Purchases of U3O8 Cover Co.'s Production Shortfall
Research Report

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Disclosures for HoldCo. Markets, UR-Energy, April 14, 2025

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Ur-Energy Inc. (URG:NYSE.MKT; URE:TSX), as noted in its recently announced full-year 2024 (FY24) financial results, purchased uranium inventory to make up for the near-term production shortfall at its Lost Creek project and to meet the year's contractual obligations, reported HoldCo Markets in an April 14 research note. HoldCo lowered its target price on the miner after accounting for its recent corporate adjustments.

"Much like other uranium producers before (most recently EnCore Energy Corp. (EU:TSX.V; ENCUF:OTCQX), relying on purchased inventory to meet contracted figures is increasingly becoming the norm during the ramp-up phase," HoldCo wrote.

76% Return Implied

HoldCo's new target price on Ur-Energy is US$1.20 per share, the investment firm noted. This reflects a potential return for investors of 76% given the energy company was trading at the time of the report at about US$0.68 per share.

Ur-Energy has 317.66 million shares outstanding. Its market cap is US$248.7 million.

Insufficient U3O8 Produced

HoldCo explained how the production shortfall occurred. In FY24, Ur-Energy's production from Lost Creek in Wyoming totaled 265,744 captured pounds. Of this amount, 81,767 pounds were produced in Q4/24, representing the highest quarterly production figure since the 2023 restart.

While the 265,744 pounds met revised guidance of 260,000 pounds (260 Klb), it fell short of previously announced guidance of about 550 Klb, mostly due to Ur-Energy being unable to source the needed drill rigs to develop the wellfields, noted HoldCo.

"Given that the Q4/2024 captured figured was previously disclosed in February, coupled with the announced production shortfall, some sort of purchase was expected to happen in order to fill the 570 Klb contractual obligations for FY24," noted HoldCo.

Ur-Energy restarted uranium production at Los Creek in May 2023 after the operation had been shut down, due to uneconomic uranium prices, since 2017.

"After this event, life-of-mine production from Lost Creek has amounted to about 3,100,000 pounds since 2013 when in situ recovery production initially began," reported HoldCo.

Outcomes of Deficit

To rectify the shortfall, in Q4/24 Ur-Energy purchased 550 Klb of uranium, including 250 Klb borrowed, at an average price of US$75.87/lb, relayed HoldCo.

The uranium miner's FY24 revenues were higher year over year, but the average price received for sales of its uranium was lower. Ultimately, the company's costs were higher because of the inventory purchase. The combination led to a loss of US$6.19 per pound sold, reversing the gain from sales of US$30.90/lb in FY23.

Since Q4/24, production at Lost Creek has been trending higher.

Differentiating Fundamentals

HoldCo highlighted the strong fundamentals of Ur-Energy that differentiate it from its peers. These include, for one, the company's current contract book through 2033 that includes 5.84 MMlb. The cash balance is another. It is equal to about 30% of the uranium producer's market cap and exceeds the 335 Klb of uranium in inventory, according to HoldCo estimates.

Upcoming Catalysts

HoldCo discussed what is next for Ur-Energy. It now is advancing its Shirley Basin project toward commissioning in early 2026.

Already the uranium producer installed 120 monitor wells for the first mine unit (SB MU1) there, and these yielded excellent hydrologic results. Production rates on testing have been in the 70–80 gallons per minute range, in line with documented historical flow from the early 1960s.

In these monitor wells, in the coming week, the company is to start installing downhole pumps using six drill rigs. Completion of baseline sampling is expected to occur in spring, followed by the end of construction in late 2025.