Energy Fuels' Rare Earth Expansion Resets US Cost Curves & Capital Intensity

• Energy Fuels' Phase 2 rare earth processing expansion, detailed in the January 15, 2026 Bankable Feasibility Study, challenges the assumption that US rare earth supply chains must be high-cost and capital-intensive, with initial capex of $410 million materially below peer benchmarks for comparable scale processing assets.
• BFS-derived NdPr production costs of $29.39 to $59.80 per kilogram, depending on feedstock blend, place the project in the first quartile of the global cost curve, competitive with and in some cases below Chinese separation facilities.
• Standalone Phase 2 economics project $1.9 billion NPV at an 8% discount rate and 33% IRR, while integrated economics combining processing with upstream monazite feedstock projects indicate $3.7 billion NPV and $15.26 per share implied value.
• The expansion targets 6,000 tonnes per annum of NdPr oxide capacity plus 240 tpa dysprosium and 66 tpa terbium, positioning Energy Fuels to supply 100% of US heavy rare earth demand by 2030 according to company guidance based on Benchmark Mineral Intelligence forecasts.
• Approximately $700 million in liquidity, including $625 million from the October 2025 convertible notes offering, combined with uranium production of over 2 million pounds annually, provides self-funding capability through the targeted Q1 2029 commissioning.

Why Rare Earth Cost Curves Matter More Than Ever

The investment case for non-Chinese rare earth supply has evolved considerably over the past several years. While geopolitical arguments have gained traction among policymakers and defense contractors, capital markets have maintained a more skeptical posture regarding economic viability.

From Supply Security to Economic Viability

Investors have largely accepted the geopolitical case for non-Chinese rare earth supply, but remain skeptical of economic competitiveness. Historical failures in Western rare earth projects stemmed less from geology and more from processing complexity, capex overruns, and cost inflation. Capital markets increasingly reward projects that demonstrate cost-curve resilience, not just strategic alignment with national security objectives.

The Market's Core Question

Two fundamental questions now define investor due diligence in the rare earth sector. First, can rare earth production outside China compete on sustained operating costs, not just policy support? Second, can capital intensity be controlled enough to generate institutional-grade returns without perpetual subsidy reliance?

Energy Fuels' Phase 2 expansion positions the company to address both questions directly, offering investors a potential inflection point in how Western rare earth economics are evaluated.

Energy Fuels' Phase 2 Expansion: A Capital Efficiency Inflection Point

The Phase 2 expansion at White Mesa represents a departure from the capital-intensive development patterns that have characterized previous Western rare earth attempts. The January 2026 BFS indicates that brownfield infrastructure advantages may fundamentally alter the risk-return calculus for rare earth processing investments.

Lower-Than-Expected Capex in a Historically Capital-Heavy Sector

Phase 2 circuit capex is estimated at $410 million, lower than previous estimates and materially below peer benchmarks for comparable scale processing assets. The expansion targets 6,000 tonnes per annum of NdPr oxide capacity plus heavy rare earth production of 240 tpa dysprosium and 66 tpa terbium. Investors should view this as a brownfield expansion advantage, leveraging existing licensed infrastructure rather than greenfield construction.

EBITDA Visibility & Payback Implications

Standalone Phase 2 economics project approximately $311 million in average annual EBITDA over 15 years, based on Q3 2025 price forecasts from Adamas Intelligence for rare earth elements and TradeTech for uranium. The implied payback period is materially shorter than most global rare earth developments, improving financing flexibility.

Mark Chalmers, Chief Executive Officer of Energy Fuels, emphasized the foundation supporting this expansion:

"Energy Fuels is a company that is unique from all others that you'd look at because we are focused on building a critical mineral hub that is built around our uranium business but also includes the rare earth suite of elements including the Nd, and the Pr, and the Dy, and the Tb."

Cost Curve Positioning: Competing Directly With Chinese Producers

Cost leadership in rare earth processing has historically been viewed as structurally unattainable for Western producers. Energy Fuels' BFS results challenge this assumption with operating cost projections that place the company in direct competition with established Chinese separation facilities.

First-Quartile NdPr Production Costs

BFS-derived all-in NdPr oxide costs range from $29.39 per kilogram to $59.80 per kilogram, depending on feedstock blend. The lower cost assumes feedstock exclusively from the Vara Mada Project in Madagascar, while the higher figure reflects a blended feedstock model of 50,000 tonnes per annum sourced from the Vara Mada, Donald, and Bahia projects. These costs would place Energy Fuels in the first quartile of the global NdPr cost curve, including against Chinese separation facilities.

Why This Matters for Valuation

Cost leadership protects margins during price volatility and allows participation in long-term offtake agreements without margin compression. Investors should interpret this not as a short-term arbitrage opportunity, but as structural cost durability that can sustain returns across commodity cycles.

Mark Chalmers addressed the company's differentiated processing capability:

"We're trying to differentiate between others so that we can deal with the radioactivity, recover uranium, and process monazite in the United States when nobody else can."

Integrated Economics: Processing Plus Feedstock Optionality

The Phase 2 expansion economics improve substantially when viewed in conjunction with Energy Fuels' upstream monazite feedstock projects. This integrated perspective reveals additional value creation potential that standalone processing metrics do not fully capture.

Standalone vs. Integrated Valuation

Phase 2 standalone economics indicate $1.9 billion NPV at an 8% discount rate, 33% internal rate of return, and $7.96 per share implied value based on current outstanding shares. Integrated Phase 2 economics combined with upstream monazite projects yield $3.7 billion NPV at an 8% discount rate and $15.26 per share implied value. The valuation differential reflects the margin capture available when feedstock and processing are vertically integrated.

Upstream Project Pipeline

The integrated valuation incorporates four feedstock sources at various development stages. The Donald Project in Australia, a joint venture with Astron Corp, targets a final investment decision in Q1 2026 with deliveries expected as early as Q1 2028. The Toliara Project in Madagascar is seeking government approvals with an FID expected in 2026 and deliveries targeting Q1 2029. The Bahia Project in Brazil expects a resource estimate in 2026 with deliveries projected for 2030. Additionally, an existing offtake agreement with Chemours provides 500 to 2,000 tonnes per annum of monazite from Georgia.

Heavy Rare Earth Exposure: Where Scarcity Drives Strategic Value

Heavy rare earths occupy a distinct position in the supply chain hierarchy due to their concentrated production geography and critical end-use applications. Energy Fuels' strategic focus on monazite feedstocks provides exposure to these scarcer elements in ways that bastnaesite-focused competitors cannot replicate.

The Dysprosium & Terbium Constraint

Heavy rare earths, particularly dysprosium and terbium, are essential for high-performance permanent magnets used in electric vehicles, wind turbines, and defense systems. Global supply of these elements remains far more concentrated than light rare earths, with Chinese production representing an even larger market share than for neodymium and praseodymium.

Strategic Implications for US Supply Chains

Energy Fuels targets supplying 100% of US heavy rare earth demand by 2030, based on Benchmark Mineral Intelligence forecasts. This shifts the company from commodity exposure to strategic scarcity exposure, which carries valuation optionality that standard commodity multiples may not fully capture.

Mark Chalmers highlighted the competitive distinction in feedstock selection:

"MP focused on bastnaesite and that is a great source of rare earths but not heavies. They do not have heavies."

He further emphasized the Donald Project's contribution:

"Donald project... it's very very high-grade heavies. It's got really high grades of the Dy and the Tb, extraordinarily high."

Jurisdictional & Permitting Advantage

Permitting timelines and regulatory execution risk represent material variables in rare earth project economics. The White Mesa Mill's existing operational licenses provide advantages that extend beyond simple time savings.

Why Permitting Certainty Is an Economic Variable

Rare earth processing is not just capital-intensive; it is permit-intensive. The White Mesa Mill is fully licensed, permitted, and producing, with capacity to process up to 8 million pounds of U3O8 and the distinction of being the only US facility able to process monazite for rare earth oxide production. Phase 1 is currently operational with installed capability to produce roughly 1,000 tonnes per annum of NdPr oxide.

Phase 2 Regulatory Timeline

The company is currently seeking regulatory approval for the Phase 2 circuit design and construction, with Utah state submissions well advanced. Regulatory approval is expected by mid-2027, with construction planned to meet a commissioning target of Q1 2029.

Mark Chalmers addressed the jurisdictional positioning:

"If the United States wants to reshore the ability to be independent of China particularly on rare earth... we have a facility in the United States that's constructed, permitted, operating to do that."

Balance Sheet Strength & Funding Flexibility

Capital structure considerations have become increasingly important for institutional allocators evaluating resource sector investments. Energy Fuels' financial position provides flexibility that reduces execution risk during the Phase 2 development period.

Self-Funding Capacity

Approximately $700 million in liquidity, comprising roughly $300 million in working capital and inventory as of September 30, 2025, plus approximately $625 million in net proceeds from the October 2025 convertible senior notes offering, provides flexibility to advance Phase 2 without forced equity issuance. The convertible notes carry a 0.75% annual coupon with a 32.5% conversion premium at $20.34 per share, and a capped call structure effectively increases the conversion price to $30.70 per share to minimize dilution.

Uranium Cash Flow Foundation

The uranium business provides downside protection during rare earth build-out. Energy Fuels is currently producing more U3O8 than any other US company, with a run-rate of approximately 2 million pounds per year. The Pinyon Plain Mine operates at costs of approximately $23 to $30 per pound of U3O8.

Mark Chalmers emphasized the balance sheet foundation:

"We've got this strong balance sheet. We've got this convert with three-quarters of a percent coupon.We are in an absolutely strong position from a balance sheet and revenue generation looking forward for the next several years."

Execution Risk: What Investors Should Monitor

Several variables warrant continued monitoring as the Phase 2 expansion advances through development milestones. Regulatory approval timing for Phase 2 represents the primary permitting variable, with mid-2027 targeted for Utah state approval. Feedstock delivery synchronization between upstream projects and White Mesa processing capacity requires coordination across multiple jurisdictions, with the Donald Project targeting Q1 2028 deliveries. Rare earth pricing volatility during the commissioning phase could affect initial operating margins.

Mitigating factors include the AACE Class 3 BFS confidence level indicating engineering maturity appropriate for financing decisions, brownfield infrastructure reducing construction risk, and Energy Fuels' proven processing track record at White Mesa where Phase 1 is currently producing commercial NdPr oxide.

The Investment Thesis for Rare Earth Processing Exposure

The Phase 2 expansion presents several strategic attributes that warrant investor attention.

• First-quartile NdPr production costs challenge assumptions about the competitive positioning of US rare earth processing relative to Chinese incumbents.
• Capital efficiency of $410 million in capex for 6,000 tpa NdPr oxide capacity improves risk-adjusted returns compared to historical Western rare earth investments.
• Heavy rare earth exposure through monazite feedstocks provides optionality beyond light rare earth economics, with the company targeting 100% of US heavy rare earth demand by 2030.
• Licensed US infrastructure at an operating facility reduces timeline and regulatory risk relative to greenfield alternatives.
• Balance sheet strength with approximately $700 million in liquidity lowers dilution risk and reduces execution dependency on capital markets.
• Integrated feedstock optionality across four development projects provides margin enhancement potential beyond standalone processing economics.
• Uranium cash flow diversification at a run-rate of 2 million pounds annually provides downside protection during rare earth development.

Energy Fuels' Phase 2 rare earth expansion, as outlined in the January 2026 BFS, reframes how investors should evaluate US rare earth supply—not as a geopolitical concession requiring subsidy support, but as a potentially competitive industrial strategy with institutional-grade return potential. Lower-than-expected capex, first-quartile cost positioning, and meaningful EBITDA visibility challenge assumptions that rare earth processing outside China must be structurally disadvantaged.

For investors, the significance lies less in headline production volumes and more in economic durability across commodity cycles. If execution aligns with feasibility assumptions and the Q1 2029 commissioning target is achieved, Energy Fuels' expansion represents a potential intersection of strategic relevance, cost leadership, and capital discipline—attributes increasingly defining selection criteria for sophisticated capital seeking resource sector exposure with defensible economics.

TL;DR

Energy Fuels' January 2026 Bankable Feasibility Study positions its Phase 2 rare earth expansion at White Mesa as a potential inflection point for Western rare earth economics. The $410 million brownfield expansion targets 6,000 tonnes per annum of NdPr oxide capacity plus heavy rare earths, with production costs of $29.39-$59.80/kg placing the project in the global cost curve's first quartile. Standalone economics project $1.9 billion NPV at 8% discount rate and 33% IRR, while integrated valuations reach $3.7 billion. With approximately $700 million in liquidity and uranium cash flows exceeding 2 million pounds annually, Energy Fuels can self-fund through Q1 2029 commissioning, potentially supplying 100% of US heavy rare earth demand by 2030.

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