Ur-Energy Inc.
Q2 2015 Earnings Call Transcript

Published: 4 Aug 2015

[Operator:]

Good morning and welcome to the Ur-Energy Second Quarter 2015 Teleconference and webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event in being recorded. I would now like to turn the conference over to Penne Goplerud. Please go ahead.

[Penne Goplerud:]

Thank you and thank you all for joining us today. We are required to draw the attention of our listeners to the legal disclaimers contained in this morning's slide presentation, which apply equally to our oral presentation today. At slide 2, you will find legal disclaimers, with regard to forward-looking statements, risk factors and protections as well as other cautionary notes to U.S. investors. We ask that you read and consider these disclaimers carefully before investing in our shares. As well risk factors inherent in forward-looking statements and projections are set forth and discussed in the Company's Annual Report on Form 10-K, filed March 2, 2015, with U.S. Securities and Exchange on EDGAR and with securities regulators in Canada on SEDAR. I would now like to introduce and turn the webcast presentation over to our Founder, Chairman of the Board and our CEO, Jeffrey Klenda.

[Jeffrey Klenda:]

Great, thank you very much Penny and welcome everyone. I too am very happy and appreciative to have you join us today. We have a lot of very positive and I think exciting information to impart to you, so let's to go ahead and get started. But one of the first comments that I would like to make is that this webcast is coming at a 4Q at this time is actually on a day of week we are making the second anniversary of our final approval to begin operations at Lost Creek and of course, while we did not turn on the pumps and begin producing uranium immediately we had - that was our start date in August of 2013. Make no misstate, that too your period has been filled with plenty of trials and tribulations. The commissioning process is never easy, but I like to think that we have done a good job of navigating it. As it happens, our last webcast took place on December 4th of last year, so roughly eight months ago today. And during that webcast we provided a theme and that theme was delivering performance in the post Fukushima environment. And always to the consternation of our General Counsel, I'm firm to making forward-looking statements and we will be making forward-looking statements again today. But we also gave some guidance for what we expected for calendar year 2015. So along the way, we're going to be referring back to that webcast and some of the projections that we made for 2015 now that we are reporting at the mid-way point for 2015 and we'll let you be the judge as to how we have performed. As unfortunately have been the case all too often over the last few years, we are still finding ourselves in a very challenging time in not just the uranium space but in the natural resources in general. In fact, those of you who are followers of not just our space, but all things natural resources will note that just last week, we managed to achieve 13 year lows on the Bloomberg Natural Resource Index, an index, which follows 22 commodities. And those are things that we simply cannot control. It's actually interesting and somewhat ironic to note that over the first six months of this year, uranium has actually held pretty steady, it's actually remained somewhat flat. And because of that we've probably been one of the top performers in that Bloomberg Index. Of course, that has not spared our stock from being - from separating the downtown that all things natural resource have been caught up in. So at this time, let's go ahead and let's kick off the PowerPoint presentation. I will draw your attention to slide number three, that's entitled Ur-Energy's Market Position and this gives you a good snapshot of our share capital and cash position. And of course, you can see our trading charts there on both the NYSE market under the symbol URG and the TSX market under the symbol URE. The takeaway from this slide and the thing that I would like to emphasize here is that this slide and our - issued an outstanding shares really have not changed materially, since we engaged in our last financing in December of 2013. And if you recall we raised a little above $5 million and that was attendance to and facilitated the purchase of the Pathfinder assets from the French giants Ariba, but aside from that in December of 2013. We have not issued additional shares. I consider myself to be the gate keeper of the capital structure. And as a result of that, we have continued to do our best results to maintain our capital structure without expanding it and during these very challenging times. If you move on now to slide number four. I'd simply like to point out here that two months ago, the U.S. Energy Information Administration and EIA came out with their uranium marketing annual survey and it was more than 100 pages long. Look, this is the one slide that I wanted to pull out of there and that I wanted to incorporate into our PowerPoint and that it speaks volumes about our industry. There are many things that we've all been waiting for like the restart of reactors in Japan and we've been worried whether or not there would be geopolitical events that would influence the uranium marketplace. But I think this is an inconvenient truth if you will, sorry to barge through the reference there, to the uranium space in particular and the position that the utilities find themselves in. Frankly, I do not understand, the complacency of the United States utilities, but as you can see here, there is a growing disparity between the requirements of the U.S. utilities beginning in 2017 and those contracted for requirements or the those requirements that they have indeed contracted for and it becomes very, very large as we move towards the end of the decade. Some of the analysts out there have projected that because of this, when do get the reversal in our space that it's something that is going to be not gradual, but actually a rather violent reversal. Given the forward looking nature of the United States utilities, always looking at three to five years out, I've got to think that they've got to be aware of this and are beginning to sweat this. Having said that, let's talk a little bit about what we're going to be bringing to you today. On weekly basis over the last four months, we have begun internally in engaging in what we call our executive committee meetings. And during those ExCo meetings as we have come to call them, we call upon all of our senior executive staffers to give an update on the activities of their department during that previous week. We find this to be very, very useful and not only has it opened up the lines of communications across all of our departments, but we stay absolutely current on everything that's happening in this Company and I think it has been very, very beneficial in retrospect. So we are going to really copy that format where we hear from each one of our department heads in turn now. We will not in this case be hearing from all of our executive staffers but we will hear from first operationally Steve Hatten, followed by exploration and resources with James Bonner and finally we will hear from Roger Smith, our CFO and Chief Administrative Officer. But in each case what I would like to do is by preface that by making a few comments on what our projections were back in December and then I'll allow our department heads to comment on how we have performed along those lines. So pursuant to that format let me get started here. Our first presentation and our first update will be begin to us by Steve Hatten, Senior Vice President of Engineering and realistically, Steve has all things operationally for our Company. But as promised when he referred back to December and our webcast. What we stated at that time was that one of our goals and we thought that this would probably come somewhere around middle point of the year, that our objective was to achieve steady state production and that we wanted to make sure that we firmly established ourselves as consistent low-cost producers. And that in order to do that, that would require that we achieved certain operational efficiencies that we knew that we could improve on, and that if we were successful in that endeavor, it would result in falling costs. I think that we've done an excellent job of that, but rather than take it from me. I will at this time turn it over to Steve Hatten to give you his direct updates. Steve, if you will take it away, please.

[Steve Hatten:]

Thank you, Jeff. Rich if you could take us to slide five, Lost Creek development status. I'm going to first talk about, as we generally do out there, we talk about where the fluid comes from, where the fluid goes to and what it cost us. So we'll talk about, what we're doing out in the field to get production going. We'll talk about the drilling status. Right now, we've already installed all of the wells that we had originally planned in our first mine unit. This is one of those forward-looking statement, Jeff, had referred before when I say, originally planned that's exactly what we mean, Our geologists in June came out with the revised tech report where they increased our net resource in the first mine unit by 1.3 million pounds. The original planned well not incorporate those 1.3 million pounds and so in the future we will be planning for a drilling and an installation program that incorporates the production of those 1.3 million pounds of resource and thereby utilizing the existing infrastructure; fences, power, pipelines where possible and lowering the per pound cost based on that. So we have installed 100% of those original planned well, which is 13 header houses worth. We are also starting on our production well installation in our second mine unit. Those who work with me know that I routinely say that running a operation in ISR is driving a battleship you have to steer several months in ahead and this is the beginning of the steering process for mine unit too. We'll start installing those wells this year in preparation for production next year. Then finally with our drilling program, Jim Bonner will later about where we're going with the exploration end, but we are completing 150 hole program and we expect to do that sometime in mid-August. The second phase of what goes on outside the plant is the mine unit construction or the surface construction. The wells are installed, but we have to pipe all those in and that involve pipelines, powerlines, header houses, instrumentation management of that flow. So right now we have header houses 1 through 10 are complete on construction. We are nearing the end of construction on header house 11. The pipeline in the road to header house 11 are complete and the surface and downhole construction is underway and we should be again complete in another couple months. That doesn't preclude us from the other work that goes on out there. Our guys do a great job. They are constantly working on multiple fronts. So they have been working on the prefabrication of header house 12 and they will keep working towards 13 and then prepping for mine unit 2 construction. And also we will be doing some surface construction in the form of infrastructure in the mine unit 2 area starting in Q4. Rich, if you could please take us to slide six, Lost Creek production results. I am very happy to say that on the day of our two year anniversary, we are shipping our 33rd truckload of uranium out of our facility today, we're very proud of our staff. We're very proud of all the folks in the plant, in the wellfield, in the regulatory group, in the operations group that make all that happen. So with shipping that 33rd lot, it has given us the production numbers that we see below and I won't read those for you, but there is a few things I would like to point out, is that quarter-over-quarter we continue to expand the number of pounds, so you see continued growth quarter-over-quarter, for the last four quarters. And that comes in all forms that we are concerned with, the captured pounds, which is what comes in on the flow stream, the drums pounds and the ship pounds. As a matter of fact our folks at currently with the use of only one of our drying systems are drying at a million pound rate, routinely. Jeff referred to steady-state and this is what we're talking about with steady state. And with steady-state comes the reduction of unit costs. So again we talk about slow and steady and steady state. We have continued to bring on header house at a routine rate. We are on our 10th header house operating 10th of 13 in the first mine unit with many more to come. And again, there the other thing that you will see in steady-state that comes with steady state operations and ISR, is you will see a lowering of grade. But you will see that right now year-to-date we're 107 milligrams per liter apart from million used 308 and that is lower than it was the year ago. However, as you continue operations in any area, you hit peaks and then you start to come down from those areas and we are inclusive of that original below. We have header houses one, two, three, all those of grades are still running very reasonably, but we have an average grade of 107 there for the year. We are still making our production targets and we're doing quite well with that. A major milestone we hit that I'd like to point out before I move on is the 1 million pound. We were able to capture dry drum and ship that and that's an amazing feat and it's a big milestone for any operation. Also just touch briefly, as we talked about steady-state. We have all the systems in the plant are functional. We are not running our reverse osmosis system right now. It's not necessary for our operations to maintain also. Waste water is the tail that wags, the dog in this industry and three of our disposal wells are available and are utilized as necessary. Both of our storage ponds that are associated with the waste water system are at an all-time low and they are less than 30% of total capacity and are available in case we have any upset conditions within the waste water system. Rich, could you go ahead and take us to slide seven please, Lost Creek operational results. Finally, and we'll kind of segue into the cash end of things, which is what also wags this dog. But you will see that we have showed continued increases over time and are captured our ground and thus a nice reduction in the cost. You will see our cash cost in 2013 were $22 a pound, essentially $20 a pound in 2014 and we're running, less in Q1 we're $18.86 and in Q2 we're at $16.15 cash cost, that's an excellent number for us. And that turns into better revenues. As you can see, despite the lagging spot market and the price of uranium, we have continued to show increases in revenues in cost savings and therefore increases in what's coming in. So for last year we are showing $19.73 was the average cash cost and we're very proud of all those numbers. Again it speaks to the consistency of the operation, the uniformity in the staff and the excellent job that they're doing on a daily basis. And with that, Jeff, I'll turn it back over to you.

[Jeffrey Klenda:]

Great. Thank you very much, Steve. As we move forward here, Jim Bonner will be our next presenter. Jim is our Senior VP for Exploration and really he has been charged with all things resource and the growth of our resource. For those of you who have been with us a while as shareholders, you know that as a company we have always held out Lost Creek as being a very scalable project. Now we have to be cautious they're not to get too excited and make forward-looking statements. That when we were in December during our last webcast. We felt that 2015 was going to be a great opportunity for us to demonstrate the scalability of this particular project. And I think we've done an excellent job of this and I would take just a moment here to comment on something and that is that over the last years we have fielded a certain amount of criticism for actually being a producer and the thinking being is that we were burning up a very valuable and very finite resource in a very challenging environment and that if we were prudent we shouldn't be producing instead, we should be a pounds in the ground company, a land bank, if you will waiting for those higher prices. Of course, when we are fielding those criticisms our detractors are always remising, never mentioning that we are realizing upwards of $30 margins, during a time when we are experiencing $35 spot prices and that we are growing our resources. One of the things that was very, very important to us and we stated this in December was that we wanted to demonstrate that we would not only replacing those pounds that we were producing but that we were actively growing the resource at a rapid rate at the same time. So this is something that was a high priority for us and once again we'll let you be the judged as to how we've done. And with that I'll turn it over to Jim Bonner to give you an update from resources and exploration. Jim if you will, please.

[James Bonner:]

Thank you Jeff. As Steve mentioned in his presentation, we have three different drilling programs for resource growth at Lost Creek this year. I'll provide some details to those programs. Number one, in the first quarter of the year, production there completed all pattern drilling within mine one. Results of this drilling were interpreted in order to update under pattern resources last reported in 2013. As part of this interpretation and based on the high uranium recoveries from production operations within mine unit one, the great thickness or GT cut off used in the resource estimation process was lowered. Together, the increased density of the drill hole data and the lower GT cut off, resulted in an increase of 2.3 million pounds of major resource with mine unit one. Even after subtracting all pounds produced from this mining unit since the beginning of operations, we realized that 55% increase to mine unit one resources. Number two, we designed 2015 exploratory drilling program at Lost Creek to replace produced resources. In the first quarter of this year, we completed 60% of this 150 hole program, as shown on the slides immediately south and east of mine unit one. We added 120,000 pounds of measured and indicated resources and nearly 300,000 pounds of inferred resources this winter. Currently, we have two drill rigs on this exploratory drilling program and should have it completed this month. Number three, this month Ur-Energy will also begin pattern drilling on mine unit two as shown on this slide as development drilling because of this increased density of drilling, we also expect to add to the resource base of his mine unit. Rich, could I have slide my number nine, please. This is a graphic of Ur-Energy's overall Lost Creek property with the Lost Creek project in the center. Total measured and indicated resources for the Lost Creek property is 10.1 million pounds with an additional 5 million pounds of inferred resources. Incorporating the results of the described exploration drilling program, the pattern drilling within mine unit two and the lowering of the GT cut off from 0.3 to 0.2, U-r Energy is planning to complete a total resource update for the Lost Creek property. We expect to complete a technical on this work in the fourth quarter of 2015. Rich, number 10 please. The Shirley Basin project remains a priority for U-r Energy and is right on schedule. Preliminary economics for this 8.8 million pound measured and indicated resource we reported in January of this year. This deposit is located on patent and claims within the historic Shirley Basin uranium mining district. As you could see on this slide, the high average grade of 0.23% makes this an extremely attractive project. We are wrapping up all baseline surveys for the project and anticipate submitting permit applications in the next several weeks. After summary of the resource related activities on U-r Energy properties, I'll now turn this back to Jeff now.

[Jeffrey Klenda:]

Great. Thank you very much, Jim. Moving forward, I will next - we'll next hear an update from Roger Smith, U-r Energy's Chief Financial Officer and Chief Administrative Officer. And I'd like to take this opportunity to take a moment and comment. I don't know if our listeners today and our participants have noticed this. But one of the things that I have certainly noticed over the last couple of years is that our accounting team has absolutely honed it's craft. One of the things that I have seen take place is that over the last two years. I firmly believe that our accounting team is now producing some of the most readable and easily understandable financial and MD&A statements in any industry. It's a real testament to their professionalism and confidence in what they do. But once again referring back to our webcast from December of last year. We stated our objectives of continuing to achieve $20 or better, targeted operational costs and we felt that this was very important. It was, we knew that we had a good year in 2014, but you are only as good as what you've done lately, and we had to demonstrate and we felt it important that we demonstrate that we could be a consistent low cost producer and indeed one of the lowest cost producers in the world, if not, the world's current low cost producer. And that if we could do that that we - and achieve those efficiencies, but it would result in discretionary sales on the part of the company and of course, widen our margins as our cost continue to drop. We've done a very good job on that, but once again I'll let you hear that directly from the man who receives it. So with that I'll turn this over to Roger to give an update on our Q2 and first half financial results. Roger?

[Roger Smith:]

Thank you, Jeff and thank you for those kind words, we certainly try to do a good job and hats off to my team and everybody else that helps us with that process. Anybody that works in a regulatory environment, reporting environment knows it's a daunting task. So we very much appreciate all their assistance. As Steve indicated in the first two quarters of 2015 we've been moving towards our targeted production rate of approximately 70,000 pounds per month. As we approach this rate, in the steady state we are beginning to see positive results in the form of lower production costs per pound. And result in lower cost per pound sold as well. This chart demonstrates our declining cost per pound sold trend, particularly in Q2 after higher cost pounds from earlier periods have now made their way through the system. In Q2 our all in, cost per pound sold had decreased below $30 a pound to $28.98 a pound, which includes ad valorem and severance taxes of $2.78 a pound, cash cost of $16.15 a pound and non-cash cost of $10.05 a pound. This chart also indicates that our margins for the year are improving, as the gap is widened between our average term contract price which is $50 a pound for this year and our year-to-date all in cost per pound sold, which is now down to $32 a pound for the year. Moving towards the steady state has also allowed us to improve our operating efficiencies. Next slide please. Improving our operational efficiencies has in turn given us the opportunity to build inventory, which now stands at 175,000 pounds, this included 79,000 pounds of in process inventory, 30,000 pounds of dried and drummed inventory at the plant and 66,000 pounds of finished product at the conversion facility. As you know our non-cash costs are fixed and do not fluctuate very much at penny. Our cash cost which are primarily process based do not necessarily fluctuate with production. So as production levels increase to our targeted rate, the cost per pound in inventory will decrease, so long as our cost remain on target. The line in this chart demonstrates this as it shows the all in cost per pound in ending inventory at the conversion facility by the way, so this is our finished product, which has now decreased to $27.37 at the end of Q2, down from the average that we had in Q2 driven for our cost of the goods sold. It is made up of ad valorem and severance taxes of $2.30 a pound, cash cost of $15.48 a pound, which is down from $16.18, which was our average cost per pound sold in Q2 and non-cash cost of $9.59 a pound. I believe this point, paints a pretty good picture as we head into Q3 where we are hopeful to see similar if not better cost profiles. Thank you.

[Jeffrey Klenda:]

Okay. Great. Thank you very much Roger. And if you would Rich, go ahead move forward to slide number 13 and this slide ladies and gentlemen has had all additional considerations and this is my attempt to anticipate some questions that will probably be asked during the Q&A period. So bear with me for just a couple of more minutes here and I'll cover to all quantum areas that I think that you probably have some questions on anyway. The first of these, the first bullet point, reductions in our general and administrative costs and any other savings that we can affect. But we all know this is a difficult time in the uranium space and in natural resources in general. We're not immune to those overall macro market conditions and consequently, it's incumbent upon us to effect savings wherever we possibly can. And I am very happy to report but actually over the last three, four months we have significantly cut G&A at least in my view we have been and that's upwards of $600,000 to $700,000. Now we still have some positions that we need to fill, but this is going o be something that's going to be upper most in our mind and we will continue to run what we consider to be a very lean, clean machine and we will affect those savings wherever possible. The following bullet point, has to do with our long-term sales. This is one of these things that's interesting about the uranium space. If you go back to 2011, we actually feel the criticisms for entering into those $60 plus contracts and the feeling at the time that we were giving away our Blue Sky as a company. And it's something of an oddity that characterizes the uranium space and what I'm referring to here is that idea that $70 pricing is always right around the corner. Well we are now 4.5 years after Fukushima and spot price is at $35 a pound, thanks goodness for those long-term contracts. They have kept this company in good stead. They have allowed us to company to execute on our business plan and they have greatly derisked this company to our shareholders. It's important to note also that we have now entered into 11 contracts that extend through the calendar year 2021. I'd also like to point out that of those 11 contracts, all, but one of those were entered into after Fukushima. So to those who would say that acceptable pricing and margins cannot or have not been able to be achieved in the post-Fukushima environment, I would suggest to you that we stand as a testament to the contrary. Beyond that, I want to also point that we are being very, very selective as to what pricing we will accept. We tend to for that percentage of our production that we feel is appropriate target roughly about $50 a pound. The reason that we do that is because we know what margins we're locking and we feel that those are very, very acceptable margins in this environment. We are competing directly frankly with the traders out there and in virtually a zero interest rate environment, they are playing in the carry trade, which makes it very difficult to compete in pricing in the near-term years 2016, 2017 and 2018. Fortunately, we feel that we've done a great job of contracting in those years. We remain open to securing additional contracts through 2019, 2020 and 2021, but only at prices that we feel are acceptable to us and frankly that's $5 or greater. Next I would like to comment on is the CEO position, which you know is vacated back in April of this year. We have not had a lot of questions with respect to this, but I think that given the presentations and the updates that you just received from our senior staffers, I hope that what we have succeeded in impacting upon you is the fact that we are achieving efficiencies this company has been known before. We are lowering our operational cost to levels that we have never been able to bring to the marketplace. And we thing that quite frankly we're firing on all cylinders and this is a - the company is operating at absolute peak efficiency. We've had our board meetings around our second quarter financials, last week. And during those board meetings, I think that we were fairly unanimous across our board in that with respect to going out there and for any reasons filling the CEO position, sell into the heading of if ain't broke, don't fix it. And quite candidly, in this market environmental, I don't think there is any rush to replace that very high salary. We are doing functioning extremely well and the people that brought us here are the people that are heading these departments today and I think that you are seeing the results of that. Next, with respect to M&A activity. I would emphasize that right now, with respect to the M as in mergers and acquisitions, there is absolutely nothing contemplated at this time. We pride ourselves, we always have on being willing to listen to anything and any advances that we receive from other peers out there in the marketplace. But there is absolutely nothing that we are contemplating doing at this time. As to the A as for acquisitions, as we've stated in December, we are always open and on the lookout for acquisitions that make sense to us and if you recall what we stated at that time was that our acquisitions would be very selective. Again, we will never be at pounds in the ground player, but if we have the opportunity to add pounds in a very intelligent way in and around our production areas we're going to be doing it. And we will in so doing, extend life of mine and that will be our objective, but we will only add pounds in a very intelligent manner. And so you will not see adding pounds on our part for pound sake. Finally, with respect to those additional considerations, I feel that this is a recurring theme unfortunately that I have to constantly come back to and I at time vacillate on this and between mild amusement and finding it mildly infuriating. But since January of 2014 we have been told on numerous occasions that we must go out and engage in an equity financing and that they will not survive otherwise. I'm sorry to disappoint but we are now 19 months and counting and we have not done an equity raise and there is not one anticipated. And you've seen from our revenues over $7 million in gross revenues in the first quarter, followed that up in the second by over $18 million in gross revenues and we're looking toward a $10 plus million gross revenue third quarter. We are cash flowing quite nicely thank you very much and there is no equity raise in the offing. So with that and those additional considerations we are happy to open this up to Q&A at this time. So Andrew if you would facilitate that for us please.

[Operator:]

[Operator Instructions] The first question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.

[Joseph Reagor:]

Good morning guys and congrats on the strong cash cost this quarter.

[Jeffrey Klenda:]

Thanks, Joe, appreciate it.

[Joseph Reagor:]

So I just have a couple of kind of more minor questions. You guys touched on a lot already. But on the drilling side with the additional pounds over ground, did you guys work out I guess cost of discovery was on a per pound basis for that?

[Jeffrey Klenda:]

Well, I would defer to either Roger or Jim on that.

[Roger Smith:]

No, we did not. The program wasn't terribly expensive. Drilling as you know, was relatively shallow, so we don't spend a terrible amount on it. We're in the process of another currently, and we'll continue to monitor that. Of course, we watch our cash very, very closely as we can.

[Joseph Reagor:]

Okay. Do you know what the total cost was for the first 60% that was completed already.

[Roger Smith:]

It wasn't very much. I think the program in total was in the neighborhood of $300,000, if I recall, is that correct, Jim.

[James Bonner:]

Yes, that was the total. So we would have spent somewhere in the area of $200,000.

[Joseph Reagor:]

Okay, so you're at less than $1 a pound.

[James Bonner:]

Right.

[Steve Hatten:]

This is Steve Hatten I think what's important to note here is that a lot of this comes in the form of as we produced and we saw the production levels coming out of the existing installations, we revised our modeling as Jim has pointed out before. We revised our GT contour evaluation and so essentially this was not a drilling exercise, so much on the additional resources in mine unit one as it was a reevaluation of the existing data. And that's where we really reaped a lot of benefits.

[Joseph Reagor:]

Okay. Thanks for the color on that. Then one other thing. On the cost side, it seems like you know if you're guiding to without saying it, but that such a costs per pound basis, could be down another $1 dollar to $2 a pound. Just looking at the inventory cost levels versus what your sales were in the second quarter. Is that an accurate assessment?

[Roger Smith:]

Yeah, is forward-looking statement, but yeah, I believe we're going to see a continued decrease until we basically achieve that steady state for multiple periods. Assuming our cost profile doesn't change a lot, I would expect our cost per pound to decrease a bit further. I'm not going to peg in, number just yet, but we'll watch that pretty closely.

[Joseph Reagor:]

Okay. Thanks a lot.

[Jeffrey Klenda:]

Great. Thanks, Joe.

[Operator:]

[Operator Instructions] The next question comes from Colin Healey of Haywood Securities. Please go ahead.

[Colin Healey:]

Hey guys, I'll second what the first thing you said, into the improving cost trends, just very soft. So congrats on that. My question has to do with the - back in March, when you guys reported 2014 year-end. I think you've said that 630,000 pounds were contracted for 2015 in the kind of average price. So that was going to be $50.10, so if my math is working here, you've sold 480,000 pounds year-to-date into the contracts, leaving 150,000 pounds for the contract at sales through in second half of 2015. I'm looking around $57 for that, just based on the numbers I just gave you. My question is, and I think it was mentioned that you're expecting somewhere in the neighborhood of $10 million in revenue for H2 '15. So if there are spot sales in there because I'm calculating about $8.5 million of contract sales. So I'm just was wondering what kind of the sales guidance is back at the $10 million, if I heard that number right.

[Jeffrey Klenda:]

You heard the number right and that's spot on. We as Roger pointed out, we have a significant and growing inventories at this point in time. We have actually our highest price delivery will take place this month. I believe we're scheduled for the 17. And there will be a spot sale to augment that. Obviously, we'll try and time that as best we can for an upswing in the marketplace. It's a bit weakness out there right now, but as you know, we in our projections for the year, we have modeled a certain number of discretionary spot sales.

[Colin Healey:]

Okay. Good. That's it for me.

[Jeffrey Klenda:]

Great. Thanks, Colin.

[Operator:]

The next question comes from George Casper [ph], private investor. Please go ahead.

[George Casper:]

Yes, good morning. Just a little color if you could on Shirley Basin timetable. Can you outline what you're looking at possibly going forward in terms of a timetable on the prospect? And do you have any early thoughts on uranium total that you would be zeroing in on there? And what type of development, financial development is it going to require on your part?

[Jeffrey Klenda:]

Yeah, I'll tell you what let me just make just a brief comment on this and then I'm going to turn it over to Jim Bonner for specifics. But as you may or may not be aware for more than a year now, we have been engaged in completing our baseline data gathering for Shirley Basin. In addition to that we did updated our technical report and finalize a PEA that was released preliminary economic assessment that was released at the end of January. So we have - these are very well defined pounds. And in that PEA we pointed to a little over $30 million as capital costs that will be attended to bringing that into production. But with specifics on the resource and timetables and the filing of the amended application, I'll let Jim speak to that although, not with us today, taking some much-deserved time off is John Cash. He normally heads that, but Jim is certainly best suited to comment on that. Jim, if you would please.

[James Bonner:]

Yes, Jeff. George, our original that we put out with our preliminary economic analysis. We're saying that we were shooting for our programming, which we are on schedule and start of construction, the end of 2017 and so that's our rough timeframe for starting this operation up. Now with respect to drilling, Pathfiner mines had drilled this deposit out on very close centers. And so for us to go forward and into some pattern [Audio Gap] will go right into designing patterns for ISR operations. Does that help at all?

[George Casper:]

Yeah, thank you. My compliments to the management. You are very detailed in your analysis on your operation currently and certainly that will go a long way in projecting interest on the part of the investor. And as you move to the next exploration and development move. I have a question and if you could answer this. On the U.S. uranium demand situation right now, has there been any change in the percentage of uranium produced in the United States? What is the time the U.S. requirement at this point in time? As a percentage of the U.S. based production?

[Jeffrey Klenda:]

Well, George, I'll make a couple of comments on that, but you have guys on this line in the form of the analysts that are far better suited to comment on this than I am. But of course, we live this every day. We've seen that last year's production, 2014 came in just under 5 million pounds. Our consumption once again, will come in somewhere around the 55 million pounds. With the EIA report that I referred to earlier, actually was very instructive. The simple fact of the matter is is that the United States purchased 53 million pounds last year; 39% of those coming from Russia, Kazakhstan Uzbekistan and other 38% coming from Canada and Australia. The second number doesn't bother me, the first one should cause great concern among our U.S. utilities. I can't imagine how anybody feels secure in relying on 40% of our primary supply of uranium coming from part of the world and I think anybody that does, should probably speak to some of the Europeans have been relying on natural gas and oil from those same sources for their comfort. But, no, that has not changed a great deal. We continue to be the largest consumer on the planet and we are a very small producer. Personally, it has always been my contention that this is murk into consistent something of a national security issue at some point in time. But I'll leave that for future administrations handle, wish I had a better answer for you on that, but that is the current state.

[George Casper:]

Okay. Well, thank you for that.

[Jeffrey Klenda:]

Great. Thank you. I understand, Andrew, that that is the last of our questions.

[Operator:]

That is correct. So I'd like to turn the conference back over to you for any closing remarks, sir.

[Jeffrey Klenda:]

Great. Thank you very much and I don't know whether or not we were just incredibly thorough or if we can attribute just a three day weekend in Canada either way. We greatly appreciate your participation today and joining us. And I just like to make a couple of closing comments. Look these are very, very difficult times and during times like these, it's very easy for companies to lose their way or perhaps lose sight of their identity and certainly nothing has tested that more than the 4.5 years that followed Fukushima. But we like to think that as a company we have not lost our identity. We feel that our shareholders gave us a mandate many years ago to become legitimate uranium company. We are not going to be - we're not selling Blue Sky, we're selling performance. We are not going to a pounds in the ground player. Since we feel that that is our mandate, we firmly believe that things like low cost, growing revenues, positive cash flows and profits are actually what our mandate is and we don't believe that those our motive, it calms us. We will continue to work on improving our efficiencies. We'll continue to strive for steady-state production and consistent production. We will continue to endeavor to growth those resources at a very rapid rate and certainly far out stripping our level of production. And we will continue to advance Shirley Basin at a very rapid pace, putting it is our next million pounds a year. And all I can say to you ladies and gentlemen, is that you get the very best efforts of this management team and we will succeed. So with that I will say thank you very much and we will look forward to presenting to you again in early November with our third quarter results. Thank you.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.