Uranium Resources, Inc (
Q2 2011 Earnings Call Transcript
August 15, 2011, 11:00 am ET
Deborah Pawlowski - IR
Don Ewigleben - President, CEO
Tom Ehrlich - CFO
Rick Van Horn - SVP of Operations and Exploration
Mark Pelizza - SVP of Environmental Safety and Public Affairs
David Snow - Energy Equities
[Wanmei Shay - Platts]
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Greetings and welcome to the Uranium Resources, Incorporated second quarter 2011 quarterly update conference call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. (Operator Instructions).
As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Uranium Resources, Incorporated. Thank you. You may begin.
Thank you, [Diego], and good morning, everyone. We appreciate your time today and your interest in Uranium Resources. On the call with me today, I have President and CEO, Don Ewigleben, who will discuss the quarter and recent events as well as our strategy and outlook as we move forward. We also have Tom Ehrlich, Chief Financial Officer; Rick Van Horn, Senior Vice President of Operations and Exploration; as well as Mark Pelizza, Senior Vice President of Environmental Safety and Public Affairs
I will conclude the call with an opportunity for questions and answers. If you don't have today's release, it can be found on our website at uraniumresources.com.
As you are aware, we may make some forward-looking statements during the formal presentation and the Q&A portion of this teleconference. Those statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause the actual results to differ materially from where we are today.
These factors are outlined in the news release as well as the documents filed by the company with the Securities and Exchange Commission. You can find those on our website where we regularly post information about the company as well as on the SEC's website at sec.gov. So please review our forward-looking statements in conjunction with these cautionary factors.
With that, let me turn the call over to Don to begin the discussion. Don?
Thanks, Debbie, and thanks to all of you participating this morning. I guess it's an understatement to say that we live in very interesting times. These past few weeks have been more [pointive] than usual.
Let me start with a review of the current environment and particularly what the state of the industry is like and then I'll update you on our progress in Texas and in Mexico.
There's no question that we have continued uncertainty resulting from Fukushima and the general events and perceptions that ultimately translate into a reality of inventory buildup for now.
In the near term, we see that the typical slow to purchasing activity in the summer months -- as you all know, spring's the heaviest purchasing period for Uranium historically -- combined with the resulting inventory buildup from the shutdowns in Japan and Germany and maintenance safety reviews around the globe as well as the continued effort by the Department of Energy to sell its inventories, has continued to weigh on the price of uranium.
Current spot price is down to about $51.50 and has been fluctuating in the lower 50s since our last call when prices had been in the range of the upper 50s. Long-term contract price has dropped somewhat to about $68 as of August 8 but there could be pressure there as well as buyers are like short-term markets for purchasing activity with the current price differential.
An interesting scenario that could help repair prices would be if Kazakhstan were to choose to limit production. None of us know if that will come to fruition. It's not a typical behavior to be expected from them but they do appear to be holding at their original production goal of 52 billion pounds rather than exceeding it as they had been in years past.
Current estimates are that long-term reduction in demand, as a result of the Fukushima incident and the reactions that followed in Japan, Germany and Sweden could be about 8% lower over the next 20 years.
China, India, Russia and South Korea's nuclear plans can more than offset this decline but the market still needs a better understanding of how much China actually can build and how quickly it can build it.
Of course, as pricing softens, it gives us uncertainty and it assumes lower expectations in demand. The impact of prices also drives uncertainty regarding financing for supply expansion. This should become another offsetting factor and support and improving in prices whilst especially when the Russian HEU contract comes to an end at the end of 2013.
What's the impact on Uranium Resources? From a capital requirement standpoint, clearly, Uranium stocks have been seriously damaged since Fukushima. HSBC uranium mining index was down about 45% since mid-March and URRE is down about 46%, so right in the average. That's actually an improvement from the 58% decline during last week's roller coaster ride.
We are firm believers in the long-term picture for nuclear power. Ultimately, this industry must meet the needs of the growing base of the nuclear power to continue to develop projects around the world.
We think that US-based production should become a more critical consideration for US utilities and based on inquiries we get, we continue to receive from India, Asia and other places, we believe that because of our large base of assets -- which I think you all know is among the top 10 of the largest in the world -- that we must continue to pursue our projects just as planned and we continue to operate with this conviction.