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Energy Fuels (UUUU) - US Uranium & Rare Earths Hub Building Critical Mass

January 8 2021, 12:31 GMT

Energy Fuels

  • NYSE: UUUU
  • Shares Outstanding: 126.83M
  • Share price USD$4.07 (05.01.2021)
  • Market Cap: USD$552M

Energy Fuels is the leading US producer of uranium – the fuel for carbon-free, emission-free nuclear energy. Nuclear energy is expected to see strong growth in the coming years, as nations around the World work to provide plentiful and affordable energy while combating global climate change and air pollution.  

It’s been an excellent few weeks for Energy Fuels in the world of Uranium and Rare Earths as we approach the decision for the creation of the US Uranium Reserve, and we spoke to Mark Chalmers, President & CEO of Energy Fuels to discuss what this means for the company and their progress and opportunities going forward into 2021.

Uranium Reserve & Importance of $150M Budget

The US Uranium reserve will be a unique arrangement for the US government stockpile reserve, which doesn’t come into the market in terms of a tradable commodity.  So it becomes part of the US government holding, like an oil reserve.  It is an endorsement of the government that they need a Uranium industry in the United States, and that nuclear power is important for the country going forward. The focus should be on proven producers that have a history of production and know that their projects work.

The US has a long history of producing Uranium and nuclear fuel and is now seeing renewed interest in nuclear power. The United States is the largest consumer of Uranium nuclear products in the world, consuming 25% to 30% of the world’s Uranium. There is a need to protect the US capabilities for producing Uranium and the creation of a US Uranium reserve covers the basic steps of that fuel cycle in the US. 

Sustainability & Potential Price Adjustment

Energy Fuels believe that the government should buy existing inventories from companies that have inventories and there are not very many of those. Energy Fuels has an inventory of around 700,000lbs that they produced during the period of the slow market environment mainly from their conventional assets, through different sources.  So they’re hopeful that these inventories would be the first material that could go into the Reserve, because others have to re-start operations that will take a year to even be able to produce any Uranium. And with and Developers unlikely to be able to get into production for 3-5 years, it puts Energy Fuels at the front of the line.

Energy Fuels (UUUU) - US Uranium & Rare Earths Hub Building Critical Mass

So, they think the first step is the inventories; and then the next step is to start building up a few operations that can start filling the Reserves in a couple of years.  If Energy Fuels is able to sell their inventory at elevated prices it gives them a strong balance sheet to start developing some more projects.

Positioning Energy Fuels & Progress Made

Energy Fuels has held onto their inventories because it felt that the price of Uranium had to go up. They have both Uranium inventories and Vanadium inventories and between the 2 of them there is around USD$30M of inventories as finished goods that can be sold when the time is right.

Energy Fuels (UUUU) - US Uranium & Rare Earths Hub Building Critical Mass

The Market in 2020: Catalysts, Timeline, & Interest

Looking back at 2020, we have seen significant impact on supply, with Kazatomprom, Cameco, again recently shutting down production, and others too. As Uranium demand increases, many projects are being depleted and some are closing down completely, such as Australia's Ranger project after 40 years continued production.

People are realising that nuclear is a critical part of the future in energy supply, the Uranium reserve is on the horizon plus the change of administration, with Biden’s platform supporting nuclear are all combined reasons why there has been a recent upswing for almost everyone in the Uranium space. It is good to see some energy come back in and investor sentiment increasing substantially in the Uranium market. 

Energy Fuels (UUUU) - US Uranium & Rare Earths Hub Building Critical Mass

New Entrants, Time to Off-Load Assets?

Energy Fuels has been actively trying to sell a few of their non-core assets to create more value for their shareholders. They’re good assets but they have too many assets to give them all the attention they need and need to be able to concentrate on their core businesses. 

US Hub for Rare Earths: Progress & Possibilities

Energy Fuels is excited about the Rare Earths focus that they’ve taken and they have made significant progress.  They announced in April they were getting involved and they knew the White Mesa Mill could play a very important role, because they can extract Uranium from the Rare Earth sources using their facilities and the permits to do it.  They also have a team with some of the world’s most successful companies and experts in the area which has given them a lot of traction. We explore these relationships in some of our other articles on the topic.

Energy Fuels (UUUU) - US Uranium & Rare Earths Hub Building Critical Mass  

Deal with Chemours Company: Terms & Opportunities

The announcement Energy Fuels made regarding their agreement with Chemours is very exciting for the company. Chemours is based in the United States and is mining very high-grade Monazite in their Florida/Georgia region. This first Agreement represents about 10% of the US requirements and they believe it has the ability to ramp up the quantities to maybe 2 to 2.5 times of the initial Agreement. 

It’s a 3-year agreement for a minimum of 2,500t/year and it is material that was going to China but the White Mesa Mill is much closer so there is a shipping advantage too. They are hoping for a long term agreement with Chemours and appreciate the importance of having a critical material production in the United States. They have made this first step and they will need to increase the quantities more, to get the economics of scale.

Energy Fuels (UUUU) - US Uranium & Rare Earths Hub Building Critical Mass

Process Going Forward: Timeline, Financing, Upgrades

They are aiming for full integration and are planning to grow this alongside Uranium as their core business.  The first step is to build on the commercialisation of the Rare Earths Carbonate and to do that they had to spend USD$3M on the plant which was almost nothing as they are mainly using existing equipment.  They are looking for supply agreements to do separation for them as they don’t have those capabilities just yet. But they are planning to do separation with the existing infrastructure at the Mill in 2021.  The investment will cost about USD$100M to move the separation and about USD$50M to USD$75M to move the metal and alloys, so USD$150M - USD$200M for full integration. 

These costs will be followed up with engineered estimates and they have hired a group to do that going forward. They plan to secure the feed and show that they can make the Carbonate, which they are already doing at scale, and then move to separations and look for full integration in time to try to build up a company looking towards those USD$3Bn to USD$4Bn companies that currently exist.

Do US Uranium Companies Need the Government Support?

It is important to have some support from the US government, because of the national security implications being dependent on some countries like China and Russia, and state-owned enterprises.  Energy Fuels is aiming to be one of the world leaders in terms of cost competitiveness and production. Now that the agreement with Chemours has been signed they will start talking to end users of the Rare Earths products. like Tesla, General Motors, Siemens etc.

Focus for 2021

Energy Fuels has a new Rare Earths opportunity in front of them, but also have the original Uranium and Vanadium business and they will try to give them equal balance as the Uranium is their core business. They are in a great position in the Uranium business in the United States, but also could be a significant Rare Earths player in the United States too. See our rare Earths Article. They will be concentrating on both sectors to give them equal balance as they go forward into 2021 and we look forward to hearing their news as we go through the year.

Energy Fuels (UUUU) - US Uranium & Rare Earths Hub Building Critical Mass

To find out more, go to Energy Fuels' Website.   


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