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Energy Fuels Inc: THE INVESTMENT CASE

Energy Fuels poised to pounce on uranium market upturn

The group would clearly like to see higher uranium prices, but does have other revenue generating streams
Energy Fuels poised to pounce on uranium market upturn
INVESTMENT OVERVIEW: EFR The Big Picture
Uranium prices have suffered badly since 2011 and Fukushima

Energy Fuels Inc (TSE:EFR) is ticking along and ready to roll once uranium prices improve.

As Curtis Moore, vice president of marketing and corporate development, recently told Proactive Investors, the group would clearly like to see higher  uranium prices, but the firm does have other revenue generating streams in the meantime, including toll processing at its White Mesa mill (the only uranium mill in the US).

Once the market does turn a corner, it will be able to bring on stream 2 to 2.5 million pounds of uranium concentrate (U308) per year output within 6- 12 months, he explains.

WATCH - Energy Fuels meeting production targets and maintaining a strong balance sheet

So what are the assets...?

Energy has the White Mesa conventional mill in Utah, which has a licensed capacity for over 8mln pounds of U308  a year, providing good potential to scale up output.

It also owns the Nichols Ranch ISR (in situ recovery) project in Wyoming and ISR assets in Texas that are collectively named Alta Mesa.

Nichols Ranch has total licensed capacity of 2mln pounds of uranium a year, production began in 2014 and it has significant expansion potential.

In situ mining, put simply, is where a leaching method is used to dissolve and then extract the uranium out of the rock.

The advantages of the method are said to include lower capital costs to develop the mine and no waste rock, tailings pond.

Earlier this month, it struck a deal to sell some non-core properties in Wyoming for  $5.39mln.

Upgrade to resources...

And in August this year, it released a new resource for its conventional Canyon mine in Arizona.

This mine is now estimated to contain 139,000 tons of higher confidence measured and indicated resources with an average grade of 0.88% U3O8, containing 2.434mln pounds of uranium.

There are 18,000 tons of inferred resources with an average grade of 0.38% U3O8 containing 134,000 pounds of uranium.

Significantly, the main zone of the deposit is also estimated to contain 11.939mln pounds of copper contained in 101,000 tons of measured and indicated mineral resources with an average grade of 5.93% copper.

Also the total uranium resources at the wholly-owned mine in Coconino County had been lifted by an estimated 1mln pounds, more or less, of triuranium octoxide (U3O8).

A key deal to increase cash flow and margins...

On November 13, Energy said it had struck an important deal, which would increase cash flow and margins at its flagship Wyoming asset and see it acquire an exciting new US asset.

The transaction, done via  a merger of Excalibur Industries and an Energy Fuel subsidiary, sees Energy extinguish the royalties it had to pay on the Nichols Ranch ISR (in situ recovery) project.

It also removed royalties on several operating, standby and advanced-stage ISR projects in Wyoming owned and operated by Power Resources, Inc, which is a wholly-owned subsidiary of Cameco Corp - the largest uranium firm in the world.

The cost is a total of US$3.5mln worth of Energy shares paid to Excalibur shareholders.

Energy fuels now expects to produce around between 140,000 and 160,000 pounds of uranium in 2018 from the Nichols Ranch project.

Full year  production targets for 2017..

Moore said the firm is expecting to produce 650,000 pounds of U308 (uranium concentrate) from its own account for the year, and 950,000 pounds from its processing mill for a third party.

In its latest quarter,  Energy Fuels said uranium output totalled 465,000 pounds of U3O8, of which 170,000 pounds were for the company's account and 295,000 pounds were from alternative feed materials toll milled for the account of others.

Significantly, during the reporting period, the Nichols Ranch in-situ recovery (ISR) facility surpassed one million pounds of total life-of-mine uranium production.

“During today's low uranium prices, Energy Fuels enjoys a number of potential revenue-generating opportunities, along with a supportive administration in Washington DC, that we believe recognizes the importance of maintaining a healthy US uranium mining industry,” said Stephen Antony, chief executive of Energy Fuels.

At the end of September the company had US$32.7mln of working capital.

Reflecting the currently depressed state of the uranium market, the company posted a net loss of US$4.77mln on revenue of US$5.50mln.





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