Ur-Energy Inc. (URG) Q2 2016 Earnings Report, Transcript and Summary

Good day, and welcome to the Ur-Energy Second Quarter 2016 Conference Call and Webcast. All participants will be in listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ms. Penne Goplerud as General Counsel and Corporate Secretary. Ms. Goplerud, the floor is yours, ma'am.

Thank you, Mike, and thank you, all, for joining us today for our Second Quarter 2016 teleconference and webcast. We are required to draw the attention of all of our participants to the legal disclaimers contained in this morning's slide presentation, which apply equally to our oral presentation today. At Slide 2, you will find legal disclaimers with regard to forward-looking statements, risk factors and projections, as well as other cautionary notes to U.S. investors. We ask that you read and consider these disclaimers carefully before investing in our shares. As well, risk factors inherent in forward-looking statements and projections are set forth and discussed in the Company's Annual Report on Form 10-K, filed on February 26, 2016, with U.S. Securities and Exchange on EDGAR and with securities regulatory authorities in Canada on SEDAR. I would like to now introduce and turn the webcast presentation over to our Chair and Executive Director, Jeff Klenda.

Great, thank you very much Penne, and I, too, would like to extend a greeting. Good morning to all of you for joining us today. It has continued to be a very challenging time in the Uranium space. I think we all recognized that and while our company has continued to adjust and adapt to these challenging market conditions, we've nonetheless really have what I would consider to be very much a business-as-usual quarter. It certainly had its ups and downs, but overall we're very pleased with our performance. Unfortunately what we saw in this last second quarter was a continued drop in pricing where we did see another $4 drop in spot pricing quarter-over-quarter. At some point I hope that we will be able to stem that flow and actually see a reversal in momentum for the underlying spot price. But while we continue to perform well as a company in the industry itself, continues to be characterized by elevated inventories, limited demand and oversupply. Of course I won't go into detail on this, but there are a number of contributing factors that are aiding this. One of those is of course the delays and the restarts coming out of Japan, also because of very low interest rates. The carry trade is in full swing and of course that is contributing to the underfeeding and we also have large global inventories in places like Japan and others where we know that they reside around the globe. But in addition to that, one of the things that I think has been a more recent development over the last couple of years and that has been the unrestricted and unfortunately unrelenting dumping that is taking place primarily coming out of area places like Kazakhstan that are hurting our pricing at the margins. With that said, I think that what I would like to do throughout this morning's webcast is point out to you the changes that we as a company are making and the things that we are doing to adapt in this marketplace; but then close out with what I consider to be some silver linings, because I do think that there are some very positive things that are taking place in the industry. With that, let's go ahead and kick off the webcast and start in. You should be on Slide 3 right now. Of course these are Ur-Energy's priorities as a company. You've seen this slide before last year. We had excellent results to our efforts to expand resources. In the aggregate for the year, we grew the resources by 6.3 million lbs, 4.6 million lbs in the measured and indicated category and 1.7 million lbs in the inferred resources category. But in addition to that, this year in 2016, our resource development will be primarily realizing and our growth in resources will be primarily realized through the development of Mine Unit 2. I'll go into that in more detail in just a few minutes, but the following bullet point is one that is very important to all of us and that is that we have consistently made it our objective to realize better prices through long-term sales agreements, particularly with U.S. utilities and that continues to be the case. I'll have more details with respect to that initiative as well. Steve Hatten will be joining me on the call this morning and he will take you through our production results for the quarter, but I think that it's very important to emphasize that to-date, we have nearly 1.9 million lbs that have been produced out of Lost Creek Mine Unit 1 and we do expect to eclipse the 2 million lbs mark before the end of 2016. I think that's nothing short of amazing. We are now on our 12th quarter of production out of Mine Unit 1 and it looks as though – this forward-looking statement, much depending to dismay, I'm prone to making these forward-looking statements – but we firmly believe that we can see a good four to four and-a-half years and perhaps more of production out of the first Mine Unit alone, which that is nothing less that astounding when you're talking about institute recovery. Finally, our next project, Pathfinder continues to move along in the permitting process. Our applications are moving through the system and one of the things that I like to emphasize here is that this is a relatively low-cost of production, excuse me, low costs of permitting and it will continue to be the case as we move forward full permitting on Shirley basin and we are expecting that to come on some time in the 2018-2019 timeline. Moving forward Ur-Energy's current market position, there are a couple of things I'd like to point out on this slide, but first would be in the upper left-hand corner under Share Capital & Cash Position, you'll notice that we have flip-noted this week, finished the quarter with quite anemic $700,000 in the corporate accounts, but please notice that we flip-noted that and before the end of this week, we will bring in nearly $9 million in revenues from contractual sales that will settle before the end of this week. In addition to that, as you go over on the right-hand side and look at the performance of the stock on both New York and Toronto stock exchanges, you will notice that in the beginning of June, there was a tremendous spike in both volume and in price. What we saw there was buying that was coming in from a very specific area – frankly it was coming in from Hong Kong – but one of the things that makes this very notable is that during a five-day period of time, we actually turned over 13% of our shareholder base. We traded at that time roughly 38% of our total volume year-to-date and the stock moved up a little over 60%. It surged to demonstrate one of the things that I've been emphasizing for the last couple of years and that is that when the turnaround takes place in the Uranium, I believe that it will be focused on a very limited number of players and in this case it was four producers or near-term producers and UPC, the Uranium Participation Corp. I think that that clearly demonstrated that that's going to continue the be the case and when we do see the turnaround, it's going to be concentrated on very few names. Finally, one of the things that I emphasized with this particular slide is that we will continue to be very protective of the capital structure during these down times. That is something that is probably represented the single greatest challenge to us, but we will be very stingy when it comes to the issuance of shares. Moving forward, this is another slide that is familiar to those of you who follow our company, but it's one that I think tells a very dramatic story and that is the increase in resource growth since Fukushima in March of 2011. We have grown our resource by more than 250% and I think that that is a testament to Lost Creek as a property. We have always maintained that as a very scalable property and I think this is just a tremendous job of illustrating this. This is a big of a forward-looking statement as well, but we firmly believe that over the years ahead, we will continue to grow this resource and that there is a great deal of more scalability in front of Lost Creek as a project. We are a bit different from our peers when it comes to growth of our resources. We have focused our efforts on organic growth rather than on the purchase or the acquisition of outside resources. I think that right now is actually a very good time for the acquisition of resources, but our approach over the last five years has been different and that is to grow resources internally. But in addition to that, one of the things that I'll point out is that we do not have an exploration drill program for this year. Again, we will focus our growth and resources primarily on the development of Mine Unit 2, but if Mine Unit 2 is anything like Mine Unit 1, those of you who have been following our story also recall that over the course of the last three years as we continue to infill, drill and develop Mine Unit 1, we were forced to recalculate and update our technical reports for that mine unit which significantly increased our resources. While this is a forward-looking statement, we certainly expect that that will continue to be the case as we move forward and develop Mine Unit 2. Moving on to Slide 6, this is something of course as I've emphasized is very important to us as a company and very simply in this marketplace, you either have contracts or you don't. We all know that we are roughly at $26.5 on spot, $38 to $40 depending on who you're reading on term pricing and it's a very difficult time to go out and secure significant or better-priced contracts at this point in time. Again, you either have them or you don't. But this represents one of our greatest strengths as a company. We have solid contracting through the end of the decade. You can see in the bullet points there, we firmly believe that cash flow is keen, but in addition to that, our average off take through the remainder of this decade is roughly 600,000 lbs that we have targeted and we're coming in at just under $50 per pound. This continues to protect our company and I believe that it's something that our board is to be given a great deal of credit for because it took a lot of encouraging foresight for them to engage in this type of forward-contracting during a time when most people believe that that was somewhat ill-advised or that we were just always a quarter or two away from substantially higher pricing. But with that, I will say that we're very pleased with the contracts that we have been able to put in place and we're very happy with the roughly $30 margins that we are realizing in a sub-$30 spot marketplace. That's something that nobody else is doing in our industry. But it doesn't just take good contracts, some good prices, it takes low cost. With that, I'll turn it over to the man who is ever in pursuit of low-cost and that is Ur-Energy's Senior VP of Operations, Steve Hatten. Steve, take it away, please.

Good morning, everybody. Thanks, Jeff, and thanks to every one of you for joining us today. All the originally planned wells in Mine Unit 1 are now installed and operating. This includes the most recent startup of our 13th Header House in late May. Based on what we've seen in Header House 13 to-date, we believe that we can enhance productivity and possibly ultimate recoveries in the other Mine Unit 1 Header Houses as well. To that end, we will begin our remedial work in those areas starting this month. Late end 2015 and earlier in 2016 were drilled in cased within the first three Header Houses in Mine Unit 2. Once modifications in Mine Unit 1 are complete, it's expected that we will move into Mine Unit 2 to begin developing work again. In addition, the Mine Unit 2 plan was submitted to the appropriate regulatory agencies earlier this summer and we anticipate having all the necessary approvals this fall. As with drilling, surface construction of Header House 13 was completed in May, incorporating modifications to aid in sustaining operating flow rates and limit [ph] maintenance activities. These changes have proven themselves out over the last two months and will be systematically incorporated into the other operating care houses over the next few months with the goal of again, enhancing productivity and increasing the ultimate recovery by Header House. Construction of the infrastructure for Mine Unit 2 is also ongoing with fencing and road complete, and the pipelines and power lines in various stages of completion. So, let's talk about the production results. Production statistics during the second quarter of '16 exhibit a reduction in all categories as the book of the flow came from the mature Header Houses 1 through 12. However, while April and May were dominated by older production grade and flow from Header House 13 begin to contribute in June, as of July 28, production is turned upwards with nearly 48,000 lbs captured and over 50,000 lbs drummed. In spite of the reduction in average grade, Lost Creek was still able to ship almost 149,000 lbs to the converter during Q2. One of the other recent highlights in July was the shipping of our 50th lot from Lost Creek in less than three years of operation. We're very proud of that. As per plant and operational activities, we continue to maintain operating systems as necessary for the production rate. In addition, while the permitting of the classified water treatment system continues, person of the site have acquired the components necessary to treat and inject water into the classified wells. The use of the classified water disposal system will reduce the load on our deep disposal wells and allow greater flexibility in the recycling of water. So on our operational results; I'd like to summarize the activities at Lost Creek in 2016. Production is in the line with previous guidance -- even while pursuing cost-cutting measures and continuing operations from mature areas. Production to date has allowed us to maintain healthy inventories both on-site and at the converter. Year-to-date, cash cost of only $16.46 per pound, only slightly higher than 2015 cost, but still $19.60 a pound below what we received per pound of [indiscernible] during the first two quarters. Still, only producing from the first of many planned mine units at the Lost Creek project, which is only a portion of the Lost Creek property. Again, back to the scalability of this project, we believe that we can grow things internally here instead of having to go out and capture something else. Finally, as I always do, you guys probably get tired of hearing me say this, I want to make sure and thank all of the hard-working employees of Lost Creek and Ur-Energy. Without them, none of this would have been possible. Back to you, Jeff.

Great. Thank you, Steve. I'm going to make a couple of comments here. Steve is being a bit modest, but it has been said that institute recovery is as much hard as it is science. It's interesting how adept Steve and his team has been at adapting to the sub-surface here and to changing our methodology and Header House 13, it really represents a significant effort on the part of Steve. Steve, this is where they're attempting to take everything that they've learned over the last three years and now bring a vibrator efficiencies and this means it's a very multi-faceted approach and we've been actually running Header House 13 as a separate mine unit, if you will, that now will be effectively integrated back with the greater mine unit. It's successful and we believe that the first two months have already demonstrated its success. It will change the way we do things from this day forward and that's the type of thing that you need to see. But also with respect to the longevity of Mine Unit 1, one of the things that I'd like to emphasize there is that it really allows us to defer capital expenditures and in this present environment where cash is so very dear, that's not a small issue. That's something where that's a great advantage that we have over other producers and Lost Creek has proven to be just an exceptional property from that standpoint. We've always consistently maintained that steady state production is one of our primary goals. Steve and his team have of course done a great job of adapting and changing the level of his production in response to these market conditions or as the board has directed. But it's Roger Smith, our CFO that has to pay the bills. He'll be going through what our results were and what our numbers were for the quarter -- but one of the things that Roger is going to emphasize to you is that there is a very direct relationship between our level of production and our cost of production. So with that, I'll turn it over to Roger and have him take you through that. Roger, please.

Great. Thanks, Jeff and good morning, everyone. Slide 10 shows our pounds drawn by quarter and the related cost per pound at the finished product at the conversion facility. In Q2, our pounds drawn decreased as we continue to operate Header Houses 1 through 12 and prepare Header House 13 for production. Our well fill and plant cost also decreased during the quarter as certain expenditures in Q1 were not repeated in Q2. Despite the decrease in cost, our cost per pound in any inventory did increase through $28.32 per pound. This was due to lower production rates, but still remains below $30 per pound. This was expected and we spoke about it in our last webcast. At that time, we were seeing higher cost pounds in our in-process inventory and we anticipated that those higher cost pounds would make their way through inventory to the conversion facility, which they did. Indian inventory total 201,000 lbs and consisted 62,000 lbs in process. 4,000 lbs have dried and drummed product at the plant and 136,000 lbs of finished products at conversion facility. This does represent a decrease in the inventory from the previous quarter as we sold more pounds than we captured during the quarter. The ending cost per pound at the conversion facility was $28.32 and consisted as several [ph] of $2.68, cash cost of $17.50 and non-cash cost of $8.14. Slide 11 shows our cost per pound sold by quarter. It also shows the average sales price that we received as compared to the average spot price during the period. During the quarter, we sold 187,000 lbs including two contract sales totaling 137,000 lbs at $39 per pound; and one spot sell at 50,000 lbs at $27 per pound. This generated Uranium sales revenues of $6.7 million and an average price of $36 per pound as compared to the average spot priced during the period which was $27. The average cost per pound sold increased to $27 per pound during the quarter. As a result, our gross profit was $9 per pound, which represents a gross profit margin of about 24%. On a cash cost basis, our gross profit was $19 per pound, or 53% on a gross profit margin basis. In short, the Q2 price per pound sold was consistent with Q1, but as we predicted in Q1, our cost per pound sold in Q2 increased about $2.50 per pound because of the lower production rates. The result in gross profit per pound sold was down slightly from the previous quarter. Our expectation for Q3 is that we will have higher average selling prices and that our cost per pound sold will be consistent with Q2. Slide 12 shows our anticipated Uranium revenues for 2016. During the first two quarters, we had a mix of spot sales and contract sales. Unfortunately, the spot price declined substantially during this time as you can see from the spot pricing we received in Q2 as compared to Q1. Our contract sales during the first half of the year were all at the same price. In Q3, we will have two contract sales. They total 200,000 lbs at an average price of $47 per pound. In Q4, we will have another 100,000 lbs contract sale at about $33 per pound. During Q1, we assigned two contractual deliveries totaling 200,000 lbs to a third party. The assignment was the direct result of having the expected delivery dates for the contracts postponed from the first half of the year to the second half of the year. We received proceeds of 5.1 million from the transaction. Those proceeds were treated as deferred revenue and would be recognized as revenue in Q3 and Q4 as shown here. In total, we estimate our 2016 Uranium revenues will be $27.3 million and that we will sell 562,000 lbs from production. Looking ahead, with the addition of Header House 13, we expect our production levels to increase in Q3. Assuming our production cost are consistent with the previous quarter, we expect our cost-per-pound sold in Q3 to be similar to Q2. Our average selling price will be higher in Q3 as we deliver into higher priced contracts during the quarter. In addition, we will recognize about one-half of the deferred revenue in Q3. Because of the higher average sales prices and recognized deferred revenue, we estimate that our gross profit margin in Q3 will be higher than that in Q2. In closing, I would like to thank everybody and I'll turn it back over to Jeff.

Great. Thank you, Roger. Just a couple of comments with respect to Roger's report as I think his slides clearly detect. There is a very direct relationship between our level of production and the cost of our production and we're very hopeful that in the not-too-distant future, that we are able to justify an acceleration of production up to our full production rate which would be 1 million lbs a year or 250,000 lbs per quarter. We strongly believe that this is yet another forward-looking statement, but we firmly believe that if we can ever match up 250,000 lbs in a quarter with a full quarter's expenditures, that our cost are going to come down quite significantly below where they are right now and we believe that we can make a very significant improvement in our cost and decrease cost even further and become yet still lower cost producer. But one of the things that we always strive for and I believe we've made this very clear over the years is transparency, and I think that Roger and his team have done just an excellent job of delivering that transparency quarter after quarter. I have repeated complimented he and his team on the readability of their financial statements. And with our company, there is no mystery as to what our cause our, our revenues or our strengths and weaknesses, they're on display for all to see. But to wrap things up and open things up for Q&A, we'll move on to Slide 13, and just to emphasize what our goals, we'll continue to be in the quarters ahead. We will continue to focus on company-wide cost savings. We did announce some six weeks ago that we had a reduction in work force. That was something that was very painful to have to undertake. Nobody who's ever been through that enjoys it. We had to say goodbye to some very good people. But ultimately we work for our shareholders and we did what we knew we had to do in the best interest of the company. As far as long-term sales agreements are concern, we do have very strong contract-base through to the end of the decade. And there are a lot of our piece out there right now. There's a bit of tug-of-war going on. There are request for proposals being put out by the U.S. utilities who are all attempting to be very opportunistic in their buying, and of course if I were in their position I would be doing the same thing. Alternately, we as the providers of that product are being very selective as to the deliveries that we're willing to make and the prices that we're willing to accept in the marketplace. So when we enter into new contracts, of course you will all know about it. One of the things that we will continue to do is add resources again. That will largely come through the development of mine unit number two. But we had a great year last year increasing both in measured indicated and the inferred categories. As far as M&A activity is concerned, I think there are no shortages of merger opportunities right now in the marketplace. There is a lot of pain and suffering to go around out there. But unfortunately for us, we feel that few of them make sense. We remain open to merger opportunities. But right now, until we see something that we think truly brings value to our shareholders, we'll continue to maintain just was we have. With respect to acquisitions, they also are quite plentiful in the marketplace. There are a number of projects that we think they may not be the low-cost producer of Lost Creek, they certainly may fall into that lower 30 to 40 percentiles. And so they're something that we should look at to grow the base of the company in the future. But just because you're buying something doesn't necessarily mean that you're bringing value to your shareholders in this environment. Finally, with respect to our priorities moving forward they will continue to do, be to achieve greater and greater efficiencies at Lost Creek and to advance Shirley Basin, so that we have that teed up and ready to go when the market finally allows us to bring it into production later in the decade. So with that, I will open it up to Q&A, and please call in and give us your questions.

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question we have will come from Joseph Reagor of Roth Capital Partners. Please go ahead.

Good morning, everyone, and thanks for taking my questions. So I guess the first thing, just thinking about the way you've been producing so far, kind of restraining production a bit because of the overall prevailing markets. Is there any way you can quantify on a dollar for pound basis the impact to cost from that versus the impact to cost from the reduction in head grade, because head grades seem to be turning downwards over the first half of the year.

Steve, do you want to fill that?

Sure. Well it's really simple with respect to grade. As we trimmed through production, we anticipate that grade and we model that in from day one. As we do the budgets every year and we update those budgets, we know the grade's going to come down and we model in when we need to bring our new production and when it is worthwhile to bring on flow. We know that we can continue to produce economically or at normal economic conditions as low as around 10 parts per million from each Header House. But what we're trying to do is counter-act that with production from newer houses and bring that on. Are you talking about how sales affect that? That's a real trick for us, it's wanting to balance what are production cost are with what we can get from the marketplace and Roger, and I, and Jeff, try and work together in planning our quarterly production rates to make sure that our cost do not exceed what we can get back in for those. So it is a balancing act. We do know that we can get significantly lower. If you'll remember, this project was budgeted to originally start at an average PPM of 42. We're still above that right now, and we plan on staying above that in the near term. But we will also, if you also remember back in 2012, 2013, the price was a lot higher. So we evaluate that on a routine basis. I know it's kind of a roundabout answer. There isn't a set answer. We do evaluate production models versus grade, versus flow, versus operating cost, versus contract cost on a routine quarterly basis and present those to our board of directors to get guidance on where we want to go at each time.

Okay, that somewhat helps. And then with this new Header House coming online, should we expect cost to kind of improve a little bit in the third quarter? And also, can you guys talk about what you're planning as far as year-ending inventory, do you have a goal there?

Roger?

Yes, I alluded to that. I hedge my bench a little bit thinking that our cost per pound will stay consistent in Q3 or Q2. Honestly I think there's chance we'll see some decrease there. However you have to remember that we've got some higher cost pounds still in process in the plant and working their way through. But we also have some lower cost pounds coming in as the production rate comes up in July and August that's why I'm just kind of predicting that we'll have consistent cost, but I'm hopeful that we'll see some reduction there. But we won't know until we get there and see how those pounds make their way through the plant. As far as year-end inventory, we always balance out our inventories to meet our projected production requirements and to predict those numbers, but we haven't published that so I'm not going to go there.

Joe, I think we anticipated that when we throttled back production as we slight increase in cost. But we feel that it's still, we're very pleased with when the costs are coming in, and we don't see that as being problematic and I think that as Roger stated that I think that we can just maintain consistency through the remainder of the year down in this kind of 16, 16.5 range, we'd be very pleased with that.

And then the revenue forecast, we are talking about selling 300,000 pounds during the second half of the year, and you can assume that if we produce at relatively consistent levels you can, I think, come up with your own figures.

Okay, all right, I'll turn it over. Thank you.

Okay, thanks, Joe.

Next, we have David Talbot of Dundee Capital Markets.

Good morning, all. Jeff, could you or Roger please walk us through the cash burn for this upcoming quarter. It looks like you had about $2.5 million at the end of Q2, probably about $2.7 million now. You did mention $8.7 million in sales are pending here. Will part of that include the $5 million in deferred sales already received?

No, Dave, that money was already received. In terms of the money that we're receiving, this unchanged. But that strong ongoing contractual sales, one that took place early in June and one that took place over there. All of that money is cash income. In terms of our cash burn rate, it's going to be consistent with the previous quarters of production cost, say sub $30 again on a full cost basis obviously. Cash cost in the performance seven stacks it should be consistent with quarters. I don't anticipate any operating expense changes that are out of line with our previous quarters, G&A, exploration and evaluation should all be consistent. And expense however, left somewhat in the second half of the year, and that's because we're going back and touching the Header Houses in mine unit one as Steve described. Subsequent to that we'll start working on those, we will see some additional development of interest there. Other than that I think things are going to be pretty consistent with previous quarters.

Okay, so if you need to top up, then you've still got your spot sales. Would you consider that really a last resort in this market, something you'd rather avoid than feed into the market?

Absolutely, in these prices I don't want to do it unless I have to. Now it will depend of course on the timing of Steve's development expenditures and when we have to start paying those. Our goal would be to put that office as long as possible.

Okay, thank you guys.

Thanks, Dave.

[Operator Instructions] Next we have Hussain [ph] of Radiance.

Good morning guys. Thanks for the call. A follow up question on the MU 1 [ph]. Do we have a sense on how long you guys postpone MU to development cost at this point or you still have to figure out how the field react to the changes you incorporate from the Header House 13?

No, actually that's a very good question. I'll let Steve answer that in depth. But we're working through a number of different scenarios right now that, and while I mentioned earlier that one of the benefits of course with the longevity of mine unit, number one, has been the deferral of capital expenditures were minute. And number two, I would emphasize that it is a deferral, and whether that's going to be three months, six months or whatever the case might be is going to depend on how well the reworks are taking the field. And Steve, I'll let you make a couple of comments on that.

As with anything, any prudent manager models, best case, average case and worst case, and we've done that with respect to the reworks in mine unit one and the modifications if we're going to put in place there. We think speaking realistically that we will be working in mine unit two later on at the end of this year and we'll be focusing on getting productioning up there during 2017. Our models show that we should with these modifications we're making that we should see bump and ultimate recoveries. But it remains to be seen when you're working anytime with mature production, not everything can be modified as easy as it is on paper. So that's where we see ourselves being, but we will play it month by month, look at the works that we've done and see the responses that we get, modify our game plan and see where that takes us.

And the senses is that once MU2 comes on, your productive capacity will remain similar to what you have now or is it going to increase a little or as a general sense is that it will stay flat?

I think that in fairness what we would want to convey to the marketplace here is that we're holding production at the level that we are right now because it's really difficult to justify significantly greater production in this market which spot price being what it is. And while we certainly want to have inventory in place so that we can make those discretionary spot sales whenever we feel that's [indiscernible] to do so. We also want to make sure that we're holding our production at steady state. When mine unit two comes on, that's going to give us the ability to step on the gas. And when the market dictates that it's the time to do it and for us to take our production more up to name plate production rather where we're holding it now at a steady state. Steve, any further comment on that?

No, Jeff, I think you nailed it right there. We want to make sure that capital expenditures or development expenditures are commensurate with what the market has to give us with respect to production. So we want to be ready and you see that we are ready. We have done significant work in mine unit two with drilling and casing of wells, and we are ready to go ahead and move in with power lines and pipelines, and we can turn things around very quickly if the market gives us the opportunity. But we don't want to overspend our production.

Thanks, guys.

All right, great, thanks so much.

If there are no further questions, I would now like to turn the conference back over to the management team for any closing remarks.

Great, I do have a few closing remarks. And as promised I hope that there are a few silver linings. We do think that there's some very positive things going on right there. And many of you, and especially on this call saw that came out with their annual summary and projections for the marketplace back in April. And one of the things, like there were a number of notable elements to their report and one of them was electricity demand is projected to increase our growth by 35% between 2015 and 2030, also that with the number of reactors that are coming online, the gigawatt output and capacity are projected to increase by 44% through to 2030, and that the Chinese are breaking ground on eight to nine reactors a year and this represents 2.3% growth rate in the industry. Also their report demonstrated very clearly that with respect to supply, several of the large producers have announced that there are production cuts coming in the next few years with them. I think that that's very good development. The simple fact of the matter is what the exception of ourselves, and a few producers out of cost expend there are very few companies right now globally that can operate with a positive cash flow in this environment and at this price, and those that are operating and producing are doing so at thinner and thinner margins as we move further along through the decade here. So I think that this is something that as the old saying goes, the cure for low prices is low prices, and we're seeing that play out in our industry. There was however something yesterday that I think is very noteworthy, and that was the decision by the New York Public Service Commission to approve New York's first ever clean energy standard. And I never thought that I would be saying this, but I must actually compliment Gov. Andrew Cuomo of the State of New York for spearheading this. I think that this is something that represents a very welcome and long overdue change in policy that we've been waiting for, and frankly we hope that this will serve as a model and an incentive for other very, very dysfunctional states like Illinois and California to modify their own behavior and recognize the value of nuclear energy in the marketplace. So we hope that this is something that's going to work changes in our market over the course of the next couple of years. What I'd like to close with is just some commentary on the recent trading activity in ours and a few other stocks that took place in early June. At the end, this is something that I think clearly demonstrated that there are very few viable entities, viable companies left in the Uranium space. We are certainly one of them. We don't know when things are going to turn around, but we were right at the forefront of that move in the marketplace and we'll be right at the forefront when this thing turns around. But in addition to that, I think that it's critical that our company remain in a position continue to produce and positively position ourselves to where when this thing turn around we come into work on a Monday morning and stock price all of a sudden has moved up dramatically for whatever reason. We're in a position where we can step on the gas, we can increase production accordingly. I know that a lot of companies are saying they can do that, but the fact is that with Uranium production is simply unrealistic to believe that someday that's not currently in production can ramp up very quickly and come into production. We will keep ourselves in a position where we can be very responsive and when the time is right we'll be able to rapidly adjust to changing market condition. So with that I will say thank you very much for joining us. Once again, we appreciate your ongoing support and we'll talk to you next quarter. Thanks so much.

And we thank you, sir and to the rest of the management team for your comments today. The conference call has now concluded. Again, we thank you all for attending today's presentation. At this time you may disconnect your lines. Thank you. Take care and have a great day.