Uranium Producer Ramps Up Production for the US Market

• Ur-Energy has two flagship properties.
• The company has secured a contract to sell uranium at approximately $64 per pound and has raised $40 million. They aim for a commercial restart of Lost Creek in May 2023.
• A "header house" is a facility with two manifolds: one serving injection wells and the other serving production wells.
• Ur-Energy also has the Shirley Basin project, which is fully permitted. It is expected to have a slightly lower cost of production than Lost Creek, with an estimated capital expenditure of around $35 million for its development.
• Ur-Energy is in discussions with potential buyers from the US, Europe, and Asia for uranium contracts.
• The company sees a bifurcated market with potential for higher contract prices, and they are also interested in acquiring quality projects in the future.

Ur-Energy is an undervalued uranium mining company with significant potential for growth. The company operates two low-cost in-situ uranium projects in Wyoming, USA, and is currently ramping up production to fulfill long-term supply contracts at profitable prices. Ur-Energy's strong operational track record, clean balance sheet, and strategic US-based assets position it attractively to benefit from rising uranium prices amid tightening global supply dynamics.

Ramping up Production at Flagship Lost Creek Mine

Lost Creek is Ur-Energy's flagship in-situ uranium mine, located in the Great Divide Basin of Wyoming, which has been in production since 2013. The mine has a licensed annual production capacity of 1.2 million pounds U3O8, of which only 50% is currently contracted, leaving room for significant expansion.

Ur-Energy halted production at Lost Creek in 2020 due to low uranium prices but is now ramping up again to fulfill two long-term supply contracts secured in 2021 totalling 600,000 lb per year, at a price above $60/lb. The contracts represent over $200 million in revenue for Ur-Energy over a 6-year period starting in 2023, providing the company with clear cash flow visibility.

The company brought the next production area, Header House 2-4, online in Q2 2022. Installation of the pipelines connecting Header House 2-5 is underway, with production from this area expected to commence in the coming weeks. The sequential addition of these two header houses is anticipated to effectively double Lost Creek's production capacity.

According to CEO John Cash, bringing the two new header houses online will increase production to a rate of 600,000 lb per year, the level required to fulfill Ur-Energy's existing long-term contracts from 2023 onward. Further increasing production above this level is achievable and would allow the company to supply additional long-term contracts, which Ur-Energy continues to negotiate in the favourable uranium pricing environment.

Ur-Energy has demonstrated Lost Creek's potential for low-cost production of as low as $16/lb during previous years, owing to economies of scale. While inflationary pressures may add $2-4/lb to costs looking ahead, Lost Creek is still set to remain one of the industry's lowest-cost producers. Critically, with infrastructure like roads and power lines already in place, Lost Creek requires minimal further capital to expand production.

Advancing the Shirley Basin Project

Ur-Energy's second major project, Shirley Basin, is fully permitted and construction-ready, providing the company with clear visibility on its next phase of growth. Located a short distance from Lost Creek, Shirley Basin is an 8.8 million pounds in-situ uranium deposit amenable to low-cost ISR mining.

The project benefits from strong existing infrastructure like roads, power lines and buildings left by previous operators. An initial capital outlay of around $35 million would be required to construct a satellite plant and first header houses and ramp up to commercial production rates of several hundred thousand pounds per year.

The company has already completed detailed engineering, hydrological testing and assays, providing confidence in the project's characteristics. Ur-Energy can leverage the experience from Lost Creek's design to fast-track Shirley Basin's development timeline once the go-ahead is given.

Like at Lost Creek, the decision to start construction at Shirley Basin hinges on securing sufficient long-term contracts that justify production. The company is currently engaged in advanced contracting discussions with major utilities. Given the declining global primary supply, it aims to bring Shirley Basin online within 18-24 months of a construction decision, providing Ur-Energy with a clear second phase of low-cost production growth.

Capitalizing on Favorable Uranium Market Dynamics

After a prolonged downturn, uranium markets have shown definitive signs of recovering over the past year. This is being driven by a widening supply-demand imbalance, with analyst estimates pointing to a 10-20 million lb annual deficit opening up from 2023 onward.

On the demand side, nuclear energy and uranium demand have seen a resurgence around the world, with major economies like the US, UK and others targeting large-scale nuclear capacity expansions to meet decarbonization objectives. Global identified uranium requirements are projected to rise around 40% by 2030.

However, years of low prices have stunted investment on the supply-side. 2021 saw the lowest level of global uranium production in over 15 years. Existing mines are depleting their reserves, and widespread project deferrals leave a dearth of new mines ready to be brought online. This sets the scene for large production-demand imbalances and upward price pressure as uncovered utility requirements grow.

While the uranium spot price remains around $50/lb, higher-priced long-term contracts are emerging, as utilities seek to lock in secure supply. As a proven producer in a premier US jurisdiction, Ur-Energy is capitalizing on its competitive advantages. It has already secured six-year contracts for its ramping up Lost Creek production at over $60/lb with major utilities.

Further upside from rising uranium prices will accrue as Ur-Energy brings its low-cost capacity online into an increasingly supply-constrained market. CEO Cash expects the company's realized sales prices to continue rising amid the bifurcation between spot and contract markets emerging. As larger production volumes are achieved, Ur-Energy stands to benefit from substantial operating leverage.

Strategic executor in strengthening uranium bull cycle

In summary, Ur-Energy is an under-the-radar uranium producer strategically positioning itself to create shareholder value as the uranium bull market accelerates. As Lost Creek's production doubles in the coming months, the company will be on track to deliver rising production into its contracted volumes at profitable prices. The incremental ramp-up of low-cost production allows Ur-Energy to capture early gains from a rising uranium price environment. Expansion plans are de-risked, with Shirley Basin ready to extend the growth pipeline once contracted. The asset portfolio's US domicile provides security and geopolitical stability coveted by utilities.

Meanwhile, the company maintains a strong balance sheet with over $70 million in cash and nearly 250,000 lbs of finished inventory providing flexibility. This positions it well to continue executing its strategy. At the current market capitalization of around $160 million, Ur-Energy trades a fraction of its net asset value, presenting significant upside potential as the uranium market tightens. With high barriers to new global supply, existing profitable producers like Ur-Energy stand ready to benefit.

The Investment Thesis for Ur-Energy

Strong operations and growth potential: Ur-Energy has an impressive track record of low-cost production at its flagship Lost Creek mine. It is now rapidly scaling up production at Lost Creek, with installed capacity to potentially double output. This demonstrates strong operational execution and positions the company to benefit from rising uranium prices. Ur-Energy also holds a second fully-permitted project, Shirley Basin, providing investors with a clear growth pipeline.

Favorable market outlook: Global uranium demand is strengthening considerably as nuclear power sees a renaissance. However, years of low prices have curtailed supply-side investment. This is setting the scene for large production deficits and upward price pressure as demand outpaces supply. As an existing producer, Ur-Energy stands ready to capitalize on higher prices as the market tightens.

Profitable long-term contracts: Unlike uranium spot prices still around $50/lb, Ur-Energy has already secured long-term contracts for its ramping up production at over $60/lb with major utilities. This provides cash flow visibility through 2029. Further contracts carry the potential for added high-margin revenues as the company expands production.

Strong fundamentals: Ur-Energy has a clean balance sheet with minimal debt and over $70 million in cash. Its assets are located in the safe, stable mining jurisdiction of Wyoming. This limits operational/geopolitical risks relative to peers. The company is undervalued trading at a fraction of its net asset value.

Ur-Energy presents an attractive investment opportunity with growing low-cost production, contracted volumes at profitable prices, an expansion pipeline, and upside exposure to a strengthening uranium market. As the bull cycle accelerates, Ur-Energy looks poised to generate substantial shareholder value.

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