would that do to potential pricing.

Remember, David, because more than half of our asset base in New Mexico is conventional and we are looking at the opportunities in the same feasibility study for how best to bring our conventional properties forward, it has even a greater impact there. If it takes more time for the conventional properties to come online, that will improve the overall position and maybe allow us to get into conventional sooner in our pipeline of production.

However, we're counting on getting Churchrock/Crownpoint up and running in 2013 to take advantage of what we think will be an initial increased price; and then as the prices do increase over time because of a change in what expectations were for production and therefore purchase of uranium, we believe we will be well suited to bring forward our conventional properties on the tail end of our ISR.

Okay. You had said that there was some interesting sands in your drilling in Texas. Have you got roll fronts that you just hit by random luck with the wide-spaced regular grid of holes?

It's too early for us to draw those kinds of conclusions. We haven't even finished Phase I; and as you know, with the spacing that we're using we are trying to zero in on strong fields in the future. Moreover it is a joint venture arrangement, and I am not in a position that I could discuss specific findings to date because that takes a joint venture decision.

But I am not trying to skirt the issue. We do want to talk about Los Finados; but remember in a Phase I where you've got mono-spacing of your drill holes you are trying to zero in on various locations. The sandy soil conditions are something that we are overcoming with every drill hole, and we are pleased to see that.

Depths are averaging, as we said, around 1,300 feet, but we have seen some depths -- a greater depth, we have seen some shorter depth. So right now it's a matter of trying to determine how best to take Phase II forward, and then we will know what kind of roll fronts are going to be available.

I am wondering if you can tell us if -- how many holes were you trying to have drilled when you actually got 16?

The fact of the matter is we are going to have more than 16 before this program is over, because we have only spent $900,000 of our $1 million budget. So we are going to have more holes.

But the original estimates varied, and it was in part because at the outset of Phase I drills were hard to get and drillers were hard to get, and particularly drillers who would meet fairly stringent standards for what we had in mind between the joint venture partners.

So we have improved our cost profile over time in part because more drills were available and certain drillers became available.

We did switch drillers. I am not at liberty to talk about the specifics, but we switched drillers over time so that we had a better chance of working in this new type of setting, if you will. And I do have Rick available if there is a more specific question, but we are somewhat limited as to what we can speak to. So I couldn't tell you exactly what the projected number of holes are, but I am at liberty to say we have produced 16 so far and we expect a few more before we have depleted the first $1 million budget.

Is the money for the holding ponds in 2012 going to be offset with any revenues immediately? Or how soon will it be before you start getting revenues out of that?

Well, I am going to let Rick speak to that because he has put the project proposal together. It is about a $2 million expense, which we believe will all be recovered.

But Rick, if you can speak to David's question about how quickly you will begin to recover that in sales.

The project will take approximately 10 months to complete. We will see our first saleable production in the -- something we can send to a converter in month 7. So we will have to have a working capital amount here to keep this project going of approximately $1.5 million to $2 million before we see our first sale.

Okay. Then how long would it take to get the full sales?

The end of the 10 months, David.

After 10 months you will have the whole sales completed?

Yes. That's correct.

Okay, so after 10 months you will really break even on this?

If we recover the uranium we believe is there, and if the sales price helps us out, that's correct.

So you're actually --

David, I'm sorry; are you finished? I need you to get back in queue; but finish up your questions.

Yes.

Okay?

Jackie, the next person in line.

David Talbot, Dundee Capital Markets.

Good morning, all. I have a couple questions about liquidity and then just want to follow up with a focus question. Now you did talk about a debt facility. How far in advance of production would you be considering to set something like this up?

And you did mention equity, but you didn't mention anything about off-take. Do you have some sort of alternative financing plan like that would see you selling forward?

David, we have considered all three of those options and we will continue to do so. Generally speaking we would avoid a debt facility simply because we had expectations pre-Fukushima that we would be able to use equity or some other form.

As you well know, we are very, very pleased to be involved with a joint venture with Cameco in Texas, and we have looked at opportunities in the past for having joint ventures in New Mexico. Those joint ventures typically would have an offtake agreement.

And while I am not at liberty to talk about specifics, obviously with a project that is coming on in the foreseeable future and the large-scale asset that we have in the New Mexico region, we have certainly had people approach us about such offtake agreements. In the past we have been reluctant to consider those until we were certain that there wasn't an equity opportunity or a partial equity opportunity or some other arrangement, including a debt facility.

A debt facility in our mind means we would have some form of an offtake agreement with someone, so that we can manage the debt appropriately. The good news for us is with a plus-15-year project at 3 million pounds per year -- that assumes no additional ISR acquisition or exploration activity to increase that mine life -- you can look at a debt facility and make it work in terms of rate of return and get the kind of numbers that we need.

That is part and parcel to our feasibility study. We will look at all three options. But I will say to you that I am most interested in joint ventures with offtake agreements if they take into consideration that $63 the present -- last week price for long-term is insufficient.

We would not be doing justice to our shareholders if we put in place a long-term contract setting at those kind of dollars, because we are confident that we are going to see an increased price after 2013, certainly once we are up and running. So we will be very careful as to how we consider each of these three options -- if you want to lump them in that category of equity, joint venture with offtake agreements, and/or debt facility with potential offtake agreement.

Okay. But in the meantime, if you are looking at production potentially in 2012, maybe early 2013, you would likely have to be delivering in a spot market at that point.

Yes, and let me just be clear. We will actually be in construction in 2012. We won't be in production until the latter half of 2013.

But if it was at that point that we still were looking at a $63 long-term price we would have to look at spot price. And certainly a portion of that early production would be at spot, because we have no present arrangement with any entity. We will begin those marketing discussions.

And while we have created the opportunity for those marketing discussions in a variety of locations, we are not in any great hurry to include an offtake agreement and a long-term price today.

Okay. Now as far as funds that might be held up in bonding in Texas, is there anything that is going to come back to you as your rounds of reclamation are completed?

Because of the stability period of time that has been included in the regulations in recent years, there actually is a slower process to get it back. Will we eventually get those dollars back? Yes; but we are not going to have them in the near-term future, meaning the next two years because of that stability period.

So we are not contemplating those dollars as part of our capital necessary to build either of our two districts -- to build the Churchrock/Crownpoint project in New Mexico or to get back to production in Texas. We will look forward to that as part of a long-term model in either location, but for now it is a matter that we'll need to raise the necessary capital to acquire new properties in Texas, such as we did in the Los Finados setting, or to continue to add to our asset basket in New Mexico.

Okay, and then I just had one final question about corporate focus. Your presentations start with Texas; you guys talk about exploration in Texas, the Cameco JV property acquisitions. During this call earlier you mentioned that you've got no plans to return to production in Texas unless we see higher uranium prices.

On the flipside, in New Mexico you have a pathway to production at Churchrock; then you've got -- with significant visibility. I guess a little less visibility with your conventional resources there.

But just where is your head at as a company? How do you focus on one project or what sort of focus are you giving on your pipeline?

Certainly. And it's a very good question, David. We have to stay focused on the most important activity for this Company -- that is, get to production. That means Churchrock/Crownpoint. That means get this feasibility study done, have the necessary capital, start the construction in 2012, and get into production in 2013. There is no higher priority than getting to production in New Mexico.

However, you are aware that we have certain contractual arrangements on both short-term and long-term pricing in assets other than Los Finados in our Texas setting. So it is difficult to say today we will go back into production at this price, because what is left of that original 9 million pound asset -- not including Los Finados -- has been depleted over 8 million pounds worth in the 20 years of operation. So what is left is not particularly low-hanging fruit resource.

That said, it is not a good idea to waste what sits there in South Texas. You have two processing facilities available for immediate activity. This is even if we get the toll milling arrangement down the road, because we have great success at Los Finados. We have capacity.

When you have two fully permitted facilities, to move away from Texas made no sense. We also have a great relationship with the community and with the regulatory authorities in the state of Texas in what is arguably one of the best places in the world to do business. With the combination of 30 to 35 people who have been doing this for a long time in that area, it is a human asset that we don't want to miss.

Then that last priority, you have to look at conventional assets way further ahead of time than any of our ISR. We stated this before. There in this district sits a number of junior mining companies, all expecting to build a mill. We know that the capital is not available for multiple mills at $250 million to $300 million to build a mill for conventional facilities.

So there will have to be some form of consolidation. So our third priority is to review our own conventional assets and ask the question -- what is it that is out there that might make sense from a joint venture, from an acquisition, from whatever standpoint to enhance our conventional pounds and bring them to production sooner, because we increase grade, we increase profitability? Or we improve our position in the permit line; meaning we have been so focused and will continue to stay that way on our ISR projects that we have not moved as swiftly as some of the other companies on the permit front for conventional.

So we only look at those relationships in the context of enhancing the existing 101.4 million pounds. Beyond that, we as you know have 182,000 acres in that district. Untapped resource that we have to get to an exploration phase when we have the necessary capital to do it.

We are right now only doing exploration to fulfill our own needs for the feasibility study. So last year when we did our small exploration infill drilling program, it was to ensure ISR amenability as opposed to going out and finding new areas of ISR.

Lastly, and still part of that same third priority, we know there are some people who have ISR assets in that region that are unlikely to be able to permit and build a processing facility for ISR. So it makes sense that we have open arms for all discussions with any owner of ISR-amenable assets in that district.

That means we have to have some understanding of capacity capability for that Churchrock/Crownpoint facility in the event that we decide it's going to be something more than 45 million pounds because of some form of joint venture, acquisition, or toll milling. Does that answer your question?

Yes. No, that more than answered my question and really no surprises there. So thank you for that.

(Operator Instructions) [Kurt Giordadis], a private investor.

Good morning, gentlemen. I was on the last conference call you guys had, and I guess a couple questions and I will keep them short is -- we keep talking about 100 million pounds, more acquisitions. Do you feel at some point that we are putting the cart in front of the horse?

By acquiring more things and doing more test holes that we get to the point where we take on more debt, we take on more partners, and we don't get to the point where we get to production. We are giving away the farm.

Kurt, we don't feel that way at all. In fact just the opposite.

Knowing that we are headed for construction and then production in New Mexico, we know that we will have the capability as a result of sales to do the necessary acquisition and/or exploration in New Mexico.

We are not doing it today. The only reason that we would be doing acquisition is, as I mentioned earlier, to enhance the specific assets that we have today.

We may have mentioned this before in the prior call but let me just zero in on a specific point. You are probably aware from our presentations that we have six shafts in our conventional areas. Many of our competitors do not.

So if we can enhance our asset position on a conventional property by utilizing our shafts and attaining or joint-venturing with them -- because they may have a higher grade or a lesser depth or a more feasible property that would improve the likelihood of production from our conventional, we have to consider that now.

The reason we are doing it now is we are in this feasibility phase. We are spending the $1.3 million -- we're actually under budget and we're on schedule -- for the feasibility study to go beyond the question of how quickly can we get to production in Churchrock/Crownpoint. We are asking ourselves these questions because conventional properties take much, much longer to get to production. So we have to be five years ahead of our plans for each of these conventional assets.

I understand your point, and every shareholder in URI should be asking management the same question -- how soon to production? Because they have been very benevolent in waiting on the New Mexico setting as we waited through the litigation.

Now that we are beyond it, we have the necessary permits and licenses to go forward, we have to get the job done right. That feasibility study will get us there. We will be in production in 2013.

And we won't be doing anything from an acquisition standpoint unless it enhances existing assets for a greater rate of return for shareholders.

We also talk about consolidation in the industry. We are seeing Cameco and other companies that are trying to buy other smaller uranium companies. Do you feel that the partnership with Cameco or the 1 million pounds that you are sitting on, and all these other things that you've talked about -- does that not make us a likely candidate for acquisition, consolidation?

What do you see? Have you had anybody approach you? Sometimes the whole farm is worth more money than its pieces.

Well, we always have to have that in the back of our minds. And more than that, as part of our strategic plan, we have addressed that question by asking -- if we were approached, by our own fiduciary responsibilities we of course have to consider any approach, and we take it to the Board of Directors, and then the shareholders if it has viability.

But we also have to ask -- have we done for our shareholders what we should be doing? And Fukushima did change valuation of pounds in the ground. But even in the unpermitted, uninfrastructured pounds in the ground pre-Fukushima, being $3 to $5 per pound, we should have a market cap of $300 million to $500 million.

We do not. And we know why. We have to get to production. So when we are in production, we probably will become a stronger target.

But we are a target today, no question, and we would approach every discussion in a manner that meets our fiduciary responsibility but keeps in mind that we need to bring value to shareholders. So as we move forward in our construction and then operation projects, we will bring value that brings to the shareholders a higher degree of value than if we were taken out today.

While I am not at liberty to say, because of things of -- confidentiality agreements and that nature, whether we have been approached, I can certainly tell you that at this point, we are not in a discussion for anybody to take us out. And I think I can tell you why.

It is only my guess, but if you think about we are the largest player in that district and there are a lot of small companies, a larger uranium company would likely be waiting to say -- what can be done in that acquisition on a very targeted basis, before they step into the district.

Because when a larger uranium company -- or a multi-minerals mining company, for that matter, because we have seen some of them taking up their uranium assets recently -- if they step into that district the prices will skyrocket. That is good for us and our shareholders, unless we need to acquire a particular piece of property.

So, we are very carefully watching what might be happening with the Hathor deal in the Athabasca, any of the other deals, the [Monsor] deal in Australia, and we are trying to compare how we sit. But we can't lose focus. The management of this Company has as its number-one priority -- get to production.

All right, I agree and I appreciate that. You know as a stockholder, I am just concerned, you talk about the ATM that has been set up or the financing for the further test holes and things like that. I mean, that is highly dilutive, of course, to us current stockholders.

I think that is probably better than going to the open market for financing. So just trying to get bearings on what is going to happen in the future. I realize 2013 is a very important date for all of us that are involved in this; and we are with you and hope you hit the targets.

Thank you, Kurt. Rest assured, we don't do anything in the capital markets without understanding its impact to our existing shareholders. So to the extent that we can keep this Company moving forward in the least dilutive manner, we will do so.

I will tell you that the ATM process years ago didn't seem to have the same level of benefit that it does today. So we took a hard look at whether or not this would deal with what I will call short-term financing issues at a cheaper price. And it did, therefore it is less dilutive to the shareholders.

But we do not take lightly where we stand with our existing shareholders. Part of that is because many of our shareholders have been with us more than 10 years and they want to see that production. They want to see Churchrock/Crownpoint up and running. Thanks, Kurt.

David Snow, Energy Equities, Incorporated.

Yes, hi. I'm just trying to remember where I was. The -- how many pounds do you have left in Texas after 18 million were depleted?

Well, 8 million were depleted, David, and we have a little less than 1 million left because a little more than 8 million of that original 9 million pound asset was -- 8 million of it was depleted. What is probably left is on the order of 650,000 to 750,000 pounds recoverable.

And I will turn your attention back to 2008 when we were at about $47 a pound, and 2009 when we were at about $43 a pound before we shut it down. As you know, we have short-term and long-term contracts there. I would like to see some movement in the relationship that we have there, and we are certainly hoping to have an arrangement that improves the opportunity to get back to production in Texas from that last, call it, 0.75 million pounds that is left.

But we also have some opportunity there. Unfortunately, this isn't the right time to be expending money. As someone has pointed out, we need to stay focused.

Let me explain. There are some lands that we have under our permits but we don't have land control. There are some areas that we have land control but we are not permitted. And for an additional estimated amount of $8 million to $10 million investment, we can bring in some additional pounds that would still be covered by our existing short-term and long-term contracts.

We have not done so because we would like to have a renegotiation of those contracts first. And then we want to make certain that we don't lose focus on New Mexico by coming back to production from what I have described as the lesser hanging fruit asset base.

And in the meantime, we have to go forward with Los Finados because it has such great potential. We ultimately look forward to the idea that if we can be producing 500,000 pounds per year in Texas, pre-Los Finados coming in, that would come from that existing asset we still have and/or new lands that we would acquire or new lands that we would permit. We would be very comfortable with a Texas operating plan going forward without any set time frame of about 500,000 pounds per year until we bring in Los Finados.

Okay. How much are you going to have to spend in '13 to -- I mean in '12 or through '12 to get yourself ramped for production in '13?

Well as we publicly stated, our conceptual studies in the past had suggested $30 million to $50 million to build Churchrock/Crownpoint and a processing facility. Based on what we know today it is certainly likely to be closer to the $50 million than the $30 million, and that is simply because of the increased cost of steel and all the materials, labor generally, cost of fuel, et cetera. But we won't know specifically until we have completed this feasibility study.

So we do intend in 1Q to have further information available to the public and to our shareholders about our expectations following the completion of the feasibility study. But part of this is also a question of -- if you are going to consider any other ISR assets that are out there being toll milled or acquired or joint ventured in that district, what is the optimum capacity for that project?

So we might increase the cost of the overall project if we believe there is a greater likelihood than not we will be able to bring in additional ISR assets. I can tell you right now we are very confident that we will, simply because we still own a great deal of acreage and untapped exploration potential, but also because there are people in that area that have lesser properties that it's unlikely they will try to build their own process facility. So we want to talk to them about, as I said, joint venture relationships, acquisitions, land swaps, whatever it may take to ensure that we maximize the capacity for Churchrock/Crownpoint. That will also tell us what that cost is going to be ultimately.

Did you mention 45 million pounds that you are going to be permitting for, that you're going to be building that $50 million project for?

Yes, the conceptual studies were based on approximately 45 million pounds for that district area that we own. That would not include anything we bring in. So it could be that we would need to increase that from 45 million; could be 50 million, could be 55 million. Too early to say.

But the point is, you want to be able to ensure that your facility could handle the additional capacity. And whether or not it has to be done now, vis-a-vis existing construction costs, or could it be done in baby steps over the course of a 15-year-plus mine life -- and that is what we get when we get to detailed engineering questions after feasibility.

45 million pounds is just the ISR?

Correct.

But you only have 6.5 million that you are going to initially be permitting. So aren't you going to phase your ISR project up in any case?

Well, we are. As you know, that license encompasses 27 million of that 45 million. We have additional permitting activities that we will do in years to come to bring in the rest. But we are concentrating on Section 8 to get started.

That is simply because the way the license is arranged that is where we must start. If we are going to seek to do anything outside of Section 8 before, it would require an amendment. And frankly right now there is no particular technical reason to do that.

So we will stay with Section 8 as the starting point and increase the overall capacity of that facility by permitting in those additional pounds in that 45 million and/or anything that we acquire, joint venture, swap for, or have as a toll milling.

The swapping or various horse-trading could occur in the coming year?

Well, I would have to say that we are very conscious of the question that Kurt just raised -- not to the extent that we would somehow lose focus on getting this built. But to the extent that there is an opportunity, and there certainly is; without question after Fukushima, pounds in the ground are cheaper. So we have to do our best review now to say whether or not we can enhance our existing asset base with some of those other assets.

But we are also very open to joint venture arrangements. So it could be that there is some other business model that would work other than acquisition. And we will maximize our production capability to take in any of the additional ISR assets because we just don't think anybody else is likely to build an ISR facility in that district.

In this last court action, you expect a motion. You are asking for the motion to be removed in March 8, and preliminary injunction would otherwise happen in April 2? Is that the time?

It is, but frankly we believe that the renewal process will be completed or nearly completed, which likely could moot the legal challenge. That is pure supposition, but we are prepared to go to the mat on all legal matters because this particular question -- as to whether or not NMED has interpreted their own timely renewal process -- is something that is not just important to us; it is important to every ISR property in the United States because timely renewal as a concept in all of the regulations -- particularly in agreement stage, but in a case where you have NMED having Clean Water Act authority -- we believe in the strength of their position; we will support it. And yes, we think we would prevail in summary judgment.

But it might be mooted simply by the fact that the renewal process will already have been completed.

So that is a potential critical path item that could prevent your actually starting construction if it didn't (technical difficulty) way.

No, that is actually not true. Remember that this is the renewal of the existing UIC permit. So we have the UIC permit in hand today, but every one of these permits requires a renewal period over time.

We want it to be renewed before we begin construction so that we have a complete open view for how we go forward.

But if we are renewing it as we are in production, that is still not a particular problem, because we can construct today.

But it would be difficult to finance with that overhanging, wouldn't it?

Honestly, I don't believe so. Simply because it is a legal permit today.

Okay.

We have all that we need, but we are in the renewal process -- call it ahead of the game, because we were prepared to do so and we didn't functionally change anything from the prior permit that would have caused a reopening of a hearing or anything of that nature.

So the heavy lifting of your capital will come in starting maybe in the second quarter of '12?

1 and 2Q. We are targeting 1 or 2Q depending upon market conditions, the completion of our feasibility study and any other detailed engineering that is necessary to bring it to bankable status; and generally speaking what happens in the marketplace for people who are out there buying uranium.

We also believe that 2012 will be a year of new discussion for the utility industry and for energy consortiums that are out there buying. The closer we get to production, the more conversations will be had about long-term (inaudible).

Okay. Thank you very much.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Don Ewigleben for any closing remarks.

Thanks, Jackie, and you have done a wonderful job with my terrible surname. We continue to believe in the long-term future of the nuclear industry. No question about it.

And the need for development of more uranium projects exists. Specifically in the US, to address the domestic requirements that are here.

We do remain focused on our strategy to advance New Mexico assets to production and grow our asset base in New Mexico, enhance it, or in Texas to get back to production.

We always appreciate you taking the time to listen to our conversations, but you know you can contact Kei Advisors at any given time, Debbie Pawlowski, or any of the individuals of the management team. And to the extent that it's public information we will be pleased to visit with you at any time. With that, I appreciate your participation today and look forward to talking to you in the future. Thank you.

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