Uranium Resources, Inc. (NASDAQ:URRE)
Q3 2009 Earnings Call
November 9, 2009 1:30 pm ET
Deborah Pawlowski - Investor Relations
Don Ewigleben - President and CEO
Tom Ehrlich - CFO
Welcome to the Uranium Resources Incorporated third 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) As a reminder this conference is being recorded.
It is now my pleasure to introduce your host, Ms. Deborah Pawlowski, Investor Relations for Uranium Resources. Thank you Ms. Pawlowski, you may begin.
Thank you, Tania, and good afternoon everyone. We appreciate your time today and your interest in Uranium Resources. On the call with us today is President and CEO, Don Ewigleben. Don was appointed as President and CEO on September 3rd and after transitioning from his previous role with AngloGold Ashanti has been fully onboard since the beginning of October. So join me in welcoming Don to the call today. Also on a call are Senior Vice President of Operations, Rick Van Horn; and Chief Financial Officer, Tom Ehrlich.
Don is going to provide some comments regarding the company's operations and his perspective on its outlook, and Tom will give brief highlight of the financials. After that we will open it up for Q&A. If you don't have the news release, it can be found on our website which is 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 is sec.gov. So please review our forward-looking statements in conjunction with these precautionary factors.
With that, let me turn it over to Don to begin the discussion. Don?
Thank you, Debbie. For those of you that I have not met as we get into the Q&A period, please don't even try with that surname it's a very difficult one and while it's pronounced Ewigleben I hope to meet all of you and so from this point forward let's just simply call it Don from here out. I do want thank those participants, many of which I have not met I do hope to meet you in the coming year.
Let me start by telling you just a little bit about myself and why I decided I join URI. I hope to meet all of you soon but since I have only been on the job about 39 days, I have chosen to concentrate on meeting the URI team and learning as much as I can about our asset base and all the properties that are nearby our development areas.
This is my 33rd year in mining and I spent 14 years in the coal business and approximately 19 in the mining of gold. My coal years gave me a familiarity with the utility business and I started my experience in environmental permitting. When I moved to gold in 1990, I had opportunity to develop and permit many properties in various states and countries. Working for both domestic and international mining houses, I worked in different cultures and learned that development of mining properties is never one size fits all.
This was always one of the reasons that I was lured to URI and paid attention to what they were doing in the course of the past few years. I have had to develop community relations and governmental affairs strategies that had to conform to international standards but also considered the needs and desires of the local culture and the various community opinion leaders in that community. That's one of the struggles that URI faces and I look forward to that challenge.
I bring the URI a strong background in transactions. I've done a lot in joint venture management and I've grown a business to various business development tactics. I also have a history of successful operational management and I've built that on a proven set of systems that are based on the very simple communication and coordination policies that we've now set down for the management team for URI.
I chose to come to URI and leave a multinational gold mining company because I am a believer in the future of uranium market. Part of it is the result of this clamor for climate change that you see throughout the world. The concerns that are coming about carbon footprint, I believe are going to move the environmentalist toward the acceptance of uranium as part of the energy mix for Americas.
While I'm trained as a lawyer and I served as the General Council for many different companies, I'll operate URI as a management generalist, and I've told the Board that I'm a recovering attorney and while I might use some of my legal background in support of a few of our activities, I'm here to manage a company.
That's a bit about background on Don and why I have joined URI. I would like to break down the next part of the discussion in terms of short-term versus long-term. The near-term issues and certainly, the current primary issue for URI is preservation of the company.
We need to understand the assets and the resource base of this company, and then capitalized on what I see as a wealth of experience from the management team. I was working for a fellow who once said that people are our best asset. Then, I worked another fellow that said, that's hogwash.
People aren't assets, desks and reserves in the ground and trucks are assets, people are the business and that stuck with me when I came over to URI because I've never seen the depth of loyalty to URI from a management group of people and their breadth of experience and expertise is second to none from my 30 plus years of mining. So I'm quite pleased to see what's happening inside this company, but we do need to preserve it and we do need to grow the company.
So we started a review of an intend to amend the strategic plan. The strategic plan that had been approved for 2009 is the basis upon where we start and I intend to present to the Board before the end of this year, a new and revised strategic plan that we will act upon in Q1 of 2010.
Our foremost issue is the budget and our present use of cash. We must maintain this business and all the obligations that we have but we can't forget that we're preparing for the future return of the Uranium price. It will come back. So we must be poised to take competitive advantage of these opportunities and I believe in the inevitable rise of the price. Therefore, we've got a limited amount of time to structure this company in a way to be prepared.
We'll only expend funds where needed for the preservation of value. We recently completed a review of the 2009 and 2010 budgets to try and reduce the spend to a minimum. That was conducted over the course of the past 60 days and we still are seeking ways to reduce cost in the coming year.
We're looking at everything. We are evaluating all the leases, all the property positions, the nearby property positions of others, evaluating our own operations, the organizational structure that is necessary to operate but also to stabilize our existing facilities and to meet our restoration obligations.
We use the cash where its needed to preserve the opportunity for growth and that's going to include some due diligence activities as we consider a very synergistic relationships with other companies. Some of these have already expressed a willingness to have a conversation and say hello. I would be purely speculative on my part to say whether or not any of those could be successful, but I am certainly pleased in the first month to find a number of other company CEOs who want to have a conversation about synergies in the districts in which we develop and operate.
The target burn rate at the moment is $500,000 per month and that's with a view towards continuing certain costs reduction program as we are moving in to 2010 but for the foreseeable future in order to maintain this business and apply whatever the new strategic plan will be in the first quarter, I have to work under the assumption that we will be at target burn rate of $500,000 per month.
On the short-term, in New Mexico, I have become very pleased with what I have seen. I have made several trips throughout New Mexico and I find it to be a much more favorable climate for mining development than was advertised when I first began looking in to URI.
Many of the things that I read on the website were just simply propaganda by opponents to mining in general, but at least as I walk through the various communities in New Mexico, I see that this is a far better jurisdiction and many other ones I have already worked in, at least regarding the native communities' concerns, governmental officials willingness to have a conversation and just in general the people in the nearby towns who were supportive.
Our legal issue with regards to New Mexico I think everyone is aware of the Tenth Circuit Court of Appeals did accept our petition for an en banc review of the prior three-judge panel decision that Section 8 of Church Rock was in Indian land. We have already filed our supplemental brief regarding the jurisdictional issues and the EPA and the Navajo Nation will have another 10 days from today to respond.
If they do then we can file a reply brief before December of 11 of this year and the Court is still anticipating all arguments on this case to be held during the week of January the 11. Again, I can't speculate on the likely outcome, but I will say this, the company is very confident of its position.
With that said, we are looking all the alternative courses of action that might be available to us as a result of this case. We believe that the litigation is actually a last resort method of development and we prefer to do things like partnerships. So we'd like to partner with the Navajo Nation to seek an amicable way of moving forward on this question of who regulates Indian lands. Is it the State of New Mexico or is it the US EPA.
So, we could view this case as just another means of establishing a stronger working relationship with the Navajo Counsel leaders and we intend to use that discussion to move forward and not to look at it as an adversarial of setting.
On section 17, we are looking at the existing historic contamination on that section. Our first initial observations about that is actually quite minimal but we've given a report to the Navajo EPA and we have not had a chance yet to sit down and discuss it with them, but this report would describe not how to clean it up but rather how to evaluate the property in general.
We see this as a means of doing two things, accomplishing two objectives. One is an opportunity for a meaningful partnership with the Navajo on a historic property with its legacy issue, even though it wasn't caused by URI, so that we can demonstrate our restoration capabilities that being point one and two while working together with them, so that they can understand how we do it and be a part of that process, again building upon that working relationship.
When I was in New Mexico, literally on the very first day on the job I'd the pleasure of sitting in a Job Bank Public Session, we had over 130 applications for jobs that presently do not exist but we need to begin the training exercise of getting persons prepared for the type of work and activities that we will be doing in New Mexico.
So we held two public meetings in early October. We had over 85 people there who were supporting uranium mining in the Grants Mineral Belt. The discussion was about mining industry practices for today and of course there were a lot of concerns expressed about mining practices from the sixties.
We had this opportunity to show the difference between what modern mining techniques are versus those historic problems that were created in the past. We see it one more time as another opportunity to have a conversation about the future as opposed to the past. Now I'll tell you that it showed me that our team is well placed to handle the conversation necessary in this type of community.
There's also strong support for the development of Church Rock and Crownpoint and I must say that came as a bit of a surprise to me. So I'm very pleased with what I've seen in New Mexico today.
As far as the legislature, we'll be working with the Uranium Mining subcommittee again in discussing these legacy issues that are of concern to the government and to the native community. We have to find out about how monies can be received at a time when the recession has caused the State of New Mexico and obviously the Federal Government to not have an obvious cleanup money.
The next session begins in January and there maybe some Uranium legislation discussed there. We're not worrying about anything at this point, but one thing that the legacy bill that the industry put together shows is that there is a willingness to deal with this issue. We think it's a great start and if weren't for some political problems that occurred, not they were any because of the industry, we think that those can be overcome and right now we'd be working on cleanup of those historic sites.
With regards to Section 13 at Ambrosia Lake, we won't be drilling during the winter season for obvious reasons. So we'll evaluate in the spring and see what our availability of funds are plus the likelihood of moving forward on that project from pure operational standpoint in the spring time. We do have our contractors selected and we hope to move forward on 13.
On the topic that I think many of you've read about with regard to the Navajo Nation. Joshua Lavar's mandated leave of absence dealing with potential corruption, doesn't by itself have any real bearing on the uranium industry in my mind. It's more about his attempt to decrease the size of council, but it does demonstrate to us that there is a clear division between the council members and we have to always keep in mind that the council delegates are the ones who actually voted to support the ban on uranium on Indian lands.
So we'll need to continue to educate them on why Joshua's prior political position on uranium was flawed. Also it should be noted that this isn't an outright ban, but its one that requires approval of a certain set of criteria for uranium mining to be held on Indian lands.
So we have got that job of convincing the council that modern uranium mining can be conducted safely not just for persons but also for the environment. When that's done, then the criteria can be jointly developed training industry and the nation and our properties will be approved for further development and I feel very strongly about that in my initial view of this properties in New Mexico.
We continued to have good conversations with various administrative staff of the Navajo Nation including the Director of their EPA, their Director of Environmental Services and people in their Washington Office. This is a good starting point. Just a few short years ago we were not having much of the conversation with the Navajo and this has been a significant change for 2009 that I attribute to the management team and my predecessors.
We are also pleased to see that there is a bit of a growing division between the environmental community leaders and Navajo Nation on the coal-fired power plant. Now can that be translated exactly to uranium mining?
Probably not today, but it does sow that the Navajo Nation particularly the council members are eager to learn more about how they can bring economic value to their people and that's where we wanted to be standing when we have this conversation with the Navajo.
Moving on to Texas, we have a lot of remediation activity underway and we'll continue to meet all of our obligations on restoration. I also have commissioned and I'm pleased to have initial reports on an exploration potential study.
I'm pleased to report that that initial discussion leads me to believe that we have over 500,000 pounds available if the price is right and all the permitting is put in place. In fact there is larger numbers than that, but we have got a ways to go to prove up on this exploration plan that we can move forward in Texas.
There is also a numerous other opportunities for future exploration and growth in South Texas. I have only been there a couple of times now in the first month. I am quite pleased that this is still [elephant] country and those that had written of South Texas for future uranium mining I think are simply wrong.
In short, despite some rumors to that effect we are not abandoning Texas at all. We plan to use our considerable expertise to a competitive advantage in the area. No one brings that level of expertise and ISR technology better than URI. There is potential revenue that could come from our restoration activity. There will be government cleanup.
We are one of the few companies that have the technical strength to do that kind of restoration and cleanup, and we want to use that not only as a competitive advantage to get to new properties that may need cleanup but as part of our long-term joint venture strategy with other companies that can't deal with their own problems.
As far as the uranium industry in the short-term, we have some concerns about the DOE release of uranium. But it is as always a government, a fickle strategy. The change in the wind could occur any minute. Is it going to have a long-term impact on the uranium price? We don't think so. We'll have a short-term potentially.
I was pleased to attend the recent NEI conference in Austin, a few weeks ago, so that I could begin learning more and more about the uranium industry. While I do bring some background from my AngloGold Ashanti days because of their involvement in uranium production, they're the largest African producers of uranium and I had some transactional activities involved with Nufcor, the uranium trading company.
I still have a lot to learn about uranium and I was seeing varied NEI number of participants who could help me learn, and I listened intently. There was one particular presentation about the utilities getting back into involvement on specific projects that tells me the rebirth of the uranium market is upon us, that we want to benefit from that.
Onto the long-term perspective, as I've mentioned, we will be revising our long-term business strategy. I'll seek Board approval for that in the first quarter and will begin implementing. But what we'll do is try to capitalize on URI's deep experience space in uranium mining and that's not just ISR.
Some people view us as only being an ISR miner. But, in fact, we have expertise in both conventional and ISR mining. As you might guess, my background is all in conventional mining, both deep and surface mining, but we have strong expertise in both areas.
Probably one of the strongest bench strength I had ever seen from a technical perspective, on operating and remediation. So I'm very pleased to say that we can use that as a long-term strength as part of our business strategy. But how do we do that?
We've got to partner with and create joint venture with multiple different entities. I will include some majors who haven't been focused on uranium, but they have it in their portfolio. I came from one of those. I know what they could be if uranium gets some focus by virtue of a joint venture where a junior mining and developing company, such as URI, steps into the shoes of a large major and uses their source of funding and their source of properties to develop and we think we can be there.
The synergistic activities with other juniors, we bring some expertise that they might not have. They maybe development companies who've been able to create money to go after certain assets, but they may not have that technical expertise to put ISR or conventional methods of mining in place that we've done for 20-plus years.
Certainly, we can remediate with others who have environmental overhangs. So it's a broadened-properties that had difficulties. We believe our strengths in that remediation area will make us an attractive partner.
Again, no other mining company, whether it's a developmental junior or an operating junior in the URI competitive nature, offers the history and success record that we have. We plan to accelerate the 100-plus million pounds of uranium in New Mexico to production, fewer renewed conversation with the Navajo Nation through its council.
We will not seek to mine the URI assets in a vacuum, rather we hope to show that the nation has considerable resource base that could be mined under our permits and we'd like to do it in a true joint venture with native representation and management.
Not a normal idea, it's been done in many other places, but the worst skeptical of the mining industry because of this historic legacy issues. We've got to prove to them that we're a modern mining company with a necessary expertise to do so and now we're willing to sit at the table with them in a joint setting.
We also may need to monetize some of our non-core assets. Well, I'm not at a point where I could say where those are today, I will say this. There are no sacred cows. We'll look at every existing asset and determine how the best way to bring value to our shareholders on that particular asset.
We will also look to expand our Uranium assets beyond New Mexico and Texas. I see it is having two legs of a stool, but I'd like to have at least four legs of a stool. Three would be great, but I'd like to have a four-legged stool and that strategic plan for the future will likely do know ways to strengthen beyond New Mexico and Texas.
As I mentioned before, I want to look beyond to ISR mining. Basically any Uranium asset west of the Mississippi is where we'll be looking first. Then once we've developed some additional expertise and we have the financial capabilities, we'll look beyond our borders.
At the uranium supply and demand, the Uranium prices and a relationship to our strategy is, of course, an equal dose of those. Strategic energy source for the US cannot be denied. I'm very pleased to note that a number of environmental-based senators, those with constituencies from the environmental community, have recently come out stating that Uranium has to be a part of the national energy mix.
Of course, we think that's going to drive long-term price. Not just because of climate change but also because of the nature of a strategic energy source. When you have a great deal of Uranium being imported into this country from sources that may not be seen as a strategic partner that brings opportunity, URI needs to be persist for that opportunity and we plan to be there.
With that, I'd like to turn it to over to Tom who is going to review the third quarter financials with you. Tom?
Don, thanks very much. I plan to highlight the financial result for the third quarter of 2009 and discuss a data about your eyes expectations moving forward.
From an operational perspective, the production activities from our South Texas project ceased in June 2009. We did receive 6,600 pounds of positive asset adjustments that increased the uranium inventory during the third quarter of '09.
Total revenue for the quarter amounted to $1.4 million. We sold just under 30,000 pounds during the third quarter at an average price of $47.21 a pound. With these sales during the quarter, we have sold substantially all of our remaining inventory and through the end of October, we have received the proceeds from these sales.
Our cash position at September 30, 2009, was approximately $8.2 million. Our cash on hand at the end of October was $7.7 million. Our South Texas activities during the quarter were primarily for restoration, reclamation, and standby activities for our Vasquez and Kingsville Dome projects, and for care and maintenance activities at our Rosita project which is currently in a restoration stabilization phase.
We estimate on a go-forward basis that our expenditures for restoration, reclamation for Kingsville Dome and Vasquez will be in the $1.2 million to $1.3 million range over the next 12 months.
Again our cash balance of $8.2 million at September 30 of '09 was a reduction of $1.6 million from where we were at the second quarter of 2009, which is balanced with $9.3 million. During the quarter, we used $969,000 of cash from operations and had capital expenditures of about $149,000 for property, plant and equipment.
Our current operating cash balance of $7.7 million at the end of October. As Don previously noted, moving forward, we're projecting an average cash spend of approximately $500,000 on a monthly basis for the balance of this year and for 2010. These expenditures will be for restoration, reclamation and holding cost for our South Texas production sites, general, administrative, legal, public company and related costs, advancement of our New Mexico properties, land holding and others.
Our current employee count at the end of October 2009 totaled 44 people. This compares to 60 full-time equivalents at June 30 for 2009 and 79 employees at the beginning of 2009. As Don had mentioned, the companies management team and Board of Directors continue to probe each cost center each area of our business to minimize cost and to review all of the assets and resources to maximize these potential assets and to extend our cash position.
Thanks, Tom. At this point, I think we're ready to open it up for questions-and-answers.
Well, operator I guess, we don't have questions today.
Okay. I would like to turn the floor back over to Mr. Don Ewigleben for closing comments.
Thank you very much and once again thanks to the participants for listening in today. If you don't have any existing questions, that's all right. We, certainly, would be prepared to answer questions at a later time. You can listen to this presentation once again from our website or you can contact key advisors or myself at any time and we'll go forward, try and respond to any question you might have at a later date.
We look forward to the fourth quarter activities as we reposition this company and to be in a setting to capitalize on what we believe will be a higher uranium price. Thank you all for participating today.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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