Noble Capital is upgrading its rating on Energy Fuels Inc (NYSEAMERICAN:UUUU) (TSE:EFR) to ‘Outperform’ and slapping a $9 price target on the stock after “increased recognition” of the value of the company’s Rare Earth Element (REE) strategy.
The integrated resource company is making strides toward building a critical US rare earth supply chain with the development of an REE carbonate production program at its White Mesa Mill, which was ramped up during the first quarter of 2021.
“Although difficult to quantify financially, we believe the processing of REE will provide significant cash flow to the company,” Noble wrote in a note recently.
“Management has indicated its intent to process 15,000 tonnes of sand per year, which would represent approximately half of the national demand but less than 2% of the capacity of the White Mesa plant. Management has also indicated its intent to move to separate REE concentrate into individual elements.”
Outside of rare earths, Energy Fuels cut its teeth supplying uranium (U3O8) to major nuclear utilities. The White Mesa Mill is the only conventional uranium mill operating in the US today, has a licensed capacity of over 11 million pounds of U3O8 per year.
Noble wrote it believes that the company is well-positioned to take advantage of an expected increase in uranium prices, citing its unlevered balance sheet, experienced management team and control of licensed processing facilities.
“The success of Energy Fuels and its stock price is largely tied to the success of the domestic uranium industry,” the analysts wrote.
“If uranium prices return to historical levels above $50 per pound, all domestic uranium companies including Energy Fuels will do well. We believe such a move will occur in the next few years in response to rising demand and decreasing international supply of uranium…Energy Fuels is licensed to produce 11 million pounds of uranium, which would represent more uranium than has been produced in the United States in any given year.”
Energy Fuels ended its first quarter with US$60.4 million in working capital and around $28 million worth of inventory, including 690,800 pounds of uranium and 1,672,000 pounds of vanadium – both immediately marketable, according to the firm.
Shares of Energy Fuels were up 8.3% in New York at US$6.30 and 8.8% in Toronto at C$7.63 at the midway point of Wednesday’s trading session.
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