Ur-Energy (TSX: URE; NYSE-MKT: URG) is getting the production numbers it expected as it ramps up its Lost Creek uranium project towards commercial production, but water issues at the facility have caused concern.
The company reported first-quarter results from the in-situ recovery uranium facility in south-central Wyoming and showed 171,200 lb. uranium oxide (U3O8) output, which was up over 30% from the same period last year. From that total the company sold 110,000 lb. (up from 90,000 lb. in first-quarter 2013) at an average US$61.12 lb. — which is impressive, considering the spot price for uranium stands at just US$32.50 per lb.
Plant head grades of 179 mg per litre also came in higher than expected.
But there are some concerns at the site. Chief among them are waste water management and deep disposal-well performance issues.
The impact these issues could have on production had Haywood Securities analyst Colin Healey lowering his rating for the stock to a “hold” from a “buy,” and cutting his price target by 20¢ to $1.90.
The deep-disposal wells can’t accept all of the waste water generated from the process plant and from the well-field bleed.
Ur-Energy addressed these concerns at the U.S. Nuclear Regulatory Commission (NRC) regarding its two holding ponds at Lost Creek going over their limits, as outlined in its NRC licence.
To correct the issue and comply with the licence, production flow rates were cut by 35% of the first-quarter average in early April. The move freed up disposal capacity at the deep-disposal wells and helped the company reduce levels in the ponds.
Going forward, Healey is optimistic that the company can reach a more sustainable solution.
“Ur-Energy has viable options to address these issues in the mid-term, as up to three more deep-disposal wells are permitted at Lost Creek, and could be added as needed for an estimated $4 million to $5 million each,” Healey wrote.
Ur-Energy has said little about the waste water management issues, but expects to reach more routine production levels by the end of April.
On April 24 the company’s stock traded for $1.46, off 2% from the previous day’s close on 306,000 shares traded.
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