Greetings, and welcome to the Uranium Resources, Inc. first quarter 2010 financial results conference call. At this time, all participants are in a listen-only mode. A 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 Cadia and good morning everyone. We appreciate your time today and your interest in Uranium Resources. President and CEO, Don Ewigleben, is going to cover the strategy and outlook for the company, and following that we will do some Q&A. If you don't have the news release, it can be found on our Web site, which is www.uraniumresources.com.
As you are aware, we may make some forward-looking statements during the formal presentation and the Q&A portion of this teleconference. Those statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in the news release as well as in documents filed by the company with the Securities and Exchange Commission. You can find those at our Web site where we regularly post information about the company as well as the SEC's Web site, which is www.sec.gov. So please review our forward-looking statements in conjunction with these precautionary factors.
So with that, let me turn it over to Don to begin the discussion. Don?
Thank you, Debbie; and to those of you who are listening in today about the position of URI and its activities in the first quarter, we've been trying to achieve the elements of a new strategic plan that we previously announced. With me on the call today and available for answering questions are Rick Van Horn, our Senior Vice President of Operations and Development; and Tom Ehrlich, our CFO.
As many of you know, the UI Board approved a revised strategic plan in the first quarter, which set a course of action for our management team regarding financing, operational improvements, project developments, regulatory and community affairs outreach, and some significant business development plans to try to extend our position in both Texas and the New Mexico districts.
Our number one priority has been our cash conservation program, which was put in play in mid 2009. As you know, our cash position according to the press release as it states was $3.8 million at the end of the quarter. We had a slightly higher burn rate than we would've liked. This was primarily due to timing of legal issues with respect to two cases.
We will maintain our efforts to reach our object of a $500,000 per month core burn rate, and we believe we can achieve it. We are concerned that it may not be a consistent monthly expenditure rate or sustainable over the latter quarters of this year given our efforts to prepare both Texas and New Mexico for rapid movement to advance our projects there when it is appropriate and when the price recovers, and to the return of these non-recurring legal fees in the latter part of the year related to the case in South Texas. I’ll come back to that in detail in a bit.
You all be aware that we filed last week a shelf registration. This is a three-year, somewhat general shelf registration to provide the flexibility that we need to raise the capital to be prepared to go back into production in South Texas and to start the full-scale development of our New Mexico properties after the en banc case is completed.
It is important for us to consider our longstanding shareholders who stayed with us while we’ve been awaiting this decision in the en banc case, the Tenth Circuit, with regard to our New Mexico properties; and I’ll speak in more detail on that case in just a moment.
We also know that they've been waiting for the return of the uranium price. And we believe that the uranium price will be recovering. It may take several years to recover from the existing arrangements that our government has with regard to its own DoE nuclear material, as well as the material that they dealt with in the Russian agreement.
But we firmly believe that we will be prepared not only in South Texas, but in New Mexico, when that uranium price recovers as early as the 2011 time period or more likely the 2012 or 2013 time period to take advantage as one of the few companies with 100 million pounds in a domestic setting that is permitted and capable of being operated.
Now specifically, our uses of capital for whatever we do with regard to the shelf registration and whatever financing activities we bring forward in the coming quarter. First thing, we need to be prepared to return to production in Texas. We are permitted there. We have all the identified reserves and we have some identified potential resources that we'd like to explore for.
Our exploration and development in the New Mexico properties on non-Indian country lands under Section 13 allow us to drill holes and to do some additional analysis work, primarily to determine if this is amendable to ISR technology, and we hope to do that this summer – during the summer season.
We need to do develop a bankable feasibility study on the Churchrock property, and if the Tenth Circuit ruling deems that New Mexico has jurisdiction over the UIC permit then we will be able to move forward. We need to develop an EPA filing should the court decide that it is the jurisdiction of the EPA for the UIC permit.
And lastly, we want to be prepared to take advantage of joint venture development opportunities in both New Mexico and Texas.
So those will be the primary uses of the capital for the shelf registration going forward.
Let me speak more specifically about the Tenth Circuit setting. We really don't have any word on when the case will be decided. We have nothing more than pure speculation as to the possibility of having a ruling before the Chief Justice of the appellate court retires at the end of June. But we need to be prepared for the timeframe and we are certainly hoping for that decision as soon as possible.
You will recall that on January 12, the oral arguments were made with regard to that case and this is the case that primarily determines jurisdiction of an existing underground injection control or UIC permit that was given to us many years ago by the state of New Mexico who has the authority for the Clean Water Program. Our opponents, however, argued that the land might be under the jurisdiction of the EPA if it is deemed Indian lands under federal law.
Our belief is that if we are successful, it’s likely the opposing parties will appeal. They would have to seek to be heard by the Supreme Court. If we are unsuccessful, we also will have that opportunity. But our first approach is to avoid litigation going forward and to continue the development of a dialogue with not only the Navajo Nation but the other opponents, primary the environmental community in the area who objected to the UIC permit. And we think that we are on a road to recovery in both those communities for further conversation and a way to resolve these problems amicably.
We must also update all of the documentation that we have with the existing state permits and we will prepare a bankable feasibility study. To do so we will need to expand on the existing conceptual plans that we have, the movement towards a prefeasibility, we will update our geologic studies, we will develop mining plans, we will have engineering design on the processing facility and we will have to make some determinations about whether or not a joint processing facility makes sense in the New Mexico region considering our competitors who are in the district and no one at this present time has a processing facility.
What's unique about URI and that whole position in New Mexico for that 100 million pounds is that with all the permits, the licensing, the approvals and no further restrictions from court cases we could be in production within 2 years to 3 years. That fixed time frame to what our belief is the return of the uranium price in a domestic setting where we know that there are 17 applications or 18 applications before the commission at the present time that would approve something on the order of 20 to 22 different nuclear reactors on a domestic basis.
Now that said, our belief going forward is that international sources for use of uranium would be far greater than domestic in a short term. We've had all sorts of indications of interest from outside the US for uranium, particularly India and China. And as you know, we have existing relationships with the Japanese and the Germans.
But it is our hope that in the coming three years to four years the domestic market returns and we will be positioned with New Mexico to prepare all the product necessary to meet domestic needs in certain regions.
If the USEPA jurisdiction is the ruling by the court and we decide to go forward without appealing that court decision, we can apply to the USEPA for the permit. But as I mentioned before, we will need to work with the Navajo EPA on that permit. We have some relationships at this present time working on some historic legacy issues and how to best assess the impacts of those.
But there are other legacy issues that we want to deal with, particularly dating back to the 60s and 70s health related programs and we worked with the New Mexico legislature in the past, we want to do that with the new governor. And most of all, we’ll need to make certain that our communication with the Navajo Nation is increasing as we move forward on the projects.
We’ll need to develop that permit application for the NRC – excuse me, the UIC permit. Although we have an EIS in place, we would expect that the EPA will have numerous questions about the existing EIS. And so we look forward to a process, if we are unsuccessful in the court case, of somewhere about one year to 18 months as a general estimate of time necessary to deal with permitting process under UIC permit with USEPA jurisdiction.
With our bankable feasibility study and the geologic analysis update, our mine plan, our engineering plans for the processing facility, it will take some costs. Therefore we have, with the shelf registration in place, up to an amount of $25 million that will get us from where we are today to where we need to be to move forward on feasibility. Our estimated costs for these activities are in the nature of $20 million to $30 million at the present time.
I'd like to move to Texas for a moment. As you know from our previous calls, we are not abandoning Texas. There was some indication that because we have a lesser resource base there that we would move to New Mexico. We are going to capitalize on the 25-plus year history and success and 20-year history of ISR technology as well as our capability for closure in Texas.
Our restoration activities are on track at the present time. I've mentioned the legal proceedings. While the major case regarding a lease, and this is what caused our quarterly financials to be somewhat upset in the sense that we had nonrecurring legal fees related to this case. That case is now been postponed until next year. But there will be some ongoing activities to protect our legal position that we expect the third and fourth quarter to incur some charges there.
As to exploration progress in South Texas, we are quite excited about some opportunities that are now being presented. The big ranches in the area are still available. There is some untapped resource. Yes we have some competitors in the area, but they have their own activities to deal with from a permitting standpoint, regulatory activities and community affairs. And these are areas where we are already there and well established. So we want to take advantage of our position and deal with new opportunities in the exploration area in South Texas.
Of course, it takes money to do this. We're going to need between $3 million to $5 million in South Texas to be ready for production to occur to meet our future production targets for the 1 million plus resource that we still have in South Texas, and to expend appropriate dollars on exploration in South Texas to be able to be prepared again for the recovery of the uranium price.
Moving to our strategic initiatives. With regard to our financing activities, in the very near term we will engage an investment banker to provide support for a variety of activities. We need to enlarge our pipeline of properties, we need to access new ground, we need to consider the joint venture opportunities that we now see available to us in both the Texas and the New Mexico district, and in general we need some advice with regard to potential divestiture of non-core assets.
We have been contacted by some entities interested in some of those potentially non-core assets and to the extent that we can improve our financial position. By taking a particular project and monetizing it when we do not see it as being a core business going forward in South Texas or New Mexico then we will move in that direction. Therefore we need some investment and banking advice to assist us in those activities.
Our potential in New Mexico through consolidation of assets is a bit more exciting than we even expected when we first announced the change. We've been moving in this direction at a faster pace than expected and we see that there are potential opportunities for further consolidation that will help that district in the coming future.
I mentioned in the past the outside interest that had contacted us for potential uranium. We also will use this as a potential for bringing some outside entities to join us in a joint venture on project development activities. And while we have in the past had a relationship with regard to Churchrock we don't presently have such a relationship, which gives us an opportunity to go forward.
That maybe, one, means a financing for the development, but moving back to the shelf registration we need maximum flexibility to allow us to go forward and recover as quickly as we can in operations in South Texas when the uranium price returns and when we have the decision return from the Tenth Circuit en banc appeal with regard to the UIC permit so that we can move forward on Churchrock/Crownpoint area development as well our Roca Honda properties in the New Mexico district.
And with that, I’ll stop and see if we have any questions. And again, Rick and Tom are available to assist in answering these questions.
(Operator instructions) It appears we have no questions. I'll now turn the floor back over to management for any closing remarks.
Well, they say that if there are no questions asked you’ve either explained it thoroughly or someone needs time to digest the information. I’ll assume it’s the latter and if you do have questions we of course can always receive those questions either through our Web site or direct calls to the Dallas office in the numbers listed on the Web site.
If you do have any immediate questions with regard to the first quarter, please do not hesitate to contact Debbie, myself or the management team so that we can answer those questions. And in the future, we will be holding further conference calls to announce our activities with regard to financing, development, joint venture and the like.
Thank you for participating in the call today.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.
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