U.S. Uranium Producer Targets 2.2Mlb Output as Nuclear Demand Surges

• Ur-Energy is the largest uranium miner in the US with one active mine (Lost Creek) and a second mine (Shirley Basin) under construction
• The company is well-positioned for growth as it ramps up production at Lost Creek and begins production at Shirley Basin in late 2025
• Ur-Energy has an experienced management team that has worked together for 18 years and understands the risks and challenges of the uranium industry
• The company has secured several long-term supply contracts at attractive prices and sees potential for uranium prices to rise to $90-100/lb to incentivize new production
• Potential catalysts include supportive government policies under the Trump administration, growing demand from nuclear utilities, and tightening supply as Kazakh uranium is increasingly directed to Russia/China

The global uranium market appears poised for robust growth in the coming years, driven by increasing demand for carbon-free baseload power generation and tightening supply. One company well-positioned to capitalize on this opportunity is Ur-Energy (NYSE: URG), the largest uranium producer in the United States. It has an established operating asset, an advanced development project, an experienced management team, and several long-term contracts already in place.

Largest U.S. Uranium Producer 

Ur-Energy currently operates the Lost Creek in-situ recovery (ISR) uranium facility in Wyoming, which has been the largest uranium mine in the U.S. over the last four quarters according to the EIA. Lost Creek is licensed to produce 1.2 million pounds of U3O8 per year and the company is implementing a strategy to ramp up to its licensed capacity. Ur-Energy Chairman, President and CEO John Cash stated:

"Certainly one of the challenges we faced going into the year was getting enough drill rigs. Right now we've got 20 drill rigs, and within a few days,I believe we’ll have 21 drill rigs turning out at Lost Creek."

This demonstrates that Ur-Energy is aggressively investing to expand production and solidify its position as the top U.S. uranium miner. The company's ability to secure necessary equipment and skilled labor in a tight market should enable it to deliver on its growth objectives.

Advanced Development Asset Nears Production 

In addition to Lost Creek, Ur-Energy is constructing its Shirley Basin ISR uranium project in Wyoming, with initial production expected in late 2025 or early 2026. Shirley Basin will add another one million pounds per year of production capacity, doubling the company's output.

Commenting on the project, Cash said:

"Shirley Basin is fully licensed, permitted, ready to go. 1 million pounds per year. If we ever decide to build out the back end of the plant there, we can do it at 2 million pounds a year fully licensed and permitted ready to go. So that'll take our full company production, from those two facilities, up to a maximum of 2.2 million pounds per year."

Shirley Basin is a significant growth driver for Ur-Energy that will come online just as the global uranium market is projected to shift into a supply deficit. The low-cost scalability of the project provides options for Ur-Energy to grow production beyond 2.2 million pounds per year should market conditions warrant.

Interview with Chairman, President & CEO, John Cash

Attractive Cost Structure 

Ur-Energy has historically ranked as one of the lowest cost uranium producers globally, with cash costs in the $16-17/lb range and all-in sustaining costs in the mid-$40s/lb. These costs are expected to remain very competitive going forward. Cash explained:

"Great cost structures at Lost Creek and Shirley Basin. Historically, we've been a very low-cost producer with cash costs of $16 to $17 per pound. When you include all development costs, we've been in the mid-$40s. Going forward, we expect Lost Creek's all-in costs to be in the $45-50 range. Shirley Basin will be slightly more expensive since it's a smaller mine - potentially just above $50 per pound all-in costs.

With current spot uranium prices around $70/lb and term prices in the $80s/lb, Ur-Energy is generating strong margins and free cash flow. This provides the company financial flexibility to invest in growth while maintaining a healthy balance sheet. At the end of the September 2024 quarter, Ur-Energy had $110 million of unrestricted cash.

Experienced Leadership Team 

Navigating the complexities of the uranium industry requires a management team with deep operational expertise and experience managing risks. Ur-Energy benefits from a seasoned leadership group that has worked together for nearly two decades.

"Our Senior Management and our executive team, we've all been working together for 18 years now. Many of us have been in the uranium industry for 30-35 years."

This continuity of leadership and experience dealing with previous uranium cycles positions Ur-Energy to allocate capital efficiently and adapt to evolving market conditions. The company's track record of achieving production and cost guidance is a testament to the strength of its management.

Long-Term Contracts Secure Revenue 

Ur-Energy has signed several long-term uranium supply contracts with U.S. and European utilities at prices in the $60s/lb escalating to the $80s/lb. These contracts will provide a stable revenue foundation as Ur-Energy increases production volumes. Cash noted:

"We've got a lot of contracts signed up. It represents a little over half of our production capacity for the next few years, we've left some room in our book for sales to DoE or other high-priced contracts. We're moving more and more toward that hybrid model where we combine the two. It gives our investors some exposure to the blue sky, so when the uranium price pops, we enjoy that as well going forward."

By blending term and spot contracts, Ur-Energy aims to achieve revenue and cash flow stability while maintaining exposure to higher uranium prices. This strategy is well-suited for a market facing constrained supply and rising demand.

Uranium Prices Poised to Increase 

Long-term fundamentals remain very bullish for uranium prices. Demand growth is expected to outpace supply over the next decade as new nuclear reactors come online globally and utilities return to the term market to secure future supply.

At the same time, uranium production has been slow to respond to improving market dynamics due to years of underinvestment, technical challenges, and rising geopolitical risks around key supply sources. In this environment, uranium prices will likely need to increase further to incentivize the development of new capacity.

While uranium prices are notoriously volatile, the structural supply deficit facing the industry points to the need for meaningfully higher sustainable prices. Ur-Energy is well positioned to capitalize as one of the few producers with immediate scalable production capacity in a stable U.S. jurisdiction.

The Investment Thesis for Ur-Energy

• Largest U.S. uranium producer ramping up production at Lost Creek
• Expects to double production with Shirley Basin project online in late 2025
• Long-term contracts in place lock in sales at $60s-$80s/lb
• Low all-in sustaining costs of $45-50/lb create healthy margins
• 18-year continuity of experienced management reduces operational risks
• Debt-free balance sheet and $110 million cash provide financial flexibility
• Leveraged exposure to strengthening uranium market fundamentals
• Potential to grow resources through low-cost exploration
• Aim to return capital to shareholders through buybacks and/or dividends

Macro Thematic Analysis

The global uranium industry appears to be at an inflection point, with the supply/demand balance forecast to tighten considerably over the next decade. Demand is expected to grow robustly, driven by an acceleration in new nuclear reactor builds and restarts of idled capacity as countries seek reliable carbon-free baseload energy.

At the same time, global uranium production has been slow to respond to improving market dynamics after a prolonged period of depressed prices. Years of underinvestment in the industry combined with technical challenges, geopolitical risks, and increasingly stringent ESG considerations have constrained primary supply.

In this environment, analysts forecast the uranium market shifting into a structural supply deficit. This means uranium prices will need to increase significantly to incentivize enough new production to meet rapidly growing reactor requirements. For investors, uranium miners with established, low-cost production in stable jurisdictions like Ur-Energy should be well-positioned to outperform against this bullish backdrop.