LEASES

3 Months Ended

Mar. 31, 2023

LEASES

LEASES

9. LEASES

The Company’s lease portfolio consists of an operating lease for the corporate office and other small operating and finance leases for office equipment in the Alabama office.  The corporate office lease has a remaining lease term of 0.3 years and includes an option to extend the lease for 3 years. Under our corporate office lease, we are required to reimburse the lessor each month for common use expenses such as maintenance and security services. Because these amounts are variable from year to year and not specifically set in the lease terms, they are not included in the measurement of the right-of-use asset and related lease liability, but rather expensed in the period incurred.  The remaining lease terms for the office equipment leases ranges from 3.1 to 4.3 years.

The Company is party to several leases that have terms that are less than a year in length. These include leases for land used in exploration activities, office equipment, machinery, office space, storage and other. The Company has elected the short-term lease exemption allowed under the new leasing standards, whereby leases with initial terms of one year or less are not capitalized and instead expensed on a straight-line basis over the lease term. In addition, the Company holds several leases related to mineral exploration and production to which it has not applied the new leasing standard. Leases to explore or use minerals and similar nonregenerative resources are specifically excluded by ASC 842, “Leases.”

The right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities were recognized at the commencement date of the lease based on the present value of lease payments over the lease term using  discount rates that range from 3.00% to 9.50%.  These rates are either implicit within the lease contract or reflected at the Company’s estimated incremental borrowing rate at the lease commencement dates.

The components of lease cost are as follows:

	For the Three Months Ended
	March 31,
(thousands of dollars)	2023		2022
Operating least cost	$	41	$	38
Finance lease cost
Amortization of right-of-use assets		4		—
Interest on lease liabilities		1		—
Total finance lease cost		5		—
Variable lease costs		4		—
Lease cost	$	50	$	38

Supplemental cash flow information related to the Company’s leases is as follows:

	For the Three Months Ended
	March 31,
(thousands of dollars)	2023		2022
Cash paid for amounts included in lease liabilities:
Operating cash flows from operating leases	$	41	$	39
Operating cash flows from finance leases	$	1	$	—
Financing cash flows from finance leases	$	4	$	—

Weighted-average remaining lease term and discount rate for the Company’s operating lease are as follows:

	Operating Leases		Finance Lease
Weighted average remaining lease term (in years)	0.9		4.3
Weighted average discount rate	8.6	%	3.0	%

Maturities of lease liabilities for the Company’s operating leases are as follows:

Lease payments by year
(in thousands)	Operating leases		Finance leases
2023 (remainder of year)	$	56	$	5
2024		4		6
2025		4		6
2026		1		6
2027		—		3
Total lease payments		65		26
Less imputed interest		—		(1)
Total	$	65	$	25

As of March 31, 2023, the Company has $0.1 million in right-of-use assets and $0.1 million in related lease liabilities ($0.1 million of which is current). The most significant operating lease is for the Company’s corporate office in Centennial, Colorado, with $0.1 million remaining in undiscounted cash payments through the end of the lease term in 2023. The total undiscounted cash payments remaining on operating leases through the end of their respective terms is $0.1 million.

As of March 31, 2023, the Company has entered into certain leases that have not yet commenced.  Each of the leases relates to equipment to be used at the Kellyton Graphite Plant and will commence in mid-2023 with lease terms of 5 years.  The net present value of such leases is $1.1 million.