Earnings Call Transcript - URG Q1 2024

Operator, Operator

Good day and welcome to the Ur-Energy 2024 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. 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, Chairman

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 applies 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 US 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, CEO

All right. Thank you, Penne. I appreciate that, and thank you everyone for joining us this morning. I want to take some time here to review our Q1 2024 earnings and take some time for Q&A at the end. It's been a good quarter for us at Lost Creek and Shirley Basin and for the company as we continue to advance toward commercial production. I will give you the highlights of the financials and operations. We will provide a presentation via PowerPoint form to talk about the broader industry. A lot is going on right now, including some activity last week in Congress that has affected uranium prices recently. I believe it will continue to have an impact moving forward. The agenda today is we'll do the presentation, and then I'll open it up to comments from Roger Smith, our CFO, who will provide some highlights on financials, and then turn it over to our COO, Steve Hatten, who will cover 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 it will be quite instructive. It covers not only operations in the company but also talks about the investment thesis in nuclear and why now is a great time to jump in. 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 is, of course, risk in any investment. In the recent past, I have attended investor relations conferences and talked to various investors, and it has become very apparent that we have many new people coming into this space. There is 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. We get many fundamental one-on-one questions about what it is that we do, what is in situ mining, how do we recover uranium? We've added a few new slides into the slide deck that focus on in situ mining and the technology we utilize since many people are unfamiliar with it. Ur-Energy is an in situ uranium miner. In situ, as a Latin term, means 'in the place.' We don't move any rock. We don't dig deeper holes or add tunnels to access the ore. Instead, we access the ore through water wells. You can see in the diagram that the blue wells are injection wells. We inject water, CO2, and oxygen into the ore body. You can see the ore body is that crescent-shaped black figure. The mining solution, water, and those two gases move across the ore body. It dissolves the uranium, and we simply pump it to the surface through that yellow well—the production well—up 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 primary reason is it has a very small footprint on the surface. The photograph I have of our operating Lost Creek mine was taken a few years ago. You can see that the wellheads in the foreground, the little brown boxes that look like beehives, showcase minimal disturbance after we get the wells installed and we reclaim the surface. When we finish mining, we remove the wellheads and reclaim the surface, and within a few years, it will be hard to tell we were even there, allowing the ground to be returned to any use. You can put towns, schools, or hospitals on it. It is absolutely unrestricted use once we're done. The other reason this 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, which is why the world is increasingly moving toward in-situ mining. Right now, a little over half—about 55%—of the world's uranium is recovered using in-situ technology, because of the economics and minimal environmental footprint. 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, we built a Header House, and you will see on the left side along the wall, there are 60-meter runs, and each one of those runs feeds an individual injection well, while the right side has 30 production wells, and the lines lead to production wells. Each Header House typically has about 90 wells: 60 injectors and 30 producers. The manifold system in the center is for filtration of the water to remove sand and silt clays produced from the aquifer. The next photograph shows our operating Lost Creek mine. On the left side, those are the ion exchange columns, within which are billions of little styrene plastic beads that have an office and electrical charge. As the uranium ions come in, because the charges are opposite of each other, the uranium binds electrochemically to the resin beads is captured from the water. This well-established technology has been around for decades and is used in other water treatment systems as well. 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 was sent off to ConAgra Dine on behalf of one of our customers buying the product. We package it in 55-gallon drums, load the product on a truck, and send it off for processing. In a nutshell, that is in-situ mining, and I wanted to provide those slides to people who are new to uranium mining and the in-situ technology. It's an important part of who we are at Ur-Energy. Now, I will switch gears and talk about our two flagship properties. We have other properties; however, I'm not going to discuss those today, as they are exploration stage and more toward development stage properties. But the existing production in the near-term will come from Lost Creek, which is in production, and Shirley Basin, which we are entering construction for now. Starting with Lost Creek, it has been in production for over 10 years. In that time, we've produced nearly 3 million pounds of U308, 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—these are the new production areas. We decided to ramp production back up because of the contract book. I'll be talking in detail about our contracts, but suffice it to say we had three contracts in place that gave us the faith it was time to ramp production back up. Since then, we have signed three more offtake agreements totaling nearly 6 million pounds, plus or minus flex, over a time period now through 2030. We also have one of those contracts with an option for extending for three additional years. We have a very good resource at Lost Creek—nearly 12.7 million pounds of measured and indicated resource. In addition, we have a little over 6 million pounds of inferred resource. I'll make a forward-looking statement here, but we believe we have considerable opportunities to expand that resource through exploration in the future. 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 strong history of low-cost production, and we believe we can achieve low costs again as we ramp up production, potentially not back to historic numbers because inflation is impacting costs moving forward, but we believe we can return to very low costs. We have technical reports that have been released, the NI 43-101 compliant and S-K 1300 compliant reports that are available on links on our website. We're estimating our operating costs 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. I need to explain the difference—I wanted extra room in the processing plant to toll process either for competitors or for another one of our projects, such as Shirley Basin when we bring it online. The capacity of 2.2 million pounds at the plant at Lost Creek is fully constructed and operational. This takes us to Shirley Basin, as we intend to fill some of that capacity at Lost Creek with pounds from Shirley Basin, where we'll 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, and then take that resin, load it back on a truck, and ship it back over to Shirley Basin to be reused in the system there. Shirley Basin is fully permitted. We have all our major permits and licenses, and we have announced a decision to initiate construction, and we are in the early stages of construction right now as we speak. There is a license capacity at the mine and the mill for Shirley Basin of 1 million pounds per year. There is already a lot of infrastructure in place there because it is a brownfield property. Power lines are already there; we have some roads coming in that need to be upgraded, but they do exist. There are also a couple of buildings on-site, a 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 are no inferred pounds; this project has been heavily drilled, and we have all the historic data. Everything has been classified into the measured and indicated resources. Shirley Basin has a reputation for being the first in-situ uranium mine in the world, which we believe to be true. We have the records showing that the concept was initiated around April 1961. By spring of 1963, a pilot project was producing about 1.5 million pounds of uranium using in-situ technology at Shirley Basin. We are excited to bring this technology back to what we believe is its birthplace. The operating cost at Shirley Basin is estimated to be about $24.40 a pound, again once we reach economies of scale. We have initiated construction, moving forward with installing our first monitor well ring. We are also looking to upgrade 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 and preparing to order long lead items. We have already begun ordering some, such as ion exchange columns. Once we have a lot of that material on the ground, we will break ground and truly initiate construction in earnest, with the objective of completing it by late 2025 or early 2026, and production commencing immediately thereafter. We're very excited about that, as it is a famous uranium mining district in Wyoming. Additionally, there is a market investment thesis that many are asking about. Why nuclear? Why now? One main reason the price started to rise, and the world is beginning to show more interest in nuclear power is due to its status as carbon-free energy. Burning uranium in a reactor emits no CO2 or other greenhouse gases, and the world is realizing that is a tremendous benefit. It's strong baseload energy; in other words, it doesn't switch off when the sun goes down or there is no wind, and it can be relied upon at very high uptime with reasonable costs. The US garners about 20% of its electricity from nuclear power, and over half of our carbon-free electricity comes from nuclear. Currently, the world has about 440 operating nuclear reactors. Additionally, 60 are under construction. Many of those are in China, and we just had two come online in the US down in Georgia, built by Southern Company. We're excited to have those operational in the US and a new production source. There are 92 reactors on order, and another 343 have been proposed. The World Nuclear Association is projecting significant increases in demand for uranium in the coming years. The demand last year was 171 million pounds. By 2040, that demand is projected to increase to 338 million pounds—this is a massive increase in a short time, and it's imperative that miners around the world supply that demand. There's much catch-up to ensure that supply meets demand. That demand projection does not even factor in the small modular reactors, the SMRs. There are existing SMRs operating in three countries, and there is a strong push in the US to construct more. The Nuclear Energy Institute recently conducted a survey of its US members. The US utilities estimate that they could have as many as 300 small modular reactors online by 2050. Again, in the nuclear industry, 2050 is merely tomorrow; it is approaching very quickly. Here in Wyoming, TerraPower is building out a small modular reactor. TerraPower is owned by Pacific Power, and Bill Gates and Warren Buffett are invested in that project. Those two gentlemen can get a project done, and they're making good progress towards construction and approval of the plant. We are proud to have that underway here in Wyoming, and we look forward to possibly becoming a supplier to that reactor in the future. It is difficult to discuss the nuclear investment thesis without examining geopolitics, as they have a significant impact on the market due to the dual use of nuclear fuel. The invasion of Ukraine by Russia was a real game changer for the industry because Russia is a major refiner or processor of uranium. They don't mine much, but they are one of the leading processors of uranium globally. Western companies currently lack the capacity to backfill that supply gap, but I believe that will change swiftly. Today, Western companies simply cannot backfill a supply gap caused by Russia's actions. The turmoil in the market caused by the invasion of Ukraine prompted prices to rise. It's vital to understand that Kazakhstan doesn't refine uranium much, but they do a lot of mining, supplying nearly half of the world's uranium feedstock. Much of that goes to Russia for refining and is distributed globally, including to the US. With Russia becoming a bad actor and its involvement in Kazakhstan, we see increasing influence from Russia and China over Kazakh production. China has also been making significant moves into Africa, acquiring mines and becoming a dominant controlling force in uranium production across the continent. The West is trying to catch up; for example, Cameco is working on bringing its significant Tier 1 mines back online in Canada, which has been slower than expected, but I am confident they will ultimately succeed. However, Canadian production is insufficient to displace potential supply chain issues resulting from Kazakhstan and Russia. Recently, events in Niger challenged the market, although Niger only contributes about 4% of the world's uranium. While 4% may seem small, in a supply-constrained market it carries significant weight and generates considerable market anxiety over its impact. In the US, we have seen increasing support for nuclear power from Congress and the White House. The top three bullets in the slides indicate some successes the industry has had with Congress over the past couple of years. The three items at the bottom outline ongoing support. Most importantly, just last week, we received approval from the Senate and unanimous consent from both Democrats and Republicans to institute a ban on the import of Russian low-enriched uranium. The House had already voted unanimously in support of the ban on imports of uranium from Russia, which is unprecedented in today's political climate. That legislation is now moving to the President's desk, and we have every reason to believe he will sign it. This ban will remain in effect until 2040, with a waiver process ending in 2027, allowing utilities in specific cases to seek authorization from the Department of Energy to procure low-enriched uranium from Russia. However, we believe that waiver process will be stringent and limited to specific circumstances. To cover our ongoing projects, I will show a few final slides on Lost Creek and Shirley Basin before addressing the financials. The map here illustrates the property we hold in the Great Divide Basin. In blue is Lost Creek, the area currently permitted and has been in production for over 10 years, achieving recovery rates averaging 90%. We are also proud of our royalty burden at both Lost Creek and Shirley Basin, which averages less than 1%. That is among the lowest in the industry and greatly benefits our economics. The green area shows good mineralization, and we will continue to explore these regions moving forward. We are currently working on LC East permitting, with two of the three major permits already obtained. We await the third and final permit to bring LC East into production. The regions in green are within pipeline distance of the processing plant at Lost Creek. There is a history of being a low-cost producer, and while I won’t go through all the numbers on the slide here, I'd like to highlight our production in 2015, which was around 800,000 pounds. Our average cash cost that year was approximately $16 per pound, which is outstanding. We believe we can return to those numbers, not exactly but close, as we ramp up production. The C1 cash cost does not reflect all-in cash numbers, but we believe we can achieve very low costs going into the future. Currently, we are ramping up commercial operations at Lost Creek. We have four new header houses online, and we expect to fill better houses in May, continuously speeding up construction and bringing new areas into production throughout the summer. We are finalizing permitting on two new deep disposal wells, which we hope to have operational soon. We are conscious of supply chain issues—these are real. We're ordering equipment 12 to 18 months in advance to ensure it arrives on time at Lost Creek, and we've been successful, but we must remain vigilant because delays can affect production. Our key staff on-site have been instrumental, training our new personnel as they come online. We've finished hiring but publically acknowledged the challenges, which haven’t been easy. Referring back to the green revolution, if you compare the energy output from Lost Creek and Shirley Basin to that of a coal-fired power plant, we will offset more than 300 million metric tons of CO2 emissions. This equates to removing 67.5 million cars from the road annually. We are proud of this contribution, which emphasizes why the world is gravitating toward nuclear energy. We have also been leaders in research and development. Our R&D programs involve a new type of well casing for patenting protection and an advanced water treatment and filtration program. Currently, our R&D efforts are limited, but we are optimistic for good outcomes that will reduce costs and improve our environmental footprint over time. Looking at financial highlights as of the second of this month, we had $52.9 million in cash. We are now debt-free and have secured six long-term contracts. I list those out there; this year, we need to deliver 570,000 pounds under those contracts. Keep in mind that our current mine capacity is 1.2 million pounds per year, which should increase to 2.2 million pounds as we develop Shirley Basin. We expect some income also from interest and disposal fees from Shirley Basin. Moving to our market position, we have seen strong volume recently as interest in Ur-Energy in the nuclear space has surged, trading over 3 million shares daily for the last few days and seeing significant price pressure. We are pleased to have sophisticated investors engaged in the uranium mining space, with companies that specialize in research and have significant expertise in the uranium market. We currently have over 50% institutional ownership, with a peak of 62%. We also enjoy excellent analyst coverage from some of the biggest names in the uranium sector. As I close this presentation, a few takeaways: we are well financed and have solid contracts in place, beginning to see revenues from those. We continue to receive RFPs from utilities, and as prices increase, we are looking to respond to those at higher prices. The market is improving, and we will seek even higher pricing. Before I finish, I would like to take a couple of additional minutes to address our contracting philosophy, as this is a common query from investors. Currently, we have signed six long-term sales contracts for delivery of 5.72 million pounds of U308 from this year, 2024 through 2030, with additional potential for a three-year extension on one contract. The first three contracts signed were to secure the company by ensuring revenue in the upcoming years. Each contract was signed at prices above long-term prices prevailing when commercial terms were agreed upon, and they remain profitable for Lost Creek and Shirley Basin production. Two of the recent contracts incorporate significant pricing components tied to spot market-related collars. These collars help maintain profitability in a declining market while allowing upside potential when the market is rising. We prefer this contract structure moving forward. Our current contract book represents over 50% of our current licensed capacity, leaving nearly 50% available for future long-term contracts over the following six years. This marketing strategy has benefited us: revenues from long-term contracts from 2014 to 2020 resulted in profits and minimized the need to dilute shareholders via equity raises. During that time, many peers without solid contract books had to conduct substantial equity raises; at least one even went bankrupt due to lack of hedging. For now, we plan not to sell into the spot market. Any production exceeding our contract book will be allocated to building inventory, which may allow us to eventually sell into the spot market when advantageous, but right now we will remain patient. I assure you our marketing strategy is adjustable and will evolve according to our production, projected future uranium demand, prices, and several other factors. In summary, our strategy is to protect the company by allocating a percentage of production to long-term contracts while maintaining significant availability for future sales at higher prices under market-related terms. There have been numerous questions about contracting, and I hope I've provided helpful insight. Before I hand things over to our CFO, Roger Smith, for the Q1 financial highlights, I want to thank the state of Wyoming and Sweetwater County for their assistance with the Wyoming State Bond Loan. In 2014, the state, together with Sweetwater County, supported a $34 million loan essential for completing the ramp-up of production at Lost Creek. On March 27th, we made the final payment and are now debt-free. I want to thank the treasurer of Wyoming, Governor Mark Gordon, who was instrumental in finalizing the deal. We genuinely appreciate the support from the state and county and commit to being good stewards of the land, demonstrating that Wyoming is an excellent state for uranium miners. With that, Roger, I'll turn it over to you to discuss the highlights of Q1.

Roger Smith, CFO

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 with some production to discuss. Let me begin with production. During the quarter, we drummed 39,229 pounds after overcoming 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 31st. 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 rises, we anticipate the cost per pound shipped through the conversion facility will 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, 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 utilized $5.7 million for debt payments, including our regular quarterly loan payment and the loan payoff in March. Now that we are debt-free, we are very pleased, and I would also like to express our thanks to the Treasurer and State of Wyoming for their assistance during this process. In addition to a small amount of capital expenditures, we spent about $2.6 million on production costs during the quarter. Production activities comprised well field operations, plant operations, site administration, and product distribution. The costs incurred to capture and ship 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, culminating in capturing 68,448 pounds in Q4 2023. Due to drying limitations in Q4, which we corrected in Q1, we managed to capture 38,221 pounds during 2024 Q1. With those drying limitations resolved, we are capturing and drumming more—through May 2nd, we drummed 29,497 pounds, and we anticipate seeing our cost per pound continue to decrease in Q2. We invested $14.7 million in operating costs this quarter, accounting for exploration, evaluation, development, and corporate overhead. Development costs made up $12 million of the $15 million in operating costs. This includes $3.5 million for completing a deep disposal well, with completion work finished in Q1, and we are now working on obtaining remaining regulatory approvals. Additionally, $7.9 million was spent on the development of the Lost Creek wellfield. Wellfield development includes all costs ahead of operations such as drilling and related costs, construction costs, and infrastructure costs. These expenses are incurred in advance of production and are expensed as incurred. As we continue to fill the wellfields at Lost Creek, these costs will persist but will stabilize as production ramps up. I will conclude with a few comments about sales. We project sales of 570,000 pounds for 2024. Our first sale took place in April for 75,000 pounds, and the remaining sales will occur in the latter half of the year. We expect revenues of approximately $33.1 million at an average price of about $58 per pound. 2024 sales deliveries are to base escalated contracts negotiated in 2022, with long-term prices between $43 and $52 per pound. These contracts facilitated our decision to ramp up operations at Lost Creek. Now we are well into the ramp-up process, and we currently have six active sales agreements. Pricing for our sales agreements will be projected to be profitable based on all-in production costs after we reach our targeted production rates. We anticipate hitting those targets before the year ends. With that, I will turn it back over to John. Thank you, everyone.

John Cash, CEO

Thank you, Roger. I appreciate you running through the numbers for everyone. Steve, our Chief Operating Officer, Steve, if you could provide an update on operations.

Steve Hatten, COO

Sure. Thanks, John, and thank you to everyone for joining us today, we appreciate it. First, we are proud to be one of the few publicly traded companies actively drilling, constructing, and commercially recovering uranium while expanding our production capacity to sell into a strengthening uranium market, especially amid recent developments on the world stage. Let's first discuss Lost Creek. The ramp-up continues at Lost Creek with two additional Header Houses, 2-6 and 2-7, coming online thus far in 2024. That makes four total since the decision to restart normal operations. While we've faced some equipment and operational challenges, we are witnessing more consistency in drying and packaging, having drummed nearly 30,000 pounds since the quarter's end through May 2nd, along with shipping 35,398 pounds and transferring 75,000 pounds to customers. The primary hurdle we've faced regarding the ramp-up speed has stemmed from challenges in hiring and retaining personnel, a common issue seen across all work phases at the site, and for our contractors too. Despite these difficulties, we are advancing the project, albeit at a pace of one step forward and two steps back. Regardless, we prioritize occupational, regulatory, and environmental safety and compliance in everything we do. We drilled an additional deep disposal well at Lost Creek, starting in mid-2023. Following the receipt of regulatory approvals, final completion work was conducted in Q1 of 2024. We are now in the process of obtaining remaining regulatory approvals, followed by the specification of surface injection equipment ahead of the deep well's operation, including the procurement and installation of a power line, anticipated to enable operations in 2024. Initial injection systems are already onsite, allowing the deep well to operate immediately after the injection permits are acquired. Looking ahead, we have 12 drill rigs currently operational, with at least one additional rig expected to begin work in early May. Drilling has progressed on Header House 2-11, with completion work near finality at Header House 2-8. The fabrication of Header Houses 2-8 and 2-9 is complete, and work on Header Houses 2-10 and 2-11 progresses well in our Casper construction shop. Header House 2-8 is expected to come online in May. We project 2024 production from Mine Unit 2 will range from 550,000 to 650,000 pounds, with additional routine shipments from our Lost Creek mine to the conversion facility planned throughout the year. Next, we'll address Shirley Basin. Given our expanded sales contract book and encouraging market conditions, we were pleased to announce our decision in the first quarter of 2024 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. This decision will nearly double our annual permitted production to 2.2 million pounds of U3O8. The satellite plant will be a relatively low-cost facility consisting of ion-exchange, wastewater, and groundwater restoration circuits. The ion exchange at Shirley Basin will be loaded with uranium mined from the site and transferred to Lost Creek for processing before being cycled back into operations at Shirley Basin. This satellite approach helps mitigate the initial facility capital cost to about $24.5 million and pre-operational 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 an annual production capacity of up to 1 million pounds U3O8. Our permits and licenses already account for constructing any elution, precipitation, and drying circuits if it becomes economically beneficial. No amendments to the existing permits or licenses would be necessary. The estimated timeline to finalize designs, order materials, and construct the satellite plant and initial wellfield recovery area is approximately 24 months. Work has already initiated on long-lead items, including detailed engineering and geologic patterns planning for the wellfield. The planning is complete for the monitor well ring for the first mine unit, which includes plans to install around 120 wells in 2024 Q2 and Q3. Drilling rigs have already been mobilized for this effort. This installation will enable hydrologic testing and baseline water quality analyses before proceeding with production pattern installation in mid-2025. Importantly, the bid process and award for ion exchange column fabrication have been completed; this procurement represents one of the longest lead items for the facility. Major construction activities are expected to commence in 2025, with initial production projected to start in 2026. Thank you for your time, John. Back to you.

John Cash, CEO

Thank you, Steve. I appreciate the operations update. At this point, we'll jump into Q&A. We have a few minutes left, and I'm happy to answer any questions you may have. Penne, I'll turn it over to you shortly, but I have two questions that have been posed. After I answer those, I'll turn it over to you for any additional queries. The first question, I believe Steve has already addressed, but it asks, can you discuss how you see production advancing through 2024 to meet annual guidance? We slightly downgraded our production forecast for this year by about 100,000 pounds. We are now looking at around 550,000 to 650,000 pounds. This aligns with our need to fill the contract book for this year, and we're very optimistic and working hard daily to achieve production going forward. We aim for approximately 600,000 pounds of production this year to fulfill our contract commitments. The second question relates to share performance in comparison to our peers. I want to emphasize that our share price has risen 89.4% over the past year, which I find outstanding. It raises a common question about why we may not always outperform other stocks, particularly compared to stories that might not be in production right now. Globally, the number of junior mining companies in production can be counted on one hand. Thus, comparisons should consider the producer versus non-producer dynamics. I pride ourselves on our performance, and the team is continuously looking for ways to improve production while lowering costs and securing high contract prices to boost our stock value. We will maintain our commitment to transparency, as we've always been. With that, Penny, I will turn it over to you to see if there are additional questions from the listeners.

Penne Goplerud, Chairman

Thank you, John. There are no further questions on the webcast, but our operator may have attendees on the line with inquiries.

Operator, Operator

Ladies and gentlemen, the floor is open for questions. Our first question is from Heiko Ihle with H.C. Wainwright. Your line is live.

Heiko Ihle, Analyst

Hey, John. Thanks for taking my questions. I assume you can hear me okay.

John Cash, CEO

Yes, I can hear you well, Heiko, and thank you for joining the call. I appreciate it.

Heiko Ihle, Analyst

Of course. Let's discuss the long-term contracts that have come up several times on this call, specifically regarding demand fluctuations. Can you share any insights on pricing or demand changes from clients between the end of Q1 and now, and how the recent Senate decision has impacted this?

John Cash, CEO

Certainly, Heiko. I'll address those points in reverse order. We have not noticed any RFPs since the Senate decision, but we have observed the spot price rising by several dollars—around $94 per pound yesterday, with long-term pricing at approximately $80. These figures make our Lost Creek and Shirley Basin operations very profitable. Other than changes in spot prices, no notable shifts regarding contracting or RFPs have occurred recently. I think much of this was anticipated. The utilities in the mining industry understood that the decision to ban imports from Russia was forthcoming, it was just a matter of time. Though we will continue to see price pressure increase, the market has matured in some ways. Two to three years ago, RFP responses from utilities often focused on securing a base price with inflation protection, avoiding short-term pricing options. This buyers' market dynamic has shifted to a seller's market, granting us more favorable opportunities in structuring long-term contracts now. We are optimistic regarding future pricing, waiting for the right opportunities to contract only at favorable terms.

Heiko Ihle, Analyst

That's helpful. Regarding small modular reactors, you mentioned that this is a long-term catalyst. How soon could we genuinely see an impactful demand increase from this?

John Cash, CEO

That's a great question, Heiko. I believe we have the potential for substantial demand long-term, but you're correct that we won't likely see significant demand in the next few years. I'm referring to an impact timeline of around seven to eight years; material demand from SMRs could start becoming evident by 2028 or 2030. Despite that, development and processing will take time. The lead time for processing fuel from yellowcake to high assay low enriched uranium can exceed two years. Thus, companies will need to look for contracts two to four years out for that fuel, especially since it's a new type. However, cumulative demand will build over time, challenging existing supply levels as we progress. One risk that could prove monumental is the NRC's ability to efficiently process approvals to advance small modular reactors. Hopefully, regulatory improvements will occur swiftly.

Heiko Ihle, Analyst

Thanks for that insight. I'll get back in the queue.

Operator, Operator

Our next question is from Matthew Key with B. Riley Securities. Your line is live.

Matthew Key, Analyst

Good morning, everyone, and thank you for taking my questions. With the recent announcement around Shirley Basin doubling production, I'm curious about other opportunities that would allow increased processing beyond 2.2 million pounds. Is M&A part of your strategy in this current environment?

John Cash, CEO

We have a few potential avenues to consider for expanding production in future years. First, regarding M&A, we are consistently exploring opportunities in this space, but we are quite selective in property acquisitions. Over the past decade, we've made one acquisition—Pathfinder Mines—and that brought Shirley Basin into our portfolio. Moving forward, we will remain cautious in our assessment of acquisition opportunities and only pursue properties that can quickly enter economical production. Given the limited universe of candidates, M&A is indeed challenging, as there are few viable counterparties. Additionally, we have development and exploration projects such as North Huddle, Aero, Lost Creek North, and Lost Creek Southwest we could explore to bring those into production in the future. Finally, we will also examine how we can potentially expand production at existing facilities. It will require addressing some technical challenges that currently restrain us from exceeding 2.2 million pounds per year at Lost Creek or the 1 million pounds at Shirley Basin. While I cannot promise timing or concrete numbers, I assure you we will continue to seek avenues to enhance and grow production.

Matthew Key, Analyst

Got it. Thank you for that overview. In your prepared remarks, you mentioned that building inventory is essential right now. Is there a specific inventory level you hope to reach before fully engaging in the spot market?

John Cash, CEO

The inventory level is indeed flexible, depending on our confidence in production, contract book status, and market predictions. Personally, I would feel more secure with a minimum inventory of 100,000 pounds, but ideally, 200,000 pounds would be even better. It's fluid overall, but those numbers are our goal.

Matthew Key, Analyst

Thank you for that clarification. I'll turn it back now.

Operator, Operator

Our next question is from Joseph Reagor with ROTH MKM. Your line is live.

Joseph Reagor, Analyst

Hey, John. Thanks for taking my questions. Most of what I wanted to touched on has already been asked, but regarding labor issues at Lost Creek, are there any other challenges that keep you up at night? Or any future concerns regarding manpower at Shirley Basin?

John Cash, CEO

Excellent question, Joe. I appreciate it, and thank you for participating. We have addressed staffing needs at Lost Creek for now. While we have the required personnel, I wouldn't say we're entirely free of manpower issues. We still have a lot of inexperienced but promising employees. It falls to us to ensure they are trained and guided in the right way. We are committed to nurturing that talent. By lifting their skills, we hope to mitigate upcoming challenges as production elevates. Referring to Shirley Basin, we probably need around 55 more employees. This mine is substantially closer to a city, making recruitment easier due to its legacy in the area. There is strong community support for bringing it back into operation, which makes me optimistic despite recognizing ongoing challenges.

Joseph Reagor, Analyst

Thank you. I'll turn it over.

John Cash, CEO

Operator, we should start to conclude the call. We have exceeded an hour, but I appreciate everyone for joining us today. We will strive to keep our investors updated on production and activities going forth. Thank you very much. If you have additional questions and couldn't get into the queue, my email is provided in the presentation; feel free to reach out to me. I will endeavor to respond promptly. Thank you, everyone.

Operator, Operator

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