Energy Fuels (UUUU) - World Nuclear Association (WNA) Fireside Chat

Energy Fuels Inc. is a leading US producer of uranium- the fuel for carbon and emission-free nuclear energy. Nuclear energy is expected to see growth in the coming years, as nations around the world work to provide plentiful and affordable energy while combating climate change and air pollution. Energy Fuels is also a major US producer of vanadium and an emerging player in the commercial rare earth business where its work is helping to re-establish a fully-integrated US supply chain. With a truly unique portfolio, the company has more production capacity, licensed mines and processing facilities, and in-ground uranium resources than any other US producer. It boasts diverse cash flow-generating opportunities that include vanadium production, uranium recycling, and rare earth processing.

Matt Gordon caught up with Mark Chalmers, President, and CEO, Energy Fuels. From 2011 to 2015, Mr. Chalmers served as Executive General Manager of Production for Paladin Energy Ltd, a uranium producer with assets in Australia and Africa, including the Langer Heinrich and Kayelekera mines where, as Head of Operations, he oversaw sustained, significant increases in production while reducing operating costs. He also possesses extensive experience in ISR (in-situ recovery) uranium production, including management of the Beverley Uranium Mine owned by General Atomics (Australia), and the Highland mine owned by Cameco Corporation (USA). Mr. Chalmers has also consulted for several of the largest players in the uranium supply sector, including BHP Billiton, Rio Tinto, and Marubeni. Until recently, he served as the Chair of the Australian Uranium Council, a position he held for 10 years. Mr. Chalmers is a registered professional engineer and holds a Bachelor of Science in Mining Engineering from the University of Arizona.

Company Overview

Energy Fuels Inc. is a leading, US-based integrated uranium producer for use in carbon-free, clean nuclear energy. The company also produces high-grade vanadium which is used in aerospace, steel, chemical industries, and battery production. The majority of the vanadium production comes from the White Mesa Mill in Utah. Energy Fuels is emerging as the largest critical minerals producer in North America with a strong focus on uranium, and rare earth metals production and processing. It is also involved in vanadium production and recycling. The company’s main assets are located in the western part of the United States where it owns and operates the only uranium mill in the country. The company was founded in 1987 and is headquartered in Colorado, United States. It is listed on the New York Stock Exchange (NYSE: UUUU) and the Toronto Stock Exchange (TSX: EFR).

Energy Fuels is a US-based company focused on critical elements, primarily uranium, vanadium, and rare earths. The company is currently processing all drive reduction of carbon emissions and is improving electrification. The company’s representatives attended the WNA (World Nuclear Association) conference in London. According to the company, there is a certain amount of fear in people as they seek to increase nuclear energy generation and reduce carbon emissions. Due to the ongoing Russia-Ukraine conflict, people are looking for reliable suppliers to source, convert and enrich uranium. There has also been discussion around the development of new reactors and strategies for building the reactors in faster and more efficient ways.

The Market Landscape

The market now realises the effects of being dependent on Russia for the past two decades. In the current cycle, companies are focused on reducing carbon emissions. There has been bipartisan support in several countries to reduce carbon emissions.

According to Energy Fuels, uranium companies have been surviving over the past 10 years. However, recent changes have allowed uranium companies and developers to work on exciting projects. In the past 2 months, the company has hired around 25 people. It is preparing its mines to restart production. The company has also signed 3 contracts, out of which 2 are major US utilities. Material delivery is expected to start next year.

The company has also submitted a proposal to sell uranium to the DoE (Department of Energy). The uranium purchase by the DoE is a result of Section 232. The DoE is looking to purchase millions of pounds of uranium. The company is looking for an update on the submitted proposal by next month.

Moving Towards De-globalisation

Following the enactment of the Inflation Reduction Act, the US government is moving on several fronts to re-establish the country’s ability to source material locally. After 20-25 years of globalisation, countries are now starting to de-globalize. According to the company, de-globalisation will take at least a decade to gain momentum. In the meantime, uranium projects are starting to come online. The company is looking to start a project next year and is looking to sell some of the uranium supply to the DoE.

In recent times, the dialogue between developers and producers, and utilities has changed. Energy Fuels has a solid relationship with the utilities they’ve conducted business with in the past. As per the company, all parties need to work together to improve the existing circumstances, which can lead to better outcomes.

Utilities often look at competitive pricing, however, due to current changes in the market landscape, they have realised that uranium is no longer available at cheaper prices. Due to inflation over the past 1-2 years, the $50/lb-$55/lb pricing was considered an incentive. However, there is anticipation in the market that uranium pricing could go as high as $70/lb. The inflation has also caused an increase in operating costs that include reagents, people, parts, and supplies. This rise in costs is changing the way businesses operate.

There has been a lack of domestic facilities that can carry out uranium conversion and enrichment in recent times. 5 years ago, uranium could be easily purchased from various sources and there wouldn’t be a price difference whether the supply was bought from the US, Russia, or Kazakhstan. This attitude has observed a major shift in recent times, and for the right reasons. Due to an increasing focus on decarbonization, electrification, and ESG (Environmental, Social, and Governance), companies are now expected to source the material in a responsible manner. As per Energy Fuels, the sustainability question will be harder to answer for a number of utilities due to the recent changes. Energy Fuels’ is focused on achieving better outcomes for its customers, namely nuclear utilities.

De-globalisation is underway, but it is expected to be a slow process as the supply dynamics of uranium products start to shift. Energy Fuels anticipates that it’s going to take at least a decade to make a small dent in the dynamics. The transition will require money and government support.

Looking at the nuclear fuel cycle around the world, it is apparent that no program has been able to succeed without government support. In countries where the governments started to pull back support, the fuel cycles began dropping off. Sustained government support is crucial in order to achieve a positive nuclear fuel cycle.

Globalisation had made people content with sourcing materials at the lowest prices. In the past, the origin of these materials wasn’t taken into consideration. This inclination made consumers dependent on cheaper products that were manufactured and sourced from countries like China. Similarly, the dependence on Russia for uranium enrichment has led to a shortfall due to the ongoing Russia-Ukraine crisis.

As per the company, Section 232 is a vital development that is leading toward positive outcomes. The company had been messaging the government and the people in DC for about 5 years, highlighting the country’s dependence on Russia and Kazakhstan for uranium. The scale at which the problem has now intensified was unforeseen. The current situation would have been a lot different had the government placed trade barriers in place 4-5 years back.

The demand for uranium continues to grow and the supply side appears to be lacking. Due to the ongoing inflation, prices have gone up significantly. If large projects refresh their capital expenditure after 2-3 years, the price changes are going to shock a number of people.

Since Energy Fuels has already expended the majority of its capital, the company is in an advantageous position, as it can start up operations faster. In recent times, there has been a massive increase in the number of moving parts in the uranium business.

Public Sentiment On Nuclear Energy

There is a lot of reservation among the general population around the use of nuclear energy to generate power. According to Energy Fuels, there isn’t any alternative energy source that can achieve electrification on a global scale. Interestingly, coal production in the US is now one-third of what it was 10 years ago.

Due to an increased focus on ESG-compliant operations, the funding for coal and other carbon-intensive energy sources is diminishing. Electrifying the world and reducing carbon emissions cannot be achieved without nuclear power. A number of environmental groups and politicians that have historically been against nuclear power are now realising its merits and potential. California’s decision to extend the operating life of the Diablo Canyon nuclear power plant, the only nuclear plant in the state, demonstrates that the transition is already in motion. Countries like South Korea and Japan are also doubling down on nuclear power.

At the WNA conference, there were a number of conversations around clean energy funds. As per Energy Fuels, there needs to be a transition from coal, oil, and gas in a planned manner. Moving too quickly could lead to problems similar to the ones Germany is currently experiencing.

Targets 2022 and Beyond

Energy Fuels’ rare earth business is in a strong position. The company is looking to start production at 1 of its uranium mines. By Q4, 2022, the company is looking to expand its vision and plans as the investors are looking to understand whether the company is focused primarily on uranium or the rare earths business. While the company intends to work on both fronts, a definitive vision will serve the company’s investors. The company is focused on critical elements to reduce carbon emissions and achieve electrification. Energy Fuels offers a rare opportunity for people to simultaneously invest in both uranium and rare earths.

To find out more, go to the Energy Fuels website