Westwater Resources Inc (WWR) 2012 Q3 法說會逐字稿

Greetings. Welcome to the Uranium Resources, Incorporated Third-Quarter 2012 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, Deborah Pawlowski, Investor Relations for Uranium Resources, Incorporated. Thank you, Ms Pawlowski, you may now begin.

Thank you, Rob, and good morning, everyone. We certainly appreciate your time today and your interest in Uranium Resources. On the call, I have with me Interim President and CEO, Terence Cryan, who will review the recent events of the last quarter and what our focus and strategic initiatives are for the Company as we move forward. Tom Ehrlich, Chief Financial Officer, will review our current financial position. Also available on the call is Mark Pelizza, the Senior Vice President of Environment, Safety and Public Affairs.

After formal remarks, we will open the call for questions and answers. If you don't have this morning's news release, it can be found on our website at www.uraniumresources.com.

As you are aware, we may make some forward-looking statements during the formal presentation and Q&A portion of this teleconference. Those statements apply to future events, which are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in the news release, as well as in documents filed by the Company with the Securities & 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 precautionary factors. With that, I'd like to turn the call over to Terence to begin the discussion. Terence?

Thank you, Debbie, and good morning, everyone. We appreciate your time today.

Before I get started, I'd like to comment on the resignation of our President and Chief Executive Officer, Don Ewigleben, effective at the end of September. We were disappointed with Don's departure and made a concerted effort to retain him as our CEO. Ultimately, it was a lifestyle decision, not a monetary one, which Don made for himself and his family. Immediately after his departure, we began actively searching for a replacement and are interviewing potential candidates. Ideally, we'll be in a position to identify a candidate as soon as possible, though of course, as a Board, we must be diligent in our search to find the best possible leader for URI.

As you may have seen in this morning's release, there are near-term decisions that we need to make. We are narrowing our priorities and focusing on specific areas that we believe will position us for the long run. Ultimately, we remain confident in the long-term fundamentals for the nuclear industry and the outlook for URI. Our strategic intent is to have URI in a strong position to capitalize on the potential surge in pricing when it happens.

As experienced in 2005 to 2007, we know the market can move quickly. Nonetheless, there has been a steady decline in uranium prices, with the spot price dropping over 20% in the last six months. Uranium spot price closed under $41 at the end of October. Many industry observers now consider that prices may remain depressed through 2013 until the effects of the Fukushima-related nuclear plant slowdowns dissipate. As a result, an increasing number of global uranium producers are announcing cutbacks in production plans and canceling expansions.

In New Mexico, we are delaying construction plans for our Churchrock Section 8 project. This is significant because it eliminates the near-term requirement to raise the $50 million we have targeted in financing for the project. While we are delaying construction, we will continue with actions that improve the economics of the project and facilitate future development options for it. One option we are studying is a phased development plan that would reduce our up-front capital requirements.

Importantly, we are continuing to advance the negotiations with the Navajo. We believe the conversations are going well. Although we have mentioned it before, it is a major accomplishment just to be in these discussions, and we appreciate the Navajo Nation and its government for their recognition that we are truly interested in keeping the environment protected and protecting the welfare of the people in the region, and believe that our project can. Our objective is to reach a comprehensive agreement, mutually beneficial to both parties regarding ISR mining of uranium in New Mexico.

At the end of October, we released the results of a groundwater report we developed in conjunction with the Navajo Nation and the City of Gallup. The study was very positive, and substantiates our belief that ISR mining, specifically at our Churchrock project, is a safe groundwater-friendly way to extract uranium. Specifically, the study demonstrated that there is no discernible risk that ISR activities would adversely affect groundwater available to the City of Gallup and the Navajo Nation, and indicates that current and future water supply wells for the area will not be impacted by Section 8 ISR activities. We believe that this jointly-developed study is a solid step forward to help address mining concerns in the area.

The refinement of the feasibility study is in its final stages. We anticipate having a summary of the study made available to the public in December of this year. Certainly, the price of uranium has a significant impact on project economics. The base price used in the study was about $60 to $65, which provided a reasonable return. We recognize that the current royalty on the project impedes the projected rate of return on the project. We are in discussions with royalty holders, aimed at reducing this burden and improving the anticipated rate of return on the project.

Importantly, at the end of August, we did complete our acquisition of Neutron, which added more than 50 million pounds of in-place mineralized uranium material, positioning URI as one of the largest US uranium development companies. Some additional strategic benefits included resource development synergies in the Ambrosia Lake region, adding highly qualified mining and permitting professionals, and a previously-permitted conventional mill site.

In Texas, as noted in our release, groundwater restoration has been completed and is currently being monitored for stability at four production areas at our Kingsville Dome and Rosita projects. Final closure of these production areas is targeted for the second half of 2013. Restoration activities are continuing at three other production areas, two at Vasquez and one at Kingsville Dome, with stabilization targeted to be completed next year.

Phase II drilling for our joint Los Finados exploration project with Cameco wrapped up in August. Cameco, which now owns 50% of the project, agreed with us to delay the decision to proceed with Phase III until the end of this year. Although there have been no significant findings, the geologic opportunities in the area are still encouraging.

We also continue discussions with Itochu and UG regarding restructuring our current supply agreements in Texas. Restructuring the contracts would enable us to return to production sooner in Texas, when market conditions permit.

To accomplish our priorities, we are containing our cash requirements as much as possible, while still moving forward. As you might surmise, we will need cash to manage through the next year. To do this, we are formulating a financing strategy which provides adequate liquidity, while minimizing dilution to our existing shareholders. A shareholder rights offering is one option we are considering.

In summary, we need to manage our cost structure, stay focused on our priorities, find the right long-term leader for the Company, and be in a position to fully realize the value of our assets in the ground when the market improves.

With that, I'd like to hand the call over to our Chief Financial Officer, Tom Ehrlich, who will discuss our liquidity position. Tom?

Thank you, Terry, and good morning, everyone. With regards to our liquidity position, we had a cash balance at the end of September 30, 2012 of approximately $4 million. This compares to a cash balance of about $2.9 million at year-end 2011. In early September of this year, we closed tranche two of the investment agreement with RCF, and raised an additional $5 million in financing. The purchase price of the shares that we raised was about $0.52 a share, representing the volume-weighted average price for the 20 days preceding the Neutron closing, and they purchased right at 9.7 million shares of the Company's common stock.

During the third quarter, the Company sold 5.6 million shares of common stock, and raised $2.9 million under our existing At-The-Market Sales Agreement. In October of this year, we sold an additional 2.2 million shares under the program, and raised about $937,000 in net proceeds. At the end of October, we had a total of about $9 million in share value that was available for future sales under the ATM program.

During the first nine months of this year, the Company used $10.4 million of cash in operations, and $7.8 million of cash in investing activities. About half of which of the monies used in investing activities were directed for the funding of Neutron's operating and development budgets in connection with the merger agreement.

One other area that we have got facing us is our NASDAQ listing, and regarding the status of this matter, we're currently under a 180-day extension for our NASDAQ listing, which runs through mid-January of next year. Should we not be able to meet the minimum bid requirements of $1 for 10 consecutive days by January 14, 2013, we would be able to move into an appeals process with the Listing Standards Committee, with a plan to achieve a requirement to get back into compliance. That plan would need to include the prospects and the reality of a reverse stock split. Any reverse stock split that we put in place would require shareholder approval, so we'd need to go out with a full proxy solicitation to move on that one.

Terry? Can I turn the call back over to you?

Thank you, Tom. Operator, we'd like to open the call for any questions.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Gerald Fay, a Private Investor.

Hello?

Good morning.

Yes, good morning. I'm an individual investor; I have been for quite some time. A couple of the things you mentioned in the introduction, Mr. Cryan, the shareholder rights plan that you talked about, can you flesh that out a little bit?

Well, thank you for your question. As I noted in my remarks, we will need to raise additional financing in 2013. We are looking at a range of options, but we are very cognizant of the fact that we want to minimize dilution to our existing shareholders as we secure the necessary financing. One option that we are looking at is a shareholder rights plan, which would allow shareholders to maintain their pro rata interest in the Company. But again, we have not finalized our financing plan, but intend to do so before year-end.

All right, correct me if I'm wrong, a shareholder rights plan is also colloquially known as a "poison pill?"

No, Gerry, this is Debbie. A shareholder rights plan, basically, it offers you rights to purchase shares in the Company. Typically, it will be done at some kind of a discount, when we offer the rights to you, so you're just basically buying into the rights. Then, when we offer them to you, we will offer them to you at a range and we will provide like a given range for the rights and we'll provide a given time period that it would occur in. Is that correct, Terry. And so --. I am confusing him, but go ahead. So anyways, what it does is it enables (multiple speakers) .

(multiple speakers) effectively, how does that prevent dilution?

Well, because the shareholders, themselves, have the rights to purchase it. So if you purchase up, you get your pro rata amount of shares that you already hold; your piece of the pie stays the same.

Okay. I'm not following that.

I'll follow up with you afterwards.

I'm sorry for that.

No problem.

It seems to me that that would just be a plan that would make it less likely that somebody would take over the Company, or put control for that decision in the hands of the Board of Directors, rather than in the shareholders' hands.

No.

Is that incorrect?

No, not at all. We are looking at this purely as a financing vehicle. I think that you may be confusing that with some sort of a "poison pill" structure, and that is certainly not our intent.

Yes, that's not what this is at all.

Okay. Given that you've put off your plans to start construction in 2013, are you giving any tentative date, or is it totally dependent on the market for uranium?

Well, there are a number of issues that will impact any decision to move forward on construction at Section 8 Churchrock. Obviously, reaching a final comprehensive agreement with the Navajo is an important component of that.

Understood, understood. I believe I brought that up in the last call, and it seemed that you were down to either negotiation or litigation, as far as access rights, which, I'm concerned, is a major issue. Don't they have a very -- I understand you're working well with the Navajo Nation, I really appreciate that, but aren't they in a very strong negotiating position if they can totally inhibit your access to Churchrock Section 8?

Actually, I think that we are making very good progress, and as you probably know, we already have reached a temporary access agreement with the Navajo Nation. This is a significant accomplishment, and I think it really does represent a turning point in our relationship with the Navajo. We've continued to build on that, and our objective is to reach a negotiated agreement with the Navajo Nation on permanent access, rather than pursuing a litigation strategy.

Yes. Understood. Okay, I guess, one last thing, and I have got to be frank with this, compensation. You're basically in a hibernation mode right now, as I understand it. There's very little going on, no revenues coming in. Compensations are, from what we can see publicly, really high. Any thoughts? Can I at least suggest changing the plan to one, instead of using the ATM facility to go out and raise money to pay these salaries, compensate in those shares?

I think there's really, I think, maybe two questions embedded there. First, let me just talk about compensation as a philosophy. In our history as a company, we have, at times, in difficult times, taken aggressive and creative steps to address compensation. And that is something, certainly, that we will look at going forward. But we also have to recognize that, with the current state of the mining industry, we do need to remain competitive on compensation in order to attract the best talent. Certainly compensation is an issue, and something that we take very seriously, and our history has been, in tough times, we have found creative ways to lower our compensation expense.

I think the second part or question that might have been embedded there was in relation to the ATM. While we believe that the At-The-Market structure has been an efficient and cost-effective way for us to raise capital, we recognize its obvious limitations and we also recognize the potential overhang effect that it has on the stock. So as we look at our financing options for 2013, while the ATM is potentially part of the equation, it on its own will not be the answer.

And to your other answers are?

Well, I think as we've already indicated, we are evaluating a range of options; a rights offering is certainly one of those options; and our intention is that we will finalize our financing plan prior to year-end.

Okay. Well, thank you very much.

Thank you.

Thank you. I will now turn the floor back to management for closing comments.

Well, we certainly appreciate your time and attention today, look forward to continuing this dialogue with you and look forward to communicating with you on a very regular basis, as we move forward with our search for a permanent CEO, as we move forward with our plans for 2013. So, once again, we thank you for your time and attention.

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