Ur-Energy: Production Pressure Still On; Inventory Purchase to Help With Contractual Obligations

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On April 11, Ur-Energy filed its 2024 year-end financials. Though FY uranium production from Lost Creek amounted to 265,744 captured lbs (81,767 lbs in Q4/2024) and met with revised FY/2024 guidance for 260,000 lbs, we note that earlier in 2024 the full year production guidance figure was significantly higher at ~550,000 lbs. Given that the Q4/2024 captured figure was previously disclosed in February, coupled with the announced production shortfall, some sort of purchase was expected to happen in order to fill the 570,000 lb contractual obligations for FY/2024. That purchase figure was undertaken in Q4 and announced in conjunction with the filing of the year end numbers - 550,000 lbs at an average price of $75.87 per lb. Much like other uranium producers before (most recently enCore Energy), relying on purchased inventory to meet contracted figures is increasingly becoming the norm. Though FY revenues were higher y/y, a lower average price received coupled with higher costs led to a loss of $6.19/lb sold, reversing the $30.90/lb sold gain, as seen in FY/2023. Factoring in the latest corporate adjustments, we maintain our NAV8% valuation methodology however reduce our target multiple from 1.10x to 1.00x. Using a LT uranium forecast of $80/lb, this equates to a price objective of $1.20 (rounded) per share, representing +76% upside from the most recent close.

The good news during the quarter was that Lost Creek production continues to ramp higher as the latest print of 81,767 lbs captured 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 which came on line in late January, production has smoothed over the past few quarters and has become more consistent (Q4/2024 head grades amounted to 66.2 mg/L). 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) Q4/2024 Domestic Uranium Production Report, Lost Creek ranked as the third largest producer of uranium during the quarter, trailing production only from White Mesa (157,525 lbs) and Alta Mesa (127,293 lbs).

What wasn't know however was 1) the financial impact of the production shortfall and 2) the measures and magnitude of corrective action needed to be taken. Given the need for 570,000 lbs to be delivered in 2024, a total of 550,000 lbs were purchased in Q4/2024 (specifically, 300,000 lbs were purchased while a further 250,000 lbs were borrowed). Given that the average price for this transaction amounted to $75.87/lb, the average unit cost per lb sold was significantly higher this year ($64.34/lb compared to $30.99 in 2023). The purchase of 550,000 lbs is significant, as is the purchase price. Recall that other significant inventory transactions undertaken in 2024 have included:

• enCore Energy (EU) purchasing 580,000 lbs at ~$100.75/lb.

• NexGen Energy (NXE) purchasing 2.7M lbs at $92.50/lb.

  
  

Seeing as Ur-Energy's average price sold for the year was $58.15/lb and the average cost sold was even higher (driven largely by the purchased inventory), this resulted in an average loss/lb sold of $6.19 and an average loss margin of nearly 11%. That said, uranium inventory now stands at over 335,000 lbs (262,239 lbs at the conversion facility, along with additional in-process and drummed lbs).

Much of the production shortfall was attributed to the inability to secure the needed drill rigs to develop the wellfields. Additionally, recruiting a sustainable workforce also proved to be more time consuming than anticipated. Low dryer production also limited the company's ability to capture lbs within the plant due to uranium storage limitations within the plant.

The company currently has 21 drill rigs turning at Lost Creek along with a compliment of approximately 85 full time employees. Significant repairs on Dryer no.1 were completed in Q4/2024. This allowed for the taking down of Dryer no.2 in January for minor maintenance repairs. 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.

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:

Ur-Energy maintains a strong contract book encompassing 5.84M lbs contracted for delivery between 2025-2033 (split between seven global nuclear purchasers). The contracts include pricing escalators and some market based pricing features. A total of 440,000 lbs are contracted for in FY/2025. The company maintains an unrestricted cash position of $71.8M as of April 9, 2025. We estimate that the current cash and equivalent position likely represents nearly 30% of current market capitalization. Note as well the 335,000 lbs currently held in inventory.

Our valuation methodology continues to be underpinned by a $80 per lb LT uranium price while our NAV8% multiple has been reduced from 1.10x to 1.00x. Factoring in the latest corporate adjustments, our 1.00x NAV8% valuation methodology equates to a price objective representing +76% from the most recent close. Shares in Ur-Energy currently trade at 0.57x NAV.