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Executives

Deborah Pawlowski - Head, IR

Don Ewigleben - President, CEO & COO

Matt Lueras - VP, Corporate Development

Tom Ehrlich - VP & CFO

Analysts

Davis Snow - Energy Equities

Anthony Young - Dahlman Rose

George Walsh - Gilford Securities

Uranium Resources, Inc. (URI) Preliminary 2011 Continental AG Earnings Conference Call March 2, 2012 11:30 AM ET

Operator

Greetings and welcome to the Uranium Resources Neutron Acquisition 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.

Deborah Pawlowski

Thank you Louis and good morning everyone. We certainly appreciate your time today and your interest in Uranium Resources. I am sure you've seen the news release that we put out late last night regarding our acquisition, our signing of the definitive agreement to acquire Neutron Energy Inc. as well as the financing agreement with RCF. Don Ewigleben who is with me this morning, President and CEO of Uranium Resources will discuss the acquisition financing and we've also got Tom Ehrlich, Chief Financial Officer and Matt Lueras, Vice President of Business Development on the line with us as well.

So let me just mention that as you are aware we may make some forward-looking statements during the formal presentation and the Q&A of this teleconference. These 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 on our website where we regularly post information about the company as well as on the SEC’s website at sec.gov. So please review our forward-looking statements in conjunction with these precautionary factors. So with that let me turn the call over to Don to begin the discussion. Don?

Don Ewigleben

Thanks Debby. And first I would like to thank everyone for joining us today. As you know last night we announced the signing of a definitive agreement to acquire Neutron Energy, Inc. and a funding agreement with Resource Capital Funds. Before we open it up for Q&A I would like to provide a brief overview of the transaction and why we believe it makes strategic sense and also want to discuss the funding component that was completed.

We start with the transaction. URI is going to acquire at closing a 100% of the equity in Neutron on a debt-free basis and I would go into a bit more detail with the funding in just a moment. A total of 37 million URI common shares will be issued for the merger resulting in a total consideration of about $38 million based on URI’s closing stock price at the end of last week February 24th, that was at a $1.03.

In addition RCF will invest $10 million in URI in exchange for 10.3 million URI common shares within the next ten days. The 37 million shares of URI common stock to be issued will be distributed along these lines. 24.6 million URI shares will go to RCF, 8.4 million URI shares will go to RMB and if you are not familiar with RMB, that is Rand Merchant Bank, Australia Holdings actually the entity that we are talking with. 3.8 million URI shares to be distributed to current shareholders of Neutron and 0.2 million URI shares to be used to satisfy some obligation that Neutron had that we will be picking up.

The Boards of Directors of both URI and Neutron unanimously approved the transaction, but it is subject to shareholder approval. We will be holding a special shareholder meeting sometime in the not-so-distant future and we expect the transaction to close in the third quarter of 2012. I would like to give you a little background on Neutron and just exactly what we are acquiring.

Neutron is a private uranium exploration and development company with significant assets located in the Grants Mineral Belt of New Mexico where of course we also have holdings. They have a position in South Dakota and Wyoming as well. In total, Neutron owns interest in over 63,000 net acres of leased or state properties in these three states with nearly 24,000 acres in New Mexico, where of course we already have a measurable land position.

Their focus has been on the exploration of the Cibola project which consists of the Cebolleta and the Juan Tafoya properties. Combined, they cover an area of approximately 10,800 acres located West Northwest of the City of Albuquerque in New Mexico and just east of Mt. Taylor. They’re located on private land and are planned to be mined conventionally. The Cebolleta property contains 11.2 million tons of mineralized material at weighted average grade of about 0.14% U3O8.

While Juan Tafoya property contains about 4.2 million tons of mineralized material at a weighted average grade around 0.15% U3O8. Neutron also holds a suite of properties west of Mt. Taylor in what is known as the Ambrosia Lake region. That holds 3.2 million tons of mineralized material at a grade of 0.15%. Be aware that this is in the same locale as our Roca Honda properties.

With this acquisition, we gain a previously permitted mill site that was once constructed back in the 80s, but never operated. It has since been torn down as most of these mills had been around that time period when the company that had been providing funding at that time for that project decided to stop its nuclear projects. Most of the material at the Ambrosia Lake project is planned to be mined using conventional techniques.

While there may be small isolated pockets which may be amenable to in situ recovery or ISR. We will determine the plans for the Wyoming and South Dakota property sometime in the future as our focus will be on advancing the New Mexico projects. The South Dakota property will require a future lease payment position upon production by the company that has that property. With that background, we believe there is a great significance in consolidating uranium assets in New Mexico.

It is after all one of our most important strategic objectives and part of this is to create economies of scale for production. The cost necessary to build mills for conventional mining must have as part of the conservation an economy scale. We also believe this acquisition represents multiple strategic benefits for growth and the consolidation strategy that I just mentioned.

What about the benefits? Now let me just talk to you on a couple of them as we go through this. This is the first major consolidation deal in New Mexico in quite a while and it will clearly increase our interest in this uranium prolific state. With the combined assets URI will be positioned as one of the largest US uranium development companies with the upside exploration potential of over 200,000 acres in the uranium-rich Grants Belt district, both east and west of Mt. Taylor.

We believe we can leverage several synergies between the two companies. For example we think that there are resource development synergies on our neighboring properties in the Ambrosia Lake region near Roca Honda and our conventional assets combined provide greater justifications for advancing a conventional mining strategy in New Mexico towards the construction of a mill site.

As I had mentioned there's also a benefit of a previously permitted mill site to our portfolio with this acquisition on the east side of Mt. Taylor. Because of the merger we've been able to build up our bench and have added some highly qualified mining and permitting professionals to the URI team. We expect to also leverage Neutron’s positive relationships with stakeholders in the region to advance our combined effort.

Let me emphasize this one point for just a moment. Because the uranium industry has grown over the past several decades and is now on a rebirth, we are having trouble finding good strong talent in this industry, where people have experienced and the kind of expertise necessary. We in this transaction will increase our bench strength to a great degree.

Also this transaction we think puts us in a great position to complete further consolidation in the New Mexico district. I would be remiss in pointing out as well that the transaction brings in sophisticated mining investors to our shareholder base in the case of RCF and RMB. With their support we believe we can continue to advance our key development assets. RCF now only participated in removing most of Neutron’s debt but also will be providing capital to progress the near-term development budget of both URI and Neutron properties.

I want to stress that it is our belief that we can move forward on the Neutron properties without losing focus on the development and construction of our ISR property at Church Rock and Crownpoint.

We think their involvement with URI is a testament to the value of Uranium mining potential in New Mexico and we are glad that they are going to be a part of our shareholder base.

What about the funding? Let me cover some of the details regarding the funding of the transaction. As a background Neutron has approximately $28 million in loans outstanding to RMB Australia Holdings Ltd. As part of the agreement our RCF will provide us with $20 million, which will be used to partially repay the existing RMB loan in cash. The remainder of Neutron debt owed to RMB will be converted into URI common stock resulting in URI acquiring Neutron on a debt free basis.

RCF will also provide up to $10 million to URI to advance the development of projects held by URI and Neutron through the purchase of 10.3 million shares at $0.97, which was the trailing 40-day volume weighted average trading price of URI shares as of last Friday. We expect to have those funds within ten business days.

At closing of the merger, which as I mentioned earlier we expect to occur no later than 180 days. URI is going to have an option to receive an additional $5 million from RCF. The share price will be based off the lower of the URI share price as defined on the first tranche or the volume weighted-average trading price of URI common stock on the NASDAQ Exchange of the previous 20 days prior to closing of the merger. So, we have an option to take that at a given price.

Under the terms of the transaction agreement with Neutron, RMB and RCF, upon completion of the acquisition and RCF’s initial 10 million private placement, URI will have a 143.1 million shares outstanding. As you might imagine, we think this is a great step forward in our New Mexico strategy.

I should also mentioned that we just received yesterday afternoon the feasibility study report from the mining engineering firm that was certifying the Section 8 Churchrock Crownpoint feasibility study.

We plan to have this reviewed for discussion next week when we hold our quarterly conference call.

As you might imagine, we’ve not yet had the time for executive management and the Board to review it. I plan to handle our review as quickly as possible so that we can report on those findings for everyone on this call, all of our shareholders and the interested analysts.

It unfortunately took much longer than had been promised by the firm we retained as the demand in the mining industry for studies is quite high right now. Nonetheless, we think they’ve done a fine job and while we wanted to have it out a bit sooner, the timing works very well for us right now, to have that feasibility report made public at the same time that we’re announcing in this transaction. Our focus will stay towards our move to production at Churchrock/Crownpoint for ISR production, while continuing to move forward on the development of Cebolleta, Juan Tafoya, our conventional properties in the Rocco Honda and Ambrosia lake district that [anyhow I] have.

So with that overview we would like to open it up for some questions now I will ask Louis to give the instructions about how we do the Q and A.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Davis Snow of Energy Equities Inc. Please proceed with your question.

Davis Snow - Energy Equities

Hi good morning. I am trying to remember what the historic resources of Neutron are and since that I believe if I have got it right in the Juan Tafoya, it is 15.8 million pounds and they have part of Marquez Canyon and I am wondering if that is part of what Strathmore has 9.3 million pounds in and how much of that they might own if that’s case and then what would be the historic resources if any for them…?

Don Ewigleben

David, let me just kind of give you the specifics there so you will have them and I will slow because I know you’ll take them down. In the Cebolleta Uranium project the historical tons are 4.50 at a 0.090 U308 historical.

Davis Snow - Energy Equities

What does that give in pounds?

Deborah Pawlowski

Because these are not, these have not been confirmed by a third-party under a feasibility study not filed with the SEC, we can’t talk to pounds.

Davis Snow - Energy Equities

Okay the 4.5 million tons, is it?

Deborah Pawlowski

I can actually send you a (inaudible)

Davis Snow - Energy Equities

And the 0.090% are pounds per ton?

Don Ewigleben

That is percent U3O8.

Davis Snow - Energy Equities

Okay.

Don Ewigleben

And you heard Debbie say we would be happy to give you a spreadsheet on this. The historical portion is not 43-101 compliant. So the point here is, you asked about specific historic, so there is an historic area at Cebolleta and you asked whether or not that was in the neighborhood of Strathmore's property, yes it is. There is also historical references in the Ambrosia Lake Project West of Mount Taylor, but there is no historical in the Juan Tafoya.

Davis Snow - Energy Equities

I hadn't picked up on business synopsis that run at 15.8 million pounds. I wonder where they got that from. That’s not right.

Don Ewigleben

Well I don't have that number in front of me. So I won't confirm or deny it; it is a number that may have been presented by Neutron in prior public; but I do know at this stage of the game there is no 43-101 compliant number for that, so I don't want to speak to something I don't have.

Davis Snow - Energy Equities

Do they also have the Bokum deposit?

Don Ewigleben

That would be encapsulated in this Cibola project. The way that they looked at this was Cebolleta and Juan Tafoya were going to be managed as one Cibola project and then Ambrosia Lake which is on the West side of Mount Taylor would be managed as a separate project and we will continue to look at it in the same ways. In fact we are as I mentioned very enthused about picking up the talent team that is on those projects as part of this merger and we are hopeful that we can maintain every single person that’s worked on this project. This is one of the most defined sets of project data that we’ve encountered as we looked at all of the assets available in our consolidation strategy.

Davis Snow - Energy Equities

But the Bokum deposit, historical resources are not included in the numbers that you’re referring to I guess?

Don Ewigleben

Well, I am not going to speak to whether they are, because I don’t have that detail in front of me, but we will provide that detail to you after this call.

Operator

Our next question comes from the line of [Peter Hammond] of Oppenheimer. Please proceed with your question.

Unidentified Analyst

I was curious, you mentioned in passing the fact that Neutron had a previously permitted production site, mill site which have been subsequently torn down and didn’t say much about it after that. Is that, since it was previously permitted, is that sort of like what came across a year or so ago, but didn’t work out I think in the nutshell. Does that allow you to not have to go through an entire permitting process for some sort of subset of that and would you be thinking of -- do you think that property, that location as a site for a mill for you guys and other uranium miners in that area?

Don Ewigleben

What we seek with this acquisition is optionality; that former Bokum mill site; even though it was never operated, was fully permitted at the time.

Unidentified Analyst

How do you spell Bokum?

Don Ewigleben

[B-O-K-E-M]. The unfortunate thing is yes you would still have to permit it because, you know, you typically would create a design. What’s good about it is the locale is still perfectly suited for a mill. Number one is there is an area that we discovered as part of the due diligence for appropriate tailing impoundment. There is water in the area. There is infrastructure. There is roadways. It was a perfect location for a mill back in 1980. It was torn down, closer to 2000. We wish that it weren’t, but it was and we certainly understand why it was, but it’s a perfect location.

Now your question as to whether or not it was similar to the Rio Algom on the West side of Mount Taylor, similar setting in that they both were permitted and it is certainly easier to permit a new mill in a location where it once was permitted. But in the case of the Rio Algom site, it’s still being held by another company and they’re in the midst of restoration of that.

Unidentified Analyst

But, the way it is easier is because is it the permitting at the federal level of Nuclear Regulatory Commission or is it the New Mexico governmental regulatory process?

Don Ewigleben

With regard to the NRC portion, it would be NRC. This is not an agreement state with regard to permitting on say water quality etcetera. The Clean Water Act is managed by New Mexico’s Environmental Division, MED and it would have the authority. What we know about present sites like these are they have already got the environmental base line; it once was permitted you know talking about updating all the permit SI files instead of starting from scratch.

So moreover Neutron has done a great deal of work in this area on this old Bokum of site, because it of course had been their preferred alternative as part of the work they would eventually have in the feasibility study to describe where they would have it for the regulator.

So all of that engineering, the environmental work etcetera is something that we benefit by and there in the permit queue right now it’s not the most close to production stage; they are certainly one of the top companies in terms of having a position from a permitting perspective that is closest to production and in comparison we have that for our ISR properties but not for our conventional.

Unidentified Analyst

Can I ask one and half additional question?

Don Ewigleben

Yes of course

Unidentified Analyst

It’s sort of what more of what David asked, the different grades which I understand are not compliant with the 41 or 308 or I forget what the standard is, but does the lower grades of some of pounds wind up causing you to adjust downwards from the millions of pounds that you report or are those still, if you have them proven and they were at that percentage grade, would it equal or can it be like 15 point something or the million pounds in total?

Don Ewigleben

Let me kind of break it down and then again offline we would be happy to provide a schedule but when you kind of look at it from the standpoint of how much mineralized material will URI have in New Mexico post this acquisition.

Unidentified Analyst

Yeah, exactly that's what more or less that I was asking.

Don Ewigleben

And I kind of got that. URI as you know has a 183000 acres of uranium, 101.4 million pounds in place of mineralized uranium to date. This acquisition will add at Cebolleta 6.68 million tons of mineralized material at a grade of 0.176% and also on that property the Cebolleta because remember it’s been looked at as a project, a Cibola project et cetera, so it has two different characteristics at Cebolleta, an additional 4.5 million tons of mineralized material at a grade of 0.09%.

Unidentified Analyst

0.09%?

Don Ewigleben

Correct.

Unidentified Analyst

Okay.

Don Ewigleben

Now similarly on the Juan Tafoya, it’s broken down into two categories. 0.81 million tons of mineralized material.

Unidentified Analyst

Million pounds or tons?

Deborah Pawlowski

This is all in tons and grade Peter. Yeah, let me just send you the schedule I think that will be easier. And just summarizing it comes to about 18.2 million tons at an average grade of 0.147 which relates to our tons of 32.7 million at an weighted average grade of 0.15.

Unidentified Analyst

Find. Okay, you can send me that schedule and then the other question is not actually related to the acquisition, but do you as a company have any view on the given the activity in the markets in China utilities et cetera. Do you have any view in terms of the supply demand for uranium given that the Russian deal ends next year and at the beginning of 2013 or the end or the middle or what?

Don Ewigleben

It goes away at the end of 2013, but as you might guess what happens between now and then is that the utility buyers in all of those that are concerned about what the prices will do, that actually starts affecting price ranges in 2013. We still are very, very strong on the belief that the demand will outpace the production.

And if you look at some of the reports that have been prepared in recent times, there is a very good description by our joint venture partner company. When Cameco was discussing the idea that every time we have a cycle, where the prices rise, there is a discussion about new development and it drives down the assumption about whether demand will be higher than production.

Now we have had a lull as a result of Fukushima and other forces on the market place that have kept prices artificially low and many of these development properties that people thought were going to come forward are not coming to fruition. But we still firmly believe that GAAP between demand and supply will be witnessed in 2013 as a significant price rise.

I am not going to speculate on a specific number, but certainly look at this transaction as saying we believe in the future of this district and the ability to be able to produce uranium pounds from conventional resource. Knowing that we already have the bulk of the ISR and the easiest to get in and the easiest to get out in terms of production pounds, we had to prepare a pipeline that says we also have a strong conventional process.

That’s one of the things that is intriguing about the projects that we would be acquiring here is the great effort and work that was done by the Neutron team. We won’t have to spend the kind of capital and time necessary to prove up resources that have yet been untested because they’ve been doing that with regard to theirs and we will able to learn from their activities on our properties.

Unidentified Analyst

And are there of the same poundage perhaps, are there 5, 10, 2 or 20 other potential acquisition candidates in New Mexico?

Don Ewigleben

Well, you’ve got about half a dozen, may be a few more junior mining development companies in the uranium district. Several are public, this was one of the private ones in this particular setting. Our company and their company had been in conversation for sometime because of basically what occurred last year at Fukushima, they were in a period where they really couldn’t go out, do an IPO et cetera and these two companies have great synergies, but most importantly, these two companies have synergies with other companies.

And your point is well taken. But we’re generally talking about a half dozen plus small junior mining companies and we know that there won’t be the ability to find the capital to build half a dozen mills. So we are looking at this as you acquire a potential mill site, but most importantly you acquire good assets and good people.

Unidentified Analyst

And relationships that they have.

Don Ewigleben

Absolutely.

Operator

(Operator Instructions) Our next question comes from Anthony Young of Dahlman Rose.

Anthony Young - Dahlman Rose

The first just on the Section 8 project and when do guys expect to start construction of that?

Don Ewigleben

We are still looking at the concept of construction in the late third quarter or early fourth quarter of this year.

Anthony Young - Dahlman Rose

And I mean you have touched upon this briefly in the last questions, but looking at the acquisition you have made and looking at where you guys were previously you had a strong bent towards ISR with some conventional stuff possibly later down the road, making this acquisition last night or today or are you guys thinking now of being more aggressive on the conventional side of things and probably pushing some of these projects up sooner.

Don Ewigleben

Well the way we look at it Anthony is we have already captured the majority of the ISR amendable assets in New Mexico in this district and that’s not all, there is certainly some other good assets out there and there are some other companies trying to do things with those and we will always keep that in mind as part of our consolidation strategies.

But we have been known as an ISR company because of our production in Texas and yet the reality of our asset baskets pre this acquisition was still about 60-40, 60% conventional, 40% ISR. But because we were held up on the permitting for so many years and now we have all our necessary permits to go forward on Churchrock and Crownpoint we need to begin to think about that next step and that is the conventional assets in that district, because it takes a good five years to develop these projects, we wanted to get a leg up by trying to go after a group of assets that have been well-managed and move forward, that would be the assets of Neutron as opposed to our Rocco Honda assets near the Ambrosia Lake property that they have, which haven't been as advanced as far because we were working and solely concentrating on ISR.

So it’s not a shift in focus. Priority one, get the production at Churchrock, Crownpoint, ISR, keep a capital to get in, lower cost to produce and get it out. But when the prices return and such was the case what Peter was asking a moment ago and you certainly follow this better than I, Anthony. But in terms of the pricing expectations when that price returns to a $75 price, which is what we think is going to take to get conventional pounds out of the ground, at a profit, we want to be prepared to have that in our pipeline and because you have five year lead times to be able to do that, we are taking a leg up in this acquisition by getting projects that are already in the permit cycles.

Anthony Young - Dahlman Rose

Fair enough And I think you can talk about $75 for conventional, I mean what do you sort of view as the price that's needed for you to make investments in ISR?

Don Ewigleben

Well, we are there right now at $52 pricing. There is a rate of return that still makes sense on ISR. It is all in the question of your production cost in the case of our ability study until it comes public, I can’t go into the details but we are comfortable about where we are going to be in ISR in New Mexico at the start of production at the end of 2013.

In terms of long-term pricing, it is quite the delta that we would like to see between short-term and long-term. So we have been reluctant to lock in long-term pricing on our projects at this point. Those opportunities exist. We know that some of our competitors have done that in some locations but we would like to see a price higher than $62 or $63 for long-term before we locked in any long-term prices.

Anthony Young - Dahlman Rose

Okay. And then just on the Texas and you have to give me a specific number. What I mean, would you need to see a price somewhere between the $52 and $75 to sort of restart some of those assets?

Don Ewigleben

Certainly north of $50. The work is being done as we speak on pre-feasibility for additional production in Texas. And the reason I say that is, we still hold roughly speaking about 600,000 to 750,000 pounds of production pounds and there are about a million pounds left in the resource. So recoverable somewhere in the neighborhood of 650 to 750, but that is the lower end of what we have already produced of nine million pound asset. So we are looking at some additional assets and I think you are aware as others are, we got a joint venture looking at a large play from an exploration.

We’re thinking about near-term production from near-term properties. And that does require some investment to finalize land position and finalize permitting. So our pre-fees will talk about the necessary activities and capital to get to production in Texas. We also have existing contracts for most of those properties. Those contracts do not involve the Los Finados exploration joint venture, but we would be looking at those contracts because they impact the regular pricing. That’s why I say north of 50, but it largely depends on how those numbers roll in with the additional resource that we would bring to bear.

We do have the two processing facilities and one of the things that we’re doing this year is we’re improving and maintaining those facilities to go back in to production. So things like, do I have available head room in our ponds and things of that nature. So, we’re in maintenance and preparation mode if you will in Texas to get to production.

If we get something significantly greater than $50, we could be in production fairly quickly because we’re fully permitted and we still have the operating team there in place.

Operator

Our next question comes from the line of David Snow of Energy Equities. Please proceed with your question.

David Snow - Energy Equities

Just to follow up on that last question, were you talking about adding additional nearby resources to what you have already in the 600 to 750 pounds?

Don Ewigleben

We would, David. What we know at this point is there are some areas that we have land control but we don’t have permitting. There are some areas within our permit boundaries that we don’t have permitting and there are some areas within our permit boundaries that we don’t have land control. So what we would want to do is optimize these existing resources with any closely resource areas that we can get back to production and it is all about as [Andy] just pointed out at what price.

David Snow - Energy Equities

And is this part of what, the 10 million raise would go for?

Don Ewigleben

No at this part of the game the additional 10 million that is coming in from RCF is to be used for two primary purposes; one is continued development of activities towards production at Churchrock and Crownpoint and the second and still very important is the continued development of the Cebolleta and Juan Tafoya projects that Neutron has.

So between now and closing of this transaction we will be actually advancing funds to Neutron to ensure that those activities go forward and that was part of the arrangement that we created. We did not want to have the activities that they have been on at NEI Neutron stop in the course of the process because of their lack of funding. So it is important for us that they keep on that schedule, that we can get the production sooner out of the conventional side if they maintain their projects. So we will be doing some interim funding and that was part of the 10 million tranche that RCF is providing.

David Snow - Energy Equities

Is that mainly for the permitting, keeping the permitting process going?

Don Ewigleben

It is primarily permitting at this point, because there won’t be any drilling going on during this period but there is also engineering work that is continuing on by the Neutron staff.

David Snow - Energy Equities

Okay. And the part that would go for your Crownpoint that would be for the ISR project?

Don Ewigleben

It would, general capital needs, primarily for development in New Mexico. However, having said that I mentioned earlier in our budget we want to have the ability to if you will turn the spigot back on in Texas just as soon as we can. So we are using some general capital funds in the 2012 budget for these maintenance activities to ensure that we are raring to go as soon as we can on the Texas front.

Davis Snow - Energy Equities

On the liquidity front you need to raise more for the ISR completion?

Tom Ehrlich

Yes sir, once we hit the public with the feasibility study, we would be looking at all very opportunities to fund. In the past we've discussed publicly somewhere between $30 million and $50 million would be needed to construct the entire project that’s not at one sitting, that's over the course of time to build the project.

I can tell you the feasibility study came back and when we released the specifics you will have it, but it is within that range, we are very comfortable where it is within that range, that tells us that there's a lot of opportunities. It is a certified 43-101 feasibility study by a third-party, a qualified person that allows us to call it bankable, would we ever look at a debt setting, we might. We will look at whether or not that makes sense for the overall cost of capital for some mine life of 15 years plus.

But we will also look at equity. There's joint venture potential, they are certainly interests that have been expressed to us for off-take agreements but as I mentioned earlier, we are reluctant right now to do any long-term off-take agreement with the prices being where they are because it is our expectation that the prices this time next year will be considerably higher.

Davis Snow - Energy Equities

And I am just wondering if you can give us macro, apparently in the cold winter in Europe, Germany restarted some of these closed reactors whether do you think they are going to keep them open or whether that was just a temporary maneuver and likewise. Do you think that Japanese will go through air-conditioners in this summer or turn some of theirs back-on?

Don Ewigleben

Well, David, I am not a very good prognosticator. I don’t go to Las Vegas and there is a reason. But there are three points that I look at from our strategic standpoint of trying to understand the market for the future.

Number one as it relates to Germany is, yes there was a political movement that caused them to say they were not going to renew the licensing on those existing reactors. In all of the demand forecast we had already assumed they were coming offline that they would not have been included in the 2030 period between now and 2030.

Secondly, they turn right around and bought power from the French which is nuclear generator. So if the real political issue exist, it may have been somewhat reaction to Fukushima and we do know that political winds change. So wouldn’t surprised us at all. If there is some change in policy about Germany going back to having some reactors, continue on.

As in the case of Japan, as I mentioned there are people expressing interest in off-take agreements that would certainly include the people in Japan. The weather energy contortions, the utilities are doing that to fulfill existing needs. It is our belief that they cannot maintain their particular industrial models without having the power supply necessary and that have to include the continuation of reactors. How many? Still uncertain; how long; even more uncertain.

But we are very confident that there will still be a market and our market and this is the third point, could be somewhat of a pure and simple market here in the US. When you think about the 104 reactors here and the amount of pounds that they use versus the amount of pounds that we produce, the concept that we’re going to be producing in our first full-year of production up to 1 million pounds under our license at Crownpoint and in the following years when we prove commercial restoration up to 3 million pounds, we’re going to be close to doubling the production in the US for this country.

We want to be able to fulfill wherever there is a need and if that’s in the domestic market, great. If it’s in the Asian market, fantastic. It very well could be back in Germany or in the Balkans, who knows. We clearly want to be positioned to be one of the largest domestic producers and/or with a quality company with a 150 million pounds some day where we can talk about long-term pipeline of projects, both ISR and conventional.

Davis Snow - Energy Equities

Is there still an issue about the DoE stockpile?

Don Ewigleben

That issue is still pending. There have been a number of studies as you know developed by DoE to try and determine whether the HEU agreement truly impacts the economy. There have been some limits discussed. We’re less fuss these days about what they’re doing in the marketplace, because we think it’s already been absorbed for 2012 and 2013. So this is all about what happens for future purchasing beyond the HEU agreement.

Davis Snow - Energy Equities

And then one last question. Do you have any update on your minimum bid requirement that was flagged by, I think, NASDAQ or somebody?

Don Ewigleben

Yes, and for the benefit of those NASDAQ requires that anytime you don’t maintain your $1 or above share price for 30 consecutive days you get a notice. We have six months to cure; it has happened to us once before. We certainly came back up about $1; our expectation is that it will and in fact in the last several weeks it’s been averaging well over a $1. You must have 10 consecutive days, business days of $1 or more and we’re not there yet, but I am certain that we will be.

Deborah Pawlowski

Yeah, we did actually hit nine days and then (inaudible) did his thing.

Don Ewigleben

Yeah, there is a lot of forces that work here but, we’re very confident that that is not an issue for us with the NASDAQ having discussed it in the past and our stock is a volatile stock, high levels of volume. We understand that.

And the general for a place that we sit today at around $1 is certainly far below what it needs to be. It’s our job to show value to the markets by virtue of the things that we’re doing, bringing to production, acquisitions such as this nature etcetera.

But it is a very undervalued overall in the sense of, if you have a 101.4 million pounds now and you’re adding pounds, it clearly need to have a market value that’s greater than a $100 million where we sit today. So we’ll be looking to resolve that issue by having 10 consecutive days over $1 in the very near future.

Davis Snow - Energy Equities

And what is your liquidity currently?

Don Ewigleben

I don’t have those numbers available. We are going to talk about that at next Friday’s quarterly call.

Operator

Our next question comes from George Walsh of Gilford Securities. Please proceed with your question.

George Walsh - Gilford Securities

Just a quick question, the $10 million comes in within the signing of the definitive agreement, what is, is your day on the signing of the definitive agreement.

Don Ewigleben

It was signed last night.

George Walsh - Gilford Securities

Okay, so you will be getting that money within the next 10 days, is that correct?

Don Ewigleben

Yes sir.

George Walsh - Gilford Securities

Okay, and that is just in theory that's regardless of now whether the deal is finalized or not?

Don Ewigleben

That's correct. Its one of the reasons we are pleased the way that this has unfolded, the point being that RCF is making an investment in URI with or without the closing of this transaction and while we all certainly hope and believe that this transaction will close, there's been a great deal of due diligence on both sides but you still have to have shareholders votes and there will be a prospectus and an S-4 and we will explain to both sets of shareholders why this is a beneficial transaction for both groups.

But the reality of it is RCF will have already invested in URI and this is a very learned group of people who spend a great deal of time looking at mining projects, a number of funds that they have invested in gold and copper and a variety of other things, we could not be more pleased that this is a stamp of approval for the New Mexico district.

But I also want to say RMB had already made that decision many years ago and but for the kind of difficult set of circumstances that forced Neutron to look for someone like us to partner with because of the inability to go to the market after Fukashima. You would already have an RMB position and look what they are doing, they are converting their shares into URI which means two quality firms that spend a lot of time looking at mining projects are now saying this is a district in which they want to invest, very positive for all of us.

George Walsh - Gilford Securities

Yeah. And it eliminate a lot debt and all that stuff like you are saying, how many employees are at Neutron currently?

Don Ewigleben

You know George, I don’t have that exact number. Tom, I know you are on the phone and Matt do you have that number?

Matt Lueras

Yeah. Right now I believe they have got between 8 to 10 people.

George Walsh - Gilford Securities

Okay. A part of the reason for that is, as part of this interim funding discussion, we have brought over several of their technical people onto our staff already. It was a way to provide some interim funding to them and then we have contracted back to do the same type of development work that they needed to do on their Juan Tafoya and Cebolleta projects. Again we want to ensure that that continues to be maintained, that work activity. So it was a way to lessen their personnel cost but maintain the bench strength for the two combined companies at the end of the day.

So I believe three or four people have already come across, that has lowered their numbers slightly and I’ve said this before, but we are looking to try and have all of that talent absorbed into the new company and really make this a merger of two good companies.

George Walsh - Gilford Securities

Okay. And you mentioned that there were 3.8 million shares that were Neutron shareholders that are getting shares in URI, do you have any idea of the number of shareholders and how those shares are spread out?

Don Ewigleben

Well, I do know.

Deborah Pawlowski

The two primary shareholders hold something like almost 50% or something Don, wasn’t it kind of there.

Don Ewigleben

It’s actually, the top two, let’s say above 5% shareholders as well as the officers and directors have agreed that they would vote in favor of this transaction and I believe that locked up about 44% of the overall shares of Neutron. There will need to be obviously discussions between Neutron’s management and its shareholders. They will have to have to have a shareholder vote. So, they will use our S-4 and the general prospectus to discuss the rest. You need, as I understand it, 50.01 for the approval. We’ve very, very high confidence level that that would be the case and that’s primarily because they have a limited number of shareholders overall and the next several shareholders down, when you get beyond the top two shareholders and the officers and directors would take us over the 50% mark.

George Walsh - Gilford Securities

Okay. Are the shareholders mostly management or is it outside investors? I mean is it the other entities that are investing here?

Don Ewigleben

Well, the bulk would be outside investment funds. They do have position in terms of officers and directors that is, I’ll just simply say, important. I don’t know, I won’t go as far as saying significant. But generally speaking, the management team in general has about 12 plus%. So it’s important. They have a shareholder with about 24%. They have a shareholder with about 5%. Those make up that sort of 44% that we know are in favor of the transaction and quite simply I am sure that all we can say 3.8 million shares when I look at this other setting but it is to absorb that debt and they have to look at this as a positive step in maintaining the momentum of their projects just in the form of new share denominations and it is certainly better than any other alternative that was facing the company because of indebtedness.

Then when you go after the next couple of shareholders they are at 4% or below and so you bring out a couple of those to get over that 50% hurdle and again I am pretty confident I won't put the words in the mouth of any of the persons at any eye management or the shareholders. But their confidence is that what makes us confident and this is a story that once may be begin to realize what can happen in this district and the nature of what these two companies combined can be, we are very confident it is going to be approved.

George Walsh - Gilford Securities

Okay. I just kind of review and certainly as you consolidate and gather assets it increases the viability for joint venture as we just as you amassed more pound in the ground. Going forward you kind of alluded to a bit, but I wonder if you can elaborate how this changes the landscape for you in joint venture discussions.

Don Ewigleben

We still have to maintain our long term position which we are open to any discussion of a joint venture. That is because in the conventional mining side of this district the high cost of capital for building large mines is so much greater. We talked about between $30 million and $50 million to build an ISR project. Well its probably ten fold that, maybe not but in the order of $250 million to $350 million depending up on if you have one regional mill or as we've been talking about possibility of one east of Mt. Taylor, one west if the prices go down. But it’s all about economy of scale. So as you can have a joint venture that would provide a capital on a split basis and absorb the risk on a split basis, it certainly makes sense.

Moreover, we have a joint venture with a large uranium mining company; it’s been very beneficial to us. We hope it’s been beneficial to them as we've been developing the most Los Finados thing in Texas. So we've got a very positive experience with joint ventures. We think what we bring to the table is beyond the ground knowledge for larger companies that bring capital to the table but they also bring technical expertise that some time the junior mining companies and junior development companies such as us don't have. So it’s been very rewarding for us in a joint venture so far and we are going to look up favorably on any other future joint ventures.

Operator

Our next question comes from [Peter Hammond] from Oppenheimer. Please proceed with your question.

Unidentified Analyst

I apologize for getting one and quarter previously. I am confused, I have heard lots of numbers, do you know what the actual number of pounds coming off to market in 2013 from the AGU exploration data, I have heard different ranges. I have also read in the NRC’s website that although the AGU represents 20% to 30% of worldwide consumption that it represents 50% of US consumption. Do you know that? And then finally who is RCF and are they sophisticated minerals commodity or best of all uranium investors?

Don Ewigleben

Let me answer the last one first simply, because it is much easier and we don’t have to show you my ignorance on the first question. Resource Capital Fund, RCF has been around for quite a few years, a group of former investment bankers have partnered with the number of mining engineers to develop a staff where they said they were going to have funds to strictly go into mining, they are typically long-term holders. They pay very, very close attention to the details of the projects that they invest in. In many cases they actually have someone nominated to be on the board.

So they want to see where these projects go. Because they are long-term holders, they want to see all these projects get to production. And I believe the return on their investment will be when projects aren’t built just for the purpose of development and flogged to be sold to someone else. But how do we get them to production. So that’s why we are still pleased to have them in the fold.

Peter back on the ATU numbers, I don’t have them in front of me but I will promise you this. We have got to do our quarterly conference call a week from today and we will pull out those numbers so will have them available and try to clear up at least what we think is the present setting of the impact of HEU on the quarterly sales in the US.

Unidentified Analyst

They aren’t saying that I can confirm is that as of I believe November on the NRC website, I specifically read that not what the overall production coming from HEU was but the HEU contribution to US consumption was 50% of U.S. consumption.

Don Ewigleben

We will begin determine between that period and now just if any of that changed, this is always a moving target. There are many activities, just recently Congress was looking at whether or not they were going to provide some additional support to USEC and use some funding from the sales of that material to take care of other clean up sites. That’s been a bit up of a political discussion. We’re not actively involved in that discussion. We’re kind of watching it from a far end and it’s I said, earlier today, we’re kind of the belief that whatever it is, it’s already absorbed in the minds of those who are in the marketing positions and the buying positions of the utility. So we’re more concerned about what happens next year than this year as it relates to HEU.

Operator

Our next question comes from the line of George Walsh of Griffin Securities. Please proceed with your question.

George Walsh - Griffin Securities

Just to follow-up with that John, as you mentioned, you know, when and if it closes, how will the composition of the board change given the new investors particularly RCF and RMB?

Don Ewigleben

Well, we presently have a five-member board, two executive board members, the Chairman and myself and three independents. Our expectation is that we will be in the same range; two executives and maybe three or four independents. We want to maintain certainly our majority of independents. And an RMB nominated person would come on as a independent.

But again it’s a requirement that we add a person to do that and they’ll nominate somebody to be on there. We have an AGM coming up in June and the best I can say is between now and June, we will determine how to work on that issue. I would like to see that we’ve made that change effective and certainly as possible so that we have the available expertise for that additional director and if we can do it by our AGM we are going to do that.

George Walsh - Griffin Securities

And if I am not mistaken the way you rated out RCF will be the largest shareholder by far, correct?

Don Ewigleben

That is correct. Previously, our largest shareholder was in neighborhood of 6% to 7% and this will be over to 20%.

Operator

There are no more questions at this time. I would like to hand the call back over to management for closing comments.

Don Ewigleben

Thanks Louis and thanks to all of you asking good questions. These are important times for us for obvious reasons ask any time that you have the questions. We try above all as to be as open as we possibly can about public information. You can contact the company through the website, you can certainly contact us through key advisors, our investor relations. Matt Lueras, who manages our corporate affairs is on this call today and he and I are always standing ready to answer your questions.

Overall, based on what I just heard about questions, we continue to see strong indications that the nuclear industry is rebounding. And the shark of the horrific tsunami that occurred in Japan just about a year ago and the impact that it did on the Fukushima nuclear facility is still lingering, we know that. But nuclear power planning around the world is still going on.

For example, the US Nuclear Regulatory Commission recently issued a combined construction and operating license for two active plants in Georgia and US Nuclear generating capacity is expected to grow about 11% by 2035. You've probably also seen the news that India’s power ministers just said that it plans to have a 63,000 megawatt nuclear power generation capacity in the next 20 years and which analysts have estimated would raise their annual demand for uranium from its current 2.4 million pounds to around 14 million pounds by 2030.

So clearly, it’s a level of demand that's unmatched by our current production forecast biennial and as we all know China continues to build its nuclear facilities and develop fuel sources. So our expectation for increasing demand without a significant increase in production still exists.

Recognizing that those expectations for expanded nuclear power are ahead of uranium supply forecast it just bodes well for future uranium prices and the advancement of the combined portfolio of production of these two companies. So this acquisition helps to grow our position and asset base in this future upcoming industry.

Importantly, we also believe we are well positioned to continue to execute our own strategic plan and this shows that. We are going to advance projects to production and we are going to consolidate that uranium assets in this district with the vision of being the leading uranium production company not only in New Mexico, but in the US; not just because we want to be the biggest, because we have to have economy of scale in this conventional marketplace to have a mill that makes sense or now with this opportunity for a mill East of Mount Taylor and a mill West of Mount Taylor it even gives us greater optionally.

So we could not be more excited about the acquisition. I am very pleased with the way that the NEI management team pushed their projects forward. They have an excellent technical team. We look forward to absorbing that group into the URI family, their projects as well, the relationships that they have in the marketplace, the relationships that they have in the locale. They have a very positive working relationship with the communities around them. We want to expand them. And we couldn’t be happier that they came to us at a time of need and there was a joint way to RCF and RMB to make this work.

And just as a remainder, I mentioned it couple of times that we are filing our 10K on Friday March 9th and we will host a conference call and webcast to discuss the fourth quarter issues at 11.00 Eastern Time on Friday March 9th. So hope to have you there. We can answer a few more questions with regard to the transaction, but we will be focused 4Q and 2011 numbers at that time.

So again, we say thanks for joining us today. Have a great day. We are still pleased to be working towards the closure of this transaction and with NEI, RCF and RMB it is a good day for URI and we think it’s going to be a great day for Neutron shareholders as well. Thanks.

Operator

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

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Source: Uranium Resources' CEO Discusses Definitive Agreement to Acquire Neutron Energy and Executes Financing Agreement with Resource Capital Fund (Transcript)
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