Energy Fuels Q2 2024 Results - Advances Uranium Mining, Achieves Rare Earth Separation Milestone & Expands Global Footprint

• Energy Fuels reported Q2 2024 financial results, including uranium mining activities and successful commissioning of commercial rare earth separation.
• The company sold 100,000 pounds of uranium on the spot market and signed a new long-term sales contract with a U.S. nuclear utility.
• Energy Fuels achieved a milestone by producing 'on-spec' separated NdPr at commercial scale from monazite sourced from Florida and Georgia.
• The company entered agreements to add two world-scale rare earth and heavy mineral sand projects to its portfolio.
• Energy Fuels reported a robust balance sheet with over $200 million in liquidity and no debt as of June 30, 2024.

Energy Fuels Announces Q2 2024 Results

Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) has established itself as a leader in the critical minerals sector, positioning itself at the forefront of uranium and rare earth elements (REE) production for the energy transition. The company's recent Q2 2024 financial results and strategic developments highlight its progress in capitalizing on market opportunities and advancing its long-term value creation strategy.

Uranium Production & Market Dynamics

Energy Fuels continues to demonstrate its prowess in uranium production, leveraging favorable market conditions to drive revenue and expand its operations. In Q2 2024, the company sold 100,000 pounds of uranium on the spot market at a realized sales price of $85.90 per pound, generating total proceeds of $8.59 million. This sale resulted in a gross profit of $4.91 million and an impressive gross margin of 57%.

The company's strategic positioning in the uranium market is further evidenced by its new long-term uranium sales contract with a U.S. utility. Under this contract, Energy Fuels will deliver between 270,000 to 330,000 pounds of uranium from 2026 to 2027, with the potential for an additional 180,000 to 220,000 pounds until 2029. The contract's "hybrid" pricing formula, which includes floor and ceiling prices, provides exposure to potential uranium market upside while offering protection against inflation.

Mark Chalmers, Energy Fuels' President and Chief Executive Officer, emphasized the company's proactive approach to capitalizing on uranium market opportunities:

"Energy Fuels continues to capitalize on uranium market opportunities, profitably selling an additional 100,000 pounds of uranium on the spot market, signing a new long-term sales contract with a U.S. nuclear utility at supportive pricing, and mining uranium from three of our conventional mines in anticipation of a large-scale uranium processing campaign at our White Mesa Mill expected to begin later this quarter and continue through 2025 and into 2026."

The company's uranium production strategy is ambitious, with plans to ramp up to a production run-rate of approximately 1.1 to 1.4 million pounds of U3O8 per year by late-2024. Energy Fuels expects to produce between 150,000 to 500,000 pounds of finished U3O8 during 2024 from stockpiled alternate feed materials and newly mined ore. Furthermore, the company is preparing its Nichols Ranch in-situ recovery (ISR) Project in Wyoming and Whirlwind Mine in Colorado for production within one year from a "go" decision, which could potentially increase the production run-rate to roughly two million pounds per year by as early as 2026.

Rare Earth Elements: A New Frontier

Energy Fuels has made significant strides in its rare earth elements (REE) business, marking a major milestone for both the company and the United States. In Q2 2024, the company successfully commissioned its commercial scale "Phase 1" REE separation circuit at the White Mesa Mill, achieving one of its major long-term strategies of creating a complementary and additive business without compromising its uranium capacity or production profile.

The company expects to produce about 25 – 35 tonnes of separated NdPr and 10 to 20 tonnes of a "heavy" Sm+ mixed rare earth carbonate from its newly commissioned Phase 1 REE separation circuit by early Q3-2024. This achievement positions Energy Fuels as a key player in the U.S. critical minerals industry, capable of producing many of the raw materials needed for the energy transition.

Chalmers highlighted the significance of this accomplishment:

"This quarter, we also achieved another U.S. critical mineral industry milestone when we produced 'on-spec' separated NdPr at commercial scale at our White Mesa Mill in Utah from monazite sourced from Florida and Georgia. Our efforts this quarter have moved us closer to our business objective of becoming a long-term U.S. critical minerals company that produces many of the raw materials needed for the energy transition."

The company's REE strategy is further bolstered by the release of an AACE International Class 4 Pre-Feasibility Study for the Mill's planned Phase 2 expanded REE oxide production. The study indicates globally competitive capital and operating costs, with capital expenditures of $348 million for a 30,000 tpa Phase 2 separation facility and an average processing cost of $29.88/kg NdPr.

Strategic Expansion into Heavy Mineral Sands

Energy Fuels has made significant moves to secure its position in the heavy mineral sands (HMS) sector, which complements its REE business and provides additional revenue streams. The company has entered into agreements to add two world-scale REE and HMS projects to its portfolio:

• Donald Project: Energy Fuels completed binding agreements with Astron Corporation Limited to jointly develop the Donald HMS and REE project in Australia. The company has the right to invest up to AUS$183 million (approximately $122 million) to earn up to a 49% interest in the Donald Project Joint Venture. This project has the potential to produce approximately 7,000 to 8,000 tonnes of monazite per year during its first phase, and 13,000 to 14,000 tonnes during its second phase.
• Base Resources Acquisition: Energy Fuels announced an agreement to acquire all the issued and outstanding shares of Base Resources Ltd., which includes the advanced, world-class Toliara HMS project in Madagascar. This acquisition is expected to create a global leader in critical minerals production, including HMS, REEs, and uranium.

These strategic moves are designed to secure low-cost sources of monazite feed for the Mill's current and future REE separation infrastructure while also potentially producing significant standalone cash flow from the sale of ilmenite, rutile (titanium), zircon (zirconium), and other minerals.

Financial Position & Liquidity

As of June 30, 2024, Energy Fuels maintained a robust balance sheet with over $200 million of liquidity and no debt. The company reported $200.94 million of working capital, including $24.59 million of cash and cash equivalents, $146.66 million of marketable securities, and $23.52 million of inventory.

The company's strong financial position provides it with the flexibility to pursue its growth strategies and capitalize on market opportunities across its various business segments.

Vanadium & Medical Isotopes: Diversification Opportunities

While uranium and REEs remain the primary focus, Energy Fuels continues to maintain its vanadium business and explore opportunities in medical isotopes. The company holds about 905,000 pounds of V2O5 in inventory, positioning itself to capitalize on potential market improvements.

In the medical isotope space, Energy Fuels has obtained a research and development license for the recovery of Ra-226 at the Mill, with the intent to recover radioisotopes for use in emerging targeted alpha therapy cancer therapeutics. This initiative represents a potential new avenue for growth and diversification.

Future Outlook & Strategic Vision

Energy Fuels is positioning itself as a multi-faceted critical minerals company, leveraging its expertise in handling and processing naturally radioactive feedstocks to create a unique business model. The company aims to build profitable, cash flow generating businesses in three distinct growth areas: uranium, REEs, and HMS, with the added potential of producing radioisotopes for emerging cancer treatments.

Mr. Chalmers articulated the company's strategic vision:

"We believe we are innovating a new model for low-cost, responsible critical mineral supply chains, by leveraging Energy Fuels' 40+ years of relevant expertise in the handling and processing of naturally radioactive feedstocks, along with the facilities and permits of our foundational uranium business. As a result, we believe we are building profitable, cash flow generating businesses in three, distinct growth areas: uranium, REE's and HMS, with the added potential of producing radioisotopes for emerging cancer treatments."

The company's goal is to create a profitable, sustainable enterprise with low-cost exposure to several critical minerals needed for the energy transition, capable of withstanding the natural business cycles associated with these commodities. Energy Fuels aims to be globally competitive in these markets, offering commercial and government customers a reliable, low-cost U.S. alternative.

The Investment Thesis for Energy Fuels

• Diversified Critical Minerals Portfolio: Invest in a company with exposure to uranium, rare earth elements, and heavy mineral sands, providing a balanced approach to the critical minerals sector.
• Leading U.S. Uranium Producer: Capitalize on Energy Fuels' position as the top uranium producer in the United States, with potential for significant production growth as market conditions improve.
• Rare Earth Elements Pioneer: Gain exposure to the growing REE market through Energy Fuels' innovative processing capabilities and strategic partnerships.
• Strong Financial Position: Benefit from the company's robust balance sheet with over $200 million in liquidity and no debt, providing flexibility for growth and market opportunities.
• Strategic Asset Base: Invest in a company with a diverse portfolio of high-quality assets, including operating facilities and development projects across North America and potentially internationally.
• Experienced Management Team: Leverage the expertise of a management team with a proven track record in the critical minerals sector.
• Potential for Value Creation: Capitalize on Energy Fuels' ongoing initiatives to expand production, enter new markets, and optimize operations across its business segments.

Energy Fuels' Q2 2024 results and recent strategic developments demonstrate the company's progress in establishing itself as a leading U.S.-based critical minerals company. With its strong position in uranium production, breakthrough achievements in REE separation, and strategic expansion into heavy mineral sands, Energy Fuels is well-positioned to capitalize on the growing demand for critical minerals essential to the energy transition.

The company's robust financial position, diverse portfolio of assets, and clear strategic vision provide a solid foundation for future growth and value creation. As the global focus on secure and sustainable supply chains for critical minerals intensifies, Energy Fuels stands out as a key player in the U.S. market, offering investors exposure to multiple high-growth sectors within the critical minerals space.

Macro Thematic Analysis

The critical minerals sector is experiencing a significant transformation driven by global efforts to transition to cleaner energy sources and advanced technologies. This shift is creating substantial demand for uranium, rare earth elements, and other strategic minerals, positioning companies like Energy Fuels at the forefront of a major macro trend.

The nuclear energy renaissance is gaining momentum as countries seek to reduce carbon emissions while maintaining reliable baseload power. This trend is expected to drive increased demand for uranium in the coming years, benefiting established producers like Energy Fuels. The company's ability to ramp up production quickly positions it to capitalize on improving market conditions.

Simultaneously, the rapid growth of electric vehicles, wind turbines, and other clean energy technologies is fueling demand for rare earth elements. As geopolitical tensions highlight the need for secure supply chains, Energy Fuels' position as a U.S.-based REE producer becomes increasingly strategic.

The company's expansion into heavy mineral sands further diversifies its portfolio, tapping into markets for titanium, zirconium, and additional rare earth elements. This move aligns with the broader trend of securing domestic supplies of critical minerals essential for various industries.

Mark Chalmers encapsulates the opportunity:

"Our goal is to create a profitable, sustainable company with low-cost exposure to several critical minerals needed for the energy transition, that is able to withstand the natural business cycles associated with these critical minerals."

This strategy positions Energy Fuels to benefit from multiple facets of the clean energy transition and technological advancement, potentially offering investors a comprehensive exposure to the critical minerals sector within a single company.