Item 8.01. Other Events On January 9, 2006 the Registrant issued a press release announcing the United States Nuclear Regulatory Commission's ruling on the license at the Company's Crownpoint Uranium Project and an update on the expected timing of Texas Commission on Environmental Quality for approving the Company's Kingsville Production Area Authorization 3.
IP: Logged |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward Looking Statements
This Item 2 contains "forward-looking statements." These statements include, without limitation, statements relating to liquidity, financing of operations, continued volatility of uranium prices, estimates of future capital expenditures and other such matters. The words "believes," "anticipates," "expects," "projects," "targets" or "estimates" and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company's disclosures under the heading: "Cautionary Statements" in the Company's 2004 Annual Report on Form 10-KSB/A.
The financial statements for the year ended December 31, 2004 and the nine months and three months ended September 30, 2004, have been restated to give effect for fair value accounting of our uranium sales contracts under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company determined that at December 31, 2003 and March 31, 2004, its long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes, and the financial statements have been restated as of such date, to record these contracts at fair value.
Financial Condition and Results of Operations
Comparison of Nine Months and Three Months Ended September 30, 2005 and 2004
Production and Sales. During the first nine months of 2004 we had no uranium production or sales. Our first uranium sales occurred in the fourth quarter of 2004. In the first nine months of 2005, we sold 219,000 pounds of Vasquez production, resulting in revenues of $4.0 million (including $253,000 from the renegotiation of the contract price of sales that were made in the fourth quarter of 2004). 74,340 pounds were sold in the third quarter of 2005, resulting in revenues of $1.3 million.
Net Losses. During the first nine months of 2005, we had a net loss of ($14,458,000) compared to a net loss of ($14,159,000) for the corresponding period of 2004. These losses included non-cash unrealized losses on derivatives of ($12.1) million and ($12.0) million, respectively. For the three months ended September 30, 2005 we had a net loss of ($2,018,000) compared to a net loss of ($4,494,000) for the corresponding period of 2004. These losses included non-cash unrealized losses on derivatives of ($648,000) and ($3.4) million respectively.
Operating Expenses. During the first nine months of 2005, operating expenses and related royalties and commissions for Vasquez production sold was $2,672,000. For the third quarter of 2005 those expenses were $1,299,000. During these periods we incurred $52,000 and $16,000, respectively, of stand-by costs at the Rosita project that was charged to operations. During the corresponding nine and three months of 2004, we had no sales and, therefore, no costs of sales, but we did incur $570,000 and $240,000, respectively, of stand-by costs that were charged to operations.
Depreciation and Depletion. During the first nine months of 2005, we incurred depreciation and depletion expense attributable to our Vasquez production of $1,092,000. For the third quarter of 2005 those expenses were $539,000. During these same nine and three month periods, we incurred $11,000 and $3,000, respectively, of stand-by depreciation cost for the Rosita project. In the corresponding nine and three months of 2004, we incurred depreciation related to stand-by activities of $21,000 and $8,000, respectively. The increase reflects the commencement of production at our Vasquez property in the fourth quarter of 2004.
Accretion and Amortization of Future Restoration Costs. During the first nine months of 2005, the accretion and amortization of future restoration costs was $268,000. For the third quarter of 2005 those expenses were $97,000. During the corresponding nine and three months of 2004, these expenses were $290,000 and $159,000, respectively.
General and Administrative Charges. During the first nine months of 2005, general and administrative charges and corporate depreciation were $2,340,000. For the third quarter of 2005 those expenses were $713,000. In the corresponding nine and three months of 2004, these expenses were
$1,274,000 and $556,000, respectively. The increase in these charges in 2005 resulted primarily from stock compensation expense of $444,000 incurred in the second quarter of 2005 (see Note 6. "Stock Based Compensation") and increased personnel costs related to Vasquez, increases in insurance premiums and legal fees as a result of our capital raising activities.
Cash Sources and Uses. In the first nine months of 2005 we had net cash flow from operations of $27,000 and raised $13.7 million from financing activities. $11.6 million of the $13.7 million was raised in the third quarter. Our net cash flow from operations during the third quarter of 2005 was a negative $52,000. In the first nine months of 2005 we spent $2.7 million at Vasquez for property, plant and equipment (of which $1.3 million was spent in the third quarter), $381,000 at Kingsville Dome (of which $175,000 was spent in the third quarter) and $708,000 for other property additions in Texas and New Mexico (of which $441,000 was spent in the third quarter).
In the first nine months of 2004 we had negative cash flow from operations of $1.7 million and we raised $6.5 million from financing activities (of which $38,000 was raised in the third quarter of 2004). In the first nine months of 2004 we spent $2.1 million at Vasquez for property, plant and equipment (of which $1.1 million was spent in the third quarter), $661,000 at Kingsville Dome (of which $303,000 was spent in the third quarter) and $253,000 for other property additions in Texas and New Mexico (of which $118,000 was spent in the third quarter). We also increased by $830,000 our restricted cash used to collateralize letters of credit pledged to secure our reclamation obligations (of which $767,000 was spent in the third quarter), and we used $1,740,000 for working capital (of which $1.1 million was spent in the third quarter).
Selected Production, Price and Cost of Uranium Sold Data
For the three and nine months ended September 30, 2005 and 2004.
Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Pounds of uranium produced 65,797 - 239,738 - Pounds of uranium sold 74,340 - 219,000 - Average sales price per pound (1) $ 16.99 - $ 18.40 - Cost of produced pounds sold (2) (3) $ 23.57 - $ 15.96 - Royalties/commissions per pound $ 1.18 - $ 1.23 -
(1) Average sales price per pound for the nine months includes approximately $253,000 in revenue recorded in 2005 related to a renegotiation of the contract price completed in the first quarter of 2005 for pounds sold in 2004. (2) Includes operating expenses (less standby costs of $21,000 for the three months and $67,000 for the nine months) and depreciation and depletion of capital costs. Excludes royalties and commissions, accretion/amortization of restoration reserve and unrealized loss on derivatives. It also excludes our estimated future cost of restoration, reclamation and decommissioning ($1.20/lb) and $2.7 million of Vasquez costs capitalized and written off prior to 2004.
(3) As production from the new wellfields at Vasquez that utilize the closer spaced well patterns ramps up and as additional wellfields at Vasquez come online we expect such production to be breakeven to marginally profitable.
Liquidity - Cash Needs and Sources through the Second Quarter of 2006.
From mid 1999 until the fourth quarter of 2004, the Company had no revenues and was able to continue to maintain minimal operations, primarily conducting reclamation activities in South Texas, as a result of equity infusions and utilization, with the consent of Texas regulators, of cash collateral pledged to secure reclamation obligations. With the improvement in uranium spot prices from $7.10 in 2000 to $11.00 by mid 2003, the Company began steps to bring its Vasquez property into production.
We signed two long-term contracts, one in August 2003 and another in January 2004, each of which called for deliveries of 600,000 pounds of uranium in each of 2005 through 2008. After amendments, the long-term contracts now call for delivery of 617,650 pounds of uranium in 2005 (or one-half of actual production to each purchaser), 690,000 pounds of uranium in 2006 and 600,000 pounds of uranium in each of the years 2007 through 2008. The Company expects to realize under these two contracts an average base price of $17.90 per pound for its 2005 deliveries $14.40 for its 2006 deliveries and $13.75 per pound for its 2007 through 2008 deliveries. In addition, the Company has entered into two
contracts that call for an aggregate of 645,000 pounds of deliveries by 2007 at the then current spot price on the date of delivery less an average discount of $3.80 per pound.
In May 2004, we raised equity of approximately $5.9 million and commenced the development and mining at Vasquez. Production from Vasquez in the first nine months of 2005 was less than projected and totaled approximately 240,000 pounds. Any shortfalls in 2005 deliveries will be made up in 2006. We have experienced chemical and permeability obstacles in the Vasquez formation that were not experienced at our Kingsville Dome and Rosita properties.
In August 2005 we raised $12 million of equity, and we have implemented a plan to address the Vasquez production problems and increase the production rate by constructing a third remote ion exchange plant (satellite plant) and drilling additional production wells in existing wellfields to reduce the distance between our injection and production wells. We have also designed new wellfields to reflect the closer well spacing. In November 2005, we brought online the first new wellfield using closer spaced wells and the third satellite plant. Production from this wellfield commenced on November 4, 2005, some four weeks later than previously projected. While the new wellfield is not yet at full capacity, it is producing in accordance with our expectations at this phase in its production cycle. We also plan to bring on additional wellfields to supply feed to a fourth satellite plant in January 2006. These actions are anticipated to achieve production rates that meet the annual scheduled obligations under our delivery contracts.
At September 30, 2005, we had cash on hand of $10.1 million.
Our projected cash requirements for the fourth quarter of 2005 and the first six months of 2006 are approximately $21.7 million. We project that this cash will come from cash on hand at September 30, 2005 of $10.1 million, sales of our Vasquez production of $9.2 million and sales under our existing spot contracts of $3.1 million from production at our Kingsville Dome facility. We expect to spend the $21.7 million as follows:
$9 million will be used for ongoing Vasquez production, development and related activities (which includes ongoing financial surety requirements of $1.2 million required in the fourth quarter of the year);
$6.9 million for pre-production and development and production activities to start-up production at Kingsville Dome;
$1.2 million for other equipment and South Texas working capital;
$630,000 for ongoing groundwater restoration activities at our Kingsville Dome and Rosita projects;
$930,000 for land acquisition and holding costs for our Texas and New Mexico properties; and
$3 million for general and administrative and other working capital costs.
We are actively working towards the completion of the Production Area Authorization #3 at Kingsville Dome, which we expect to be completed by year end 2005, with sales from this production commencing in the second quarter of 2006. We expect the profitability from our Kingsville Dome production will be greater than that seen from our Vasquez production as a result of higher anticipated sales prices. We have entered into two contracts that call for an aggregate of 645,000 pounds of deliveries by 2007 at the then current spot price on the date of delivery less an average discount of $3.80 per pound which are expected to be filled with such production. http://biz.yahoo.com/e/051118/urix.ob10qsb_a.html
IP: Logged |
posted
We are actively working towards the completion of the Production Area Authorization #3 at Kingsville Dome, which we expect to be completed by year end 2005, with sales from this production commencing in the second quarter of 2006. We expect the profitability from our Kingsville Dome production will be greater than that seen from our Vasquez production as a result of higher anticipated sales prices. We have entered into two contracts that call for an aggregate of 645,000 pounds of deliveries by 2007 at the then current spot price on the date of delivery less an average discount of $3.80 per pound which are expected to be filled with such production.
IP: Logged |
posted
ShortTerm, it looks to me like .9 was a good entry point, based on your chart at the top. Why do you see it going higher from here?
IP: Logged |
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
![[Wink]](wink.gif)
