Uranium Resources Inc. (NASDAQ:URRE)
Q2 2009 Earnings Call
August 10, 2009; 1:30 pm ET
David Clark - President & Chief Executive Officer
Tom Ehrlich - Chief Financial Officer
Deborah Pawlowski - Investor Relations
David Snell - Energy Equities
Greetings, and welcome to the Uranium Resources second quarter 2009 financial results 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)
It is now my pleasure to introduce your host, Miss Deborah Pawlowski, Investor Relations for Uranium Resources. Thank you Miss Pawlowski, you may begin.
Thank you, operator and good afternoon everyone. We appreciate your time today and your interest in Uranium Resources. On the call is President and CEO, Dave Clark; Executive Vice President and Chief Operating Officer, Rick Van Horn; and Chief Financial Officer, Tom Ehrlich.
Dave is going to provide some comments regarding the company and today’s release, as well as the outlook, and Tom will then do a brief review of the financials. After that we will open it up for Q&A. If you don’t have a news release, it can be found on our website which is www.uraniumresources.com.
As you are aware, we may make some forward-statements during the formal presentation and the Q&A portion of this teleconference. Those statements apply to future events, which are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from where we are today.
These factors are outlined in the news release, as well as in documents filed by the company with the Securities and Exchange Commission. You can find those at our website, where we regularly post information, as well as the SEC’s website which www.sec.gov. So please review our forward-looking statements in conjunction with these precautionary factors.
With that, let me turn it over to Dave to begin the discussion. Dave.
Thanks Debbie. Good afternoon everybody. Thanks for giving us a small piece of your summer for what I believe you’ll find to be some very good news about URI. I have to tell you, I have been looking forward to this day for the past several months. The day when I can finally feel free to tell you the full extent of our actions this year, and how these actions are helping us achieve the main objective of our strategic plan.
When I drafted the strategic plan two year ago, the internal vision statement called for URI to become a $20 per share company. Of course that was when uranium prices were headed to about $100 per pound, and URI was trading at $8 per share. On the March 2009 call, I talked about my expectation for uranium to trade in the range of $40 to $70 per pound neutrally for the next several years; nothing has happened since to change that view.
I still believe a $40 price will continue to offer major support, given the cost curve considerations; and that $70 is high enough for supply to meet demand in an economic environment where new reactor schedules maybe pushed out a few years, together with the real possibility with the Obama Administration, in an effort to fight runaway deficits, may elect to increase uranium sales.
Given these expectations, we refined our strategy earlier this year to focus our attention on the development of the Crownpoint Uranium Project, which led us to shift towards building our ISR resources and move away from conventional mining for now, given the simple but not economically viable in today’s market. This refinement of strategy, together with everything that has happened this year, has changed my per share value expectations for URI in an unexpected way. I now believe we can generate value significantly higher than $20 per share even in this market.
How do we create that value? The formula is really pretty simple in concept. In the 30 plus years I have been in this industry, the most reliable metric for value uranium companies has been in the value of pound in the ground. The numbers I refer to are published every week by UBS in the uranium sector update, which generates this metric by taking a publicly traded uranium company’s enterprise value, and dividing it by that company’s uranium reserves, plus measured and indicated resources; the latter being the equivalent of the SEC compliant uranium mineralized material.
For the sake of ease, I’m going to use the term resources, and not uranium mineralized material throughout this presentation. There are 30 companies on the UBS list, that are broken down into six producing companies and 24 exploration companies.
Of the six producing companies which includes Canaco, ERA, Paladin, Uranium One, Denison and First Uranium, the average enterprise value per pound in the ground as of July 17, 2009 was $10.60. That means these companies average trading value equals $10.60 for each pound of reserves, plus the measured indicated resource they had in the ground. The average for the 24 exploration companies of which URI is a part is $12 per pound. As I’m sure many of you are aware, the value for URI, including NGO properties we are about to acquire, is about $0.44 per pound in the ground.
So why the rock bottom valuation? Obviously it reflects a new universal belief, that now the Navajo ban uranium development that encumbers our resources will never be removed, and therefore URI will never be able to use its NRC license to mine its 136 million pounds in New Mexico, that is why we are priced where we are. It is also why it has been relatively easy for us to acquire the properties we need, to reach our strategic goal to 200 million to 300 million pounds in uranium assets.
In my view, we take the pounds when nobody else wants them and that is the opportunity we were given with NGU. We have been working to acquire the NGU property since the beginning of year. It’s an extremely valuable asset given the $20 million to $35 million pounds on properties URI previously released, and included under our NRC license. On top of the $35 million pounds, we are also picking up 113,000 acres of exploration properties, but along with our own properties, it now gives us 300,000 acres that covers a stretch of land from Church Rock in the West of the district, to Mount Taylor on the East.
When we closed the transaction, we owned over 136 million pounds of uranium in New Mexico. In addition, we were licensed to mine 27 million pounds at Unit 1, which is located just outside of Crownpoint. We never want to hold these leases, at least along these properties, because they’re owned by Navajo, who are prevented from entering any leases because the BIA recognizes the Navajo ban.
Given our attempt and capability to develop these resources because we hold the license, we believe we would be able to obtain leases when the ban is lifted. If you add Unit 1 to our resource base, this would take us up to 165 million pounds of uranium that we either own and/or have a license to mine. In addition, we are in advanced negotiations to acquire additional resources that would take us up toward 200 million pounds.
We can acquire these properties and most of the trading assets we have in a way that will allow us to increase and upgrade our resources for ISR production under our Crownpoint Project. In sum, it is now possible for us to reach our near term goal of 200 million pounds, without the use of significant cash for issuance of new shares.
I would also add, the opportunity to increase our resources from 200 million to 300 million pounds will come once the band is lifted, given most of these pounds have come from the Navajo allottees. As such, the acquisition of these resources will not require any further financing either.
That response to the announcement of the NGU deal was understandable. Why pay anything now to acquire resources you cannot mine? There are two important reasons why we should build our resources now. First of all, these assets will never get any cheaper, given the universal belief that we will never be able to resolve the Navajo ban. Something I had not wanted to report until now, given our desire to first acquire the resources at the lowest possible cost. It was the addition of these resources at such a low cost that led me to raise my estimate of potential valuation, to significantly above $20 per share.
The second reason to acquire more resources now, is to create strategic value. Few companies in the world can build this size resource base, and no one can even come close in the United States. By comparison, our resources can be two to three times the size of Canaco’s US based power resources, and when you look at the UBS listing of 30 companies, our 136 million pounds places us fourth on that list, putting URI between Paladin’s 277 million pounds, and Uranium One’s 114 million pounds of reserves plus measured and indicated resources.
I believe the size of our resource base is extremely important in building the value of this company. One reason there have been so few mergers and acquisitions during a time when most investors and analysts were expecting a wave of activity, is the fact that a few companies of sufficient size for the major uranium companies to acquire, would significantly influence their bottom line.
The fact that we are building by far the largest resource base and have an NIC license to produce 3 million pounds per year at our Crownpoint Project, is what is now attracting the attention of major industry players. We are in discussions with several companies who have had a stake in the production in New Mexico, and are interested in partnering with us to help bring production online. I will discuss these potential partners more in a few minutes.
For those of you who aren’t keeping up with the math, if we acquired the 200 million pounds are now within our grip, if we are able to resolve the Navajo ban, at a value of $10 pound in the ground, that is the average for producing companies, it would make us more than a $30 stock out of $20 ones. That is possible without any dramatic increase in uranium prices. In fact, it is possible if prices remain in the $40 to $70 that I expect over the next several year.
If you like uranium space as I do, because of the compelling long term fundamentals, but are not sure when the next price spike will come, I would suggest there’s no other company that can offer the potential returns that URI can, without any increase in the uranium price at all. If that price spike comes, we can do even better.
Now that we discussed the future valuation potential for URI, let’s cut to the chase and talk about the prospects for removing the Navajo ban on uranium development; since that is the key issue for unlocking the full value of this company. Thankfully, I now have the freedom to be formal and open about what we have been doing, now that we’ve picked up the properties we are seeking, but first a little history.
It was only four short years ago that the Navajo Nation declared the end of uranium mining in New Mexico. Navajo President, Joe Shirley, the spokesman, in announcing the ban, stated the President’s belief is that “The powers that permitted uranium mining on Navajo land have committed genocide.” There are two main legitimate issues that Navajo has with uranium; the legacy problems with the past minings, and the fear that future mining if not done safely, will only add to the problems that already exist.
The Dine Natural Resources Protection Act of 2005, otherwise known as The Uranium Ban, details what the legacy issues are. In short, they deal with the need for monetary compensation for health related problems of former uranium workers and their families, and the need to remediate hundreds of uranium mines, tailing piles and waste piles, located in Navajo Indian country.
President Shirley has been leading the cause to clean up all the contamination from decades of uranium mining in the Navajo land. He has been successful at taking a local issue and bringing it to national attention. There have been congressional hearings and frequent articles in major newspapers like the New York Times and Los Angeles Times, that deal with legacy issues on the nation, and his efforts have advanced this cause.
One success appears to be a much stronger push from the State and National regulatory agencies, to finish the clean up of the Northeast Church Rock site that is owned by UNC, a wholly owned subsidiary of General Electric. This is a site where the Navajos recently marked the anniversary of a disastrous trailing spill 30 years ago. Recounting that spill has shown the deep concern and pain the Navajo people feel over uranium histories, and it’s the reason that one of their primary goal is to remove all the trailings and surface waste from the Navajo land.
Our approach has been to acknowledge the industry’s past things, even though it was not our company that created them. As you’ve heard me say before, we have been working to pass the legacy bill in the New Mexico legislature that will provide the funds to remediate the ban on the mine place.
We are trying to find other ways to help the Navajo implement workable solutions. This past May, we began a week long assessment of our section 17 Church Rock property with the Navajo Nation EPA, to determine radiation levels that may exist from previous mining operations, and potential impact on the air, soil and water in the area. While URI never mined in this space, the assessment is a good first step for us to demonstrate to Navajo, our attempt to help resolve these legacy issues.
Regarding the site assessment and our work together, Navajo Nation EPA, Executive Director, Steve Etsitty, who has not been one of our biggest fans said publicly, “URI is being much more proactive in working with us than in the past, to make sure that any contamination that wasn’t fully addressed in the past, is fully addressed today.” While we are working with the Navajo to resolve legacy issues, we are also working hard to demonstrate the future mining, using ISR methods that can be done safely and will not add to legacy problems.
At the end of ISR mining, there will be no radioactive waste left on the surface, as was the case with conventional mining. It is important to say, that in 40 years of ISR mining, there has never been a ground work exertion that led to affect the nearby water wells outside the mine zone. Of course that is what we say, the same industry that left the Navajo with legacy problems to fix in the first place.
This is where our work to become the world leader in ISR groundwater restoration technology comes in. Ground water restoration is the only environmental issue with ISR mining. Since the beginning of the year we’ve been working with the other operating ISR companies in the US to coordinate our restoration efforts. More importantly, we are receiving significant Federal Government support to three national laboratories; Pacific Northwest, Los Alamos and Sandina, as well as the United States Geological Survey.
Last week we drilled holes to recover core samples of the Kingsville Dome, that will be used by Pacific Northwest and the USGS for column studies to analyze the reducing capacity of mined out zones. As Los Alamos collected groundwater samples across the Rosita project, that ramped from the outside zone to beyond the mined out and reduced our deposits. They’re using the latest state-of-the-art analytical machines to measure minor changes in the natural isotope ratio between U238 and U235 that occurred in the reduced zone of an ore body.
In theory, this could allow them to quantify the reducing capacity of an ISR project from restoration, to determine its natural attenuation, and act as an ultimate safeguard. All of this research being done carries the promise, that ISR groundwater restoration can be made even safer and possibly to lower costs.
While all of this work is important, the research by Los Alamos and Sandina may prove to be the most valuable, given our position in the State of New Mexico, where we rank amongst the most highly esteemed institutions. It is one thing for URI, the NRC and EPA to say ISR mining can be done safely. It’s something else entirely for these highly credible, independent labs, to be able to verify the science, for the environmental safety of ISR mining.
Once the environmental safety aspects of ISR mining are more readily accepted, the economic benefits from the mining can be gained by everyone, including the Navajo Nation. Historic data suggests there are sufficient known resources on the Nation to produce 3 million pounds per year, by ISR methods for 20 years more, an amount equal to our Crownpoint project. This will create more than 300 direct well paying jobs, and 500 indirect jobs.
At $50 per pound, this project will generate $150 million per year of revenue, with all the profits going to the Nation. Given the long term fundamentals for uranium, this would be the low end of what I believe is possible. If they can use low cost electricity generated from Navajo coal, they could reach significant operating savings as well.
Uranium mining for the Nation could generate economic benefits similar to those that Navajo are trying to realize from their Desert Rock energy project. According to the website, that generating station and the associated coal mine would create 400 direct jobs, and $42 million in annual tax and royalty revenue for the Nation.
The justifications of President Shirley that was used for developing this project, echo the claims URI has been making for the past 20 years; namely, this will be state-of-the-art power generation that can and will be done safely, and will generate jobs and revenue that are desperately needed on a reservation, to cover some 50% unemployment.
The uranium resources that are owned by Navajo Nation, the Navajo allottees and URI, add up to significantly more than 300 million pounds of lease-hold rates, all of which we believe can be developed by half of the means, making this one of the largest low cost uranium districts in the world.
Even resources in the Navajo can develop for their own benefit, and we are willing to provide any assistance they would need to do so. By working together, we believe we can provide economic benefits to all, while helping clean up past legacy issues. I believe the best way for us to resolve our local issues is to make the Crownpoint Uranium Project, a project of national importance.
As I discussed earlier, we are in discussions with several major industry players who have a stake in seeing production return to New Mexico. This will very much follow the model of Urentro, used to gain the support needed to build its new enrichment facility in Hobbs, New Mexico, which is slated to start up by the end of this year. In return for supply contracts, these companies will help us gain the backing and support we need on a Federal level to resolve the issues, both we and the Navajo are dealing with.
I’m pleased to say there has been substantial amount of progress in our dealings with the Navajo. When I came into the company three years ago, there was no contact with the Navajo Nation, because all communication with the uranium companies was prohibited as part of the ban. However, the past few years have gone from no contact at all, to having very productive discussions with the Navajo on many levels. Part of this has been the result of URI’s efforts to educate the public about the safety of future uranium mining, versus the dangerous mining practices of the past.
We have met with community leaders one-on-one, worked with community organizations, and taken community and political leaders on site tours to our Texas properties, where we demonstrate the small footprint of an ISR mining operation, relative to a conventional mining mill, and show them how we are going to restore these properties.
The downturn in the economy is also now leading to a change in attitude towards uranium mining. Given jobs in the economy are the main concerns in New Mexico, just as they are everywhere else these days. This is giving us a new opportunity to tell Navajo why uranium mining for the future will be nothing like the past; that it can be done safely, in an environmental benign way, using ISR methods.
As a result of our education efforts in a troubled economy, we are now seeing more elected officials willing to publicly express their support for uranium. In April, Governor Richardson for the first time publicly said he supports new uranium mining, as long as it can be done safely. More importantly, we have seen a growing number of Navajos stepping forward to challenge the hard liners. This includes some ranking officials within the Navajo Nation, who have left openings in public statements for new paths forward.
For example, Budget and Finance Committee Chairman LoRenzo Bates said, “Given the lack of any further revenue outside the casinos, outside of Desert Rock that has yet to become a reality, the President may end up looking at some sort of involvement with uranium.” From the Navajo Times dated March 19, 2009, “There is another generation born long after the last uranium boom, and maybe willing to take a chance in the yellow world once more.”
A few weeks ago, New Mexico State Representative, Sandra Jeff, in Navajo representing the Church Rock and Crownpoint areas, traveled to Washington D.C. with us to meet with the New Mexico delegation, to support the funding for the clean up of the abandoned mines. Even Navajo Nation President Joe Shirley recently softened his tone in saying “We will stand our ground until the terms of the Dine Natural Resources Protection Act are met.” Those terms are addressed in the ban itself.
“The purpose of the Dine Natural Resources and Protection Act of 2005 is to ensure that no further damage to the culture, society and the economy of the Navajo Nation occurs, because of the uranium mining within the Navajo Nation and Navajo Indian Country, and that no further damage to the culture, society and economy occurs because of the uranium processes, until all adverse effects; economic, environmental and human health effects from past uranium mining and processing have been eliminated or substantially reduced to the satisfaction of the Navaho Nation Council.”
‘Until’ is the operative word in that statement, and maybe the reason several Navajo officials are now saying the ban was never meant to be permanent. As such, the same administration not that long ago compared uranium mining to genocide, is now signaling that the ban could be lifted if the legacy issues are addressed in a satisfactory manner.
The change in attitude towards new uranium mining we have seen over the past six months has been truly remarkable. In fact, we’ve now reached the point where I no longer view Navaho as being opponents of what URI is trying to do. Instead, I see them now as being our potential partners. We want to partner with them to address legacy issues, and have done so on our joint work on Section 17 at Church Rock.
We want to partner with them on passing a legacy bill in New Mexico legislature, that would provide the funding needed to clean up old mine sites on the Navaho land. We want to partner in helping them establish their sovereignty over the Navaho Indian Country, and would like to find a resolution of the jurisdictional dispute in the Tenth Circuit Court to enhance their sovereign position, and we want to partner with them on uranium development that could benefit us both.
Our education programs the work with the national labs on groundwater restoration, and the partnering with major industry players are not the only initiatives we are working on to help revolve these issues; they are just the ones we can talk about now.
Rest assured URI will do everything we can to resolve these issues, so we can begin mining as soon as possible. We are planning to move our headquarters to Albuquerque, to demonstrate our commitment to the State of New Mexico, and we are looking to add influential Board members from the State, who can help us resolve the issues we face. There’s no doubt in my mind we’ll prevail in the end, because the benefit is to be gained by everyone, including the Navajo, are just too overwhelming to dismiss the importance of uranium mining in New Mexico.
I started by discussing what the valuation of the company would be if we could obtain full value by resolving the Navajo ban, and then told you what we are going to do to resolve that ban. Of course the natural question is, how long is all of this going to take? I have always subscribed to the first rule of forecasting, if you give a price, never give a time. I’m pleased to tell you I strongly believe we are on the doorstep of being able to realize the full value of this company’s considerable assets, not five years from now or beyond, but in as little as half that time.
At least that’s what I believed until just about an hour ago. I was given some news that was so incredible, I simply couldn’t believe it. I was absolutely stunned when I was told there was a chance we could hear an announcement, as early as tomorrow, that the ban on uranium mining could be lifted by the end of this year. Do you have any idea what that means for us?
Unfortunately it was my wife who told me the news, and she was just messing with me. Her name is Joy, and that’s what she wanted me to feel, if only for a brief moment. I’m sorry to say the news is not true. There will be no such announcement tomorrow. There are still too many serious issues to be resolved before that can happen. However, I hope you just got a taste of what you would think and do if you did suddenly hear that news.
Here’s the point I want you to carry away. I don’t believe our stock needs an announcement that the ban has been removed to go from being valued at $0.44 on $10 in the ground. Any developments that will happen along the way should increase the visibility and the probability of such an event occurring.
I think given all that is happening, it is ridiculous for us to be trading at a 96% discount that is entirely based on the Navajo ban. The fact is, we are the only ones talking to the Navajo, so we’re the only ones who are in a position to see how much their position has changed. In my opinion, the near universal belief is we cannot resolve this ban if based more on cynicism than it is on up-to-date information.
Although I can’t tell you when the ban will be removed, I do believe the probability of such an event happening is not zero. Perhaps it will come with the new Navajo administration that will be elected at the end of next year; maybe it will come sooner if we can find a way to work together for everyone’s benefit. That said, I don’t see a whole lot of downside risk for our company either, given our asset base that has the potential to generate a 30 fold return to our shareholders over the next few years, without any change in the uranium prices.
Now that you have a good idea of what the company could be worth when the ban is removed, I’d like to spend a few minutes talking about how much it’s going to cost for us to realize this great potential return. I hear a lot of concerns about our financial position, and what we’re going to do to survive in this tough market. Let me try and put those concerns to rest.
First, I’ll talk about our cash burn, but we now no longer have any producing properties in Texas. Second, I want to address another major concern that deals with how we are going to finance development at Church Rock, once we obtain the final permits we need to begin mining.
Now that we have shut down production, we expect our costs to be roughly $6 million per year. While we believe we can cut that rate even further, we already have one of the lowest burn rates of any development company, namely because the other companies had to spend large sums of cash to gain the licenses and permits we already have in Texas and New Mexico.
We do have restoration costs that other development companies do not have, but this currently amounts to only $1.4 million per year or less than 25% of our annual budget. Economically, it is far more cost effective to restore quickly; therefore, trying to save cash by taking slower paths towards restoration makes little economic sense.
As I discussed earlier, we are also using our current restoration to great benefit, to help us demonstrate that ISR mines can be fully restored and pose little environmental harm. Let me remind you, we will get all the money back we are now spending on restoration, as soon as we are finished with our cash bond release.
Outside of restoration, the rest of our costs come from maintaining our Texas properties, public company expense, corporate overhead, advancing our New Mexico strategy. If needed, we will cut our cash burn. That would come at the expense of slowing down our progress in New Mexico or diminishing our capability in Texas.
I’ve said on previous calls, one area to look at in order to raise capital was the possibility of monetizing assets. To that end, I can now tell you we issued a request for proposals at the end of last year, to a limited number of companies who might have an interest in purchasing our Rosita project.
Rosita is a fully licensed ISR processing facility that has been completely refurbished. It also has associated reserves that can be used as an initial start up in plant. In addition to groundwater and all the previously mined areas, other than well field 8, which we started up in shutting last year, have been operationally restored.
These production areas are now in the third quarter of sampling, which is part of the two year stability period that is required to complete the groundwater restoration program. As such, Rosita is an attractive asset with limited remaining groundwater restoration required.
We’ve had serious interest from several companies and received offers to buy Rosita, but none of those offers in our opinion match the value of these assets. Granted the first half of this year was not a great time to be selling anything. With that said, our Rosita and Kingsville Dome processing plants are extremely valuable, not only for what they can do for us in Texas once the market moves higher, but what they can do for us in New Mexico as well.
Which takes me to the second issue; how are we going to finance the development of Church Rock once we obtain the last permits we need? The fact of the matter is Church Rock can be developed as a satellite operation, the same way Vasquez was the satellite of the Kingsville Dome. We’ve had five satellite units that were used at Kingsville Dome, Rosita and Vasquez. Each had a capacity to process 1,000 per minute and costs $600,000 a piece.
We believe it will take four to five satellites to produce 1 million pounds a year at Church Rock, and therefore we require no additional capital if these satellites are used in New Mexico. The lowered resin from Church Rock would then be trailered to Texas for processing at either Rosita or Kingsville Dome processing plants. This would save us $10 million to $15 million in upfront capital to build a processing plant in New Mexico.
Already having satellites, the resins, the resin trailers, and the processing plant, the main development cost for bringing Church Rock online, will be a few million dollars to install the first well field. That’s all we would need to spend before this operation would begin generating positive cash flow.
That gives us a distinct advantage over our competitors, who once they obtain all their licenses and permits, will need to buy all the equipment to get into production. This is a considerable advantage, and we will not give up by monetizing a valuable asset at sharply discount prices. In addition, we also retained the option to dismantle and ship the entire Rosita plant to New Mexico, lock, stock and barrel.
I suggest, given our relatively low cash burn, and minimal cash requirements, we will need to start up production in New Mexico. Coupled with our extraordinary upside potential, I believe we will be able to acquire the financial resources we will need to operate beyond the end of 2010, either through funding from industry sources or from the financial markets.
In summary, I hope you now have a much better understanding of what we have been doing over the course of this year. My principal job is to create value for our shareholders. I have given you the road map of how we intend to triple our uranium assets in New Mexico, and the outline of our plans to work with the Navajo to resolve the ban on uranium development, and I have shown you how this could all lead to a value for our company of $30 a share or more.
I hope you understand why we have been unable to keep you better informed, as we slowly put all the pieces together this year. Moving forward, you should now expect to hear from us quite often, given all we expect to be able to tell you for the rest of the year.
With that, I’d like to turn it over to Tom to review the second quarter financials.
Thank you, Dave. Our South Texas production activities ceased in June 2009 as Dave said. Our second quarter production totaled 20,300 pounds. Since October ‘08, all of our new production has been from the Kingsville Dome project. Direct costs of production for the current quarter was about $36 a pound, roughly $10 higher than what our costs were in the first quarter.
As we had communicated previously, we said that we would remain in production as long as our activities maintained a positive impact on our cash flow. As our production volumes declined and the costs increased, we made that decision to cease our production in the June timeframe.
At the end of the second quarter, we had just under 21,000 pounds of uranium inventory, which was produced at an average cost of just under $30 a pound. The inventory that we carried at the end of June, was included in a sale that we made in the first week of August, totaling just under 23,000 pounds. The average price for the material that we delivered in August was over $47 a pound, which results in revenue of just over $1 million that will be recorded and received in the third quarter this year.
Our sales revenue for the second quarter of ‘09 was $1.8 million on 30,300 pounds. The average sales price that we received for that material was $48.85 a pound. The cost related to our uranium sales during the quarter was about $25.83 a pound, totaling 945,000 pounds. The cost of sales that we saw from operations was $20.85 a pound, and our depletion, depreciation and amortization costs that we recorded during the quarter was about $5 dollars a pound.
The other expenses related directly to uranium sales is primarily our royalties and commissions, and what we saw during the first quarter there was $167,000 or $4.56 a pound, representing approximately 9.3% of our sales during the quarter. Our cost of sales also included an impairment provision related to the write-down of our carrying value of the company’s uranium properties, totaling about $1.2 million.
Going down to the general administrative expense side of the income statement, our corporate expenses including G&A, were about $1.5 million for the first quarter, representing a $1.3 million reduction from what we saw in the first quarter of ‘08. Again, as we scaled back production, as we scaled back office space comparing year to year, we’ve implemented a number of cost-cutting measures which began in the second and third quarter of ‘08, and allowed us to reduce our costs when compared to 2009.
The significant categories for the G&A costs that we saw during the quarter were non-cash stock compensation expense of $220,000, personnel costs including salary and benefit of $512,000, consulting and professional services of $274,000.
Again included in some of those numbers were as Dave mentioned earlier, we did a number of assessments related to the legacy issues of Section 17 at Church Rock, which we spent and incurred numbers approaching $100,000 during the quarter on those activities to further our position with demonstrating the safety with the Navajo Council. Legal accounting in the public company expenses were about $300,000, and other G&A costs were about 270,000.
Our sources and uses of cash during the quarter, we had a cash balance of $9.3 million at the end of June, a reduction of just $800,000 from where we were at March 31. During the quarter we used $640,000 for our cash in operations. The uranium sales that we had in April brought an operating cash at the beginning of the quarter, and the remainder of the quarter our operating activities included production, restoration and reclamation activities for our South Texas project.
During the second quarter, our 2009 CapEx for uranium property, plant and equipment was about $145,000; that was primarily for land holding costs, down slightly from the $214,000 that we saw in the first quarter of the year. The reduction in capital spending for our uranium projects corresponds again with our decision in the second and third quarter of 2008 to defer the future wealth development of Kingsville Dome and Rosita.
Also during the second quarter we increased our restricted cash by $40,000 to collateralize maturity obligations for the South Texas projects, and also rounding out our financing activities, we used $41,000 to pay down obligations for capital leases and equipment financing.
Talking about the cash being spent, as Dave said our current operating cash balance plus the receivables that we have generated from our August uranium sale is about $9.4 million. Since the end of the second quarter, again we’ve ceased production activities, and with that cessation of production activities, Dave did mention our annual burn is roughly $6 million or $0.5 million a month.
We are continuing to review all of the areas of the company for additional cost savings, and looking at exploring other potential revenue generating strategies to minimize the monthly net cash output that we have, again focusing on cutting costs, bringing in revenue wherever we can from whatever options and projects that might be available to us.
Dave, back to you.
Thanks Tom. With that operator, I think we’re ready for questions.
(Operator Instructions) Your first question comes from David Snell - Energy Equities.
David Snell - Energy Equities
I came on late, so I’m not sure if you touched on it, but how long will it be before we lift off of this malaise in uranium prices?
David, my view really hasn’t changed since the March call. I expect to continue to trade in the $40 to $70 range. I think $40 is pretty strong as I said, given the cost curve considerations. You just need to check back on the March call at the beginning of the transcript, you can get that.
It seems there are no further questions at this time. I would like to turn the floor back over to management for closing comments.
Thank you very much. Thanks everybody for taking the time to listen to us again. It’s a gorgeous day in New England. I’m sure it’s where you are as well. Thanks for the patience with us. I hope what we’ve been able to tell you today helps you understand where we’ve come from this year, and where we expect to go in the next couple of years. Thank you very much.
This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
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