Uranium prices continue to drift higher as demand grows and supply remains both constrained and at risk of disruption by Russia and Russian controlled entities. In the past month, uranium prices are up ~4% and they are up 15.72% over the past year. At the current price low cost uranium producers are starting to do quite well.

Uranium prices continue to march higher the past 3 years, currently at US$50.80

Source: Trading Economics

Ur-Energy Inc.

Ur-Energy Inc. (NYSE American: URG | TSX: URE) is a leading low cost U.S. uranium producer from their Lost Creek uranium mine & facility in south-central Wyoming, USA. They also own the Shirley Basin, Last Soldier, and Lucky Mc Mine uranium projects in the USA. Shirley Basin is ready to go subject to market demand for more uranium – Meaning it has its permits and authorizations to begin construction.

Ur-Energy announced in mid-December 2022 that they had signed an additional multi-year uranium sales agreement for delivery of 300,000 pounds of uranium concentrates per annum over a 5-year period beginning in 2024 with a leading nuclear fuel company. Ur-Energy’s total sales quantity under contract (after this announcement) is 500,000 pounds of uranium concentrates per annum, beginning in 2024, plus or minus.

Additional Sales plus Uranium Reserve sales, and Ur-Energy decide to ramp up Lost Creek production

Then on December 19, 2022, Ur-Energy announced further great news with even more sales commitments from uranium buyers, including the U.S reserve. Ur-Energy stated: “The Company’s total sales quantity now under contract will be 600,000 pounds U₃O₈ per year beginning in 2024, plus or minus a small, optional flex. Having secured these sales commitments, Ur-Energy has made the decision to immediately ramp up production at its operating Lost Creek uranium mine to levels sufficient to deliver into these current contracts. The Company will target an initial annual production rate of 600,000 pounds U₃O_8, which represents 50% of Lost Creek’s licensed wellfield production capacity of 1.2 million pounds……..we expect to commence production in Q1 2023 and reach the initial annual production rate in Q4 2023.”

Furthermore, the Department of Energy has agreed to buy 100,000 pounds of domestically produced uranium concentrate from Ur-Energy for the National Uranium Reserve at a sales price of US$64.47/lb. Ur-Energy say that they will provide the material for this one-time purchase from their existing U.S. produced inventory of 324,000 pounds. Ur-Energy’s Lost Creek Mine life of mine operation cost is an estimated ~US$16.34/lb.

Expansion potential

Production and sales mean revenue to Ur-Energy in 2023. Given the uranium price is now higher Ur-Energy should be able to potentially make a decent profit margin as they scale operations back up again. Furthermore, Ur-Energy has an unrivaled potential to expand production further as the company states: “Our current contract book fills just over 25% of our annual licensed wellfield capacity of 2.2 million pounds and only 14% of our annual licensed processing capacity of 4.2 million pounds. This leaves us considerable room to increase production, open satellite operations, toll process material for other companies, and sell into a rising market.”

Ur-Energy CEO John Cash sums up the excitement well stating:

“The growth in our contract book gives us the confidence to ramp production at Lost Creek to 600,000 pounds per year. Our entire team has been working toward this goal for several years and we are excited to bring our low cost, flagship property back into meaningful production. In addition to our Lost Creek mine, our Shirley Basin Project has all major permits and licenses required to construct and operate a one million pound per year production facility.”

Source: Ur-Energy company presentation

Closing comments

They say timing is everything in life. In this case, it certainly looks like the timing is now right to take a further look at Ur-Energy. The stock is currently trading on a market cap of C$395 million (US$292 million) with 2023 sales and production commencing, then expanding in 2024 with 600,000 pounds U₃O₈ pa of contracted sales; with potential to expand on that further with 4.2 million pounds pa of licensed production capacity and a large inventory of U₃O₈. It looks like there should be some good times ahead for Ur-Energy after enduring the last uranium downturn.

The uranium market is back. The uranium price rose very strongly in H2 2021 and is now consolidating, having reached US$46.45/lb. Demand for baseload nuclear power should only increase this decade as the world looks to de-carbonize and move away from coal power. Is this the beginning of a uranium bull market?

Source: Trading Economics

Today’s company announced in November 2021 its intention to prepare for “full production-ready status” at their U.S uranium mine with production able to begin following preparations in Q1 2022.

The company is Ur-Energy Inc. (NYSE American: URG | TSX: URE). Ur-Energy operates its flagship Lost Creek ‘in-situ recovery’ uranium mine and facility in south-central Wyoming, USA. The Lost Creek Mine and facility has been on care and maintenance awaiting higher uranium prices. When operational, Ur-Energy is among the top two U.S uranium producers and is a global low-cost uranium producer. It also owns the Shirley Basin, Lucky Mc mine, and Last Soldier uranium projects in the USA as well as the Excel Gold Project in Nevada.

Ur-Energy uses a uranium in situ recovery process at their Lost Creek Mine which has a lower environmental impact

Source: Ur-Energy website

In the November 1, 2021 announcement Ur-Energy Chairman and CEO, Jeff Klenda stated:

“In addition to the release of our 2021 Q3 results we are pleased to announce the commencement of a development program at Lost Creek that will advance us from reduced operations to full production-ready status. As of October 27, 2021, we had more than $40 million in cash and 285,000 pounds of U.S. produced U₃O₈ in inventory worth approximately $13.4 million, stored at the conversion facility…. “

“Throughout the prolonged downturn of the uranium market…. we optimized our production processes, conducted extensive maintenance, and readied the Lost Creek plant for full production. Now we are seeing a fundamental shift in the uranium market, as evidenced by a 70 percent rise in the spot price from earlier year lows and are taking active measures to better prepare for immediate start up when warranted.”

Note: Bold emphasis is by the author.

Fast forward to today and we still have similar strong uranium prices as in November 2021 and, we are in Q1, 2022. This means we can reasonably expect Ur-Energy to soon announce a move from reduced operations to full production operations.

Huge expansion of uranium production potential for Ur-Energy

Lost Creek is capable of ramping up to an annualized run rate of one million pounds of uranium production.

CEO Klenda stated: “Our second uranium ISR project, Shirley Basin, stands ready for development and construction. Having received all remaining major approvals for Shirley Basin earlier this year, we have effectively doubled the Company’s licensed and permitted production capacity.”

U.S. uranium Reserve update and Build Back Better plan

In June 2021 World Nuclear News reported: “The request notes that the DOE Office of Nuclear Energy and the National Nuclear Security Administration are working to develop and implement the reserve which received an enacted USD75 million in FY21 but does not request funds for the program in FY22.”

Then in September 2021, the U.S Federal register stated: “The Department of Energy (DOE) published the Request for information (RFI) to invite public comment on topics related to the Establishment of the DOE’s Uranium Reserve program on August 11, 2021.”

The Nuclear Energy Institute highlights 2022 as potentially being a good year for nuclear, with the Build Back Better Act poised to hopefully pass in early 2022, which includes a production tax credit (PTC) for electricity generated by nuclear power plants in operation today.

Closing remarks

A stronger uranium price is looking positive for the uranium miners in 2022. Constrained supply and strengthening demand are near-term positives. In the longer term, the move away from coal powered baseload energy to nuclear energy is another potential positive this decade for uranium.

Ur-Energy is a top two U.S uranium producers, currently preparing to start up production again at their Lost Creek Mine. The Company can rapidly ramp back up its uranium supply and has an additional capacity that can be developed in the near term, particularly at Shirley Basin.

Ur-Energy trades on a market cap of US$266 million. Will 2022 be the year U.S uranium miners finally bring back lost production capacity? We will soon see.