<PAGE> 1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
[Fee required]
For the fiscal year ended December 31, 1999 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
[No fee required]
For the transition period from __________ to __________
Commission file number 0-17171
URANIUM RESOURCES, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 75-2212772
(State of Incorporation) (I.R.S. Employer Identification No.)
12750 MERIT DRIVE, SUITE 720, DALLAS, TEXAS 75251
(Address of principal executive offices, including zip code)
(972) 387-7777
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.001 par value per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates at April 12, 2000 was approximately $717,833.
Number of shares of Common Stock outstanding as of April 12, 2000: 14,520,366
shares.
Documents Incorporated by Reference:
None
================================================================================
<PAGE> 2
URANIUM RESOURCES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I...................................................................................................1
ITEM 1. BUSINESS......................................................................................1
Going Concern/Uncertain Future Operations...........................................................1
The Company.........................................................................................2
Marketing Strategy/Uranium Sales Contracts.......................................................3
Reserves.........................................................................................3
The ISL Mining Process...........................................................................3
Environmental Considerations and Permitting; Water Rights........................................5
The Uranium Industry................................................................................7
General..........................................................................................7
Market Price Formation...........................................................................8
Sources of Supply................................................................................8
Required Primary Production......................................................................9
Uranium Prices...................................................................................9
Competition.....................................................................................10
ITEM 2. PROPERTIES...................................................................................10
South Texas Producing Properties................................................................10
South Texas Development Properties..............................................................12
New Mexico Development Properties...............................................................12
Santa Fe Properties.............................................................................16
Reclaimed Properties............................................................................16
Reclamation and Restoration Costs and Bonding Requirements......................................17
ITEM 3. LEGAL PROCEEDINGS............................................................................17
Longoria........................................................................................17
ProBank.........................................................................................17
Benton Bankruptcy...............................................................................18
Indian Lands Jurisdictional Dispute.............................................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................................18
PART II.................................................................................................27
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........................27
Market Information..............................................................................27
Holders.........................................................................................27
Dividends.......................................................................................27
ITEM 6. SELECTED FINANCIAL DATA......................................................................28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........30
Forward Looking Statements......................................................................30
Capital Resources and Liquidity.................................................................30
Writedown of Uranium Properties.................................................................33
Environmental Aspects...........................................................................34
Results of Operations...........................................................................34
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................................37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................................................38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.........38
PART III................................................................................................39
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........................................39
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ITEM 11. EXECUTIVE COMPENSATION......................................................................42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............................47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................................49
PART IV.................................................................................................50
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.............................50
SIGNATURES.....................................................................................51
</TABLE>
Index to Consolidated Financial Statements,
Financial Statements
and Supplemental Data F-1 to F-24
Index to Exhibits. E-1 to E-3
ii
<PAGE> 4
URANIUM RESOURCES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
PART I
The "Company" or "Registrant" is used in this report to refer to Uranium
Resources, Inc. and its consolidated subsidiaries. Items 1 and 2 contain
"forward-looking statements" and are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. These
statements include, without limitation, statements relating to management's
expectations regarding the Company's resource base, timing of receipt of mining
permits, production capacity of mining operations planned for properties in
South Texas and New Mexico and planned dates for commencement of production at
such properties, business strategies and other plans and objectives of the
Company's management for future operations and activities and other such
matters. The words "believes," "plans," "intends," "strategy," "projects,"
"targets," or "anticipates" and similar expressions identify forward-looking
statements. The Company does not undertake to update, revise or correct any of
the forward-looking information. Readers are cautioned that such forward-looking
statements should be read in conjunction with the Company's disclosures under
the heading: "Cautionary Statement for the Purposes of the `Safe Harbor'
Provisions of the Private Securities Litigation Reform Act of 1995" beginning on
page 19.
Certain terms used in this Form 10-K are defined in the "Glossary of
Certain Terms" appearing at the end of Part I hereto.
ITEM 1. BUSINESS
GOING CONCERN/UNCERTAIN FUTURE OPERATIONS
Uranium Resources, Inc., a Delaware corporation (the "Company"), ceased
production activities in 1999 at both of its two producing properties because of
depressed uranium prices. In 1999 and the first quarter of 2000 the Company
monetized all of its remaining long-term uranium sales contracts and sold
certain of its property and equipment to maintain a positive cash position. The
Company has exhausted all of its available sources of cash to support continuing
operations and will be unable to continue in business beyond June 2000 unless it
can secure a cash infusion. If the Company is unable to secure a cash infusion
prior to June, it will consider all of its possible alternatives, including a
possible filing in bankruptcy.
The Company's near-term potential illiquidity has necessitated a
reevaluation of the Company's method of valuing its uranium properties for
accounting purposes. The Company has previously valued its uranium properties on
a held for production basis, i.e., assuming that each property would be
ultimately placed into production. Because of the Company's potential
illiquidity, the Company has determined that it should value these properties on
a held for sale basis.
On a held for sale basis the Company has determined that the discounted
cash flow method is the most reasonable method for valuing the properties,
because of a lack of any data on sales of comparable properties or any other
method that is reasonably available. The Company projected the future cash flows
assuming a sale price for uranium of $9.00 per pound (current spot price is
$9.10) and has discounted those cash flows at 20% per annum. If such valuation
resulted in a zero or negative number, the Company wrote off all intangible
costs and carried tangible costs at salvage value, which was assumed to be 5% of
original cost. This valuation method reduced the carrying value of the Company's
uranium properties by $38.4 million from ($40.5 million to $2.1 million) with a
corresponding charge against earnings, resulting in a deficit shareholders'
equity of $6.4 million at December 31, 1999.
1
<PAGE> 5
The Company's independent public accountants have advised the Company that
they will be unable to perform an audit of the Company's financial statements
for year-end 1999 unless the valuation of the Company's uranium properties is
supported by an appraisal from an independent third party. The Company lacks the
funds to retain an independent third party to perform that valuation. As a
result, the Company's financial statements for the year ended December 31, 1999
included in this Annual Report on Form 10-K are unaudited.
THE COMPANY
The Company was formed in 1977 to acquire, explore and develop properties
for the mining of uranium in the United States using the in situ leach ("ISL")
mining process. The Company is recognized as a leader in the field of ISL
mining.
In the ISL process, groundwater fortified with oxidizing agents is pumped
into the ore body causing the uranium contained in the ore to dissolve. The
resulting solution is pumped to the surface where it is further processed to a
dried form of uranium which is shipped to conversion facilities for sale to the
Company's customers. The ISL process is generally a more cost effective and
environmentally benign mining method than conventional mining techniques.
In March 1988, the Company commenced production from its Kingsville Dome
property in South Texas and produced a total of approximately 1.5 million pounds
of uranium from that property prior to September 1990 when it was shut-in
because of low uranium prices. Production was reestablished in March 1996 and an
additional 2.0 million pounds of uranium were produced through 1999. In the
first quarter of 1999 the Company placed production at Kingsville Dome on
stand-by but continued to maintain nominal production through July 1999. Total
production for the year was 61,000 pounds. Additional uranium resources exist at
Kingsville Dome, but additional capital investment will be required in order to
begin development of these resources.
In October 1990, the Company commenced production from its Rosita property
in South Texas and produced a total of approximately 1.1 million pounds of
uranium from that property prior to March 1992 when it was shut-in because of
low uranium prices. Production was reestablished in June 1995 and an additional
1.5 million pounds of uranium have been produced through 1999. In the first
quarter of 1999 the Company placed production at Rosita on stand-by but
continued to maintain nominal production through July 1999. Total production for
the year was 48,000 pounds. The Rosita property is essentially at the end of its
productive capacity, although some minor resources still remain that could be
produced.
The weakness of the uranium market saw spot prices that ranged from $9.60
to $10.85 in 1999. The continued weak market for uranium prices during the year,
which primarily resulted from the actions of aggressive sellers, including the
disposition of former U.S. Government stockpiles have continued to depress
uranium prices. The current spot market price of $9.10 remains below the level
needed by the Company to obtain the necessary financing to allow development of
new production areas at its Kingsville Dome and Vasquez sites.
The Company has implemented cost reduction initiatives to reduce
expenditures throughout the Company. These included a 62% reduction in the
Company's workforce, the closure of its regional offices in Albuquerque, New
Mexico and an overall reduction in general and administrative expenses of over
31% from 1998 levels. These cost cutting moves coupled with the Company's
ability to monetize the value of its long-term sales contracts and certain of
its property and equipment during 1999 allowed it to remain liquid during the
year.
2
<PAGE> 6
The ability of the Company to continue to maintain a positive cash position
will require an infusion of capital that is currently unavailable to it. Absent
such capital inflows the Company will experience a negative cash position by
June 2000 which will prevent it from continuing in business. The Company will
continue to pursue alternatives as long as possible to allow it to achieve
positive liquidity through 2000 and beyond.
The Company continues to hold its Vasquez development project in South
Texas and has three development projects in two districts in New Mexico, the
Churchrock district and the Crownpoint district. Commencement of production at
these properties will be dependent on a rebound in uranium prices to profitable
levels, the availability of sales contracts and the availability of capital.
As of April 10, 2000, the Company had 20 employees, including its
professional staff consisting of 3 geologists, 5 engineers and two certified
public accountants. To support its operations the Company maintains field
offices at the Kingsville Dome site, the Rosita site and in Crownpoint, New
Mexico.
MARKETING STRATEGY/URANIUM SALES CONTRACTS
Long-term contracts have historically been the primary source of revenue to
the Company. At the beginning of 1999 the Company had four long-term contracts
for deliveries over the next two, three and four years of approximately $26.9
million in revenues. During 1999, the Company assigned its delivery rights for
2000 through 2002 under one of these contracts for $1,290,000 and also
accelerated the scheduled deliveries under another contract into the fourth
quarter of 1999, effectively bringing forward $1,069,000 of cash originally
scheduled for the fourth quarter of 2000. These transactions coupled with
transactions made in the first quarter of 2000 have monetized the Company's
long-term sales contracts and exhausted the Company's sales contract portfolio.
Currently, the Company does not have any remaining scheduled uranium deliveries
under contract for the balance of 2000 or beyond.
In 1999 and 1998, the Company had sales to four and three customers,
respectively, that amounted to more than 10% of total sales. These customers
represented 31%, 29%, 25% and 15% of sales in 1999 and 27%, 18% and 14% of sales
in 1998.
RESERVES
The Company has previously reported the proven and probable reserve base
for each of its producing and development projects in Texas and New Mexico
assuming that each of these projects would be placed into production at a future
date. The reserves utilized recovery factors and certain cut-off grades based
upon uranium sales prices of $16 per pound. In December 1999 the Company wrote
down the carrying value of its uranium properties based upon a change in its
methodology for valuing those assets. As a result of this writedown the Company
has reclassified its significant uranium holdings from reserves to resources
consistent with the Securities and Exchange Commission definitions. See
"Glossary".
THE ISL MINING PROCESS
The ISL mining process, a form of solution mining, differs dramatically
from conventional mining techniques. The ISL technique avoids the movement and
milling of significant quantities of rock and ore as well as mill tailings waste
associated with more traditional mining methods and generally results in a more
cost-effective and more environmentally benign extraction operation in
comparison to conventional uranium mining. Historically, the majority of U.S.
uranium production resulted from either open pit surface mines or underground
shaft operations. These conventional mining methods are, in many cases, capital
and labor intensive and are not cost competitive with the majority of non-U.S.
conventional producers.
3
<PAGE> 7
The ISL process was first tested for the production of uranium in the
mid-1960's and was first applied to a commercial-scale project in 1975 in South
Texas. The ISL process had become well established in the South Texas uranium
district by the late 1970's, where it was employed in connection with
approximately twenty commercial projects, including two operated by the Company.
In the ISL process, groundwater fortified with oxygen and other
solubilizing agents is pumped into a permeable ore body causing the uranium
contained in the ore to dissolve. The resulting solution is pumped to the
surface where the uranium is removed from the solution and processed to a dried
form of uranium which is shipped to conversion facilities for sale to the
Company's customers.
An ISL project involves several major components:
ORE BODY EVALUATION
Ore bodies which are currently being mined by the ISL process are
associated with groundwater saturated permeable sandstone formations typically
located between 100 and 2,000 feet below the surface. The uranium ore is
deposited in a roll front configuration where the groundwater passing through
the sandstone passes from a natural oxidizing environment to a naturally
occurring reducing environment. This change causes the dissolved uranium in the
groundwater to become insoluble, and it then attaches to the grains of the
sandstone. Some important factors in evaluating an ore body for the ISL process
are permeability, the thickness of the ore zone, depth, size, grade of ore,
shape of the ore body, nature of uranium mineralization, host rock mineralogy,
and the hydrology. These factors are important in determining the design of the
wellfield, the type and flow of the leaching solution, and the nature of the
surface ISL facilities.
WELLFIELD DESIGN
The wellfield is the mechanism by which the leaching solution, or
lixiviant, is circulated through the ore body. The wellfield consists of a
series of injection, production (extraction) and monitoring wells drilled in
specified patterns. These patterns will vary primarily with the configuration of
the ore and the hydrologic characteristics of each deposit. Determining the
wellfield pattern is crucial to minimizing costs and maximizing efficiencies of
production. Injection and production wells vary in diameter from four to six
inches. Generally, these wells are drilled down to the bottom of the ore zone
(through which the lixiviant must be circulated to achieve production).
Injection and production wells are cased with polyvinyl chloride ("PVC") or
fiberglass casings which are cemented in place from the bottom of the ore zone
to the surface. The wells are then completed into the ore zone.
LIXIVIANT CHEMISTRY
The lixiviant, consisting of native groundwater fortified with an oxidant
and an anionic complexing agent, is introduced via the injection wells to the
ore bearing aquifer. The oxidant (gaseous oxygen) changes the uranium valence
state making the uranium soluble in the lixiviant. The lixiviant (sodium
bicarbonate) complexes the original uranium to a soluble ion, uranyl
dicarbonate, which dissolves the uranium. The dissolved uranium then flows to
the surface with the lixiviant fluid which is circulated through the ore body
until economic recovery is achieved.
URANIUM RECOVERY PROCESS
The uranium recovery process consists of a lixiviant circuit, an
elution/precipitation circuit and a drying and packaging process. The lixiviant
circuit flows from the ore body, where the uranium is dissolved. The lixiviant
stream is then circulated to an ion exchange column on the surface where uranium
is extracted from the lixiviant by absorption onto the resin beads of the ion
exchange columns. The lixiviant is then refortified and reinjected into the ore
body. When the ion exchange column's resin beads
4
<PAGE> 8
are loaded with uranium, the loaded uranium is removed and placed into the
elution circuit where the uranium is flushed with a salt water solution which
precipitates the uranium from the beads. This leaves the uranium in a slurry,
which is then dried and packaged for shipment as uranium powder.
The Company has historically utilized a central plant for the ion exchange
portion of the production process. In order to increase operating efficiency and
reduce future capital expenditures, the Company began the design and development
of wellfield-specific remote ion exchange methodology. Instead of piping the
solutions over large distances through large diameter pipe lines and mixing the
waters of several wellfields together, each wellfield will be mined using a
dedicated satellite ion exchange facility. This will allow for ion exchange to
take place at the wellfield instead of at the central plant.
Nominal design for the remote ion exchange facilities flow will be in the
range of 1,200 gpm, about 25% of the design flow of the central plant at the
Kingsville Dome project. Each of these units will consist of several
ion-exchange columns and a resin transfer facility. When fully loaded with
uranium, the resin will be transferred to a trailer and the resin trucked to the
central plant for elution. After stripping the uranium from the resin, the resin
will be transferred into the trailer and transported back to the satellite plant
at the wellfield.
These satellite facilities will allow each wellfield to be mined using its
own native groundwater only, thus eliminating the problems associated with
progressive buildup of dissolved solids in the groundwaters and thereby
enhancing mining efficiencies and uranium recoveries.
WELLFIELD RESTORATION
At the conclusion of mining, the mine site is decommissioned and
decontaminated and the wellfield is restored and reclaimed. Wellfield
restoration involves returning the aquifer to a condition consistent with its
pre-mining use and removing evidences of surface disturbance. The restoration of
the wellfield can be accomplished by flushing the ore zone for a time with
native ground water and/or using reverse osmosis to remove ions, minerals and
salts to provide clean water for reinjection to flush the ore zone.
Decommissioning and decontamination of the mine site entails decontamination,
dismantling and removal for disposal or reuse of the structures, equipment and
materials used at the site during the mining and restoration activities.
ENVIRONMENTAL CONSIDERATIONS AND PERMITTING; WATER RIGHTS
The production of uranium is subject to extensive regulations, including
federal and state (and potentially tribal) environmental regulations, that have
a material effect on the economics of the Company's operations and the timing of
project development. The Company's primary regulatory costs have been related to
obtaining and complying with the regulatory licenses and permits that must be
obtained from federal and state agencies prior to the commencement of uranium
mining activities.
Environmental considerations include the prevention of groundwater
contamination by vertical or horizontal escape of leaching solution (through
proper design and operation of the wellfield and the use of monitoring wells to
detect any potential excursions from the mining area) and the treatment and
disposal of liquid and/or solid discrete surface waste or by-product materials
(so-called "11e. (2) by-product material" under federal law). The majority of
by-product material that is generated is liquid and generally is disposed of by
a combination of reverse osmosis, brine concentration and evaporation or, after
treatment, by surface deposition or discharge or through underground injection
wells. Any such disposal must be approved by the governing authority having
jurisdiction over that aspect of the Company's activities. Once mining is
completed, the Company is required to reclaim the surface areas and restore
underground water quality to the level of quality mandated by applicable
regulations or license requirements. A small amount of solid discrete surface
waste materials generated by the ISL process is disposed of by delivery to a
licensed by-product material disposal site or to a licensed conventional uranium
mill tailings pile. While
5
<PAGE> 9
such sites may not be readily available in the future, the Company believes that
any increase in the cost of such disposal will continue to be insignificant
relative to total costs of production and will not be a material portion of
restoration/reclamation costs.
In both Texas and New Mexico there are two primary regulatory
authorizations required prior to operations: a radioactive material license and
underground injection control ("UIC") permits which relate both to the injection
of water for production purposes and to the disposal of by-product material
through underground injection wells. Uranium mining is subject to regulation by
the U.S. Nuclear Regulatory Commission ("NRC") under the federal Atomic Energy
Act ("AEA"); however, the AEA also allows for states with regulatory programs
deemed satisfactory by the NRC to take primary responsibility for licensing and
regulating certain activities, such as uranium recovery operations. When a state
seeks this responsibility, it enters into an agreement with the NRC whereby the
NRC agrees to recede from the exercise of most of its counterpart jurisdiction,
leaving the matters to be administered by the state. Texas has entered into such
an agreement; however, New Mexico is not a party to such an agreement.
The federal Safe Drinking Water Act ("SDWA") creates a nationwide
regulatory program protecting groundwater which is administered by the U.S.
Environmental Protection Agency ("EPA"). To avoid the burden of dual federal and
state (or Indian tribal) regulation, the SDWA allows for the permits issued by
the UIC regulatory programs of states and Indian tribes determined eligible for
treatment as states to suffice in place of a UIC permit required under the SDWA.
A state whose UIC program has been determined sufficient for this purpose is
said to have been granted "primary enforcement responsibility" or "primacy," and
a UIC permit from a state with primacy suffices in lieu of an EPA-issued permit,
provided the EPA grants, upon request by the permitting state, an "aquifer
exemption" or "temporary aquifer designation" modifying the permitting state's
UIC program to recognize the temporary placement of mining fluids into the
intended mining zone within the horizontal confines of the proposed mining area.
Although the EPA's consent to aquifer exemptions or temporary aquifer
designations for certain mineral deposits is often issued almost automatically,
the EPA may delay or decline to process the state's application if the EPA
questions the state's jurisdiction over the mine site. Both Texas and New Mexico
have been granted "primacy" for their UIC programs, and the Navajo Nation has
been determined eligible for treatment as a state but is not due to submit its
program for EPA approval for several years. Until such time as the Navajo Nation
has been granted "primacy," ISL uranium mining activities within Navajo Nation
jurisdiction will require a UIC permit from the EPA. Despite some procedural
differences, the substantive requirements of the Texas, New Mexico and EPA UIC
programs are very similar.
In addition to its radioactive materials licenses and UIC permit, the
Company is also required to obtain from appropriate governmental authorities a
number of other permits or exemptions, such as for waste water discharge, land
application of treated waste water, or for air emissions.
The current environmental regulatory program for the ISL industry is well
established. Many ISL mines have gone full cycle through the
permit-operating-restoration cycle without any significant environmental impact.
However, the public anti-nuclear lobby can make environmental permitting
difficult and permit timing less than predictable.
In Texas, the radioactive materials license required for ISL uranium mining
is granted by the Texas Department of Health ("TDH") and the UIC permits are
granted by the Texas Natural Resource Conservation Commission ("TNRCC"). The
TNRCC also regulates air quality and surface deposition or discharge of treated
wastewater associated with the ISL mining process. In order for a licensee to
receive final release from further radioactive materials license obligations
after all of its mining and post-mining clean-up has been completed, approval
must be issued by the TDH along with concurrence from the NRC.
In New Mexico, radioactive materials' licensing is handled directly by the
NRC, rather than by the State of New Mexico. Furthermore, depending upon whether
a site located within New Mexico falls under state or Navajo Nation
jurisdiction, the permitting of the UIC aspects of ISL mining may be conducted
by either the New Mexico Environmental Department ("NMED") or the EPA or
possibly both in case of
6
<PAGE> 10
jurisdictional conflict. The jurisdictional issue when raised as to any
development property, could result in litigation between the state and the EPA,
with the possibility of delays in the issuance of affected UIC permits. The
Company is currently a party to such litigation with respect to certain of its
New Mexico properties. See "Litigation".
Water is essential to the ISL process. It is readily available in South
Texas for the Company's operations and obtaining water rights is not required
because water is subject to capture. In New Mexico the use of water rights is
administered through the New Mexico State Engineer subject to Indian tribal
jurisdictional claims. The State Engineer carefully and strictly regulates
obtaining new water rights, and the transfer or change in use of existing water
rights. The State Engineer may also grant an application for a "temporary water
right" which will not establish a vested right but may provide a sufficient
quantity of water to fulfill the applicant's needs. The State Engineer exercises
jurisdiction over underground water basins with "reasonably ascertainable
boundaries." Accordingly, new appropriations or changes in purpose or place of
use or points of diversion of existing water rights, such as those in the San
Juan and Gallup Basins where the Company's properties are located, must be
obtained by permit from the State Engineer. Applications are required to be
published and are subject to hearing if protested. There are three criteria for
decision, that the application: (1) not impair existing water rights, (2) not be
contrary to the conservation of water within New Mexico, and (3) not be
detrimental to the public welfare. Applications may be approved subject to
conditions that govern exercise of the water rights. Appeals from decisions of
the State Engineer are to the district court of the county in which the work or
point of desired appropriation is situated and from there to the New Mexico
Court of Appeals. Finally, jurisdiction over water rights may become an issue in
New Mexico when an Indian nation, such as the Navajo Nation, objects to the
State Engineer's authority to grant or transfer a water right or to award a
temporary water right, claiming tribal jurisdiction over Indian country. This
issue could result in litigation between the Indian nation and the state which
may delay action on water right applications, and, depending on who prevails as
to any particular property, could result in a requirement to make applications
to the appropriate Indian nation and continuing jurisdiction by the Indian
nation over use of the water. All of the foregoing issues arise to a greater or
lesser extent in connection with the Company's New Mexico properties.
There can be no assurance that additional regulatory permits or licenses in
Texas or New Mexico, or the applications for water rights in New Mexico,
required for any project of the Company will be approved by the necessary
governing authority in the form contemplated by management, or in any other
form, or within the time periods necessary to commence timely production.
Additionally, regulations and permit requirements are subject to revisions and
changes that may materially affect the Company's operations. Any delay or
failure in obtaining such permits or water rights could materially and adversely
affect the business and operations of the Company.
In addition to the costs and responsibilities associated with obtaining and
maintaining permits, and the regulation of production activities, the Company is
subject to those environmental laws and regulations applicable to the ownership
and operation of real property in general, including but not limited to the
potential responsibility for the activities of prior owners and operators.
THE URANIUM INDUSTRY
GENERAL
The only significant commercial use for uranium is to fuel nuclear power
plants for the generation of electricity. During 1999, 436 nuclear power plants
were operating in the world. It is estimated that these plants consumed 156
million pounds of uranium during the year.
7
<PAGE> 11
MARKET PRICE FORMATION
At December 31, 1999 the spot price was $9.60 per pound U3O8 (the form in
which the Company sells its production) compared to $8.75 at December 31, 1998.
Utility spot market contract activity for U(3)O(8) increased significantly from
the dramatically low levels experienced in 1998. While this increase in activity
was expected to fuel a recovery in spot prices, this result did not materialize.
A large portion of the increase resulted from purchases by producers and
non-U.S. utilities, typically groups that are not significant buyers in this
market. The demand increases last year appear to have been filled by suppliers
willing to provide very aggressive pricing including enrichment entities who
became a larger supplier in the market. This group which has not been
traditionally a significant source of spot market supply was believed to account
for one quarter or more of the uranium spot volume last year. The combination of
non-traditional buyers and sellers in 1999 prevented the large increase in spot
demand from having the expected positive result of firming spot market prices.
SOURCES OF SUPPLY
Traditional Supply Sources
Based on reports by the Ux Consulting Company, LLC ("Ux") and the Uranium
Institute ("UI"), worldwide production of uranium (U(3)O(8)) for 1999 is
estimated to be approximately 82 million pounds, down from 89 million pounds in
1998. This production accounted for approximately 50% of the year's utility
requirements. Production for 2000 is expected at between 87-88 million pounds
and will result in production meeting only 52% of the estimated consumption by
utilities during 2000 of approximately 168 million pounds.
Production from existing mines is projected by Ux to decline during the
next few years as lower cost resources are exhausted. Accordingly, new
production is expected to replace that from existing mines in the year 2005 with
total production projected by Ux to be only 102-103 million pounds in 2005. This
represents approximately 59% of consumption as projected by the UI for 2005 of
approximately 175 million pounds. Consumption has outstripped production in each
year since 1985 with the shortfalls filled by drawdowns of inventories amassed
prior to that time.
Non-Traditional Supply Sources
As excess inventory is reduced, the availability of non-traditional supplies
will play an increasingly important role in establishing market equilibrium.
These supplies consist of Government stockpiles, Russian and U.S. highly
enriched uranium ("HEU"), inventory of the United States Enrichment Corporation
("USEC"), tails re-enrichment, and savings achieved through the reprocessing of
spent fuel. Ux has projected that the following categories represent those
sources of non-traditional supplies that could be available to the market place
through 2005:
Russian HEU: In 1993, the U.S. and Russia entered into an Agreement to
convert highly enriched uranium ("HEU") derived from dismantling Russian nuclear
weapons into fuel suitable for use in commercial reactors. At a maximum
conversion rate of 30 metric tons HEU per annum approximately 24 million pounds
of U(3)O(8) would be available in each year of which approximately 6.7 million
pounds per year will be used internally by Russia.
U.S. HEU: Sales are subject to a determination to be made by the Secretary
of Energy, as required under the USEC Privatization Act, that such sales will
have no adverse impact on the domestic mining industry or the U.S./Russia HEU
Agreement.
8
<PAGE> 12
USEC Inventory: In July 1998, USEC consummated its privatization with a
public offering of stock. In its prospectus USEC disclosed that it had inventory
of approximately 75 million pounds U(3)O(8) equivalent of which approximately
46-52 million pounds would be available to sell through 2005. This inventory
represents amounts of uranium transferred to it by the DOE. Additional inventory
may be realized through USEC's ability to underfeed its enrichment plants
through the same period.
Reprocessing: It is expected that reprocessing of spent fuel will save 5-7
million pounds of demand in each year through 2005. This activity is primarily
focused in Europe and Japan.
Tails Re-enrichment: This is a new activity primarily pursued by Russia in
order to utilize their excess enrichment capacity. The Company estimates that
this activity could yield approximately 6.0 million pounds U(3)O(8) per annum
through 2005.
The potential disposition of Government inventories is the most significant
non-traditional supply factor effecting the market. On March 24, 1999 an
agreement between Tenex, the commercial arm of the Russian Federations' Ministry
of Atomic Energy, and three Western commercial entities was executed that will
provide more certainty regarding the disposition of Russian HEU derived uranium.
In an effort to support this transaction and the continuation of the U.S./Russia
HEU Agreement, DOE budgeted $325 million to pay for approximately 28 million
pounds of HEU derived uranium delivered to the U.S. during 1997-1998. As part of
this agreement, DOE will hold this purchased uranium, and its own remaining
inventory (approximately 30 million pounds) off the market for a ten year period
beginning in 1999.
REQUIRED PRIMARY PRODUCTION
New production will be needed to fill the gap between utility demand and
the estimated supply sources. This production, however, will not be forthcoming
at current market prices. Further, any change in the availability of
non-traditional supplies or the emergence of additional non-traditional sources
could impact the need for new production.
URANIUM PRICES
Spot prices reflect the price at which uranium may be purchased for
delivery within one year. Historically, spot prices have been more volatile than
long-term contract prices, increasing from $6.00 per pound in 1973 to $43.00 per
pound in 1978, then declining to a low of $7.25 per pound in October 1991. The
spot price per pound as of March 31, 2000 was $9.20.
9
<PAGE> 13
The following graph shows spot prices per pound from 1978 to March 31,
2000, as reported by Trade Tech.
[GRAPH]
- ---------
All prices beginning in 1993 represent U(3)O(8) deliveries available to U.S.
utilities.
COMPETITION
The Company markets uranium to utilities in direct competition with
supplies available from various sources worldwide. The Company competes
primarily on the basis of price.
ITEM 2. PROPERTIES
SOUTH TEXAS PRODUCING PROPERTIES
The Company has two properties located in South Texas, Rosita and
Kingsville Dome. These properties have had recent production, one of which
(Kingsville Dome) would be capable of resuming production given improved market
conditions and available funding. The following is a description of these
properties.
KINGSVILLE DOME
The Property. The Kingsville Dome property consists of mineral leases from
private landowners (and a small portion owned in fee) on 3,068 gross (3,043 net)
acres located in central Kleberg County, Texas. The leases provide for royalties
based upon uranium sales. The leases have expiration dates ranging from 2000 to
2007. With a few minor exceptions, all the leases contain shut-in royalty
clauses which permit the Company to extend the leases not held by production by
payment of a royalty.
Production History. Initial production commenced in May 1988. In May 1989,
due to the continuing decline in the spot price of uranium, the Company deferred
development of the next wellfield, and the plant was shut-in in September 1990.
Total production from May 1988 through September 1990 was approximately 1.5
million pounds.
10
<PAGE> 14
Wellfield development activities resumed in December 1995, and production
commenced in March 1996. Production at Kingsville Dome was approximately 2.0
million pounds from recommencement of production in March 1996 through July 1999
with 61,000 pounds produced in 1999.
The Company shut-in and placed on stand-by production at the Kingsville
Dome site in the first quarter of 1999 because of depressed uranium market
conditions. Nominal production from this site continued until July 1999 when the
incremental production costs at this facility exceeded the cost of purchasing
uranium in the marketplace.
Further Development Potential. Further exploration and development
activities are not currently planned and are not anticipated until uranium
market conditions firm. The Company believes that there is a significant
quantity of uranium resource remaining at the Kingsville Dome site that would be
mined if market conditions were favorable and sufficient funding for delineation
and development were available. The Company spent approximately $137,000 in
capital expenditures in 1999 and does not project to make significant
expenditures in 2000.
Permitting Status. Radioactive material licensing and UIC permit hearings
for currently producing areas have been completed, and the necessary permits
were issued. In the first quarter of 2000 the District Court of Travis County
Texas ruled that the decision of the TNRCC to grant the Company's PAA#3 without
granting a hearing to certain intervenors in the case would require further
review by the TNRCC. The District Court remanded the issue back to the TNRCC for
further action which has the effect of placing the Company's PAA#3 on hold from
future production pending a decision by the TNRCC. The Company anticipates a
favorable outcome in this matter. With regard to future production areas certain
minor amendments to the license and permit for further production within the
permit area will be required as development proceeds. The term of the license
and UIC permit is effectively open-ended.
Restoration and Reclamation. Restoration of groundwater was conducted
during 1999 and is expected to continue in 2000.
ROSITA
The Property. The Rosita property consists of mineral leases on 3,359 gross
and net acres located in northeastern Duval County, Texas. All the leases,
except minor leases, are held by production. The leases provide for royalties
based upon uranium sales.
Production History. The Company began initial production at Rosita in
October 1990. Total production from Rosita for the eighteen months through March
31, 1992 was approximately 1.1 million pounds. In March 1992, due to depressed
uranium prices, the Company shut-in production.
Wellfield development activities resumed at Rosita in March 1995 and
production recommenced in June 1995. From that date through July 1999
approximately 1.6 million pounds were produced with 48,000 pounds produced in
1999.
The Company shut-in and placed on stand-by production at the Rosita site in
the first quarter of 1999 because of depressed uranium market conditions.
Nominal production from this site continued until July 1999 when the incremental
production costs at this facility exceeded the cost of purchasing uranium in the
marketplace.
Further Development Potential. The Company estimates that there are
approximately 261,000 recoverable pounds of uranium remaining to be produced
from the Rosita project. The timing of production from this property will be
dependent upon future uranium prices, the availability of sales contracts and
the availability of capital. The Company spent approximately $77,000 for
development activities, permitting and land holding costs in 1999. Significant
expenditures for these activities are not expected in 2000.
11
<PAGE> 15
Permitting Status. Radioactive materials licensing and UIC permit hearings
for currently producing areas have been completed, and the necessary permits
have been issued. Some minor amendments for further production within the permit
area will be required as development proceeds. The term of the license and UIC
permit is effectively open-ended.
Restoration and Reclamation. The Company conducted groundwater restoration
in 1999 and expects to continue these activities in 2000.
SOUTH TEXAS DEVELOPMENT PROPERTIES
VASQUEZ
The Property. The property consists of two mineral leases on 842 gross and
net acres located in southwestern Duval County, Texas.
The secondary lease term for this property expired in February 2000. URI
tendered payment under the shut-in royalty clause of the lease and also holds
its rights to the property through continuous development clauses in the lease.
The lessor returned the Company's shut-in royalty payments without disclosing
their reasons for rejecting the Company's payment. The Company believes that it
will continue to hold its rights to the property under either the shut-in
royalty or the continuing development clauses of the lease. The leases provide
for royalties based on uranium sales.
Reserves. The Company estimates that the property contained approximately
2.8 million pounds of recoverable reserves at December 31, 1999.
Development Plan. The timing of production will be dependent on a number of
factors. Prior to the commencement of production at Vasquez the Company will
require new capital inflows of approximately $2.5 million for construction,
development and financial surety needs.
Permitting Status. All of the required permits for this property have been
received from the TNRCC and the TDH.
NEW MEXICO DEVELOPMENT PROPERTIES
GENERAL
The Company has various interests in properties located in the Churchrock
and Crownpoint districts in New Mexico. As to these properties, the Company
holds both patented and unpatented mining claims, mineral leases and some
surface leases from private parties, the Navajo Nation and Navajo allottees. In
addition, in March 1997, the Company acquired from Santa Fe certain uranium
mineral interests and exploration rights for uranium on significant acreage in
New Mexico, a small portion of which falls within the Churchrock district.
In keeping with its overall corporate strategy, the Company's development
plan for its New Mexico properties will proceed incrementally, subject to timely
permitting, the availability of water rights, the availability of sales
contracts and the availability of capital. The Company plans to develop the
Churchrock district first and the Crownpoint district next.
12
<PAGE> 16
REGULATORY FRAMEWORK
NRC License. In New Mexico, uranium production requires a radioactive
materials license issued by the NRC. The Company has applied for one NRC license
covering all properties located in both the Churchrock and Crownpoint districts
(except the Mancos property) and has included the properties in both districts
(except the Mancos leases) under one Final Environmental Impact Statement
("FEIS"), which is a prerequisite for the NRC license.
The NRC finalized and completed the publication of the FEIS in the first
quarter of 1997. The NRC issued an operating license in January 1998 that would
allow operations to begin in the Churchrock district. In mid-1998, the NRC
determined that certain Churchrock and Crownpoint residents who requested a
hearing were qualified as to standing. Under the source materials licensing
procedures of the NRC, a hearing covering the license was conducted during 1999.
The administrative law judge has ruled on all of the contentions and upheld the
license. Subsequently, the ruling by the administrative law judge was appealed
to the full NRC. Although all the decisions to date have been favorable to the
Company, there can be no assurance that the license will be maintained in its
current form allowing the Company to proceed with its planned operations, or
that the NRC process will be concluded on a timely basis.
UIC Permit. NMED has jurisdiction under the New Mexico Water Quality Act to
regulate UIC activities within the State of New Mexico, and the New Mexico UIC
program has received "primary enforcement responsibility" from the EPA under the
federal SDWA. However, by the terms of regulations issued by the EPA and the
primacy determination made for the State of New Mexico, New Mexico's UIC primacy
does not extend to New Mexico's exercise of UIC regulation or permitting over
facilities located on "Indian lands," a term whose geographic reach the EPA has
defined as coextensive with that of "Indian country". Because even a permit
issued by a state holding UIC primacy cannot suffice in lieu of a federal UIC
permit issued under the SDWA unless the EPA issued a corresponding aquifer
exemption or temporary aquifer designation, the EPA's opinion that a site lies
within Indian country virtually compels a state UIC applicant to secure an EPA
UIC permit for UIC activities to be conducted on such a site.
In addition to the EPA's assertions, the Navajo Nation claims regulatory
jurisdiction over a significant portion of the Company's New Mexico development
properties. These claims subject the development of those properties within the
area claimed as "Indian country" to further uncertainties, including a potential
for delays in UIC permitting. For certain properties not permitted by the EPA at
the time a Navajo regulatory program is promulgated and accepted by the EPA for
a determination of primacy, the Company would then apply to the Navajo EPA for
its UIC permits. Although a Navajo UIC program may adopt unique application,
permitting, and enforcement procedures, it would, nonetheless, be required to
impose virtually the same substantive requirements that the Company is prepared
to satisfy under existing New Mexico and EPA UIC programs.
This dispute over UIC jurisdiction is currently focused on a portion of the
Churchrock and Crownpoint properties. Despite this current jurisdictional
dispute among the EPA, the State of New Mexico, and the Navajo Nation, the
Company maintains good relations with the State of New Mexico, the Navajo
Nation, and the EPA. However, there can be no assurance that the jurisdictional
dispute will not have a material adverse effect on the Company's development
plans in New Mexico.
Water Rights. For general information on water rights in New Mexico, see
"Business-Environmental Considerations and Permitting; Water Rights."
CHURCHROCK DISTRICT
The Property. The Churchrock properties encompass 2,225 gross and net acres
and include mineral leases, patented mining claims and unpatented mining claims.
The properties are located in McKinley County, New Mexico, and consist of three
parcels, known as Section 8, Section 17 and Mancos. None of these parcels lies
within the area generally recognized as constituting the Navajo Reservation. The
13
<PAGE> 17
Company owns the mineral estate in fee for both Sections 17 and the Mancos
properties. The surface estate on Section 17 is owned by the U.S. Government and
held in trust for the Navajo Nation. The Company owns patented and unpatented
mining claims on Section 8.
Resources. The Company estimates that as of December 31, 1999, Section 8
contained approximately 4.2 million pounds of recoverable uranium resources.
Section 17 contained approximately 5.5 million pounds of recoverable resources
and the Mancos property contained approximately 2.7 million pounds of
recoverable resources.
Development Plan. It is anticipated that the first property to be developed
will be Churchrock. Costs related to permitting activities and land holding
costs were approximately $666,000 in 1999. The Company does not anticipate
significant spending for permitting and land holding costs in 2000. The Company
anticipates having to demonstrate financial surety in connection with production
activities.
Water Rights. The Company originally acquired mineral leases on Sections 8
and 17 from United Nuclear Corporation ("UNC") and, in connection therewith,
acquired certain rights to use water from UNC. An application to use one of
these rights was the subject of extensive administrative proceedings and
litigation with the New Mexico State Engineer and the Navajo Nation over the
nature and extent of UNC's water rights. The State Engineer approved HRI's water
rights application in October 1999 and granted it sufficient water rights for
the life of the Churchrock mine.
Permitting Status. On June 21, 1989 the EPA issued its aquifer exemption
covering that portion of the Churchrock site known as Section 8, and on November
1, 1989, NMED issued its permit, covering UIC activities on Section 8. On
October 7, 1994, NMED issued an amended permit covering UIC activities on both
Section 8 and Section 17. The permit for Section 17 was contested by the Navajo
Nation which claimed UIC regulatory jurisdiction over the site, based on the
fact that the surface estate is owned by the Navajo Nation. The EPA, acting as
an advocate for the Navajo Nation, has asserted the Navajo Nation's claim and
has refused to amend its previously issued aquifer exemption covering Section 8
to add the portion of the Churchrock facility on Section 17. The Navajo Nation
has asserted jurisdiction over Section 8 as being a "dependent Indian
community". The EPA has informed the Company that the regulatory jurisdiction of
the property is considered to be in "dispute" and would require an EPA-issued
permit prior to the commencement of mining. The Company does not plan to pursue
permits for Mancos at this time.
In June 1996, the Company filed with the NMED two applications to renew the
permit in two distinct parts, one covering the Section 8 portion and the other
the Section 17 portion of Churchrock. This was to assure that the Company
maintained a "clear" UIC authorization on the Section 8 portion of the site. The
surface estate on Section 8 is not owned by the Navajo Nation or Navajo
allottees. Because the renewal application was timely filed, the permit covering
the Section 8 property has remained continuously in effect pending final
determination on the renewal application by the NMED.
The Navajo Nation has asserted jurisdiction over the UIC for Section 8,
claiming that the land lies within a "dependent Indian community." While the EPA
has not yet taken a final position on this issue, they have determined that a
dispute does exist between the NMED and the Navajo tribe. As a result of this
dispute, the EPA has indicated that an EPA permit will be required on this
property. The State of New Mexico and the Company appealed the action of the EPA
to the United States Court of Appeals for the Tenth Circuit. The Tenth Circuit
in January 2000, determined that EPA had jurisdiction and remanded the matter
back to EPA for further evaluation. The Company cannot predict the impact of
this decision and there can be no assurance that EPA will reissue a UIC permit
in its current form or on a timely basis. This situation could potentially delay
or obstruct development of Section 8.
14
<PAGE> 18
CROWNPOINT DISTRICT
The Property. The Crownpoint properties are located in the San Juan Basin,
22 miles northeast of the Company's Churchrock deposits and 35 miles northeast
of Gallup, New Mexico, adjacent to the town of Crownpoint. The Properties
consist of 1,578 gross and net acres, as follows:
(a) 162 gross and net acres on Section 24. The Company has 100% of the
mineral estate on this acreage pursuant to a combination of a 40% fee
interest, a mineral lease on the other 60% of the mineral estate unpatented
mining claims. This acreage is subject to an obligation of the Company to
pay a production payment on the first 50,000 pounds of uranium produced and
an override based on uranium sales;
(b) 959 gross and net acres on Sections 19 and 29 pursuant to a lease
from private mineral owners (expiring August 2007) which provides for
royalties and an override based on uranium sales; and
(c) 457 gross and net acres of unpatented mining claims in Sections 9,
24 and 25.
Resources. With respect to all the Crownpoint acreage, the Company
estimates as of December 31, 1999, the property contained approximately 25.3
million pounds of recoverable resources.
Development Plan. The New Mexico properties will be developed according to
the license conditions issued by the NRC. Under the license, the first operating
property will be Churchrock followed by Crownpoint. Costs relating to permitting
activities and land holding costs for Crownpoint were $874,000 in 1999, and are
not expected to be significant in 2000.
Water Rights. With respect to Crownpoint, the Company has acquired three
applications for appropriations of water which give the Company the first three
"positions in line" on the hearings list for the San Juan Basin. Certain aspects
of all three applications were protested and are subject to hearings. Water
rights relating to Unit 1 may likely involve the claim of the jurisdiction of
the Navajo Nation, and this jurisdictional issue might also be present for other
parts of Crownpoint. The Company plans to proceed with water rights for
Crownpoint at a future date.
Permitting Status. The NRC license is part of the overall development plan
for both the Churchrock and Crownpoint districts discussed above. The Company
has recently submitted a revised UIC permit application for Section 24. There
can be no assurance that the UIC permit will be granted. The surface estate on
Section 19 and 29 is owned by the U.S. Government and held in trust for the
Navajo Nation and may be subject to the same jurisdictional dispute as for
Section 17 in Churchrock.
Unit I Property. In addition to the foregoing, at December 31 1999 the
Company had 1,440 gross and net acres of mineral leases on nine separate parcels
(hereinafter referred to as "Unit 1") from Navajo allottees who are the
beneficial owners of the surface and mineral rights. The leases have been and
are subject to approval by the Bureau of Indian Affairs (the "BIA"). Such
approval had not been received at December 31, 1999 and as a result, the Company
reviewed each of the nine agreements to determine those that have been executed
by all the necessary parties to finalize each agreement. Three of the agreements
have received the required signatures from the allottees to complete the leases.
The remaining six require additional efforts to complete the leasing process. As
a result of this review, the Company has requested that the BIA return those
funds that have been held in escrow related to those six leases that require
further completion. This request was made and the Company received funds
totaling approximately $440,000 in the first quarter of 2000 related to these
leases.
15
<PAGE> 19
SANTA FE PROPERTIES
GENERAL
In March 1997 the Company acquired from Santa Fe certain uranium mineral
interests and exploration rights for uranium in New Mexico.
The Properties. The properties consist of: (a) 37,000 acres as to which the
Company has acquired a fee interest in the entire mineral estate, excluding coal
("Category I Properties"); (b) approximately 140,000 acres as to which the
Company has acquired the fee interest in uranium (the "Category II Properties");
and (c) approximately 346,000 acres as to which the Company has acquired the
exclusive right to explore for uranium and other minerals excluding coal (the
"Category III Properties").
The Company is obligated to spend on exploration $200,000 per year for the
ten-year period starting in March 1997 and $400,000 per year for the seven-year
period starting in March 2007. This expenditure can be made on any of the
Category II or Category III properties.
The license is for 17 years, expiring in March 2014. In the event that the
sale price of uranium shall exceed $25 per pound for any twelve-month period URI
has committed to spend on exploration (or pay to Santa Fe) during the following
5 years an aggregate of $5 million; and in the event that the sale price of
uranium shall exceed $30 per pound for any twelve-month period URI has committed
to spend on exploration (or pay to Santa Fe) during the following 5 years an
aggregate of $10 million.
With respect to Category II and Category III properties, at such time as
URI shall apply for a mining permit with respect to any such properties Santa Fe
has the right to put the remaining mineral interests owned by it (excluding
coal) to the Company at a price of $200 per acre for any acreage in any section
which is covered by the mining application. The acreage price shall be increased
by the same percentage as the percentage increase in the price of uranium on the
date of such application over $15.80 per pound. URI has the option to purchase
at any time the entire mineral estates (excluding coal) on such properties on
the same terms.
Resources. The Company estimates that the Category I Properties contain 9.6
million pounds of recoverable resources.
Development Plan. The planned development strategy is to integrate
qualified properties from the Santa Fe lands into the production plans for
Churchrock and Crownpoint.
Exploration Potential. There is significant exploration potential for the
Santa Fe properties. Numerous ore grade holes drilled on the properties
demonstrates this potential; however, because the deposits are not delineated,
development costs are uncertain.
RECLAIMED PROPERTIES
The Company has completed production and groundwater restoration on its
Benavides and Longoria projects in South Texas. The Company completed the final
stages of surface reclamation on these projects and received full and final
release for these sites in 1999.
The Company acquired the Section 17 leases in the New Mexico Churchrock
district from United Nuclear Corporation ("UNC"). UNC had conducted underground
mining for uranium on Section 17 and had reclaimed these properties. In
connection with the acquisition, the Company assumed any liability of UNC for
any remaining remediation work that might be required. NMED has not determined
what, if any,
16
<PAGE> 20
additional remediation will be required under the New Mexico Mining Act. If more
remediation work is required, the Company believes it will not involve material
expenditures.
RECLAMATION AND RESTORATION COSTS AND BONDING REQUIREMENTS
Upon completion of production from a wellfield, the Company is obligated
under state and federal law to restore the aquifer to a condition consistent
with its pre-mining use. This involves restoration of the aquifer, plugging and
abandoning the injection and production wells and reclaiming the surface. With
respect to operations at Kingsville Dome and Rosita the TNRCC and TDH requires
the Company to provide financial surety to cover the costs of such restoration
and reclamation. The surety bond requirement at December 31, 1999 was
approximately $6.2 million. The Company fulfills this requirement through the
issuance of surety bonds from the United States Fidelity and Guaranty Company
("USF&G") and has deposited as collateral for such bonds cash of approximately
$3.6 million. The Company is obligated to fund the cash collateral account with
an additional $0.50 for each pound of uranium production until the account
accumulates an additional $1.0 million. The Company estimates that its future
reclamation liabilities with respect to current operations at December 31, 1999
approximates $5.1 million, which has been charged to earnings. These financial
surety obligations are reviewed and revised annually by the TNRCC and TDH.
The Company anticipates that it will be required to provide financial
surety of approximately $1.0 million as a condition to receipt of the requisite
permits for the mining of the Vasquez project.
In New Mexico surety bonding will be required prior to development of the
properties. The Company anticipates that it will be required to provide
financial surety as a condition to receipt of the requisite permits for the
Churchrock project. The amount of the surety bond will be subject to annual
review and revision by the NRC and State of New Mexico.
ITEM 3. LEGAL PROCEEDINGS
LONGORIA
On August 28, 1995, Manuel T. Longoria, as owner of the ranch containing
the site of the Company's Longoria mine near Bruni in Duval County, Texas,
brought suit against the Company in state district court in Duval County, Texas
asserting claims said to have arisen at various times over the last 18 years. In
the action styled Longoria v. Uranium Resources, Inc., et al., Longoria sought
remediation of the Longoria property and for unspecified actual and punitive
damages.
The suit was settled in 1999 for an immaterial amount. All reclamation has
been completed and the Company received final release of its obligations from
the TDH in 1999.
PROBANK
On July 12, 1995, the Company filed a lawsuit in the federal district court
in Colorado against Professional Bank, a Colorado chartered bank ("ProBank"). In
the action styled Uranium Resources, Inc. v. Professional Bank, the Company
alleged that ProBank transferred $1,080,000, without the Company's
authorization, from the Company's account at ProBank to the accounts maintained
at ProBank of various entities and an individual affiliated with Oren L. Benton.
The Company recovered $300,000 of the total in 1995 and recovered $575,000 from
ProBank in June 1997 in settlement of the action against ProBank.
17
<PAGE> 21
BENTON BANKRUPTCY
During 1994, the Company encountered liquidity problems that resulted in
the Company entering into certain transactions with companies controlled by Mr.
Benton (the "Benton Companies"). On February 23, 1995, Benton and various of the
Benton Companies filed for protection under Chapter 11 of the Federal Bankruptcy
Code (the "Benton Bankruptcy"). On February 19, 1998, David J. Beckman, as
Liquidating Trustee for the CSI Liquidating Trust and the NTC Liquidating Trust
filed a complaint seeking recovery of a November 7, 1994 payment of $1,400,000
and $203,050 in cash advances made to the Company during a period from December
1994 to February 1995. The Liquidating Trustee asserted that the payments and
advances were avoidable as preferential and/or fraudulent transfers. On July 26,
1999, the parties entered into a settlement agreement and are currently
attempting to finalize the details of the settlement. Settlement negotiations
between the parties are presently ongoing. The Company does not believe any such
settlement or other outcome from this matter will have a material adverse impact
on the operating results or financial position of the Company.
The Company has asserted certain claims against Benton and the Benton
Companies in the bankruptcy proceedings. This matter was settled in 1999 by the
issuance of a note by Benton to the Company. In conjunction with that
settlement, the Company received the first of four scheduled installment
payments. The next two scheduled payments were not paid when due and are
currently outstanding.
OTHER
The Company is subject to periodic inspection by certain regulatory
agencies for the purpose of determining compliance by the Company with the
conditions of its licenses. In the ordinary course of business, minor violations
may occur, however, these are not expected to cause material expenditures.
INDIAN LANDS JURISDICTIONAL DISPUTE
See "Churchrock District-Permitting Status" for a discussion of permitting
jurisdiction over certain of the Company's mineral properties in New Mexico.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
18
<PAGE> 22
-----------------------------
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company is including the following cautionary statement to take
advantage of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 for any forward-looking statement made by, or on behalf of,
the Company. The factors identified in this cautionary statement are important
factors (but not necessarily all of the important factors) that could cause
actual results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company. Where any such forward-looking
statement includes a statement of the assumptions or bases underlying such
forward-looking statement, the Company cautions that, while it believes such
assumptions or bases to be reasonable and makes them in good faith, assumed
facts or bases almost always vary from actual results, and the differences
between assumed facts or bases and actual results can be material, depending
upon the circumstances. Where, in any forward-looking statement, the Company, or
its management, expresses an expectation or belief as to the future results,
such expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result, or be achieved or accomplished. Taking into
account the foregoing, the following are identified as important risk factors
that could cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company:
POSSIBLE BANKRUPTCY/COMPANY LIQUIDITY
As a result of the depressed spot prices in the uranium marketplace, the
Company shut-in and placed on stand-by its two South Texas facilities in the
first quarter of 1999. Nominal production from these sites continued to July
1999 until their incremental production costs exceeded the cost of purchasing
uranium in the marketplace. The Company continues to maintain certain activities
at these locations including its ongoing groundwater restoration efforts. The
Company has implemented additional steps in 1999 to preserve cash by reducing
expenses and maximizing the cash flow from its existing sales contracts.
The Company has consolidated certain of its administrative locations and
reduced its workforce. These measures were initiated in the fourth quarter of
1998 and continued in 1999. The successful implementation of these strategies
allowed the Company to maintain a positive liquidity position through 1999.
These cost cutting moves coupled with the Company's ability to monetize the
value of its long-term sales contracts during 1999 allowed it to remain liquid
during the year. The ability of the Company to continue to maintain a positive
cash position will require an infusion of capital that is currently unavailable
to it. Absent these capital inflows the Company will experience a negative cash
position by June 2000 which will prevent it from continuing in business. The
Company will continue to pursue alternatives as long as possible to allow it to
achieve positive liquidity through 2000 and beyond. If the Company is unable to
secure a cash infusion prior to June, it will consider all of its possible
alternatives, including a possible filing in bankruptcy.
Even if the market price of uranium increases and the demand for new
production increases, there can be no assurance that the Company can survive
long enough to participate in these changes or that it will have access to the
capital necessary to bring new production on line.
CONTINUING SIGNIFICANT CAPITAL REQUIREMENTS
An ISL mining operation requires a substantial amount of capital prior to
the commencement of, and in connection with, production of uranium, including
costs related to acquiring the rights to mine uranium, securing regulatory
permits and licenses, exploration and definitional drilling to determine the
underground configuration of the ore body, designing and constructing the
uranium processing plant,
19
<PAGE> 23
drilling and developing in order to establish the infrastructure for the
production wells for each wellfield and complying with financial surety
requirements established by various regulatory agencies regarding the future
restoration and reclamation activities for each property.
The Company does not expect to be able to fund its 2000 capital
requirements from existing sources cash flow from operations or existing working
capital financing arrangements. The Company's ability to survive will be
dependent upon it securing additional sources of funding for operational and
capital needs. There can be no assurance that the Company will secure such
capital to fund these its cash requirements in 2000.
POTENTIAL ADVERSE EFFECT OF FEDERAL AND STATE REGULATIONS
The development and production of uranium is subject to extensive
governmental regulations that materially affect the economics of the Company's
operations and the timing of project development. To produce uranium, the
Company must secure and maintain multiple permits, obtain adequate water rights
and comply with extensive federal, state and potential tribal regulations for
environmental protection, including regulations relating to air and water
quality, the prevention of groundwater contamination, the reclamation and
restoration of wellfield aquifers and the treatment, transportation and disposal
of liquid and/or byproduct material and solid wastes generated by the Company's
uranium mining and processing activities. To date, the Company's operations have
not been materially and adversely affected by the inability to obtain or
maintain required permits or water rights, or by any groundwater contamination
or the disposal of waste or byproduct material. However, should the Company be
unable to obtain or maintain permits or water rights for development of its
properties or otherwise fail to adequately handle future environmental issues,
the Company's operations could be materially and adversely affected by
expenditures or delays in the Company's ability to initiate or continue
production at its properties.
The Company must obtain all necessary permits from the appropriate
governmental agency before it can commence production at any of its development
properties. The Company's future production is highly dependent on its ability
to bring these development properties into production. Applications for
permitting of certain of these properties have been filed. There can be no
assurances that all the necessary permits will be obtained or that such permits
will be obtained in a timely manner. Any significant delays in obtaining the
necessary permits could have a material adverse effect upon the Company and its
developmental plans for these properties.
The Company has expended significant resources, both financial and
managerial, to comply with environmental protection laws, regulations and
permitting requirements and anticipates that it will be required to continue to
do so in the future. Although the Company believes its producing properties
comply in all material respects with all relevant permits, licenses and
regulations pertaining to worker health and safety as well as those pertaining
to the environment, the historical trend toward stricter environmental
regulation may continue. The uranium industry is subject to not only the worker
health and safety and environmental risks associated with all mining businesses,
but also to additional risks uniquely associated with uranium mining and
processing. The possibility of more stringent regulations exists in the areas of
worker health and safety, the disposal of wastes and byproduct material, the
decommissioning, decontamination and reclamation of mining, milling, refining
and conversion sites, and other environmental matters, each of which could have
a material adverse effect on the costs or the viability of a particular project.
The Company is required to provide financial surety to state environmental
agencies for plugging wells, groundwater restoration and site decommissioning,
decontamination and reclamation. The Company estimates that its current
restoration, decommissioning, decontamination and reclamation costs are
approximately $5.2 million, which amount the Company has accrued as a liability
on its financial statements. The Company satisfied its financial surety
requirements imposed by environmental regulators with surety bonds totaling
approximately $6.2 million at December 31, 1999, $3.6 million of which is
collateralized by the Company with cash. The Company anticipates that its future
financial surety
20
<PAGE> 24
requirements will increase significantly when future development and production
occurs at its sites in Texas and New Mexico. The amount of the financial surety
for each producing property is subject to annual review and revision by
regulators. There can be no assurance that the Company will have sufficient
capital to meet these future financial surety obligations.
URANIUM RESOURCE ESTIMATES
Uranium resource estimates are necessarily imprecise and depend to some
extent on statistical inferences drawn from limited drilling, which may prove
unreliable; and there can be no assurance that the indicated level of recoveries
will be realized. Should the Company encounter mineralization or formations at
any of its mines or projects different from those predicted by drilling,
sampling and similar examinations, uranium resource estimates may have to be
adjusted and mining plans may have to be altered in a way that could adversely
affect the Company's operations. Moreover, short-term operating factors relating
to the uranium resources, such as the need for sequential development of ore
bodies and the processing of new or different uranium grades, may adversely
affect the Company's profitability in any particular accounting period.
NEED TO REPLACE RESERVES
When in production, the Company's producing uranium mines are, in general,
characterized by a series of individual wellfields that produce at differing
declining production rates. Each wellfield's production decline rate depends on
ore reserve characteristics, and, in the case of the Company, varies from a
steep decline rate of six months, to a relatively slow production decline rate
of eighteen months. The Company's future uranium reserve production, and
therefore cash flow and income, are highly dependent upon the Company's level of
success in exploiting its current resources and acquiring or developing
additional reserves. Reserves at the Company's producing sites were depleted in
1999, although there is the potential for developing additional wellfields at
Kingsville Dome. There can be no assurance that the Company's development
properties will be placed into production or that the Company will be able to
continue to find and develop or acquire additional reserves.
COMPETITION
There is global competition in the uranium industry for mineral properties,
capital, customers and the employment and retention or qualified personnel. In
the production and marketing of uranium concentrates there are approximately 15
major uranium-producing entities, some of which are government controlled and
all of which are significantly larger and better capitalized than the Company.
The Company competes with larger producers in Canada, Australia and Africa,
as well as with other United States ISL producers of uranium and other producers
that recover uranium as a by-product of other mineral recovery processes. The
Company also expects to compete with uranium recovered from the de-enrichment of
highly enriched uranium obtained from the dismantlement of U.S. and Russian
nuclear weapons and sold in the market by the United States Enrichment
Corporation and/or the United States Department of Energy, as well as from
imports to the United States of uranium from the CIS. The amount of uranium
produced by competitors or imported into the United States may have a material
impact on uranium prices.
URANIUM PRICE VOLATILITY
The Company's existence is dependent on the price of uranium, which is
determined primarily by global supply and demand and by the relationship of that
price to the Company's costs of production. Historically, uranium prices have
been subject to fluctuation, and the price of uranium has been and will continue
to be affected by numerous factors beyond the Company's control, including the
demand for nuclear power, political and economic conditions, and governmental
legislation in uranium producing and consuming countries and production levels
and costs of production of other producing companies. Certain
21
<PAGE> 25
of the Company's current long and medium-term contracts have pricing mechanisms
related to spot market prices. In recent years, prior to 1996, imports of
uranium, including imports of uranium from the CIS, have resulted in significant
downward pressure on uranium prices.
The spot market price for uranium has demonstrated a large range since
January 1995. Prices have risen from $9.65 per pound as of January 31, 1995 to a
high of $16.50 per pound as of May 31, 1996. The spot price as of December 31,
1999 and March 31, 2000 was $9.60 and $9.20 per pound, respectively.
URANIUM CONTRACT PORTFOLIO
Long-term contracts have historically been the primary source of revenue to
the Company. At the beginning of 1999 the Company had four long-term contracts
for deliveries over the next two, three and four years of approximately $26.9
million in revenues. During 1999, the Company assigned its delivery rights for
2000 through 2002 under one of these contracts and also accelerated the
scheduled deliveries under another contract into the fourth quarter of 1999.
These transactions coupled with additional transactions made in the first
quarter of 2000 converting the value of the Company's long-term sales contracts
into cash have had the effect of exhausting its sales contract portfolio.
Currently, the Company does not have any remaining scheduled uranium deliveries
under contract for the balance of 2000 or beyond.
The Company must secure new profitable uranium sales contracts as the basis
for its continued existence. Demonstrated profitability under such new contracts
will form the basis for the Company to be able to secure the requisite
financing/equity infusion to resume production at its mine sites. The
profitability under such new contracts will depend on a number of factors
including the cost of producing uranium at the Company's mining properties, the
Company's ability to produce uranium to meet its sales commitments and the spot
market price of uranium.
LIMITED MARKET; DEPENDENCE ON A FEW CUSTOMERS
The Company's primary source of revenue is derived from its sale of uranium
to U.S. nuclear power plants. Uranium's only current commercial use is as fuel
for nuclear power reactors. Accordingly, the Company's past and potential
customers are electric utilities that operate nuclear power plants. The United
States is the world's largest producer of nuclear-generated electricity. There
can be no assurance that the Company can continue to compete successfully for
such customers.
Historically, a significant portion of the Company's contracted sales of
uranium has been from a small number of customers. This trend is expected to
continue if the Company is able to secure new sales contracts. The inability to
secure these new customers or the loss of any of these customers or curtailment
of purchases by such customers would have a significant materially adverse
effect on the Company including its inability to remain in business.
COMPETITION FROM ALTERNATIVE ENERGY SOURCES AND PUBLIC ACCEPTANCE OF NUCLEAR
ENERGY
Nuclear energy competes with other sources of energy, including oil and
gas, coal and hydro-electricity. These alternative energy sources are to some
extent interchangeable with nuclear energy, particularly over the longer term.
Lower prices of oil, gas, coal and hydro-electricity for an extended period of
time, as well as the possibility of developing in the future other low cost
sources for energy, have made and could continue to make nuclear power a less
attractive fuel source for the generation of electricity, thus resulting in
lower demand for uranium. Furthermore, the growth of the uranium and nuclear
power industry beyond or maintenance at its current level will depend upon
continued and increased acceptance of nuclear technology as a means of
generating electricity. Because of unique political, technological and
environmental factors that affect the nuclear industry, the industry is subject
to public opinion risks which have and could continue to have an adverse impact
on the demand for nuclear power and increase the regulation of the nuclear power
industry.
22
<PAGE> 26
POTENTIAL ADVERSE IMPACT OF LOSS OF KEY PERSONNEL
Certain of the Company's employees have significant experience in the
uranium ISL mining industry. The number of individuals with ISL experience is
small. The continuation of the Company is dependent upon the efforts of these
key individuals, and the loss of any one or more of such persons' services could
have a material adverse effect on the Company's business operations and
prospects.
MINING RISKS AND INSURANCE
The business of uranium mining generally is subject to a number of risks
and hazards, including environmental hazards, industrial accidents, flooding,
interruptions due to weather conditions and other acts of nature. Such risks
could result in damage to or destruction of the Company's wellfield
infrastructure and production facilities, as well as to adjacent properties,
personal injury, environmental damage and processing and production delays,
causing the Company monetary losses and possible legal liability. While the
Company maintains, and intends to continue to maintain, liability, property
damage and other insurance consistent with industry practice, no assurance can
be given that such insurance will continue to be available, be available at
economically acceptable premiums or be adequate to cover any resulting
liability.
23
<PAGE> 27
GLOSSARY OF CERTAIN TERMS
<TABLE>
<S> <C>
claim............................... A claim is a tract of land, the right to mine of which is held under the federal General
Mining Law of 1872 and applicable local laws.
concentrates........................ A product from a uranium mining and milling facility, which is commonly referred to as
uranium concentrate or U(3)O(8).
conversion.......................... A process whereby uranium concentrates are converted into forms suitable for use as fuel in
commercial nuclear reactors.
cut-off grade....................... Cut-off grade is determined by the following formula parameters: estimates over the relevant
period of mining costs, ore treatment costs, general and administrative costs, refining
costs, royalty expenses, process and refining recovery rates and uranium prices.
gross acres......................... Total acres under which the Company has mineral rights and can mine for uranium.
Indian country...................... A term derived from jurisdictional determinations in criminal law enforcement proceedings
under 18 U.S.C. Section 1151 and understood to encompass territory situated within Indian
reservations, land owned by Indian allottees and land within a dependent Indian community.
lixiviant........................... When used in connection with uranium in situ leach mining, a solution that is pumped into a
permeable uranium ore body to dissolve uranium in order that a uranium solution can be
pumped from production wells.
net acres........................... Actual acres under lease which may differ from gross acres when fractional mineral interests
are not leased.
ore................................. Naturally occurring material from which a mineral or minerals of economic value can be
extracted at a reasonable profit.
over feeding........................ Operating enrichment plants in a manner that reduces plant operating costs but increases the
amount of uranium required to produce a given quantity of enriched uranium.
probable reserves................... Reserves for which quantity and grade and/or quality are computed from information similar
to that used for proven (measured) reserves, but the sites for inspection, sampling, and
measurement are farther apart or are otherwise less adequately spaced. The degree of
assurance, although lower than that for proven (measured) reserves, is high enough to assume
continuity between points of observation.
</TABLE>
24
<PAGE> 28
<TABLE>
<S> <C>
proven reserves..................... Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches,
workings or drill holes; grade and/or quality are computed from the results of detailed
sampling and (b) the sites for inspection, sampling and measurement are spaced so closely
and the geologic character is so well defined that size, shape, depth and mineral content of
reserves are well-established.
reclamation......................... Reclamation involves the returning of the surface area of the mining and wellfield operating
areas to a condition similar to pre-mining.
recoverable reserves................ Reserves that are either proven or probable, are physically minable, and can be profitably
recovered under conditions specified at the time of the appraisal, based on a positive
feasibility study. The calculation of minable reserves is adjusted for potential mining
recovery and dilution.
reserve............................. That part of a mineral deposit which could be economically and legally extracted or produced
at the time of the reserve determination.
restoration......................... Restoration involves returning an aquifer to a condition consistent with its pre-mining use
and removing evidences of surface disturbance. The restoration of the wellfield can be
accomplished by flushing the ore zone with native ground water and/or using reverse osmosis
to remove ions to provide clean water for reinjection to flush the ore zone.
resources........................... A resource is a concentration of naturally occurring minerals in such a form that economic
extraction is potentially feasible.
roll front.......................... The configuration of sedimentary uranium ore bodies as they appear within the host sand. A
term that depicts an elongate uranium ore mass that is "C" shaped.
spot price.......................... The price at which uranium may be purchased for delivery within one year.
surety obligations.................. A bond, letter of credit, or financial guarantee posted by a party in favor of a beneficiary
to ensure the performance of its or another party's obligations, e.g., reclamation bonds,
workers' compensation bond, or guarantees of debt instruments.
tailings............................ Waste material from a mineral processing mill after the metals and minerals of a commercial
nature have been extracted; or that portion of the ore which remains after the valuable
minerals have been extracted.
Trade Tech.......................... A Denver-based publisher of information for the nuclear fuel industry; the successor to the
information services business of Nuexco.
</TABLE>
25
<PAGE> 29
<TABLE>
<S> <C>
uranium or uranium
concentrates........................ U(3)O(8), or triuranium octoxide.
U(3)O(8)............................ Triuranium octoxide equivalent contained in uranium concentrates, referred to as uranium
concentrate.
waste............................... Barren rock in a mine, or mineralized material that is too low in grade to be mined and
milled at a profit.
</TABLE>
26
<PAGE> 30
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Prior to March 24, 1999 the Company's Common Stock was traded on Nasdaq
under the trading symbol URIX. On March 23, 1999, the Company's common stock was
delisted from the Nasdaq National Market. Effective March 24, 1999, the
Company's common stock began being quoted on the OTC Bulletin Board. The
following table sets forth the high and low sales prices for the Common Stock as
reported on the applicable markets for the periods indicated:
<TABLE>
<CAPTION>
Common Stock
------------
Fiscal Quarter Ending High Low
- --------------------- ---- ---
<S> <C> <C>
December 31, 1999 13/64 7/64
September 30, 1999 9/32 5/32
June 30, 1999 27/64 5/32
March 31, 1999 1/2 1/8
December 31, 1998 25/32 5/32
September 30, 1998 2-3/8 7/32
June 30, 1998 3 2
March 31, 1998 4-3/8 2-1/8
</TABLE>
The high and low sales prices for the common stock for the period January
1, 2000 through March 22, 2000, was $0.4375 and $0.125, respectively.
HOLDERS
As of March 31, 2000, the Company had 14,520,366 shares of Common Stock
outstanding held of record by 127 persons.
DIVIDENDS
The Company did not declare or pay any cash or other dividends on its
Common Stock during the years ending December 31, 1999, 1998 or 1997. The
Company does not anticipate paying dividends for the foreseeable future.
27
<PAGE> 31
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
(unaudited)
--------------------------------------------------------
(In thousands, except per share and per pound amounts)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA
Uranium sales:
Produced uranium $ 2,281 $ 10,984 $ 14,737 $ 17,827 $ 7,195
Purchased uranium 4,974 12,363 15,003 6,437 14,634
Other uranium revenues 1,290 -- -- -- --
Cost of uranium sales (8,514) (21,286) (29,269) (20,122) (17,235)
-------- -------- -------- -------- --------
Earnings from operations before
writedown of uranium properties 31 2,061 471 4,142 4,594
Writedown of uranium properties (38,455) (23,112) -- -- (163)
-------- -------- -------- -------- --------
Earnings (loss) from operations
before corporate expenses (38,424) (21,051) 471 4,142 4,431
Corporate expenses (2,061) (2,730) (2,937) (3,055) (3,496)
-------- -------- -------- -------- --------
Earnings (loss) from operations (40,485) (23,781) (2,466) 1,087 935
Interest and other, net 381 56 868 (328) (324)
Loss on termination of joint venture
and transfer to stockholders -- -- -- -- (1,781)
-------- -------- -------- -------- --------
Earnings (loss) before income taxes (40,104) (23,725) (1,598) 759 (1,170)
Federal income tax (benefit) (264) (4,745) (273) -- (234)
-------- -------- -------- -------- --------
Net earnings (loss) $(39,840) $(18,980) $ (1,325) $ 759 $ (936)
======== ======== ======== ======== ========
Earnings (loss) per common share:
Basic $ (3.27) $ (1.57) $ (0.11) $ 0.09 $ (0.12)
======== ======== ======== ======== ========
Diluted $ (3.27) $ (1.57) $ (0.11) $ 0.08 $ (0.12)
======== ======== ======== ======== ========
Weighted average common stock
and equivalents outstanding:
Basic 12,178 12,053 11,760 8,789 8,098
Diluted 12,178 12,053 11,760 10,031 8,098
CONSOLIDATED OPERATING AND OTHER
DATA
Cash provided by (used in) operations $ (470) $ 8,201 $ 4,931 $ 9,294 $ 5,301
Pounds of uranium produced 109 623 871 1,360 612
Pounds of uranium purchased 414 865 1,275 488 660
Pounds of uranium delivered 570 1,586 2,240 1,656 1,633
Capital expenditures $ 1,630 $ 6,168 $ 14,901 $ 14,607 $ 3,583
Average sales price per pound(a) $ 12.72 $ 15.13 $ 13.71 $ 16.35 $ 15.64
Average cost of produced pounds sold (b) $ (c) $ 16.58 $ 15.61 $ 11.34 $ 10.28
Average cost of purchased pounds sold $ 10.35 $ 10.12 $ 10.40 $ 10.21 $ 9.41
Cash cost per produced pound(b) $ (c) $ 13.17 $ 12.17 $ 8.51 $ 7.11
Average cost per produced pound(b) $ (c) $ 17.11 $ 15.85 $ 12.12 $ 10.09
Average cost per purchased pound $ 10.35 $ 10.12 $ 10.40 $ 10.21 $ 9.52
</TABLE>
(a) Excludes sales of the Russian component of deliveries made under the matched
sales amendment. The economic benefit of such sales is treated as "pass-through"
sales.
(b) Average cost per produced pound consists of all operating costs, depletion,
depreciation and accrued restoration and reclamation costs.
(c) The Company ceased uranium production operations in the first quarter of
1999 when its South Texas projects were placed on stand-by. Costs while on
stand-by are expensed to operating expenses as they are incurred. A nominal
amount of production has occurred while the projects have been on stand-by, the
inventory resulting from such incidental production was valued at the current
spot market cost when produced.
28
<PAGE> 32
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
(unaudited)
-----------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA
Cash and cash equivalents $ 494 $ 3,714 $ 2,325 $ 16,934 $ 4,716
Working capital 586 2,631 5,999 15,269 4,710
Uranium properties (net) 2,167 39,472 61,303 42,444 37,200
Total assets 7,740 49,696 74,864 68,794 48,085
Total debt (1) 6,952 7,882 8,419 12,577 7,487
Total liabilities 14,139 16,363 22,959 23,497 18,214
Total shareholders' equity (deficit) (6,399) 33,333 51,905 45,297 29,872
</TABLE>
(1) Includes current portion of long-term debt and notes payable.
29
<PAGE> 33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This Item 7 contains "forward-looking statements" which are made pursuant
to the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. These statements include, without limitation, statements relating to
liquidity, financing of operations, continued volatility of uranium prices and
other such matters. The words "believes," "expects," "projects," "targets," or
"estimates" and similar expressions identify forward-looking statements. The
Company does not undertake to update, revise or correct any of the
forward-looking information. Readers are cautioned that such forward-looking
statements should be read in conjunction with the Company's disclosures under
the heading: "Cautionary Statement for the Purposes of the `Safe Harbor'
Provisions of the Private Securities Litigation Reform Act of 1995" beginning on
page 19.
CAPITAL RESOURCES AND LIQUIDITY
Operating Cash Flows
At December 31, 1999, the Company's cash and cash equivalents were $494,000
compared to $3,714,000 at year end 1998. Cash and cash equivalents in 1998
increased by $1,388,000 from 1997 year end levels. The Company's uranium
operations generated negative cash flow of $470,000 for the year ended December
31, 1999, in comparison to positive cash flow from operations in 1998 and 1997
of $8,201,000 and $4,931,000, respectively. The Company's net working capital at
December 31, 1999 and 1998 was $586,000 and $2,631,000, respectively.
As a result of depressed spot prices in the uranium marketplace, the
Company shut-in and placed on stand-by its two South Texas facilities in the
first quarter of 1999. Nominal production from these sites continued through
July 1999 until their incremental production costs exceeded the cost of
purchasing uranium in the marketplace. The Company continues to maintain certain
activities at these locations including its ongoing groundwater restoration
efforts. The Company also implemented steps in 1999 to preserve cash by reducing
expenses and maximizing the cash flow from its existing sales contracts.
The Company consolidated certain of its administrative locations, and
significantly reduced its workforce. The implementation of these measures were
initiated in the fourth quarter of 1998 and continued in 1999. The
implementation of these strategies allowed the Company to maintain positive
liquidity through 1999.
The ability of the Company to continue to maintain a positive cash position
in 2000 will require an infusion of capital that is currently unavailable to it.
Absent these capital inflows the Company will experience a negative cash
position by June 2000 which will prevent it from continuing in business. The
Company will continue to pursue alternatives as long as possible to allow it to
achieve positive liquidity through 2000 and beyond.
In March 1998, the Company entered into an agreement to extend the maturity
date of its $6,000,000 secured convertible note from May 31, 1998 to May 31,
2000. As a result of this two year extension, the Company reclassified this
obligation as a long-term obligation which had a positive impact of $6,000,000
to its net working capital at December 31, 1997. In February 2000, the note
along with accrued interest of $334,438 was converted into 2,111,478 shares of
the Company's Common Stock. This conversion eliminated all obligations under the
note.
During January 1995, when companies controlled by Oren L. Benton (the
"Benton Companies") held effective control of the common stock of the Company,
the Company transferred $1 million to the Benton Companies in connection with a
planned joint venture to process uranium at a Benton Companies
30
<PAGE> 34
mill. Shortly thereafter, an additional $1,080,000 was transferred to or for the
benefit of Mr. Benton or certain Benton Companies without the authorization of
the Company's Board of Directors. In February 1995, Mr. Benton and certain of
the Benton Companies filed for bankruptcy. The Company has recovered $875,000
related to the unauthorized transfer ($300,000 in 1995 and $575,000 in 1997);
however, the remaining $1.2 million will not be recovered. A loss for these
transactions of $1.78 million was recorded in 1995 and the recovery of the
$575,000 resulted in an increase to other income in 1997.
Investing Cash Flows
The Company resumed development activities at its Rosita site during the
second quarter of 1995 and uranium production began in June 1995. During 1998
and 1999, $244,000 and $77,000 in capital expenditures were incurred at Rosita,
respectively. Capital expenditures to be incurred for 2000 at Rosita are
expected to be minimal.
Significant development activities at the Company's Kingsville Dome
facility began in December 1995 and resulted in commencement of production at
this site in March 1996. Capital expenditures at Kingsville Dome during 1998 and
1999 totaled $2,999,000 and $137,000, respectively and are expected to be
minimal in 2000. The Company will require additional sources of funding in 2000
to fund its operating activities including those at the Kingsville Dome and
Rosita.
In June 1996, the Company acquired the rights to a significant uranium
deposit in South Texas known as the Alta Mesa project. The Company spent
$4,000,000 to acquire the uranium rights to the property which contains
significant resources. The primary term of the lease was to expire in December
1999 and required either minimum production from the property or a payment of
approximately $530,000. In December 1998, the Company attempted to renegotiate
the lease. The renegotiation was not successful and in January 1999 the Company
relinquished its rights to this property which resulted in a pre-tax write-off
of approximately $5.0 million in the fourth quarter of 1998. Capital
expenditures related primarily to permitting activities and land holding costs
totaled approximately $515,000 and $103,000, respectively in 1997 and 1998.
The initial capital costs to acquire the rights to the Alta Mesa property
were obtained through a one-year note from the Lindner Dividend Fund. This $4.0
million note was repaid in January 1997 from the proceeds from the Company's
equity placement completed in December 1996.
Capital expenditures at the Company's Churchrock, Crownpoint and Vasquez
projects for permitting and land holding costs totaled approximately $2,800,000
and $1,598,000 in 1998 and 1999, respectively and are not expected to be
significant in 2000. Capital requirements for 2000 and beyond for these projects
will require additional inflows of capital not currently available to the
Company. These future sources of debt and/or equity financing will be necessary
for the Company to remain operating.
Cash used for other investing activities for 1998 and 1999 totaled $345,000
and $2,000, respectively and was for the purchase of certificates of deposit to
collateralize bonds for the Company's producing and development properties.
These certificates of deposit are not readily available to the Company. See Note
1 - "Restricted Cash" of the Notes to Consolidated Financial Statements.
Financing Cash Flows
In July 1999, the Company extended its revolving credit facility through
July 2000. The maximum amount available under the facility is $3.0 million.
Borrowings under this agreement are secured by the Company's uranium inventory
and/or by receivables from its uranium sales contracts. Principal and interest
payments under the loan are due monthly, with interest on the loan accruing at
the prime rate plus 1%. Principal advances, outstanding, under the facility
totaled $575,000 at December 31, 1999 such amount was repaid in the first
quarter of 2000. At March 31, 2000, the Company had monetized all of its uranium
sales contracts and sold all its uranium inventories. Without these underlying
assets, the Company is unable to draw on the credit facility and cannot utilize
it as a source of working capital.
31
<PAGE> 35
In June 1996, the Company received $4.0 million in proceeds from the
one-year note entered into with the Lindner Dividend Fund, noted previously. The
terms of the note provided for the payment of both the principal and accrued
interest by June 1997 with interest on the note accruing at a rate of 6.5% per
annum. The principal and accrued interest on this note was paid in January 1997.
In December 1996, the Company completed an equity placement in which
2,000,000 shares of the Company's common stock were sold in a public offering.
Net proceeds to the Company totaled over $14,000,000 with $4,900,000 of the
proceeds used in January 1997 to repay the $4.0 million note from the Lindner
Dividend Fund and to pay certain other long-term obligations. The balance of the
proceeds was used for working capital purposes and to fund development
activities at the Company's projects.
The Company was obligated to pay a production payment royalty of $1.00 per
pound on the first three million pounds of uranium produced and sold from either
Kingsville Dome or Rosita. The Company has cumulatively produced in excess of
three million pounds of uranium from these properties and made the final payment
of approximately $730,000 on this obligation in January 1997.
In 1997 the Company generated $133,000 from the issuance of 40,000 shares
of common stock associated with the exercise of certain stock warrants.
Other Non-Cash Transactions
In 1999, the Company issued approximately 288,000 shares of common stock to
certain officers and directors in satisfaction of $108,000 of compensation
deferred by these individuals under the Uranium Resources, Inc. 1999 Deferred
Compensation Plan.
In March 1997, the Company acquired from Santa Fe Pacific Gold Corporation
("Santa Fe") certain mineral interests covering approximately 500,000 acres in
northwestern New Mexico in exchange for 1.2 million shares of the Company's
common stock and a commitment for certain exploration expenditures.
Approximately one-third of the acreage comprises uranium mineral rights and the
remaining acreage comprises exploration rights with rights to purchase and
develop any uranium mineral interests found.
DEPENDENCE ON URANIUM PRICES
The Company's operations are dependent on the price of uranium relative to
the Company's cost of production. Historically, uranium prices have demonstrated
significant volatility and have been and will continue to be affected by factors
outside of the Company's control.
IMPACT OF URANIUM PRICE DECLINES
The USEC privatization and the potential disposition of their uranium
inventory has had a detrimental effect on the uranium markets. The continued
sale of USEC inventory and the ultimate disposition of highly enriched Russian
uranium and U.S. Government uranium stockpiles will continue to depress uranium
prices or inhibit prices from rising to higher levels over the next several
years. The prospect of potentially depressed uranium prices for continued
periods has and will continue to adversely impact the Company's ability to
secure additional long-term sales contracts at prices that exceed the Company's
overall costs.
The market price of uranium has fallen to levels that are currently below
the Company's cost of uranium production. The outlook for uranium prices through
the end of 2000 indicates that a price rebound to levels which would enable the
Company to obtain the necessary financing to allow development of new production
areas in South Texas during this period is unlikely.
In order for the Company to maximize the cash flow from its uranium sales
contracts, the Company has assigned its rights to make future deliveries,
accelerated deliveries scheduled for 2000 and negotiated a buy-out of its future
deliveries related to all of its uranium sales contracts. These transactions
have completely exhausted the Company's portfolio of sales contracts and
positioned it without any source of revenue and cash flow in 2000 and beyond.
32
<PAGE> 36
The production operations in South Texas at the Kingsville Dome and Rosita
facilities were shut-in and placed on stand-by in the first quarter of 1999.
Nominal production from these sites continued through July 1999 until their
incremental production costs exceeded the cost of purchasing uranium in the
marketplace. The timing of the resumption of full-scale production from these
sites will be dependent upon future uranium prices, the availability of sales
contracts and the availability of capital. While on stand-by, the Company will
continue to maintain certain activities at these locations including its ongoing
restoration efforts.
In connection with the shut-in of production, the Company made additional
cost reductions at all levels. These cost savings included the consolidation of
certain administrative locations, personnel reductions in both its operating and
its general and administrative workforce and reductions in compensation for the
Company's executive management.
The Company continues to evaluate its core uranium assets in Texas and New
Mexico in order to optimize the value of these assets to the Company. Possible
alternatives for these uranium assets may include the sale or joint venturing of
certain of these projects or the termination of the Company's rights for those
properties whose holding costs are determined to be in excess of their expected
value.
WRITEDOWN OF URANIUM PROPERTIES
PROPERTY WRITEDOWN IN 1999
In 1999 and the first quarter of 2000, the Company monetized all of its
remaining long-term uranium sales contracts and sold certain of its property and
equipment to maintain a positive cash position. The Company has exhausted all of
its available sources of cash to support continuing operations and will be
unable to continue in business beyond June 2000 unless it can secure a cash
infusion.
The Company's near-term potential illiquidity has necessitated a
reevaluation of the Company's method of valuing its uranium properties for
accounting purposes. The Company has previously valued its uranium properties
based upon the methodology that assumed that each property would be ultimately
placed into production. The Company has determined that it can no longer utilize
this valuation method and has determined the value of these assets are more
reasonably estimated by valuing them on a held for sale basis.
The change in valuation methodology for Company's uranium assets used
significant estimates regarding the value of these properties based upon their
sales value in the current uranium market. In this process the Company examined
the value each of its uranium properties on a property-by-property basis. Such
review has included an examination of each of the specific components comprising
each individual property to determine its fair market value should the Company
dispose of the assets.
The cost basis for both of the Company's uranium production properties are
comprised of both tangible physical assets and intangible assets that have been
capitalized as part of the mineral rights acquisition, permitting, licensing,
exploration and development process. The cost basis for the Company's
development properties are comprised primarily of those intangible costs noted
above.
In evaluating the fair value of the Company's production properties
management has determined that the fair value of these properties is best
represented by the salvage value of the tangible physical assets associated with
each site. All intangible costs associated with the production properties were
written off as a part of this determination.
The valuation for the Company's development properties was performed by
determining those projects whose cost structure would be able to maintain a
positive cash flow if operated in the current uranium market and those which
require higher uranium prices to operate profitable. It was determined that the
Company's South Texas Vasquez property could operate with a positive cash flow
in the current
33
<PAGE> 37
market and all other development properties including all New Mexico projects
require higher prices. The valuation for all development properties other than
Vasquez have been valued at the salvage value of their tangible physical assets.
The Vasquez project was valued based upon the estimated discounted cash flows
from the project.
The resulting writedown of the Company's uranium properties resulted in a
pre-tax charge against earnings of approximately $38.4 million. After the
property writedown, the Company's uranium properties had a net carrying value of
approximately $2.1 million at December 31, 1999.
Significant estimates were utilized in determining the carrying value of
the Company's uranium properties. The actual value received from the disposition
of these assets may vary significantly from these estimates based upon market
conditions, financing availability and other factors.
PROPERTY WRITEDOWN IN 1998
In view of the continuing weakness in uranium prices in 1998, the Company
reviewed the carrying values of its uranium properties and determined that a
writedown was required at September 30, 1998 with respect to its existing
producing properties of approximately $18,000,000. The writedown was recorded as
a non-cash charge against earnings in the third quarter of 1998. The writedown
in the carrying value of the Kingsville Dome and Rosita properties totaled
$12,300,000 and $5,600,000, respectively. The net carrying value of these
properties at December 31, 1998 (after giving effect to the writedown) was
approximately $6,106,000 for Kingsville Dome and $900,000 for Rosita.
The review utilized a number of estimates and assumptions, including
current and projected uranium prices (which assumed higher prices in the future)
and the timing and costs of future production activities. The estimates also
assumed that the Company would be able to operate each of its production sites
in the future at production rates that are higher than the Company's production
rate for 1998 and as a result operate at costs that are significantly below
those experienced for 1998.
ALTA MESA
In June 1996, the Company acquired the Alta Mesa property in South Texas
for $4 million. In 1998, the Company determined that this project would not be
pursued toward development and the Company terminated the lease agreement and
wrote off the net carrying value of the property in 1998 of $5,021,000.
ENVIRONMENTAL ASPECTS
The Company utilizes ISL solution mining technology as its only mining
method. Unlike conventional uranium mining companies, the Company's mining
technology does not create "tailings". Nevertheless, the Company is highly
regulated. Its primary environmental costs to date have been related to
obtaining and complying with environmental mining permits and, once mining is
completed, the reclamation and restoration of the surface areas and underground
water quality to a condition consistent with applicable requirements. Accruals
for the estimated future cost of such activities are made on a per-pound basis
as part of production costs. See the Consolidated Statements of Operations for
the applicable provisions for such future costs. See also Note 1 - "Restoration
and Reclamation Costs" of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Revenues, earnings from operations and net income for the Company can
fluctuate significantly on a quarter to quarter basis during the year because of
the timing of deliveries requested by its utility customers. The Company's
customers have generally elected, where possible, to take delivery of the bulk
of the annual deliveries under their long-term sales contracts later in each
year. Accordingly, operating
34
<PAGE> 38
results for any quarter or year-to-date period are not necessarily comparable
and may not be indicative of the results which may be expected for future
quarters or for the entire year.
Years Ended December 31, 1999, 1998 and 1997
The following is a summary of the key operational and financial statistics
related to the Results of Operations:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(In thousands, except per pound data)
<S> <C> <C> <C>
Uranium sales revenue(a) $7,255 $ 23,347 $ 29,741
Other uranium revenues $1,290 -- --
Total pounds delivered 570 1,586 2,240
Average sales price/pound(b) $12.72 $ 15.13 $ 13.71
Pounds produced 109 623 871
Pounds purchased 414 865 1,275
Average production cost of produced pounds (c) $ 17.11 $ 15.85
Average cost of purchased pounds $10.35 $ 10.12 $ 10.40
Average cost of produced pounds sold (c) $ 16.58 $ 15.61
Average cost of purchased pounds sold $10.35 $ 10.12 $ 10.40
</TABLE>
(a) 1998 and 1997 uranium sales revenues include approximately $1.5 million and
$2.8 million, respectively, from the sale of Russian uranium which is sold under
the matched sales Amendment.
(b) Average sales price does not include the sales of Russian material sold as a
"pass through" sale under the matched sales Amendment.
(c) The Company ceased uranium production operations in the first quarter of
1999 when its South Texas projects were placed on stand-by. Costs while on
stand-by are expensed to operating expenses as they are incurred. A nominal
amount of production has occurred while the projects have been on stand-by, the
inventory resulting from such incidental production has been valued at the
current spot market cost.
Revenue from uranium sales in 1999 decreased by $16,092,000 from 1998
amounts. This decrease resulted primarily from lower uranium deliveries this
year (570,000 pounds) compared to 1998 (1,586,000 pounds). Deliveries were
comprised of produced pounds and uranium sold into existing contracts. 1998
deliveries included 717,000 pounds of purchased Russian uranium whose economic
benefit is essentially treated as a "pass through" sale (this includes the
delivery of Russian origin uranium under the Company's matched sales contracts).
While such sales have a positive impact on revenues, they have no impact on
earnings from operations or net income.
The deliveries of the Company's produced pounds and non-pass through
purchased pounds in 1997 was approximately 1,555,000 pounds compared to
1,496,000 in 1998. The average sales price for such sales in 1997 was $14.68 per
pound compared to $15.13 in 1998. The average sales price for total uranium
deliveries (including Russian origin uranium) in 1998 and 1997 was $14.73 per
pound and $13.28 per pound, respectively.
35
<PAGE> 39
Details of the cost of uranium sales were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Cost of purchased uranium $ 4,285 $ 8,745 $13,258
Royalties 146 580 834
Operating expenses 2,913 5,347 6,564
Provision for restoration and reclamation costs 235 692 1,032
Depreciation and depletion of uranium properties 935 5,923 7,581
Writedown of uranium properties 38,455 23,112 --
------- ------- -------
Total cost of uranium sales $46,969 $44,399 $29,269
======= ======= =======
</TABLE>
The Company ceased uranium production operations in the first quarter of
1999 when its Kingsville Dome and Rosita facilities were placed on stand-by.
Nominal production of 109,000 pounds were produced from these sites and were
valued at the then current spot market cost. The timing of the resumption of
full-scale production from these sites will be dependent upon certain factors
(see Item 1. Business "Going Concern/Uncertain Future Operations").
Combined production for 1998 from Kingsville Dome and Rosita was 623,000
pounds which approximated the Company's "produced pound" delivery requirements
under its 1998 uranium sales contracts. 1998 per pound costs of uranium
production was an average cost of $17.11 per pound from the two facilities. This
increase in unit costs resulted from the fixed costs of operations remaining at
levels which were not absorbed as efficiently by the fewer pounds that were
produced during the year.
In 1997, a number of organizational and operating changes, including plant
design modifications, were implemented to address specific production
inefficiencies. The main operating changes related to the water quality of the
mine areas under wellfield at each site. Certain redesign of the plants and
wellfield patterns were performed to mitigate the effects of continuously
recycled ground water utilized in the production process by minimizing the
amount of mine water that previously was used in multiple wellfields.
The average cost of uranium purchases made in 1999 was $10.35 per pound
compared to $10.12 in 1998 and $10.40 in 1997. Total deliveries in 1999 were
570,000 pounds of which 414,000 were purchased pounds and 156,000 were produced
pounds. Total deliveries in 1998 were 1,586,000 pounds of which 865,000 were
purchased pounds and 721,000 were produced pounds (average cost of $16.58 per
pound). Deliveries in 1997 consisted of 1,275,400 purchased pounds, at an
average cost per pound of $10.40, and 965,000 produced pounds at $15.61 per
pound.
Operating expenses totaled $2,913,000 in 1999 compared to $5,347,000 ($7.41
per pound) in 1998 and $6,564,000 ($6.80 per pound) in 1997. Total operating
expenses and depreciation and depletion include standby costs for the Kingsville
Dome and Rosita facilities when these facilities are not in production and a
lower of cost or market adjustment. These costs have been recorded as direct
charges to operations. Standby costs for 1999 were 1,383,000 and a lower of cost
or market adjustment of $423,000.
The provision for restoration and reclamation in 1999 of $235,000 consists
of $147,000 ($0.94 per pound) for production sold and $88,000 for restoration
related to a previous production site. The provision for restoration and
reclamation in 1998 of $692,000 consists primarily of costs from produced pounds
sold during the year ($0.95 per pound). Restoration and reclamation in 1997 was
$910,000 ($0.95 per pound) for production sold in 1997 and $120,000 for costs
associated with reclamation activities related to the Benavides project (a
previous mining location).
36
<PAGE> 40
The depreciation and depletion provision in 1999 was $935,000 and consisted
of $653,000 ($4.18 per pound) for produced uranium sold and $282,000 for
depreciation while on stand-by. Comparable costs for 1998 were $5,923,000
(average rate of $8.21 per pound) and $7,580,000 in 1997 (an average rate of
$7.86 per pound).
Royalties in 1999 were $146,000 compared to $579,000 in 1998 and $834,000
in 1997. The decrease in 1999 and 1998 is directly attributable to the lower
production from Rosita and Kingsville Dome and the corresponding reduction in
sales of produced uranium compared to each prior year.
Corporate expenses consisting of general and administrative ("G&A")
expenses decreased to $2,036,000 in 1999 from $2,672,000 in 1998 and $2,914,000
in 1997. The reduction in 1999 and 1998 from 1997 costs reflected primarily from
lower overall compensation levels and cost reductions that were implemented in
1998 and continued throughout 1999.
Interest and other income increased to $608,000 in 1999 compared to 1998.
This change in 1999 included a gain from the sale of equipment ($269,000) and
the settlement of claims against Benton and the Benton Companies in the
bankruptcy proceedings ($100,000). Interest and other income in 1998 totaled
$208,000, down from 1997 levels. The 1997 total included amounts primarily from
the settlement in June 1997 of the Company's lawsuit against the Professional
Bank of Denver, Colorado ($575,000) and an increase in interest income for that
year. The higher interest income resulted from higher average available cash and
investment balances that were generated from the Company's equity placement in
December 1996.
YEAR 2000 READINESS
The Company currently utilizes computer software in the management of its
operations and in accounting for its operating results that could be affected by
the date change in the year 2000 (the "Y2K issue"). All critical information
technology software and systems utilized by the Company has been purchased from
and are supported by third party vendors. Prior to the end of 1999 the Company
conducted a review of the potential impact of the year 2000 on such systems, and
concluded that it would not encounter significant operational or financial costs
related to compliance with this issue. The Company did not incur any adverse
impact related to the changeover to the year 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
URANIUM PRICE VOLATILITY
The Company is subject to market risk related to the market price of
uranium. The Company's cash flow has historically been dependent on the price of
uranium, which is determined primarily by global supply and demand, relative to
the Company's costs of production. Historically, uranium prices have been
subject to fluctuation, and the price of uranium has been and will continue to
be affected by numerous factors beyond the Company's control, including the
demand for nuclear power, political and economic conditions, and governmental
legislation in uranium producing and consuming countries and production levels
and costs of production of other producing companies.
The spot market price for uranium has demonstrated a large range since
January 1995. Prices have risen from $9.65 per pound as of January 31, 1995 to a
high of $16.50 per pound as of May 31, 1996. The spot price as of March 31, 2000
was $9.20 per pound.
37
<PAGE> 41
URANIUM SALES CONTRACT PORTFOLIO
Long-term contracts have historically been the primary source of revenue to
the Company. At the beginning of 1999 the Company had four long-term contracts
for deliveries over the next two, three and four years of approximately $26.9
million in revenues. During 1999, the Company assigned its delivery rights for
2000 through 2002 under one of these contracts and also accelerated the
scheduled deliveries under another contract into the fourth quarter of 1999.
These transactions coupled with additional transactions made in the first
quarter of 2000 converting the value of the Company's long-term sales contracts
into cash have had the effect of exhausting its sales contract portfolio.
Currently, the Company does not have any remaining uranium sales contracts for
the balance of 2000 or beyond.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Item 8 appears on pages F-1 through F-24 of
this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
38
<PAGE> 42
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The Board of Directors of the Company consists of the three individuals
shown below. Directors hold office until the next annual meeting of stockholders
and until their successors are elected and qualified. Directors are elected by
plurality vote.
The following table sets forth certain information concerning the
individuals nominated for election as directors of the Company:
<TABLE>
<CAPTION>
Positions and Offices
Name Age with the Company
---- --- ----------------------
<S> <C> <C>
Paul K. Willmott 60 Chairman, Chief Executive Officer,
President and Director
Leland O. Erdahl 71 Director
George R. Ireland 43 Director
</TABLE>
NOMINEES FOR DIRECTOR
PAUL K. WILLMOTT has served as a director of the Company since August 1994,
as President of the Company since February 1995 and as Chairman of the Board and
Chief Executive Officer since July 31, 1995. Mr. Willmott served as the
Company's Chief Financial Officer from April 12, 1995 to September 25, 1995. Mr.
Willmott retired from Union Carbide Corporation ("Union Carbide") where he was
involved for 25 years in the finance and operation of Union Carbide's world-wide
mining and metals business. Most recently, Mr. Willmott was President of UMETCO
Minerals Corporation, a wholly-owned subsidiary of Union Carbide, from 1987 to
1991, where he was responsible for Union Carbide's uranium and vanadium
businesses. From January 1993 until February 1995, Mr. Willmott was engaged by
the Concord Mining Unit as a senior vice president where he was primarily
involved in the acquisition of UMETCO Minerals Corporation's uranium and
vanadium operating assets. Mr. Willmott graduated from Michigan Technological
University with a Bachelor of Science degree in Mining in 1964 and a Bachelor of
Science Degree in Engineering Administration in 1967. He has been an active
member of the American Institute of Mining Engineers, the Canadian Institute of
Mining Engineers and a number of state professional organizations.
LELAND O. ERDAHL has served as a director of the Company since July 11,
1994. From 1986 to 1991, Mr. Erdahl served as President and Chief Executive
Officer for Stolar, Inc., a high-tech company involved in the radio wave imaging
of geologic media and underground radio transmission for voice and data. He was
also President and CEO of Albuquerque Uranium Corporation, a uranium mining
company, from 1987 to 1991. He is a Certified Public Accountant and is a
graduate from the College of Santa Fe. He is currently a director of Hecla
Mining Company, Canyon Resources Corporation and a trustee for a group of John
Hancock Mutual Funds. Mr. Erdahl also serves on the compensation committee of
Hecla Mining Company and Canyon Resources Corporation.
GEORGE R. IRELAND has served as a director since May 25, 1995. Mr. Ireland
is a General Partner in Ring Partners.com, a private investment partnership.
From February 1991 to February 2000, Mr. Ireland was a financial analyst for and
a partner in Knott Partners L.P., a private investment partnership. Mr. Ireland
specialized in investing in securities of natural resource and other basic
industrial companies, both domestically and abroad. From 1987 to 1991, he was a
Vice President of Fulcrum Management, Inc., which was the manager of the
VenturesTrident Limited Partnerships, (venture capital funds dedicated to
investing in the mining industry), and Senior Vice President and Chief
39
<PAGE> 43
Financial Officer of MinVen Gold Corporation, a company in which the
VenturesTrident funds had a significant investment. Mr. Ireland graduated from
the University of Michigan with degrees in Geology and Resource Economics. He
also attended the Graduate School of Business Administration of New York
University. Mr. Ireland is a director of Merrill & Ring, Inc., a private land
and timber holding company in the state of Washington. Mr. Ireland acted as a
consultant to Ryback Management Corporation and performed due diligence on the
Company in connection with Ryback's loan of $6 million to the Company on behalf
of members of the Lindner Group in 1995. Mr. Ireland is not otherwise affiliated
with the Lindner Group or Ryback.
ARRANGEMENTS REGARDING ELECTION OF DIRECTORS
On May 25, 1995, George R. Ireland was appointed to the Board of Directors
following the closing of certain transactions with the Lindner Group. In
connection with these transactions, the Company has agreed to nominate two
individuals designated by the Lindner Group for election to the Board. Mr.
Ireland was the Lindner Group's sole designee for membership to the Board.
OTHER EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the Board
of Directors and are subject to annual appointment by the Board at its first
meeting following the Annual General Meeting of the Stockholders. The officers
of the Company hold office until their successors are appointed by the Board of
Directors. All officers of the Company are employed on a full-time basis. There
is no family relationship between any director and executive officer of the
Company.
The following table sets forth certain information concerning executive
officers who are not also directors of the Company:
<TABLE>
<CAPTION>
Positions and Offices
Name Age with the Company
---- --- ----------------------
<S> <C> <C>
Joe H. Card(1) 45 Senior Vice President - Marketing
Richard F. Clement, Jr.(1) 55 Senior Vice President - Exploration and
President - Hydro Resources, Inc.(1)
Richard A. Van Horn 53 Senior Vice President - Operations
Thomas H. Ehrlich 40 Vice President, Chief Financial Officer, Secretary
and Treasurer
Mark S. Pelizza(2) 47 Vice President - Health, Safety and Environmental
Affairs and President - Hydro Resources, Inc.
</TABLE>
(1) Messrs. Card and Clement terminated employment with the Company on December
31 and December 9, 1999, respectively.
(2) Mr. Pelizza assumed the position of President - Hydro Resources, Inc. in
November 1999.
40
<PAGE> 44
The following sets forth certain information concerning the business
experience of the foregoing executive officers during the past five years.
JOE H. CARD joined the Company as Vice President - Marketing in March 1989.
In February 1993, he was promoted to Senior Vice President - Marketing.
Previously, he spent four years with UG U.S.A., Inc., a U.S. marketing
subsidiary of a major German mining company, most recently as Marketing Manager.
His responsibilities were related to the entire uranium fuel cycle, primarily in
dealing with U.S. nuclear utilities customers. Prior to his work at UG U.S.A.,
Inc., Mr. Card spent five years with Mitsubishi International Corporation as
marketing manager. He earned a B.B.A. degree in Finance from the University of
Georgia in 1975 and an M.B.A. degree from Georgia State University in 1978. Mr.
Card terminated employment with the Company effective December 31, 1999.
RICHARD F. CLEMENT, JR. joined the Company as Vice President-Exploration in
1983. In April 1990, he was appointed Senior Vice President-Exploration. Mr.
Clement was a director of the Company from February 1985 to July 1994 at which
time he resigned his positions as director and officer of the Company. During
the period from July 1994 to February 1996, Mr. Clement remained with the
Company as Exploration Manager. In February 1996, he was again appointed Senior
Vice President-Exploration of the Company as well as the President and a
Director of Hydro Resources, Inc., a wholly owned subsidiary of the Company.
Prior to joining the Company, he spent 16 years with Mobil Oil Corporation, most
recently as vice president and exploration manager for Mobil Energy
Minerals-Australia, where he initiated and managed Mobil's Australian coal,
uranium and other minerals exploration and acquisition programs. Mr. Clement
received his B.S. degree in Geology from Boston College in 1965 and his M.S.
degree in Geology from the University of Vermont in 1967. Mr. Clement retired
from the Company effective December 9, 1999.
RICHARD A. VAN HORN joined the Company in March 1997 and assumed the
position of Senior Vice President of Operations on April 1, 1997. Previously, he
spent three years with Energy Fuels Nuclear, Inc. as General Manager - Colorado
Plateau Operations with responsibility for the daily management of and planning
for Energy Fuels Nuclear, Inc. mining activities on the Colorado Plateau. Prior
to his work at Energy Fuels Nuclear, Inc., Mr. Van Horn spent eighteen years
with Union Carbide Corporation where he was involved with the finance and
operation of that company's worldwide mining and metals business. From 1990 to
1994, Mr. Van Horn was Director of Operations of UMETCO Minerals Corporation, a
wholly owned subsidiary of Union Carbide Corporation, responsible for all
operating aspects of UMETCO's uranium and vanadium business on the Colorado
Plateau prior to its sale to Energy Fuels Nuclear, Inc. Mr. Van Horn graduated
from the Colorado School of Mines with a Engineer of Mines degree in mining in
1973.
THOMAS H. EHRLICH, a certified public accountant, rejoined the Company in
September 1995 as Vice President and Chief Financial Officer and was appointed
Secretary and Treasurer of the Company in December 1995. Immediately prior to
that, Mr. Ehrlich spent nine months as a Division Controller with Affiliated
Computer Services, Inc., an information technology services provider in Dallas,
Texas. Mr. Ehrlich originally joined the Company in November 1987 as
Controller-Public Reporting and was promoted to Controller and Chief Accounting
Officer in February 1990. In February 1993, Mr. Ehrlich assumed the additional
duties of Vice President and Secretary of the Company. Prior to joining the
Company, he spent four years with Deloitte Haskins & Sells and worked primarily
with clients that were publicly held companies. Prior to his work at Deloitte
Haskins & Sells, he spent three years in various accounting duties at Enserch
Exploration, Inc., an oil and gas company in Dallas, Texas. Mr. Ehrlich received
his B.S. B.A. degree in Accounting from Bryant College in 1981.
MARK S. PELIZZA has served as the Company's Environmental Manager since
1980, and as such, he has been responsible for all environmental regulatory
activities. In February 1996, he was appointed Vice President - Health, Safety
and Environmental Affairs of the Company. In November 1999, he was appointed
President and a Director of Hydro Resources, Inc., a wholly owned subsidiary of
the Company. Prior to joining the Company, he was employed for two years by
Union Carbide as an Environmental Planning Engineer at Union Carbide's Palangana
solution mining plant in South Texas. Mr. Pelizza received a M.S. degree in
Engineering Geology from Colorado School of Mines in 1978 and a B.S. degree in
Geology from Fort Lewis College in 1974.
41
<PAGE> 45
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to annual
and long-term compensation for services in all capacities for the years ended
December 31, 1999, 1998 and 1997 paid to the Company's Chief Executive Officer
and certain other executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
=================== =======================
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- ------ ----- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul K. Willmott(3) 1999 $187,859 $ 0 $ 942 -- $ 9,818
Chairman, President and 1998 $200,701 $ 0 $ 561 40,000 $ 1,887
Chief Executive Officer 1997 $202,200 $ 0 $ 283 26,280 $ 5,474
Joe H. Card 1999 $114,560 $ 0 $ 2,443 -- $ 12,899
Senior Vice President - 1998 $128,200 $ 0 $ 2,757 15,000 $ 1,255
Marketing 1997 $129,987 $ 0 $ 3,954 15,800 $ 3,618
Richard F. Clement, Jr. 1999 $114,326 $ 0 $ 2,088 -- $ 12,184
Senior Vice President - 1998 $144,045 $ 0 $ 2,156 10,000 $ 1,027
Exploration/President - 1997 $149,783 $ 0 $ 2,754 15,100 $ 87,860
Hydro Resources, Inc.
Richard A. Van Horn 1999 $115,283 $ 0 $ 863 -- $ 11,036
Senior Vice President - 1998 $132,749 $ 0 $ 1,960 25,000 $ 1,200
Operations 1997 $104,569 $ 0 $ 168 55,000 $ 19,349
Mark S. Pelizza 1999 $ 95,384 $ 0 $ 7,456 -- $ 6,166
Vice President - Health, Safety 1998 $107,634 $ 0 $ 6,386 9,000 $ 1,010
and Environmental Affairs 1997 $109,713 $ 0 $ 2,560 7,700 $ 3,057
</TABLE>
(1) Represents amount paid for out-of-pocket medical and dental expenses under
the Company's Supplemental Health Care Plan.
(2) Represents contributions made by the Company under the Company's 401(k)
Profit Sharing Plan (see "401(k) Profit Sharing Plan" below); and compensation
in shares of the Company's Common Stock under the 1999 Deferred Compensation
Plan (See "Deferred Compensation Plan" below). The shares issued under the
Deferred Compensation Plan were valued at $0.375 per share, such value exceeded
the fair market value of such shares when issued. For Mr. Clement in 1997
includes moving costs received upon his relocation to Albuquerque, New Mexico
($84,281) and for Mr. Van Horn in 1997 includes moving costs received upon his
relocation to Corpus Christi, Texas ($19,349).
(3) Salary for 1999 includes $99,904 which was deferred under the Company's 1999
Deferred Compensation Plan.
42
<PAGE> 46
SUPPLEMENTAL HEALTH CARE PLAN
The Company has adopted a health care plan (the "Supplemental Plan") for
the officers of the Company and certain of the employees of the Company who are
also stockholders, which supplements the standard health care plan available to
all eligible employees of the Company (the "Standard Plan"). The Supplemental
Plan pays directly to the participant 80% of all out-of-pocket medical and
dental expenses not covered under the Standard Plan, including deductibles and
co-insurance amounts. Additionally, the Supplemental Plan provides to each
participant $100,000 of accidental death and dismemberment insurance protection
and a world wide medical assistance benefit. Each participant in the
Supplemental Plan may receive a maximum annual benefit of $50,000 or $100,000,
at the Company's option. The Company pays an annual premium under the
Supplemental Plan equal to $250 per participant plus 10% of claims paid. There
are currently ten officers and employees covered by the Supplemental Plan.
401(k) PROFIT SHARING PLAN
The Company maintains a defined contribution profit sharing plan for
employees of the Company (the "401(k)") that is administered by a committee of
trustees appointed by the Company. All Company employees are eligible to
participate upon the completion of six months of employment, subject to minimum
age requirements. Each year the Company makes a contribution to the 401(k) out
of its current or accumulated net profits (as defined) in an amount determined
by the Board of Directors but not exceeding 15% of the total compensation paid
or accrued to participants during such fiscal year. The Company's contributions
are allocated to participants in amounts equal to 25% (or a higher percentage,
determined at the Company's discretion) of the participants' contributions, up
to 4% of each participant's gross pay. For the plan years ended July 31, 1999
and July 31, 1998, the Company contributed amounts equal to 25% of the
participant's contributions, up to 4% of gross pay. For the plan year ended July
31, 1997, the Company contributed amounts equal to 50% of the participants'
contribution, up to 4% of gross pay. Participants become 20% vested in their
Company contribution account for each year of service until full vesting occurs
upon the completion of five years of service. Distributions are made upon
retirement, death or disability in a lump sum or in installments.
STOCK OPTION PLANS
On December 19, 1995, the Company's Stockholders approved the 1995 Stock
Incentive Plan (the "1995 Plan") for key employees of the Company. The 1995 Plan
initially authorized grants of incentive stock options and non-qualified options
to purchase up to an aggregate of 750,000 shares of Common Stock. The Company
adopted an amendment to the 1995 Plan which increased the number of shares of
Common Stock authorized to be issued to 1,250,000 shares. The Employees' Stock
Option Committee of the Board of Directors is responsible for the administration
of the 1995 Plan and has the full authority, subject to the provisions of the
1995 Plan, to determine to whom and when to grant options and the number of
shares of Common Stock covered by each grant. As of March 31, 2000, a total of
409,725 shares are reserved for issuance upon exercise of options granted under
the 1995 Plan and 840,275 shares were reserved for exercise upon the future
grant of options under the 1995 Plan. No shares have been issued upon the
exercise of options under the 1995 Plan.
The 1995 Plan replaced the Company's previous plan maintained for employees
under which the Company was authorized to grant non-qualified options. All
outstanding options under that plan will remain in effect but no new options
will be granted under that plan. As of March 31, 2000, a total of 356,737 shares
are reserved for issuance under that plan.
DEFERRED COMPENSATION PLAN
Effective January 11, 1999, the Company adopted the 1999 Deferred
Compensation Plan (the "Deferred Compensation Plan") for the benefit of
executive officers and directors of the Company and its subsidiaries. Under the
Deferred Compensation Plan, each year participants may elect to defer up to 100%
of their salary for the duration of the year. Salary deferred will be paid to
each participant on January 11, 2006. Upon termination of employment with
43
<PAGE> 47
the Company or its subsidiaries, a participant's account is frozen and the
participant is entitled to receive the deferred amount on January 11, 2006. The
Deferred Compensation Plan is administered by the Company's Board of Directors.
At the time of the deferral election, a participant may elect to receive
payment of up to 100% of the deferred amount of salary in shares of the
Company's Common Stock. An aggregate of 454,846 shares of Common Stock may be
issued under the Deferred Compensation Plan. The number of shares to be received
pursuant to any election will be based on the closing market price of the
Company's Common Stock on January 11, 1999. At the end of each quarter, a
participant will receive any shares of Common Stock he or she has so elected to
receive in lieu of deferred salary and may make a new election for the next
quarter to increase or decrease the percent of deferred salary to be received in
shares of Common Stock.
The Company's directors and executive officers elected to defer an
aggregate amount of $231,844 of their 1999 salaries pursuant to the Deferred
Compensation Plan, $59,116 of which was received by such directors and executive
officers for 302,939 shares of the Company's Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the executive officers named in the Summary
Compensation Table in the fiscal year ended December 31, 1999.
44
<PAGE> 48
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following sets forth information with respect to each exercise of stock
options during the fiscal year ended December 31, 1999 and the year-end value of
unexercised options held by each of the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE REALIZED OPTIONS AT FISCAL OPTIONS AT FISCAL
NAME EXERCISE (#) ($) YEAR END (#) YEAR END ($)
---- ------------ -------------- ----------------- -----------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
------------- -------------
<S> <C> <C> <C> <C>
Paul K. Willmott(1) -- -- 100,000/0 **
100,000/0 **
40,200/0 **
28,254/9,416 **
13,140/13,140 **
10,000/30,000 **
19,000/0 **
1,000/0 **
Joe H. Card(2) -- -- 1,750/0 **
6,064/0 **
10,080/3,360 **
7,900/7,900 **
3,750/11,250 **
Richard F. Clement, Jr.(3) -- -- 24,750/0 **
27,720/0 **
12,099/4,031 **
56,250/18,750 **
7,550/7,550 **
2,500/7,500 **
Richard A. Van Horn(4) -- -- 27,500/27,500 **
6,250/18,750 **
Mark S. Pelizza(5) -- -- 14,437/0 **
7,020/2,340 **
3,850/3,850 **
2,250/6,750 **
</TABLE>
- --------
** Represents an option whose grant price is above the December 31, 1999 closing
price on the OTC Bulletin Board.
(1) Based on the closing price on the OTC Bulletin Board on December 31, 1999
($0.14) less the grant prices of $4.13, $8.38, $6.88, $9.75, $7.125, $2.9375,
$4.25 and $5.88, respectively.
(2) Based on the closing price on the OTC Bulletin Board on December 31, 1999
($0.14) less the grant prices of $2.94, $6.88, $9.75, $7.125 and $2.9375,
respectively.
(3) Based on the closing price on the OTC Bulletin Board on December 31, 1999
($0.14) less the grant price of $2.94, $6.88, $9.75, $16.13, $7.125 and $2.9375,
respectively.
(4) Based on the closing price on the OTC Bulletin Board on December 31, 1999
($0.14) less the grant price of $5.50 and $2.9375, respectively.
(5) Based on the closing price on the OTC Bulletin Board on December 31, 1999
($0.14) less the grant price of $2.94, $9.75, $7.125 and $2.9375, respectively.
45
<PAGE> 49
DIRECTOR COMPENSATION
Under the Company's Directors' Stock Option Plan ("Directors' Plan"), each
new non-employee director elected or appointed to the Board of Directors for the
first time shall be granted an option to purchase 20,000 shares of Common Stock
as of the date of such election or appointment and, upon the re-election of a
non-employee director at an annual meeting of the Company's stockholders, such
director will be granted an option to purchase an additional 1,000 shares as of
the date of such election. As of March 31, 2000, a total of 71,000 shares are
reserved for issuance upon exercise of options granted under the Directors' Plan
and 77,000 shares were reserved for exercise upon the future grant of options
under the Directors' Plan. Mr. Erdahl holds options covering 26,000 shares under
the Directors' Plan and Mr. Ireland holds options covering 25,000 shares under
the Directors' Plan. Mr. Willmott holds options covering 20,000 shares under the
Directors' Plan. In addition, Messrs. Ireland and Erdahl each hold options to
purchase 100,000 shares of Common Stock. Those options were not granted under
the Directors' Plan. On November 17, 1997, the Company entered into agreements
with each of its non-employee directors to amend the terms of these nonqualified
stock options such that the expiration date of the option was extended for three
years until 2001 and the exercise price was increased by $0.25 per share.
Compensation for 1999 to the non-employee directors was awarded at the rate of
$3,000 per quarter plus $1,000 per meeting attended of the Board and committees
of the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In August 1994, the Company formed a Compensation Committee to determine
the compensation of the executive officers and to set the guidelines for
compensation for the employees of the Company. During the fiscal year ended
December 31, 1999, the Compensation Committee was comprised of Leland O. Erdahl
and George R. Ireland . No member of the Compensation Committee has been or was
during the fiscal year ended December 31, 1999, an officer or employee of the
Company or any of the Company's subsidiaries. In addition, no member of the
Compensation Committee during the fiscal year ended December 31, 1999 had any
relationship requiring disclosure under the caption "Certain Relationships and
Related Transactions." No executive officer of the Company serves or served on
the compensation committee of another entity during the fiscal year ended
December 31, 1999 and no executive officer of the Company serves or served as a
director of another entity who has or had an executive officer serving on the
Compensation Committee of the Company.
COMPENSATION AGREEMENTS WITH KEY EXECUTIVES
In June 1997, the Company entered into Compensation Agreements with six of
its key executives. Each of these agreements provide that in the event of a
change in control of the Company, the executive will have certain rights and
benefits for a period of either twenty-four or thirty-six months following such
change in control. In particular, the agreements specify that the executive will
continue to receive compensation and benefits for the remainder of the
applicable period if the Company terminates the executive or if the executive
terminates his employment following the occurrence of certain actions without
the executive's consent. However, the Company is not obligated to provide such
rights and benefits to the executive if the executive was terminated for cause
or does not resign as an officer and/or director promptly after receiving
written request from the Company to do so.
46
<PAGE> 50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 2000, certain
information regarding persons known by the Company to be the beneficial owner of
more than 5% of the outstanding shares of the Company's Common Stock.
PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
- ------------------------------------ ---------------------- -------------------
<S> <C> <C>
Lindner Allocation Fund
7711 Carondelet Avenue, Suite 700 2,208,609(3) 15.2%
Clayton, MO 63105
Lindner Market Neutral Fund
7711 Carondelet Avenue, Suite 700 902,869(4) 6.2%
Clayton, MO 63105
The Winchester Group
335 Madison Avenue 4,035,650(5) 27.8%
New York, NY 10017
Rudolf J. Mueller
335 Madison Avenue 2,892,600(6) 19.9%
New York, NY 10017
Santa Fe Pacific Gold Corporation
(a wholly owned subsidiary of 1,200,000 8.3%
Newmont Gold Company)
1700 Lincoln Street
Denver, CO 80203
</TABLE>
- -------------
(1) Each person has sole voting and investment power with respect to the shares
listed, unless otherwise indicated. Beneficial ownership includes shares over
which the indicated beneficial owner exercises voting and/or investment power.
(2) The shares owned by each person, and the shares included in the total number
of shares outstanding, have been adjusted, and the percentages owned have been
computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act
of 1934. Shares subject to options or warrants currently exercisable or
exercisable within 60 days are deemed outstanding for computing the percentage
ownership of the person holding such options or warrants, but are not deemed
outstanding for computing the percentage ownership of any other person.
(3) Ownership includes 625,000 shares obtainable at $3.00 per share pursuant to
warrants that are exercisable through May 31, 2000.
(4) Ownership includes 375,000 shares obtainable at $3.00 per share pursuant to
warrants that are exercisable through May 31, 2000.
(5) Has no ownership or voting rights but has shared investment power with
respect to these shares.
(6) Has sole voting and investment power with respect to 2,834,400 shares and
shared voting and investment power with respect to 58,200 shares.
47
<PAGE> 51
DIRECTORS AND EXECUTIVES
The following table sets forth as of December 31, 1999 certain information
regarding the beneficial ownership of the Company's Common Stock by (i) each
director and nominee for director of the Company, (ii) each of the executive
officers named in the Summary Compensation Table set forth below under the
caption Executive Compensation, and (iii) all directors and executive officers
as a group.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
---------------- ----------------------- -------------------
<S> <C> <C>
Paul K. Willmott 380,843(3) 2.8%
Joe H. Card 84,911(4) *
Leland O. Erdahl 143,240(5) 1.1%
George R. Ireland 179,740(6) 1.4%
Richard F. Clement, Jr. 206,343(7) 1.5%
Richard A. Van Horn 78,400(8) *
Mark S. Pelizza 298,055(9) 2.3%
All executive officers and directors 1,459,692(10) 10.9%
as a group (8 persons)
</TABLE>
- ---------------
* Less than 1%.
(1) Each person has sole voting and investment power with respect to the shares
listed, unless otherwise indicated. Beneficial ownership includes shares over
which the indicated beneficial owner exercises voting and/or investment power.
(2) The shares owned by each person, and the shares included in the total number
of shares outstanding, have been adjusted, and the percentages owned have been
computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act
of 1934. Shares subject to options currently exercisable or exercisable within
60 days are deemed outstanding for computing the percentage ownership of the
person holding such options, but not deemed outstanding for computing the
percentage ownership of any other person.
(3) Includes 337,580 shares that may be obtained by Mr. Willmott through the
exercise of stock options which are currently exercisable. Does not include
26,570 shares that may be obtained by Mr. Willmott through the exercise of stock
options exercisable more than 60 days from the date hereof.
(4) Includes 40,604 shares that may be obtained by Mr. Card through the exercise
of stock options which are currently exercisable. Does not include 11,450 shares
that may be obtained by Mr. Card through the exercise of stock options
exercisable more than 60 days from the date hereof.
(5) Includes 123,500 shares that may be obtained by Mr. Erdahl through the
exercise of stock options which are currently exercisable. Does not include
2,500 shares that may be obtained by Mr. Erdahl through the exercise of stock
options exercisable more than 60 days from the date hereof.
(6) Includes 122,500 shares that may be obtained by Mr. Ireland through the
exercise of stock options which are currently exercisable. Does not include
2,500 shares that may be obtained by Mr. Ireland through the exercise of stock
options exercisable more than 60 days from the date hereof.
(7) Includes 141,175 shares that may be obtained by Mr. Clement through the
exercise of stock options which are currently exercisable. Does not include
27,525 shares that may be obtained by Mr. Clement through the exercise of stock
options exercisable more than 60 days from the date hereof.
(8) Includes 40,000 shares that may be obtained by Mr. Van Horn through the
exercise of stock options which are currently exercisable. Does not include
40,000 shares that may be obtained by Mr. Van Horn through the exercise of stock
options exercisable more than 60 days from the date hereof.
(9) Includes 34,072 shares that may be obtained by Mr. Pelizza through the
exercise of stock options which are currently exercisable. Does not include
6,425 shares that may be obtained by Mr. Pelizza through the exercise of stock
options exercisable more than 60 days from the date hereof.
(10 Includes 895,191 shares that may be obtained through the exercise of stock
options which are currently exercisable or will become exercisable within 60
days.
48
<PAGE> 52
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXTENSION OF MATURITY DATE AND ADJUSTMENT OF CONVERSION PRICE OF LINDNER LOAN
On May 25, 1995, the Company received $6,000,000 in cash (the "Lindner
Loan") through the issuance of 6.5% secured convertible notes in the aggregate
principal amounts of $1,500,000 and $4,500,000. The Lindner Loan was initially
convertible at $4.00 per share into 375,000 and 1,125,000 shares of Common
Stock, the Lindner Investments (on behalf of Lindner Bulwark Fund) ("Bulwark")
and Lindner Dividend Fund, Inc. ("Dividend"), respectively. In addition, the
Company issued immediately exercisable warrants (the "Lindner Warrants") to
purchase 375,000 shares and 1,125,000 shares of the Company's Common Stock at an
initial exercise price of $4.00 per share to Lindner Investments (on behalf of
Lindner Bulwark Fund) and Dividend, respectively. Dividend has exercised its
right to purchase 500,000 shares under the Lindner Warrants.
In March 1998, the Company entered into an agreement to extend the maturity
date of its $6,000,000 secured convertible note from May 31, 1998 to May 31,
2000. In return for the extension in the maturity of the note, the conversion
price was adjusted from $4.00 per share to $3.00 per share. The exercise price
of the remaining Lindner warrants to purchase 1,000,000 shares of the Company's
common stock was also adjusted from $4.00 per share to $3.00 per share, and the
expiration date of the warrants was extended by two years, to May 31, 2000.
In February 2000, the entire $6,000,000 plus accrued interest of $334,000
were converted into 2,111,478 shares of the Company's common stock.
49
<PAGE> 53
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
See the Index to Consolidated Financial Statements on page F-1 for a
listing of those financial statements filed as part of this Annual
Report.
(a)(2) Financial Statement Schedules.
See the Index to Consolidated Financial Statements on page F-1 for a
listing of those financial statements filed as part of this Annual
Report.
(a)(3) Exhibits.
See the Index to Exhibits on page E-1 for a listing of the exhibits
that are filed as part of this Annual Report.
(b) Reports on Form 8-K.
None.
50
<PAGE> 54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 14, 2000
URANIUM RESOURCES, INC.
By: /s/ Paul K. Willmott
--------------------------------
Paul K. Willmott, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Date
- --------- ----
<S> <C>
/s/ Paul K. Willmott April 14, 2000
- -----------------------------------------------------
Paul K. Willmott,
Director, President and Chief Executive Officer
/s/ Thomas H. Ehrlich April 14, 2000
- -----------------------------------------------------
Thomas H. Ehrlich,
Vice President-Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Leland O. Erdahl April 14, 2000
- -----------------------------------------------------
Leland O. Erdahl, Director
/s/ George R. Ireland April 14, 2000
- -----------------------------------------------------
George R. Ireland, Director
</TABLE>
51
<PAGE> 55
URANIUM RESOURCES, INC. AND CONSOLIDATED SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants for the Years Ended December 31, 1998 and 1997...................F-2
Consolidated Balance Sheets (unaudited as to December 31, 1999)...........................................F-3
Consolidated Statements of Operations (unaudited as to Year Ended December 31, 1999)......................F-5
Consolidated Statements of Common Shareholders' Equity (unaudited as to Year Ended Dec. 31, 1999).........F-6
Consolidated Statements of Cash Flows (unaudited as to Year Ended December 31, 1999)......................F-7
Notes to Consolidated Financial Statements (unaudited as to December 31, 1999)............................F-8
</TABLE>
The Company's independent public accountants have advised the Company
that they will be unable to perform an audit of the Company's financial
statements for year-end 1999 unless the valuation of the Company's uranium
properties is supported by an appraisal from an independent third party. The
Company lacks the funds to retain an independent third party to perform that
valuation. As a result, the Company's financial statements for the year ended
December 31, 1999 included in this Annual Report on Form 10-K are unaudited.
The additional financial data referred to below should be read in
conjunction with these financial statements. Schedules not included with this
additional financial data have been omitted because they are not applicable, or
the required information is shown in the financial statements or notes thereto.
The individual financial statements of the subsidiaries of the Company have been
omitted because all such subsidiaries are included in the consolidated financial
statements being filed.
ADDITIONAL FINANCIAL DATA
Financial statement schedules for the years ended
December 31, 1999, 1998 and 1997
II - Valuation and Qualifying Accounts and Reserves................F-24
The accounts of the Company are maintained in United States dollars.
All dollar amounts in the financial statements are stated in United States
dollars except where indicated.
F-1
<PAGE> 56
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Uranium Resources, Inc.:
We have audited the accompanying consolidated balance sheets of Uranium
Resources, Inc. (a Delaware Corporation) and subsidiaries as of December 31,
1998, and the related consolidated statements of operations, shareholders'
equity, and cash flows for the two years in the period ended December 31, 1998
and 1997. These consolidated financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Uranium Resources, Inc. and
subsidiaries as of December 31, 1998, and the results of its operations and its
cash flows for the two years ended December 31, 1998 and 1997, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has incurred operating losses in
1998 and 1997 due largely to a significant decline in the market price of
uranium. Further, the Company has limited capital resources available to support
its ongoing operations until such time, if ever, the Company is able to resume
full-scale operations. These factors among others discussed in Note 2, raised
substantial doubt concerning the ability of the Company to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
Our audits were made for the purpose of forming an opinion on the basic
financial statements for 1998 and 1997 taken as a whole. The schedule listed in
the index of financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule as it relates to 1998 and 1997 has been
subjected to the auditing procedures applied in the audits of the basic
financial statements referred to above and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
February 26, 1999
F-2
<PAGE> 57
URANIUM RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 493,567 $ 3,713,566
Short-term investment:
Certificate of deposit, restricted -- 582,623
Receivables, net 1,155,198 1,482,806
Uranium inventory 112,901 956,590
Materials and supplies inventory 70,319 92,495
Prepaid and other current assets 45,913 244,301
------------ ------------
Total current assets 1,877,898 7,072,381
------------ ------------
Property, plant and equipment, at cost:
Uranium properties 99,400,677 98,073,350
Other property, plant and equipment 383,229 538,974
Less-accumulated depreciation and depletion (97,578,333) (59,059,968)
------------ ------------
Net property, plant and equipment 2,205,573 39,552,356
Long-term investment:
Certificate of deposit, restricted 3,651,758 3,066,703
Other assets 4,299 4,299
------------ ------------
$ 7,739,528 $ 49,695,739
============ ============
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated statements.
F-3
<PAGE> 58
URANIUM RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 396,836 $ 1,829,255
Notes payable 575,000 1,685,000
Accrued interest payable 2,336 113,778
Current portion of long-term debt 5,000 8,000
Royalties payable 64,922 132,626
Current portion of restoration reserve 83,000 324,000
Other accrued liabilities 164,646 348,337
------------ ------------
Total current liabilities 1,291,740 4,440,996
------------ ------------
Other long-term liabilities and deferred credits 6,474,680 5,469,394
Long-term debt, less current portion 6,372,208 6,189,007
Deferred federal income taxes -- 263,810
Shareholders' equity:
Common stock, $.001 par value, shares authorized:
25,000,000; shares issued and outstanding
(net of treasury shares): 1999 - 12,341,290
1998 - 12,053,027 12,494 12,205
Paid-in capital 40,737,736 40,629,923
Retained earnings (loss) (47,139,912) (7,300,178)
Less: Treasury stock (152,500 shares), at cost (9,418) (9,418)
------------ ------------
Total shareholders' equity (6,399,100) 33,332,532
------------ ------------
$ 7,739,528 $ 49,695,739
============ ============
</TABLE>
The accompanying notes to financial statements are an integral
part of these consolidated statements.
F-4
<PAGE> 59
URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues: (unaudited)
Uranium sales -
Produced uranium $ 2,281,335 $ 10,984,040 $ 14,737,579
Purchased uranium 4,973,741 12,363,274 15,002,838
------------ ------------ ------------
Uranium sales 7,255,076 23,347,314 29,740,417
Other uranium revenues 1,289,600 -- --
------------ ------------ ------------
Total revenue 8,544,676 23,347,314 29,740,417
Costs and expenses:
Cost of uranium sales -
Direct cost of purchased uranium 4,285,100 8,745,246 13,257,989
Royalties 145,690 579,439 833,534
Operating expenses 2,913,444 5,347,145 6,564,363
Provision for restoration and reclamation costs 234,537 692,317 1,032,587
Depreciation and depletion 935,056 5,922,508 7,580,809
Writedown of uranium properties and
other uranium assets 38,454,955 23,111,956 --
------------ ------------ ------------
Total cost of uranium sales 46,968,782 44,398,611 29,269,282
------------ ------------ ------------
Earnings (loss) from operations
before corporate expenses (38,424,106) (21,051,297) 471,135
Corporate expenses -
General and administrative 2,036,150 2,672,319 2,913,776
Depreciation 24,711 57,150 22,956
------------ ------------ ------------
Total corporate expenses 2,060,861 2,729,469 2,936,732
------------ ------------ ------------
Loss from operations (40,484,967) (23,780,766) (2,465,597)
Other income (expense):
Interest expense, net of capitalized interest (226,841) (152,009) (168,789)
Interest and other income, net 608,264 207,954 1,036,290
------------ ------------ ------------
Loss before federal income taxes (40,103,544) (23,724,821) (1,598,096)
Federal income tax provision (benefit):
Current -- -- 44,775
Deferred (263,810) (4,745,000) (318,000)
------------ ------------ ------------
Net loss $(39,839,734) $(18,979,821) $ (1,324,871)
============ ============ ============
Net loss per common share:
Basic $ (3.27) $ (1.57) $ (0.11)
============ ============ ============
Diluted $ (3.27) $ (1.57) $ (0.11)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part
of these consolidated statements.
F-5
<PAGE> 60
URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
----------------------------- Paid-In Retained Treasury
Shares Amount Capital Earnings Stock
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1996 10,813,027 $ 10,966 $ 32,290,630 $ 13,004,514 $ (9,418)
Net loss -- -- -- (1,324,871) --
Common stock issuance for
employee stock option plans 25,500 25 74,944 -- --
Common stock issuance
for stock warrants 14,500 14 57,985 -- --
Common stock issuance
for property 1,200,000 1,200 7,798,800 -- --
------------ ------------ ------------ ------------ ------------
Balances, December 31, 1997 12,053,027 $ 12,205 $ 40,222,359 $ 11,679,643 $ (9,418)
Net loss -- -- -- (18,979,821) --
Re-valuation of
common stock warrants -- -- 407,564 -- --
------------ ------------ ------------ ------------ ------------
Balances, December 31, 1998 12,053,027 $ 12,205 $ 40,629,923 $ (7,300,178) $ (9,418)
Net loss (unaudited) -- -- -- (39,839,734) --
Common stock issuance for
deferred compensation (unaudited) 288,263 289 107,813 -- --
------------ ------------ ------------ ------------ ------------
Balances, December 31, 1999 (unaudited) 12,341,290 $ 12,494 $ 40,737,736 $(47,139,912) $ (9,418)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part
of these consolidated statements.
F-6
<PAGE> 61
URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1999 1998 1997
------------ ------------ ------------
(unaudited)
<S> <C> <C> <C>
Cash flows from operations:
Net loss $(39,839,734) $(18,979,821) $ (1,324,871)
Reconciliation of net income to cash provided by operations-
Provision for restoration and reclamation costs 234,537 692,317 1,032,587
Depreciation and depletion 959,767 5,979,658 7,603,765
Writedown of uranium properties and other assets 38,454,955 23,111,956 --
Credit for deferred income taxes (263,810) (4,745,000) (318,000)
Decrease in restoration and reclamation accrual (344,187) (69,357) (317,270)
Other non-cash items, net 1,321,820 688,458 205,169
------------ ------------ ------------
Cash flow provided by operations, before changes in
operating working capital items 523,348 6,678,211 6,881,380
Effect of changes in operating working capital items-
(Increase) decrease in receivables 327,608 3,024,284 (2,677,551)
Decrease in inventories 624,839 247,334 496,100
Increase in prepaid and other current assets (150,078) (398,040) (446,910)
Increase (decrease) in payables and accrued liabilities (1,795,256) (1,350,414) 677,795
------------ ------------ ------------
Net cash provided by (used in) operations (469,539) 8,201,375 4,930,814
Investing activities:
Increase in investments (2,432) (345,131) (524,355)
Additions (reductions) to property, plant and equipment -
Kingsville Dome (137,208) (2,998,871) (8,998,305)
Rosita (77,307) (244,290) (2,450,105)
Vasquez (58,607) (439,929) (384,192)
Alta Mesa (36,679) (103,399) (514,503)
Churchrock (665,717) (1,044,948) (1,013,257)
Crownpoint (873,767) (876,474) (1,152,783)
Other property 219,168 (460,115) (387,379)
Increase in other assets -- (27,240) (25,487)
------------ ------------ ------------
Net cash used in investing activities (1,632,549) (6,540,397) (15,450,366)
Financing activities:
Proceeds from borrowings 2,875,000 8,135,000 3,500,000
Payments and refinancings of principal (3,992,911) (8,407,570) (7,722,535)
Issuance of common stock and warrants, net -- -- 132,969
------------ ------------ ------------
Net cash used in financing activities (1,117,911) (272,570) (4,089,566)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (3,219,999) 1,388,408 (14,609,118)
Cash and cash equivalents, beginning of period 3,713,566 2,325,158 16,934,276
------------ ------------ ------------
Cash and cash equivalents, end of period $ 493,567 $ 3,713,566 $ 2,325,158
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part of these consolidated statements.
F-7
<PAGE> 62
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND DESCRIPTION OF COMPANY
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and include the accounts of
Uranium Resources, Inc. ("URI") and its wholly owned subsidiaries (collectively
"the Company"). All significant intercompany transactions have been eliminated
in consolidation.
URI was formed in 1977 and domesticated in Delaware in 1987. The
Company is primarily engaged in the business of acquiring, exploring, developing
and mining uranium properties, using the in situ leach ("ISL") or solution
mining process. The primary customers of the Company are major utilities who
utilize nuclear power to generate electricity. The Company continuously
evaluates the creditworthiness of its customers. The Company has been, in the
past, involved in a number of significant ISL uranium mining joint venture
arrangements and has also provided consulting, plant design and construction
expertise to other companies. At present the Company owns both producing and
development properties in South Texas and development properties in New Mexico.
The Company's Rosita and Kingsville Dome uranium production facilities in South
Texas resumed operations in June 1995 and March 1996, respectively, and were
both shut-in and placed on stand-by in the first quarter of 1999.
INVENTORIES
Uranium inventory consists of uranium concentrates (U(3)O(8)) located
at the Company's Rosita and Kingsville Dome sites and also at converters
awaiting delivery to customers. All uranium inventories are valued at the lower
of cost (first-in, first-out) or market. The cost of produced uranium includes
all operating production costs, and provisions for depreciation, depletion and
future restoration obligations. Materials and supplies inventory is valued at
the lower of average cost or market.
BORROWED URANIUM
Uranium is occasionally borrowed from other parties to facilitate
deliveries under sales contracts. Repayment of the loan is normally made from
production or from purchased uranium. The liability for borrowed uranium is
recorded at the latest spot market price (estimated replacement cost) and the
cost is adjusted to the actual amount when the borrowed material is repaid.
F-8
<PAGE> 63
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
PROPERTY, PLANT AND EQUIPMENT
Uranium Properties
Capitalization of Development Costs - All acquisition, exploration and
development costs (including financing, salary and related overhead costs)
incurred in connection with the various uranium properties are capitalized.
Gains or losses are recognized upon the sale of individual property interests.
All costs incurred in connection with unsuccessful acquisition and exploration
efforts and abandoned properties are charged to expense when known. All
properties with significant acquisition or incurred costs are evaluated for
their realizability on a property-by-property basis. Any impairment of such
costs is recognized by providing a valuation allowance (see Note 3 - "Uranium
Properties - 1998 Property Abandonment" and "Uranium Properties - Uranium
Property Realizability"). Total exploration and evaluation costs capitalized in
1999, 1998 and 1997 were $161,000, $327,000, and $120,000, respectively.
Depreciation and Depletion - In general, depletion of uranium mineral
interests and related development costs is computed on a property-by-property
basis using the units-of-production method based on the proved and probable
recoverable uranium reserves as estimated periodically by the Company's
geologists and engineers. Depreciation and depletion is provided on the
investment costs, net of salvage value, of the various uranium properties'
production plants and related equipment using the estimated production life of
the uranium reserves. Other ancillary plant equipment and vehicles are
depreciated using a straight line method based upon the estimated useful lives
of the assets.
Other Property
Other property consists of corporate office equipment, furniture and
fixtures and transportation equipment. Depreciation on other property is
computed based upon the estimated useful lives of the assets. Repairs and
maintenance costs are expensed as incurred. Gain or loss on disposal of such
assets is recorded as other income or expense as such assets are disposed.
Capitalization of Interest
The Company capitalizes interest cost with respect to properties
undergoing exploration or development activities that are not subject to
depreciation or depletion. The average interest rate on outstanding borrowings
during the period is used in calculating the amount of interest to be
capitalized. Interest capitalized in the twelve months ended December 31, 1999,
1998 and 1997 amounted to $620,000, $704,000, and $378,000, respectively. Total
interest costs in these periods were $847,000, $856,000, and $547,000,
respectively.
RESTORATION AND RECLAMATION COSTS
Various federal and state mining laws and regulations require the
Company to reclaim the surface areas and restore underground water quality to
the pre-existing mine area average quality. Accruals for the estimated future
cost of restoration and reclamation are made on a per-pound basis as part of
production costs, or when it is determined by an engineering study that an
adjustment to the accrual is required.
F-9
<PAGE> 64
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
REVENUE RECOGNITION FOR CERTAIN URANIUM SALES
The Company recognizes revenue from the sale of uranium under which
substantially all of its obligations related to the delivery have been
completed. Under certain uranium sales contracts which contain origin-specific
delivery requirements, the revenue from the portion of a sale which requires the
satisfaction of future obligations is recorded as unearned revenue until these
commitments are satisfied. Commitments that are expected to be completed within
one year are classified as current; all others are recorded as long-term
deferred credits.
EARNINGS PER SHARE
Effective with the year ended December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128 ("FAS 128"), "Earnings per
Share", which sets standards for the calculation and presentations of earnings
per share. FAS 128 supercedes APB Opinion No. 15, Earnings per Share. Net
earnings (loss) per common share - basic has been calculated based on the
weighted average shares outstanding during the year and net earnings (loss) per
common share - diluted has been calculated assuming the exercise or conversion
of all dilutive securities on January 1 of each year presented or as of the date
of issuance if later.
The weighted average number of shares used to calculate basic earnings
per share were 12,178,000, 12,053,000, and 11,760,000 in 1999, 1998 and 1997,
respectively. The weighted average number of shares used to calculate diluted
earnings per share were 12,178,000, 12,053,000, and 11,760,000 in 1999, 1998 and
1997, respectively. The potential common stock that was excluded from the
calculation of diluted earnings per share were 2,319,690, 2,405,021, and
2,413,977 in 1999, 1998 and 1997, respectively.
UNAMORTIZED DEBT ISSUANCE COSTS
Debt discount and related expenses arising from the issuance of debt
securities are amortized by the effective interest method.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Additional disclosures of cash flow information follow:
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash paid during the period for:
Interest $351,000 $567,000 $687,000
</TABLE>
The change in inventories in the Consolidated Statements of Cash Flows
during 1999, 1998 and 1997 excludes the changes in uranium inventories for
non-cash capitalized restoration and depreciation and depletion provisions. Such
decreases totaled ($241,000), ($1,088,000), and ($816,000), respectively.
F-10
<PAGE> 65
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
An additional non-cash transaction occurred in 1999 and 1997 and such
transactions are summarized as follows:
In 1999, the Company issued approximately 288,000 shares of
common stock to certain officers and directors in satisfaction
of compensation deferred by those individuals. $108,000
In March 1997, 1,200,000 common shares were issued to Santa Fe
Pacific Gold in exchange for certain uranium mineral interests
and exploration rights covering approximately 523,000 acres in
New Mexico. $7,800,000
RESTRICTED CASH
At December 31, 1999, 1998 and 1997, the Company had pledged a
certificate of deposit of $3,652,000, $3,649,000, and $3,304,000, respectively,
in order to collateralize surety bonds required for future restoration and
reclamation obligations related to the Company's South Texas production and
development properties. These funds are not readily available to the Company and
are not included in cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. Such estimates and assumptions may affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RISKS AND UNCERTAINTIES
Historically, the market for uranium has experienced significant price
fluctuations. Prices are significantly impacted by global supply and demand
which is affected by the demand for nuclear power, political and economic
conditions, governmental legislation in uranium producing and consuming
countries, and production levels and costs of production of other producing
companies. Increases or decreases in prices received could have a significant
impact on the Company's future results of operations.
2. FUTURE OPERATIONS
The financial statements of the Company have been prepared on the basis
of accounting principles applicable to a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. Due to a continued period of depressed prices for uranium compared
to the Company's cost to produce uranium, the Company has generated operating
losses in each of the last three years. Such price declines have reduced the
market price of uranium to levels that are currently below the Company's cost to
produce uranium and below levels needed by the Company to obtain the necessary
financing to allow development of new production areas at its South Texas sites.
These factors raise substantial doubt concerning the ability of the Company to
continue operating as a going concern.
During the fourth quarter of 1998 the Company began implementation of
the shut-in and placement of its Kingsville Dome and Rosita production
facilities on stand-by in response these market conditions. Each production site
was shut-in in the first quarter of 1999 but the Company maintained
F-11
<PAGE> 66
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
nominal production through July 1999 when the incremental production cost of
operating exceeded the cost of purchasing uranium to satisfy the Company's 1999
delivery requirements.
The ability of the Company to continue to maintain a positive cash
position will require an infusion of capital that is currently unavailable to
it. Absent new sources of capital inflows, the Company will experience a
negative cash position by June 2000 which will prevent it from continuing in
business. The Company will continue to pursue alternatives as long as possible
to allow it to achieve positive liquidity through 2000 and beyond.
Further, the Company will also require additional capital resources to
fund the cost to resume production and to fund development of its undeveloped
properties. There is no assurance the Company will be successful in raising such
capital or that uranium prices will recover to levels which would enable the
Company to operate profitably. If the Company is unsuccessful in these efforts
the Company will cease to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent upon a recovery of uranium prices, its ability to restart
its uranium production facilities and successfully produce uranium at
economically feasible levels and its ability to successfully raise capital to
support ongoing operations and future development efforts.
3. URANIUM PROPERTIES
PROPERTY REALIZABILITY
The Company's near-term potential illiquidity has necessitated a
reevaluation of the Company's method of valuing its uranium properties for
accounting purposes as of December 31, 1999. Prior to the fourth quarter of
1999, the Company had previously valued its uranium properties on a held for
production basis, i.e., assuming that each property would be ultimately placed
into production. Because of the Company's potential illiquidity, the Company has
determined that it should value these properties on a held for sale basis.
On a held for sale basis the Company has determined that the discounted
cash flow method is the most reasonable method for valuing the properties,
because of a lack of any data on sales of comparable properties or any other
method that is reasonably available. The Company projected the future cash flows
assuming a sale price for uranium of $9.00 per pound (current spot price is
$9.10) and has discounted those cash flows at 20% per annum. If such valuation
resulted in a zero or negative number, the Company wrote off all intangible
costs and carried tangible costs at salvage value, which was assumed to be 5% of
original cost. This valuation method reduced the carrying value of the Company's
uranium properties by $38.4 million from ($40.5 million to $2.1 million) with a
corresponding charge against earnings, resulting in a deficit shareholders'
equity of $6.4 million at December 31, 1999.
Significant estimates were utilized in determining the carrying value
of the Company's uranium properties. The actual value received from the
disposition of the assets may vary significantly from these estimates based upon
market conditions, financing availability and other factors.
F-12
<PAGE> 67
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
KINGSVILLE DOME PROPERTY
In 1981, the Company acquired an exploration property in South Texas,
known as Kingsville Dome, from Exxon Corporation. After significant production
in 1988-1990, the property was put on a standby basis because of low uranium
spot prices and production ceased in September 1990.
Wellfield development activities began in December 1995 at Kingsville
Dome which lead to the resumption of production at the property in March 1996.
Production in 1997 totaled 640,000 pounds at an average cost of approximately
$15.47 per pound. Production in 1998 totaled 445,000 pounds at an average cost
of approximately $16.93 per pound.
The Company ceased uranium production operations in the first quarter
of 1999 and the property was placed on standby. Production in 1999 totaled
61,000 pounds, the inventory resulting from such incidental production has been
valued at the current spot market cost.
Cost of uranium sales in 1999 in the Consolidated Statements of
Operations includes $1,088,000 of costs incurred to maintain the facility while
Kingsville Dome was on standby and not in production. At December 31, 1999, the
Company believes that the property contains a significant amount of undeveloped
uranium resource. The Company has changed its methodology in estimating the
valuation of its uranium properties at December 31, 1999. This change in
valuation methods resulted in significant writedowns in the carrying value of
its uranium properties and resulted in a writedown of approximately $5.2 million
for the Kingsville Dome property. The net carrying value of the property was
approximately $500,000 at December 31, 1999.
ROSITA PROPERTY
In late 1985, the Company acquired several lease holdings in a uranium
prospect ("Rosita") in South Texas. Construction and development activities
began in the first quarter of 1990 and were completed in September 1990 with
production commencing immediately thereafter. The property was originally put on
a standby basis and production ceased in March 1992.
Wellfield development activity began in early 1995 at Rosita which lead
to the resumption of production at the property in June 1995. Total production
for the year ended December 31, 1997 was approximately 230,000 pounds at a cost
of approximately $16.92 per pound. Production in 1998 totaled 178,000 pounds at
an average cost of approximately $17.55 per pound. The Company ceased uranium
production operations in the first quarter of 1999 and the property was placed
on standby. Production in 1999 totaled 48,000 pounds, the inventory resulting
from such incidental production has been valued at the current spot market cost.
Cost of uranium sales in 1999 in the Consolidated Statements of
Operations includes $527,000 of costs incurred to maintain the facility while
Rosita was on standby and not in production. The Company has changed its
methodology in estimating the valuation of its uranium properties at December
31, 1999. This change in valuation methods resulted in significant writedowns in
the carrying value of its uranium properties and resulted in a writedown of
approximately $544,000 for the Rosita property. The net carrying value of the
property at December 31, 1999 was approximately $230,000.
F-13
<PAGE> 68
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
ALTA MESA PROPERTY
In June 1996, the Company acquired the Alta Mesa property consisting of
4,575 acres of leases in South Texas for a cash payment of $4 million of which
$1 million was recoverable against one-half of future royalties. In December
1998, the Company terminated the lease agreement and wrote off the net carrying
value of $5,021,000. Total cost expensed in 1999 relating to the property
totaled $37,000.
CHURCHROCK PROPERTIES
In December 1986, the Company acquired properties in the Churchrock
region of New Mexico containing approximately 6,951,000 pounds of estimated
recoverable uranium resources.
In September 1991, an additional 200 acres of leases were obtained in
exchange for a future production royalty payment which, based upon the expected
selling price of the uranium production, may vary between 5% and 10%.
Preliminary analysis of the drilling data of these 200 acres indicates
approximately 5,488,000 pounds of estimated recoverable uranium resources.
Permitting activities are currently ongoing on both of these
properties. The net carrying value of these properties were written down to zero
at December 31, 1999. Such writedown resulted in a pre-tax charge against
earnings of approximately $9,624,000.
CROWNPOINT PROPERTY
In August 1988, the Company acquired the Crownpoint property,
consisting of 163 acres of leases and related equipment and buildings for cash
payments of $550,000, amounts payable in future years of $950,000 and a sliding
scale overriding royalty on future production. The present value of the future
payable amount, $407,054 at December 31, 1996, is recorded as a purchase money
obligation. Additionally, also in 1988, the Company staked 321 acres of claims
in the same area. In August 1993, the Company acquired approximately 959 acres
of leases adjoining the Crownpoint properties. Initial interpretation of the
drilling data for all the properties acquired in 1988 and 1993 indicate total
estimated recoverable uranium resources of approximately 25,323,000 pounds. The
net carrying value of these properties were written down to approximately
$565,000 at December 31, 1999. Such writedown resulted in a pre-tax charge
against earnings of approximately $9,919,000.
SANTA FE PROPERTIES
In March 1997 the Company acquired from Santa Fe certain uranium
mineral interests and exploration rights for uranium in New Mexico. The major
components of the transaction include the following detail.
The Properties. The properties consist of: (a) 37,000 acres as to which
the Company has acquired a fee interest in the entire mineral estate, excluding
coal ("Category I Properties"); (b) approximately 140,000 acres as to which the
Company has acquired the fee interest in uranium (the "Category II Properties");
and (c) approximately 346,000 acres as to which the Company has acquired the
exclusive right to explore for uranium (the "Category III Properties").
F-14
<PAGE> 69
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
The Company is obligated to spend on exploration $200,000 per year for
the ten year period starting in March 1997 and $400,000 per year for the seven
year period starting in March 2007. This expenditure can be made on any of the
Category II or Category III properties. The net carrying value of the property
was written down to zero at December 31, 1999. Such writedown resulted in a
pre-tax charge against operations of approximately $11,547,000.
1998 PROPERTY IMPAIRMENT AND ABANDONMENT
In view of the continuing weakness in uranium prices in 1998, the
Company reviewed the carrying values of its uranium properties and determined
that a writedown was required at September 30, 1998 with respect to its existing
producing properties of approximately $18,000,000. The writedown was recorded as
a non-cash charge against earnings in the third quarter of 1998. The writedown
in the carrying value of the Kingsville Dome and Rosita properties totaled
$12,300,000 and $5,600,000, respectively. The net carrying value of these
properties at December 31, 1998 (after giving effect to the writedown) was
approximately $6,106,000 for Kingsville Dome and $900,000 for Rosita.
The review utilized a number of estimates and assumptions, including
current and projected uranium prices (which assumed higher prices in the future)
and the timing and costs of future production activities. The estimates also
assumed that the Company would be able to operate each of its production sites
in the future at production rates that are higher than the Company's production
rate for 1998 and as a result operate at costs that are significantly below
those experienced for 1998.
In 1998, the Company determined that the Alta Mesa property and certain
evaluation projects in South Texas would not be pursued toward development and
acquisition. The costs related to these projects were expensed in 1998 resulting
in a pre-tax charge of approximately $5,240,000.
4. CONTRACT COMMITMENTS
SALES CONTRACTS
Long-term contracts have historically been the primary source of
revenue to the Company. At the beginning of 1999 the Company had four long-term
contracts for deliveries over the next two, three and four years of
approximately $26.9 million in revenues. During 1999, the Company assigned its
delivery rights for 2000 through 2002 under one of these contracts and also
accelerated the scheduled deliveries under another contract into the fourth
quarter of 1999. These transactions coupled with additional transactions made in
the first quarter of 2000 converted the value of the Company's long-term sales
contracts and exhausted its sales contract portfolio. Currently, the Company
does not have any remaining scheduled uranium deliveries under contract for the
balance of 2000 or beyond.
The Company must secure new profitable uranium sales contracts in order
for it to continue in existence. Demonstrated profitability under such new
contracts will form the basis for the Company to be able to secure the requisite
financing/equity infusion to resume production at its mine sites. The
profitability under such new contracts will depend on a number of factors
including the cost of producing uranium at the Company's mining properties, the
Company's ability to produce uranium to meet its sales commitments and the spot
market price of uranium.
All uranium sales revenues for the twelve months ended December 31,
1999 were from sales to four customers, all of which represented more than 10%
of total uranium revenues. Sales to these three customers totaled $2,229,000,
$2,106,000, $1,800,000 and $1,119,000 in 1999.
F-15
<PAGE> 70
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
In June 1999 the Company assigned its rights to deliver uranium for the
years 2000 through 2002 (the final three years) under a uranium sales contract.
In exchange for the assignment, the Company received 124,000 pounds of uranium
inventory in July 1999. The transaction was valued at $10.40 per pound for the
uranium inventory received (the spot market price of uranium) and resulted in
increased revenue, earnings from operations and income before income taxes of
$1,290,000 in 1999.
All revenues for the twelve months ended December 31, 1998 were from
sales to six customers, three of which represented more than 10% of total
revenues. Sales to these three customers totaled $10,831,000, $4,085,000 and
$3,375,000 in 1998. All revenues for the twelve months ended December 31, 1997
were from sales to nine customers, four of which represented more than 10% of
total revenues. Sales to these four customers totaled $5,500,000, $4,650,000,
$4,445,000 and $3,851,000 in 1997.
5. SHORT-TERM DEBT
NATIONSBANK CREDIT AGREEMENT
In May 1996 the Company entered into a $3.0 million revolving-credit
facility with NationsBank, N.A. ("Nations"). In July 1997 the facility was
renewed and expanded to $5.0 million for a two-year term. The facility was
renewed again for $3.0 million in July 1999 for a one-year term. This facility
is secured by the Company's uranium inventory and/or its receivables from its
uranium sales contracts with interest on the loan accruing at the prime rate
plus 1%. Principal and interest payments under the facility are due monthly. As
of December 31, 1999, $575,000 was outstanding under this facility.
LINDNER SHORT-TERM NOTE
In June 1996 the Company entered into an agreement with Lindner
Dividend Fund for a $4.0 million note to acquire the Alta Mesa property. The
terms of the note provide for the payment of both the principal and accrued
interest by June 1997. Interest on the note accrued at a rate of 6.5% per annum.
The entire principal amount plus accrued interest was repaid in January 1997.
6. LONG-TERM DEBT
LINDNER NOTE
On May 25, 1995 the Company entered into an agreement with Lindner
Investments and Lindner Dividend Fund, (the "Lender") two mutual funds managed
by Ryback & Associates, for a $6 million secured convertible note with the
Company (the "Lindner Note"). The Lindner Note was initially issued for a term
of three years and bore interest at an annual rate of 6.5% and was convertible
at any time during the three-year term into 1.5 million shares of the Company's
common stock at an initial conversion price of $4.00 per share. The Lender also
received a three-year warrant to purchase 1.5 million shares of the Company's
common stock at an initial price of $4.00 per share. In 1995, the Lender
exercised 500,000 shares of warrants under the agreement for an infusion of $2.0
million to the Company. Certain other financial advisors associated with the
transaction were granted warrants and options to purchase up to 150,000 shares
at an initial exercise price of $4.00 per share. As of December 31, 1999, these
certain other financial advisors have exercised 62,500 shares of warrants under
the agreement and 37,500 shares of warrants have expired.
F-16
<PAGE> 71
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
In March 1998, the Company entered into an agreement with the Lender to
extend the maturity date of the Lindner Note to May 31, 2000. The note was
convertible at any time during this term into 2.0 million shares of the
Company's common stock at a conversion price of $3.00 per share. In connection
with this transaction the Company allocated $408,000 for the value of the
warrants resulting in an effective rate of 10% on the refinanced note. As of
December 31, 1999, $329,000 has been amortized.
In February 2000, the entire $6,000,000 plus accrued interest of
$334,000 were converted into 2,111,478 shares of the Company's common stock.
PURCHASE MONEY OBLIGATION
In 1987, the Company acquired certain long-term sales contract delivery
rights in exchange for cash plus an assignment of a $3,000,000 future production
payment, at $1.00 per pound of production sold from the Kingsville Dome and
Rosita projects, starting in 1988. The production payment was recorded as a
purchase money obligation at an original calculated present value of $2,379,839.
The balance of the production payment of $730,074 was repaid in January 1997.
SUMMARY OF LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Long-term debt of the Company consists of:
Lindner Note $5,921,632 $5,733,520
Crownpoint property (Note 3) 450,000 450,000
Other 5,576 13,487
---------- ----------
6,377,208 6,197,007
Less - Current portion 5,000 8,000
---------- ----------
Total long-term debt $6,372,208 $6,189,007
========== ==========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
For the Twelve Months Ended: For the Twelve Months Ended:
- ---------------------------- ----------------------------
<S> <C> <C>
December 31, 2000 $5,000 December 31, 2003 --
December 31, 2001 $1,000 December 31, 2004 and beyond $450,000
December 31, 2002 --
</TABLE>
The above table excludes the $5,921,632 of long-term debt from the Lindner Note.
Such debt was converted to common stock in February 2000.
7. RELATED-PARTY TRANSACTIONS
During January 1995, a control group of companies based in Denver,
Colorado (the "Benton Companies") held effective control of the common stock of
the Company, the Company transferred $1.0 million to the Benton Companies in
connection with a planned joint venture to process uranium at a Benton
Companies' mill. The specific Benton Companies, which were to be part of the
planned joint venture, did not receive the transferred funds. In February 1995,
the Benton Companies filed for bankruptcy (the "Benton Bankruptcy"). Because of
the bankruptcy, the realizability of the Company's $1.0 million investment is
doubtful. Shortly thereafter, the then Chairman and CFO of the Company, who were
also
F-17
<PAGE> 72
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
officers of the Benton Companies, transferred $1.08 million out of the Company
without the authorization of the Company's Board of Directors. The Company
recovered $300,000 in June 1995 and $575,000 in mid-1997 from the $1.08 million
transfer, but $1.2 million of the initial $2.08 million has not been recovered.
The Company recorded losses totaling $1.78 million for these transactions in
1995. The $575,000 recovered in 1997 was recorded to other income in the second
quarter of that year.
In connection with the Benton Bankruptcy, the bankrupt estates have
commenced an action against the Company in the United States Bankruptcy Court
for the District of Colorado. The action seeks to recover approximately
$1,600,000 from various transactions entered into with the Benton Companies.
Settlement negotiations regarding this matter were ongoing at December 31, 1999.
The Company does not believe any such settlement or other outcome from this
matter will have a material adverse impact on the operating results or financial
position of the Company.
The Company has asserted certain claims against Benton and the Benton
Companies in the bankruptcy proceedings. This matter was settled in 1999 by the
issuance of a note by Benton to the Company. In conjunction with that
settlement, the Company received the first of four scheduled installment
payments. The next two scheduled payments were not paid when due and are
currently outstanding. The Company is pursuing its rights under the note to
correct this situation.
8. SHAREHOLDERS' EQUITY
COMMON STOCK
Common Stock Issued in 1997
In March 1997, the Company issued 1,200,000 shares of common stock to
Santa Fe Pacific Gold Corporation in exchange for certain uranium mineral
interests in New Mexico. The value of the common stock for the transaction was
$6.50 per share and resulted in an increase to shareholders equity of $7.8
million.
Issuance of Treasury Shares
On May 25, 1995, the Company issued 35,000 shares of the Company's
common stock which were held as treasury shares to financial advisors in
connection with the Lindner Note as discussed in Note 5.
Common Stock Issued in 1999
In 1999, the Company issued 288,263 shares of common stock to certain
officers and directors of the Company in connection with the Uranium Resources,
Inc. 1999 Deferred Compensation Plan (the "Plan"). The Plan was approved by a
vote of the shareholders at the June 18, 1999 Annual Meeting.
WARRANTS
Lindner Warrants
In connection with the May 1995 Lindner Note as discussed in Note 6,
the Company issued a three-year warrant to purchase 1,500,000 shares of the
Company's common stock at an initial conversion price of $4.00 per share. The
warrants were initially exercisable at any time through May 1998. In 1995,
500,000 warrants were exercised. In addition, the Lindner Note was convertible
at any time during the
F-18
<PAGE> 73
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
three year term into 1,500,000 shares of the Company's common stock at an
initial conversion price of $4.00 per share, none of which have been converted
at December 31, 1999. In March 1998, the Company extended the maturity date of
the Lindner Note and revised the terms of the warrants and the convertible
securities. See Note 6 - Long-Term Debt "Lindner Note" for further discussion.
Financial Advisors' Warrants/Options
On May 25, 1995, the Company issued a three-year warrant to purchase
100,000 shares of the Company's common stock at an initial conversion price of
$4.00 per share to certain financial advisors associated with the Lindner Note
transaction. The warrants were convertible at any time through May 1998 and
62,500 warrants were exercised. In addition, the Company granted options to
purchase 50,000 shares at an initial conversion price of $4.00 per share. The
options were immediately exercisable and expired unexercised on March 6, 2000.
STOCK OPTIONS
Directors Stock Options
On May 25, 1995, the Company granted options to certain directors of
URI, to purchase 200,000 shares of the Company's common stock at an exercise
price of $4.50 per share. All such options are immediately exercisable and were
originally scheduled to expire May 24, 1998 or 30 days after the holder ceases
to be a director of the Company or one year after such holder's death, whichever
occurs first. In November 1997, the term of these options was revised for three
years and the exercise price was increased to $4.75 per share. None of these
options have been exercised as of December 31, 1999 and 100,000 of these options
remain outstanding.
On August 16, 1995, the Company granted options to a director of URI,
to purchase 100,000 shares of the Company's common stock at an exercise price of
$8.38 per share which was the fair market value of a share of common stock on
August 16, 1995. Such options are immediately exercisable and were originally
scheduled to expire May 24, 1998, 30 days after the holder ceases to be a
director of the Company or one year after his death, whichever occurs first. In
November 1997, the term of these options was revised for three years and the
exercise price was increased to $8.63 per share. None of these options have been
exercised as of December 31, 1999.
Other Stock Options
On July 31, 1995, the Company granted options to a former officer of
the Company to purchase 50,000 shares of the Company's common stock at an
exercise price of $4.75 per share which was the fair market value of a share of
common stock on that date. All of these options were exercised in 1996.
Market for Common Stock
Prior to March 24, 1999, the Company's Common Stock was traded on
Nasdaq but was delisted for noncompliance with the minimum bid price
requirements of Nasdaq. Effective March 24, 1999, the Company's Common Stock
began being quoted on the OTC Bulletin Board.
9. STOCK-BASED COMPENSATION PLANS
The Company has three stock option plans, the Employees' Stock Option
Plan, the Stock Incentive Plan and the Directors' Stock Option Plan. The Company
accounts for these plans under APB
F-19
<PAGE> 74
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined consistent with FASB Statement
No. 123 ("FAS 123"), the Company's net earnings (loss) and earnings (loss) per
share ("EPS") for the year ended December 31, 1999, 1998 and 1997 would have
been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Net Earnings (Loss): As reported $(39,839,734) $(18,979,821) $(1,324,871)
Pro forma $(40,545,062) $(19,684,005) $(2,983,028)
Basic EPS: As reported $ (3.27) $ (1.57) $ (0.11)
Pro forma $ (3.33) $ (1.63) $ (0.25)
Diluted EPS: As reported $ (3.27) $ (1.57) $ (0.11)
Pro forma $ (3.33) $ (1.63) $ (0.25)
</TABLE>
The fair value of each option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1999, 1998 and 1997, respectively: expected
volatility of 88%, 68% and 70% and risk-free interest rates of 6.0%, 5.6% and
6.4%. An expected life of 5.7, 5.2 and 5.0 years was used for options granted to
the employees and directors, respectively.
The FAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, and accordingly the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
The Directors' Stock Option Plan provides for the grant of 20,000 stock
options to each of the non-employee directors along with additional annual
grants of stock options upon re-election as directors at the Company's annual
meeting. Currently there are 69,000 stock options outstanding under the
Directors' Stock Option Plan. Also, on January 15, 1992, the Board of Directors
approved the grant of 577,248 stock options under the Employees' Stock Option
Plan. All of the previously outstanding options were canceled upon the
effectiveness of the new options. On August 10, 1994, the Board of Directors
increased the available options under the Employees' Stock Option Plan and the
Directors' Stock Option Plan to 850,000 options and 150,000 options,
respectively. On October 11, 1995, the Board of Directors elected to discontinue
grants under the Employees' Stock Option Plan with the adoption of a stock
incentive plan covering key employees. The Stock Incentive Plan provides for the
grant of a maximum of 750,000 stock options. These options may be qualified or
nonqualified. On June 5, 1998, the Company's stockholders elected to increase
the available options under the Stock Incentive Plan to 1,250,000 options. As of
December 31, 1999, there are 582,590 options outstanding under the Stock
Incentive Plan. Additional details about the options granted under the stock
option plans are as follows:
F-20
<PAGE> 75
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
---------------------------------------------------------
At December 31, 1999
---------------------------------------------------------
Options
Exercise Options Available Options Options Options
Date of Grant Price Granted for Exercise Exercised Canceled Outstanding
------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
January 15, 1992 $ 2.94 617,248 99,437 327,625 190,186 99,437
May 22, 1992 $ 3.00 2,000 -- 1,000 1,000 --
------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31, 1992 619,248 99,437 328,625 191,186 99,437
------------ ------------ ------------ ------------ ------------ ------------
February 26, 1993 $ 2.50 10,000 -- 2,500 7,500 --
May 27, 1993 $ 3.50 2,000 -- 500 1,500 --
------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31, 1993 631,248 99,437 331,625 200,186 99,437
------------ ------------ ------------ ------------ ------------ ------------
July 11, 1994 $ 4.38 20,000 20,000 -- -- 20,000
August 10, 1994 $ 4.25 140,000 19,000 1,000 120,000 19,000
December 15, 1994 $ 5.88 3,000 2,000 -- 1,000 2,000
------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31, 1994 794,248 140,437 332,625 321,186 140,437
------------ ------------ ------------ ------------ ------------ ------------
February 24, 1995 $ 4.13 210,000 100,000 -- 110,000 100,000
April 12, 1995 $ 3.88 10,000 10,000 -- -- 10,000
May 26, 1995 $ 3.75 40,000 20,000 -- 20,000 20,000
August 16, 1995 $ 8.38 100,000 100,000 -- -- 100,000
August 31, 1995 $ 6.88 127,508 107,584 -- 19,924 107,584
October 11, 1995 $ 6.94 35,000 35,000 -- -- 35,000
December 19, 1995 $ 5.50 3,000 2,000 -- 1,000 2,000
------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31, 1995 1,319,756 515,021 332,625 472,110 515,021
------------ ------------ ------------ ------------ ------------ ------------
February 22, 1996 $ 9.75 178,810 102,168 -- 42,600 136,210
May 29, 1996 $ 17.00 3,000 1,500 -- 1,000 2,000
May 30, 1996 $ 16.13 75,000 56,250 -- -- 75,000
July 22, 1996 $ 11.13 50,000 -- -- 50,000 --
------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31, 1996 1,626,566 674,939 332,625 565,710 728,231
------------ ------------ ------------ ------------ ------------ ------------
February 10, 1997 $ 7.125 182,405 65,696 -- 51,025 131,380
April 1, 1997 $ 5.50 55,000 27,500 -- -- 55,000
May 1, 1997 $ 5.00 3,000 1,000 -- 1,000 2,000
------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31, 1997 1,866,971 769,135 332,625 617,735 916,611
------------ ------------ ------------ ------------ ------------ ------------
February 23, 1998 $ 2.9375 172,000 37,500 -- 22,000 150,000
June 5, 1998 $ 2.50 3,000 500 -- 1,000 2,000
------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31, 1998 2,041,971 807,135 332,625 640,735 1,068,611
------------ ------------ ------------ ------------ ------------ ------------
June 18, 1999 $ 2.50 2,000 -- -- -- 2,000
------------ ------------ ------------ ------------ ------------ ------------
Balances at December 31, 1999 2,043,971 807,135 332,625 640,735 1,070,611
============ ============ ============ ============ ============ ============
</TABLE>
The exercise price for the options granted under the stock option plans
has been the approximate market price of the common stock on the date granted.
The terms of the options provide that no options may be exercised for one year
after grant, and then for ratable exercise over the subsequent four-year period,
with a total exercisable period of ten years.
The exercise price for the options granted under the Stock Incentive
Plan has been the approximate market price of the common stock on the date
granted. The terms of the options are determined by the Board of Directors upon
grant; however, no options may be exercised after a period of ten years.
F-21
<PAGE> 76
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
10. FEDERAL INCOME TAXES
The deferred federal income tax liability consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Property development costs - net of amortization $(10,897,000) $ 545,000
Property acquisition costs -- 2,652,000
Accelerated depreciation 108,000 229,000
Restoration reserves (1,780,000) (1,817,000)
Net operating loss and percentage
depletion carryforwards (14,000) (7,015,000)
Valuation allowance and other - net 12,583,000 5,670,000
------------ ------------
Total deferred income tax liability $ 0 $ 264,000
============ ============
</TABLE>
Major items causing the Company's tax provision to differ from the
federal statutory rate of 34% were:
<TABLE>
<CAPTION>
For the Twelve Months Ended December 31,
--------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------- -------------------------- ----------------------------
% of Pretax % of Pretax % of Pretax
Amount Income Amount Income Amount Income
------------ ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Pretax loss $(40,103,544) $(23,724,821) $ (1,598,096)
------------ ------------ ------------ ---------- ------------ -----------
Pretax loss times
statutory tax rate (13,635,000) (34)% (8,066,000) (34)% (543,000) (34.0)%
Increases in taxes resulting from:
Percentage depletion 13,635,000 34% 8,066,000 34% 543,000 34.0%
Alternative minimum
tax (263,810) (0.7)% (4,745,000) 0.0% (273,225) 0.0%
------------ ------------ ------------ ---------- ------------ -----------
Income tax benefit $ (263,810) (0.7)% $ (4,745,000) (20)% $ (273,225) (17.1)%
============ ============ ============ ========== ============ ===========
</TABLE>
The Company's net operating loss carryforwards generated in 1999 and in
prior years have generally been valued, net of valuation allowance, at
Alternative Minimum Tax ("AMT") rates imposed by the 1986 Tax Reform Act ("the
86 ACT"). It is assumed that these deferred tax assets will be realized at such
rates.
At December 31, 1999, approximately $43,784,000 of percentage depletion
(available for regular tax purposes) had not been utilized to shelter book
income and is available to carry forward to future accounting periods. The
Company received refunds of $3,348 and $42,000 from prior year's federal income
payments in 1999 and 1998, respectively, and paid $45,000 in federal income
taxes in 1997.
The Company also has available for regular federal income tax purposes
at December 31, 1999 estimated net operating loss carryforwards of approximately
$31,375,000 which expire primarily in 2004 through 2020, if not previously
utilized. At December 31, 1999, the Company had investment tax credit
carryforwards of approximately $1,000, after adjusting for the reductions
required by the 86 ACT, which expire for regular tax purposes in 2000.
F-22
<PAGE> 77
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1999, 1998 AND 1997
(UNAUDITED AS TO DECEMBER 31, 1999)
11. OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS
Other long-term liabilities and deferred credits on the balance sheet consisted
of:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Reserve for future restoration and reclamation costs,
net of current portion of $83,000 and $324,000 in
1999 and 1998 (Note 1) $5,054,497 $4,968,382
Long-term accounts and interest payable 811,943 --
Royalties payable 500,000 500,000
Deferred compensation 108,240 --
Unearned revenue from Russian matched sales (Note 1) -- 1,012
---------- ----------
$6,474,680 $4,969,394
========== ==========
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
The Company's mining operations are subject to federal and state
regulations for the protection of the environment, including water quality.
These laws are constantly changing and generally becoming more restrictive. The
ongoing costs of complying with such regulations have not been significant to
the Company's annual operating costs. Future mine closure and reclamation costs
are provided for as each pound of uranium is produced on a unit-of-production
basis. The Company reviews its reclamation obligations each year and determines
the appropriate unit charge. The Company also evaluates the status of current
environmental laws and their potential impact on their accrual for costs. The
Company believes its operations are in compliance with current environmental
regulations.
The Company is from time to time involved in various legal proceedings
of a character normally incident to its business. Management does not believe
that adverse decisions in any pending or threatened proceedings will have a
material adverse effect on the Company's financial condition or results of
operations.
13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure about the fair value
of financial instruments. The Company is unable to assess the fair value of its
debt instrument at December 31, 1999 due to the Company's financial position and
its inability to secure comparable financing.
F-23
<PAGE> 78
SCHEDULE II
URANIUM RESOURCES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at Charged to Charged to
Beginning Costs and Other Balance at End
Description of Period Expenses Accounts Deductions(a) of Period
----------- ---------- ---------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Accrued restoration costs .... $5,292,382 $ 234,537 $ 44,961(b) $ 344,461 $5,137,497(c)
Year ended December 31, 1998:
Accrued restoration costs .... $4,762,108 $ 692,317 $ 92,687(b) $ 69,356 $5,292,382(c)
Year ended December 31, 1997:
Accrued restoration costs .... $4,136,495 $1,032,587 $ 89,703(b) $ 317,271 $4,762,108(c)
</TABLE>
- --------------------------------
(a) Deductions represent costs incurred in the restoration process.
(b) Increase (decrease) resulted primarily from the change in the amounts of
restoration provision included in ending uranium inventory.
(c) Amounts recorded as current liabilities at December 31, 1999, 1998 and 1997
are $83,000, $324,000, and $511,000, respectively.
F-24
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C>
3.1* Restated Certificate of Incorporation of the Company, as amended (filed with the
Company's Annual Report on Form 10-K dated March 27, 1997).
3.2* Restated Bylaws of the Company (filed with the Company's Form S-3 Registration No.
333-17875 on December 16, 1996).
4.1* Registration Rights Agreement dated March 25, 1997 between the Company and Santa Fe
Pacific Gold Corporation (filed with the Company's Annual Report on Form 10-K dated
March 27, 1997).
10.1* Amended and Restated Directors Stock Option Plan (filed with the Company's Form S-8
Registration No. 333-00349 on January 22, 1996).
10.2* Amended and Restated Employee's Stock Option Plan (filed with the Company's Form S-8
Registration No. 333-00403 on January 22, 1996).
10.3* 1995 Stock Incentive Plan (filed with the Company's Form S-8 Registration No.
333-00405 on January 22, 1996).
10.4* Non-Qualified Stock Option Agreement dated August 16, 1995, between the Company and
Leland O. Erdahl (filed with the Company's Annual Report on Form 10-K dated March 27,
1996).
10.5* Non-Qualified Stock Option Agreement dated May 25, 1995, between the Company and
George R. Ireland (filed with the Company's Annual Report on Form 10-K dated March
27, 1996).
10.6* Non-Qualified Stock Option Agreement dated May 25, 1995, between the Company and
James B. Tompkins (filed with the Company's Annual Report on Form 10-K dated March
27, 1996).
10.7* Stock Option Agreement dated March 6, 1995 between the Company and James P.
Congleton, as amended on May 25, 1995 (filed with the Company's Annual Report on Form
10-K dated March 27, 1996).
10.8* Warrant to Purchase Common Stock dated May 25, 1995, between the Company and Grant
Bettingen, Inc. (filed with the Company's Annual Report on Form 10-K dated March 27,
1996).
10.9* Non-Qualified Stock Option Agreement dated July 31, 1995, between the Company and
Wallace M. Mays (filed with the Company's Form S-8 Registration Statement No.
33-64481 on November 21, 1995).
10.10* Contract for the Purchase of Natural Uranium Concentrates (U(3)O(8)) dated April 5,
1994 between Uranium Resources, Inc., URI, Inc. and Pacific Gas & Electric Company
(filed with the Company's Annual Report on Form 10-K for the year ended December 31,
1994).(1)
10.11* Agreement for the Sale of Uranium Concentrates dated as of August 23, 1990 between
OES Fuel, Incorporated, Uranium Resources, Inc. and URI, Inc. (filed with
Post-Effective Amendment No. 3 to the Company's Form S-1 Registration Statement as
filed with the Securities and Exchange Commission on December 7, 1990).(1)
</TABLE>
E-1
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C>
10.12* Summary of Supplemental Health Care Plan (filed with Amendment No. 1 to the Company's
Form S-1 Registration Statement (File No. 33-32754) as filed with the Securities and
Exchange Commission on February 20, 1990).
10.13* Note and Warrant Purchase Agreement entered into May 25, 1995 by and among Lindner
Investments, Lindner Dividend Fund and the Company (filed with the Company's Current
Report on Form 8-K dated May 25, 1995).
10.14* Loan Agreement entered into June 18, 1996 by and between Lindner Dividend Fund and
the Company (filed with the Company's Annual Report on Form 10-K dated March 27,
1997).
10.15* Uranium Concentrates Sales Agreement dated August 21, 1996 by and between the Company
and Commonwealth Edison Company (filed with the Company's Quarterly Report on Form
10-Q/A-2 for the quarter ended September 30, 1996).(1)
10.16* Agreement of Santa Fe Pacific Gold Corporation as Uranco, Inc. Shareholder with the
Company and Guarantee of the Company dated as of March 25, 1997 (filed with the
Company's Annual Report on Form 10-K dated March 27, 1997). (1)
10.17* Stock Exchange Agreement and Plan of Reorganization dated as of March 25, 1997 (filed
with the Company's Annual Report on Form 10-K dated March 27, 1997).
10.18* License to Explore and Option to Purchase dated March 21, 1997 between Santa Fe
Pacific Gold Corporation and Uranco, Inc. (filed with the Company's Annual Report on
Form 10-K dated March 27, 1997).(1)
10.19* Amendment #1 to Nonqualified Stock Option Agreement dated November 17, 1997 between
the Company and Leland O. Erdahl (filed with the Company's Annual Report on Form 10-K
dated March 27, 1998).
10.20* Amendment #1 to Nonqualified Stock Option Agreement dated November 17, 1997 between
the Company and George R. Ireland (filed with the Company's Annual Report on Form
10-K dated March 27, 1998).
10.21* Amendment #1 to Nonqualified Stock Option Agreement dated November 17, 1997 between
the Company and James B. Tompkins (filed with the Company's Annual Report on Form
10-K dated March 27, 1998).
10.22* Compensation Agreement dated June 2, 1997 between the Company and Paul K. Willmott
(filed with the Company's Annual Report on Form 10-K dated March 27, 1998).
10.23* Compensation Agreement dated June 2, 1997 between the Company and Richard F. Clement,
Jr. (filed with the Company's Annual Report on Form 10-K dated March 27, 1998).
10.24* Compensation Agreement dated June 2, 1997 between the Company and Joe H. Card (filed
with the Company's Annual Report on Form 10-K dated March 27, 1998).
10.25* Compensation Agreement dated June 2, 1997 between the Company and Richard A. Van Horn
(filed with the Company's Annual Report on Form 10-K dated March 27, 1998).
</TABLE>
E-2
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<S> <C> <C>
10.26* Compensation Agreement dated June 2, 1997 between the Company and Thomas H. Ehrlich
(filed with the Company's Annual Report on Form 10-K dated March 27, 1998).
10.27* Compensation Agreement dated June 2, 1997 between the Company and Mark S. Pelizza
(filed with the Company's Annual Report on Form 10-K dated March 27, 1998).
10.28* Note and Warrant Exchange Agreement dated March 23, 1998 between the Company and
Lindner Investments (filed with the Company's Annual Report on Form 10-K dated March
27, 1998).
10.29* 6.5% Secured Convertible Note for $1,500,000 dated March 23, 1998 between the Company
and Lindner Investments (filed with the Company's Annual Report on Form 10-K dated
March 27, 1998).
10.30* 6.5% Secured Convertible Note for $4,500,000 dated March 23, 1998 between the Company
and Lindner Investments (filed with the Company's Annual Report on Form 10-K dated
March 27, 1998).
10.31* Warrant to Purchase Common Stock for 625,000 shares dated March 23, 1998 between the
Company and Lindner Investments (filed with the Company's Annual Report on Form 10-K
dated March 27, 1998).
10.32* Warrant to Purchase Common Stock for 325,000 shares dated March 23, 1998 between the
Company and Lindner Investments (filed with the Company's Annual Report on Form 10-K
dated March 27, 1998).
10.33* Uranium Resources, Inc. 1999 Deferred Compensation Plan.
21.1* Subsidiaries of the Company (filed with the Company's Annual Report on Form 10-K
dated March 27, 1998).
27.1 Financial Schedule.
</TABLE>
*Incorporated by reference pursuant to Rule 12b-32 under the Securities
and Exchange Act of 1934, as amended.
(1)Certain provisions have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for
confidential treatment.
E-3
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 493,567
<SECURITIES> 0
<RECEIVABLES> 1,155,198
<ALLOWANCES> 0
<INVENTORY> 183,220
<CURRENT-ASSETS> 1,877,898
<PP&E> 99,783,906
<DEPRECIATION> (97,578,333)
<TOTAL-ASSETS> 7,739,528
<CURRENT-LIABILITIES> 1,291,740
<BONDS> 6,372,208
0
0
<COMMON> 12,494
<OTHER-SE> (6,411,594)
<TOTAL-LIABILITY-AND-EQUITY> 7,739,528
<SALES> 7,255,076
<TOTAL-REVENUES> 7,255,076
<CGS> 46,968,782
<TOTAL-COSTS> 49,029,643
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 226,841
<INCOME-PRETAX> (40,103,544)
<INCOME-TAX> (263,810)
<INCOME-CONTINUING> (39,839,734)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,839,734)
<EPS-BASIC> (3.27)
<EPS-DILUTED> (3.27)
</TABLE>
