The company supplies uranium (U3O8) to major nuclear utilities and can also produce vanadium from some projects as market conditions allow
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 the US.
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 said it is in talks with several entities, including the US government, about the potential 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 two 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
In addition to the above, 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:
In its most recent development, Energy Fuels said on March 2, 2021, that it is teaming up with Neo Performance Materials (TSE:NEO) 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 earths separation facility in Estonia. The firm is also evaluating the potential to develop separation facilities in the US.
In December 2020, Energy Fuels announced that it is set to become the first US company in several years to produce a marketable mixed rare earth element (REE) concentrate ready for separation on a commercial scale.
This comes after the company reported that it has entered into a three-year supply agreement with The Chemours Company (NYSE:CC) to acquire a minimum of 2,500 tons per year of natural monazite sands from the Offerman Mineral Sand Plant in Georgia.
Energy Fuels said it plans to process the monazite at its White Mesa Mill in Utah beginning in 1Q 2021, while also recovering the contained uranium, which it believes represents an important step toward re-establishing a fully-integrated US REE supply chain.
The goal is to process at least 15,000 tons of monazite per year for the recovery of REEs and uranium, which would represent about 2% of White Mesa’s throughput capacity.
Energy Fuels has said it expects to have between 670,000 and 700,000 pounds of finished uranium and 1.672 million pounds of finished vanadium in inventory at the end of 2020.
The company has also been able to produce a rare earth element (REE) carbonate concentrate on a pilot scale at its 100% owned White Mesa Mill in Utah, which it believes is the first REE concentrate produced from monazite sands at any significant quantity in North America in more than 20 years.
Energy Fuels noted that it is in negotiations with various parties to procure sources of monazite sands that can potentially be processed on a commercial scale at the Mill for the recovery of REE concentrate and uranium. In addition, it is carrying out ongoing discussions on the possible sale of REE concentrate produced at the Mill to an REE separation facility.
The company ended its third quarter of 2020 with working capital of $44.7 million, a 17% quarter-over-quarter increase, which includes $28.1 million in cash and marketable securities plus $25.6 million of concentrate inventory and work in progress. As of October 6, 2020, the company was debt-free for the first time since 2012.
What the broker says:
Analysts with Noble Capital Markets on March 3 reiterated their ‘Market Perform’ rating on Energy Fuels’ shares, a day after the uranium firm announced its outtake agreement with Neo Performance Materials.
Noble noted that Neo will take 80% of the rare earth products processed from monazite sand by Energy Fuels’ White Mills plant and that the agreement includes a put option for Energy Fuels to sell the remaining 20% as well as a right of first refusal option for Neo for additional monazite purchases.
“The agreement will only use only 2% of White Mill capacity, leaving room to expand either monazite/rare earth operations or start-up uranium operations,” the analysts wrote.
The analysts noted that Energy Fuels and China are the world’s only producers of monazite: “Other mills may follow Energy Fuel’s lead, but UUUU will have a first mover advantage should the fledgling industry take off. Should the company move to start separating rare earth elements, it could be especially lucrative for the company.”
Going forward, the Noble said they expect that the processing of rare earth elements will generate several million dollars in free cash flow for Energy Fuels.
They added: “However, with excess capacity at the mill, it is not hard to see this free cash flow estimate expand quickly with new agreements. With no other monazite processing plants to use as a comparison, we have not yet factored the agreement into our models. Instead, we simply view the movement into monazite processing as a positive step with large potential.”
Inflection points:
Commercial rare earth concentrate production possible in 2021
Update on government budget proposal
Uranium/vanadium price moves
What the boss says:
“By using existing infrastructure and technologies at the Mill to recover the uranium and the REEs from monazite sands, we are able to avoid the years of permitting and development, along with the tens, or even hundreds, of millions of dollars of capital that others would be faced with. Assuming the company is able to secure adequate quantities of monazite sands, we expect to be in a position to produce commercial quantities of REE Concentrate by early 2021,” Energy Fuels CEO Mark Chalmers said in a recent statement.
He added, “successful testing at scale also demonstrates the importance of the White Mesa Mill in helping the US re-establish its domestic REE supply chain.”
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