Uranium Resources’ Merger with Anatolia Energy a Clear Winner

Are you able to provide readers with a pro-forma capital structure?

We expect to issue about 20.5 million shares to Anatolia shareholders, who will own 41% of the combined URI. Our existing shareholders will own 59%. On a pro-forma basis, we expect to have 51.3 million basic shares outstanding and 64.9 million fully-diluted shares post merger. URI’s stock options and 2.2 million warrants at an exercise price of $2.00 are not presently in the money.

With the proposed moving of a processing plant to Turkey, would that be a high-risk undertaking? 

As announced, we expect savings totaling up to $11 million to reduce the estimated start-up cap-ex for the Temrezli Project in Turkey. Of the $11 million, we expect to save $8 million by relocating our Rosita processing plant and $3 million in Engineering, Procurement and Construction savings by using in-house expertise. A rebuild would take about the same time as new construction.

The Rosita plant design was submitted by Anatolia as part of its environmental permitting process for Temrezli. This project already has its operating license but needs to secure environmental and construction permits to begin building. Rosita is a perfect fit. It was designed and built using proven processing methods, and a design capacity of 800,000 pounds per year. The plant was designed for expansion to double capacity cost-effectively with incremental capital expenditures.

Assuming the merger closes, why sell pounds out of Turkey’s Temrezli, even if profitable, at such a low uranium price? 

Good question Peter, long-term contracts would be possible and we are seeing interest. Anatolia’s CEO Paul Cronin and I met with prospective customers and investors in Hong Kong and Australia during a recent trip. Paul is having preliminary discussions with utilities for off-take agreements. Utilities are increasingly interested in evaluating long-term agreements with lower-cost projects located in stable jurisdictions.

We keep on top of what analysts and consultants like UxC project regarding the impending shortfall in uranium supply as nuclear generation expands globally in China, India and elsewhere. Many analysts anticipate a uranium deficit between 2017 and 2021, which would strengthen uranium prices in line with uranium market fundamentals.

Subject to the timely receipt of permits, Anatolia’s Pre-Feasibility Study projects full production for Temrezli in 2017. While the timing of permits could slip, Temrezli is Turkey’s first uranium mine being permitted and will be held to the same high standards seen in the U.S. and Europe.

Peter, you are correct that uranium prices in the mid $30s are quite low by historical standards. However, when we look at a long-term price of $44-$45 per pound, Turkey’s Temrezli would generate a solid margin even at these price levels. Temrezli is in the lowest cost quartile. This project has all-in sustaining costs of roughly $30 per pound, allowing it to operate profitably at very low prices. Like most emerging uranium companies, we believe that uranium prices will rebound in 2016 or 2017, coinciding with the commencement of our pipeline of projects.