Ur-Energy Inc

TSX:URE

Earnings Call Transcript 2024-Q1

[Operator]

Good day, and welcome to the Ur-Energy 2024 First Quarter Earnings Call. [Operator Instructions] Please note, this conference is being recorded.I will now turn the conference over to your host, Penne Goplerud. Ma'am, the floor is yours.

[Penne Goplerud, executive]

Thank you, and thank you all for joining us for our teleconference and webcast this morning. We are required to draw the attention of all participants to the legal disclaimers contained in this morning's slide presentation, which apply equally to our oral presentation today. At Slide 2, you will find legal disclaimers with regard to forward-looking statements, risk factors and projections as well as other cautionary notes to investors. We ask that you read and consider these disclaimers carefully before investing in our shares. As well, risk factors inherent in forward-looking statements and projections are set forth and discussed in the company's annual report on Form 10-K filed on March 6, 2024, with the U.S. Securities and Exchange on EDGAR and with the securities regulatory authorities in Canada on SEDAR+.I would now like to introduce and turn the webcast presentation over to our Chairman and CEO, John Cash.

[John Cash, executive]

All right. Thank you, Penne. I appreciate that. And thank you, everyone, for joining us this morning. Take some time here to review our Q1 2024 earnings and takes some time for Q&A at the end. But certainly, it's been a good quarter for us at Lost Creek and at Shirley Basin and for the company as we continue to advance toward commercial production. And we'll be giving you the highlights of the financials and operations. As well, we'll provide a presentation via PowerPoint form here to talk about the broader industry. Certainly, a lot is going on right now, including some activity last week in Congress that has had an effect on uranium prices recently, and I think it will continue to have an impact going forward.So the agenda here today is we'll do the presentation, and then I'll open it up to comments from Roger Smith, our CFO. He'll provide some highlights on financials and then turn it over to our COO, Steve Hatten, who will cover off on some of the operations and provide you with an update on that. After that, we'll take Q&A.So without further ado, let's jump into the presentation. Many of you have seen this presentation before. But if you're new to the industry or new to Ur-Energy, I believe that the presentation will be quite instructive. It covers off on not only just operations in the company, but it also talks about the investment thesis in nuclear and why now is a great time to be jumping in.So Penne has already talked about the disclaimer, so I won't go into further detail there other than to say we encourage you to do your own homework before investing. There certainly is risk in any investment.In the recent past, as I attend Investor Relations conferences and talk to various investors, it's become very apparent that we have a lot of new people coming into the space. There's a lot of excitement in the nuclear industry throughout the fuel cycle and with utilities as the world begins to move more and more toward carbon-free electricity. And because of that, we get a lot of just fundamental [ 101 ] questions about what is it that you do, what is in situ mining, how do you recover uranium. So we've added a few new slides into the slide deck that really focus on in situ mining and what the technology is that we utilize since so many people are unfamiliar with it.But Ur-Energy, we are an in situ uranium miner. In situ is a Latin term, it means in the place. So we don't move any rock. We don't dig any deep holes or add its tunnels to access the ore. Instead, we access the ore through water wells. And you can see in the diagram here that the blue wells, those are injection wells, we inject water, CO2 and oxygen into the ore body. And you can see the ore body there is that crescent-shaped black figure. The mining solution of water in those 2 gases moves across the ore body. It dissolves the uranium, and we simply pump it to the surface through that yellow well, the production well, pump it to the surface and send it to a processing plant for recovery. The water, once the uranium is removed from it, is simply recycled back into the ground to continue to recover the ore until the ore body is depleted.There are many reasons why we utilize this technology. One of the primary reasons, though, is that it has a very small footprint on the surface. So the photograph here is of our operating Lost Creek mine. This is in operation. This was taken a few years ago, but you can see that those are the wellheads in the foreground, the little brown boxes that look like beehives. But you can see that there's minimal disturbance after we get the wells installed and we reclaim the surface. When we get done with mining, we will remove the wellheads, reseed the surface. And within a few years, it will be hard to tell that we were even there and the ground can be returned to any use, grazing, you could put towns on it, buildings, schools, hospitals. It is absolutely unrestricted use once we're done.The other reason the technology is used is economics. The minimal disturbance lends itself to low cost. We are not digging up large tonnages of rock. So the cost of operations of an in situ mine typically is less than for a conventional mine. And that's why the world is moving toward in situ mining increasingly. Right now, a little over half, about 55% of the world's uranium is recovered using in situ technology because of the economics, because of the minimal environmental footprint.So when the water is produced from the wells, it's directed into a header house. A header house is simply a manifold system to collect and distribute water. In the photograph here, this is a header house that we've built. And on the left-hand side along the wall, there are 60 meter runs if you can count each of those runs. And each one of those is feeding an individual injection well. On the right-hand side, you will see 30 production wells or lines that lead to production wells. And so each header house has typically about 90 wells, 60 injectors, 30 producers. The manifold system in the center, that is for filtration of the water to remove sand and silt, clays, that are produced from the aquifer.So the next photograph, it shows our operating Lost Creek mine. On the left-hand side, those are the ion exchange columns. Within those columns are billions and billions of little styrene plastic beads that have an opposite electrical charge as the uranium ions coming in because the charges are opposite of each other, the uranium gloms onto electrochemically through the resin beads and they're captured from the water. This is a well-established technology. It's been around for many, many decades and is used not only in the uranium recovery industry, but in all kinds of water treatment systems.The next slide shows one of our shipments that we sent out recently. I believe this one is lot 75. We've had additional shipments since then, but lot 75 that we sent off to ConverDyn on behalf of one of our customers that is buying the product. And so we -- you see we package it in 55-gallon drums, load the product on a truck and send it off for processing. So in a nutshell, that is in situ mining and wanted to provide those slides to people who are new to uranium mining and new to in situ technology. It's an important part of who we are at Ur-Energy.So with that, I'll switch gears, and we'll talk a little bit about our 2 flagship properties. We have other properties that I'm not going to talk about today, but exploration stage and more toward development-stage properties. But the existing production and the near-term production from our 2 flagship properties will come from Lost Creek, which is in production. And Shirley Basin, which we're entering construction now.So starting with Lost Creek. It's been in production now for over 10 years. And in that time period, we have produced nearly 3 million pounds of U308. U308 is the chemical formula for yellowcake, which is the product we produce. We recently made the decision to restart production, and we've been bringing new header houses online. Again, those header houses are the new production areas. We were able to make that decision to go and to ramp production back up because of the contract book. And I'll be talking in some detail about our contracts.But suffice it to say, early on, we had 3 contracts in place that gave us the faith that it was time to ramp production back up. We're in the process of that. And since then, we have signed 3 more offtake agreements that totaled nearly 6 million pounds, plus or minus flex. That's over a time period of now through 2030. We also have one of those contracts that has an option for extending for 3 additional years. We have a very good resource at Lost Creek, nearly 12.7 million pounds of the measured and indicated resource. In addition to that, we have a little over 6 million pounds of inferred resource.Now I'll make a forward-looking statement here, but we do believe we have considerable opportunity to expand that resource through exploration in the future. So we keep that in mind when we talk about the mine life of around 13 years, we believe we can grow that through exploration.Lost Creek has a very good history of low-cost production, and we believe we can get back to a very low cost, maybe not back to those historic numbers because inflation is impacting costs going forward. But we believe we can get back to a very low cost as we continue to ramp up. We do have technical reports that we have released NI43-101 compliant and S-K 1300 compliant reports that are available on links on our website, but we're estimating that our operating cost at Lost Creek will be about $16.73 a pound as we reach economies of scale.The license for Lost Creek allows for 1.2 million pounds of production from the mine site and 2.2 million pounds a year from the plant. Now I need to explain the delta, why the 2 different numbers. We -- that was intentional. We wanted extra room in the processing plant to be able to toll process for competitors or for another one of our projects, such as Shirley Basin, when we bring it online. So that 2.2-million-pound capacity at the plant at Lost Creek is fully constructed out and is operational.So that takes us to Shirley Basin because we intend to fill some of that capacity at Lost Creek with pounds from Shirley Basin where we're going to build out just a satellite, just the front end of the processing plant, ship the loaded ion exchange resin over to Lost Creek for processing there and then take that resin, load it back on a truck, ship it back over to Shirley Basin to be reutilized in the system there. So Shirley Basin is fully permitted. We have all of our major permits and licenses. We've announced a decision to initiate construction, and we are in the early stages of construction right now, as we speak.There is a licensed capacity at the mine and the mill for Shirley Basin of 1 million pounds per year. There's already a lot of infrastructure in place there because it is a brownfield property. Power lines are already there. We've got some roads coming in. Those need to be upgraded, but they do exist. There are also a couple of buildings on site, tailings management facility. So that gives us a head start on bringing that facility into production.Shirley Basin has a resource of 8.8 million pounds of measured and indicated resource. Please note there that there are no inferred pounds. This project has been heavily drilled and we have all of the historic data. So everything has been put into the measured and indicated resources. Shirley Basin has a reputation of being the first in situ uranium mine in the world that we believe that to be true. We have the records for that, showing that the concept was initiated back in about April of 1961. By spring of 1963, they were working on a pilot project that produced about 1.5 million pounds of uranium using the in situ technology at Shirley Basin. So we're excited to bring this technology back to what we believe is its birthplace.The operating cost at Shirley Basin, we're estimating will be about $24.40 a pound, again, once we reach economies of scale. As I indicated, we have initiated construction. We are moving forward with the installation of our first monitor well ring. We're also looking to begin upgrading of the road. But we won't break ground on the processing plant or the satellite until about this time next year. We're putting final touches now on detailed engineering. We're getting ready to order long lead items. And in fact, we've already begun ordering some of the long lead items like ion exchange columns.Once we get a lot of that material on the ground, we will break ground and really initiate construction in earnest with the objective of having construction done late '25, early '26 with production immediately thereafter. And so very excited about that. It's a famous uranium mining district in the State of Wyoming. And when we made the announcement that we're going to bring Shirley Basin back into production, we had tremendous inbounds from the public, very supportive to bring that back into production.So we'll leave behind our 2 flagship properties just for a little bit and talk about the nuclear investing thesis. Why nuclear, why now? And really one of the main reasons and the early reasons that the price began to move and the world began to show much more interest in nuclear power is because it's carbon-free. When you burn uranium in a reactor, there are no emissions of CO2 or other greenhouse gases that are emitted and the world is realizing that, hey, that is a tremendous benefit. It's strong baseload. In other words, it doesn't go turn off when the sun goes down or the wind doesn't blow and we can rely on it at very high uptimes and with very reasonable cost. Already, the U.S. gets about 20% of its electricity from nuclear power and over half of our carbon-free electricity is from nuclear.Right now, in the world, we have about 440 operating nuclear reactors, an additional 60 are in construction. Many of those are in China. We just had 2 come on in the U.S. down in Georgia. They were built by a company called Southern Company. So we're excited to have those on in the U.S. and have new production there. There are 92 reactors on order and another 343 have been proposed. Because of that growth, the World Nuclear Association, the WNA, is projecting significant increases in demand for uranium in the coming years. The demand last year was 171 million pounds, that's global demand. They're projecting, by the year 2040, that demand will have increased to 338 million pounds. That is a massive increase in such a short amount of time. And it's going to be incumbent upon the miners around the world to be able to fill that supply. And we have a lot of catch-up to do to meet that demand.That demand is before you start to layer in the small modular reactors, so the SMRs. They're already operational in 3 countries, and there are strong moves in the U.S. to build out more here, the NEI, which is the Nuclear Energy Institute. They did a poll of their members here in the U.S. and the U.S. utilities are estimating that they could have as many as 300 small modular reactors online by the year 2050. Again, in the nuclear industry, 2050 is like tomorrow. That's very quickly.Here in Wyoming, from where I sit, not too far behind me here to the west, TerraPower is building out a small modular reactor. TerraPower is owned by Pacific Power and Bill Gates, Warren Buffet are involved in that project. If there are any 2 gentlemen in the U.S. that can get a project done, it is those 2 guys, and they're making good progress for construction and approval of that plant. But we're proud to have that here in Wyoming and looking forward to hopefully being a supplier to that at some point in the future.It's really difficult to talk about the nuclear investing thesis without talking about geopolitics because as the heading says here, it is the tail that wags the dog. And it has been for decades, and that's because of the dual use of nuclear fuel. When Russia invaded Ukraine, that was a real game changer for the industry because Russia is a major refiner or processor of uranium. They don't mind very much, but they are one of the leading processors of uranium globally. And in fact, Western companies really don't have the capacity today to backfill that. Now I think that's going to change very rapidly. But sitting here today, Western companies cannot backfill a supply gap from Russia. So when Russia became a bad actor and invaded Ukraine, the markets got put into turmoil, a lot of risk, a lot of questions, where will the resources be coming from if we can't rely on Russia? So we started to see prices moving up with that invasion of Ukraine.Important to that discussion, too, is Kazakhstan. Kazakhstan doesn't refine very much uranium, but they do a lot of mining. In fact, they supply nearly half of the world's feedstock of uranium. Much of that goes into Russia for refining and then is distributed around the world, including here in the U.S. Russia has a lot of influence in Kazakhstan that can't be ignored going forward. And we're beginning to see that Russia and China have greater influence over Kazakh production. China has been moving into Africa and buying mines there and has become a dominant controlling force of uranium production in Africa.The West is trying to keep up. For example, Cameco has been bringing their 2 big Tier 1 mines back online, up in Canada. It's been a little slower than they wanted, but they are making progress, and I'm confident they will ultimately be successful, but it has not been easy for them. And quite honestly, the production out of Canada is not enough to displace supply chain problems that could evolve out of Kazakhstan and out of Russia. They're a great supplier, but it's not enough.Then you layer in on top of all of those issues, the coup in Niger that happened a few months ago. And Niger only supplies about 4% of the world's uranium. And you say, well, that's not very much. That's a pretty small percentage. So when you consider that the supply chain is already stressed and supply is not keeping up with demand. And you call into question 4% more, that creates a lot more nervousness in the market. It's not clear where that's going to settle out at this point.Here in the U.S., we've seen increasing support in Congress and in the White House for nuclear power. And I'm not going to read all of the bullets on this slide, but the top 3 bullets, those are successes that the industry has had with Congress in the last couple of years. The bottom 3 bullets are just some points on ongoing support. Most importantly, last week -- middle of last week, we got approval from the Senate and a unanimous consent, Democrats and Republicans to institute a ban on the import of Russian low-enriched uranium. The House had already voted in favor, again, unanimously to put a ban in place to halt imports of uranium coming from Russia.I can't think of anything else in the last few years where the Democrats and the Republicans have agreed unanimously in the House and in the Senate to do anything. So I think this speaks to the desire to enhance nuclear output here in the U.S. throughout the entire fuel cycle. That bill is now moving to the President's desk. We have every reason to believe that he will sign it. Once that is signed into law, it will take effect 90 days after signature. The ban will last until the year 2040. There is a waiver process through the end of 2027. So if a utility is unable to acquire low-enriched uranium, they can go to the Department of Energy and seek a waiver that would allow them to get Russian material into the country. That waiver process, at this point, is not very well defined, but we believe it will be stringent and will only be utilized under very limited circumstances.Going back to some of the projects we have, just a few more slides on Lost Creek and Shirley Basin, and then we'll get into some of the financials. But the map here on the left, it does show the property that we hold in the Great Divide Basin. In blue is Lost Creek. That's the area that is currently permitted. Been in production for over 10 years now, and it has had incredibly good recovery rates, averaging 90% over 10 years. We're also very proud of our royalty burden at both Lost Creek and at Shirley Basin. They both average less than 1%. I think we probably have some of the lowest royalty burdens in the industry, and that really helps us out on the economics.The green area, we believe there is good mineralization throughout those areas, and we'll continue to explore in those areas going forward. We are working on permitting LC East. We have 2 of the 3 major permits we need on that. We're awaiting the third and file permit to bring LC East into the production portfolio. But all of those areas in green, they are within pipeline distance of the processing plant at Lost Creek. And as I mentioned earlier, we do believe we have a lot of room to explore both laterally and vertically. There are a number of geologic horizons that have had little to no exploration including the KM, L, M and N Horizons. So we have a lot of room to explore going forward.I had indicated earlier that we have a history of being a low-cost producer, I won't go through all the numbers on the slide here, but I would call your attention to the year 2015. It's highlighted in yellow. And you can see our production that year was pushing 800,000 pounds. So we had very good economies of scale. Our average cash cost that year was a little over $16 a pound, which is outstanding. We believe that we can get back not to those numbers, but not too terribly far off of those numbers as we ramp up. Now that is C1 cash cost. That does not include an all-in cash number. But again, we believe we can get down to a very low cost going forward.So right now, we are ramping up commercial operations at Lost Creek. We've got 4 new header houses that are online, and we expect a fifth header house in May, and we expect to continue to speed up the rate of construction and bringing new areas into production throughout the summer. We've got a new deep disposal well, and we're finalizing the permitting on that. I hope to have that up and running in the not-too-distant future.We are very aware of supply chain issues. They are very real. We are ordering some equipment 12 to 18 months in advance to make sure we've got it on the ground at Lost Creek in a timely manner. We've been successful there, but we have to stay on top of that situation because it can interfere with production if we don't stay on top of it. We are pleased that we've been able to keep some of our key staff out of the mine site. They've been incredibly helpful to us and important as we ramp up. They are training our new staff as they come online. We are now done with hiring. I've been very open public about challenges with hiring. It's not been easy, but we do have our staff that we need.Going back to the Green Revolution. I'm not going to read everything on this slide. I'll let you read that. But I do love the top bullet. The statistic is just amazing. If you take a look at the pounds we will produce from Lost Creek and Shirley Basin and that energy output. If you compare that energy output to the output from a coal-fired power plant, we will offset over 300 million metric tons of CO2. That's the equivalent of taking 67.5 million cars off the road per year. We're very proud of that. And as I've indicated, that's an important component of nuclear energy and why the world is moving toward that.We have also been a leader in research and development. The top 4 bullets. They highlight some of the successes that we've had in the past. We have announced programs -- R&D programs for a new type of well casing that we are working through the patenting process on. So we have protection on that. And we've also announced an advanced water treatment and filtration R&D program. Both of those have been kind of held off a little bit as we ramp up. We simply don't have the manpower to dedicate to those. We are excited about the opportunities they present, and we will get back to them in the not-too-distant future as we work our way through ramp up. R&D is difficult. We can't be sure what the outcomes are, but we're optimistic that we'll have some good developments there that will reduce costs and at the same time, improve our environmental footprint.So looking at financial highlights. As of the second of this month, we have $52.9 million in cash. We are now debt-free. We have 6 long-term contracts that we've put in place. List those out there. For this year, we need to deliver 570,000 pounds into those contracts. Keep in mind that our current mine capacity is 1.2 million pounds per year, and we expect that to increase to 2.2 million pounds a year as we get Shirley Basin built out and put into production. We also have a little bit of income that comes in from interest as well as disposal fees out at Shirley Basin.So here's our market position. We've had some very good volume days here lately as interest grows in Ur-Energy in the nuclear space. We've been trading over 3 million shares a day. The last couple 3 days, it's been substantially greater than that. So we've got great liquidity. Price, we see upward pressure here over the last few days. Very pleased and really want to highlight this on the slide. We believe we have some of the most sophisticated investors in the uranium mining space. These are companies that research daily and have tremendous expertise in the uranium market. They know it better than most. And so companies like Lloyd's Harbor (sic) [ Lloyd Harbor ], which is a part Sachem Cove, MM Cap, CQS, Segra, Azarias, some of the ETFs are significant shareholders, and I think it speaks really well to the value our company presents. We are well over 50% institutional held at this point. In fact, at one point, I think we reached 62% institutional. We've retreated off of that just slightly, but very pleased with our share registry. We also have great analyst coverage. These are some of the biggest names in the uranium space again that cover off on the uranium miner. So we're very pleased to have such good coverage.So just closing here on the presentation, a few takeaways. We are well financed at this point. We've got some very good contracts in place, and we're beginning to experience revenue from those. We are continuing to see RFPs come in from utilities, and we are going to continue to respond to those RFPs at increasing prices. The market is continuing to warm up. And as it gets warmer, we're going to look to get higher and higher pricing. I'm going to reserve some comments on that to the end of the presentation here. I'll speak more about our contracting philosophy. Certainly, that is a question that we commonly get from investors. So I want to touch that in a little more detail here in a couple of minutes.The ramp-up to commercial production is well underway. We've got our core operational staff hired. They are getting more and more experienced. We expect the production rate to continue to improve and increase throughout this year as we move into commercial production. We believe that our ramp-up costs are going to be lower than most out there, other build-out stories, and that's certainly been a part of our DNA that we are low cost.So there are a number of catalysts out there. I think investors need to be considering when they look at investing in uranium miners and specifically, Ur-Energy. First off, we do continue to see the uranium price move higher. So that is moving share prices along with it. But again, the world is moving toward green energy, that's putting a lot of pressure. The suppliers are struggling to keep up with demand. I don't think that's going to change in the near term, maybe in the midterm to long term, that will change, but it is going to take time for the miners to catch up with the demand. Geopolitics are putting a lot of pressure on supply and pricing. And the financial players have really jumped into and they've been mopping up a lot of that mobile inventory. We believe there is very, very little mobile inventory out there at this point.So with that, that concludes the presentation, but I would like to take a couple of more minutes before I turn it over to Roger and Steve to talk about a couple of additional things in a little more detail because we get a lot of questions on this. And that is the philosophy on marketing of pounds and contracting, how much are you going to hedge? So just I would like to take a few minutes to talk about it.So at this point, as we've discussed in the PowerPoint presentation, we've signed 6 long-term sales contracts for delivery of 5.72 million pounds of U308 from this year, 2024 through 2030, plus we have potential for a 3-year extension on one of the contracts. Some of these contracts contain a flex provision of plus or minus 10%. The first 3 contracts that we signed were for the explicit purpose of protecting the company by ensuring revenue over the next several years. and each were signed at prices higher than the long-term prices prevailing at the time commercial terms were agreed to. Each of these contracts is well in the money for Lost Creek and Shirley Basin production.Two of our recent contracts have significant pricing components with spot market-related collars. The floors keep us well in the money in a declining market and the ceilings allow for upside potential in a rising market. We have a strong preference for this contract structure going forward. Our current contract book represents a little over 50% of our current licensed capacity, which leaves nearly 50% of our capacity for future long-term contracts. That 50%, I need to tell you what that's measured against. That's measured over the next 6 years of the contract book. So that's where that 50% comes from.So this marketing strategy has worked well for us over the years. As evidence of that, I would encourage you to consider how revenues from long-term contracts we delivered into from 2014 to 2020, resulted in profits and dramatically minimized our need to dilute our shareholders via equity raises. During that time period, many of our peers who didn't have the benefit of a robust contract book had to complete large equity raises and at least one of our peers went bankrupt as a result of not hedging. At this point, it is not our intent to sell into the spot market. We prefer to dedicate any production in excess of our contract book toward building inventory. At some point in the future, when production has been ramped to commercial levels at Lost Creek and Shirley Basin, and we have comfortable inventory, we may consider selling into the spot market if and when it is advantageous, but not until then.I want to be clear that our marketing strategy is fluid and will change in response to our production, our prediction of future uranium demand, prices and other factors. However, in summary, our strategy will be to protect the company by dedicating a percentage of production into long-term contracts, while keeping significant powder dry to enjoy higher prices in the future and/or market-related contracts with strong collar pricing. So we've been receiving a lot of questions about contracting, and I wanted to supply some insight into that. We've commented on this in our public disclosure, but hopefully, this is helpful.Before I turn the mic over to our CFO, Roger Smith, to discuss the Q1 financial highlights, I want to take an opportunity to thank the State of Wyoming and Sweetwater County for their assistance with the Wyoming State Bond Loan. In 2014, the state, along with Sweetwater County, supported a $34 million loan that was instrumental in completing the ramp-up of production at Lost Creek. I'm pleased to report that on March 27, we made the final payment, and we are now debt free. At the time the loan is authorized, the now Governor, Mark Gordon, was the State Treasurer and played an integral role in finalizing the transaction. We truly appreciate the support the state and county has given us, and we commit to remaining good stewards of the land. But we believe this demonstrates that Wyoming is a great place to be for uranium miners.So with that, Roger, I'll turn it over to you. If you don't mind, if you could touch on the highlights of Q1, I would appreciate it.

[Roger Smith, executive]

Well, thank you, John, and good morning, everyone. Thank you for being with us. It has been a long time, but it is good to be back and have some production to talk about.So let me begin with production. During the quarter, we drummed 39,229 pounds after overcoming some equipment issues in Q4. This allowed us to make our first shipment of 35,445 pounds to the conversion facility in February. Our ending inventory at the conversion facility was 79,235 pounds on March 31. As expected, the cost per pound at the conversion facility increased to $39 following the February shipment, which came in at about $52 per pound. As production increases, we expect the cost per pound shipped to the conversion facility to decrease and the conversion facility cost per pound to also decrease. In April, we made our second shipment and expect to make routine shipments throughout the year.Turning to cash. We ended the quarter with $53.9 million, which was down $5.8 million from December. During the quarter, we received $15.8 million from the exercise of warrants, proceeds from ATM sales and interest income. We used $5.7 million of the funds for debt payments, including the normal quarterly loan payment and in January, the loan payoff in March as well. We are now debt free, as John told you, and that's very fine. And I would also like to thank the Treasurer and the State of Wyoming. They were so helpful during the process and very, very good to work with throughout.In addition to a small amount of capital expenditures, we spent about $2.6 million on production costs during the quarter. Production activities include wellfield operations, plant operations, site administration and product distribution. The costs, captured, drummed and shipped uranium to the conversion facility are included in our production costs. Our cost per pound captured decreased during 2023 as we captured more pounds each quarter, ultimately capturing 68,448 pounds in 2023 Q4. Because of drying limitations in Q4, which we remedy in Q1, we were only able to capture 38,221 pounds in 2024 Q1. With the drying limitations behind us, we are now able to capture and drum more pounds. Through May 2, we drummed 29,497 pounds, and we should see our cost per pound captured continue to decrease in Q2.We spent $14.7 million on operating costs during the quarter. Operating costs include exploration, evaluation, development and corporate overhead costs. Development costs accounted for $12 million of the $15 million in operating costs. Included in development costs, we spent $3.5 million on the completion of a deep disposal well. The completion work was finished in Q1, and we are now in the process of obtaining the remaining regulatory approvals. $7.9 million was for the development of the wellfield at Lost Creek.Wellfield development includes all of the cost in advance of wellfield operations, such as drilling and drill-related costs, header house construction costs and infrastructure costs. These costs are incurred in advance of production and are expensed as they are incurred. As we continue to develop the wellfields at Lost Creek, these costs will continue, but will stabilize as production increases and we achieve a balance between wellfield development, wellfield operations and plant operations.I will close with a few comments about sales. Sales are projected to be 570,000 pounds in 2024. Our first sale was in April for 75,000 pounds, and the remaining sales will take place in the second half of the year. We expect to realize revenues of $33.1 million at an average price of about $58 per pound. The 2024 sales deliveries are into base escalated contracts that were negotiated in 2022 when the long-term price was between $43 and $52 per pound. Those contracts enabled us to make the decision to ramp up operations at Lost Creek. Fast forward today, we are well into the ramp-up process. And currently, we have 6 active sales agreements in place. The pricing of our sales agreements is anticipated to be profitable on an all-in production cost basis after we reach targeted production rates. We anticipate reaching those targeted production rates before year end.With that, I'll turn it back over to John. Thank you, everybody.

[John Cash, executive]

All right. Thank you, Roger. I appreciate you running through the numbers with everyone. Steve -- Steve Hatten, our Chief Operating Officer. Steve, if you could give us an update on operations.

[Steven Hatten, executive]

Sure. Thanks, John, and thank you to everybody who has taken the time to join us today. We appreciate it.First, we are pleased to be one of the few publicly traded companies that are actively and aggressively drilling, constructing and commercially recovering uranium and expanding our production capacity to sell into a strengthening uranium market, especially given recent developments on the world stage. We'll talk about Lost Creek first. Ramp-up continues at Lost Creek with 2 additional header houses, 2-6 and 2-7 coming online thus far in '24. That's 4 total since the decision to restart normal operations.While we have experienced some additional equipment and operational challenges, we are seeing more consistent drying and packaging with nearly 30,000 pounds drummed since quarter end through May 2 as well as shipping 35,398 pounds and transferring 75,000 pounds to customers. Primarily, the issues reducing speed of ramp-up are related to the challenging market for hiring and retaining personnel. This has been true in all phases of work at the site and has also been true for our contractors. In spite of difficulties with hiring, retaining and training personnel, we continue to advance the project, albeit sometimes in a one step forward, 2 steps back manner. Regardless occupational, regulatory and environmental safety and compliance remain primary in everything we do.We also drilled an additional deep disposal well at Lost Creek starting in mid-2023 and following the receipt of regulatory approvals, final completion work was finished in Q1 of '24. We will now obtain remaining regulatory approvals followed by specification of surface injection equipment. In advance of operation of the deep well, procurement and installation of a power line was completed, enabling anticipated operation in '24. Initial injection systems are already on site, allowing for operation of the deep wells soon after injection permits are received.Looking ahead, we have 12 drill rigs on site with at least 1 additional rig scheduled to commence work in early May. Drilling has advanced into Header House 2-11 with completion work nearly finished in Heder House 2-8. Fabrication of Header Houses 2-8 and 2-9 is complete and work on Header Houses 2-10 and 2-11 is advancing in our Casper construction shop. Header House 2-8 is expected to come online in May. We expect 2024 production from Mine Unit 2 to be between 550,000 and 650,000 pounds. We also anticipate routine shipments from our Lost Creek mine at the conversion facility continued throughout the year.Next, we'll talk about Shirley Basin. With our expanded sales contract book and encouraging market conditions, we were pleased to announce our decision in first quarter of '24 to proceed with the build-out of a satellite facility at our wholly owned, fully permitted and licensed Shirley Basin Project in Carbon County, Wyoming. The decision will nearly double our annual permitted mine production to 2.2 million pounds U3O8.The satellite plant will be a relatively low-cost facility consisting of ion exchange, wastewater and groundwater restoration circuits. The ion exchange resin at Shirley Basin will be loaded with uranium from the mine and shipped to our Lost Creek facility for processing before being recycled back into operations at Shirley Basin. This satellite approach will help minimize initial facility capital costs to approximately $24.5 million and preoperational wellfield development costs to $16.3 million.The satellite plant will be designed with a flow rate of up to 6,000 gallons per minute and capacity to produce up to 1 million pounds of U3O8 per year. Our permits and license allow for the construction of the elution, precipitation and drying circuits should have become economically advantageous to do so. No amendments to the existing permits or licenses would be required to do that. The estimated time to finalize designs, order materials and construct the satellite plant and initial wellfield recovery area is approximately 24 months.Work has already been initiated on long lead items, including detailed engineering, and additional geologic pattern planning for the wellfield. Planning has been completed for the monitor well ring for the first mine unit with plans to install approximately 120 wells in 2024 Qs 2 and 3. We have already mobilized rigs to that effort and people are working on that as well. This installation will enable hydrologic testing, baseline water quality analysis to proceed prior to the start of installation of production patterns in mid-2025. Significantly, the bid process and award for the fabrication of IX columns has been completed. This procurement represents one of the longest lead items within the facility. Major construction activities are expected to begin in 2025 and initial production is expected to commence in 2026.Thanks for your time. John, back to you.

[John Cash, executive]

All right. Thank you, Steve. I really appreciate the operations update. At this point, we'll jump into Q&A. We do have a few minutes of time left over here. So very happy to be able to try to answer any questions you have. Penne, I'll turn it over to you shortly, but I do have 2 questions that have been posed. And after I answer those, I'll turn it over to you to see what other questions we have.The first question, I believe Steve has already spoken to, but asked, could you speak to how you see production advancing through 2024 to meet annual guidance? Again, Steve addressed this. But a few weeks ago, we put out a press release. We did slightly -- very slightly downgrade our production forecast for this year by 100,000 pounds. Now we're looking at around 550,000 to 650,000 pounds of production this year. That's right in line with what we need to fill our contract book for this year. And we're very optimistic, and we're working hard on a day-to-day basis to be able to meet that production going forward. And Steve, I think, gave us a really good presentation on the activities that are going on for us to be able to meet that production for this year. So we're targeting right at around 600,000 pounds of production this year to fill our contract book.The second question is talking about share performance, comparing that to our peers. Just would like to point out that -- and I just did a quick look here on Yahoo Finance. Our share price is up 89.4% over the last year. I think that's outstanding. I wish I got that on my 401(k), I would have retired many, many years ago. But having said that, sometimes people ask me, well, how come you're not doing as well against the stock or that stock? It's not an uncommon question that we get. So our performance has been very good. But I would ask, who are our peers, who is in production that you can compare us against? And I think it's difficult to compare a producer against a more promotional story that perhaps most likely is not in production.Right now, in the U.S. and globally, the number of junior mining companies that are in production, you can literally count it on one hand. Don't even need all your fingers to do that. So I would question who are the peers, but very proud of our performance. And I can assure everyone on the call that every day, we are looking for ways to improve production, lower cost, get higher contracts to be able to boost that share price. At the same time, we're going to continue to be a very transparent story. I think we always have been, we always will be. That's how the company was founded and how we're going to continue to run that.So with that, Penne, I'll turn it over to you to see if there are any additional questions from the listeners.

[Penne Goplerud, executive]

Thank you, John. There are no other questions on the webcast, but I believe that our operator has some folks standing by with questions.

[John Cash, executive]

Okay. Thank you. Ali, if you can give us the questions, I would appreciate it.

[Operator]

Yes, indeed. [Operator Instructions] Our first question is coming from Heiko Ihle with H.C. Wainwright.

[Heiko Ihle, analyst]

I assume you can hear me, okay?

[John Cash, executive]

Yes, I sure can. And thank you for joining the call, Heiko. I appreciate it.

[Heiko Ihle, analyst]

Of course, let's talk a little bit about these long-term contracts. I mean they came up a couple of times throughout the course of this call here. And also, in your release, you stated that you have received increasing requests for proposals from utilities, not really surprising, but can I build on this just a little bit. What are you seeing in regards to changes in pricing and demand from clients between, call it, the end of Q1 and today? And then building on that question, could you maybe provide a bit of feedback on if there has been any changes since the recent Senate decision?

[John Cash, executive]

Yes. No, for sure. I'll take those in reverse order. We've not seen any RFPs since the Senate decision. We have seen the spot price go up several dollars. I believe yesterday, it was around $94 a pound on the spot long term was around $80. So very good pricing there. For us, at Lost Creek and Shirley Basin, those numbers are well in the money. So we're very pleased with where the market is. But we -- other than the changes in the spot price, we've not seen anything with regard to contracting RFPs in that short amount of time. I'm not sure that we will.I think that decision, that vote by the Senate and the House, I think a lot of that was already baked into the cake. I think everyone in the mining industry. And I believe the utilities, too, appreciated that, that decision was ultimately going to be made and the band was going to be put in place. It simply was a question of when. So again, I think it was largely understood it was going to happen. It's baked into the cake, but we'll continue to see a benefit from that going forward, they'll continue to put upward price pressure on the market.But over the last few months, how has the market evolved as far as RFPs and the structures of contracts? I would say, going back a little further, 2 years ago, 3 years ago, in response to RFPs, the utilities would have insisted on a base price, perhaps with inflation protection but a base price. They would not entertain any proposal that would have included collars or anything related to a short-term price. I think that was pretty much completely off the table because it was a buyer's market, not a seller's market. But what we've seen more recently is it's become more and more a seller's market instead of a buyer's market. So as a result of that, we see increasing opportunity for contracts that are based, at least in part, on collars with the market-related provisions.We're also seeing that utilities don't demand as much flex typically -- not always, but typically. So we see those 2 significant changes. It's just -- it's a buyer or a seller's market now. And so the buyers, if they want a contract, they're going to have to come in line with what the sellers want. So going forward, we're going to take advantage of that. We're only going to sign contracts at increasing prices. We really would prefer that any contracts we signed going forward would have significant components, if not 100% of collared with a very strong floor that is very profitable for us even in the worst case. But also leaves us tremendous blue sky for an increasing market.Heiko, you'd asked about some numbers. I'm hesitant to get into those numbers. It's not something that we release on individual contracts. I want to be careful there. But suffice it to say, it is definitely a seller's market now. We are going to be patient. We're not going to sell into the spot market for the foreseeable future, but we're going to be patient as far as signing any additional long-term contracts. We believe that there's going to continue to be upward pressure on the market for the foreseeable future. And so yes, we'll be patient. We've got really good revenues locked in for many years to come. So we're in a very good strong position.So Heiko, I know I evaded some components of that question, sorry about that, but hopefully, I've answered most of it.

[Heiko Ihle, analyst]

No, I think you got pretty close. And then you talked about the small modular reactors earlier. I mean this is obviously a very, very long-term catalyst. I mean you mentioned 2050 earlier on this call. But any idea in regards to growth trajectory? Like how soon could we really see meaningful impacts on demand from this?

[John Cash, executive]

No. Very good question, Heiko. I think in the long term, we have the potential to see tremendous demand, but you're, I think, spot on, we're not going to see significant demand in the very near term. By near term, I mean, the next 3, 4, 5 years. I think we're going to start to see incipient demand 7, 8, 9 years out. Keep in mind, to process the fuel from yellowcake to high assay low enriched uranium, which most of the small modular reactors will utilize, you're looking at 2 years, maybe even a little bit over 2 years. So those companies are going to start contracting out at a minimum 2 years, more likely 3 years, maybe even 4 years before they need that fuel because this is a new type of fuel, it may take a little bit longer. So it's going to take a while for the SMRs to reach a level of large consumption. But keep in mind, they will be buying fuel years before.So if I have to throw out a number where we begin to see a material demand from SMRs, 2028, 2030, somewhere in there, I believe we began to see a relatively significant demand. We'll see how the NRC approves the reactors and how they're able to advance them. I think that is one risk to SMRs that is too often overlooked is the inability of the NRC to get out of its own way. And so hopefully, the NRC begins to find efficiencies and can help advance that industry, but they've got some dramatic room for improvement.

[Heiko Ihle, analyst]

That's helpful.

[John Cash, executive]

Thanks, Heiko. Any other questions?

[Operator]

Yes, sir. Our next question is coming from Matthew Key with B. Riley Securities.

[Matthew Key, analyst]

Obviously, we had a recent announcement on Shirley Basin, which will double production output. But I was wondering beyond that, what opportunities are out there that you could allow you to push your processing capacity beyond 2.2 million pounds. Is M&A something that you guys are looking at in this environment?

[John Cash, executive]

Yes. So I think we have perhaps 3 ways to improve and increase production in the outlying years. First off, let me talk about M&A since you specifically brought that up. We are always aggressively looking for opportunity on the M&A front. So we are very picky, though, about any property that we acquire. And so we've always been very disciplined as a company. We've made -- really, in the last 10 years or so, 11 years, we've made really one acquisition, and that was with Pathfinder Mines that brought Shirley Basin into our story.So we'll continue to look very hard on the M&A front for quality properties that we believe we can bring into economic production in the near term. It's a bit like a marriage. You want to get married with someone who is like you. And so we'll continue to look for companies and projects that are like us. It's a small universe out there. So M&A is difficult. People ask me what's your strategy? Well, it's difficult to have a strategy when there are so few potential counterparties. It's really is kind of predicated on when there's opportunity, you assess the opportunity and you proceed or not. So we're looking at that. We're also looking at some of our potential development and exploration projects like North Hadsell, Arrow, Lost Creek North, Lost Creek South, West. We believe that there's some opportunity to continue to develop those and explore those and potentially bring them into production. So that's not out of our minds.And we're also -- we'll be considering opportunities to expand production at existing facilities. And that would be the third way we can do this. There are technical matters that we need to address before we can get above the 2.2 million pounds a year at Lost Creek, the capacity there and the 1 million pounds a year at Shirley Basin. Those are related to hydrologic constraints, geologic constraints, wastewater management constraints, but that certainly is on the table. Not making any promises here on timing or what those numbers would be, but I can assure you that we're always looking at ways to be able to enhance and grow production at existing facilities. And so we're keeping an eye on that.We've got a very good regulatory regime in the State of Wyoming. So if we are able to overcome any of those technical constraints, I believe we could go back to our regulatory agencies and within a reasonable time period, get approvals to advance additional production. So yes, the -- I guess, the short answer is, absolutely, we are looking for opportunities to expand production. Those are the 3 broad buckets that we're looking at.

[Matthew Key, analyst]

Got it. Great. Great overview. And in your prepared remarks, you mentioned that building inventory is a priority over spot sales right now. I was wondering if there is a specific inventory level that you guys would like to reach before you're more comfortable in taking a more active role in the spot market.

[John Cash, executive]

Yes. Again, I think it's a fluid number depending on our confidence of production and where the contract book is and where we think the market is going to go. But I would personally sleep a lot better at night if we had a minimum of 100,000 pounds of inventory and even better if we had 200,000 pounds of inventory. So yes, it's fluid, but certainly, we'd like to have those minimal numbers of inventory to rely on.

[Operator]

Our next question is coming from Joseph Reagor with ROTH MKM.

[Joseph Reagor, analyst]

Most of the stuff I wanted to touch on was already asked. But you mentioned that you guys have kind of solved the labor issues at Lost Creek. Are there any other things that are still a challenge for you guys with the ramp-up that you think that you lose sleep over. And then thinking about in the future, Shirley Basin, when that comes online, how many more employees are you going to need to run Shirley Basin? And any concerns about given how tough it was this time around to hire, would that repeat itself?

[John Cash, executive]

Yes. No, Joe, very good questions. I appreciate that, and thanks for being on the call. So we do have our manpower at Lost Creek now. We have the body count we need. But I wouldn't say our manpower issues are totally resolved. I want to be very transparent here. We still have a lot of very green employees, and they're good people. We like them. Glad to have them on board. They're absolutely critical to our success going forward. And they're doing the best job that they can, but they're very green. So it's incumbent upon us to continue to train them, to advise them, to encourage them to advance production.Maybe not a great analogy, but I almost think now that our senior management, we're almost in the parental role right now with our young employees, where it's our job to make sure they're safe to continue to educate and bring them along, encourage them, correct them appropriately. But in the end, they're going to turn out to be great employees and will be the better company for it. So I don't want to say we have the manpower issue solved. But I would say, we are a long ways down that pathway, and we expect production to continue to improve in the near term and in the long term.Switching over to Shirley Basin and manpower there. Penne can probably or Steve can probably correct me, but we're probably going to need 55 or so employees at Shirley Basin. I don't think I'm too far off on that number. But Shirley Basin is dramatically closer to Casper, Wyoming into a major Wyoming city, as I'm speaking in relative terms there. I think that's going to make it a lot easier for us to get employees out at Shirley Basin that, and it also is a historic mining district.I mentioned earlier in the presentation that when we made the public announcement that we were going to go into production at Shirley Basin, there was an absolute outpouring of support from the community. So many people have worked out at those mines historically. They work there or they're uncle or their dad, their mom work there. So it's just a much more public mine. It's got paved roads almost all the way to it, much easier access, much closer to town.So am I concerned about manpower at Shirley Basin? Yes, absolutely. But I believe it's got a couple of things going for it that will make it a lot easier than at Lost Creek. So -- but Joe, thanks for being on the call.

[Joseph Reagor, analyst]

Yes. And then just on -- back on Lost Creek, are there any other things holding back ramp up? Or is it still just training employees?

[John Cash, executive]

I think the big thing is training. I mean I could point to a few other issues, but those issues I think if you did a root cause analysis and the root cause would come back to just lack of experience. And so I think the vast majority of those issues will be resolved in the near term. They're temporary problems. Joe, maybe another way to say it, too, is the vast majority of any issues we are concerned with are surficial. They're tangible. We can touch them, we can see them, we can analyze them and we can fix them. And as we grow in that experience, I think we will fix them and continue to advance.All right. Ali, I think we better call out there. We're a little over hour and -- but I really truly appreciate everyone being on the call. As always, we will work hard to continue to keep our investors updated on production and activities going forward. So thank you very much. And if you have other questions and weren't able to get into the queue, my e-mail address is there on the presentation, shoot me an e-mail. I'll work very hard to get your response in a timely manner. But thank you, everyone.

[Operator]

Thank you, sir. This concludes today's call, and you may disconnect your lines at this time. We thank you for your participation.