UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,  D.C. 20549 

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

 

 

 

 

 

 

UR-ENERGY INC.

10758 West Centennial Road, Suite 200

Littleton, Colorado 80127

 

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 5, 2016

 

To the Shareholders of Ur-Energy Inc.:

 

The Annual and Special Meeting of Shareholders of Ur-Energy Inc. (the “Company”), will be held at the Hampton Inn & Suites, 7611 Shaffer Parkway, Littleton, Colorado 80127, on Thursday, May 5, 2016 at 1:00 p.m. local time to receive the audited consolidated financial statements of the Company for the year ended December 31, 2015, together with the report from the auditors thereon, and for the purpose of considering and voting upon proposals to:

 

1.Elect six (6) directors, each to serve until the next annual meeting of shareholders of the Company or until their successors are elected and appointed;

 

2.Re-appoint PricewaterhouseCoopers LLP, Chartered Professional Accountants, as the independent auditors of the Company and to authorize the directors to fix the remuneration of the auditors;

 

3.Approve, in an advisory (non-binding) vote, the compensation of the Company’s named executive officers (“say-on-pay”);

 

4.Ratify, confirm and approve the renewal of the Ur-Energy Inc. Amended Restricted Share Unit Plan (the “RSU Plan”), and approve and authorize for a period of three years all unallocated restricted share units issuable pursuant to the RSU Plan;

 

5.Ratify and confirm the Ur-Energy By-Law No. 2 (Advance Notice By-Law); and

 

6.Transact such other business as may lawfully come before the meeting or any adjournment(s) or postponement(s) thereof.

 

The Board of Directors has fixed the close of business on March 31, 2016 as the record date for determination of the shareholders entitled to vote at the meeting and any adjournment(s) or postponement(s) thereof.  This Notice of Annual and Special Meeting of Shareholders and related proxy materials are first being distributed or made available to shareholders beginning on or about April 8, 2016.

 

We cordially invite you to attend the annual and special meeting of shareholders. Whether or not you plan to attend, it is important that your shares be represented and voted at the meeting. Please refer to your proxy card for more information on how to vote your shares at the meeting and return your voting instructions as promptly as possible.

 

The attached Management Proxy Circular, proxy card, and the Company’s Annual Report to Shareholders (including financial statements) for the fiscal year ended December 31, 2015 are available at http://www.ur-energy.com/annual-general-meeting-info/.

 

Thank you for your support. 

 

 

 

 

 

 

 

 

MANAGEMENT PROXY CIRCULAR

TABLE OF CONTENTS

 

SCHEDULE A (UR-ENERGY AMENDED RESTRICTED SHARE UNIT PLAN)

SCHEDULE B (BYLAW NO. 2 (ADVANCE NOTICE))

 

 

 

 

 

UR-ENERGY INC.

10758 West Centennial Road, Suite 200

Littleton, Colorado 80127

 

MANAGEMENT PROXY CIRCULAR

ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

MAY 5, 2016

 

SOLICITATION OF PROXIES

This management proxy circular (the “Circular”) is furnished in connection with the solicitation by the management of Ur-Energy Inc. (the “Company” or “Ur-Energy”) of proxies for use at the annual and special meeting of shareholders of the Company (the “Meeting”) to be held at the Hampton Inn & Suites, 7611 Shaffer Parkway, Littleton, Colorado 80127 on Thursday, May 5, 2016 commencing at 1:00 p.m. local time, and at any adjournment thereof, for the purposes set forth in the accompanying Notice of Meeting (the “Notice”). The solicitation will be primarily by mail, but proxies may also be solicited personally or by telephone by directors, officers, employees or representatives of the Company. All costs of solicitation will be borne by the Company. This Circular and related proxy materials are being first distributed or made available to shareholders beginning on or about April 8, 2016. The information contained herein is given as at March 31, 2016 unless otherwise indicated.

All dollar amounts in this Circular are in U.S. dollars, except where indicated otherwise. On March 31, 2016, the noon exchange rate of Canadian currency in exchange for United States currency, as reported by the Bank of Canada, was US$1.00 = C$[•].

 

This Management Proxy Circular, the proxy card, and the Company’s Annual Report to Shareholders (including financial statements) for the fiscal year ended December 31, 2015 are available at http://www.ur-energy.com/annual-general-meeting-info/.

 

APPOINTMENT OF PROXIES

The persons named in the enclosed form of proxy are officers of the Company. Each shareholder has the right to appoint a person other than the persons named in the enclosed form of proxy, who need not be a shareholder of the Company, to represent such shareholder at the Meeting or any adjournment thereof. Such right may be exercised by inserting such person’s name in the blank space provided in the form of proxy and striking out the other names or by completing another proper form of proxy.

 

VOTING INSTRUCTIONS

Registered Shareholders

There are two methods by which registered shareholders (“Registered Shareholders”), whose names are shown on the books or records of the Company as owning common shares of the Company (“Common Shares”), can vote their Common Shares at the Meeting either in person at the Meeting or by proxy.  Should a Registered Shareholder wish to vote in person at the Meeting, the Registered Shareholder should attend the Meeting where his or her vote will be taken and counted. Should the Registered Shareholder not wish to attend the meeting or not wish to vote in person, his or her vote may be voted by proxy through one of the methods described below and the Common Shares represented by the proxy will be voted or withheld from voting, in accordance with the instructions as indicated in the form of proxy, on any ballot that may be called for, and if a choice was specified with respect to any matter to be acted upon, the shares will be voted accordingly.

A Registered Shareholder may vote by proxy by using one of the following methods:  (i) the paper form of proxy to be returned by mail or delivery; (ii) by Internet; or (iii) by telephone.  The methods of using each of these procedures are as follows:

Voting by Mail.  A Registered Shareholder may vote by mail or delivery by completing, dating and signing the enclosed form of proxy and depositing it with Computershare Investor Services Inc. (the “Transfer Agent”) using the envelope provided or by mailing it to Computershare Investor Services Inc., Attention: Proxy Department, 100 University Avenue, 9th Floor, Toronto, Ontario M5J 2Y1 or to the Corporate Secretary of the Company at 10758 West Centennial Road, Suite 200, Littleton, Colorado 80127 for receipt no later than 1:00 p.m. (MDT) on Tuesday, May 3, 2016, or if the Meeting is adjourned, by no later than 48 hours (excluding Saturdays, Sundays and holidays) before any adjourned Meeting.

Voting by Internet.  A Registered Shareholder may vote by Internet by accessing the following website:  www.investorvote.com. When you log on to the site you will be required to input a control number as instructed on the form of proxy.  Please see additional information enclosed with the Circular on the form of proxy.  Registered Shareholders may vote by Internet up to 1:00 p.m. (MDT) on Tuesday, May 3, 2016, or if the Meeting is adjourned, no later than 48 hours (excluding Saturdays, Sundays and holidays) before any adjourned Meeting.

Voting by Telephone. A Registered Shareholder may vote by telephone by calling the toll free number 1‑866-732-8683 from a touch tone phone.  When you telephone you will be required to input a control number as instructed on the form of proxy.  Please see additional information enclosed with the Circular on the form of proxy.  Registered Shareholders may vote by telephone up to 1:00 p.m. (MDT) on Tuesday, May 3, 2016, or if the Meeting is adjourned, no later than 48 hours (excluding Saturdays, Sundays and holidays) before any adjourned Meeting.

Voting by mail or the Internet are the only methods by which a Registered Shareholder may choose an appointee other than the management appointees named on the proxy and must be completed by the Registered Shareholder or by an attorney authorized in writing or, if the Registered Shareholder is a corporation or other legal entity, by an authorized officer or attorney.

Non-Registered Shareholders (Beneficial Owners)

In this Circular and the enclosed form of proxy and Notice, all references to shareholders are to Registered Shareholders of Common Shares. Only Registered Shareholders of Common Shares, or the person they appoint as their proxy, are permitted to vote at the Meeting.  However, in many cases, Common Shares beneficially owned by a holder (a “Non-Registered Shareholder” or “Beneficial Owner”) are registered either:

(a)in the name of an intermediary (an “Intermediary”) that the Non-Registered Shareholder deals with in respect of the shares, such as, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans; or

(b)in the name of a clearing agency such as CDS&Co. or DTC (the registration names for CDS Clearing and Depository Services Inc., and Depositary Trust Company, respectively) of which the Intermediary is a participant.

Common Shares held by your broker or its nominee can only be voted upon your instructions. Beneficial shareholders should ensure that instructions respecting the voting of their Common Shares are communicated to the appropriate person.

There are two kinds of Beneficial Owners, those who object to their name being made known to the Company, referred to as objecting beneficial owners (“OBOs”), and those who do not object to the Company knowing who they are, referred to as non-objecting beneficial owners (“NOBOs”). In accordance with the requirements of National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”), the Company has opted this year to distribute copies of the Notice, Circular, the form of proxy and our annual report for the fiscal year ended December 31, 2015 (including financial statements) (collectively, the “Meeting Materials”) to all NOBOs directly through the Transfer Agent.  Whereas, the Meeting Materials will continue to be distributed to OBOs through clearing agencies and Intermediaries, who often use a service company (such as Broadridge Financial Solutions, Inc. (“Broadridge”)) to forward meeting materials to Non-Registered Shareholders.  The Company is not relying on the notice-and-access delivery procedures of NI 54-101 or the corresponding rules of the U.S. Securities and Exchange Commission (“SEC”) to distribute copies of the Meeting Materials. 

The Meeting Materials are being sent to both Registered and Non-Registered Shareholders of the securities. If you are a Non-Registered Shareholder, and the Company or its agent has sent these Meeting Materials directly to you, your name and address and information about your holdings of common shares, have been obtained in accordance with applicable securities regulatory requirements from the Intermediary holding on your behalf.

By choosing to send the Meeting Materials to NOBOs directly, the Company (and not the Intermediary holding on your behalf) has assumed responsibility for (i) delivering these Meeting Materials to you, and (ii) executing your proper voting instructions.  Please return your voting instructions as specified in the request for voting instructions.

Objecting Beneficial Owners

Intermediaries are required to forward Meeting Materials to OBOs unless an OBO has waived the right to receive them. Generally, OBOs who have not waived the right to receive Meeting Materials will usually receive a voting instruction form (“VIF”) from their applicable Intermediary in lieu of the form of proxy from the Company. The VIF will name the same persons as the proxy to represent the shareholder at the Meeting. A shareholder has the right to appoint a person (who need not be a shareholder of Ur-Energy) other than persons designated in the VIF, to represent the shareholder at the Meeting. To exercise this right, the shareholder should insert the name of the desired representative in the blank space provided in the VIF. You are asked to complete and return the VIF to your applicable Intermediary by mail or facsimile. Alternatively, you may be able to call the toll free telephone number or access the Internet website listed on your VIF to vote your Common Shares. If you receive a VIF from your Intermediary, it cannot be used as a proxy to vote Common Shares directly at the Meeting as the VIF must be returned to your Intermediary well in advance

of the Meeting in order to have the Common Shares voted or to appoint an alternative representative to attend at the Meeting in person to vote such Common Shares.

Non-Objecting Beneficial Owners

NOBOs can expect to receive the Meeting Materials with a VIF from the Transfer Agent. These VIFs are to be completed and returned to the Transfer Agent by mail or by following the instructions contained on the VIF for telephone or Internet voting. The Transfer Agent will tabulate the results of the VIFs received from NOBOs and will provide appropriate instructions at the Meeting with respect to the shares represented by the VIFs received. If you receive a VIF from the Transfer Agent, it cannot be used as a proxy to vote Common Shares directly at the Meeting as the VIF must be returned to the Transfer Agent well in advance of the Meeting in order to have the Common Shares voted or to appoint an alternative representative to attend at the Meeting in person to vote such Common Shares.

The purpose of these procedures is to permit Non-Registered Shareholders to direct the voting of the shares they beneficially own. Should a Non-Registered Shareholder who receives either a proxy or a VIF wish to attend and vote at the Meeting in person (or have another person attend and vote on behalf of the Non-Registered Shareholder), the Non-Registered Shareholder should strike out the names of the persons named in the proxy and insert the Non-Registered Shareholder’s (or such other person’s) name in the blank space provided or, in the case of a VIF, follow the corresponding instructions on the form.

In any event, Non-Registered Shareholders should carefully follow the instructions of their Intermediaries and Broadridge or other service company, or the Transfer Agent, as the case may be.

 

Abstentions and Broker Non-Votes

 

Abstentions are counted in tabulations of votes cast on a particular proposal.  Because the approval of each matter to be voted on at the Meeting requires the affirmative vote of a majority of the votes cast at the Meeting, whether in person or by proxy, abstentions have the same effect as votes against the proposal. 

 

A “broker non-vote” occurs when an Intermediary holding shares for a beneficial owner votes on one proposal, but does not vote on another proposal because the Intermediary does not have discretionary voting power and has not received instructions to do so from the beneficial owner. The nominee that holds your shares may generally vote on “routine” matters but cannot vote on “non-routine” matters. Each of the proposals at the Meeting, other than Proposal No. 2, are “non-routine” matters and therefore an Intermediary holding shares for a beneficial owner will not have the authority to vote on those matters in the absence of instructions from the beneficial owner. Broker non-votes are not counted in the tabulation of votes cast on a particular proposal and therefore will not have an effect on the approval of that proposal.

 

REVOCATION OF PROXIES

A shareholder who has given a proxy has the power to revoke it as to any matter on which a vote shall not already have been cast pursuant to the authority conferred by such proxy and may do so (i) by delivering another properly executed proxy bearing a later date and depositing it as aforesaid, including within the prescribed time limits noted above; (ii) by depositing an instrument in writing revoking the proxy executed by the shareholder or by the shareholder’s attorney authorized in writing (A) at our head office with the Corporate Secretary at 10758 West Centennial Road, Suite 200, Littleton, Colorado 80127 at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, at which the proxy is to be used, or (B) with the Chair of the Meeting, prior to its commencement, on the day of the Meeting, or at any adjournment thereof; (iii) by attending the Meeting in person and so requesting; or (iv) in any other manner permitted by law.

A Non-Registered Shareholder may revoke a VIF or a waiver of the right to receive Meeting Materials and to vote given to an Intermediary at any time by written notice to the Intermediary, except that an Intermediary is not required to act on a revocation of a VIF or a waiver of the right to receive Meeting Materials and to vote that is not received by the Intermediary at least seven days prior to the Meeting.

VOTING AND DISCRETION OF PROXIES

On any ballot that may be called for, the shares represented by proxies in favor of the persons named by management of the Company will be voted for or against, or voted for or withheld from voting on, the matters identified in the proxy, in each case in accordance with the instructions of the shareholder. In the absence of any instructions on the proxy, it is the intention of the persons named by management in the accompanying form of proxy to vote

(1)FOR the election of all of management’s nominees as directors;

(2)FOR the re-appointment of PricewaterhouseCoopers LLP, Chartered Professional Accountants, as our independent auditors and the authorization of the directors to fix the remuneration of the auditors;  

(3)FOR the advisory resolution to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers;  

(4)FOR the resolution to approve the renewal of our Amended Restricted Share Unit Plan (the “RSU Plan”) and to approve and authorize all unallocated restricted share units issuable pursuant to the RSU Plan until the third anniversary of the adoption of the present resolution;

(5)FOR the resolution to approve and confirm By-Law No. 2 (Advance Notice);and

(6)In accordance with management’s recommendations with respect to amendments or variations of the matters set out in the Notice or any other matters which may properly come before the Meeting.

The accompanying form of proxy confers discretionary authority upon the persons named therein with respect to amendments or variations of the matters identified in the Notice or any other matters that may properly come before the Meeting. As at the date of this Circular, management of the Company knows of no such amendments, variations or other matters that may properly come before the Meeting other than the matters referred to in the Notice.

 

 

COMMON SHARES ENTITLED TO VOTE

As at March 31, 2016, the authorized capital of the Company consisted of an unlimited number of Common Shares, of which [143,323,769] Common Shares were issued and outstanding, and an unlimited number of Class A Preference Shares, issuable in series, of which none has been issued. A holder of record of Common Shares as at the close of business on March 31, 2016 (the “Record Date”) is entitled to one vote for each Common Share held by him or her. The affirmative vote of a majority of the votes cast at the Meeting, whether in person or by proxy, is required for approval of each matter set forth in this Circular, other than Proposal No. 4, which requires the approval of a majority of the votes cast, excluding shares held by certain insiders of the Company and their affiliates.

 

In accordance with the Canada Business Corporations Act, the Company will prepare a list of holders of Common Shares on the Record Date. Each holder of Common Shares named in the list at the close of business on the Record Date will be entitled to vote the Common Shares shown opposite his or her name on the list at the Meeting.

 

QUORUM

The presence, in person or by proxy, of two shareholders holding not less than 10% of the outstanding Common Shares as of the Record Date constitutes a quorum for the transaction of business at the Meeting. In the event there are not sufficient votes for a quorum or to approve any proposals at the time of the Meeting, the Meeting shall be adjourned to a date no less than seven days later than the scheduled Meeting date in order to permit further solicitation of proxies. The scrutineer will treat Common Shares represented by a properly signed and returned proxy as present at the Meeting for purposes of determining a quorum, without regard to whether the proxy is marked as casting a vote or abstaining.

 

RIGHTS OF DISSENT

Pursuant to the Canada Business Corporations Act, there are no rights of dissent in respect of the resolutions to be voted on by the shareholders at this Meeting. 

 

SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Management

 

As of March 31, 2016, we had [143,323,769] Common Shares issued and outstanding, and 7,336,666 stock options which may be exercised currently or within the sixty (60) days following March 31, 2016. 

 

 

 

 

* Less than one percent

 

(1) Address for each of our officers and directors: 10758 West Centennial Road, Suite 200, Littleton, Colorado 80127.

 

(2) The beneficial ownership shown for all holders in this table represents Common Shares and all options which may be exercised as of March 31, 2016 and within the next sixty (60) days. For our directors and executive officers, this represents the following:  Klenda (2,826,259 Common Shares, 634,011 options); Boberg (693,279 Common Shares, 309,036 options); Franklin  (543,771 Common Shares, 309,036 options); Macdonell (193,541 Common Shares, 309,036 options); Parker (88,564 Common Shares, 309,036 options); Huber (75,000 Common Shares, 183,103 options); Smith (171,597 Common Shares, 680,029 options); Goplerud (71,976 Common Shares, 540,981  options); Hatten (46,312 Common Shares, 421,539 options); Cash (57,340 Common Shares, 248,176 options); Bonner (2,948 Common Shares, 162,671 options). As of the Record Date, the number of the Company’s Common Shares beneficially owned by all of the directors and executive officers as a group and entitled to be voted at the meeting is [4,770,587]. 

 

(3) Of the total number of Common Shares held by Mr. Klenda, he has pledged 1,500,000 Common Shares on a multi-purpose equity line of credit. Mr. Klenda’s Common Shares (but not options or RSUs) are held jointly with his wife.

 

(4) Of the shares identified, Mr. Boberg holds 118,796 Common Shares jointly with his wife.

 

(5) Additionally, Mr. Macdonell’s wife owns 5,000 Common Shares, to which Mr. Macdonell disclaims beneficial ownership.

 

Security Ownership of Certain Beneficial Owners

 

The following table sets forth the beneficial ownership of the Company’s Common Shares as of March 31, 2016 by each person (other than the director nominees and executive officers of the Company) who owned of record, or was known to own beneficially, more than 5% of the outstanding voting shares of Common Shares.

 

 

 

(1) The beneficial ownership shown for all holders in this table represents Common Shares and all warrants which may be exercised as of March 31, 2016 and within the next sixty (60) days.

 

(2) Lazarus Investment Partners LLLP filed a Form 13G/A (Amendment No. 4) dated January 13, 2016 indicating holdings as at December 31, 2015,  of 8,894,346 Common Shares of Ur-Energy and warrants to acquire another 454,546 Common Shares.  Lazarus Investment Partners LLLP is a Delaware limited liability limited partnership (“Lazarus Partners”). Lazarus Management Company LLC, a Colorado limited liability company (“Lazarus Management”), as the investment adviser of Lazarus Partners, and as the general partner of Lazarus Partners, and Justin B. Borus, as the managing member of Lazarus Management, may be deemed to beneficially own the Common Shares held by Lazarus Partners, insofar as they may be deemed to voting and dispositive power over the Common Shares. The foregoing should not be deemed to constitute an admission that Lazarus Management or Mr. Borus is, for any other purpose, the beneficial owner of any of the Common Shares, and each of Lazarus Management and Mr. Borus disclaims beneficial ownership as to the Common Shares, except to the extent of his or its pecuniary interests therein. The principal business address of Lazarus Partners is 3200 Cherry Creek South Drive, Suite 670, Denver, Colorado 80209.

(3) Global X Management Company LLC filed a Form 13G (Amendment No. 3) dated February 16, 2016, indicating holdings as at December 31, 2015, of 7,285,588 Ur-Energy Common Shares. Bruno del Ama is the Chief Executive Officer of Global X Management Company LLC, a Delaware limited liability company, 623 Fifth Avenue, 115th Floor, NY, NY 10022, which, according to the Form 13G, has the sole power to vote or to direct the vote and sole power to dispose or to direct the disposition of the Common Shares. Mr. del Ama and Mr. Jose C. Gonzalez own 58% and 42%, respectively, of Global X Management Company; each specifically disclaims beneficial ownership of the shares of Ur-Energy that either one of them or Global X Management Company holds. 

 

 

MANAGEMENT

Identification of Executive Officers

 

Jeffrey T. Klenda, 59, B.A.                    Chair, Executive Director& Acting Chief Executive Officer

Mr. Klenda graduated from the University of Colorado in 1980 and began his career as a stockbroker specializing in venture capital offerings. Prior to founding Ur-Energy in 2004, he worked as a Certified Financial Planner and was a member of the International Board of Standards and Practices. In 1986, he started Klenda Financial Services, an independent financial services company providing investment advisory services to high-end individuals and corporate clients as well as providing venture capital to corporations seeking entry to the U.S. securities markets. In the same year, Mr. Klenda formed Independent Brokers of America, Inc., a national marketing organization.  He also served as President of Security First Financial, a company he founded to provide consultation to individuals and corporations seeking investment management and early stage funding.  Over the last 30 years, Mr. Klenda has acted as an officer and/or director for numerous publicly-traded companies, having taken his first company public at 28 years of age.  Currently, Mr. Klenda is a director of Organto Foods Inc. (since November 2013). Mr. Klenda co-founded Ur-Energy in 2004. Mr. Klenda has served as the Chair of the Board of Directors and Executive Director of the Company since 2006. He has served as Acting Chief Executive Officer since May 2015.    

 

Roger L. Smith, 58, CPA, MBA, CGMA                                          Chief Financial Officer and Chief Administrative Officer

Mr. Smith has 35 years of mining and manufacturing experience including finance, accounting, IT, ERP and systems implementations, mergers, acquisitions, audit, tax and public and private reporting in international environments. Mr. Smith served as Ur-Energy’s Chief Financial Officer and Vice President Finance, IT and Administration until May 2011, when he assumed the title and responsibilities of Chief Administrative Officer as well as Chief Financial Officer. Mr. Smith joined Ur-Energy in May 2007, after having served as Vice President, Finance for Luzenac America, Inc., a subsidiary of Rio Tinto PLC and Director of Financial Planning and Analysis for Rio Tinto Minerals, a division of Rio Tinto PLC, from September 2000 to May 2007.  Mr. Smith has also held such positions as Vice President Finance, Corporate Controller, Accounting Manager, and Internal Auditor with companies such as Vista Gold Corporation, Westmont Gold Inc. and Homestake Mining Corporation.  He has a Master of Business Administration and Bachelor of Arts in Accounting from Western State Colorado University, Gunnison, Colorado.

Steven M. Hatten, 52,  B.Sc. Vice President Operations

Prior to being named Ur-Energy’s Vice President Operations in May 2011, Mr. Hatten served as Engineering Manager from 2007 to 2010 and as Director of Engineering and Operations 2010 to 2011.  He has over 20 years of experience with a strong background in in situ recovery uranium design and operations.  He previously worked as a Project Engineer for Power Resources, Inc., the Manager Wellfield Operations for Rio Algom Mining Corp. and Operations Manager at Cameco’s Smith Ranch – Highland Facility.  Mr. Hatten has a Bachelor of Science in Petroleum Engineering from Texas Tech University.

John W. Cash, 43,  M.Sc.   Vice President Regulatory Affairs

Mr. Cash has been our Vice President Regulatory Affairs since March 2014. Previously, he was named Vice President Regulatory Affairs, Exploration & Geology in 2011 and served in that capacity until March 2014. Prior to that time, Mr. Cash was our Environment, Health, Safety and Regulatory Affairs Manager from 2007 to 2010 and Director of Regulatory Affairs 2010 to 2011.  He previously worked for Crow Butte Resources, Inc. a subsidiary of Cameco, from 2002 to 2007, including as Senior Environmental/Safety Superintendent, Safety Director/Wellfield Supervisor and Operations Superintendent. Prior to that time, Mr. Cash also worked in uranium exploration. He is a Fellow of the World Nuclear University Summer Institute, 2005. Mr. Cash has a M.Sc. Geology and Geophysics from the University of Missouri-Rolla.

James A. Bonner, 69, B.Sc.Vice President Geology

Mr. Bonner is a Professional Geologist with 23 years in the uranium exploration and development industry, three years in the oil and gas industry and 13 years in environmental engineering consulting. He joined Ur-Energy as Vice President Geology in March 2014, having most recently served as Vice President of Exploration for Powertech (USA), Inc.  He previously worked as a consulting geologist, was employed as a Senior Geologist for Gordon Environmental in Albuquerque, New Mexico, and worked for 16 years in uranium exploration for Rocky Mountain Energy Company throughout the western U.S.  Mr. Bonner is a Registered Professional Geologist and a Certified Professional Geologist, and is a member of the Geological Society of America, the American Institute of Professional Geologists and the Society for Mining, Metallurgy and Exploration. Mr. Bonner received a Bachelor of Science in Geology from the University of Wyoming.

Penne A. Goplerud, 54,  JDGeneral Counsel & Corporate Secretary

Ms. Goplerud has more than 20 years of diverse legal experience in complex litigation, business matters and natural resources transactions. While in private practice, she represented clients in commercial litigation, arbitration and mediation involving mining, oil and gas, commercial and corporate disputes, securities and environmental law.  She also has counseled business clients and represented clients in the negotiation of business transactions. Prior to joining Ur-Energy as Associate General Counsel in 2007, much of Ms. Goplerud’s practice focused on natural resources and transactional work. Ms. Goplerud obtained her JD from the University of Iowa College of Law.

 

 

Additionally, Wayne W. Heili served as our President and CEO during a portion of 2015. Mr. Heili’s employment agreement with the Company expired on May 1, 2015, and his employment concluded  following completion of that term. His term as a director of the Company concluded with his resignation just prior to our annual shareholder meeting in May 2015. 

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Committee is composed of independent directors and is responsible for matters of compensation as they relate to our employees and, more specifically, our executive officers including the Chief Executive Officer. The Compensation Committee discussed the following Compensation Discussion and Analysis (“CD&A”) with management, and thereafter recommended to the Board, which approved, this CD&A.

 

Compensation Program and Philosophy

 

Ur-Energy is committed to managing our human resources. We believe that the caliber and commitment of our executive officers are critical to our continued success and performance, and the overall commitment of all of our employees. 

 

The Compensation Committee reviews and makes recommendations to the Board with respect to the overall approach to compensation for all of our employees, and specifically with respect to our executive officers, including the Executive Director, Jeffrey Klenda, and the remuneration of directors. In addition to Mr. Klenda, our Executive Director and Acting Chief Executive Officer, and Mr. Smith, our Chief Financial Officer and Chief Administrative Officer, our Named Executive Officers include Ms. Goplerud, General Counsel and Corporate Secretary, Mr. Hatten, Vice President Operations and Mr. Cash, Vice President, Regulatory Affairs.  

 

Our compensation program is designed to effectively link compensation to performance as demonstrated by the completion by our executive officers of corporate and personal objectives that are designed to drive value creation. The Compensation Committee believes that it is important to maintain a clear link between the achievement of these objectives and compensation payout. Our first

two years in operations at Lost Creek have permitted us an opportunity to thoughtfully review the metrics and priorities most appropriately used to establish and maintain that connection. In doing so, the following considerations have been taken into account:

 

the selection of corporate and personal objectives that are measurable and tied to value creation is fundamental to our success as a company;

executive officers should be evaluated and paid based on performance and achievement of both corporate and personal objectives; and

executive officers should have a clear understanding of how their performance and the achievement of pre-determined objectives may influence their compensation.

The objectives of the compensation program are designed to:

 

support the achievement of results;

motivate executive officers to achieve the pre-determined objectives without taking excessive risks;

provide competitive compensation and benefit programs to attract and retain highly qualified executives; and

encourage an ownership mentality,  which is further augmented through share ownership guidelines for all executive officers.

 

The compensation program process begins fourth quarter each year as we look ahead and establish department objectives and corporate objectives. Our executives and all staff then prepare their personal objectives in conjunction with the establishment of the budget and our key performance indicators.  As a part of this look ahead, the Compensation Committee recommends and the Board considers and approves the annual grant of stock options and restricted share units (“RSUs”) to those eligible for consideration. 

 

First quarter of each year provides us an opportunity to reflect on our performance during the past year, initially with a determination of performance on corporate objectives, which is reviewed with the Compensation Committee and the Board of Directors. Performance of all staff is reviewed and employee performance reviews are conducted by supervisors and managers. Executive officers are evaluated by the Chief Executive Officer and the Compensation Committee; the Chief Executive Officer is evaluated by the Compensation Committee.  Based upon these performance appraisals, the bonuses are determined and awarded. See further discussion under the heading “Short Term Incentive Plan” below. During the performance review process, various aspects of succession planning are considered. 

 

Thereafter, typically during second quarter, cost-of-living adjustments are calculated. Contemporaneously, salary surveys are completed, with staff salaries adjusted to the findings of the survey, as necessary, and/or for merit increases. Throughout this period, employee development plans are implemented, as well as introducing additional aspects of succession planning.  As necessary and appropriate, mid-year review of departmental and/or individual objectives is undertaken, with adjustments made as required.

 

Compensation Structure

 

Our compensation program comprises base salary, short- and long-term incentives, and other perquisites. The components of total direct compensation relate to performance as follows:

 

 

 

Employment Agreements with Executive Officers

 

We have employment agreements with each of our executive officers.  Traditionally, we have not maintained multi-year agreements. The agreements contain standard employment provisions, as well as salary, entitlement to a cash bonus to be determined in the discretion of the Board, and statements of eligibility for Company benefits (health and wellness benefits, paid time off, 401k plan), and equity compensation plans (stock option and RSU plans). The agreements also provide for post-termination obligations of the executives (one-year non-solicitation provisions applicable to all executive officers; and one-year non-competition provisions in the agreements of Messrs. Hatten, Cash and Bonner). Post-termination obligations of the Company, including in an event of change of control, are discussed and summarized below under the heading “Potential Payments Upon Termination or Change of Control.” 

 

The employment agreements have been amended from time to time. In December 2008, all executive employment agreements then in place were amended to insert necessary provisions for compliance with Section 409A provision of the Internal Revenue Code of 1986 (“IRC”), as amended, including the timing of payments or deferred compensation in the event of a change of control or termination from Ur-Energy. In November 2009, the executive employment agreements in place were amended to insert provisions to provide for the establishment of a trust to hold and invest certain separation payments which Ur-Energy becomes obligated to pay because of a voluntary termination by the executive or involuntary termination by Ur-Energy or in the event of a change of a control but which payments have been delayed under Section 490A of the IRC.

 

In May 2011, existing employment agreements were amended to reflect the assumption of new responsibilities and/or new titles by the serving executive officers. Additionally, three new agreements were completed in May 2011, as described above. In November 2011, all the employment agreements of the executive officers were amended to provide that Ur-Energy will bear the costs of a mediator in the event of informal dispute resolution, with each party to bear its own attorney fees or other expenses. This amendment was recommended for approval by the Compensation Committee and approved by the Board. In February 2013, the Compensation Committee recommended, and the Board approved a change to the employment agreements regarding “paid time off” benefits to more directly coincide with the structure and accruals of paid time off benefits available to other eligible employees of Ur-Energy. In March 2014, an employment agreement was made with Mr. James Bonner, Vice President Geology. The Compensation Committee reviews the employment agreements of and compensation program for the executive officers on a periodic basis.

 

Objectives to be Met Through “Pay Mix”

 

The compensation program is designed to provide motivation and incentives to the executive officers and employees with a view toward enhancing shareholder value while successfully implementing our corporate objectives. The compensation program accomplishes this by rewarding performance that is designed to create shareholder value. The portion of variable, at-risk, performance-based compensation should be commensurate to the executive officer’s or employee’s position and rise as their respective level of responsibility increases. The mix and structure of compensation should strike an appropriate balance to achieve pre-determined objectives without motivating excessive risk taking.

 

Our share price may be heavily influenced by changes in uranium and other commodity prices, which are outside of our control. As a result, the compensation program is designed to focus on areas where the executive officers and employees have the most influence. To achieve this, a combination of operational, financial and share price criteria are utilized when selecting corporate and personal objectives and establishing an appropriate combination of pay.

 

The compensation structure and “pay mix” for our CEO and other executive officers in place for 2015 was as follows:

 

 

The characteristics of the compensation program’s mix of pay, as they relate to the executive officers, include:

 

a significant portion of executive pay is at-risk;

executive officers have a higher percentage of at-risk compensation relative to other employees, because they have the greatest ability to influence corporate performance;

 of an executives short-term incentive is based on corporate performance; and

80% of an executive’s long-term incentive is based on stock options, which are highly leveraged to our share price performance.

 

The incentive compensation actually received by the executive officers and employees varies based upon individual performance and the achievement of the pre-determined corporate and personal objectives and is ultimately subject to the discretion of the Compensation Committee. 

 

Base Salary

 

Base salary is the fixed portion of cash compensation earned by and paid to our executive officers and employees. We provide our executive officers and employees with base salaries to compensate them for services rendered during the fiscal year and to aid in attracting and retaining quality employees. Base salaries for all employees are reviewed annually and the Compensation Committee reviews the base salary for each executive officer routinely or upon a promotion or other change in job responsibility, based on the individual’s level of responsibility, the importance of the position and the individual’s contribution to our overall performance. The Compensation Committee also assesses the base salaries of the executive officers relative to a group of peer companies with similar scope and operations to ensure that it is positioned competitively with executive officers in similar roles at peer companies. Most recently, this review was made in 2015 and involved survey data from the peer group established by the Company, utilizing its subscription to Equilar. The review revealed that our executive officers are compensated within the ranges of the comparator company data, with certain exceptions. Our objective remains to provide a competitive base salary designed to recruit and retain qualified, high-performing executives, while responsibly administering our budget and attaining our corporate objectives, including advancing Lost Creek operations. We did not retain an independent compensation consultant in 2015, but have utilized the services of such consultants from time to time, including as recently as 2014.

 

In 2015, all executive officers were provided with a five percent cost-of-living adjustment, following three years with no salary increase. Additionally, certain other adjustments were made to base salary for Messrs. Klenda, Hatten and Cash, during the year, for additional duties and responsibilities assumed following Mr. Heili’s departure. The salaries of Messrs. Hatten and Cash were adjusted in April 2015, each by $1,500 per month or approximately a  10% increase.  Following the review by the Compensation Committee of our base compensation with our established peer group, Mr. Klenda’s salary was increased in December 2015, by approximately $3,200 per month or approximately 15%; and Mr. Bonner’s salary was adjusted by three percent, also in December 2015. 

 

Short-Term Incentive Plan (Cash Bonus as part of Total Cash Compensation)

 

Total cash compensation includes base salary and any variable (at risk) short-term cash incentive compensation.  Bonus awards under our short term incentive plan (“STIP”) are calculated using a formula that is based upon performance in relation to corporate objectives, set by the Chief Executive Officer and executive management and approved by the Board, and in relation to personal objectives. The STIP program is designed to recognize and reward both corporate and individual, personal performance results. As a part of the review and development of our compensation plan during 2015, the weighting of corporate and personal objectives as related to the STIP program were rebalanced. The rebalancing provides greater personal responsibility of each executive officer for not only the corporate objectives, but also his or her personal objectives which are tied to that year’s corporate objectives. This, too, was developed by the Compensation Committee through its review of peer group practices and other standards.

The following table shows the current target levels and weightings used to establish the 2015 executive STIP awards.

 

 

Historically, the STIP awards have been consistently reduced in recognition that we were not yet in operations or, as was the case in 2014, reduced as we were commissioning and seeking to reach a  steady-state of operations. As a further cash-conservation measure, the reduced short-term incentives pay-outs for executive officers and certain other employees for performance during 2014 were not

paid in cash, but rather were awarded in the form of grants of RSUs. For 2015, the STIP awards for executives were calculated on the pre-established formula, as modified, and reduced by 68%.

 

Actual STIP awards are based on performance for the year and paid in the following year after our year-end results are released. We calculate the STIP awards as follows:

 

 

 

The following table shows a demonstrative example of the STIP award calculation that would result for an executive officer with a base salary of $100,000, if his or her corporate and personal objectives results were as shown in the weighted payout column. 

 

 

Long-Term Equity Incentives

 

The long-term incentive plan (“LTIP”) includes our Option Plan and the RSU Plan. A more detailed discussion of the Option Plan and RSU Plan can be found under the heading “Stock Options and RSUs.”  The Option Plan and the RSU Plan form a long-term incentive plan for employees including executive officers and, in the case of the Option Plan, our consultants.  Participation in the Option Plan and the RSU Plan is determined by the Compensation Committee, taking into account the recommendations of the Chief Executive Officer. The purpose of the Option Plan and the RSU Plan is to provide eligible participants with the opportunity to own the Common Shares of the Company, enhance Ur-Energy’s ability to attract, retain and motivate key personnel, and align the participant’s interests with those of the shareholders. Awards made under the Option Plan and RSU Plan are similarly based upon a pre-established formula tied to base salary and the compensation structure explained above (a percentage of base salary; 4:1 ratio between stock options and RSUs). The LTIP target for our CEO is 30% of his base salary; the LTIP target for our other executives is 28% of his or her base salary.

 

Perquisites Including Benefits

 

We provide employees, including our executive officers, with perquisites including personal benefits that we believe are reasonable and consistent with the overall compensation program to better enable us to attract and retain quality employees. We periodically review the levels of perquisites provided to the employees and executive officers to ensure competitiveness and value. Executive officers participate in healthcare and other benefit programs on the same terms as other employees:  401(k) Plan, medical, prescription drug, dental, vision, short-term and long-term disability, life and supplemental life insurances; employee assistance program; and

health and dependent care flexible spending accounts. Lost Creek employees are also eligible for a safety incentive program bonus which was initiated in 2015 and will continue in 2016.

 

Compensation Risk Assessment

 

Our Compensation Committee Charter requires that the Compensation Committee review and consider  the implications of the risks associated with our compensation policies and practices to avoid encouraging inappropriate risk taking by executive officers. The Committee has undertaken reviews of this type in conjunction with periodic reviews of the compensation program, including most recently in October and December 2015.  As discussed, the Committee has implemented and maintained multiple practices to ensure that there are not incentives to take inappropriate or excessive risks, including: combining fixed and variable compensation, with appropriate levels of equity compensation, and mandating equity ownership requirements for officers and directors which are routinely reviewed. Based upon the Committee’s review, we do not believe that the Company’s executive or non-executive compensation structure is reasonably likely to have a material adverse effect on the Company.

 

2015 Review of Compensation Program and Compensation of Named Executive Officers

 

The Compensation Committee from time to time undertakes a comprehensive review of our compensation program which includes competitive market data, pay grades, share ownership guidelines and short-term and long-term incentives. Most recently, this review of the program and of compensation of executive officers was completed in 2015, in conjunction with a review of compensation of our non-executive directors. Our last third-party review was completed in 2014, when our Compensation Committee retained the services of Roger Gurr & Associates (“RG&A”) to review the compensation of our executive officers. Certain recommendations by RG&A were implemented in 2015 as a part of the review and revision of the compensation program by the Compensation Committee.

 

The 2015 compensation program review, including the implementation of recommendations from earlier studies, began with the development of our peer group, to be utilized for many purposes. Earlier peer groups have been reviewed and, as necessary revised, on an annual basis by management and the Compensation Committee and Board of Directors. With our first full year of production and product sales completed in 2014, a comprehensive review of peers as well as the compensation program had been recommended. As others before it, the newly-revised peer group will be used within our corporate objectives as a base from which we can compare our performance to other companies in the group for such things as total shareholder return. It is also used as a comparison group when we evaluate our directors and officer’s compensation, with additional review of companies outside the peer group but with similar executive positions where the peer group does not have sufficient depth of data.  Generally, we review and/or update our peer group annually after our annual shareholder meeting is held. Once updated, the Compensation Committee reviews the peer group and recommends it, with any changes or additions, to the Board for approval. We subscribe to Equilar’s compensation services. Equilar’s tools assist us in the creation and evaluation of peer groups and in the evaluation of our directors and officers compensation.

 

The peer group approved in 2015 includes other uranium producers and explorers, as well as other mining companies (e.g., coal) with similar revenues, total assets and market capital, with a focus on U.S. based companies.  Generally, our ranking is in the middle of the peer group in terms of revenues, total assets and market capital. Also, we have 13 of the 19 companies in our peer group in common with our peer’s peer groups. In other words, the companies in our peer group have also chosen many of the same companies to be in their peer groups. Our 2015 peer group, as approved by the Board of Directors is as follows:

 

 

As a result of our compensation program review, and with consideration of the programs of our peers, the weighting of STIP awards between performance to corporate objectives and personal objectives was rebalanced. Beginning in 2015, the weighting rebalances and places more weight on the executive officers’ personal objectives than in past years. These personal objectives are typically aligned with the objectives of the department for which the executive officer is responsible and are designed to help the Company achieve its overall objectives. Also, the earlier-planned structure of Lost Creek objectives being a subset of corporate objectives was modified to a system in which the categories of the overall corporate objectives relates to Total Company, Lost Creek, Pathfinder and Corporate Services on a weighted basis as set forth below.  For 2015, we retained as the most significant weightings Total Company (30%) and Lost Creek (35%).

 

2015 Performance on Objectives and Relationship to STIP Awards

 

We use corporate objectives to broadly measure our total corporate performance.  Our corporate objectives are grouped into Key Performance Areas, which in turn include a number of compensable Key Performance Indicators. For 2015, our corporate objectives are divided into four Key Performance Areas (“KPA”) that reflect our core reporting segments.  The following table shows the KPAs and their respective weights.

 

 

Weightings for each KPA are set based on the reporting segment’s objectives in relation to the overall corporate strategy of the Company. Health, safety and environmental performance objectives are embedded within each KPA. Each KPA includes a number of compensable targets called Key Performance Indicators (“KPI”). KPIs are a combination of financial and non-financial measures that are directly aligned with the reporting segment’s strategy. Each KPI is aimed at driving annual performance within the KPA.

 

KPIs are the result of a cooperative effort among the reporting segments, executives and Board of Directors to establish objectives that align with our corporate strategy as charted by the Board of Directors. Reporting segment objectives that are considered to be most critical to corporate performance are selected to be KPIs. Selected KPIs, weightings and performance levels are presented to the Compensation Committee, and subsequently to the Board of Directors, for approval.

 

Each KPI has three performance levels (Threshold, Target and Maximum) that are used to measure results. Threshold, Target and Maximum performance-level values are based on quantifiable measures when possible, where typically the Threshold value is 80% of Target and the Maximum value is 120% of Target. When quantifiable measures are not possible, or more than one measure is used, we use a seven point scale to measure results as follows:

 

1 - Unsatisfactory

2 - Below Expectations

3 - Met Expectations Low

4 - Met Expectations

5 - Met Expectations High

6 - Exceeded Expectations

7 - Outstanding

 

The Target level of performance for each KPI is set at an aggressive level that represents a 'reasonable stretch'. For example, when using our seven-point scale to measure results, a score of 5 (Met Expectations High) is used as the Target. Achieving the Target would result in a 100% payout of the Weighted KPI.

 

The Threshold level of performance is the minimum level of performance that must be met before being eligible for any payout on that KPI. The Threshold performance level is typically set at 80% of Target, or a score of 3 (Met Expectations Low) when using our seven-point scale. There is no payout if the Threshold is not met. Achieving the Threshold would result in a 50% payout of the

Weighted KPI. The Maximum level of performance for each KPI is typically set at 120% of Target, or a score of 7 (Outstanding) when using our seven-point scale. Achieving or exceeding the Maximum would result in a 150% payout of the Weighted KPI.

 

A straight-line interpolation is used to calculate payouts when the result is between the Threshold (50%) and Maximum (150%) targets.  The Weighted Payout is the result of multiplying (a) the Weighted KPI times (b) the Result Payout.

 

Together with the Compensation Committee, management regularly monitors the corporate results as they relate to the KPIs to determine if the Company is on-track to meet its objectives. After year end, a final review of the corporate results is overseen by the Compensation Committee and reported to the Board of Directors. In February 2016, the Board of Directors reviewed corporate performance based upon the selected KPI objectives established for 2015. Our corporate performance was evaluated as having generally met the performance objective targets, and exceeded the targets in several categories and specific objectives.

 

Results of performance based upon these 2015 corporate objectives, as approved by the Compensation Committee and Board of Directors, are as set forth in the tables below and explained in the text which follows each key performance area of the corporate objectives.

 

 

Total Company: Our 2015 corporate “Total Company” objectives focused on growing our organization in a safe and measured manner. Namely, with an emphasis on safety in all that we do, reaching our objectives within budget and attaining free cash flow, returning value to our shareholders and continuing with our mid- and long-term contracting became our overarching plan. Additionally, with our first full year of uranium production complete, we focused on the organic growth of our mineral resources to replace what we are producing, through limited exploration program and development of Mine Unit 2.

 

While we improved our overall safety record at all sites, we continued to experience a higher reportable incidence (TRIR in table, above) than we have targeted (namely, zero). There were no significant lost-time injuries at any site (LTIR in table, above), and our physical safety record improved significantly second half of the year over first half of the year, in addition to being substantially better than 2014.  Following two NRC inspections and two Wyoming Department of Environmental Quality inspections, we received four violations from the NRC and none from the WDEQ. Again, this result was not in line with our overall target to operate with no violations, but two of the cited violations date back to operating conditions in the earliest days of our operations at Lost Creek (both, in the first eight months of operations 2013-2014), and all four at the lowest level of seriousness. All have been remediated or otherwise resolved, though the records are unlikely to be closed until the next inspections.

 

Our free cash flow was on-target when we reviewed mid-year and third-quarter results of our corporate objectives. Fourth quarter sales resulted in lesser revenues, as we had a lower priced contract sale and lower priced spot sales for the period. As a result, our free cash flow in the fourth quarter was neutral and we fell just short of the threshold target. Our results on Total Shareholder Return (“TSR”), however, continue to be strong and above median among our peer group percent rank (1-year 87.6%; 3-year 88.7%), as targeted by our objectives. See also discussion under heading “Total Shareholder Return,” below. 

 

Mineral resource growth stood out among our accomplishments in 2015. Seeking to establish a replacement rate for production achieved, our geology staff undertook, first, to examine the perceived over-production at Lost Creek, based upon our earlier stated mineral resources. Utilizing information and data acquired through two years of operations, the analyses resulted in a lowering of our grade-thickness cut-off to reconcile the estimates with our production figures. This lowered GT cut-off was then applied to all identified mineral resources on the greater Lost Creek Property. Additionally, we conducted a limited (150-hole) exploration program during the year, which yielded identification of 139,000 pounds eU3O8 Measured and Indicated resources and 498,000 pounds eU3O8 Inferred resources. The analyses have been revised to evaluate the impact of additional identified resources. Total future life of mine production is modeled to be 13.8 million pounds and with production operations ending in 2031. This represents a nine year life of mine extension from the forecast contained in the previous preliminary economic assessment (December 2013).

 

Lost Creek: Our 2015 corporate objectives continued to focus on Lost Creek, with a weighting of 35% associated with the objectives directly related to Lost Creek including achieving steady state operations, while improving safety standards.  In 2015, we strove to establish trends in production rates, costs and sales pricing, as well as the further growth in our mineral resource, as discussed above in Total Company Objectives. In nearly all categories, we were able to achieve and maintain such trends: After nearly two and a half years of production, we have been able to maintain our production goals while operating only the first 12 header houses in Mine Unit 1. We have achieved a routine and measurable increase, year-over-year, of pounds captured, drummed and shipped, with figures which have climbed from the original 190,000 pounds captured for four months in 2013, to 596,000 in 2014, to 784,000 pounds U₃O₈ captured in 2015. Meanwhile, our production cash costs per pound sold continue to trend lower, having initially been $21.98/lb. at the close of 2013, to $19.73/lb. for 2014 production and $16.27/lb. for 2015 production. These costs do not include severance taxes or ad valorem taxes. All-in total costs continue to decline quarter-over-quarter as at year end 2015. Additionally, the headgrade from our first mine unit remained at more than twice the originally projected rates at the end of 2015.

 

As discussed above, we completed two updates to our mineral resource estimates at Lost Creek, and related Technical Reports, with a net increase to the Measured and Indicated categories of resource of 4.6 million pounds of eU₃O₈ and 1.7 million pounds eU₃O₈ in the Inferred category of resources. Construction and development of Mine Unit 1 wellfield is complete, with all originally-planned wells completed by mid-year 2015, and header house 1-13 scheduled to be brought online in Q2 2016. Development drilling in Mine Unit 2 is ongoing, with drilling progressing to casing, completion, and mechanical testing.  As we did in 2014, we met our production objectives in 2015, although we did not quite meet our targeted production objective of 840,000 pounds drummed. That objective was established in 2014 in anticipation of improving uranium spot prices. In 2015, the Company intentionally reduced production output levels to meet contractual commitments only. The reduction was in response to the continued depressed spot price market.

 

Finally, our community relations based from Lost Creek, as well as our relationships with our vendors and service providers, remain strong. Our turnover rates of site staff remain higher than targeted, but were reduced from 2014 as our “steady state” status was true of more than our production rates. 

 

 

Pathfinder:  Our 2015 performance in respect of our Pathfinder Mines assets was again strong. Our safety record for Pathfinder, including Shirley Basin Project, was perfect: no incidents. This included activities with staff on site conducting baseline environmental studies, assisting with fencing of lands, and working with contractors. We issued the Shirley Basin Preliminary Economic Assessment on time in January 2015, accomplishing our stated objectives of establishing an NI 43-101 compliant resource for the Shirley Basin Project (June 2014),  and initiating mine planning activities through the development of the PEA. During 2015, we completed all baseline environmental studies, including some of which were conducted by Company staff to conserve on budgeted cash funds, and completed our first application in December, submitting our application for permit to mine to the WDEQ.  Preparation of the application for a  source material license is well underway. Also during 2015, we made diligent efforts to engage with our landowning neighbors in Shirley Basin, establishing good working relationships, and conducting an instructive tour of Lost Creek. We also created working agreements for the fencing of a variety of neighboring lands – efforts which had been on hold for years prior to our acquisition of Pathfinder in 2013. Our Pathfinder advances were made largely under budget. We operated the byproduct disposal facility with existing contracted parties making deliveries and adding one contracting/disposal party to our business.

 

 

Corporate Services:  Again, with a focus on safety at all of our sites, our support services groups performed well during 2015, although there was one reportable incident in our Casper office. Risk management remained a priority with our finance, compliance and legal groups, with reporting and other obligations completed in a timely and professional manner. We experienced no significant legal or compliance issue during the year. Our internal and external reporting remains of high quality, and finance continues to examine new priorities for the evolution of our internal reporting. The finance department was successful in forecasting and

managing our cash resources, through contracted and spot product sales, and with additional use of the RMB debt facility. The latter included an amendment in Q3 2015, to permit for the repayment of the revolver in equal installments to year-end 2016, with no associated fees or costs. As well, regulatory staff continues to assist in this endeavor through ongoing reviews of bonds identifying possible reductions and obtaining decreases in certain bonded amounts. These efforts will undoubtedly tie to our ongoing efforts to strategically and successfully position the Company in these challenging market times. Finally, our Chief Financial Officer assisted with the review of our compensation and benefit programs, including working with the Compensation Committee throughout the compensation review and implementation of the new executive STIP program. See discussion, below, under the heading “2015 Review of Compensation Program and Compensation of Named Executive Officers.”

 

Overall, our performance-to-objectives in 2015 result was 91.4% of the targeted 100%. All areas showed positive or acceptable results with the exception of the free cash flow and production objectives discussed above. We are particularly pleased to report overall improvements in health and safety for the year.    

 

Total Shareholder Return

 

The total shareholder return (“TSR”) of the Company compared with the returns of our peer comparator group is shown on a one-year through five-year basis in the table below. The long-term TSR of Ur-Energy has been well above the top quartile, with a ranking in the top five of the comparator companies. Notwithstanding this favorable comparison, the Compensation Committee and Board have chosen to continue the focus on achieving sustained, even positive cash flow before providing substantially higher cash bonus awards (STIPs).  

 

 

 

 

 

Executive Compensation – Related Fees

The Compensation Committee did not utilize any direct third-party consulting services during 2015. Management and the Compensation Committee continue to utilize the Company’s subscription to Equilar Services.

 

2016 Compensation Program and Outlook

 

While the compensation program will remain largely the same in 2016 for all employees and executive officers, recommendations from the compensation studies of the last two years, supported by the Compensation Committee and the Board of Directors, will continue to be reviewed and implemented by the Company to adjust the pay mix for executive management and to refine the executive STIP plan to include an even more robust performance-based compensation plan and evaluation process. 

 

The average spot price per pound of U3O8, as reported by Ux Consulting Company, LLC and TradeTech, LLC, for the week of March 28, 2016 was $[ • ]. As a result of the continuing low spot price environment, we will once again maintain production at levels that will be consistent with our contractual sales obligations, which are 662,000 pounds at an average price of $47.58 per pound in 2016. Our current production target for 2016 is to maintain an average production rate such that our annual production is between 650,000 and 750,000 pounds.  Excess production, beyond what is needed for our contractual commitments, will be used to build inventory, which may be utilized to complete discretionary spot sales transactions on an as-needed basis if market conditions justify it. In addition to our production plans for Lost Creek, and advancing the additional permitting applications and amendments to provide for future production of identified resources in the KM horizon and the LC East Project, we will continue to advance our efforts to obtain all required operational licenses and permits for Shirley Basin project.

 

Our “total company” objectives for 2016 concentrate on operating safely in an environmentally-sound fashion, focusing on the health and well-being of our employees, while returning value to our shareholders through the development of additional and stronger relationships with utility customers through additional long-term supply contracts. Additionally, all executive officers have a separate subset of objectives and key performance indicators related to their respective departments and to Lost Creek, its operational success and expansion potential.

 

 

 

Additional Compensation Practices

 

As discussed above, we maintain a compensation program in which both performance and compensation are routinely evaluated.  Further, we maintain a program in which (a) pay for performance is supported by a significant percentage of executive pay being at risk (50% of executive directors; 45% of other executive officers); (b) motivating executive officers to create shareholder value by using total shareholder return a part of the Total Company objectives; (c)  performance by each and every employee on personal objectives and corporate objectives is evaluated, with executive officers’ STIP bonus awards being more closely aligned to performance on corporate objectives based upon the greater opportunity, and responsibility, to shape corporate performance (hourly and non-managerial staff bonuses are more heavily weighted to their personal objectives); (d)  certain defined thresholds must be reached as a minimum level of performance before eligibility for payout on any Key Performance Indicator or objective and, by contrast, STIP bonuses are effectively capped, as the maximum level of performance for each Key Performance Indicator is typically set at 120% (or, a score of 7 on our 1-7 scale); (e) reasonable salaries and overall compensation packages are based upon routinely updated compensation surveys – including on a time-to-time basis by a third-party independent consultant – and, ongoing review of peer comparators’ practices; (f) compliance with executive stock ownership guidelines is routinely monitored; (g) we have no multi-year contracts with executive employees, and our employment agreements with executive officers protect specialized and proprietary information, contacts and personnel obtained while employed with the Company; (h) we do not permit repricing of stock options; and (i) executives are not permitted to hedge their beneficially-held Company’s shares. 

 

Share Ownership Guidelines

 

All of our executive officers and directors are encouraged to have a significant long-term financial interest in our Company. To encourage alignment of the interests of the executive officers and directors with those of our shareholders, in 2009, the Board of Directors mandated that each executive officer of Ur-Energy, whether currently appointed or appointed in the future, is required to invest an amount equal to one times the executive officer’s annual base salary in shares or securities exercisable into shares on or before the later of (i) December 31, 2013, or (ii) the fifth anniversary of the executive officer’s appointment. The investment amount is calculated using the amount of the base salary of the executive officer at the later of (i) January 1, 2009, or (ii) the date of executive officer’s appointment. The share ownership requirements are also applicable to the non-executive directors who are required to invest an amount equal to three times their annual retainer.  See further discussion under the heading “Share Ownership Guidelines for Directors” below. Reviewed most recently in December 2015, all executive officers meet the Share Ownership Guidelines or are on-track to meet the Share Ownership Guidelines within the prescribed timeframes.

 

Anti-Hedging Policy; Pledging

 

We have a formal anti-hedging policy which prohibits our executive officers and directors from engaging in any hedging or similar monetization transactions with respect to the Company’s securities, including, but not limited to, through the use of financial instruments such as exchange funds, prepaid variable forwards, equity swaps, puts, calls, collars, forwards and other derivative instruments, or through the establishment of a short position in the Company’s securities.

 

The Board has not formally adopted a policy restricting the pledging of its Common Shares held by executive officers or directors as, historically, there has been little or no pledging of the Company’s shares by our executive officers or directors. Currently, only one insider has pledged Common Shares; those pledged Common Shares represent approximately one percent of our issued and outstanding shares.  See Notes to Security Ownership Table, above.

 

Clawback

 

The Company does not have a formal clawback policy pursuant to which it is entitled to claw back amounts paid to executive officers in the event of a future restatement, but it has informed its executive officers that the Company reserves the right to claw back awards to the extent required to comply with future rules implemented under Section 954 of the Dodd-Frank Act. 

 

Tax and Accounting Considerations

 

The Compensation Committee considers tax and accounting rules and regulations when structuring our executive compensation program. Our plans and programs are designed to comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), which regulates deferred compensation and provides for potentially early taxation and a 20% additional tax on non-compliant arrangements. The Compensation Committee also monitors whether our executive compensation may be subject to the $1,000,000 per year deduction limitation set forth under Section 162(m) of the Code, although to date the compensation of our Named Executive Officers has been well under the $1,000,000 per year limit. Equity awards are accounted for under FASB ASC Topic 718, which requires the recognition of expense for the fair value of such awards, and the Compensation Committee considers the accounting expense of such awards when authorizing stock option and RSU grants.

 

 

EXECUTIVE COMPENSATION

 

Say on Pay Advisory Vote in 2015

In 2015, our shareholders approved our compensation plan for our Named Executive Officers by a vote in favor or 69%. Our initial shareholder say on pay advisory vote in 2014 was 92% in favor, based upon substantively the same compensation program and compensation of our Named Executive Officers. It is noteworthy that amendments to our RSU Plan were approved by our shareholders last year with a vote of 93% in favor. See discussion “Stock Options and RSUs.” Based on our discussions with certain shareholders, we believe that the decreased approval rate for our say on pay vote was due, at least in part, to a concern that our overall employee composition and related compensation was unnecessarily high.  Prior to those discussions, we had already begun a review of our human resources in light of current operations and needs and had instituted a more streamlined process than

previously in place. We successfully reduced our overall employee count from a combined Ur-Energy USA (Casper/Littleton) and Lost Creek total of 90 employees at year-end 2013 to 84 employees year-end 2014, to 79 at year-end 2015. 

The Compensation Committee continues to believe the first two years’ results are an indication that a significant number of our shareholders are satisfied with our executive compensation policies and decisions, and that our executive compensation program effectively aligns the interests of our Named Executive Officers with the interests of our shareholders. As a part of the continuing refinement of our objectives setting, compensation program and, specifically, compensation of our Named Executive Officers,  we did not make significant changes to the compensation of our executives, instead undertaking to make certain refinements to the executive “pay mix,” STIP program, and as discussed above. 

Based upon the first advisory vote by our shareholders, in 2014, concerning “say when on pay,” our Board adopted an annual advisory vote for “say on pay,” until our next say when on pay vote in 2020. As a result, our next say on pay vote will be in 2017.

Summary Compensation Table

The following table sets forth the summary information concerning compensation earned during the financial years ended December 31, 2015, 2014 and 2013 by our Chief Executive Officer, Chief Financial Officer and the three highest paid executive officers, who were serving as executive officers at December 31, 2015 (collectively, the “Named Executive Officers”).

 

 

(1)  Canadian dollar figures have been converted to U.S. dollar figures at the average exchange rate for 2015 of C$1.00 = US$0.7835725 as quoted by Bank of Canada on its website www.bankofcanada.com and for 2014 of C$1.00 = US$0.90581, and for 2013 of C$1.00 = US$0.97104 as quoted by OANDA Corporation on its website www.oanda.com.    

(2) Each of the executive officers (Messrs. Klenda, Smith, Hatten, Cash and Bonner and Ms. Goplerud) has an employment agreement with the Company, as has been amended from time to time.  See discussion under heading “Employment Agreements with Executive Officers” above and “Potential Payments Upon Termination or Change of Control – Employment Agreements with our Named Executive Officers” below.

(3) Annual incentive plan awards were earned in the years shown and are typically paid in the first half of the following year.

(4) The issuance of share-based and option-based awards in conjunction with the LTIP are shown in the year they were issued.

(5)  On March 11, 2015, each of the executive officers received a grant of RSUs in lieu of a cash STIP award for performance during 2014:  Mr. Klenda received 40,966 RSUs Mr. Smith received 37,900 RSUs, Ms. Goplerud received 34,074 RSUs, Mr. Hatten received 25,850 RSUs, and Mr. Cash received 25,158 RSUs.

(6)  For additional information regarding the fair value of stock options and RSUs, as at December 31, 2015 (using the Company’s TSX closing stock price of C$0.89 on the last trading day of 2015), see Annual Report on Form 10-K, Note 15 to Financial Statements, which has been filed with the U.S. Securities and Exchange Commission at http://www.sec.gov/edgar.shtml and with Canadian securities regulators, and is available at www.sedar.com.

(7)  Mr. Heili served as our President and Chief Executive Officer until May 1, 2015, when his employment agreement expired and employment terminated concurrent with the completion of the term. Mr. Heili was paid $275,000 in severance. In lieu of a cash STIP award, Mr. Heili received a grant of 40,966 RSUs on March 11, 2015.

(8) Reflects the Company’s matching contribution toward the executive’s 401(k) retirement account.

 

EQUITY INCENTIVE PLANS

The following table sets forth certain summary information concerning our equity compensation plans as at December 31, 2015. Directors, officers, employees, and consultants are eligible to participate in the Stock Option Plan. Directors and employees, including executive officers, are eligible to participate in the RSU Plan. 

 

 

 

(1)Our shareholders have approved both the Ur-Energy Inc. Amended and Restated Stock Option Plan 2005, as amended, and the Ur-Energy Inc. Amended Restricted Share Unit Plan, as amended.

(2)The exercise price represents the weighted exercise price of the 9,974,407 outstanding stock options.

(3)The figure represents 421,381 Common Shares remaining available for issuance under the Ur-Energy Inc. Amended and Restated Stock Option Plan and 1,527,102 Common Shares available under the Ur-Energy Amended Restricted Share Unit Plan.

(4)  The warrants included represent only those which form a portion of compensation for certain consultants and our lender.

 

Stock Options and RSUs

We adopted the Ur-Energy Inc. Amended and Restated Stock Option Plan in order to advance our interests by providing directors, officers, employees and consultants with a financial incentive tied to Ur-Energy’s long-term financial performance and continued service to or employment with us. Subsequently, we adopted the Ur-Energy Inc. Amended Restricted Share Unit Plan (the “RSU Plan”) as part of our overall stock-based compensation plan. The RSU Plan allows participants to earn Common Shares over time, rather than options that give participants the right to purchase shares at a set price.

A total of up to 10% of Ur-Energy’s issued and outstanding Common Shares may be reserved for issuance pursuant to the Option Plan and the RSU Plan, in the aggregate. As of March 31, 2016, we have listed and reserved 12,671,055 Common Shares in the aggregate of which 10,379,168 Common Shares were notionally reserved under the Option Plan, and 2,291,887 Common Shares were notionally reserved under the RSU Plan. We have historically allocated, and expect going forward will allocate, approximately 80% of those reserved shares to the Option Plan and 20% to the RSU Plan. Of those currently reserved, 8,760,439 options for Common Shares have been granted and are outstanding, as at March 31, 2016, or approximately 6.1% of our issued and outstanding Common Shares. There are 738,817 RSUs that have been granted and are outstanding as of March 31, 2016, or approximately 0.5% of our issued and outstanding Common Shares. The number of shares reserved is subject to adjustment if the Common Shares are subdivided, consolidated, converted or reclassified or the number of Common Shares varies as a result of a stock dividend or an increase or a reduction in our share capital.

Option Plan

Under the Option Plan, options may be granted to all of our directors, executive officers, eligible employees and consultants. The maximum number of Common Shares that may be reserved for issuance to any one person under the Option Plan is five percent of the number of Common Shares outstanding at the time of reservation.  The options are personal and non-assignable.  The exercise price for Common Shares subject to an option is determined by the Board of Directors at the time of grant and may not be less than the market price of the Common Shares at the time the option is granted. Market price at any date in respect of the Common Shares means the closing price of the Common Shares on the TSX (or, if the Common Shares are not then listed and posted for trading on the TSX, then on the recognized stock exchange on which such Common Shares are listed or posted or, if such Common Shares are not so listed on any recognized stock exchange, then on the over-the-counter market on which they are traded or posted as selected for such purpose by the Compensation Committee or, in accordance with Section 5.5 of the Option Plan) on the immediately preceding trading day. Options are generally exercisable as to 10% immediately on the date of grant; with an additional 22% becoming exercisable four and one-half months after the date of grant; 22% becoming exercisable nine months after the date of grant; 22% thirteen and one-half months after the date of grant; and, the balance of 24% exercisable eighteen months after the date of grant, subject to the right of the Board of Directors to determine at the time of a particular grant that such options will become exercisable on different dates. An option may be for a term of up to five years.

Options granted under the Option Plan are subject to early termination under certain circumstances, including (i) one year after the death of the option holder, (ii) three months after the option holder’s resignation or dismissal without cause as an employee or consultant, or (iii) immediately upon the option holder’s dismissal for cause as an employee. In each case, only options vested at the time of the event which gave rise to such early termination may be exercised by the option holder during such period. The Option Plan also provides that upon a change of control all options under the Option Plan vest immediately and are immediately exercisable.

The Option Plan and the terms of any outstanding option may be amended at any time by the Board of Directors subject to any required regulatory or shareholder approvals, provided that where such an amendment would prejudice the rights of an option holder under any outstanding option, the consent of the option holder is required to be obtained. Amendments requiring shareholder approval are those amendments set forth in the TSX Company Manual.  Amendments that do not require shareholder approval are ‘housekeeping” amendments such as amendments to the Option Plan to comply with regulatory requirements, amendments related to the administration of the Option Plan and to change the eligibility requirements under the Option Plan and terms and conditions on which the options may be granted. The Option Plan may be suspended, terminated or discontinued in the sole discretion of the Board of Directors.

The Option Plan was most recently approved by shareholders, with an approval of 92%, on April 29, 2014.

RSU Plan

The RSU Plan was adopted by the Board of Directors on May 7, 2010 and was approved in its entirety most recently by our shareholders on April 25, 2013 with an approval of 93%.  Certain amendments to the RSU Plan were approved and ratified by our shareholders May 28, 2015, with an approval of 94%. The amendments did not include any increase in the percentage number of shares available for issuance under the RSU Plan. The full text of the RSU Plan is attached as Schedule A to this Circular. As discussed further below, the TSX rules provide that all eligible insiders in order to participate in the RSU Plan may not vote on the approval of the renewal of the RSU Plan. Accordingly, the resolution must be passed by a majority of votes, excluding [4,770,587] Common Shares held by certain insiders of the Company and their affiliates.

The RSU Plan is a plan which includes directors and employees, including executive officers, of Ur-Energy as possible eligible participants. As of March 31, 2016, there are approximately [35] employees and five non-executive directors who would be eligible to participate in the RSU Plan. The Board of Directors has appointed the Compensation Committee to determine which persons are entitled to participate in the RSU Plan and the number of RSUs to be awarded to each participant. The RSU Plan does not limit the participation of any specific eligible participant including insiders. RSUs awarded to participants are credited to a notional account that is established on their behalf and maintained in accordance with the RSU Plan. Each RSU awarded conditionally entitles the participant to the delivery of one Common Share (or cash in lieu of such share at the Compensation Committee’s discretion) upon attainment of the RSU vesting period. Prior to the amendments, RSUs awarded to participants vest in accordance with the terms of the RSU Plan over a two year period: 50% vest on the first anniversary and 50% vest on the second anniversary of the date of grant. Subsequent to the 2015 amendments, grants of RSUs vest 100% on the two-year anniversary of the date of the grant. As at March 31, 2016, the closing price of our Common Shares on the NYSE MKT was $[ • ] and on the TSX was C$[ • ].  

The RSU Plan permits us to either redeem RSUs for cash or issue Common Shares from treasury in order to satisfy all or any portion of a vested RSU award. The RSUs will be redeemed for an amount equal to fair market value which means the closing price of the Common Shares on the TSX on the business day immediately prior to the redemption date, or if the shares are not listed on the TSX, then on such other stock exchange or quotation system as may be selected by the Compensation Committee, provided that, if the Common Shares are not listed or quoted on any other stock exchange or quotation system, then the fair market value will be the value determined by the Compensation Committee in its sole discretion acting in good faith; in the event of a change of control, as

defined in the RSU Plan, we are required to redeem 100% of the RSUs granted to participants; and in the event of an involuntary termination of an employee, other than for cause, or a director who is not re-elected we are required to redeem the RSUs for cash. Rights respecting RSU shall not be transferable or assignable other than by will.

 

The Board may from time to time amend or suspend this RSU Plan and may at any time terminate the RSU Plan. No such amendment, suspension or termination shall adversely affect the rights of any eligible person with respect to outstanding and unredeemed RSUs credited to that person without consent. Amendments requiring shareholder approval are those amendments set forth in the TSX Company Manual. Amendments that do not require shareholder approval are ‘housekeeping” amendments such as amendments to the RSU Plan to comply with regulatory requirements, amendments related to the administration of the RSU Plan and to change the eligibility requirements under the RSU Plan and terms and conditions on which the RSUs may be granted.

 

RSUs are generally treated as ordinary compensation income as and when Common Shares are issued to the participant upon vesting or settlement of the award. If the participant is an employee, this income is subject to withholding for income and employment tax purposes. The Company is generally entitled to an income tax deduction equal to the amount or ordinary income recognized by the participant, subject to possible limitations imposed by the Code, including Section 162(m). Please note that the foregoing description is based upon U.S. federal income tax laws in effect on the date of this Circular and does not purport to be complete, and does not discuss state, local or non-U.S. tax consequences.

 

 

GRANTS OF PLAN-BASED AWARDS TO NAMED EXECUTIVE OFFICERS 

The following table sets forth information concerning option-based and share-based awards granted to each of the Named Executive Officers during the year ended December 31, 2015.

 

 

 

(1) Grants made pursuant to the Ur-Energy Inc. Amended Restricted Share Unit Plan. RSUs awarded to participants prior to the 2015 amendments to the RSU Plan vest in accordance with the terms of the earlier form of RSU Plan over a two year period: 50%

vest on the first anniversary and 50% vest on the second anniversary of the date of grant. RSUs awarded to participants following the approval and ratification of the 2015  amendments to the RSU Plan,  will be redeemed 100% on the second anniversary of the date of grant.

(2) Grants made pursuant to the Ur-Energy Inc. Amended and Restated Stock Option Plan 2005, as amended. Options are exercisable as to 10% immediately on the date of grant; with an additional 22% becoming exercisable four and one-half months after the date of grant; 22% becoming exercisable nine months after the date of grant; 22% thirteen and one-half months after the date of grant; and, the balance of 24% exercisable eighteen months after the date of grant.

 

Outstanding Equity Awards at December 31, 2015

The following table sets forth information concerning the value vested or earned in respect of incentive plan awards during the year ended December 31, 2015 by each of the Named Executive Officers: