About Energy Fuels
Energy Fuels is a U.S. producer of several critical minerals. Energy Fuels is the largest uranium (U3O8) producer in the United States. They produce the most advanced rare earth element (REE) product in the U.S. today (high-purity, partially-separated mixed REE carbonate). Energy Fuels produces vanadium (V2O5) when market conditions warrant, and the company is making strides in creating a new U.S. supply chain for certain medical isotopes needed for emerging cancer therapies. Energy Fuels also recycles certain materials for the recovery of uranium, vanadium, and potentially medical isotopes.
Energy Fuels has more uranium production capacity and experience than any other U.S. company, along with a growing portfolio of long-term uranium sales contracts with U.S. nuclear utilities. The company expects to resume production at one or more of its uranium mines and facilities in 2023 or 2024 to fulfil these contracts.
On REE’s, Energy Fuels is moving more quickly than any other U.S. company to restore this critical supply chain, and it expects to be in production of high-value separated REE oxides by the end of 2023 or early 2024.
Summary
Energy Fuels’ core competency is receiving, handing, managing, and producing products from naturally radioactive ores and raw materials. This is the common thread connecting uranium, rare earths, vanadium, medical isotopes, and recycling.
Energy Fuels is a proven U.S. producer of uranium with an exceptional track record of production, sales and deliveries. Uranium markets have improved in recent years to enable the company to resume production and sales, as early as 2023.
Surging demand for electric vehicles (EVs) is creating surging demand for certain REE’s, including neodymium (Nd), praseodymium (Pr), terbium(Tb), and dysprosium (Dy), which are used in powerful permanent magnets to power EVs.The best minerals with high concentrations of these magnetic REE’s (including a mineral called “monazite) are also naturally radioactive, due to the presence of uranium, thorium, and other radionuclides. Energy Fuels has the current licenses and capabilities to process these minerals and produce advanced REE materials.
Energy Fuels is currently the largest producer of uranium in the U.S., and the company expects to resume production, reaching approximately 2 million pounds of U3O8 per year in the next 2-3 years. At a sales price of $65/lb., that is $130 million of annual revenue.
By the end of 2023, the company expects to have the installed capacity to produce 1,000 metric tons (MT) of NdPr oxide per year. The market price for NdPr oxide has ranged between about $75,000 to $110,000 per MT. By 2026 and 2027, the company expects to have the capacity to process 30,000 MT (or more) of monazite (containing 15,000 MT total REE oxides, including about 3,000MT of NdPr, 200 MT of Dy and 100 MT of Tb oxides). At current REE prices, one MT of monazite contains recoverable REE’s (and uranium) worth about $20,000, which would total $600 million of revenue at capacity, subject to receipt of sufficient monazite feed and other factors. Vanadium, recycling and medical isotopes have the potential to make material contributions to the company’s bottom line as well.
Thesis
Energy Fuels appears to sit on the cusp of several “game-changing” opportunities, due to its existing licenses, facilities and capabilities.
Uranium markets have been very depressed for the past 10+ years. However, prices have risen significantly recently enabling the company to begin signing long-term supply agreements with U.S. nuclear utilities at supportive pricing. So far, the company has booked up to 4.1 million pounds of U3O8 sales through 2030, and they are in discussions to add to that figure.
However, REE’s could be the real opportunity. Energy Fuels only became aware of their potential role in REE’s in 2020. Since then, the company has moved aggressively to the point that they are producing commercial quantities of an advanced REE material today. And, the company is quickly moving to install REE separation infrastructure at one of its facilities (the White Mesa Mill in Utah). By the end of 2023, or early 2024, the company expects to have the capacity to produce about 1,000 MT of NdPr oxide per year. By 2026 and 2027, the Company expects to complete licensing, design, and construction of larger scale NdPr production, along with Dy and Tb separation and a dedicated monazite crack-and-leach circuit and other infrastructure, for an investment of approximately $250 million.However, this investment should be well justified, due to the magnitude of value that can be unleashed ($600 million of revenue per year at today’s prices in a rapidly growing market, with attractive margins expected).
Strong balance sheet; No debt; Access to capital
At the end of 2022, Energy Fuels had $117 million of working capital, including about 850,000 pounds of U3O8 and 950,000 pounds of V2O5 in inventory. At today’s commodity prices, this inventory is worth about $25 million more than what is reflected on the company’s balance sheet. Several additional items occurred in early 2023 that are also not reflected in their year-end numbers. In January 2023, the Company sold 300,000 pounds of U3O8 to the U.S. government for $61.47 per pound, and replaced that inventory on its balance sheet with open market purchases of U.S. origin U3O8 for about $50.00 per pound. Energy Fuels also closed to sale of one of its non-core uranium projects (Alta Mesa) in February 2023 for total consideration of $120 million ($60 million cash at closing + a $60 million2-year convertible note, bearing interest at 8% per annum). The company also acquired a large land position in Brazil for $27 million cash, which also closed in February 2023, with monazite mineralization expected to provide 3,000– 10,000 tonnes of monazite per year as very low cost feed for the company’s emerging REE business.
To get to 2 million pounds of production per year, the Company believes it has the balance sheet to mostly self-fund the approximately $50 - $60 million of development and upfront capital needed to get their standby projects back into production.
To install the“Phase 1” NdPr separation capabilities, expected to be operational later in 2023 or early 2024, the company expects to spend approximately $20 - $25million. “Phase 2” (large scale NdPr) and “Phase 3” (Dy and Tb) separation is expected to require approximately $250 million. This could be raised through equity, debt, or even U.S. government support.
The company also utilises an “at-the-market” (ATM) program to finance operations and raise capital from time to time when equity market conditions warrant.
Summary of Main Projects
The White Mesa Mill (Utah): This is Energy Fuels’ “flagship” asset. Located in southeast Utah, it is the largest uranium production facility in the U.S. (8+ million pounds of annual capacity), the only conventional uranium mill in the U.S., and the location where the company produces (or will produce) REEs, vanadium, and medical isotopes.
Pinyon Plain (Arizona): This is a fully licensed and substantially constructed high-grade conventional uranium mine located in northern Arizona. It is likely the lowest cost uranium mine in the U.S. Ore will be shipped to the White Mesa Mill for processing into U3O8. The company is currently preparing this mine for production.
La Sal(Utah): This is a series of six existing, interconnected uranium/vanadium mines located in southeast Utah. These mines have recently been rehabilitated and are ready to quickly resume production. The company is currently preparing this mine for production.
Whirlwind (Colorado): This is a mostly-developed uranium/vanadium mine located on the border between Colorado and Utah. The company is currently preparing this mine for production.
Nichols Ranch ISR (Wyoming): This is a fully licensed and constructed in situ recovery(ISR) facility located in northeast Wyoming, that is currently on standby. It has an excellent production history, along with several licensed, in-ground uranium resources that could be produced in the coming years.
Sheep Mountain (Wyoming), Roca Honda (New Mexico), Bullfrog (Utah): These are Energy Fuels’ large, longer-term uranium mines. They are in various states of permitting and can go into production within 5-6 years of a production decision. Each can produce in excess of 1 million pounds of U3O8 per year.
Bahia (Brazil): This is a 58-square mile land position Energy Fuels acquired in February 2023. It is a well-known deposit in the heavy mineral sand (HMS) sector, containing ilmenite, rutile and zircon (titanium and zirconium minerals) at surface, along with large quantities of REE-bearing monazite. The property has existing mining and exploration permits in place. Historic drilling was only completed to the water table, and the company is currently performing a sonic drill program that is confirming mineralization continues well into the water table. The company believes this project could be in production of 3,000 to 10,000 MT of monazite by 2025 or 2026.
REE exploration potential
Energy Fuels has considerable exploration and resource expansion potential for the Bahia REE-project. Over 3,500 historic shallow drill holes have confirmed excellent HMS and monazite mineralization. The company is currently in the midst of a sonic drill program that is confirming mineralization extends well below the water table. However, no SK-1300, NI 43-101, or other compliant resource report has been completed for the property. Following the completion of the sonic drilling program, the company expects to complete a new resource report. The company also expects to perform the necessary steps to get the property into production in the next 2-3 years, just in time for REE separation.
Risks
Uranium and REE markets are currently strong. Decarbonization, electrification, and market fundamentals are expected to keep these markets strong.
The ability to license, finance and construct large-scale REE separation infrastructure. Though, the company has been given permission by its regulator to construct “Phase 1” NdPr separation, which is occurring in its existing solvent extraction (SX) building.
The ability to commence production at the Bahia project.
Normal mining and processing risks.
Many analysts follow the company, so under the efficient market hypothesis, it is currently fairly valued.
