Ur-Energy Inc. (AMEX:URG) Q1 2024 Earnings Call Transcript May 8, 2024
Ur-Energy Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and welcome to the Ur-Energy 2024 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host Penne Goplerud. Ma’am, the floor is yours.
Penne Goplerud: Thank you, and thank you all for joining us for our teleconference and webcast this morning. We are required to draw the attention of all participants to the legal disclaimers contained in this morning’s slide presentation, which applies equally to our oral presentation today. At slide 2, you will find legal disclaimers with regard to forward-looking statements, risk factors and projections as well as other cautionary note to 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 on March 6, 2024 with the US Securities and Exchange on EDGAR and with the Securities Regulatory Authorities in Canada on SEDAR I would now like to introduce and turn the webcast presentation over to our Chairman and CEO, John Cash.
John Cash: All right. Thank you, Penne. Appreciate that and thank you everyone for joining us this morning. And takes some time here to review our Q1 2024 earnings and take some time for Q&A at the end. But certainly it’s been a good quarter for us at Lost Creek and Shirley Basin and for the company as we continue to advance toward commercial production, it will be giving you the highlights of the financials and operations. As well we will provide a presentation via PowerPoint form here to talk about the broader industry. Certainly a lot is going on right now including some activity last week in Congress that has had an effect on uranium prices recently. And I think it will continue to have an impact going forward. So the agenda here today is we’ll do the presentation and then I’ll open it up to comments from Roger Smith, our CFO, who will provide some highlights on financials and then turn it over to our COO, Steve Hatten who will cover off on some of the operations and provide you with an update on that.
After that we’ll take Q&A. So without further ado let’s jump into the presentation. Many of you have seen this presentation before. But if you’re new to the industry or new to Ur-Energy I believe that the presentation will be quite instructive. It covers off on not only just operations in the company, but also talks about the investment thesis in nuclear and why now is a great time to be jumping in. So Penne has already talked about the disclaimer. So I won’t go into further detail there other than to say we encourage you to do your own homework before investing. There certainly is risk in any investment. In the recent past, as I attend investor relations conferences and talk to various investors, it’s become very apparent that we have a lot of new people coming into this space.
There’s a lot of excitement in the nuclear industry throughout the fuel cycle and with utilities as the world begins to move more and more toward carbon-free electricity. And because of that we get a lot of just fundamental one-on-one questions about, what is it that you do? What is in situ mining? How do you recover uranium? So we’ve added a few new slides into the slide deck that really focus on in situ mining and what the technology is that we utilize since so many people are unfamiliar with it. But Ur-Energy, we are in in situ uranium miner. In situ as a Latin term, it means, in the place. So we don’t move any rock. We don’t dig any deeper holes or add tunnels to access the ore. Instead, we access the ore through water wells. And you can see in the diagram here that the blue wells those are injection wells.
We inject water, CO2 and oxygen into the ore body. You can see the ore body there is that crescent shaped black figure. The mining solution a water in those two gases moves across the ore body. It dissolves the uranium and we simply pump it to the surface through that yellow well — the production well up to the surface and send it to a processing plant for recovery. The water once the uranium is removed from it is simply recycled back into the ground to continue to recover the ore until the ore body is depleted. There are many reasons why we utilize this technology. One of the primary reasons though is it has a very small footprint on the surface. So the photograph here is of our operating Lost Creek mine. This is in operation. This was taken a few years ago.
So you can see that those are the wellheads in the foreground, the little brown boxes that look like bee hives. So you can see that there’s minimal disturbance after we get the wells installed and we reclaim the surface. When we get done with mining, we will remove the wellheads, receive the surface and within a few years it will be hard to tell that we were even there and the ground can be returned to any use phrasing, you can put the towns on it buildings, schools, hospitals, it is absolutely unrestricted use once we’re done. The other reason the technology is used is it economics. The minimal disturbance lends itself to low cost. We are not digging up large tonnages of rock. So the cost of operations of an in-situ mine typically is less than for a conventional mine, and that’s why the world is moving toward in-situ mining increasingly.
Right now a little over half about 55% of the world’s uranium is recovered using in-situ technology, because of the economics, because of the minimal environmental footprint. So when the water is produced from the wells, it’s directed into a Header House. Header House is simply a manifold system to collect and distribute water. In the photograph here, this is a Header House that we’ve built and on the left hand side along the wall there are 60 meter runs, if you can count each of those runs and each one of those is beating an individual injection well. On the right-hand side, you will see 30 production wells, lines that lead to production wells. And so each Header House has typically about 90 wells; 60 injectors, 30 producers. The manifold system in the center that is for filtration of the water to remove the sand and silt clays that are produced from the aquifer.
So the next photograph, it shows our operating Lost Creek mine. On the left hand side those are the ion exchange columns within those columns are billions and billions of little styrene plastic beads that have an office and electrical charge as the uranium ions coming in, because the charges are opposite of each other, the uranium gallons on to electro chemically through the resin beads and they’re captured from the water. This is a well-established technology has been around for many, many decades and is used not only in the uranium recovery industry, but in all kinds of water treatment systems. The next slide shows one of our shipments that we sent out recently. I believe this one is lots 75. We’ve had additional shipments since then, but lots 75 that we sent off to ConAgra Dine on behalf of one of our customers that is buying the product.
And so you see we package it in 55 gallon drums, load the product on a truck and send it off for processing. So in a nutshell that is in-situ mining and wanted to provide those slides to people who are new to uranium mining and new to in-situ technology. It’s an important part of who we are at Ur-Energy. So with that, I’ll switch gears and we’ll talk a little bit about our two flagship properties. We have other properties that I’m not going to talk about today, but exploration stage and more toward development stage properties. But the existing production in the near-erm production from our two flagship properties will come from Lost Creek, which is in production and Shirley Basin, which we’re entering construction now. So, starting with Lost Creek, it’s been in production now for over 10 years.
And in that time period, we have produced nearly three million pounds of U308. U308 is the chemical formula for a yellow cake, which is the product we produce. We recently made the decision to restart production and we’ve been bringing new Header Houses online. Again those Header Houses are the new production areas and we were able to make that decision to go and to ramp production back up, because of the contract book. And I’ll be talking in some detail about our contracts. But suffice it to say early on we had three contracts in place that gave us the faith that it was time to ramp production back up. We’re in the process of that. And since then we have signed three more offtake agreements that total nearly six million pounds plus or minus flex.
That’s over a time period of now through 2030. We also have one of those contracts that has an option for extending for three additional years. We have a very good resource at Lost Creek, nearly 12.7 million pounds of the measured and indicated resource. In addition to that, we have a little over six million pounds of inferred resource, and I’ll make a forward-looking statement here, but we do believe we have considerable opportunity to expand that resource through exploration in the future. So we keep that in mind when we talk about the mine life of around 13 years, we believe we can grow that through exploration. Lost Creek has a very good history of low cost production and we believe we can get back to a very low cost, maybe not back to those historic numbers because inflation is impacting cost going forward, but we believe we can get back to very low cost as we continue to ramp up.
We do have technical reports that we have released, the NI 43-101 compliant and S-K 1300 compliant reports that are available on links on our website. But we’re estimating that our operating costs at Lost Creek will be about $16.73 a pound as we reach economies of scale. The license for Lost Creek allows for 1.2 million pounds of production from the mine site and 2.2 million pounds a year from the plant. Now I need to explain the delta why the two different numbers. That was intentional; we wanted extra room in the processing plant to be able to toll process for competitors, or for another one of our projects such as Shirley Basin when we bring it online. So that 2.2 million pounds capacity at the plant at Lost Creek, it is fully constructed out and is operational.
So that takes us to Shirley Basin because we intend to fill some of that capacity at Lost Creek with pounds from Shirley Basin where we’re going to build out just a satellite, just the front end of the processing plant, ship the loaded ion exchange resin over to Lost Creek for processing there, and then take that resin, load it back on a truck, ship it back over to Shirley Basin to be reutilized in the system there. So Shirley Basin is fully permitted. We have all of our major permits and licenses. We’ve announced a decision to initiate construction, and we are in the early stages of construction right now as we speak. There is a license capacity at the mine and the mill for Shirley Basin of 1 million pounds per year. There’s already a lot of infrastructure in place there because it is a brownfield property.
Power lines are already there. We’ve got some roads coming in. Those need to be upgraded, but they do exist. There are also a couple of buildings on site, tailings management facility. So that gives us a head start on bringing that facility into production. Shirley Basin has a resource of 8.8 million pounds of measured and indicated resource. Please note there that there are no inferred pounds. This project has been heavily drilled, and we have all of the historic data. So everything has been put into the measured and indicated resources. Shirley Basin has a reputation of being the first in situ uranium mine in the world. We believe that to be true. We have the records for that showing that the concept was initiated back in about April of 1961.
By spring of 1963, they were working on a pilot project that produced about 1.5 million pounds of uranium using the insitu technology at Shirley Basin. So we’re excited to bring this technology back to what we believe is its birthplace. The operating cost at Shirley Basin we’re estimating will be about $24.40 a pound, again, once we reach economies of scale. As I indicated, we have initiated construction. We’re moving forward with the installation of our first monitor well ring. We’re also looking to begin upgrading of the road, but we won’t break ground on the processing plant or the satellite until about this time next year. We’re putting final touches now on detailed engineering. We’re getting ready to order long lead items, and in fact, we’ve already begun ordering some of the long lead items like ion exchange columns.
Once we get a lot of that material on the ground, we will break ground and really initiate construction in earnest with the objective of having construction done late 2025, early 2026 with production immediately thereafter. So very excited about that. It’s a famous uranium mining district in the state of Wyoming. We made the announcement that we’re going to bring Shirley Basin back into production. We have tremendous inbounds from the public, very supportive to bring that back into production. So we’ll leave behind our two flagship properties just for a little bit and talk about the nuclear investing thesis. Why nuclear? Why now? And really, one of the main reasons and the early reasons that the price began to move and the world began to show much more interest in nuclear power is because it’s carbon free.
When you burn uranium in a reactor, there are no emissions of CO2 or other greenhouse gases that are emitted, and the world is realizing that, hey, that is a tremendous benefit. It’s strong base load. In other words, it doesn’t turn off when the sun goes down or the wind doesn’t blow, and we can rely on it at very high uptimes and with very reasonable cost. Already, the US gets about 20 percent of its electricity from nuclear power, and over half of our carbon-free electricity is from nuclear. Right now in the world, we have about 440 operating nuclear reactors. An additional 60 are in construction. Many of those are in China. We just had two come on in the US down in Georgia. They were built by a company called Southern Company, so we’re excited to have those on in the US and have new production there.
There are 92 reactors on order, and another 343 have been proposed. Because of that growth, the World Nuclear Association, the WNA, is projecting significant increases in demand for uranium in the coming years. The demand last year was 171 million pounds. That’s global demand. They’re projecting by the year 2040, that demand will have increased to 338 million pounds. That is a massive increase in such a short amount of time. And it’s going to be incumbent upon the miners around the world to be able to fill that supply. And we have a lot of catch-up to do to meet that demand. That demand is before you start to layer in the small modular reactors, so the SMRs. They’re already operational in three countries, and there are strong moves in the US to build out more here.
The NEI, which is the Nuclear Energy Institute, they did a poll of their members here in the US, and the US utilities are estimating that they could have as many as 300 small modular reactors online by the year 2050. Again, in the nuclear industry, 2050 is like tomorrow. That’s very quickly. Here in Wyoming, from where I sit, not too far behind me here to the west, TerraPower is building out a small modular reactor. TerraPower is owned by Pacific Power, and Bill Gates and Warren Buffett are involved in that project. If there are any two gentlemen in the US that can get a project done, it is those two guys, and they’re making good progress for construction and approval of that plant. But we’re proud to have that here in Wyoming and looking forward to hopefully being a supplier to that at some point in the future.
It’s really difficult to talk about the nuclear investing thesis without talking about geopolitics because as the heading says here, it is the tail that wags the dog, and it has been for decades, and that’s because of the dual use of nuclear fuel. When Russia invaded Ukraine that was a real game changer for the industry, because Russia is a major refiner or processor of uranium. They don’t mine very much, but they are one of the leading processors of uranium globally. In fact, Western companies really don’t have the capacity today to backfill that. Now, I think that’s going to change very rapidly, but sitting here today, Western companies cannot backfill a supply gap from Russia. So when Russia became a bad actor and invaded Ukraine, the markets got put into turmoil.
A lot of risk, a lot of questions, where will the resources be coming from if we can’t rely on Russia? So we started to see prices moving up with that invasion of Ukraine. Important to that discussion, too, is Kazakhstan. Kazakhstan doesn’t refine very much uranium, but they do a lot of mining. In fact, they supply nearly half of the world’s feedstock of uranium. Much of that goes into Russia for refining and then is distributed around the world, including to here in the US. Russia has a lot of influence in Kazakhstan. That can’t be ignored going forward. And we’re beginning to see that Russia and China have greater influence over Kazakh production. China has been moving into Africa and buying mines there and has become a dominant controlling force of uranium production in Africa.
The West is trying to keep up. For example, Cameco has been bringing their two big Tier 1 mines back online up in Canada. It’s been a little slower than they wanted, but they are making progress, and I’m confident they will ultimately be successful. But it has not been easy for them. And quite honestly, the production out of Canada is not enough to displace supply chain problems that could evolve out of Kazakhstan and out of Russia. They’re a great supplier, but it’s not enough. Then you layer in on top of all of those issues the Ku and Niger that happened a few months ago. And Niger only supplies about 4% of the world’s uranium. And you say, well, that’s not very much. That’s a pretty small percentage. But when you consider that the supply chain is already stressed and supply is not keeping up with demand, and you call into question 4% more, that creates a lot more nervousness in the market.
It’s not clear where that’s going to settle out at this point. Here in the US, we’ve seen increasing support in Congress and in the White House for nuclear power. I’m not going to read all of the bullets on this slide, but the top three bullets, those are successes that the industry has had with Congress in the last couple of years. The bottom three bullets are just some points on ongoing support. Most importantly, last week, middle of last week, we got approval from the Senate and a unanimous consent, Democrats and Republicans, to institute a ban on the import of Russian low-enriched uranium. The House had already voted in favor, again, unanimously, to put a ban in place to halt imports of uranium coming from Russia. I can’t think of anything else in the last few years where the Democrats and the Republicans have agreed unanimously in the House and in the Senate to do anything.
So I think this speaks to the desire to enhance nuclear output here in the US throughout the entire fuel cycle. That Bill is now moving to the President’s desk. We have every reason to believe that he will sign it. Once that is signed into law, it will take effect 90 days after signature. The ban will last until the year 2040. There is a waiver process through the end of 2027. So if a utility is unable to acquire low-enriched uranium, they can go to the Department of Energy and seek a waiver that would allow them to get Russian material into the country. That waiver process at this point is not very well defined, but we believe it will be stringent and will only be utilized under very limited circumstances. Going back to some of the projects we have, just a few more slides on Lost Creek and Shirley Basin that will get into some of the financials.
But the map here on the left, it does show the property that we hold in the Great Divide Basin. In blue is Lost Creek. That’s the area that is currently permitted. Been in production for over 10 years now and it has had incredibly good recovery rates, averaging 90% over 10 years. We’re also very proud of our royalty burden at both Lost Creek and at Shirley Basin. They both average less than 1%. I think we probably have some of the lowest royalty burdens in industry, and that really helps us out on the economics. The green area, we believe there’s good mineralization throughout those areas, we’ll continue to explore in those areas going forward. We are working on permitting LC East. We have two of the three major permits we need on that. We’re awaiting the third and final permit to bring LC East into the production of the portfolio.
But all of those areas in green they are within pipeline distance of the processing plant at Lost Creek. As I mentioned earlier, we do believe we have a lot of room to explore both laterally and vertically. So there are a number of geologic horizons that have had little to no exploration including, the KMLM and in horizons. So, we have a lot of room to explore going forward. I had indicated earlier that we have a history of being a low-cost producer, and I won’t go through all the numbers on the slide here, but I would call your attention to the year 2015. It’s highlighted in yellow. And you can see our production that year was pushing 800,000 pounds. So we had very good economies of scale. Our average cash cost that year, was a little over $16 a pound, which is outstanding.
We believe that we can get back not to those numbers, but not too terribly far off of those numbers, as we ramp up. Now that a C1 cash cost that does not include it all in cash number. But again, we believe we can get down to a very low cost going forward. So right now, we are ramping up commercial operations at Lost Creek. We’ve got four new header houses that are online and we expect to fill better house in May, and we expect to continue to speed up the rate of construction and bringing new areas into production throughout the summer. We’ve got two new deep disposal wells, and we’re finalizing the permitting on that, hope to have that up and running in the not-too-distant future. We are very aware of supply chain issues. They are very real.
We are ordering some equipment 12 to 18 months in advance, to make sure we’ve got it on the ground at Lost Creek, in a timely manner. We’ve been successful there, but we have to stay on top of that situation, because it can interfere with production, if we don’t stay on top of it. We are pleased that we’ve been able to keep some of our key staff out of the mine site. They’ve been incredibly helpful to us they’re important as we ramp up, they are training our new staff as they come online. We are now done with hiring. I’ve been very open public about the challenges, with hiring, its not been easy, but we do have our staff that we need. Going back to the green revolution. I’m not going to read everything on this slide. I’ll let you read that, but I do love the top bullet, the statistic is just amazing.
If you take a look at the pounds we will produce from Lost Creek and Shirley Basin and that energy output, if you compare that energy output to the — output from a coal-fired power plant, we will offset over 300 million metric tons of CO2. That’s the equivalent of taking 67.5 million cars off the road per year. We’re very proud of that. And as I’ve indicated, that’s an important component of nuclear energy and why the world is moving toward that. We have also been a leader in research and development. The top four bullets, they highlight some of the successes that we’ve had in the past. We have announced programs, R&D programs for a new type of well casing that we are working through the patenting process on. So we have protection on that.
And we’ve also announced an advanced water treatment and filtration R&D program. Both of those have been kind of held off a little bit as we ramp up. We simply don’t have the manpower to dedicate to those. We are excited about the opportunities they present and we will get back to them in the not-too-distant future, as we work our way through ramp-up. R&D is difficult. We can’t be sure what the outcomes are, but we’re optimistic that we’ll have some good developments there that will reduce costs and at the same time, improve our environmental footprint. So looking at financial highlights as of the 2nd of this month, we had $52.9 million in cash. We are now debt-free. We have six long-term contracts that we’ve put in place. I list those out there.
For this year, we need to deliver 570,000 pounds into those contracts. Keep in mind, that our current mine capacity is 1.2 billion pounds per year, and we expect that to increase to 2.2 million pounds a year, as we get Shirley Basin built out and put into production. We also have a little bit of income that comes in from our interest, as well as disposal fees out of the Shirley Basin. So, here’s our market position. So we’ve had some very good volume days here lately, as interest grows and in Ur-Energy in the nuclear space, we’ve been trading over 3 million shares a day, for the last couple of three days. It’s been substantially greater than that. So we’ve got great liquidity of price. We see upward pressure here over the last few days. Very pleased, and really want to highlight this on the slide.
We believe we have some of the most sophisticated investors in the uranium mining space. These are companies that research daily and have tremendous expertise in the uranium market. They know it better than most. And so companies like Lloyd’s Harbor, which is a participation [indiscernible] Some of the ETFs, are significant shareholders and I think it speaks really well to the value our company presents. We are well over 50% institutional held at this point back to one point, I think we reach 62% institutional. We’ve retreated off of that just slightly, but very pleased with our share registry. We also have great analyst coverage, these are some of the biggest names in the uranium space again, that cover off on the uranium miners. So we’re very pleased to have such good coverage.
So just closing here on the presentation, a few takeaways. We are well financed at this point. We’ve got some very good contracts in place and we’re beginning to experience revenue from those. We are continuing to see RFPs come in from utilities and we are going to continue to respond to those RFPs at increasing prices. The market is continuing to warm up, and as it gets warmer, we’re going to look to get higher and higher pricing. I’m going to reserve some comments on that to the end of the presentation here. I’ll speak more about our contracting philosophy. Certainly that is a question that we commonly get from investors. So I want to touch that in a little more detail here in a couple of minutes. So ramp up to commercial production is well underway.
We’ve got our core operational staff hired. They are getting more and more experience. We expect the production rate to continue to improve and increase throughout this year, as we move into commercial production. We believe that our ramp-up costs are going to be lower than most out there, other buildout stories and that certainly have been a part of our DNA that we are low cost. So there are a number of catalysts out there. I think investors need to be considering when they look at investing in the uranium miners and specifically Ur-Energy. First off, we do continue to see that uranium price move higher. So that is moving share prices along with it. But again, the world is moving toward green energy. That’s putting a lot of pressure. The suppliers are struggling to keep up with demand.
I don’t think that’s going to change in the near term. Maybe in the mid-term to long-term that will change, but it is going to take time for the miners to catch up with the demand. Geopolitics are putting a lot of pressure on supply and pricing, and the financial players have really jumped into, and they’ve been mopping up a lot of that mobile inventory. We believe there is very, very little mobile inventory out there at this point. With that, that includes the presentation, but I would like to take a couple of more minutes before I turn it over to Roger and Steve to talk about a couple of additional things in a little more detail, because we get a lot of questions on this, and that is the philosophy on marketing of pounds and contracting. How much are you going to hedge?
So I’d just like to take a few minutes to talk about it. So at this point, as we’ve discussed in the PowerPoint presentation, we’ve signed six long-term sales contracts for delivery of 5.72 million pounds of U308 from this year, 2024 through 2030. Plus, we have potential for a three-year extension on one of the contracts. Some of these contracts contain a flex provision of plus or minus 10%. The first three contracts that we signed were for the explicit purpose of protecting the company by ensuring revenue over the next several years. And each were signed at prices higher than the long-term prices prevailing at the time commercial terms were agreed to. Each of these contracts is well in the money for Lost Creek and Shirley Basin production.
Two of our recent contracts have significant pricing components with spot market-related collars. The floors keep us well in the money in declining market and the ceilings allow for upside potential in a rising market. We have a strong preference for this contract structure going forward. Our current contract book represents a little over 50% of our current licensed capacity, which leaves nearly 50% of our capacity for future long-term contracts. That 50%, I need to tell you what that’s measured against. That’s measured over the next six years of the contract book. So that’s where that 50% comes from. So this marketing strategy has worked well for us over the years. As evidence of that, I would encourage you to consider how revenues from long-term contracts we delivered into from 2014 to 2020 resulted in profits and dramatically minimized our need to dilute our shareholders via equity raises.
During that time period, many of our peers who didn’t have the benefit of a robust contract book had to complete large equity raises and at least one of our peers went bankrupt as a result of not hedging. At this point, it is not our intent to sell into the spot market. We prefer to dedicate any production in excess of our contract book toward building inventory. At some point in the future when production has been ramped to commercial levels at Lost Creek and Shirley Basin and we have comfortable inventory, we may consider selling into the spot market if and when it is advantageous, but not until then. I want to be clear that our marketing strategy is fluid and will change in response to our production, our prediction of future uranium demand, prices, and other factors.
However, in summary, our strategy will be to protect the company by dedicating a percentage of production into long-term contracts, while keeping significant powder dry to enjoy higher prices in the future and or market-related contracts with strong collar pricing. So we’ve been receiving a lot of questions about contracting, and I wanted to supply some insight into that. We’ve commented on this in our public disclosure, but hopefully this is helpful. Before I turn the mic over to our CFO, Roger Smith, to discuss the Q1 financial highlights, I want to take an opportunity to thank the state of Wyoming and Sweetwater County for their assistance with the Wyoming State Bond Loan. In 2014, the state, along with Sweetwater County, supported a $34 million loan that was instrumental in completing the ramp-up of production at Lost Creek.
I’m pleased to report that on March 27th, we made the final payment, and we are now debt free. At the time the loan is authorized and now Governor Mark Gordon was the state treasurer and played an integral role in finalizing the transaction. We truly appreciate the support the state and county has given us and we commit to remaining good stewards of the land. But we believe this demonstrates that Wyoming is a great place to be for uranium miners. So with that, Roger, I’ll turn it over to you if you if you don’t mind if you could touch on the highlights of Q1. I would appreciate it.
Roger Smith: Well thank you John and good morning everyone. Thank you for being with us. It has been a long time, but it is good to be back and have some production to talk about. So let me begin with production. During the quarter, we drummed 39,229 pounds after overcoming some equipment issues in Q4. This allowed us to make our first shipment of 35,445 pounds to the conversion facility in February. Our ending inventory at the conversion facility was 79,235 pounds on March 31st. As expected, the cost per pound at the conversion facility increased to $39 following the February shipment which came in at about $52 per pound. As production increases, we expect the cost per pound shipped through the conversion facility to decrease and the conversion facility cost per pound to also decrease.
In April, we made our second shipment and expect to make routine shipments throughout the year. Turning to cash. We ended the quarter with $53.9 million, which was down $5.8 million from December. During the quarter, we received $15.8 million from the exercise of warrants proceeds from ATM sales and interest income. We used $5.7 million of the funds for debt payments including the normal quarterly loan payment and in January the loan payoff in March as well. We are now debt free as John told you and that’s very fine. And I would also like to thank the treasurer and the state of Wyoming. They were so helpful during the process and very, very good to work with throughout. In addition to a small amount of capital expenditures, we spent about $2.6 million on production costs during the quarter.
Production Activities include well field operations, plant operations, site administration and product distribution. The cost capture from and ship uranium to the conversion facility are included in our production costs. Our cost per pound captured decreased during 2023 as we captured more pounds each quarter, ultimately capturing 68,448 pounds in 2023 Q4. Because of drying limitations in Q4 which we remedied in Q1, we were only able to capture 38,221 pounds and 2024 to one. With the drying limitations behind us, we are now able to capture and drummed more apparent through May 2 we drummed 29,497 pounds and we should see our cost per pound captured continue to decrease in Q2. We spent $14.7 million on operating costs during the quarter. Operating costs include exploration, evaluation, development and corporate overhead costs.
Development costs accounted for $12 million of the $15 million in operating costs. Including the development costs, we spent $3.5 million on the completion of a deep disposal well. The completion work was finished in Q1 and we are now in the process of obtaining the remaining regulatory approval. $7.9 million was for the development of the wellfield at Lost Creek. Wellfield development includes all of the cost in advance of wellfield operations such as drilling and drill related costs center our house construction costs and infrastructure costs. These costs are incurred in advance of production and are expensed as they’re incurred. As we continue to fill the wellfields at Lost Creek, these costs will continue, but will stabilize as production increases and we achieve a balance between wellfield development, wellfield operations and plants operator.
I will close with a few comments about sales. Sales are projected to be 570,000 pounds in 2024. Our first sale was in April for 75,000 pounds and the remaining sales will take place in the second half of the year. We expect to realize revenues of $33.1 million at an average price of about $58 per pound. 2024 sales deliveries are into base escalated contracts that were negotiated in 2022 and the long-term price was between $43 and $52 per pound. Those contracts enabled us to make the decision to ramp up operations at Lost Creek. Fast-forward today we are well into the ramp-up process and currently we have six active sales agreements in place. Pricing of our sales agreements is anticipated to be profitable on an all-in production cost basis after we reach targeted production rates.
We anticipate reaching those targeted production rates before year end. With that I’ll turn it back over to John. Thank you everybody.
John Cash: Thank you, Roger. Appreciate you running through the numbers with everyone. Steve, Steve Hatten our Chief Operating Officer. Steve if you could give us an update on operations.
Steve Hatten: Sure. Thanks John and thank you to everybody who is taking the time to join us today. We appreciate it. First, we are pleased to be one of the few publicly-traded companies that are actively and aggressively drilling, constructing, and commercially recovering uranium and expanding our production capacity to sell into a strengthening uranium market, especially given recent developments on the world stage. We’ll talk about Lost Creek. First ramp-up continues at Lost Creek with two additional Header Houses 2-6 and 2-7 coming online thus far in 2024. That’s four total since the decision to restart normal operations. While we have experienced some additional equipment and operational challenges, we are seeing more consistent drying and packaging with nearly 30,000 pounds drummed since quarter end through May 2nd as well as shipping 35,398 pounds and transferring 75,000 pounds to customers.
Primarily the issues reducing speed of ramp up are related to the challenging market for hiring and retaining personnel. This has been true in all phases of work at the site and has also been true for our contractors. In spite of difficulties with hiring, retaining, and training personnel, we continue to advance the project, albeit sometimes in a one step forward, two steps back manner. Regardless, occupational, regulatory, and environmental safety and compliance remain primary in everything we do. We also drilled an additional deep disposal well at Lost Creek starting in mid-2023 and following receipt of regulatory approvals, final completion work was finished in Q1 of 2024. We will now obtain remaining regulatory approvals followed by specification of surface injection equipment in advance of operation of the deep well procurement and installation of a power line with completed enabling anticipated operation in 2024.
Initial injection systems are already on site allowing for operation of the deep well soon after injection permits are received. Looking ahead, we have 12 drill rigs on site with at least one additional rig scheduled to commence work in early May. Drilling has advanced Header House 2-11 with completion work nearly finished in Header House 2-8. Fabrication of Header Houses 2-8 and 2-9 is complete and work on Header Houses to 2-10 and 2-11 is advancing in our Casper construction shop. Header House 2-8 is expected to come online in May. We expect 2024 production from Mine Unit 2 to be between 550,000 and 650,000 pounds. We also anticipate routine shipments from our Lost Creek mine to the conversion facility continued throughout the year. Next we’ll talk about Shirley Basin.
With our expanded sales contract book and encouraging market conditions, we were pleased to announce our decision in the first quarter of 2024 to proceed with the build-out of a satellite facility at our wholly-owned fully-permitted and licensed Shirley Basin project in Carbon County, Wyoming. The decision will nearly double our annual permitted mine production to 2.2 million pounds of U3O8. The satellite plant will be a relatively low-cost facility consisting of ion-exchange, wastewater, and groundwater restoration circuits. The ion exchange at Shirley Basin will be loaded with uranium from the mine and ship to our Lost Creek facility for processing before being recycled back into operations at Shirley Basin. This satellite approach will help minimize initial facility capital cost to approximately $24.5 million and pre-operational wellfield development costs to $16.3 million.
The satellite plant will be designed with a flow rate of up to 6,000 gallons per minute and capacity to produce up to 1 million pounds of U3O8 per year. Our permits and license allow for the construction of the elution, precipitation, and drying circuits should it become economically advantageous to do so. No amendments to the existing permits or licenses would be required to do that. The estimated time to finalize designs, order materials, and construct the satellite plant and initial wellfield recovery area is approximately 24 months. Work has already been initiated on long-lead items, including detailed engineering and additional geologic pattern planning for the wellfield. Planning has been completed for the monitor well ring for the first mine unit, with plans to install approximately 120 wells in 2024 Q’s two and three.
We have already mobilized rigs to that effort and people are working on that as well. This installation will enable hydrologic testing, baseline water quality analyses to proceed prior to the start of installation of production patterns in mid-2025. Significantly, the bid process and award for the fabrication of IX columns has been completed. This procurement represents one of the longest lead items within the facility. Major construction activities are expected to begin in 2025 and initial production is expected to commence in 2026. Thanks for your time. John, back to you.
A – John Cash: All right. Thank you, Steve. I really appreciate the operations update. At this point, we’ll jump into Q&A. We do have a few minutes of time left over here. So very happy to be able to try to answer any questions you have.
A – John Cash: Penne, I’ll turn it over to you shortly, but I do have two questions that have been posed. And after I answer those, I’ll turn it over to you to see what other questions we have. The first question I believe Steve has already spoken to, but it asks could you speak to how you see production advancing through 2024 to meet annual guidance. Again, Steve addressed this, but a few weeks ago we put out a press release. So we did slightly very slightly downgrade our production forecast for this year about 100,000 pounds. Now we’re looking at around 550,000 to 650,000 pounds of production this year. That’s right in line with what we need to fill our contract book for this year and we’re very optimistic and we’re working hard on a day-to-day basis to be able to meet that production going forward.
And Steve, I think gave us a really good presentation on the activities that are going on for us to be able to meet that production for this year. So, we’re targeting right at around 600,000 pounds of production this year to fill our contract book. The second question is talking about the share performance comparing that to our peers. I just would like to point out that I just did a quick look here on Yahoo Finance. Our share price is up 89.4% over the last year. I think that’s outstanding. Wish I got that on my 401 K, I would have retired many, many years ago. But having said that sometimes people ask me well how come you’re not doing as well against this stock or that stock? It’s not an uncommon question that we get. So our performance has been very good but I would ask who are our peers who is in production that you can compare against.
And I think it’s difficult to compare a producer against a more promotional story that perhaps and most likely is not in production, right now in the US and globally the number of junior mining companies that are in production, you can literally count it on one hand don’t even need all your fingers to do that. So I would question, who are the peers but very proud of our performance. And I can assure everyone on the call that every day we are looking for ways to improve production, lower cost, higher contracts to be able to boost that share price. At the same time we’re going to continue to be a very transparent story. I think we always have been we always will be that’s how the Company was founded and how we’re going to continue to run that.
So with that Penny, I’ll turn it over to you to see if there are any additional questions from the listeners?
Penne Goplerud: Thank you, John. There are no other questions on the webcast, but I believe that our operator has some folks standing by with questions.
John Cash: Okay. Thank you. Ali, if you can give us the questions, we’d appreciate it.
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