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Lost Creek

 

On August 2, 2013, the Company began production activities at its Lost Creek Project.  Innovative design and development have focused on employee and environmental safety, water management practices, and advanced instrumentation monitoring and data capture.  First sales of Lost Creek yellowcake were made in December 2013 and during the second quarter of 2015, Lost Creek achieved the milestone of producing its one millionth pound of U3O8 since production activities began.

2016 Q4 Lost Creek Project Operations

For the quarter, 103,558 pounds of U3O8 were captured within the Lost Creek plant; 111,049 pounds U3O8 were packaged in drums; and 98,775 pounds U3O8 of drummed inventory were shipped from the Lost Creek processing plant to the converter. Production was controlled at lower levels as the market remained depressed and contract commitments were largely met earlier in the year. At December 31, inventory at the conversion facility was approximately 84,689 pounds U3O8.  

Contract sales for the quarter from Lost Creek-produced U3O8 totaled 100,000 pounds at an average price of $32.70 per pound, for sales revenues of $3.3 million. No spot sales were made during the quarter due to the continuing low spot price environment. For the year, we had 662,000 pounds U3O8 under contract at an average price of $47.61.  200,000 of the contracted U3O8 pounds were assigned to a third party in 2016 Q1. The Company recognized $2.6 million in deferred revenue from the first half of the assignment transaction in 2016 Q3.  The Company will recognize an additional $2.5 million of deferred revenue from the second half of the assignment transaction in 2016 Q4. Excluding the assignment transaction, the Company sold 562,000 pounds U3O8 from Lost Creek production at an average price of $39.49 per pound, which includes 462,000 pounds from contract sales and 100,000 pounds of spot sales. This concludes the third calendar year with consecutive quarterly sales since operations began at Lost Creek in August 2013.

 

 

Lost Creek Operations 

 

Units

2016 Q1

 

2016 Q2

 

2016 Q3

 

2016 Q4

 

2016

 

 

 

 

 

 

 

 

 

 

 

U3O8 Captured

(‘000 lbs)

159.3

 

133.3

 

 

141.8

 

 

103.6

 

 

538.0

U3O8 Dried & Drummed

(‘000 lbs)

173.8

 

130.3

 

145.9

 

111.1

 

561.1

U3O8 Sold

(from production)

(‘000 lbs)

75.0

 

187.0

 

200.0

 

100.0

 

562.0

 

 

 

 

 

 

 

 

 

 

 

Average Flow Rate

(gpm)

1,853

 

2,210

 

2,469

 

2,559

 

2,274

U3O8 Head Grade

(mg/l)

82

 

58

 

55

 

39

 

58

 

In 2016 Q4, production continued to be sourced from 13 header houses in the first mine unit. During 2016, only one header house (HH13) was brought online. Following its commissioning, staff initiated refinements to other header houses and production processes based upon results at HH13. After more than three years of operations, the first mine unit still produced a yearly average head grade of 58 ppm. However, the head grade during Q4 averaged 39 ppm. The lower head grade during this period of operation, as well as varying month-to-month grades, is a typical result as the mine matures and older operating patterns remain in the flow regime.

The final operational approvals for Underground Injection Control (UIC) Class V wells at Lost Creek were received during the quarter, following pre-operational testing. These approvals and final pre-commissioning refinements of the system allow for the onsite disposal of fresh permeate (i.e., clean water) into Class V wells.  Site operators will use the reverse osmosis circuits, which were installed during initial construction of the plant, to treat process waste water into brine and permeate streams. The brine stream will continue to be disposed of in the UIC Class I deep wells while the clean, permeate stream will be injected into the UIC Class V wells. It is expected that these operational procedures, which are currently being commissioned, will significantly enhance waste water disposal capacity at the site and allow wellfield flow rates to be increased. 

Lost Creek Property Resource Estimate

The Lost Creek Property represents the composite of six individual contiguous Projects: Lost Creek Project, LC East Project, LC West Project, LC North Project, LC South Project and EN Project. The fully-licensed and operating Lost Creek Project is considered the core project while the others are collectively referred to as the Adjoining Projects. The Adjoining Projects were acquired by the Company as exploration targets to provide resources supplemental to those recognized at the Lost Creek Project. Most were initially viewed as stand-alone projects, but expanded over time such that collectively they represent a contiguous block of land along with the Lost Creek Project.

An amended preliminary economic assessment (PEA) was issued on February 8, 2016.  The current mineral resource estimate for the Lost Creek Property, after subtracting 1.358 million pounds of uranium produced from MU1 through September 30, 2015, is 13.251 million pounds in the Measured and Indicated categories, and 6.439 million pounds in the Inferred category. The current resource estimate represents a net increase to all Lost Creek Property projects of:

  • 3.146 million pounds eU3O8 in the Measured and Indicated categories (after adjustment for MU1 production), or 31% increase when compared with the previous resource estimate in the June 17, 2015 Technical Report; and
  • 1.402 million pounds eU3O8 in the Inferred category, or a 28% increase to the last mineral resource. 

The economic analyses within the amended PEA continue to demonstrate the potential economic viability of the project.  The analyses have been revised to evaluate the impact of additional identified resources with information and data acquired through two years of ISR operations at Lost Creek. Total future life of mine production is modeled to be 13.8 million pounds and with production operations ending in 2031. This represents a nine year life of mine extension from the forecast contained in the previous PEA dated December 30, 2013.

Cautionary Note to U.S. Investors:  The terms “mineral resource,” “measured mineral resource,” “indicated mineral resource,” and “inferred mineral resource” as used in this news release are Canadian mining terms that are defined in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). These Canadian terms are not defined terms under United States Securities and Exchange Commission (“SEC”) Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC by U.S. registered companies.  The SEC permits U.S. companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. Accordingly, note that information contained in this news release describing the Company’s “mineral resources” is not directly comparable to information made public by U.S. companies subject to reporting requirements under U.S. securities laws.  U.S. investors are cautioned not to assume that any part or all of the mineral resources in these categories will ever be converted into Mineral Reserves.  U.S. investors are urged to consider closely the disclosure in our Form 10-K which may be secured from us, or online at http://www.sec.gov/edgar.shtml

Cautionary Statement: This Amended Preliminary Economic Assessment is preliminary in nature, and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is increased risk and uncertainty to commencing and conducting production without established mineral reserves that may result in economic and technical failure which may adversely impact future profitability. The estimated mineral recovery used in this Amended Preliminary Economic Assessment is based on recovery data from wellfield operations to date, as well as Ur-Energy personnel and industry experience at similar facilities. There can be no assurance that recovery at this level will be achieved.

 

Mr. James Bonner, Vice President Geology with Ur-Energy, C.P.G., American Institute of Professional Geologists and a Qualified Person as defined by NI 43-101, has reviewed and approved the technical disclosure contained on this webpage.

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