URANIUM PROPERTIES

6 Months Ended

Jun. 30, 2012

URANIUM PROPERTIES

URANIUM PROPERTIES

4.URANIUM PROPERTIES

Kingsville Dome Project

There was no uranium produced from Kingsville Dome in 2012 or 2011.  The primary activities undertaken at this project in the first six months of 2012 and 2011 were for restoration, with $535,000 and $476,000 of costs being incurred in the first six months of 2012 and 2011, respectively, for restoration work at this project.  Total capital expenditures for Kingsville Dome for the first six months of 2012 was $537,000 and was related to plant construction and land and mineral lease payments. Total capital expenditures for Kingsville Dome for the first six months of 2011 were $74,000 and were related to land and mineral lease payments.

Rosita

There was no uranium produced from Rosita in 2012 and 2011.  Groundwater restoration for the wellfields that have been depleted has been completed and these wellfields are currently under the stabilization and monitoring phase of the restoration process.  Total capital expenditures for Rosita for the first six months of 2012 and 2011 were $30,000 and $92,000, respectively, and were related to land and mineral lease payments.

Vasquez Project

Production at the Vasquez project was shut down during October 2008. The economically recoverable reserves from this project have been mined out.  The primary activities undertaken at this project in the first six months of 2012 and 2011 were for restoration, with $344,000 and $277,000 in costs being incurred in the first six months of 2012 and 2011 respectively.  Capital expenditures for Vasquez for the first six months of 2012 and 2011 were $10,000 and $15,000, respectively, and were primarily for land and mineral lease payments.

Los Finados Project

The exploration rights to the Los Finados project were acquired in December 2010. Evaluation of the uranium mineralization under Phase I of the exploration program of this property began in the second quarter of 2011 and may continue for up to three years.

In November 2011, the Company and Cameco announced their intent to move forward with Phase II of the exploration program on the Los Finados Project. The second phase of drilling began in December 2011 and is expected to be completed by the end of November 2012. URI has committed an additional $1.5 million in exploration activities during the twelve-month period ended November 30, 2012, in order to maintain the option to lease the property. Under Phase II of the agreement with URI, Cameco will fund $1.0 million toward those exploration activities and will earn an additional 10% interest in Los Finados, raising its interest in the project to 50%.

The timing for the Company’s decision to continue exploration under Phase III of the program is November 30, 2012.  Investment or drilling in excess of the minimum requirement in any year counts toward the following year’s requirements.  Cameco may elect to fund the entire $1.5 million by moving into Phase III of the program. At June 30, 2012, the Company has incurred and billed approximately $941,000 in costs to Cameco under Phase II of the agreement.

At the conclusion of the exploration program, the parties may enter into an operating joint venture to develop and produce any discovered uranium resources and reserves.  The uranium would be processed at URI’s Kingsville Dome or Rosita processing facility, with Cameco’s share of production being processed under a toll processing agreement with URI.

Capital expenditures for the first six months of 2012 totaled approximately $6,000 and were related to land acquisition and depreciable equipment.  Capital expenditures for the first six months of 2011 totaled approximately $88,000 and were related to land acquisition and depreciable equipment. Such expenditures were offset by the $300,000 payment received by CTI in connection with the execution of the exploration agreement.  The net carrying value of the property at June 30, 2012 was approximately $951,000.

Impairment of Uranium Properties

At June 30, 2012, we determined the carrying value of our project assets at each of our South Texas production locations exceeded their fair value.  A decline in the market price of uranium and an increase in the estimated costs for each of our South Texas projects resulted in a decrease in the estimated future cash flow to be generated from each site.  Such determination resulted in an impairment provision of approximately $752,000 and $588,000 for the first six months of 2012 and 2011, respectively.

The impairment provision for the first six months of 2012 and 2011, respectively were $321,000 and $362,000 related to Kingsville Dome, $401,000 and $135,000 related to Vasquez and $30,000 and $91,000 for Rosita.  The net carrying values of the Kingsville Dome, Rosita and Vasquez projects were approximately $5.4 million, $4.9 million and $436,000 at June 30, 2012.