Energy Fuels (UUUU) - $1Bn USA Critical Minerals Hub Closed Loop Co.

Energy Fuels is the leading US based Uranium mining company, supplying Uranium to major nuclear utilities. Energy Fuels also produces Vanadium, as market conditions warrant, and now expects to commence commercial production of Rare Earth's carbonate in 2021.

We caught up with Mark Chalmers, President & CEO of Energy Fuels following their recent press release announcing their joint 'US European Rare Earth Production Initiative' with Neo Performance Materials. The market is taking note of their strategy as they go forward and their share price has rocketed. The market has reacted and is listening to what they're doing as the US critical materials hub.

Energy Fuels, Still a Uranium Company or Shifting to Rare Earths?

Energy Fuels are first and foremost a Uranium company, as it is where their history and track record has been, but the introduction of rare earth has been fantastic addition for the company. It fits perfectly with their core business and when they process rare earths, they're recovering Uranium so are trying to capitalise on their unique position with the white Mesa mill.

The rare earth component has really caught the imagination of the marketplace due to the EV thematic and greener investing, but also cleaner supply chains and the language of critical minerals as security of minerals. This is all helping feed into what Energy Fuels is planning for the future.  

The monazite plant is a differentiator from others in the rare earth space due to the ability to handle the monazite sands that also contain Uranium.

Terms of the Rare Earth Production Initiative with Neo Performance Materials

Chemours is mining the monazite sands and Energy Fuels will be processing the monazite sands, but there is no separation. The next step is separation and Neo Performance has an operation in Estonia which is the only separation facility in Europe. The agreement between the two is to do separation of the initial material from Chemours as Energy Fuels process it, which will help provide some cash flow. It shows the market that they are moving through the steps quicker and keeping CapEx requirements to a minimum by using existing equipment that's already available. The total capital cost for these 3 steps, is around $2M. Moving forward this will be the first monazite material that's been mined, processed and separated in over 20 years outside of China.

Neo Performance has operations in a number of countries including China. They are not in the mining business, so they get their raw materials from others and are looking for an opportunity to diversify some of their supplies with Energy Fuels.

Growth Moving Forward: Costs & Process

Energy Fuels is making the rare earth carbon at White Mesa and needs to spend another USD$2M or $3M which would take them up to a significant scale for making a rare earth carbonate. They think they will have an agreement with Neo Performance to separate in Europe but to move to the next step at White Mesa, it will only cost something like USD$100M or $200M rather than billions for full integration. Monazite sands are the highest-grade rare-earth feed which produces 50% to 60% of total rare earths so their operating costs will be attractive as well.

Market Dynamics & Positioning: Potential for a Raise

The plan to be a critical minerals and materials supplier is different to others in the space as they have optionality over a number of different critical minerals. Looking at the supply and demand projections, the rare earths demand is increasing by 10%, year-on-year for the next 10 - 15 years. Uranium predictions are 1% to 2% year-on-year increase in demand. Energy Fuels is in a unique position but they have to demonstrate to the market that they're worth that market cap, and have room to grow.  

Now is a good time for Energy Fuels to raise the money they need for full integration. They are trying to put together additional agreements similar to the Chemours and the Neo agreements so will be building on that story. If they chose to raise money, they could do as the market and investors are able to see them as an emerging, fully integrated rare earth supplier. ESG funds are focused on sustainability in green energy and they hope to grow that initiative with the market over time.

Energy Fuels has had an initial award from the US government to do some work which they have now finished. There's a good chance that they will get some support from the US government, but they are in a position where they don’t need the US government support to be successful. Whilst govt contracts can be attractive in terms of the quantum of dollars, they do tend to come with strings attached.

Deal with Chemours Company: More Deals to Come? 

The sheer scale of the White Mesa Mill cannot be understated. The Chemours deal is significant in terms of revenues coming in, but does not utilise much of the White Mesa mill which suggests that they can add more deals, or indeed upsize their agreement with Chemours and still not harm their Uranium business.

Energy Fuels has made some investments to ensure that the Uranium and Vanadium processing capabilities can operate independently of the rare earths. There may need to be some investment to make sure they are able to keep the two separated. The rare earths is a small tonnage compared to traditional Uranium processing, only taking a few percent of the mills capacity through the plant itself or its tailings facilities. Their first goal is to get to about 15,000t of monazite feed, which would be equivalent to about 50% of current total US requirements for rare earths. They will certainly be able to increase that volume of output in time, but first they need to secure the feed.

Building a Self-Sufficient Ecosystem for Rare Earths Outside China

Energy Fuels is talking the language of being THE American critical minerals hub with White Mesa. Investors are buying into a self-sufficient ecosystem which the US is trying to create as the projections for rare earth in 10 or 15 years shows five to tenfold increases. Becoming fully integrated makes complete sense for Energy Fuels.

The last time we spoke to Energy Fuels in mid-January, they were around USD$4 a share and now they're around USD$6 a share so it has been a good couple of months for the company. It's not just Energy Fuels but they just have a different model to other companies and there really isn't another Energy Fuels outside of China. They are unique in what they're doing and how they're doing it and they hope to make the most of the opportunity in front of them and execute their plans as quickly as possible. We look forward to following the Energy Fuels story going forward and there will be further announcements coming out in due course. 

To find out more, go to Energy Fuels' Website.