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Energy Fuels helping to restore US rare earth production

Snapshot

Energy Fuels supplies uranium (U3O8) to major nuclear utilities and can also produce vanadium from some projects as market conditions allow

Energy Fuels Inc. -

Quick facts: Energy Fuels Inc.

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TSX:EFR

Price: 8.87 CAD

Market Cap: $1.32 billion
  • Largest producer of uranium in the US
  • Leading producer of vanadium used in batteries, steel, and chemical industries
  • Recovering rare earth elements (REEs) at White Mesa mill in Utah

What Energy Fuels does:

Energy Fuels Inc (TSE:EFR) (NYSEMKT:UUUU), headquartered in Colorado, is a fully integrated producer of both uranium and vanadium, and owner of the only operating conventional uranium mill at White Mesa in Utah.

It supplies uranium (U3O8) to major nuclear utilities and can also produce vanadium from some projects as market conditions allow.

The firm's White Mesa mill has a licensed capacity to produce over eight million pounds of uranium a year, and can generate vanadium when market conditions warrant. The mill is also licensed for the production of other minerals, including tantalum, which has made it onto the US government's 'critical minerals' list.

The White Mesa mill is also operating under a new processing deal to assist in the cleanup of a formerly producing, Cold war era abandoned uranium mine in New Mexico.

Energy Fuels has started to recover both light and heavy rare earth elements (REEs) at the mill, as well as uranium from certain natural ores and alternate feed materials.

Meanwhile, the group's Nichols Ranch ISR Project is in operation and has a licensed capacity of 2 million pounds of U3O8 per year. It is currently producing and has generated over 1.2 million pounds of uranium since 2014. The Alta Mesa ISR project is currently on standby

Energy Fuels also has one of the largest NI 43-101 uranium resources in the US and several uranium and uranium/vanadium mining projects on standby and in various stages of permitting and development.

How is it doing:

On August 2, the company reported that it had $98.8 million of working capital, including $79.4 million of cash and marketable securities, as of June 30, 2021. At current commodity prices, its inventory had a value of $39.1 million. 

With several existing uranium mines on standby and significant existing inventories of company-produced, US-origin uranium, the company said it continues to be ready to supply uranium into improved global markets and the proposed US Uranium Reserve once it is established by the US government.

During the first half of 2021, Energy Fuels began ramping up to commercial-scale production of a mixed REE and carbonate (RE Carbonate) as a complement to its uranium business. In July 2021, it commenced deliveries of its RE Carbonate to a separation facility in Europe.

The company also recently entered into a definitive agreement to sell a package of Energy Fuels' non-core conventional uranium projects located in Utah and Colorado to International Consolidated Uranium Inc. (CUR). Based on CUR's current share price, exchange rates, and assuming the closing and full performance of the agreement, the current proforma value of this divestment is about $24 million.

The company also entered into a strategic alliance agreement with RadTran LLC, a private technology development company, to evaluate the recovery of thorium and potentially radium from the company's RE Carbonate and uranium process streams -- as a complement to its uranium and RE Carbonate businesses -- for use in the production of medical isotopes for emerging targeted alpha therapy (TAT) cancer therapeutics

In April 2021, Energy Fuels announced a non-binding memorandum of understanding with Hyperion Metals Limited, in which Hyperion would send natural monazite sands from its Titan Project in Tennessee to Energy Fuels for processing. Energy Fuels plans to produce mixed REE products at its White Mesa Mill from the monazite sands it receives.

In addition to producing mixed REE carbonate, Energy Fuels is also evaluating the potential to develop US separation, metals, alloys, and other downstream REE capabilities at the White Mesa Mill or nearby. The company hopes to increase its supply of monazite feed to approximately 15,000 tons per year for this initiative. 

Energy Fuels also revealed recently that it has teamed up with Neo Performance Materials on a new US and European rare earth production initiative. The program will produce value-added rare earth products from natural monazite sands, which is a byproduct of heavy mineral sands mined in the southeastern US.

Energy Fuels will process the monazite sands into a mixed rare earth carbonate in Utah to use as feedstock for Neo’s rare earth separation facility in Estonia. The firm is also evaluating the potential to develop separation facilities in the US.

What the broker says:

In a note published on August 2 following Energy Fuels' 2Q results, analysts at Noble Capital reiterated their Outperform rating on the company’s stock with a $9 price target. 

The analysts noted that the company closed its quarter, which ended June 30, with a "strong" balance sheet -- $98.8 million of working capital, including $79.4 million of cash. 

“A strong balance sheet leaves the company well positioned to expand uranium and vanadium production, or enter into REE separation, should pricing justify such investments,” analysts said. 

However, the analysts said the company’s net loss of $10.8 million was below their expectations, due to higher costs associated with REE and a later-than-expected first shipment of REE, the revenues from which will fall outside the quarter.

Nevertheless, the analysts said that “we believe the overall story remains intact and believe we are starting to see the initial signs of an expected improvement in prices.”

In fact, analysts said, prices for uranium, vanadium, and REE prices have risen 7%, 83%, and 48%, respectively. 

Energy Fuels’ stock currently trades around $5.41 a share in New York.

Inflection points:

  • Commercially produce an REE product more advanced than any other US company
  • Update on government budget proposal
  • Uranium/vanadium price moves

What the boss says:

"Energy Fuels achieved another significant milestone in restoring U.S. rare earth supply chains when we recently announced the successful production of rare earth carbonate from U.S.-sourced natural monazite sand at our White Mesa Mill,” said CEO Mark Chalmers in a recent statement.

“We are also very excited about our recently announced Strategic Alliance with RadTran, which has the potential to help produce isotopes from our existing RE Carbonate and uranium process streams for use in cancer therapeutics that can improve human health and ultimately save lives. These two initiatives, which are complementary to our core uranium business, are examples of the unique and valuable capabilities of the White Mesa Mill.”

Contact the author: patrick@proactiveinvestors.com

Follow him on Twitter @PatrickMGraham

 

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