Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion and analysis of the Company’s financial condition and historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from those projected, forecasted or expected in these forward-looking statements as a result of various factors, including but not limited to, those discussed below and elsewhere in this Annual Report. Refer to “Cautionary Note Regarding Forward-looking Statements” and Item 1A. Risk Factors herein. Our management believes the assumptions underlying the Company’s financial statements and accompanying notes are reasonable. However, the Company’s financial statements and accompanying notes may not be an indication of our financial condition and results of operations in the future.
Business Overview
The following discussion is designed to provide information that we believe necessary for an understanding of our financial condition, changes in financial condition and results of our operations. The following discussion and analysis should be read in conjunction with the accompanying audited consolidated financial statements and related notes. The financial statements have been prepared in accordance with US GAAP.
The primary use of uranium is to fuel nuclear power plants for the generation of carbon and emission free electricity. According to the World Nuclear Association (“WNA”), as of January 2025, there were 440 operable nuclear reactors world-wide, which required approximately 175.2 million pounds of U3O8 annually at full operation. Worldwide, there are currently 65 new reactors under construction with an additional 86 reactors on order or in the planning stage and 344 having been proposed. According to data from TradeTech LLC (“TradeTech”), the world continues to require more uranium than it produces from primary extraction. The gap between demand and primary supply is being filled by stockpiled inventories and secondary supplies, which the Company believes have dwindled significantly in recent years.
According to the WNA in January 2025, the U.S. currently has 94 operating reactors, and other reactors on order, planned or proposed. According to the U.S. Energy Information Administration (“EIA”), in 2023, the U.S. produced approximately 18.52% of its electricity from nuclear technology, while, according to the Nuclear Energy Institute (“NEI”), the U.S. achieved an average capacity factor of 92.7%, leading all other carbon-free sources by a wide margin. According to the EIA, U.S. utilities purchased approximately 51.63 million pounds of U3O8 in 2023 (the last year reported). However, in 2023, U.S. uranium production was only 0.05 million pounds, as reported by EIA.
Uranium is not traded on an open market or organized commodity exchange, although the CME Group provides financially settled uranium futures contracts. Typically, buyers and sellers negotiate transactions privately, either directly or through brokers and intermediaries. Spot uranium transactions typically involve deliveries that occur immediately and up to 12 months in the future. Term uranium transactions typically involve deliveries that occur more than 12 months in the future, with long-term transactions involving delivery terms of at least three years. Uranium prices, both spot and term, are primarily published by two independent market consulting firms, TradeTech and UxC, LLC, on a weekly and monthly basis, along with daily price indicators. Other brokers, including Uranium Markets LLC, Evolution Markets Inc. and Numerco Ltd., also publish daily average uranium prices.
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During the period ending December 31, 2024, the uranium market saw uranium prices exceed $100 per pound U2O8 in the first quarter of the year.[1] By the end of the year, spot prices had moderated to $73.50 per pound U3O8.[2] The Company, as previously disclosed, continued to see continued nuclear utility and trading company interest in term contracting. Generally, spot and contracting volumes remain below levels observed in 2022 and 2023, and that is driven by continued geopolitical uncertainty, transportation challenges, trade restrictions, and uncertainty regarding new primary production supply. However, many of the same fundamentals that have led to the recent resurgence in support for nuclear power remain unchallenged. In 2025, the nuclear fuel market is poised to be influenced by three major macroeconomic forces: net-zero carbon emissions initiatives, emerging demand in the technology sector, and trade restrictions.
Net-zero policies require reliable, efficient, and cost-effective electricity generation that contributes to meaningful reductions in carbon emissions. These policies have led to a widespread recognition that nuclear power must play a role in meeting commitments to mitigate climate change through clean energy development. These developments build on a long-run trend in energy policy reform that has evolved to acknowledge and support nuclear power’s critical role in achieving carbon reduction goals, and now the financial markets are following with material support for real demand that is emerging faster than current generating capacity can satisfy.
While nuclear power has enjoyed renewed public support in recent years, as reported in several public sources, technology firms including Amazon, Microsoft, Meta, and Google recently announced plans to secure dedicated energy production output from nuclear power plants for their data centers. This includes agreements to build small modular reactors (SMRs) and advanced reactors in several regions.
Expanding the current reactor fleet to meet that level of electrical generating capacity remains a significant challenge to the nuclear industry. To meet those goals, the global industry must protect existing capacity, and there have been multiple public pronouncements from several countries, including the U.S. to protect existing nuclear generating capacity intact. In the U.S., as a result of clean energy credits granted be several states and the production tax credit for nuclear power provided in the Inflation Reduction Act, several nuclear utilities have announced operating life extensions and capacity expansions within their existing operating fleet. Also, the industry has seen a truly unprecedented trend in reactor recommissioning, In the U.S., where just a few years ago reactors were being shut down prematurely, nuclear plants such as Diablo Canyon, Palisades, Three Mile Island, and Duane Arnold are positioned to re-enter service.
Uprates and refurbishments have proven to be exceptionally economical for many reasons, including building on existing licenses and long-established operations. Moreover, several countries have announced plans to abandon plans to exit nuclear power, including Belgium, Japan, and South Korea. And other countries, such as Switzerland, appear to be reconsidering their exits.
There remains continued and growing support for the development of small modular reactors (“SMR”). The case for smaller reactors is largely built on cost savings as well as installation flexibility and scalability. Proponents of SMRs point to standardized design and serial production as the main drivers for reduced costs, with each manufactured unit becoming less expensive than the one before it. SMRs are expected to be smaller and more modular than traditional reactors, so they can be installed in locations would not accommodate larger reactors due to space and location. They can also be used on decommissioned coal power plant sites, which is being looked at as a way to transition to clean electricity.
With increasing demand expectations, there is an expectation that a likewise increase in uranium production must occur in an environment beset by risks, including import bans, sanctions, and secondary sanctions imposed by various countries, transportation issues, trade restrictions in other goods and services beyond nuclear fuel, and fewer available ports, which have all combined to create widespread uncertainty in the market regarding the availability of both current and future supply. The most notable recent trade restriction is the USA’s Prohibiting Russian Uranium Imports Act (H.R. 1042), which was signed into law in May 2024 and prohibits the importation of unirradiated, low-enriched uranium produced in the Russian Federation or by a Russian entity. The Act allows temporary waivers, during the period up to January 1, 2028, under certain circumstances.
In response, on November 15, the Russian government imposed “temporary limits” on the export of enriched uranium to the USA, as a retaliatory move following the enactment of the US ban on Russian uranium imports.[3] In September 2024, the U.S. Government announced that it was investigating a significant increase in enriched uranium imported from China when Russian imports were being considered for an outright ban in the context of possible circumvention of the Russian Suspension Agreement.[4] Additionally, in November 2024, the President-elect, Donald Trump declared on social media that he intends to impose a 25 percent tariff on all goods entering the USA from Mexico and Canada on his first day in
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office (January 20, 2025). Subsequent to that date, President Trump announced the tariffs will go into effect February 3, 2025. It is unknown the direct impacts these tariffs will have on the uranium market, at this time.
Below is a list of some of the recent government policy news that can influence the uranium market.
•On January 20, 2025, President Trump issued two Executive Orders that specifically refenced nuclear power and uranium as key parts to expanding energy in the U.S. The Executive Order titled, “Unleashing American Energy”, in addition to directing federal agencies to advance permitting for energy projects also called for uranium to be designated as a “critical mineral” by the U.S. Geological Survey. The Executive Order titled, “Declaring a National Energy Emergency”, that directs federal agencies, under emergency authority, to advance permit and license approvals for the production of energy and energy resources. In that Executive Order, uranium is defined as an “energy resource” and subject to the emergency declaration.
•During the 29th United Nations Climate Change Conference in Baku, Azerbaijan (COP 29), the USA announced new domestic nuclear energy deployment targets and a framework for action, which includes a target of 200 GW of new US nuclear energy capacity by 2050, and outlines pathways and actions to meet this goal. Meeting this target would triple US domestic nuclear energy capacity from current levels.
•Following the enactment of the Nuclear Fuel Security Act in 2024, the US Department of Energy (DOE) selected six companies from which it can sign contracts to procure low-enriched uranium (LEU) in order to incentivize the build-out of new uranium production capacity in the U.S.A. The companies include: American Centrifuge Operating, LLC; General Matter, Inc.; Global Laser Enrichment, LLC; Louisiana Energy Services, LLC; Laser Isotope Separation Technologies, Inc.; and Orano Federal Services; LLC.All contracts will last for up to 10 years and each awardee will receive a minimum contract of U.S. $2 million. The maximum value for all awardees totals $3.4 billion. The final award value will depend on competitive task orders to be subsequently issued by DOE.
•The U.S. Department of Energy (DOE) announced that up to US$80 million is available through a new funding opportunity to spur advancements in the process to produce high-assay low-enriched uranium (HALEU). The funding will support industry partners developing innovative technologies and approaches to strengthening the HALEU supply chain in the USA.
[1] Nuclear Market Review week ending February 2, 2024, TradeTech LLC, 2024
[2] Nuclear Market Review, December 31, 2024, TradeTech LLC, 2024
[3] “Russia Temporarily Limits Enriched Uranium Supplies to US”, Bloomberg, November 15, 2024
[4] “Exclusive-US Probes Uranium Imports From China Amid Concerns Over Russian Ban”, Reuters, September 17,2024
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Sales of Uranium and Sales Agreements
During the year ended December 31, 2024, enCore completed eight uranium sales totaling 720,000 pounds U3O8 for an average sales price of $81.02 per pound U3O8, not including converter and transaction costs. The Company used 580,000 pounds U3O8 was sourced from purchased uranium, and the balance was sourced from uranium produced at the Rosita and Alta Mesa, combined.
To support the Company’s development plans, enCore’s uranium sales strategy provides a base level of projected income from sales contracts while preserving significant ability to realize opportunities when strong short-term market fundamentals are present. This strategy assures that the Company will have committed sales to support the capital necessary for construction of new projects while maintaining flexibility to be opportunistic as market conditions continue to change in favorable ways.
The Company has been able to use improving uranium market conditions to create a balanced uranium sales agreement portfolio to provide multiple pricing structures to support future market changes and support production plans. As of December 31, 2024, we have executed eleven uranium sales agreements to supply uranium to nuclear power plants in the United States and one legacy uranium sales agreement with a uranium trading company. enCore’s uranium sales agreement portfolio is a mix of market related pricing, hybrid base price and market related pricing, base escalated pricing, and fixed prices. Of enCore’s twelve (12) current uranium sales agreements, two are market-related with no floors or ceilings, five are market related that typically retain exposure to spot pricing, while including minimum floor and maximum ceiling prices, some of which are adjusted upwards periodically for inflation. Minimum floor prices are set at levels that provide the Company with a comfortable margin over its expected costs of operations in Texas while still allowing the Company to participate in anticipated escalations of the price of uranium. The Company will continue to assess opportunities to secure future sales agreements that will support its continued project and production growth strategies. The Company is committed to honoring all sales commitments. To meet delivery obligations during the year, as uranium extraction increased, the Company occasionally purchased U3O8 in the open market to fill those contractual obligations.
As of December 31, 2024, we have 4,455 million pounds U3O8 in committed uranium sales from 2025 through 2029. Five of the current contracts provide the optionality to add an additional 1,025 million pounds U3O8 through 2029. The annual schedule of contracted sales is shown in the table below:
Delivery Year Firm Deliveries Optional Deliveries
Pounds U3O8 Pounds U3O8
* Deliveries during period are complete.
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Operations Update
The Company is focused on producing uranium in the United States and delivering that uranium to customers. The Company currently utilizes only the proven ISR technology to provide necessary fuel for the generation of clean, reliable, and carbon-free nuclear energy.
enCore owns 3 of the 11 licensed and constructed Central ISR Uranium Processing Plants (CPPs) in the United States. All of its existing facilities are located in the State of Texas. Our plants are designed and permitted to process uranium from a mix of satellite plants and primary sources within South Texas. In addition, the Company has several key mineral resource projects in other jurisdictions within the United States. Our S-K 1300 compliant resources are listed below:
Total measured and indicated Mineral Resources 30.94 million lbs U3O8
Total inferred Mineral Resources 20.54 million lbs U3O8
The Company’s strategy over the next three years is centered around two of its fully licensed Texas CPPs; Rosita and Alta Mesa. The CPPs located at the Rosita and Kingsville Dome projects are designed for, and fully capable of, processing feed resin from relocatable satellite IX plants employed at various deposits within a 100-mile radius of each plant. The Rosita CPP was the starting point for enCore’s Texas extraction strategy. In the fourth quarter of 2024, the Company announced it had commenced uranium extraction operations at Rosita from the Rosita Extension wellfield, PAA-5. Rosita is located approximately 60 miles from Corpus Christi, Texas and has an 800,000-pound U3O8 per year production capacity. The Rosita CPP will act as the central processing site for the Rosita South - Cadena, Upper Spring Creek- Brown, Upper Spring Creek – Brevard, and Butler Ranch Project.
In February 2023, the Company acquired 100% of the Alta Mesa Uranium Project and the Mesteña Grande Uranium Project from Energy Fuels for $120 million. enCore’s fully licensed Alta Mesa CPP is located approximately 100 miles southeast of Corpus Christi, TX, and has a production capacity of 1.5 million pounds ofU3O8 per year through its IX exchange system located at the plant. The facility has IX elution, precipitation, drying, and packaging capacity for 2.0 million pounds of U3O8 per year. This capacity is designed to accept direct production feed to the IX columns in the plant and concurrently accept loaded resin from satellite locations. The Alta Mesa Project includes existing and near-term production areas, including the fully permitted and authorized production areas 6 and 7. The Mesteña Grande Uranium Project also has nine additional mineral resource areas described below in the “Our Item 1 and 2. Our Business and Properties, Mesteña Grande Project” section. In total, the Alta Mesa Uranium Project combined with the Mesteña Grande Uranium Project encompasses mineral leases on 200,000 acres of private land. In February 2024, the Company sold a 30% interest in the Alta Mesa and Mesteña Grande projects to Boss for $60 million.
In June 2024, the Company announced the successful startup of uranium extraction operations at the Alta Mesa Alta Mesa Project. With the restart of the previously operating Alta Mesa Project, the Company is now the only uranium producer in the United States with multiple production facilities in operation as of December 31, 2024. The initial ramp up will be a progressive process to advance and continually increase uranium extraction via direct feed to the Alta Mesa CPP. Exploration drilling and wellfield installation continued at Wellfield 7 at Alta Mesa to support expanding extraction rate capacity through a second IX circuit at the Alta Mesa CPP. During the year ended December 31, 2024, wellfield solution head grades at the Alta Mesa Project peaked at approximately 140 mg/L U3O8 and averaged approximately 54 mg/L U3O8.
During the year ended December 31, 2024, the Company continued operations at its Rosita CPP, and it announced in June 2024, the start of uranium extraction at its Alta Mesa CPP location. For both the Rosita CPP and the Alta Mesa CPPs combined, 286,624 pounds U3O8 were captured on ion exchange resin and 236,891 pounds U3O8 were dried and packaged from our Rosita Project and Alta Mesa Project, combined over the year ended December 31, 2024. Additionally, over the same period, the Company shipped 234,842 pounds U3O8 to a North American conversion facility. In 2024, Boss received 35,181 pounds U3O8 for uranium product shipped on the behalf of the joint venture to a North American conversion facility.
Thorough the year, the Company focused on starting up its uranium recovery operations at its Rosita CPP and at its Alta Mesa CPP. During 2024, as the Company executed its plans at its Rosita and Alta Mesa CPP’s and related wellfields, operational performance met expectations, in general. There were some operational challenges that were observed by the Company that impacted uranium recovery. The Company experienced lower extraction rates of in-situ mineral resources due to wellfield pattern inefficiencies caused by incomplete geophysical data and construction. At the time, limited and unreliable PFN capabilities contributed to these challenges. The acquisition of additional PFN equipment, parts, and
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intellectual property enabled the Company to mitigate these inefficiencies for current wellfields at Alta Mesa and future South Texas Satellite IX wellfields that will supply the Rosita CPP.
At the Alta Mesa Project, uranium extraction from Wellfield 7 progressed faster than planned, outpacing wellfield replacement due to a limited number of drilling rigs in operation at the time. Additionally, the accelerated pace of activity revealed gaps in coordination across wellfield construction, infrastructure installation, and operations, further delaying replacement and the development of additional wellfield patterns to support the expanded capacity at the Alta Mesa CPP. By late Q4, the Company increased its drilling rig count from six in Q1 2024 to 17, and implemented organizational changes to enhance coordination and improve efficiency in wellfield extraction.
The Kingsville Dome CPP is currently maintained in a standby condition. This facility, similar in size and design to the Rosita facility, has a capacity of 800,000 pounds of U3O8 per year.
As the Company has been increasing its’ operational pace to meet our targets for uranium extraction rates, we have successfully increased our drilling rig capacity to facilitate replacing mineral resource depletion and adding mineral resources in South Texas. The Company started with six (6) active drilling rigs in South Texas at the beginning of 2024, and in the last half of the year, the number of active drilling rigs in South Texas increased to seventeen (17). Additionally, the Company had two active drilling rigs operating in Wyoming in the second half of the year. Additionally, enCore has an experienced technical team with years of experience in ISR operations in Texas, Wyoming, and Nebraska supporting and managing our operations. We have been able to utilize that experience and “know how” to self-execute the refurbishment of the Rosita and Alta Mesa CPP, along with design, construct and install infrastructure for three wellfields and two satellite IX facilities over the period of three years.
South Texas Regulatory Proceedings
Each of the Company’s production facilities maintain several permits and licenses in order to manage the current operations. For all of the Company’s operating locations, all permits and licenses remain current and in effect. In some cases, some of those permits and licenses are in renewal, and for some expansion activities, new permits or amendments will be necessary. All of our South Texas facilities are regulated by the TCEQ in the case of in-situ uranium recovery and underground injection operations, and for exploration and development drilling activities, the TRC is the principal regulator. The Radioactive Materials Licenses for Rosita and Alta Mesa are issued by the TCEQ under the NRC Agreement State program that assures that mature and consistent regulatory process is in place to assure more certainty regarding regulatory approvals.
As previously disclosed, there are no permits or license amendments required to execute the Alta Mesa uranium extraction rate ramp up. Currently, at Alta Mesa, the Radioactive Materials License and the Class III UIC Area Permit are in timely renewal and under technical review by the TCEQ, but those do not effect current expansion activities. At Upper Spring Creek, the TCEQ has issued the Class III UIC Area Permit, and the agency is completing the technical review of the License Amendment to the Rosita Radioactive Materials License that incorporates the Upper Spring Creek wellfield and satellite IX facility into the current license activities. This approval of the license amendment is necessary to advance wellfield and satellite IX construction, and the progress on approval remains within schedule expectations.
South Dakota Developments
In addition to the Company’s operations in South Texas, it is also developing pipeline projects in other states. Notably, the advanced stage Dewey-Burdock Uranium Project in South Dakota has demonstrated ISR resources, including a 2024 S-K 1300 Technical Report Summary and N.I. 43-101 Technical Report and Preliminary Economic Assessment (“PEA”) citing robust economics. The project has its source material license from the NRC and its underground injection permits and aquifer exemption from the EPA. In 2023, the Company announced that the NRC approval was considered final when appeals of the license approval were exhausted following a successful outcome from the Circuit Court of Appeals for the District of Columbia. In April 2024, the Company submitted its application to renew the ten (10) year old Source Material License, SUA-1600. The NRC has confirmed that the Dewey-Burdock Source Material License is in timely renewal. The underground injection permits were appealed to the EPA’s Environmental Appeals Board (“EAB”) and the aquifer exemption was appealed to the 8th Circuit Court of Appeals. In September 2024, the Company provided an update regarding the EAB appeal, including a ruling denying the intervenors contentions on the merits, and remanded to the EPA to review and complete, if necessary, the administrative record for its permit decisions. Based on the successful outcome for the company of the appeal of the NRC license, the Company believes it will be successful in the appeals of the EPA’s underground injection permits and the aquifer exemption.
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Wyoming Developments
The Company has also commenced the initial permitting work to advance the Gas Hills Project as an ISR uranium recovery operation located in central Wyoming, approximately 60 miles west of Casper, Wyoming. As part of the initial data collection for project permitting, the Company initiated core drilling during the year ended December 31, 2024. Gas Hills Project is located in the historic Gas Hills Uranium Mining District, a brownfield area of extensive previous mining.
Also, in Wyoming, the Company initiated exploration drilling to expand the project area at its Dewey Terrace Project area. The uranium orebody that consists of the Dewey-Burdock Uranium Project extends into Wyoming from South Dakota. Historically, the Company has designated the ore body extension into Wyoming as its Dewey Terrace Project.
Results of Operations:
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
The following table summarizes the results of operations for the years ended December 31, 2024 and 2023:
Year ended December 31, Increase(Decrease) PercentChange
(in thousands except per share data) 2024$ 2023$
Gain (loss) on marketable securities, unrealized (2,711) 5,918 (8,629) (146)%
Gain on marketable securities, realized 248 - 248 100%
Basic and diluted loss per share (0.34) (0.18) (0.16) 89%
The following table sets forth selected operating data and financial metrics for uranium sales for the years ended December 31, 2024 and 2023.
Year Ended December 31, Increase(Decrease) PercentChange
•Revenue from uranium sales for the year ended December 31, 2024 was $58,334 compared to revenue of $22,148 for the year ended December 31, 2023, an increase of $36,186. The increase was due to the completed sale of 720,000 pounds of uranium, compared to sales of 400,000 pounds of uranium during the year ended December 31, 2023. The realized sales prices per pound of uranium for the periods ended December 31, 2024 and 2023 were $81.0 and $55.4, respectively, and includes the contractual sales price less sales-related costs such as transfer fees. The realized sale price per pound decrease is dictated by the market for uranium, which is a commodity.
•Costs applicable to uranium sales were $65,541 for the year ended December 31, 2024 related to the completed sale of 720,000 pounds of uranium at a weighted average cost of $91.0 per pound compared to uranium costs of $19,573 for the sale of 400,000 pounds at a weighted average cost of $48.9 per pound for the year ended December 31, 2023. The increase in costs was due to higher volume of uranium sold, purchases of uranium at a
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higher market price than year-end as well as an impairment loss of $6,054 in 2024. The Company's weighted average cost components include the cost of purchased uranium and uranium from extraction.
•Operating expenses, excluding stock option expenses, for the year ended December 31, 2024, were $60,188 as compared to $39,834 for the year ended December 31, 2023. This increase primarily reflects the growth and increased activity levels the Company experienced in 2024 driven primarily by the extraction of uranium at Alta Mesa and Rosita which commenced in 2024.
•The Company recognized a loss of $2,711 on the fair value of marketable securities for the year ended December 31, 2024, compared to a gain of $5,918 for the year ended December 31, 2023. Unrealized losses for the twelve months ended December 31, 2024, are due to unfavorable market conditions during 2024.
•Interest expense for the year ended December 31, 2024, and December 31, 2023, was $1,735 and $3,503, respectively. This reduction is attributable to the Company’s debt pay down of $40,000 in 2023 and conversion of the $60,000 convertible promissory note in February 2024, partially offset by interest expense on the uranium loan in 2024.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
The following table summarizes the results of operations for the years ended December 31, 2023 and 2022:
Year ended December 31, Increase(Decrease) PercentChange
(in thousands except per share data) 2023$ 2022$
Foreign exchange loss - (58) 58 (100)%
Basic and diluted loss per share (0.18) (0.22) 0.04 (18)%
The following table sets forth selected operating data and financial metrics for uranium sales for the years ended December 31, 2023 and 2022.
Year ended December 31, Increase(Decrease) PercentChange
•Revenue from uranium for the year ended December 31, 2023 was $22,148 an increase of $17,903 due to the completed sale of 400,000 pounds of uranium, compared to sales of 100,000 pounds of uranium during the year ended December 31, 2022. The realized sales prices per pound of uranium for the periods ended December 31, 2023 and 2022 were $55.4 and $42.5, respectively, and includes the contractual sales price less sales related costs such as transfer fees. The realized sale price per pound increase is dictated by the market for uranium, which is a commodity. The realized sale price per pound increase is dictated by the market for uranium, which is a commodity.
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•Costs applicable to uranium were $19,573 for the year ended December 31, 2023 related to the completed sale of 400,000 pounds at a weighted average cost of 48.9 per pound compared to uranium costs of $2,656 for the sale of 100,000 pounds at a weighted average cost of $26.6 per pound for the year ended December 31, 2022. The increase in costs was primarily due to higher volume of uranium sold in 2023 as well as an increase in the price of Uranium that was purchased when compared to 2022.
•Operating expenses, excluding stock option expense, for the year ended December 31, 2023, were $39,834 as compared to $23,168 for the year ended December 31, 2022. This increase primarily reflects the growth and increased activity levels the Company experienced in 2023.
•Unrealized gains recognized on the fair value of marketable securities for year ended December 31, 2023, were $5,918 compared to a gain of $1,057 for the year ended December 31, 2022. This is primarily due to unrealized gain at Premier American Uranium in 2023 partially offset by losses in Anfield and Nuclear Fuels.
•Interest expense for the year ended December 31, 2023 was $3,503 attributable to interest on the Company’s issuance of a $60,000 convertible promissory note in February 2023. The Company did not incur interest expense during the year ended December 31, 2022.
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Non-GAAP Financial Measures
We present non-GAAP financial measures of total cost of extracted pounds and uranium cost per extracted pound during the reporting period. Total cost of extracted pounds is the cost of sales less the cost of sales of purchased goods, which includes the aggregate purchase price of uranium sourced from purchased uranium. Uranium cost per extracted pound is the total cost of extracted pounds divided by the pounds of uranium extracted during the period. We believe the total cost of extracted pounds and uranium cost per extracted pound, including allocation of cash and non-cash costs, assist investors in evaluating the efficiency and cost-effectiveness of the Company’s extraction process and overall cost structure and financial performance. In addition, management uses these non-GAAP measures to evaluate the ongoing operations and for internal planning and forecasting.
During the year ended December 31, 2024, the Company continued its uranium extraction activities at its South Texas operations.
U3O8 Costs Cost of Sales
Less the cost of sales of purchased pounds $ $58,433
Cash costs of extracted pounds 1 $ $6,304
Non-cash costs of extracted pounds 2 $ $804
Total cost of extracted lbs $ $7,108
U3O8 Pounds
Shipped to Boss lbs (35,181)
U3O8 Cost per Pound
Cash costs of extracted lbs $ 35.99
Non-cash costs of extracted lbs $ 4.59
Total extracted $ 40.57
The Company remains committed to cost efficiency and production optimization, ensuring competitive uranium extraction and processing. The Company anticipates further cost efficiencies as additional wellfield patterns come online and economies of scale improve.
Liquidity and Capital Resources
Our short-term cash requirements are primarily driven by exploration and development activities aimed at advancing properties for uranium extraction. We expect to meet our short-term cash requirements generally through existing working capital. As of December 31, 2024 and December 31, 2023, the Company had cash and cash equivalents of $39,701 and
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$7,493, respectively, and working capital of $57,334 and $19,038, respectively. Operations to date have been funded primarily from the issue of share capital.
Our long-term cash requirements are also primarily driven by exploration and development activities aimed at advancing properties for uranium extraction. We expect to meet our long-term cash requirements through various sources of capital, which may include a revolving credit facility or line of credit and future debt or equity issuances, existing working capital, net cash provided by operations and property dispositions. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, including the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in future indebtedness), general market conditions for uranium mining companies and other energy companies, our operating performance and liquidity and market perceptions about us. The success of our business strategy will depend, in part, on our ability to access these various capital sources.
We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments and dividend requirements for the twelve-month period following December 31, 2024. We believe that our sources of long-term cash will be sufficient for our needs thereafter.
On February 26, 2024, enCore and Boss entered into a note payable providing for up to 200,000 pounds of uranium to be lent by Boss to enCore. The loan will bear interest of 9% and be repayable in 12 months. Under the agreement, enCore may prepay the loan in full or part after six months and would be subject to a prepayment fee of $200. Both the prepayment and the prepayment fee can be paid in cash or uranium at the election of Boss Energy.
Cash Flows
The following table reflects cash flows activities for the year ended December 31, 2024 and 2023:
Year Ended December 31,
Impact of currency rate changes in cash 56 (205) 261
Net Cash Used in Operating Activities
Net cash used in operating activities increased by $22,217, to $45,204, for the year ended December 31, 2024, compared to the year ended December 31, 2023. This is largely driven by increase in expenditures driven by the Company’s commencement of extraction activities for Alta Mesa and Rosita in 2024.
Net Cash Used in Investing Activities
Net cash used in investing activities decreased by $34,627, to $29,990, for the twelve months ended December 31, 2024, compared to the twelve months ended December 31, 2023. This was largely driven by the Company’s asset acquisition of Alta Mesa in 2023, offset by the Company’s purchase of marketable securities in 2024.
Net Cash Provided by Financing Activities
Net cash provided by financing activities increased by $61,516, to $107,417 for the twelve months ended December 31, 2024, compared to the fiscal year ended December 31,2023. This was largely driven by the Company’s sale of a minority interest (30%) in JV Alta Mesa in 2024 as well as an increase in warrant exercises when compared to 2023. This was offset by a reduction in equity financings that occurred in 2024 when compared to 2023.
Commitments
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The Company has entered into several contracts with traders and nuclear utilities to sell pounds of uranium through 2033.
The Company’s sales commitments in pounds are shown below.
Year Volume (in pounds)
The Company did not have significant contractual obligations as of December 31, 2024. except for the sales commitments discussed above.
Off Balance Sheet Arrangements
As of December 31, 2024, the Company had no material off-balance sheet arrangements such as guarantee contracts, contingent interest in assets transferred to an entity, derivative instruments obligations or any obligations that trigger financing, liquidity, market or credit risk to the Company.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with U.S. GAAP. Preparation of the financial statements requires us to make judgments, estimates and assumptions that impact the reported amount of net sales and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when the estimate or assumption is complex in nature or requires a high degree of judgment and when the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements. While our significant accounting policies are described in more detail in Note 2 of our consolidated financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Impairment of Long-lived Assets: The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Mineral rights and properties and mining properties are monitored for impairment based on factors such as uranium prices, government regulations, our continued right to explore the area, exploration reports, assays, technical reports, drill results and our continued plans to fund exploration and development programs on the property.
Asset Retirement Obligations: Various federal and state mining laws and regulations require our Company to reclaim the surface areas and restore underground water quality to the pre-existing quality or class of use after the completion of mining. We recognize the present value of the future restoration and remediation costs as an asset retirement obligation in the period in which we incur an obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets.
Asset retirement obligations consist of estimated final well closure, plant and equipment decommissioning and removal and environmental remediation costs to be incurred by our Company in the future. The asset retirement obligation is estimated based on the current costs escalated at an inflation rate and discounted at a credit adjusted risk-free rate at inception. The asset retirement obligations are capitalized as part of the costs of the underlying assets and amortized over its remaining useful life. The asset retirement obligations are accreted to an undiscounted value until they are settled. The accretion
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expenses are charged to earnings and the actual retirement costs are recorded against the asset retirement obligations when incurred.
Asset Acquisitions: The Company performs a screen test as required under U.S. GAAP to determine whether a transaction is an asset acquisition under FASB ASC Topic 805, Business Combination. If substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset (or a group of similar identifiable assets), the assets acquired would not represent a business and we account for the acquisition as an asset acquisition. In addition, when an acquisition does not meet the definition of a business combination as the acquired entity does not have an input and a substantive process that together significantly contribute to the ability to create outputs, we also account for the acquisition as an asset acquisition. In an asset acquisition, any direct acquisition-related transaction costs are capitalized as part of the purchase consideration. Deferred taxes are recorded on temporary book/tax differences in an asset acquisition using the simultaneous equations method and adjusting the assigned value of the non-monetary assets acquired to include the deferred tax liability. There is no goodwill recorded, with any excess purchase price being allocated on a pro-rata basis to the acquired assets based on their relative fair values.
Income Taxes: The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recorded based on differences between the financial statement carrying values of existing assets and liabilities and their respective income tax bases (temporary differences), and losses carried forward. Deferred income tax assets and liabilities are measured using the enacted tax rates which will be in effect when the temporary differences are likely to reverse. The effect on deferred income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted.
The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized. When the Company concludes that all or part of the deferred income tax assets are not realizable in the future, the Company makes an adjustment to the valuation allowance that is charged to income tax expense in the period such determination is made.
Conversion from IFRS to U.S. GAAP
As the Company no longer qualifies as a foreign private issuer, its consolidated financial statements have been retroactively converted from IFRS to U.S. GAAP.
The significant differences between IFRS and U.S. GAAP as they relate to the Company are as follows:
{a} Exploration and Development Costs
Under IFRS, the Company capitalized exploration and development costs related to the Company’s Mineral Properties. Under US GAAP, the Company is only eligible to capitalize costs related to the following for Mineral Properties;
•Asset Acquisitions
•Direct Development Costs after establishing proven/probable reserves. This requires obtaining a S-K 1300 that supports the existence of probable or proven mineral reserves. As of December 31, 2024, the Company’s S-K 1300s do not indicate proven/probable reserves. Therefore, the Company remains an Exploration Stage Issuer and is unable to capitalize development costs.
Exploration costs, land lease costs and development costs are expensed as incurred for the years ended December 31, 2024, 2023, and 2022, respectively.
{b} Income Taxes
The Company recorded a deferred tax liability under U.S GAAP as a result of the Azarga asset acquisition. Under U.S GAAP, this requires book basis increase for the change in fair value. However, there is no tax basis bump related to the Azarga asset acquisition. This results in a difference that requires a deferred tax liability under U.S. GAAP ASC 740, Income Taxes. Under IFRS, this does not result in a deferred tax liability.
{c} Share-based Compensation
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Under IFRS, the Company utilized the expected term for share-based compensation in the Black-Scholes valuation calculation. The Company under U.S. GAAP elected the simplified method for ‘vanilla’ stock options, as permitted by the SEC. This allows the average between the vesting period and the contractual period to be utilized for the expected term.
{d} Investments in Uranium
Under IFRS, the Company treated its purchases of uranium as investment property. Under IFRS, the Company adjusted its inventory to the fair market value as of each reporting period and upon sale, recorded the sale as a non-operating gain. Under U.S. GAAP, the Company treated its purchases of Uranium as inventory, which is held at the lower of carrying value and net realizable value. This resulted in reclassification of the income statement impacts to revenue and cost of goods sold and the deferral of gain/loss on the changes in the fair market value of uranium until the uranium was sold to customers.
{e} Warrants granted in Conjunction with Equity Financing
Under IFRS, the Company allocated the proceeds received from warrants granted in conjunction with equity financing to common stock. Under US GAAP, the proceeds received are required to be applied to the warrants and the share issuance based on their relative fair value. This results in a higher additional paid in capital balance upon the granting of the warrants than under IFRS and a lower amount attributed to common stock than under IFRS.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risks includes, but is not limited to, equity price risk, uranium price risk and foreign currency risk.
Equity Price Risk
We are subject to market risk related to the market price of our common shares, which trade on Nasdaq and TSX-V. Historically, we have relied upon equity financings from the sale of our common shares to fund our operations. Movements in the price of our common shares have been volatile in the past and may continue to be volatile in the future. As a result, there is a risk that we may not be able to complete an equity financing at an acceptable price when required.
In addition, we have investments in equity securities, which are common shares and warrants of publicly listed companies. Movements in the price of these equity securities have been volatile in the past and may continue to be volatile in the future.
Uranium Price Risk
We are subject to market risk related to the market price of uranium. As of December 31, 2024, we had no uranium supply or off-take agreements in place. Since future sales of uranium concentrates are contracted based on both spot and fixed pricing, fluctuations in the market price of uranium would have a direct impact on our revenues, results of operations and cash flows. We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our uranium price exposure to manage our uranium price risk.
Foreign Currency Risk
We are subject to market risk related to foreign currency exchange rate fluctuations. Our functional currency is the United States Dollar, however, a portion of our business is transacted in other currencies including the Canadian Dollar. To date, these fluctuations have not had a material impact on our results of operations.
We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure to manage our foreign currency fluctuation risk.
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Item 8. Financial Statements and Supplementary Data (For 10-K, this should be Audited Financial Statements)
Index to Financial Statements
Financial Statements Page
Report of Registered Public Accounting Firm (KPMG PCAOB ID: 185) F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023 F-4
Notes to Consolidated Financial Statements F-12
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
enCore Energy Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of enCore Energy Corporation and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 3, 2025 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Asset retirement obligation costs
As discussed in Note 11 to the consolidated financial statements, the Company recorded an asset retirement obligation (ARO) liability of $16.9 million as of December 31, 2024. Asset retirement obligations consist of estimated final well closure, plant and equipment decommissioning and removal, and environmental remediation costs to be incurred by the Company in the future. The asset retirement obligation is estimated based on the current costs adjusted for inflation and then discounted at a credit adjusted risk-free rate at inception.
We identified the evaluation of the future costs for asset retirement obligations as a critical audit matter. Specialized skills and knowledge were required to evaluate the Company’s determination of asset retirement obligations and their related costs to satisfy the ARO.
The following are the primary procedures we performed to address this critical audit matter. We tested the determination of the planned asset retirement obligations used in the estimate by inquiring of management and inspecting cost calculations approved and permitted by regulatory agencies. We involved environmental professionals with specialized skills and knowledge, who assisted in evaluating the Company’s planned asset retirement obligations for certain sites, including comparing the Company’s planned asset retirement obligations to those communicated to regulatory authorities.
/s/ KPMG LLP
We have served as the Company’s auditor since 2024.
Houston, Texas
March 3, 2025
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
enCore Energy Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited enCore Energy Corporation and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated March 3, 2025 expressed an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses due to control deficiencies in general information technology controls and process-level controls across financial reporting processes were caused by an ineffective control environment that resulted in ineffective risk assessment, information and communication, and monitoring, which have been identified and included in management’s assessment. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Houston, Texas
March 3, 2025
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enCore Energy Corp
Consolidated Balance Sheets
December 31,
(in thousands except per share data) 2024 2023
ASSETS
Current assets
Prepaid expenses and other current assets 2,700 931
Marketable securities, non-current 837 3,047
Right of use assets - operating lease 310 459
Other long-term assets - 88
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 7,464 $ 3,582
Accounts payable - related parties 2,378 2,521
Note payable - related party 20,108 -
Operating lease liabilities, current 130 178
Convertible promissory note - 19,239
Operating lease liabilities, non-current 202 294
Commitments and contingencies (Note 12)
Stockholders’ equity
Equity portion of convertible promissory note - 3,813
Accumulated other comprehensive loss (3,597) (1,792)
Non-controlling interests 32,806 -
Total liabilities and stockholders' equity $ 392,722 $ 326,567
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enCore Energy Corp
Consolidated Statements of Operations
Years Ended December 31,
Operating costs:
Depreciation, amortization and accretion 3,369 5,696 736
Gain on marketable securities, realized 248 - -
Gain on sale of mineral properties - 11,837 1,852
Gain (loss) on marketable securities, unrealized (2,711) 5,918 1,057
Foreign exchange loss - - (58)
Other expense (17) - (679)
Net loss attributable to noncontrolling interests (6,601) - -
Net loss attributable to controlling interest $ (61,392) $ (25,611) $ (23,155)
Net loss per share
Weighted average number of shares
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enCore Energy Corp
Consolidated Statements of Comprehensive Loss
Years Ended December 31,
Other comprehensive loss, [net of tax]
Foreign currency translation adjustment (1,805) 393 (1,457)
Total other comprehensive loss, [net of tax] (1,805) 393 (1,457)
Comprehensive loss attributable to non-controlling interests (6,601) - -
Comprehensive loss attributable to stockholders $ (63,197) $ (25,218) $ (24,612)
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enCore Energy Corp
Consolidated Statements of Cash Flow
Years Ended December 31,
Cash used in operating activities
Amortization, depreciation, accretion and depletion 4,596 5,664 736
Shares issued for services - - 611
Inventory impairment charge 6,054 - -
Asset retirement obligation (gain)/loss 5,424 (221) 157
Gain on sale of mineral properties - (11,837) (1,852)
Unrealized loss/(gain) on marketable securities 2,711 (5,918) (1,057)
Loss on equity method investments - - 564
Realized gain on marketable securities (248) - -
Changes in operating assets and liabilities:
Receivables, prepaids and deposits (10) 356 (618)
Accounts payable and accrued liabilities 4,079 14 (4,242)
Asset retirement obligations (399) (291) (11)
Cash used in investing activities
Purchase of property, plant, and equipment (11,348) (7,727) (980)
Acquisition of intangible assets - - (55)
Exploration costs related to mineral properties (9,392) (8,205) (4,302)
Proceeds from the sale of mineral properties - 3,527 48
Purchase of marketable securities (9,798) - -
Proceeds from sale of marketable securities 548 - -
Cash provided by financing activities
Stock subscriptions received - - 51,559
Proceeds from the At -the-Market ("ATM") sales 2,008 49,444 -
Repayments on convertible note - (40,000) -
Financing costs incurred - - (1,717)
Proceeds from sale of minority interest 60,000 - -
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enCore Energy Corp
Consolidated Statements of Cash Flow (continued)
Contributions from non-controlling interest 8,228 - -
F-8
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enCore Energy Corp
Consolidated Statements of Cash Flow (continued)
6.
Years Ended December 31,
Non-cash financing activities:
Share issue costs on finders' warrants issued $ - $ 1,415 $ -
Conversion of subscriptions to shares - 33,300 -
Warrants issued in conjunction with subscription - 18,259 -
Financing costs remaining in accounts payable and accrued liabilities - - 1,513
Conversion of promissory note, including equity portion, to shares 23,117 - -
Inventory received in exchange for note payable 20,108 - -
Inventory distributions to non-controlling interest 1,905 - -
Unpaid contributions from non-controlling interest 1,759 - -
Fair value of Alta Mesa replacement options granted for asset acquisition - 81 -
Marketable securities obtained as part of sale of mineral property - 9,815 3,345
Non-cash investing activities:
Convertible promissory note Issued for asset acquisition - 60,000 -
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enCore Energy Corp
Consolidated Statements of Stockholders’ Equity
(in thousands except per share data) Shares Amount
Warrants issued in conjunction with private placement - - - - 4,177 - - - 4,177
Share-based compensation - - - - 4,332 - - - 4,332
Shares issued for services 193 611 - - - - - - 611
Share subscriptions received - - 51,559 - - - - - 51,559
Cumulative translation adjustment - - - - - - (1,457) - (1,457)
Warrants issued in conjunction with private placement - - - - 5,353 5,353
Warrants issued in conjunction with subscription - - (18,259) 18,259 -
Shares issued for exercise of stock options 576 1,599 - - (1,041) - - - 558
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enCore Energy Corp
Consolidated Statements of Stockholders’ Equity
Share-based compensation - - - - 3,464 - - - 3,464
Equity portion of convertible promissory note - - - 3,813 - - - - 3,813
Fair value of replacement options for Alta Mesa acquisition - - - - 81 - - - 81
Cumulative translation adjustment - - - - - - 393 - 393
Contributions from non-controlling interest - - - - 8,228 - - 1,759 9,987
Share issuance costs - (50) - - - - - - (50)
Share-based compensation - - - - 4,788 - - - 4,788
Cumulative translation adjustment - - - - - - (1,805) (1,805)
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
1.Nature of Operations
enCore Energy Corp. was incorporated on October 30, 2009 under the laws of British Columbia, Canada. enCore Energy Corp., together with its subsidiaries (collectively referred to as the “Company” or “enCore”), is principally engaged in the acquisition, exploration, development and extraction of uranium resource properties in the United States. The Company’s corporate headquarters is located at 101 N Shoreline, Suite 450, Corpus Christi, TX 78401.
The Company is focused on the extraction of domestic uranium in the United States. The Company only utilizes the proven In-Situ Recovery technology (“ISR”) to provide necessary fuel for the generation of clean, reliable, and carbon-free nuclear energy.
As of December 31, 2024, the Company is an “Exploration Stage Issuer” as defined by S-K 1300 as it has not established proven or probable mineral reserves, as required by the SEC to be defined as a Development Stage Issuer.
2.Summary of Significant Accounting Policies
Basis of Presentation
As a non-U.S. company listed on the NASDAQ, the Company historically met the definition of a foreign private issuer (“FPI”) as defined by the United States Securities and Exchange Commission (“SEC”). As such, the Company prepared consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).
As of January 1, 2025, the Company has become a U.S. Domestic Issuer. Upon becoming a U. S. Domestic Issuer, and including the report herein, the Company has prepared its consolidated financial statements in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) effective with the preparation of these financial statements as of and for the year ended December 31, 2024.
For the year ended December 31, 2024, the Company has therefore retrospectively adopted U.S. GAAP. The consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP for all periods presented. Comparative figures, which were previously prepared in accordance with IFRS, have been adjusted as required to be compliant with the Corporation’s accounting policies under U.S. GAAP.
These financial statements are presented in thousands of United States dollars. All inter-company transactions and balances have been eliminated upon consolidation.
There are certain disclosures where the Company discloses the amount in Canadian Dollar (“CAD”), as this is the currency in which the instrument is denominated in.
Principles of Consolidation
These financial statements incorporate the financial statements of the Company and its controlled subsidiaries. We consolidate entities that we control due to ownership of a majority voting interest and we consolidate variable interest entities (VIEs) when we are the primary beneficiary. All intercompany transactions and balances have been eliminated.
The Company has a 70% interest in the Alta Mesa project with Boss Energy Limited (“Boss” or “Boss Energy”). The Company retained control after Boss acquired their interest. Alta Mesa is considered a variable interest entity (“VIE”), with the Company being considered the primary beneficiary. As a result, the Company consolidates the operations of Alta Mesa with an offsetting non-controlling interest being recorded. Refer to Note 10 for more information related to the Boss transaction.
Non-controlling interests represent the portion of their equity which is not attributable, directly or indirectly, to the Company. These amounts are required to be reported as equity instead of as a liability on the consolidated balance sheet. Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification (“ASC”) Topic
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
810, Consolidation requires net income or loss from non-controlling interests to be shown separately on the consolidated statements of operations.
Segments
Operating segments are defined as components of an entity for which discrete financial information is available and is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in making decisions regarding resource allocation and performance assessment. The Company’s CODM is its Chief Executive Officer. The Company has one operating segment and one reportable segment. This reportable segment relates to uranium extraction, recovery and sales of uranium from mineral properties along with the exploration, permitting and evaluation of uranium properties in the United States. The CODM assesses financial performance and decides how to allocate resources based on performance of the mineral properties and the sale of Uranium.
Mineral Rights and Properties
We have established the existence of mineralized materials for certain uranium projects, including our Rosita and Alta Mesa Projects (collectively, the “ISR Mines Projects”). We have not established proven or probable reserves, as defined by S-K 1300, through the completion of a “final” or “bankable” feasibility study for any of the uranium projects we operate, including our ISR Mines Projects. Furthermore, we currently have no plans to establish proven or probable reserves for any of our uranium projects for which we plan on utilizing in-situ recovery (“ISR”) mining, such as our ISR Mines Projects. As a result, and despite the fact that we commenced extraction of mineralized materials at our ISR Mines Projects, we remain an Exploration Stage company, as defined by the SEC, and will continue to remain as an Exploration Stage company until such time proven or probable reserves have been established.
In accordance with U.S. GAAP, expenditures relating to the acquisition of mineral rights are initially capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time as we exit the Exploration Stage by establishing proven or probable reserves. Expenditures relating to exploration activities, such as drill programs to establish mineralized materials, are expensed as incurred. Expenditures relating to pre-extraction activities, such as the construction of mine wellfields, ion exchange facilities and disposal wells, are expensed as incurred until such time proven or probable reserves are established for that project, after which expenditures relating to mine development activities for that particular project are capitalized as incurred.
When the Company starts to extract mineral materials at our ISR Mines Projects, the capitalized costs are depleted over estimated mineral resources using the units-of-production method. Depletion costs are included in cost of sales in the consolidated statement of operations.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reported periods. Areas requiring significant judgements, estimates and assumptions include the valuation of acquired mineral rights and properties and equity-accounted investments, existence of impairment indicators for the Company’s long-lived assets, valuation and measurement of impairment losses on mineral rights and properties, valuation of asset retirement obligations, and valuation of stock options, share purchase warrants and share-based compensation. Other areas requiring estimates include allocations of expenditures to inventories, depletion and amortization of mineral rights and properties and depreciation of property, plant and equipment. Actual results could differ significantly from those estimates and assumptions.
Asset Acquisitions
The Company performs a screen test as required under U.S. GAAP to determine whether a transaction is an asset acquisition under FASB ASC Topic 805, Business Combination. If substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset (or a group of similar identifiable assets), the assets
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
acquired would not represent a business and we account for the acquisition as an asset acquisition. In addition, when an acquisition does not meet the definition of a business combination as the acquired entity does not have an input and a substantive process that together significantly contribute to the ability to create outputs, we also account for the acquisition as an asset acquisition. In an asset acquisition, any direct acquisition-related transaction costs are capitalized as part of the purchase consideration. Deferred taxes are recorded on temporary book/tax differences in an asset acquisition using the simultaneous equations method and adjusting the assigned value of the non-monetary assets acquired to include the deferred tax liability. There is no goodwill recorded, with any excess purchase price being allocated on a pro-rata basis to the acquired assets based on their relative fair values.
Foreign Currency
These financial statements are presented in U.S. dollars, unless otherwise specified. The functional currency of enCore Energy Corp. is the Canadian dollar. The functional currency of the Company’s subsidiaries is the U.S. Dollar based on the currency of the primary economic environment in which these subsidiaries operate.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive loss in the consolidated statements of comprehensive loss to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive loss. When the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.
On consolidation, the parent Company’s financial statements are translated into the presentation currency, being the U.S. dollar. Assets and liabilities are translated at the period-end exchange rate. Income and expenses are translated at the average exchange rate for the period in which they arise. Exchange differences are recognized in accumulated comprehensive loss as a separate component within equity.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of bank deposits and term deposits with an original maturity of three months or less. Restricted cash is excluded from cash and cash equivalents and is included in long-term assets. Restricted cash relates to collateralization of its performance obligations with an unrelated third party, also known as performance bonds. These funds are not available for the payment of general corporate obligations. The performance bonds are required for future restoration and reclamation obligations related to the Company’s operations. Refer to Note 11 – Asset Retirement Obligations and Restricted Cash.
Inventories
Inventories are uranium concentrates and converted products including chemicals and are measured at the lower of cost and net realizable value. The cost of converted products and uranium concentrates is based on the first in first out (FIFO) method. Cost includes direct materials, direct labor and operational overhead expenses. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Consumable supplies and spares are valued at the lower of cost or replacement value.
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
Marketable Securities
Marketable equity securities consist of investments in publicly traded equity securities. The Company classifies and accounts for its marketable equity securities as available-for-sale. Subsequent to initial recognition, marketable equity securities are measured at fair value and changes therein are recognized as a component of other income (loss) in the consolidated statements of operations.
Equity Method Investments
Investments in an entity in which our ownership is greater than 20% but less than 50%, a 50/50 joint venture which the Company does not have control, or an entity where other facts and circumstances indicate that we have the ability to exercise significant influence over its operating and financing policies, are accounted for using the equity method in accordance with FASB ASC Topic 323, Investments – Equity Method and Joint Ventures.
The Company accounts for equity method investments over which the Company exerts significant influence, but not control, over the financial and operating policies through the fair value option of FASB ASC Topic 825, Financial Instruments. The fair value of the investee’s common shares is measured based on its closing market price. Subsequent to initial recognition, equity method investments are measured at fair value and changes therein are recognized as a component of other income (loss) in the consolidated statements of operations.
Property, Plant and Equipment
Property, plant and equipment is measured at cost, less accumulated depreciation.Useful lives are based on the Company’s estimate at the date of acquisition and are depreciated straight-line as follows for each class of assets:
Category Range
Uranium Plant 15-25 years
Other Property Plant and Equipment 3-5 years
Software 2-3 years
Furniture 3-5 years
Buildings 10-40 years
Intangible Assets
Intangible assets consist of a data access agreement and data purchases, which are definite- and indefinite-lived assets, respectively. Definite-lived intangible assets are amortized over 14 years on a straight-line basis.
The Company reviews its definite-lived intangible assets for impairment when impairment indicators exist. When impairment indicators exist, the Company determines if the carrying value of its definite-lived intangible assets or asset groups exceeds the related undiscounted future cash flows. In cases where the carrying value exceeds the undiscounted future cash flows, the carrying value is written down to fair value. Fair value is determined using a discounted cash flow analysis.
The Company assesses its indefinite-lived intangible assets for impairment periodically to determine if any adverse conditions exist that would indicate impairment or when impairment indicators exist. The Company assesses its indefinite-lived intangible assets for impairment at least annually by comparing the fair value of the indefinite-lived intangible assets to their carrying value.
There were no indicators of impairment as of December 31, 2024, 2023 or 2022.
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
Impairment of Long-lived Assets
The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Mineral rights and properties and mining properties are monitored for impairment based on factors such as uranium prices, government regulations, our continued right to explore the area, exploration reports, assays, technical reports, drill results and its continued plans to fund exploration and development programs on the property.
On each reporting date, the Company conducts a review of potential triggering events for all its mineral rights and properties and mining properties. When events or changes in circumstances indicate that the related carrying amounts may not be recoverable, the Company carries out a review and evaluation of its long-lived assets in accordance with its accounting policy. Impairment losses are recognized as part of operating losses in the consolidated statement of operations.
Recoverability is measured by comparing the undiscounted future net cash flows to the net book value. When the net book value exceeds future net undiscounted cash flows, the fair value is compared to the net book value and an impairment loss may be measured and recorded based on the excess of the net book value over fair value. Fair value for mineral rights and properties prior to extraction is based on combined approach of a discounted cash flow analysis and a market approach.
Future cash flows are estimated based on quantities of recoverable mineralized material, expected uranium or Rare Earth Elements (“REE”) prices (considering current and historical prices, trends and estimates), production levels, operating costs, capital requirements and reclamation costs, all based on life-of-mine plans. In estimating future cash flows, assets are grouped at the lowest level, for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company's estimates of future cash flows are based on numerous assumptions, and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, uranium prices, production levels, costs and capital are each subject to significant risks and uncertainties.
There were no indicators of impairment for long-lived assets as of December 31, 2024 or 2023 or 2022.
Operating Leases
The Company accounts for office leases under FASB ASC Topic 842, Leases, which requires leases to be recognized as assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The Company recognizes in the balance sheet a liability to make lease payments (the lease liability) and the right-of-use asset representing the right to the underlying asset for the lease term. For leases with a term of twelve months or less, the Company has made an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The office leases all meet the definition of an operating lease.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recorded based on differences between the financial statement carrying values of existing assets and liabilities and their respective income tax bases (temporary differences), and losses carried forward. Deferred income tax assets and liabilities are measured using the enacted tax rates which will be in effect when the temporary differences are likely to reverse. The effect on deferred income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted.
The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized. When the Company concludes that all or part of the deferred income tax assets are not realizable in the future, the Company makes an adjustment to the valuation allowance that is charged to income tax expense in the period such determination is made.
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
Asset Retirement Obligations
Various federal and state mining laws and regulations require our Company to reclaim the surface areas and restore underground water quality to the pre-existing quality or class of use after the completion of mining. We recognize the present value of the future restoration and remediation costs as an asset retirement obligation in the period in which we incur an obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets.
Asset retirement obligations consist of estimated final well closure, plant and equipment decommissioning and removal and environmental remediation costs to be incurred by our Company in the future. The asset retirement obligation is estimated based on the current costs escalated at an inflation rate and discounted at a credit adjusted risk-free rate at inception. The asset retirement obligations are capitalized as part of the costs of the underlying assets and amortized over their remaining useful life. The asset retirement obligations are accreted to an undiscounted value until they are settled. The accretion expenses are charged to earnings and the actual retirement costs are recorded against the asset retirement obligations when incurred.
Share-based Compensation
We measure share-based awards, typically options, at fair value on the date of the grant and expense the awards over the requisite service period of employees, brokers or consultants. The fair value of these stock options is measured at the grant date using the Black-Scholes option pricing model. The share-based awards are equity-classified.
Share-based compensation expense related to awards with only service conditions having a graded vesting schedule is recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award were, in substance, multiple awards, while expense for all other awards are recognized on a straight-line basis.
The Company’s estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, the Company’s performance and related tax impacts.
Warrants
Warrants that are issued with shares issued have the proceeds allocated between the shares and the warrants based on their relative fair value. The fair value of the warrants is measured at the grant date using the Black-Scholes option pricing model. The fair value of the shares granted is based on the respective share’s publicly-traded market price.
Warrants issued to brokers are measured at their fair value on the vesting date. The fair value of stock options and warrants issued to brokers are estimated using the Black-Scholes option pricing model.
Financial Instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are recognized when the rights to receive or obligation to pay cash flows from the assets or liabilities have expired or been settled or have been transferred and the Company has transferred substantially all risks and rewards of ownership.
The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive loss (“FVTOCI”), or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by instrument basis) to designate them at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL. Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of loss in the period in which they arise.
Revenue Recognition and Trade Receivables
Our revenues are primarily derived from the sale of uranium that we either purchased from a third-party or recovered and extracted from the Company’s mining properties.
The Company's sales of uranium are derived from contracts with major U.S utility companies. Revenue is recognized when delivery is evidenced by book transfer at the conversion facility. The sales contracts specify the quantity to be delivered, the price, payment terms and the year of the delivery. There is no variable consideration. Under these contracts, each delivery product transferred to the customer represents a separate performance obligation; therefore, future quantities are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. Under the Company's uranium contracts, it invoices customers after the performance obligations have been satisfied, at which point the Company has an enforceable right to payment. Accordingly, the Company’s uranium contracts do not give rise to contract assets or liabilities.
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company evaluates its estimate of expected credit losses based on historical experience and current and forecasted future economic conditions for each portfolio of customers. As of December 31, 2024 and 2023, the Company did not have an allowance for expected credit losses for trade accounts receivable. As of December 31, 2024 and 2023, the Company did not have receivables from contracts with customers.
Earnings/(loss) per Share
Basic earnings or loss per share includes no potential dilution and is computed by dividing the earnings or loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings or loss per share reflects the potential dilution of securities that could share in the earnings or loss of our Company. Dilutive securities are excluded from the calculation of our diluted weighted average common shares outstanding if their effect would be anti-dilutive based on the treasury stock method or due to a net loss from continuing operations.
Non-controlling Interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date and are adjusted at each reporting date for the net income (loss) attributable to that non-controlling interest during that period. The difference between the cash received and the proportionate share of the acquiree’s identifiable net assets is attributed to additional paid-in-capital.
Recently Issued Accounting Standards
Recently Adopted Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)-Improvements to Reportable Segment Disclosures. The ASU enhances disclosure of significant segment expenses by requiring disclosure of significant segment expenses regularly provided to the chief operating decision maker, extend certain annual disclosures to interim periods, and permits more than one measure of segment profit or loss to be reported under
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
certain conditions. The amendments are effective for the Company in years beginning after December 15, 2023, and interim periods within years beginning after December 15, 2024. Early adoption of the ASU is permitted, including adoption in any interim period for which financial statements have not been issued. The Company adopted this effective January 1, 2024. The Company expanded its segment disclosure.
Recently Issued Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)-Improvements to Income Tax Disclosures. The ASU requires additional quantitative and qualitative income tax disclosures to allow readers of the consolidated financial statements to assess how the Company’s operations, related tax risks and tax planning affect its tax rate and prospects for future cash flows. For public business entities, the ASU is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures but does not expect that it will have a material impact on the Company. The Company will elect to adopt this prospectively when adopted.
On March 21, 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, which clarifies how an entity determines whether a profits interest or similar award (hereafter a “profits interest award”) is (1) within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. This ASU will be effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. The Company anticipates that it will not have a material impact on the Company.
In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements. This ASU contains amendments to the Codification that removes references to various FASB Concepts Statements. The effort facilitates Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance and other minor improvements. While the amendments are not expected to result in significant changes for most entities, the FASB provided transition guidance since some entities could be affected. This ASU will be effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20) – Induced Conversions of Convertible Debt Instruments, or ASU 2024-04. The guidance in ASU 2024-04 clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion when changes are made to conversion features as part of an offer to settle the instrument. This ASU is effective for annual periods beginning after December 15, 2025, with early adoption permitted. The amendments may be applied either (1) prospectively to any settlements of convertible debt instruments that occur after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements, with a cumulative adjustment-effect adjustment to equity. This will not have an impact on the Company.
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
3.Conversion from IFRS to U.S. GAAP
As part of the U.S. Domestication, the Company has retrospectively converted its Consolidated Financial Statements from IFRS to U.S. GAAP. Refer to Note 1 for additional details. The significant differences between IFRS and U.S. GAAP as they relate to these financial statements are as follows:
{a} Exploration and Development Costs
Under IFRS, the Company capitalized exploration and development costs related to the Company’s Mineral Properties. Under US GAAP, the Company is only eligible to capitalize costs related to the following for Mineral Properties:
•Asset Acquisitions
•Direct Development Costs after establishing proven/probable reserves. This requires obtaining a S-K 1300 that supports the existence of probable or proven mineral reserves. As of December 31, 2024, the Company’s S-K 1300s do not indicate proven/probable reserves. Therefore, the Company remains an Exploration Stage Issuer and is unable to capitalize development costs.
Exploration costs, land lease costs and development costs are expensed as incurred for the years ended December 31, 2024, 2023 and 2022.
{b} Income Taxes
The Company recorded a deferred tax liability under U.S GAAP as a result of the Azarga asset acquisition. Under U.S GAAP, this requires book basis increase for the change in fair value. However, there is no tax basis bump related to the Azarga asset acquisition. This results in a difference that requires a deferred tax liability under U.S. GAAP ASC 740, Income Taxes. Under IFRS, this does not result in a deferred tax liability.
{c} Share-based Compensation
Under IFRS, the Company utilized the expected term for share-based compensation in the Black-Scholes valuation calculation. The Company under U.S. GAAP elected the simplified method for ‘vanilla’ stock options, as permitted by the SEC. This allows the average between the vesting period and the contractual period to be utilized for the expected term.
{d} Investments in Uranium
Under IFRS, the Company treated its purchases of uranium as investment property. Under IFRS, the Company adjusted its inventory to the fair market value as of each reporting period and upon sale, recorded the sale as a non-operating gain. Under U.S. GAAP, the Company treated its purchases of Uranium as inventory, which is held at the lower of carrying value and net realizable value. This resulted in reclassification of the income statement impacts to revenue and cost of goods sold and the deferral of gain/loss on the changes in the fair market value of uranium until the uranium was sold to customers.
This impacted the consolidated statements of cash flows for the years ended December 31, 2023 and 2022, as the impacts from the decrease in the investment in uranium and the proceeds received from the sale were included as investing activity. For the year ended December 31, 2023, this would result in an increase in cash from operating activities of $5,576 and a decrease in cash from investing activities of $5,576. For the year ended December 31, 2022, this would result in an increase in cash from operating activities of $4,245 and a decrease in cash from investing activities of $4,245.
{e} Warrants granted in Conjunction with Equity Financing
Under IFRS, the Company allocated the proceeds received from warrants granted in conjunction with equity financing to common stock. Under U.S. GAAP, the proceeds received are required to be applied to
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
the warrants and the share issuance based on their relative fair value. This results in a higher additional paid in capital balance upon the granting of the warrants than under IFRS and a lower amount attributed to common stock than under IFRS.
The significant differences in the Consolidated Statements of Operations were as follows which show the (increase)/decrease to net loss during the period;
Years Ended December 31,
Depreciation, amortization and accretion 191 167 89
Impairment of mineral properties {a} - 1,538 -
Gain on sale of uranium {d} - (2,575) (35)
Gain on sale of mineral properties {a} - 1,746 227
The significant differences in the Consolidated Balance Sheet are as follows;
Note IFRS Adjustments U.S. GAAP
Assets
Right of use assets - operating lease 293 17 310
Liabilities
Accounts payable and accrued liabilities {a} 7,421 43 7,464
Equity
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
Note IFRS Adjustments U.S. GAAP
Assets
Right of use assets - operating lease 444 15 459
Liabilities
Accounts payable and accrued liabilities {a} 3,579 3 3,582
Equity
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
4.Asset Acquisitions and Sales
Acquisitions
In November 2022, the Company, and Energy Fuels, Inc (“Energy Fuels”) entered into a Definitive Agreement. Pursuant to the terms and subject to the conditions in the Definitive Agreement, on February 14, 2023, the Company acquired the Alta Mesa in-Situ Recovery uranium project (“Alta Mesa”).
The aggregate amount of the total consideration was $121,384 which consisted of a cash payment of $60,000, the issuance of a $60,000 secured vendor takeback convertible promissory note and 44,681 enCore stock options (the “Replacement Options”) for options held by Energy Fuels option holders, valued at $81 using the Black-Scholes option pricing model, and total transaction costs of $1,303 associated with the Arrangement. The transaction did not qualify as a business combination as defined in FASB ASC Topic 805, Business Combinations. It has been accounted for as an asset acquisition with the purchase price allocated based on the estimated fair value of the assets and liabilities summarized as follows:
Consideration Amount
Convertible promissory note 60,000
Fair value of replacement options 81
Transaction costs 1,303
Total consideration value $ 121,384
Net assets acquired Amount
Prepaid $ 42
Property, plant, and equipment 6,111
Asset retirement obligations (5,489)
Accounts payable and accrued liabilities (286)
Total net assets acquired $ 121,384
The fair value of the Replacement Options is based on the issuance of 44,681 options with a fair value of $81.
Sales
On July 20, 2023, the Company divested its subsidiary Neutron Energy, Inc, including its holding of the Marquez-Juan Tafoya Uranium Project to Anfield Energy, Inc. Pursuant to a Share Purchase Agreement, the Company received cash consideration of $3,796 and 185,000,000 shares of Anfield with a fair value of $7,023 (Note 6). The net book value of the subsidiary was $2,433 at the transaction date, transaction costs of $423 were incurred and $33 in currency exchange effect was recognized resulting in a gain on divestment of subsidiary of $7,995, which is included in gain on sale of mineral properties on the Company’s consolidated statements of operations.
5.Inventory
As of December 31, 2024, the Company held 245,000 pounds of purchased uranium, 59,395 pounds of extracted uranium inventory and 37,775 pounds of raw uranium. As of December 31, 2023, the Company did not hold any uranium inventory.
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enCore Energy Corp.
Notes to Consolidated Financial Statements
(all amounts in thousands, except for shares)
Costs of inventory consisted of the following:
As of December 31,
Purchased uranium inventories $ 16,614 $ -
Uranium concentrates from extraction 2,718 -
Materials and supplies 71 9
As of December 31, 2024, in order to measure inventory at the lower of cost and net realizable value, the Company recognized impairment losses of $6,054 related to purchased uranium. These losses are recorded in cost of goods sold in the Company’s consolidated statements of operations.
6.Investments in Equity and Marketable Securities
The Company records both marketable securities and equity method investments at fair value. The Company has classified these investments on the Company’s consolidated balance sheets as marketable securities.
The following table summarizes the fair value of the Company’s investment in equity securities as of December 31, 2024 and 2023:
As of December 31,
Investment in publicly traded companies 9,798 9,815
Divestment of publicly traded companies (548) -
Fair value gain/(loss) on marketable securities (2,711) 5,918
Foreign exchange translation (1,589) 253
Noncurrent marketable securities (837) (3,047)
During the year ended December 31, 2024, the company purchased an additional 15,158,426 shares and 3,690,372 warrants to purchase common stock of an investment and disposed of 26,308,250 shares related to investments held as of December 31, 2023. As of December 31, 2024, the remaining shares and warrants are carried at a fair value of $24,883. These companies are publicly traded.
During the year ended December 31, 2023, the Company purchased a total of 194,247,800 shares in companies that are publicly traded. As of December 31, 2023, these shares are carried at a fair value of $19,933.
The realized gain on marketable securities sold during the year ended December 31, 2024, was $248. There were no realized gains or losses during the year ended December 31, 2023. The unrealized loss on marketable securities for the year ended December 31, 2024 was $2,711 (year ended December 31, 2023 – $5,918 unrealized gain). These net realized and unrealized gains and losses are recorded in the Consolidated Statements of Operations.
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