Uranium Resources, Inc. (URRE)
Q2 2012 Results Earnings Call
August 10, 2012 11:30 AM ET
Deborah Pawlowski – Investor Relations
Don Ewigleben – President and CEO
Tom Ehrlich – Chief Financial Officer
Rick Van Horn – Senior Vice President, Operations and Development
Mark Pelizza – Senior Vice President, Environment, Safety and Public Affairs
Gerald Fay – Private Investor
David Snow – Energy Equities
George Walsh – Gilford Securities
Previous Statements by URRE
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Greetings. And welcome to the Uranium Resources Second Quarter 2012 Update. At this time, all participants are in a listen-only mode. A 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. Thank you, Ms. Pawlowski. You may begin.
Thank you, Claudia, and good morning, everyone. We certainly appreciate your time today and your interest in Uranium Resources.
On the call with me, I have Don Ewigleben, President and CEO; Tom Ehrlich, Chief Financial Officer; Rick Van Horn, Senior Vice President of Operations and Development; and Mark Pelizza, Senior Vice President of Environment, Safety and Public Affairs. Don will go over the results of the quarter and our focus -- what our focus and strategic initiatives of the company’s as we move forward, and he will then follow with a Q&A opportunity.
If you don’t have the release that went out after the market closed yesterday, it can be found on our website at www.uraniumresources.com.
As you are aware, we may make some forward-looking statements during the formal presentation and 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 in 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 precautionary factors.
With that, I’d like to turn the call over to Don to begin the discussion. Don?
Thank you, Debby. And thanks to those of you who have joined this morning. We do appreciate it. I’d like to start today with five major areas of our business that I’m going to update and I’ll come back in detail on each of them.
First, a short-term uncertainty that remains in this marketplace. We think in a long-term, we will still come back, we will see strong market fundamentals uranium space.
Secondly, our recently announced agreement with Navajo Nation is a significant step forward towards the development of our assets in New Mexico and I wanted detail what that means to us.
Third, the Neutron acquisition, which is about to close will position us as one of the top U.S. uranium development companies and while it's always important to, say, how big you are, or we could care less how many overall pounds in the ground. It's about getting to production with quality pounds and I’m going to talk about that in detail.
Four, we are confident that the $50 million that we need to build Churchrock and Crownpoint will be met. I’ll give you some indication why we are so confident.
Fifth, we are progressing our Texas projects as planned. We want to return to production in Texas as well. So I’ll detail some of those thoughts.
Let me start with a macro side and look at what we now know to be a difficult soft market.
The present market fundamentals with regarding uranium are not strong. Uranium spot price recently dropped below $50 and this week is been hovering around $49 and changed.
The soft market is sort of typical for this time of the year, so it wasn’t unexpected. Part of the reason is still the Department of Energy. Their uranium sales are between 5 million and 6 million pounds per year or approximately 10% of the annual U.S. reactor consumption was expected. A recent secretarial determination that could increase sales to about 15% of annual U.S. reactor consumption wasn't as expected.
We must temper those numbers with the belief that there is still not enough excess supply to balance what will happen in the coming years. With regard to the Russian HEU expiration and long-term demands international, with regard to what happened at the DOE. Let me just say that the Mining Associations, Uranium Associations are working with the Department of Energy to get back to a balanced approach.
Long-term fundamentals still remain very strong. There is an increasing demand. Let just look what happened recently. Japan restarted the Oi reactors 3 and 4, and we expect this will pave the way for more restarts in Japan.
China started the new reactor in the first quarter of this year and they have seven more planned in 2012 or into 2013. Reactors are expected to come online in other high growth countries such as South Korea, Russia, Argentina and India.
Of equal importance there are four reactors under construction in Georgia and South Carolina. Although, all that’s going on and increasing the long-term demand there is a decreasing supply.
We’ve talk frequently about the Russian HEU agreement expiring in 2013. I could remove as much as 24 million pounds annually of the supply for U.S. utilities. There are questions regarding many, many of the new development projects as some are being delayed, some are being canceled.