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Uranium Resources (NASDAQ:URRE)

Q1 2012 Earnings Call

May 11, 2012 11:00 PM ET

Executives

Deborah Pawlowski - IR

Don Ewigleben - President, CEO and COO

Rick Van Horn - SVP - Operations

Tom Ehrlich - VP and CFO

Mark Pelizza - SVP- Health, Safety, and Environmental Affairs

Analysts

David Snow - Energy Equities

Anthony Young - Dahlman Rose

Benjamin Alan - Private Investor

Operator

Greetings and welcome to the Uranium Resources Incorporated First Quarter 2012 update conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions).

It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Uranium Resources Incorporated. Thank you Ms. Pawlowski; you may begin.

Deborah Pawlowski

Thank you very much Emilia and good morning everyone. We certainly appreciate your time today and your interest in Uranium Resources.

On the call I have with me President and CEO, Don Ewigleben, who will review the recent events of the last quarter, the great strides that we have made in the first part of this year and what our focus in strategic initiatives are for the company as we move forward. He’ll be joined by Tom Ehrlich, Chief Financial Officer; Rick Van Horn, Senior Vice President of Operations and Exploration; as well as Matt Lueras who is the Senior Vice President of Environment, Safety and Public Affairs.

We will conclude the call with an opportunity for the questions and answers. If you don't have today's news release, it can be found on our website at www.uraniumresources.com.

As you are aware, we may make some forward-looking statements during the formal presentation and 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 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, I’d like to turn the call over to Don to begin the discussion. Don.

Don Ewigleben

Thanks Debby. I too appreciate all of you participating this morning on this call and taking the time to hear an update about URI a and the various activities so far in 2012. Let me start with some of the macro issues and then I'll turn to the specifics. We are still encouraged that the Uranium market fundamentals remain strong for our industry. Although the Uranium spot prices still trading in the $50 to $55 range according to UX, we still see a steady, holding of that price pattern and what that tells us that we're not likely to see a return to sub-50 spot prices. That means that we can plan to move forward.

If you look at the base case uranium worldwide requirements, it's quite impressive in terms of growth. There will be increasing from a 173 million pounds U308 in 2012 to 224 mli pounds U308 by 2020 and if you take it all the way to 2030 we are up to 271 million pounds U308. By comparison, the world market production for 2012 from all sources such as new production, existing production, inventory drawdown, is estimated to be in the 180 to 195 million pound range comparable to those numbers that I just suggested with regard to growth. The 2011 world production was approximately 140 million pounds under the middle case scenario in that report.

We also note that the China Development Bank's arm is targeting resource yields in a number of areas including uranium. That's positive. Regarding a situation in Japan, everyone is aware that in the wake of the Fukushima disasters, a number of reactors in Japan were closed. You might not be aware that there is a new world economic forum report that has surged Japan will continue to rely on nuclear power. That report's based on cost and time associated with changing power sources as well as the slowdown in industry and the Japanese economy that would result in the absence of nuclear power availability. We see that as a positive sign.

We are also encouraged to see that others. We are also encouraged to see that others are following our lead with regard to M&A activity. On the heels of our announcement to acquire a neutron energy, we see that energy fuels are buying Denison US heads. We expect further consolidation activities in this sector in the future to get to the levels of production necessary to meet demand. The Canadian nuclear safety commission's authorization to power up unit 2 of the Bruce A nuclear power plant in Ontario is also encouraging. The reactor effectively means the construction and commissioning phases of the refurbishment project and it's been offline for more than 15 years. It appears that our competitors are experiencing increased volumes and increasing their 2012 production forecast as well. Our joint venture partner Cameco announced that its earnings are up in first quarter on higher production volumes and average selling price. We also saw URI up their 2012 production forecast. These are all positive signs for the coming year in the Uranium industry in our view.

Let's take a look at the things that will be closer to home for URI and I'll start with a presence status in Texas. As we previously stated, our objective in Texas is quite simple. Return to production as soon as the Uranium price recovers. All activities in Texas are putting URI in a position for that return to production. This includes the initiation of a prefeasibility study on possible lower zones adjacent to previously recovered 8 million pound areas. We're also in the midst of other maintenance activities to ensure that we are fully prepared to chargeback into production in the near term as the price increases.

An example of that is our pawn project. It's progressing well. We've initiated the refurbishment of existing equipment at Kingsville Dome with an objective to restore full operating capacity and extend the operational lifetime of the plant. Our work today includes installation of filter presses, installation and testing of process pumps, very structural updates including electrical and steel work, installation of chemical lines and tanks and bringing the drier up to full operational capacity. The cost is approximately $2.9 million and it will continue throughout the end of this year. it may generate up to 40 maybe 50,000 pounds of U308 as a byproduct of this pawn project. It allows us to transport material form New Mexico when we being production so that we can use the existing sunk capital in our two plants in Texas.

Looking at Los Finados exploration project, I mentioned before this is a joint venture with Cameco. We are in Phase 2. We started in December of 2011 and it's scheduled for completion in November of 2012. What are we doing under Phase 2? We get nine holes and an average depth of 1,300 feet so far. Six shallow offset holes and we have a plan for 10 more deep holes plus 34 offset shallow holes. We'll spend about $1.5 million in the Phase 2 activities of which 1 million is being funded by Cameco as part of their earnings. Cameco has currently earned in about 40% of this project. Completion of Phase 2 will take their earing position to about 50%.

Reclamation and stabilization continues in Texas. It is a top priority for us. We have a terrific record of having closed well fields. We have a terrific record of having met their requirements of our permit and having had those permits completed. Very few companies can boast that they've actually been able to go through their entire life cycle of the mine from finding the material to exploration, developing the project, getting it permitted, operating it and now having closed it. So this activity of stabilization to our reclamation process has to remain a top priority. And we think we're kind of unique in this country because of our experience in Texas restoration. It will help us in the state of New Mexico as we move forward. So we'll continue that processing activity moving more batch production areas to stabilization and hopefully getting those permits released as well.

On to New Mexico. I mentioned earlier the Neutron acquisition. We announced the singing of the definitive agreement on March 1st of this year. we also executed the financing agreement with Resource Capital Fund. Acquisition requires URI and Neutron shareholders to both approve this transaction and that's expected to close in the third quarter of 2012. We would hope that it might be sooner than that but there is certainly governmental processes that have to go through an SEC standpoint for review so we're preparing for a closure as late as third quarter. It's going to position URI as one of the largest uranium developed companies in the US. A severe way that we already had the largest position in terms of overall pounds in the ground. This will move our position up significantly. But it's not just about getting more pounds in the ground. Our strategic belief is that consolidation in the New Mexico district is required in order to meet the economies of scale necessary to build the proper mills for the conventional asset. Of course we are going to be in production first in the Grants Mineral Belt as a result of our TruTrak project but we have to plan forward for a pipeline of production as the prices return after 2013.

Therefore we have to plan for having a new location that was part of our consideration in looking at the Neutron acquisition since they had a prior mill location. But to be clear, the assets that were located in the Grants Mineral Belt of New Mexico including Cebolleta and Juan Tafoya were quite encouraging for us. Over 18 million tons of non-reserved mineralized material at an weighted average grade of 0.15%. combined, the companies will have over 206,000 acres of uranium holdings in New Mexico, by far the largest. We are preparing a Form S-4 to be filed with the SEC as part of the process and we'll continue to move forward to get this project closed.

I'd like to take a moment now to turn it over to Rick who heads up our operations and development group, to speak a little about TruTrak section and the feasibility study that has been completed. Rick?

Rick Van Horn

In the events of the TruTrak property, especially Section 8 which is where we have our license and permit remains a top priority for the company. We have had an independent engineering firm validate the economics of the property with a feasibility study. That feasibility study was turned over to us, we embedded it and we have it in for final edits right now. We expect it in the next several years; we shall have those edits taken care of and see it back in our hands again.

We are in the process right now of putting bid packages together for the drilling of the project for the pulling of core. We're doing a metallurgical work and mineralogical work. We're currently looking at financing plans and moreover. We and as Don said, one of the critical path items here is to make sure that the pawns at Kingsville are in a shape by time we start up TruTrak production to receive the resin and treat the resin here and next in making package here in (inaudible) in Texas.

The project has seven well fields. With seven stagger production. They'll come in about one every year and the total number of wells drilled on this project through have produced this 6.5 million pound ore body is going to be right at about 1,000 wells over a six year period. So there is a lot of work here that has to be done with drilling and the preparation. We're still targeting production the latter part of 2013. We're looking at about 60 people to employ in New Mexico, about 30 to 35 in Texas. This does not include the contractors on the drill rigs and we plan on having something like six drill rigs out there when we are at full tilt.

We're currently in negotiations with the (inaudible) on access rights, we're looking for a access turnout that will provide the safety and better access for tractor trailers coming in and out of property so there are no safety concerns on the highway.

Capital necessary for this project is including bonding and working capital and everything is right around $50 million and that's where we are there.

Don Ewigleben

Thanks Rick. We've had a couple of questions that were provided to us before we got on this conference call. I am going to address one of them right now because we are talking about it in view of where we're on the TruTrak Section 8 feasibility and we'll come back to Q&A a little bit later but I'll address this one right now. Somebody had asked about a violation that we had received from the Navajo f regarding access issues. Just to be clear, April 5th of this year, our wholly owned subsidiary Hydra Resources received this notice of violation in order to comply with the Navajo Nation's civil trespass act. It's part of the Navajo Nation division of natural resource. Of that order that was assess or the penalty if you will was only $50, certainly not significant and material. But it’s a question that is raised about the various opportunities for access that we have in Section 8.

This order asserted that the Section 8 TruTrak property couldn’t be reached without crossing either section 9 or 17, both of which are trust lands for the nation. So we immediately went into a discussion with the Navajo. There are certainly questions that we want to ask of them about their views on access but we were already trying to develop that working relationship with the Navajo Nation. So this was not unexpected. While we are certain that we have access, we look at this project and say, for how many years, 10 plus years, this project was tied up in litigation. And it was a favorable result for us at the end of 10 years but the fact of the matter is, even though we have our permits and are prepared, we have to have a working relationship with the entire community and that's certainly involved the Navajo Nation, particularly considering a number of employees that will have, who will be Navajo. So we want to continue to have all discussions available and we are using this notice of voialation if you will, rather than just say here, here's $50 or contested in whatever manner. We want to have a working relationship and we've started down the path of those discussions to ensure that we can have a positive relationship going forward because we intend to be in this area for a long-long time. We are valuing all the options as Rick said about how we will have access. He talked about the construction of the highway turnout. That a project that's underway within New Mexico Department of Transportation.

That's primary to look at providing safe access to the project. But we're going to make certain that we work with the nation and with New Mexico Department of Transportation, to have not just the safest route but the best available access for the number of trucks that we have, for our employees to come in and out, just from a safe perspective but something that protects the community on all levels. That's why we are in the discussions with the Navajo and we look at the Navajo violation if you will, as an important step in moving our discussions to something that will get us to a closure on this best aspect of how do we work in the community with Navajo Nation.

Well enough on that, let me move to important issue. The liquidity position for the company. Our cash at March 31, 2012 was 9.9 million compared with $2.9 million at December 31, 2011. The increase was primarily due to receiving $10 million in cash associated with the sale of stock to resource capital fund in a financing transaction that occurred in March. As of April 30, 2012 we have approximately $7 million in cash on hand. We have an auction at the closing of the Neutron merge to receive an additional $5 million through the sale of additional stock to resource capital fund.

The Neutron budget funding that we have talked about in this transaction includes $0.9 million in cash for their first quarter budget. This is under a loan agree with their company prior to closing. We want to ensure that's their activities on their projects continue and that the strong staff that we will be inheriting are allowed to do the work. So we created this budget for them to continue their activities. We expect an additional 2.2 million for the second quarter of 2012 and that is in our approved and planned budget.

I know there's been some questions about our usage of the at the market facility that we have available to us. In the first quarter of 2012 and basically during January, a 1,815,073 shares of common stock was sold for approximately $1.5 million. There is still $12.9 million available for future sales under the ATM. But I want to be clear about that. The ATM is simply a tool, another operating to maintain all that we must done in the course of our financing activities to ensure we stay on track on our project. What I mean by that is, we are not in a position as a result of the agreements that we have with Neutron to go forth today and raise the necessary capital as Rick mentioned, somewhere between $30 and $50 million total all into build the TruTrak's Section 8 property. That will be done once we close the deal.

We also have opportunities to seek other forms of financing. As you will know, the section A feasibility study was done by a qualified person, meets 43101 standard and as a result is a bankable feasibility study that allows us to look at an opportunity for a debt facility. Not saying that we will, but we are certainly in the mode of looking at all available modes of financing that project. And we believe that we have a path to gaining that 50 million top number if that's what it requires prior to our construction in 4Q of this year. so we're very encouraged about our position in terms of cash on hand and the ability to meet our needs. But at the time that we exercised the ATM option, and raised that amount of money, it was prior to the arrangement with Resource Capital Fund to bring in the 10 million and we wanted to stay on track for our Section 8 style project activities, our TruTrak property. There are some pre activities that had to be continued primarily specific engineering projects that had to be done in some other on-site activities that required some cash and we did not want to take that out of our existing budget. It normally would come out of a project budget. So we had to pay ahead of the game, a few items with regard to the project budget that we will recover once we gain the financing necessary to build the project in the latter part of the year. that is the sole reason that we use the ATM. And in the future we will be equally judicious. It's not a tool that would need to use on a regular basis and that is not how we intend to finance the project itself.

I think it's probably appropriate to open up the phone lines and have some questions at this point. And come back in and try and answer each of those questions.

Question-and-Answer Session

Operator

Thank you. we will now be conduction a question-and-answer session. (Operator Instructions). Our first question comes from David Snow - Energy Equities. Please proceed with your question.

David Snow - Energy Equities

I am trying to figure out what is a fully diluted share count now including the ATM and the more recent March $10 million transaction and how many shares were issued in the March transaction.

Tom Ehrlich

David let me pull that number up and if you have any additional questions for me I'm okay with that, I don't have that at the tip of my fingers, but I'll come back to you in just a moment.

David Snow - Energy Equities

I wondering the 6.5 million pounds in place ore body, what is the recoverable amount in the feasibility study that you expect?

Rick Van Horn

Feasibility study estimated 4.35 million pounds out of that 6.5.

David Snow - Energy Equities

Okay and can you give us some idea as to how the profile would look on that?

Rick Van Horn

No what do you mean the profile?

David Snow - Energy Equities

What by year, how it would ramp up?

Rick Van Horn

Yes, it would be pretty small the first year and then the second, when I say the first year. the first year, we're still looking at the latter half of 2013 depends on week at cranked up but the next year after that we should be close to 1 million pounds of the 100,000 pounds and then a million pounds the next year after that.

David Snow - Energy Equities

And I guess you would be holding in 1 million pounds a year or so and tapering down or how does it go after 15?

Rick Van Horn

And then ramping down and the final year production be 2019.

David Snow - Energy Equities

The 16 start to ramp down or does it hold for a couple of years, after 15 how does look?

Rick Van Horn

It still holds pretty close David at 800, it then goes down to 400 in the next to last year and in the last year. and again, this depends on the timing when we get cranked up is only I think like 50,000 pounds.

Don Ewigleben

Let's not forget that this theory here is and the strategy going forward is that, while we will begin the production in the Section 8 properties, our NRC license allows for a much larger production opportunity. So while yes, we will be ramping down off of those seven well fields, we expect to be in production in the other well fields that we have under our license. So the concept of course is we will get to our maximum 1 million pound per year under the NRC license while we are in production at Section 8. But to get to the 3 million pounds per year production limit in our NRC license, we have to take in those other properties to get that level of processing. So while we are talking about ramping down section 8, let's not forget we'll be bringing on the other properties online and that's why we build the current point facility to process all of the material in that area.

David Snow - Energy Equities

And you mentioned in the press release that the first year starts to clock, it's showing restoration, I am trying to recall how you phrased that. This sounds like for years from the first year you might be able to get a probable to expand to the 3 million pound level.

Rick Van Horn

Yes, we would anticipate that at three year, after three years, we would have our commercial restoration demonstration complete and that's one of the criteria that allows us to expand into the other operations.

David Snow - Energy Equities

So the three years from the first production, is that how…

Rick Van Horn

Three years from the first production David, yes.

David Snow - Energy Equities

Okay and are the joining sections contiguous or how far away are they?

Rick Van Horn

Well the next place we go is section 17, which is directly to the south, section 17 search rock. And then their license also includes the (inaudible) property and the Crown Point property. So we will proceed in that and those are not contiguous. They are miles away.

David Snow - Energy Equities

And then I am also trying to, had a question about, you mentioned in the press release, I didn’t hear, continued discussions for the already holders on section 8. How is that going?

Don Ewigleben

Well as you might guess in any business negotiation, we are not at liberty to speak publicly about the specifics of those activities. Let's be clear about it though. We've been very open about the fact that there is a royalty there and we've been very open about the fact that our strategy is to buy down or buyout that royalty when it comes from a number of different holders. That would improve the rate of return. We have not been able to publicly release our feasibility study in part because we are in the midst of those negotiations. So suffice it to say, it's high on our radar screen to have that resolved before production begins.

David Snow - Energy Equities

Okay so, I guess we are not going to see the feasibility study published in the next.

Don Ewigleben

We hope to get it out David as soon as we can, but you've nailed the reason why we cannot do it immediately.

David Snow - Energy Equities

All right I just had one more question and that is have you had any further discussions about no other than on your property with some of the players down there or on your property with some of the other players.

Don Ewigleben

Well we continue to have conversations with every small junior entity. We've not entertained as a conversation with anyone with Mt. Taylor properties simply because we have not heard any announce plans about how they intend to deal with their mill issues. But you know there has always been a strategy for us that there was likely to be no more than two maybe three mills in that district simply because the capital structure not being able to afford to do it. We always believed that there would need to be a mill east of Mt. Taylor and we think that through the Neutron transaction we have an opportunity to potentially move towards an east Mt. Taylor mill that was located in the old (inaudible) site.

There is another site, west of Mt. Taylor where there was a previous mill and it has infrastructure area. I think everyone looks at that as a possible location for the next large scale mill west of Mt. Taylor. We've not had a specific site yet located because we're looking at every opportunity as to the idea of some form of a joint venture with the other juniors, everyone is still keeping an open mind to that concept and even though you look in the permit applications for each of the juniors who are in that district and they say they are going to build the mill, I think we have come to the same realization that they will need to be some setting under which there is either a joint venture mill or there is a mill with toll milling relationship with the other small entities.

David Snow - Energy Equities

And the one west of Mt. Taylor, to refresh my memory, was that yours or his. Was that (inaudible) or what?

Don Ewigleben

Well there is a property that was known as the real Rio Algom site and BHP has that property. It was in the midst of restoration and is still a viable location for a mill site. I think everyone will be pleased in that district if a mill could be built in that location but again, we've not sighted a particular location for our potential west Mt. Taylor mill.

David Snow - Energy Equities

I'll just throw one more question. If you have any crystal ball on whether there be some Japanese reactor restarts coming up this summer and if so, what's your prognosis at how many.

Don Ewigleben

Well David as you know, I am not very good at looking into the crystal ball, I don't gamble because I typically assume the wrong numbers whenever I am doing anything like that. So I look at it from a hard number factual basis. I am pleased to see that new report that basically said what we were summarizing. The Japanese government, despite its comments about trying to close down the reactors simply cannot do it. We don't have any specifics, we don't have any corner on the market for knowledge basis to what those specifics are. We're encouraged by the fact that these economic reports are now showing what we all assumed that Japan would not be able to close down all of their nuclear fleet and meet all of their economic needs and power needs, therefore that market is still going to remain open.

David Snow - Energy Equities

Is that available on the internet somewhere or do you have…

Don Ewigleben

I'll ensure that we get a copy of that report to you David. We've got your number, we'll try to get to you.

Tom Ehrlich

David, to follow up on your question on the capital structure, we've got 106.2 million shares that are currently outstanding at about 103 million options and then a warrant of about 1 million shares, so our total fully diluted common stock is just over 110 million. In connection with the RCF financing we issued just about 10.3 million shares, the price on that was 0.9747. so just under a $1.

David Snow - Energy Equities

And so this includes the ATM min that last transaction?

Tom Ehrlich

Yes sir. That's correct.

David Snow - Energy Equities

There is more to come through and there if you complete the merger?

Don Ewigleben

That is correct. We would be issuing additional shares as part of the transaction. The remaining number Tom, do you have that handy?

Tom Ehrlich

It's 37 million.

Operator

(Operator Instructions). Our next question comes from Anthony Young with Dahlman Rose. Please proceed with your question.

Anthony Young - Dahlman Rose

I just wanted to focus on the capital costs a little bit more and you guys I think you sort of brushed upon the last set of questions, but when you have that $50 million CapEx number that's out there, would you be building processing facilities in New Mexico as part of that or is that, utilizing the Texas facilities?

Don Ewigleben

Actually Anthony it is a combination of both. We have the luxury of having processing facilities in Texas which allows us to start the well field prior to the full and complete construction of the Crown Point processing facility because we can have the material the resin truck to Texas. We can then get into production sooner from the time that we actually start the construction of Crown Point. But ultimately the material that is being mined in that 27 million pounds under that license will be processed at the Crown Point facility.

Anthony Young - Dahlman Rose

And then just so we can sort of think about timing a little bit. You would probably spend close 30-35 or so and get into production and then you would have the rest to come in the rear portion of 2014 or 2015 to build the processing facilities in New Mexico?

Rick Van Horn

Yes, we are going to start TruTrak specially with our trucking of resin to the Texas facility. That does not include the cost of construction of a Crown Point facility. That facility would be constructed when it makes sense. As it turns out the resin hall is a little bit cheaper but obviously involves more work, but on a dollar by dollar basis they are about a loss. The facility at Crown Point would probably be built. If we built it, it would be built in years three and four of the TruTrak Section 8 to allow us to process 17 and then go on to the other Crown Point uranium project properties as laid out in the NRC license.

Anthony Young - Dahlman Rose

Could you guys envision a scenario where you just wouldn’t build that processing facility in New Mexico?

Rick Van Horn

Yes, there is a scenario that we saving, you never build it. The idea is that if a conventional mill is built in a state, the tail end of the mill could be used to process resin also.

Operator

I will like to turn the questions over to Debbie for email questions at this time.

Deborah Pawlowski

Thank you Tanya. We did have a few email questions that came in for us guys. I'll start with the one, Tom may be you could clarify regarding RCF funding in a number of shares and the 13B filing that was additionally made. The questions comes to given the recent stock price that you need clarification as to how many shares RCF actually ends up with.

Tom Ehrlich

Well the number of shares that RCF will end up with again, there's 37 million shares that were reissued in connection with the complete transaction. The number of shares that RCF will have, Debbie let me again do a quick calculation on that. I want to make sure given the right numbers. So if you go to the next question, I'll come back to that one.

Deborah Pawlowski

And then Rick going back to the Section 8, I think we actually answered most, I'll just one give to you Don or Mark Pelizza maybe you should answer this one, in the status for that, what our thoughts are regarding the situation, do we have reasons for concern?

Mark Pelizza

Can you say that again Debbie please?

Deborah Pawlowski

Sure, the question is in regard to the inbound situation with the 100 grand injection control permit, how much reasons for concern is there and what is the status?

Mark Pelizza

Well that whole decision has been deferred. The judge has chosen not to hear the matter right now. We think along the separate course, that it will probably become a moot issue because we're also in the process of the renewal on our permit and we think the renewal process will move along and make the whole issue of decision on time the renewal moot. We feel that our position is good on time of renewal but we think that it may be a court case that just never happens because our renewal process will pass it by.

Deborah Pawlowski

Rick a couple of questions on TruTrak Section 8 and Crown project, at what price per pound you see U308 economically viable project and on the pound effort, lets touch on that one first and then I'll go to the project for selecting the greater (inaudible).

Rick Van Horn

I can't talk about cost but the sales price that the feasibility study was run at was $64 a pound.

Deborah Pawlowski

Tom and then also the study with through various scenarios of varying prices per pound.

Rick Van Horn

There was a sensitive analysis.

Deborah Pawlowski

Exactly. Okay. the 20,000 to 50,000 pounds are just the amount expected for the project with (inaudible) and if so what are the additional expectations for full operating activity (inaudible). Do you mind moving toward just check this production, what our capacity is there and at what prices we would actually go back to the production.

Rick Van Horn

That's part of the pre-feasibility study that Don talked about for Texas production. We have properties that are targeted. We obviously own properties that are coming to production to start with and we have other properties that would be targeted that really can't talk to those because again, I can't show our hand on land acquisition and whatever. But we're in the range of let's say, $45 to $50 a pound, something like that.

Deborah Pawlowski

Okay and then what about the Kingsville Dome (inaudible) processing facilities. What are their capacities?

Rick Van Horn

As they stand right now, Kingsville is capable of 800,000 pounds a year or Zeta with a little bit of work is 800,000 pound a year facility. The plan is to install two driers in each which will give us two operating plants that have about 1.5 million pounds a year of capacity.

Deborah Pawlowski

And then Tom on exchange, what we have discussed the Toronto Stock Exchange, what's being curious systems, where are we with that and then secondarily on the NASDAQ continued listing requirements for the $1 stock price. Where are we with that?

Tom Ehrlich

With the Toronto Stock Exchange we're still evaluating and looking at what the best options are there. We do have an application that's up with them. They've done a preliminary view. They are looking at some of the other information we've submitted to them related to the Neutron acquisition. So we're again, looking at the best timing and options and moving forward potentially adding the Toronto Stock Exchange as one of our listing alternative. With respect to the NASDAQ notification that we received in January, obviously we're hoping with the information that we're putting out with neutron, with some of the progress that we're making on similar areas in Texas and New Mexico, we're able to achieve the $1 stock price prior to the six months deadline expiring. If not there is a number of different items that we would look to do including an appeal to NASDAQ on that, and put it in our case to demonstrate why we believe our shares should remain listed on the exchange.

Deborah Pawlowski

Okay and then do you have the answer on the RCF share count?

Tom Ehrlich

I do yes. Again in connection with the acquisition it will be 37 million shares that would be issued by URI. 24.6 million of those would be issued to RCF. In addition to the 10.3 million that they were issued in March in connection with the $10 million financing, that would bring their ownership position up to just over 24% of the 37 million another 8.4 million would be issued to the existing debt holder at Merchant Bank and the balance would be issued to the Neutron shareholders and their financial advisors Roth Capital. Now in addition to that, we view that the option of availing ourselves of another $5 million in capital with RCF. If we do that, that would, at the prices that we issued the previous amount, it would be just over 5 million shares and so if you look at the 10 million a day that they invested in March, the 24.6 that they would be receiving in connection with the acquisition, plus the 5.1 would bring their ownership position right at 27%. S

Operator

Okay, our next question comes from Benjamin Alan, a private investor. Please proceed with your question.

Benjamin Alan - Private Investor

How will I guess, I know that you have a number of potential buyers in the US. But how expensive can you sell your products out of the country?

Don Ewigleben

The answer to the question is we can certainly supply our product on the world market. We have limitations as a US nuclear regulatory commission licensed property as to certain countries that cannot buy uranium for obvious reasons, but as you probably are aware, we in the course of the 8 million plus pounds that we produced in Texas had contracts with both the Japanese and the Germans, and would still probably have similar contracts in Texas going forward. So we look to the global market. That said, I am always keeping my eye on the present status of the 104 new nuclear reactors plus a two or three that would be coming online in the US. The reason for that is, is they used about 50 million pounds last year and the country only produced about 4.8 I believe it was, I don't have the number in front of me, but less than 5 million pounds. So we are going to be introduction in the TruTrak location and in our Texas location just as that HEU agreement goes away, the 2013 prices go up and we believe the short term secondary supply will no longer be available to the US facilities, therefore the utilities will be looking for contracts just as we are getting developed and ready to be in production at full scale in 2014. So it’s a very good timing setting for us. We'll look at the global market setting, but right now we're not encumbered at TruTrak in any way she had performed as to who we can sell that to.

Operator

Our next question comes from Kurt Georgette (ph) a private investor. Please proceed with your question.

Unidentified Analyst

I've listened to the call, I call in every once in a while. I am trying to understand, I am just a small investor and I am trying to understand that, we keep hearing that in 2013, 2014 if this happens and if the price goes here, this is going to happen and yet you guys are making an acquisition with zero revenue and it feels like me as a stockholder is being the ATM on this and where does it end? As a small investor, we're tired of getting beat up. We're tired of hearing 30 to 1 leverage. We're tired of hearing, we're going to go back and we're going to dilute this and we're going to buy this. If I were doing my business that way, I would be out of business. If I don't have revenue, I can't make acquisition. I am a little stunned this morning, but it's kind of getting old. I mean we're continuing to be, we're positioning ourselves that this happened and if the market goes here, and we figured this, help me stand on board with you guys. At what point do we finally say enough is enough?

Don Ewigleben

Well Kurt, first off, again, we've not met. I want to visit with you at some point in time so I can understand your concerns. I understand your frustration. The shareholders for URI have had similar frustrations for many years because of the great delays in getting to where we are today towards TruTrak Section 8 being production and returning back to production in Texas. So I understand that frustration. When we talk about the price, what we're talking about here is something that is never a certainty. We can't say for a certain the price will be anything going forward in the future. What we can say is, we're going to be production and we will start giving the return to the shareholders that they have been looking for, that has been held up for so many years over the litigious nature of the process system. Now we're at the cusp of being there. We should be able to reduce those frustrations that you have by doing exactly what we said we were going to do. We will in fact be producing.

As to the consolidation strategy, we need to be clear on this. We don't buy pounds just to say we want to hit bigger. It has nothing to do with that. In fact, of the 101.4 million pounds that we have in New Mexico, almost 60% of it is conventional. And unfortunately it's in a checkerboard setting. It was given out in parts through the Santa Fe Railroad etcetera. So what you have is a setting where I might have a property or you or I might have a property, let's call it in our Rinconada area which is available on our website, on the map that has a terrific opportunity for development once that mill is built, but in of itself, wouldn't be able to have a rate of return to payback the necessary capital to build that facility. So what do we do? We look at the nearby section and we look and see, there is a section next to us that has similar grades, but we have the shaft. Why don't we combine those two activities through consolidations or joint venture, whatever it takes and then have the appropriate economies of scale to build the mill facility.

And let me be clear, not through the insecure recovery property, that's a different function, that's the 40 plus percent of our material in New Mexico, but for the conventional that will only be viable at about $75 price. So it is not that we can just sit back and say great, we're going to be in production by the end of 2013 right as the prices are rising at Church Rock, our job in our fiduciary responsibility to shareholders such as yourself is to say, we must have a pipeline for the rest of these assets otherwise we'd be wasting the value of those assets. How do we bring value to the shareholders by ultimately getting to production on those conventional or underground assets, we have to combine some of them to have the economies of scale to build the appropriate mill site. I realize the frustration sir. It's something that we're working very hard. Let me answer your follow up.

Unidentified Analyst

And I understand and I appreciate it. I understand you've got to run this business as an expert that you are, with the people you have in your office. You can't go by stockholders settlement or what the message board say and I appreciate that. But when you start talking about 50 million for processing plant, we keep going up and up and up with zero revenue and I am all for planning for when things happen to be in the right position but when you're doing it on dilution of a stockholders, it just kind of gets old and I realized you've already answered the question to be me but it's just a tough goal right now. We've watched the stock price go from $1.50 down to 80 and then 90 and I realize that's not how you operate is by watching what your stock does and that's great, fine and dandy but in this conference call today you said you cannot comment on future acquisitions that land. And so here we go again, it's like ATM stockholder money to buy more things, even though they might be strategically important in the future. What if we don't get to that future? What if it doesn’t get to $60 and what if just, it's almost that famous Wall Street sign that the famous Gordon Gecko where he's addressing stockholders and if this happens, and this happens and this happens, anyway, I am pulling for you, I am still hanging in, I am getting to the end of my rope. I just think that some revenues need to be generated before any more things go out whether its core samples, whatever it may be. There's got to be some of the parts have to be worth more than the whole thing.

Don Ewigleben

Kurt I do hear you. I do understand that core frustration with shareholders wanting to see us get to that production. I can only ask that you hold on because after so many years of not being able to be in production, we see the light at the end of the tunnel. We still expect to be in construction by the end of the year and in production by the end of 2013 to get to a full year's production in 2014 when we know those prices will be there. As to the certainty, well I can't ever guarantee a thing. One of the things I do know is that we're so much differently situated that our brethren in the junior mining sector, junior uranium mining sector because we've already produced 8 million pounds in Texas. We already know how to close those properties. We already have the facilities and the trained group of people that know how to do it in Texas.

That's why we are trying to combine that, that element if you will with the project's activities in New Mexico so that we can have a reduced cost and bring increased value to the shareholders sooner than the others will be able to. What I mean by that is, at a $52 price, which I think was yesterday, we're looking at still having a small margin or rate of return in Texas. But we're very close to a point where we could be back in production. I am simply asking you to do what you've been doing and that is monitor our activities, let us know your concerns and we will try to react to them appropriately. I do have a daily concern about our share price and I do have a daily concern about what our shareholders think. Because they are us. And I don't mean that as a majority (ph) way. I am simply saying to you that our whole mission is to do what finally can be done now after many, many years for this company and that is bring value to shareholders through production and get out of the mode of being the development company and into the mode of what is our rate of return for the shareholders' investment.

Unidentified Analyst

I'll keep you very brief, I know you are running out of time and Debbie has done a wonderful job of summarizing my email question. So safely I want to congratulate. Don I want to thank you for your honest communication. Don I appreciate what you just said to the previous caller and I understand and I believe at this point that you are working in the best interest of the shareholders. I am an individual shareholder. I share some of his main concerns, but my experience with you has been consistently forthright. You've been honest with me and I appreciate your efforts. So I don't want to take up any more of your time. I'll leave it there. Thanks again guys.

Don Ewigleben

Well Jerry I appreciate those comments and I just want to say to anybody listening or to any other URI shareholder, multiple means of getting to us with your questions so that we can respond. Jerry did a very nice job of preparing a neat set of email questions in preparation for this call. That is great feedback for us. I need to have that feedback. Obviously I can get to see institutional investors from time to time but I want to see the individual investor question to get answered just as well. So thanks for sending in the email. To those of you that are on the call that have similar concerns and interest, you will find that not just Debbie Pawlowski who manages our investor relations, but any other person you've heard on this call today or for that matter any other executive at URI, of which we're really a small group. We'll talk to you. we'd be happy to visit with you and we just might be near where you live. So let us know, what your thoughts are, your concerns when we make the next rounds of visits, it will be the talking about some specifics on the feasibility that we can't talk about today. We know there is some good news coming. We simply can't talk about it because of the negotiation on the royalty. So we'll be back to visit with you. in the meantime please send in the emails, talk to us through the website or just pick up the phone. Because we'll find a way to get back to you.

With that in mind let me just do a quick recap because we are just about out of time. I know there is frustration in this marketplace. We see the positive signs in both the short term and certainly in the long-term for the Uranium market. It is bound to return. It is simple matter of available production at a time when demand will be significantly increasing. We're going to stay on our strategy. We've got to advance these assets to get to production. That's what our shareholders demand that we have to do it. We only grow our asset base if there is an economically viable preferable piece of property next to us that enhances an existing asset. So it's not just garner a property for us, something bigger. It's because economies of scale will dictate we seem to go after that piece of property.

Our near term priorities are very clear. Get the financing component done for the New Mexico construction so we can get up and running in TruTrak Section 8. Visit with our Navajo Nation colleagues, so that we ensure that we've got not just in excess but the best possible access that works for the entire community for Section 8. And lastly we've got to have these discussions with our royalty holders, not because we can't make money on the project with the existing royalties but because our job is to give as much value to shareholders as we can and that includes finding a way to bring down these royalties to a reasonable number, to give us a significantly higher rate of return. That's what we're engaged in for now. Again, I thank you for your time today. I appreciate the interest in URI and mostly I appreciate the comments of everyone today and please feel free to give those same comments to us throughout the next quarter until we can do this call again.

Operator

Thank you. this concludes today teleconference. You may disconnect your lines at this time and thank you for your participation.

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