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Ur-Energy (URG) provided a production update for its wholly-owned Lost Creek ISR operation along with a construction update for the Shirley Basin ISR Project. Lost Creek production continues to ramp higher as the latest print of 81,767 lbs captured in the Q4/2024 represents the highest quarterly level since the return to commercial production, as announced in May 2023. With six header houses coming on line over the course of 2024 along with header house 2-12 coming on line in late January, production has smoothed over the past few quarters and has become more consistent (Q4/2023 head grades amounted to 66.2 mg/L). Amid a robust balance sheet, development plans now shift to the Shirley Basin ISR Project. We maintain our $2.45 Price objective which equates to upside of +140% from the most recent close. Shares of Ur-Energy trade at a 0.46x P/NAV multiple.
We note that since the May 2023 restart of Lost Creek commercial production, a total of ~365,000 lbs has been captured until Q4/2024. This brings Lost Creek's life-of-mine production to ~3.1M lbs since 2013 when ISR production initially began. According to the US Energy Information Administration's (EIA) Q3/2024 Domestic Uranium Production Report, Lost Creek is the largest uranium producer in the US.
Management currently has 20 drill rigs turning at Lost Creek along with a compliment of approximately 85 full time employees. Significant repairs on Dryer no.1 was completed in Q4/2024. this allowed for the taking down of Dryer no.2 last month for minor maintenance repairs. Both dryers will be available for use later in February. Exploration plans elsewhere in the Great Divide Basin will begin this summer as the current drill fleet is expected to be deployed to drill ~180 exploration holes (36,000m) and 20 wells. We applaud this initiative as resource development and booked resource inventory was the one department in which Ur-Energy lagged its domestic ISR peers such as enCore Energy (EU) and Peninsula Energy (PENMF):
SHIRLEY BASIN DEVELOPMENT
Development plans were also announced for the Shirley Basin ISR Project. Following the installation of 120 monitor wells for the first mine unit (SB MU1) which yielded excellent hydrologic results, the installation of downhole pumps in the monitor wells (using 6 drill rigs) is expected to begin in the coming weeks. Baseline sampling is subsequently expected to be completed in the spring. Though management expects flow rates to vary throughout the project, note that production rates within the test patters have been held within the range of 70-80 gpm which is consistent the the documented historic inflow from the early 1960s.
Power supply to the satellite plant construction area has been completed, the line is already energized. The access road is complete, and the septic system is installed. Construction of fifteen IX columns remains on target with delivery expected in Q3/2025. The contracting for long lead items is already underway while a contract has been signed with the local power company to upgrade the existing electrical substation with the goal of completing the upgrade early in Q4/2025. All the required permits for the construction and development of the Shirley Basin Project have been received. Construction at Shirley Basin is expected to be complete in late 2025 with commissioning expected to begin in early 2026. Our company-wide production estimates are as follow:
We continue to see Ur-Energy as having some of the best internal fundamentals among US based peers given the strong contract book (5.7M lbs contracted for deliveries between 2024-2030) which includes pricing escalators and some market based pricing features. Moreover, the company has an unrestricted cash position of $110.3M as of October 30, 2024. We estimate that the current cash position likely represents ~22% of current market capitalization.
Our valuation methodology continues to be underpinned by a $120 per lb LT uranium price while our NAV8% multiple remains at 1.10x. Factoring in the latest corporate adjustments, our 1.10x NAV8% valuation methodology equates to a price objective representing +140% from the most recent close.