Energy Fuels (UUUU) - Focus is Still on Uranium, AND Rare Earths

Energy Fuels Inc. is the leading producer of uranium in the United States, a major US vanadium producer, and an emerging supplier of commercial rare earth elements (REE). The company aims to aid electrification and drive the reduction of carbon emissions through its commodity supply.

The company on the 14th of November 2022, announced that it had entered into a definitive sales agreement with enCore Energy Corp. for the sale of its Alta Mesa ISR project. The sales agreement is expected to close by the beginning of 2023 at the latest and totals CAD$ 120 million. The total transaction will consist of CAD$ 60 million in cash at its closing as well as CAD$ 60 million in a secured convertible note which is payable two years from the closing of the transaction.

The sales agreement will enable Energy Fuels Inc. to pursue its uranium, rare earth elements, vanadium and medical isotope business plans for the next two to three years without diluting shareholders. The plans include the ramping up of uranium production at one or more of the company’s uranium production facilities which include the White Mesa Mill, Nichols Ranch ISR Project and Whirlwind mine amongst others. The sales agreement will further enable Energy Fuels Inc. to accelerate the licensing and development of its uranium mines, including the Sheep Mountain, Roca Honda and Bullfrog projects.

The company plans to continue with the advancement of its phase 1 and phase 2 programs at the White Mesa Mill in the future. Phase 1 consists of the expansion of its White Mesa Mill enabling REE separation with phase 2 consisting of the construction of a new separation facility and an additional solvent extraction circuit.

Alta Misa ISR project sale and company focus

The company on the 14th of November 2022, announced that it had entered into a definitive sales agreement with enCore Energy Corp. for the sale of its Alta Mesa ISR project. The sales agreement is expected to close by the beginning of 2023 at the latest and totals CAD$ 120 million. The total transaction will consist of CAD$ 60 million in cash at its closing as well as CAD$ 60 million in a secured convertible note which is payable two years from the closing of the transaction. Mark Chalmers the President and CEO of Energy Fuels Inc. explains that the transaction is advantageous for the company as it allows it to monetise the project, which was farther away from its core assets, having been located in Texas, than the company’s priority projects located in Utah, Wyoming and Arizona.

“I think it is a great deal for both of us. We're really excited about it because we were able to monetize an asset that was somewhat out of our patch. Texas, in the scheme of the world, isn't far away, but it's far away for us when you look at Utah and Wyoming and even Arizona, but I think it's good for enCore. It provides them with an asset in Texas, close to home for them because it's close to Corpus Christi. They can go ahead and focus on it now where we were not going to be able to focus on it for a few years. We're very happy with the transaction. We think we got a fair value for it, and the beauty of it is that those funds will fund us for the next 2-3 years without dilution for Energy Fuels and lets us put the accelerator down on the uranium and the rare earths. I couldn't be more pleased.”

Even though Energy Fuels Inc. has let go of the Alta Mesa ISR project, the company does not plan to move out of the uranium sector. Regarding exiting the uranium sector, Chalmers clearly states that this is not the case. The company is still committed to the industry, only aligning its priorities in such a way to not only monetise an under-utilised asset but also to create the necessary funds to enable its future plans.

“Anyone who knows me, I've been in the uranium business for 46 years and I've got uranium pumping through my veins. I'm absolutely committed to the uranium space now and going forward. It is just one of those transactions that when we looked at our bandwidth, what we could focus on in the regions that we are operating in, we want to do everything that we're focused on 100% or 110%, be funded and get that momentum going now, not 2 to 3 years from now, when we probably would have been looking at the Alta Mesa start-up, if uranium prices supported that. I know some people looked at it and raised their eyebrows, but I'm focused on what's best for the shareholders here. I know this is a great deal for the shareholders and that's the way we're rolling.”

The sales agreement will enable Energy Fuels Inc. to pursue its uranium, rare earth elements, vanadium and medical isotope business plans for the next two to three years without diluting shareholders. The plans include the ramping up of uranium production at one or more of the company’s uranium production facilities which include the White Mesa Mill, Nichols Ranch ISR Project and Whirlwind mine amongst others. The sales agreement will further enable Energy Fuels Inc. to accelerate the licensing and development of its uranium mines, including the Sheep Mountain, Roca Honda and Bullfrog projects.

Phase 1 and 2 at White Mesa Mill

The White Mesa Mill of the company is a 100% owned milling facility located near the town of Blanding in the state of Utah in the USA. The White Mesa Mill is the only licensed uranium mill in the USA and has a licensed capacity of more than 8 million pounds of uranium a year. The mill was responsible for 24% of the uranium produced in the USA between 2012 and 2018. The mill is able to process alternative feed materials, unlike various of its peers, and is as such not reliant on the availability of traditional uranium ore.

The expansion initiatives at the company’s White Mesa Mill are broken up to consist of Phase 1 and Phase 2. The first phase will see the company expand its milling facilities to recover NdPr oxide and heavier rare earth elements. The aim of phase one is to reach a capacity of between 2,500 and 5,000 tons of TREO per year. Chalmers explains phase one as follows:

“In Phase 1 we do the cracking and leaching in the existing uranium mill and then we'll build out this separation plant that will recover the NDPr and the SM+, which is the heavies, basically the heavy concentrate and we'll do that in an existing facility, our SX building, so Phase 1 is utilising a lot of our existing infrastructure. We think it's important to stay ahead of the game, to show people we can do this commercially. It's really world-significant outside of China.”

Phase 2 will see the design, engineering, permitting and construction of a crack-and-leach and light and heavy REE separation facility, which will have a capacity of up to 15,000 tons of TREO per year. Chalmers explains that the new facility will be situated next to the White Misa Mill and will be an additional circuit on top of the mill.

“In Phase 2, we will build a completely separate crack and leach facility, where we won't use the lead circuit of the White Mesa mill, we will have a separate circuit next door, and we'll have a new dedicated solvent extraction circuit that will be in addition to the circuit that we will have in the existing facility. We will probably have in the order of 15,000 tons of TREO capacity in the new circuit but will also have maybe up to 5,000 tons TREO in the Phase 1 circuit so in the order of 20,000 tons TREO, which is in about the same order of what Linus has right now.”

North American uranium space and future plans

The North American uranium sector is set for growth according to Chalmers. The largest risk however for the uranium sector is its processing section. Chalmers explains that the company is in a unique position, with no other facility in the United States being at such an advanced stage regarding processing capability.

“There are two steps with a conventional mill: there's the mining step and there's the processing step. The mining step is pretty basic and relatively simple in terms of providing conventional ore to the mill. A lot of the technical risk is on the processing side, and we've got that covered. If you put those two together, and many of the mills in the 60s, and 70s in the United States were toll processing facilities. Now, we're doing an ore buying schedule. We're not toll processing ore from parties that will sell it.”

Chalmers however explains that various uranium mining operations may fail in the future but does not mean that the sector will. The reason for failure will be due to the economics of the projects in question.

“On the topic of people starting up new projects, not just in the United States but around the world, a lot of them are going to fail. They're going to fail because of technical risks. They're going to fail because of economics; they don't achieve their projections on their production costs. History tends to repeat. The talk I gave down in Australia was about whether history will repeat itself, and it will and there will be a number of failures. There will be a few successes but there will be more failures than successes.”

The economics of the mining operations will play a factor in any future agreements made by Energy Fuels Inc. The company will aim to establish agreements with operations which have a sufficient profit margin. The rationale explained by Chalmers regarding the economics of future partners is that should an operation have a sufficient profit margin, it will be able to produce more ore, leading to Energy Fuels Inc. being able to acquire more ore for processing enabling the growth of both parties.

“You want the miners to make enough money to break rock, to put it in a truck and ship it to the mill, so then we receive it and we process it when we're ready to process it. You really want a deal that works for everybody, but ultimately, we're going to buy material that we can make a profit on. It reduces the risk profile for us because the material gets delivered to the mill, we buy it, we know what our costs of processing are and we go from there.”

Energy Fuels Inc. is optimistic regarding 2023 and believes that the future of the uranium and critical elements sectors is very promising. The company will continue to build its positions in both sectors, enabling it and its shareholders to have exposure to the value-creation opportunities of both industries.

“We think it's going to be a good time for uranium and all critical elements. We're building the critical mineral hub, producing and recovering more elements than anybody else. As I said before, you typically invest in a uranium-only company, or rare earths company, or a vanadium company, but when you invest in Energy Fuels, you get all three of those. That is absolutely unique to Energy Fuels. There really is no peer for us. We trade as a uranium company; the upside is to get more of these elements and really maximise our revenue going forward. 2023 is going to be a very important year and we are really looking forward to the future.”

To find out more, go to the Energy Fuels website