Westwater Resources Inc (WWR) 2014 Q4 法說會逐字稿

At this time, I would like to turn the conference over to Wendy Yang, Investor Relations for Uranium Resources. Please go ahead.

Thanks Joe. Welcome, everyone, to Uranium Resources' 2014 financial results conference call. I am Wendy Yang. I am the Investor Relations for Uranium Resources. You will find our company listed as URRE on the NASDAQ. This call is being webcast on our website at UraniumResources.com where we have posted slides to accompany our remarks. Telephonic replay of the call will be available from our website for three weeks following today's call.

We will be discussing some forward-looking information today, and we caution our audience that such statements involve risks and uncertainties that could cause actual results to differ materially from projections. Please review our cautionary statement on Slides 2 and 3 and review the risk factors, including some that are specific to our industry, described in our latest annual and quarterly financial reports filed with the US SEC.

We have a brief presentation before the question-and-answer portion of today's call. Our presenters are Chris Jones, President, Chief Executive Officer and Director, and Jeff Vigil, Chief Financial Officer and Vice President of Finance. Chris, please go ahead.

Thanks Wendy. Welcome and thank you all for joining us today. Let's turn to Slide 4.

We reinforced our pipeline of projects around our two licensed 800,000 pound per year processing plants in South Texas with a strategic noncash land exchange in November of 2014. With that, we increased our land position in the South Texas uranium province by twofold to approximately 17,000 acres, adding the Alta Mesa Este, Butler Ranch and Sejita Dome projects to enhance our midterm path to production. These projects add to our asset base and they serve as future satellite operations feeding our processing facilities. All the new properties are located within 75 miles of our processing plants, presently on standby for a production restart when there is sufficient and sustained uranium price recovery.

Two weeks ago, we successfully raised $5.4 million in net proceeds from a registered direct offering of securities. We appreciate the support of our shareholders in our efforts to move URI forward in a continuing difficult market environment.

While the uranium spot price has shown improvement in recent months to, as of this morning, over $40 per pound, we remain focused on building our business to ensure growth for the future. We are excited about the year ahead and our expanded scope of business activities, including an $800,000 exploration drilling program in South Texas even as we anticipate further reducing the Company's cash expenditures to $9 million in 2015.

2014 was about cost optimization in our financial, operational and general and administrative functions for a streamlined and more agile organization. Our team's vigilance and relentless improvement has dramatically reduced our annual cash expenditures.

Our targeted cash expenditure for 2015 is about a quarter less than the $11.6 million expended in 2013 and just over half the cash expenditures in 2012. These cost reductions are sustainable as we move ahead. We expect that our current cash and the availability of our aftermarket sales facility will fund our working capital needs well into 2016.

2015 is about moving ahead in Texas with new initiatives for a planned design to advance our South Texas properties to production in three to five year, depending on exploration success. To that end, we have completed five holes at the Butler Ranch project and we are currently drilling at the Alta Mesa Este project.

In New Mexico, we continue to hold a dominant land position and a significant inventory of non-reserved mineralized material. This inventory of 122 million pounds of in-place uranium and 39.4 million tons at an average grade of 0.15% is located in the prolific Grants Mineral Belt in New Mexico. We also retain an extensive historic data base of uranium exploration data and drilling for the Western United States.

Our company will be successful if we keep a laser focus on safety, costs, and reliability in all areas of our business. These core values are essential to building a sustainable business to that end.

Safety includes of course the safety of those with whom we work. It also means the safety of the environment in which we work, our assets, our reputation and our business. This year, we have updated and improved our safety systems to provide for greater accountability, awareness and employee involvement.

Our cost performance has improved as we are doing more with less for the benefit of our shareholders and our stakeholders. We work hard to spend the right dollars on the right things.

Reliability means simply that we do what we say and we do it right the first time. Reliable results are the foundation for business continuity and a sensible platform for business development.

Our targeted 2015 spending level enables us to live our URI core values by running our business safely; maintaining our key mineral rights and property positions, maintaining readiness at our Texas operate for a quick restart, conducting exploration drilling on our new properties, continuing our ongoing reclamation, which reduces our liabilities and fulfills our permitting requirements as a responsible corporate citizen.

Jeff will take us through the numbers. Jeff?

Thanks Chris. Good morning everyone. On slide 6, the data shown here reflects the closing of the registered direct financing on March 6, 2015. The offering was for the sale of 4 million units, realizing gross proceeds of $6 million. Each unit, consisting of one share and one warrant for 0.55 of one share, sold for $1.50 per share. The warrants have a strike price of $2 and are exercisable for a period of five years commencing on September 6, 2015.

Upon closing of the financing, our cash balance was $8.9 million. As Chris stated earlier, our current cash and the availability of our aftermarket sales facility are expected to fund our 2015 plans, including the exploration drilling program and our working capital needs well into 2016. As of today, we have 29.6 million shares outstanding and 35.7 million fully diluted shares.

Moving to the balance sheet on Slide 7, our year-end 2014 working capital was $3.8 million, an increase of $5 million from the working capital depths of $1.2 million at the end of 2013.

In regards to our aftermarket sales agreement, we raised gross proceeds of approximately $3 million in 2014 and through the end of February 2015. Our convertible loan outstanding with our largest shareholder, Resource Capital Funds, remains unchanged at $8 million. RCF has been taking their interest payments which is based on a 10% coupon in common stock. The convertible loan matures at the end of 2016 and may be converted into common stock at a price of $2.60 per share.

On Slide 8, net cash used in operations was $12 million in 2014, an improvement of 20%, 22% from $15.3 million in 2013. This was a result of our cost reductions Company-wide which include lower mineral property expenses, landholding costs and general and administrative expenses. Mineral property expenses at $3.5 million in 2014 were 33% lower than in 2013.

General and administrative expenses drop by 6%, as shown on the slide. In regards to G&A, when we exclude non-cash stock compensation over the same period, cash expenses for G&A decrease by $1.2 million, or 13%.

Our net loss of $10.7 million or $0.44 per share in 2014 is compared with a net loss of $20.3 million or $1.06 per share in 2013. The lower net loss was due primarily to the non-cash market -- or excuse me, mark to market gain of $2.9 million, and derivative accounting treatment related to the convertible loan, a non-cash gain of $2.3 million for the land asset exchange, the reduction of $3.9 million in impairment costs from the prior year, and a reduction in mineral property expenses.

Back to you Chris.

Thanks Jeff. We have enhanced our pipeline of projects as shown here on Slide 9 with the additions of five new Texas projects from our cashless asset exchange. We added Alta Mesa Este, Butler Ranch, and Sejita Dome in South Texas to Churchrock in our midterm production projects. The other two Texas properties, Jack Pump and Nell, are considered prospective early stage exploration projects with indications of uranium mineralization that may be amenable to ISR amendments. This is a simple land swap. We exchanged our long lead conventional properties in New Mexico for nearer-term potential ISR projects in South Texas close to our processing infrastructure. In effect, we bought pounds forward in time. It is important to know that we retain some leases, mining claims and fee-owned mineral interest which we continue to refer to as our Boca Honda project.

To fill out our path to production in the near term, we have two currently idled South Texas processing plants which have ISR deposits with 674,000 in-place pounds of uranium and 419,000 tons at an average grade of 0.08%. And in our long-term portfolio are the Cebolleta, Crownpoint, Juan Tafoya, and Roca Honda projects in New Mexico. We have almost 51 million pounds in in-place uranium in mineralized material with these four projects.

Cebolleta is the leading project in the long-term portion of our pipeline. The Canada National Instrument 43-101 compliant technical report for the Cebolleta completed in April of 2014 recommends that we advance this to a preliminary economic assessment. Another recommendation was to drill and develop an initial resource model, a mineralized material estimate for the historic St. Anthony mine area. We are evaluating the path forward on Cebolleta while concentrating on our current efforts in Texas.

Slide 10 shows the location of our South Texas projects with our Rosita and Kingsville Dome processing plants labeled in red.

Turning to the next slide, number 11, these are photos from our exploration drilling in South Texas. We are using one of our PFN gamma ray logging trucks and crew to support the rotary drilling contractor.

On Slide 12, the Butler Ranch project consists of several properties totaling almost 2,600 in Karnes County, Texas. We drilled 1,600 feet in five holes in the parcel in the middle of the map in our initial exploration program. The Butler Ranch project is located in the prolific Karnes County mining district 45 miles southeast of San Antonio. Historic open pits in the area mined uranium deposits above the water table and were operated by Conoco and Chevron, amongst others. Our initial drilling was designed to evaluate the southwesterly portion of the uranium mineralization within the Jackson Group sandstones, which is the host structure of several known uranium deposits in the area. Our targets are below the water table, which could be suitable for in situ recovery methods.

As shown on Slide 13, we are moving forward with exploration drilling at Alta Mesa Este. Rotary drilling of up to 40 holes along a 1.5 mile target zone is now underway. The Alta Mesa Este project is located approximately 56 miles southwest of our Kingsville Dome processing facility and close to Mestena's Uranium's Alta Mesa processing plant and oilfields. The Phase 1 exploration drilling is designed to test for the presence of roll front uranium mineralization in the Goliad formation, which is the hole struck for Mestena's Alta Mesa in situ recovery operations. We plan to complete this drilling program during the second quarter of 2015. Analysis of the drill results from both projects will form the basis to design plans for further exploration and permitting work.

As we see on Slide 14, the spot price for uranium is up 11% in less than three months and has rebounded 40% from the $28 low in mid-2014. The price has leveled off as of this morning at $40 and change.

In early 2015, two additional nuclear reactors in Japan at the Takahama nuclear power plant were approved for restart by their nuclear regulatory agency. During the fourth quarter of 2014, the two Sendai nuclear reactors received endorsements for restart by the local governor and prefecture in Japan. This makes four potential reactor restarts approved by the Japanese authorities.

On Slide 15, we accomplished a great deal in 2014. We completed a cashless land exchange that put key property holdings near our plants in Texas. We reduced our year-on-year cash expenditures to under $1 million a month, averaging an anticipated $750,000 per month in 2015. And we produced three 43b101 compliant technical reports on Cebolleta, Boca Honda, and Juan Tafoya in New Mexico.

On Slide 16, we expect our Company to move ahead on several fronts. Keeping our safety costs and reliability core values in line, our goals for 2015 are to achieve zero lost time injuries; complete and evaluate drill results from the Phase 1 exploration drilling programs at Butler Ranch and the Alta Mesa Este projects; establish the scope and timing for Phase 2 exploration programs; achieve our targeted cash expenditure level of $9 million; increase shareholder value by adding to our portfolio of quality mineralized material; and pursuing opportunistic value accretive acquisitions and partnering opportunities.

With that, operator, we are ready for questions.

Thank you. We will now begin the question-and-answer session. (Operator Instructions). Joseph Reagor, ROTH Capital Partners.

Good morning guys. So, three kind of quick questions. First one, what is remaining on the ATM?

Total capacity on the ATM? It's $6 million of that, Joe.

Okay. Then on the drilling program, maybe I missed this. What is the total cost you guys are assigning to that drilling program for this year?

Our total estimated spend is $800,000 for this year. That includes both Butler Ranch and Alta Mesa Este drilling for the year.

Okay. And then with uranium recovering, we are now just ticked over $40 for spot and it looks like long-term contracts should be signed in the $50 range. How far do you think you guys are away from putting one of the Texas projects into production?

Thanks for that show. I think, first of all, remember that all of our Texas pounds are currently under contract at a discount to both long-term and short-term pricing. For us, we really look for spot prices to, one, be in the $48 or so range, and with a trend to support that price before we will make that critical decision to restart production in Texas. We really want a 10% margin on our pounds for safety so that when we start up, it is the right thing to do and it's continuous.

Is there any clause on your contracts that would allow you to -- since they're spot minus, is there a clause where you can buy them back?

Not to my knowledge, not to my knowledge.

Okay. Thanks.

Dan Scott, Cowen & Co.

Good morning guys. Two questions for me. First is with the recent deal between Energy Fuels and Uranerz, how do you think about the landscape for US-based producers right now? Does this change your business approach? Thoughts on M&A?

Actually, it reinforces the story and our thinking over the last couple of years. This space is ripe for consolidation and needs to be done. And EFR has taken a first, an important first step in their work with Uranerz.

Okay. And then second, when I look at your pipeline of projects slide and with the land swap that you guys did, you now have the three Texas properties and Churchrock listed in your midterm. Has Churchrock slipped a little bit or would you kind of handicap them all parallel or is there any preference at this point of one project over another?

We still look upon Churchrock as being in that three- to five-year time frame based on our discussions and whatever future discussions we have with the Navajo Nation. What we have done by adding our Sejita dome, Butler Ranch and Alta Mesa Este projects is done two things. We have derisked that three- to five-year time frame and we have put important low-cost pounds into the program for our future restart. As you well know, the permitting timelines in Texas are quite a bit favorable to our business. Instead of the five- to eight-year time frames that we look upon in other locations in the United States, Texas is a two- to three-year time frame on permitting operations of our type. You add a year of exploration and development to that, we can see production in South Texas on those three properties as soon as three and certainly within that three- to five-year time frame.

Okay, great. Thanks very much.

(Operator Instructions). Michael Legg, Midtown Partners.

Two questions. First, what is your cost of ISR production? What is your estimated cost?

First of all, let me preface our answer by typically we use an all-in sustaining cost of production. That includes all the capital required to develop the well field, complete the wells, operate the plant and the well field and reclaim. And on that basis, our all-in sustaining cost in Texas is around $48 a pound subject to aggressive revision as we get closer and closer to production and as we further reduce our costs elsewhere in the organization.

Secondly, if you're looking at cash cost of production similar to what some of the other uranium companies in the United States report, we would be in that low 30s%.

Okay. And then when you look at your cost of equity these days with the stock price where it is, is there any way that your major shareholder would increase the debt capacity they have with you as opposed to going to the ATM to obviously continue the cost of capital with equity?

We have not yet entered into any discussions with RCF about any changes to our current debt facility, so it is a little premature for us to answer at this time.

Okay. Thank you.

Rob Chang, Cantor Fitzgerald.

Good morning guys. Just to follow-up on the question that was asked just a touch earlier, the all-in sustaining cost you mentioned is $48 and you did mention you wanted a 10% margin. So is it safe to assume the magic number so to speak is around $53 then?

Actually, given our contracts and the way they are set up, a spot price around $48 gives us that 10% margin when we start up.

I see. Great. Thank you.

There are no more questions at this time. I will turn the conference back over to Mr. Chris Jones for closing remarks.

Ladies and gentlemen, we want to thank you for allowing us to provide you with an update on Uranium Resources. Have a great day.