Energy Fuels (NYSE:UUUU) – Does The NFWG Report Change The Game?

The Energy Fuels company logo
Energy Fuels Inc.
  • Shares Outstanding: 118M
  • Share price US$1.50 (01.05.2020)
  • Market Cap: US$176M

Interview with Mark Chalmers, President & CEO of Energy Fuels (NYSE:UUUU).

Energy Fuels is America’s premier uranium producer, and Mark Chalmers was one of two CEOs who originally petitioned the U.S. government under section 232. That petition has led to this moment: the DoE’s NFWG report that carries recommendations for the U.S. government to restore America’s competitive nuclear energy advantage.

Chalmers is very pleased. Some investors have been disappointed by the lack of detail and specifics, but Chalmers is happy with the report considering it is merely a policy document with more to come.

Will the report help the American uranium space. Will it help uranium producer, Energy Fuels. Chalmers certainly thinks so. Uranium could be in for 2H/20.

We Discuss:

  1. Nuclear Fuel Report Announcement: Opinion and Expectations
  2. Shareholder & Investor Concerns: Near-Term Impact
  3. Ur-Energy and Energy Fuels: Direct Beneficiaries or One of Many?
  4. $60 Uranium: The Process of Getting There
  5. Nuclear and Renewables on a Level Playing Field: Who Gets the Subsidies?
  6. Utilities: Time to Stop Being Used to Cheap
  7. The Future for Energy Fuels

If the uranium space is your kind of thing, why not read one of our recent uranium articles, or watch one of our latest uranium interviews?

Company Website:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Energy Fuels company logo

Energy Fuels (NYSE:UUUU) – I believe in new beginnings (Transcript)

The Energy Fuels company logo
Energy Fuels Inc
  • Shares Outstanding: 115M
  • Share price US$1.78 (01.05.2020)
  • Market Cap: US$205M

Interview with Mark Chalmers, President & CEO of Energy Fuels (NYSE:UUUU).

Off the back of the promising NFWG report, Chalmers was keen to talk about what this could mean for US uranium producers and Energy Fuels. The report talks about restoring America’s competitive nuclear energy advantage. What is Chalmers’ take on the report?

Energy Fuels was one of the two American uranium CEOs (Ur-Energy was the other company) to petition under section 232 petition, he must be feeling quite pleased of himself. They managed to get a Nuclear Policy document out of the US Govt Department of Energy. Chalmers states it not very often that a sector can be this impacted by something like a report from the US government, but uranium is a unique case.

Was the document what Chalmers was expecting? He thinks it’s the boldest position the US government has taken on the nuclear fuel cycle in decades. Many uranium retail investors have been concerned at the lack of detail in the document, but Chalmers is clear: this is a policy document. There are still things that need to be filled in, but the language and narrative that is being created appear to be strong: American uranium mining and operations must be supported.

For Energy Fuels, a company ready to pull the production trigger, this latest catalyst could lead to real growth. They have 500,000lbs of material in inventory at surface, and as much as 700,000 by the end of this year, waiting to be processed at the right time, in the right price environment. If the US Govt does re-energise its nuclear industry, American uranium producers who are ready to move will benefit the most. Those are the companies that will be able to sit at the table with utility companies and negotiate long-term supply contracts. The uranium juniors that are left floundering around with lengthy permitting processes and explorative drilling will be left out in the cold.

Energy Fuels appears primed to move; its White Mesa Mill is capable of processing 2,000t of material per day. This is likely to be key to rebuilding the North American uranium industry: the only fully-functioning conventional mill in the entire country. The first step will be U308 purchases, but Chalmers is observing the situation calmly. Chalmers thinks the government needs to focus on a few producers by being selective, rather than spreading uranium budget to lots of small uranium explorers and developers.

Does America need to focus on the few to restore its uranium prestige? Chalmers states the regime of the government should be a buying schedule focussed on a limited number of ISR projects and the White Mesa Mill: the government should not be giving everyone a piece of the pie.

The spot price is up around c. US$33/lb, but Chalmers points to the price he feels is fair for “a pound of uranium produced in the western world:” US$60, or greater. This appears to be the “sustainable” figure that an industry can be rebuilt upon, though not all uranium companies will survive in such a price environment. Chalmers feels the US uranium space will continue to struggle until it hits long-term prices around US$60/lbs. Chalmers states that while Cameco may negotiate some contracts at US$40/lbs, the uranium giant will struggle unless prices rise much higher. The message is definitive: utility companies need to stop being used to dirt cheap uranium.

Moving onto specifics for Energy Fuels, what is the short-term focus? Cashed-up with 3 good assets, an experienced management team, and a great mill, Energy Fuels has a lot going for it, but what will it do to add value for shareholders? Chalmers will seek clarity from the DoE on the report and will advocate for themselves, being the producers of 35% of American uranium supply in the last 15-years. Selling inventories and working on alternate feed remain are other priorities; the rare earth elements play could be a real gamechanger.

What did you make of Chalmers? Comment below: we will respond.

We Discuss:

  1. Nuclear Fuel Report Announcement: Opinion and Expectations
  2. Shareholder & Investor Concerns: Near-Term Impact
  3. Ur-Energy and Energy Fuels: Direct Beneficiaries or One of Many?
  4. $60 Uranium: The Process of Getting There
  5. Nuclear and Renewables on a Level Playing Field: Who Gets the Subsidies?
  6. Utilities: Time to Stop Being Used to Cheap
  7. The Future for Energy Fuels

CLICK HERE to watch the full interview.

Matthew Gordon: Hey Mark, how are you doing, Sir?

Mark Chalmers: Very good, Matt, how are you?

Matthew Gordon: I’m fine, but I haven’t had the kind of couple of days that you have had since yesterday. So, we got a bit of an announcement from the US Department of Energy yesterday. How’s that been for you?

Mark Chalmers: Well, it’s been a wild, it was a wild day, that’s for sure. There was a lot of shares that transacted, I think, across the globe. You know, it’s not very often that you’re in a sector that can’t be pushed around by things like a report from the US government. But look at the interest that you know, it kind of, and how it played out in the last 2-days, everywhere in the Uranium space in the world. So you know, I’m kind of proud that at least some of our involvement, you know, may have kind of created some interest in this space.

Matthew Gordon: Well, it has certainly done that. I mean, since the moment you submitted the section 232 petition through to now, I guess the Uranium space has been holding its breath, unfortunately, almost figuratively, and literally in some cases, holding its breath and trying to work out what was going to happen. That finished then of in the middle of last year, the nuclear fuel working group then put its head, or heads together to try and come up with a recommendation that it did yesterday. So, this discussion document and recommendation was talking about how to restore America’s competitiveness in the nuclear fuel, and I think, nuclear fuel advantage, they used, but the competitiveness globally. It was a very bold document in terms of the macro, but was it what you were expecting?

Mark Chalmers: Well, look, we are pleased with the document, Matt, and you know, it’s probably the boldest position the US government has taken on the front end of a nuclear fuel cycle in decades. Okay. It doesn’t have a lot of details in it, but I think you have got to go back to the fact that it is a policy document. Okay. You know, there’s still things that have to be filled in here but there was some very strong language about the importance of the whole nuclear fuel cycle including Uranium mining and how Uranium mining had to be supported and needed assistance. So, look, as I said, we’re pleased with the document. Yes, would we all like more details? Yes, we would, but you know, we’re proud that we had a significant role in getting the United States government to take a policy position that hadn’t been taken for decades. So yes, we’re happy with the document but we are awaiting more details.

Matthew Gordon: Okay. I know you have just come off of a call with shareholders and people listening in this afternoon, what were the kinds of questions that you were fielding? Were people concerned that this document has done nothing for you? That there’s no clarity about what it means for Energy Fuels? What were they concerned about?

Mark Chalmers: Yes, look, I think that you know, initially, some that reviewed the report thought it didn’t have a lot of detail in it and they were disappointed with that but I do think that once we kind of explained to people that it’s a policy position, it’s a stepping stone, a very significant stepping stone, they become more comfortable with that. You know, I think that some of the questions are just, well, so how does it all work? And we say, well, we don’t know yet, but we think that it’s focused on keeping the front end alive and prosperous. But it’s also not trying to overdo it too. I think that there’s a focus, or will be a focus, and again, I’m speculating a little bit that, you know, it should be focused on proven existing producers, existing infrastructure but it also says that they will review it periodically to make sure that they are achieving the objectives. So, it’s really kind of a policy roadmap for the whole front of the fuel cycle; recognising you need all the steps in that process: Uranium mining, conversion and enrichment. But you also need a healthy nuclear fleet to have all those legs covered. And that was the purpose of nuclear field working group. It was a more holistic approach than the section 232.

Matthew Gordon: No, I mean, that’s for sure, but with that macro picture that they’ve painted, and we will focus on what it means domestically firstly, it means that they’re trying to get actually get their house in order for the first time in 30 to 40-years. And they do talk about taking China and Russia head on, and I get all of that. It’s a very ambitious program. Those ambitious programs cost money, they take time, a huge amount of planning and working out the economics of these things. So, me as an investor, people watching as investors thinking, well, what does that mean for US mining companies today? And I think some of them have latched on to the phrase, or the line that was used – direct purchase starting 2020. Is that going to be beneficial to you? Do you understand what it means?

Mark Chalmers: Well, look, we don’t entirely know what it means, but we think that 2020, we don’t think that was an accident. The budget package that was submitted by the president for the 10-year program was starting in 2021, so we’re asking and still advocating for immediate action, perhaps through some executive process, you know, that may be available to the president. And in our case, and probably in your energy’s case, matter of fact, I know in their case, our two companies have inventory and we would like to be able to sell that inventory at a premium price this year in 2020. You know, we think that’s the best way to stimulate those particularly existing producers because we have held that inventory because, you know, it didn’t have fair value in the marketplace. And you know, that could give us a huge boost in the near term. So, we hope for purchases as a first step, but we’ll see. We don’t know.

Matthew Gordon: It also refers to, at least to US producers, I mean, Ur-Energy and yourselves are the petitioners, do you think that they are referring to you specifically or was that just a throwaway phrase? Could be anyone?

Mark Chalmers: It looked good. I don’t think it’s specific to the two companies. It says at least two, it could be more than that. But I do think that when you look at the nuclear fuel stockpile and the demand that that would have, I don’t believe it’s been meant to be split 8 or 10 ways, for 8 or 10 producers. I think it needs to be fairly selective, focused on a few producers. I think that it certainly should be focused on some ISR production. But I also think it should be focused on White Mesa as the only conventional mill in the United States and the fact that not only is it the only conventional mill, it is the only primary Vanadium facility, production facility and that the other benefits that that project has now, or potentially could have in the future.

Matthew Gordon: Okay. So when you talked to us a moment ago about a premium, are you talking about a premium to today’s price, presumably if you’re, if you’re looking for a number, what number are you picking?

Mark Chalmers: Well, look at the spot price is up to about USD$33/lbs today, I believe, which is certainly much improved from that USD$24/lbs, $25/lbs, but it’s still not high enough to provide for sustainable production. You know, we have always said and continue to say that the fair price of a pound of Uranium produced in the Western world is USD$60/lbs or greater. That’s a sustainable price for proven low-cost producers. Many companies cannot produce Uranium for that, as a matter of fact, a lot of them cannot produce Uranium for that in a sustainable way. So, look, we think it should have a sixty handle on it plus, we think USD$65/lbs is sort of the real number.

We can produce Uranium for less than that. You know, some of our projects, like the Canyon mine can be much, much lower than that but you know, we have had these assets for a number of years and we don’t want to hydrate them and not get the margin that we deserve on these assets, and the money that has been spent on those assets over the course of many, many years. So, you know, even companies like Cameco, you know, they don’t talk up with, you know, with four handles on a lot of their production. They might sign some contracts within the forties if they can trade into them. So yes, we need sustainable Western world costs and values on the inventory.

Matthew Gordon: Okay. So, if you are to get that, you need to be part of a dialogue, part of a process where there’s some form of negotiations and explanation as to why you need the price that you want. Our conversations like that are already in the works because I’m looking at this policy document. I think that’s a great phrase that you used earlier; it is a policy document. It’s going to need to engage stakeholders, you being one of them, Uranium miners being one of them. Have they set those up? I mean, how quickly are things going to move into motion? Have you any idea that they’re even going to do that?

Mark Chalmers: Yes, look, I think that getting this document out kind of sets the stage for going into more details, you know, so it hasn’t really started yet. Personally, from our company’s perspective, we like the concept of a buying schedule, which is how the United States bought Uranium for like 30 years. It was very successful. They just basically set a price and they said you know, any company, now you start talking about 2 or more companies, but any company that can provide Uranium at a price can participate. We think that’s the fairest way of doing it. Even though, as I said earlier, we don’t think it should be split, you know, 10 ways because it’ll dilute it too much. But we think that a commitment by the government over several years to purchase Uranium, it’s the equivalent of a contract where those that can deliver. And I think that is a very straightforward, very simple way to make sure that the money spent goes to those that can deliver.

You know, there’s people out there that say they can produce economically in the United States for USD$40/lbs. We can do that. We can do that with production from Canyon or we can do that from alternate feed. We could probably do it from our ISR facilities, but with no margin. So, the best way for the government set it up is to just set a price at what’s available and let people compete for it. Okay. Some people don’t want to compete. We’re fine with that.

Matthew Gordon: They also talk about creating a level playing field between nuclear energy and renewable energy. I mean, do you think that applies to the Uranium miners or was that more to do with the reactor side of things? I mean, who is going to be picking up the subsidies? Because I assume they’re not going to stop subsidising renewable energy. So where are the subsidies going to be distributed to? Who is going to be the beneficiary?

Mark Chalmers: I’m not completely clear on that. I think they certainly made a point of having a fair and balanced fuel market for the nuclear reactors for, in some cases they’ve had to try to unfairly compete against renewables with some of the subsidies there. And look, we’re not really, you know, I’m not a believer in subsidising industries that shouldn’t survive. But, you know, that’s why I kind of go back to this Western world. You know, the report is very focused on computation with state owned enterprises. If you look at, you know, in the sixties, many of us that were producing, had contracts with utilities just even a year or two ago that were USD$60/lbs or greater because utilities were willing to pay that five or six or seven, 8-years ago. Okay. So that was the fair price of Uranium at the time before Fukushima, or just after Fukushima. So look, you have got to kind of look at it in the context of the market, the extra inventory that was available after Fukushima, you know, everything had kind of geared up, and focus on the true value of what is a fair price and in jurisdictions that have the regulatory framework, safety frameworks and whatnot, to produce Uranium responsibly.

Matthew Gordon: Okay. Okay. Is there a little bit of you that is glad that this is finally over? You know, this is the report, this is how they have chosen to respond to the market and now you can let the market decide the supply-demand fundamentals, decide how Uranium gets priced?

Mark Chalmers: Yes, look, we see this as a big step in the right direction, Matt. It is not the only step, as you said, there’s going to be a lot of work behind the scenes on, you know, the devil’s in the details as they say. So, we know there’s a lot of work to do here, but we are glad they have released a report, and it echoes what we have been saying for several years now.

Matthew Gordon: Right, so the US government gets it. So, that’s fantastic. But I’m trying to wonder, well, I’m wondering what it means now for utility buyers. It gives them maybe some comfort that there is a plan in place, potentially. I know it’s got to get through Congress. It’s got to get financing approvals and so forth, but it is going through a process, they have finally set out a policy document, so that’s great. But what are utility buyers now thinking in terms of this massive burgeoning gap between supply and demand numbers? We have been going through some of the UxC numbers, trade tech numbers, estimates, which are bouncing around the market about what that gap is, but whichever number you listen to, it’s big. So, when do we think we’re going to start seeing utilities recognising that they are going to just have to step up to the plate and actually pay more for Uranium?

Mark Chalmers: You know, I think it is important to sort of separate some of the recommendations in this report from the commercial market, for example, the nuclear fuels stockpile is US government material. It is basically unobligated material that they can use for their purposes, not necessarily in power generation, but they could use it for power generation. You know, I think that one of the issues that we have been addicted to; foreign Uranium, particularly state-owned enterprise Uranium, a lot of utilities have gotten addicted to the low price. And you know, I think that’s dangerous. And they’ve done that for a number of years. I think that certain things like the Russian suspension agreement, which is mentioned in the report is currently being renegotiated. That’s becoming more focused on enrichment capabilities and I think that that’s where the utilities want the cheapest product they can get enriched.

And so, you know, it all is sort of separate but not separate. So, I don’t know when the utilities, and I understand utilities, some of these plants are struggling, you know, and small amounts of money, you know, are difficult. But you know, we think that they need to have a portion of their product coming from Western producers and right now that is really not the case. You know, there’s some residual contracts that are out there, but they’re going to be falling off in the next year or two completely. And we cannot just say we’re going to get the cheapest producers, these state-owned enterprises, primarily in Russia, and Kazakhstan, Uzbekistan, and growing in China.

Matthew Gordon: Okay. So, they’re addicted to cheap prices and they’ve got an aging reactor fleet, which is, I can see it, you know, those are not good things. But how do you think they are looking? We will come back to the policy document. They haven’t got the reassurances that they want, that they’re going to receive subsidies for their aging fleet either, so that is going to affect the decision making, surely?

Mark Chalmers: Well, look, I think some of the stronger statements in the report were support for FERC to try to level the playing field for them and everything. And I think that’s fantastic. I think it’s great. I don’t want any of their reactors to go out of business because of the price of fuel. Now, the price of fuel is not the big issue for these reactors, you know, I mean, sure, it’s a piece, a very small piece, but a lot of it is the markets that they are operating in. The natural cost of natural gas is so low and there’s a lot of different factors, so, it’s a lot bigger than the front end of the nuclear fuel cycle. It’s just a small piece of it. But I understand it is a piece and if they can manage that to the best of their abilities, they’re going to try to do that. But it should not be at the expense of losing the front end of the fuel cycle.

You know, I think that, again, you know, with the words in the report, the government is saying, we need all of this. We need mining, conversion, enrichment and a healthy nuclear generating fleet as well. So, the beauty of the report is it’s holistic and it’s saying we need it. You know, it’s proven fact that there is no such thing as a sustainable nuclear fuel cycle in any country without a level of government support. And a lot of that support disappeared over the last couple of decades because it ceased to be a priority. This report is making it a priority again. So, again, I wish all the best for the utilities, but let’s not get addicted to cheap.

Matthew Gordon: Okay. You have said that to me before. I know you believe it. What’s the next thing you’re going to do? Next week, what is the focus for you as a business? So, there are things there that you can control and there are things that you cannot. And again, we have talked on a few occasions before, you have got money in the bank, you timed that right. You have got an experienced management team, you have got three good assets, you have got a great mill, so you have got all a lot of things going for you. But what are you going to focus on next week so you can turn to your shareholders and say, right, my number one priority for you is, what?

Mark Chalmers: You have heard me say this multiple times; we are first and foremost a Uranium producing company. So, we’re going to try to get more clarity out of the DOE report. That’s kind of the next steps. You know, we’re certainly going to be advocating that we think that our history of producing nearly 35% of the Uranium in the United States over the last 15-years should give us attention for the right reasons, but we are still going to be multitasking these other aspects of our business as well too, but at a lesser focus than Uranium business central.

Hopefully, the price of Uranium will continue up to go up. I think there are some really positive signs on the settling out of supply demand issues globally. You know, in a perfect world, everybody can float, their boat will float because of the right reasons on the front steps of the nuclear fuel cycle, right on through the whole process. But so, we’re going to try to, you know, and we’re not building our company around just the government because we have more things to our business than others: most others are 100% focussed on Uranium. So, you know, we will get more certainty. We will start to look at how we can capitalise on immediate relief from the government, selling the inventories and preparing for filling a significant portion of the national stockpile.

We will continue working on our alternate feed land clean-up and then the rare earths. We are still getting huge interest. I know people kind of go, well, why are they getting into rare earths? But you know, this is exciting for us. This is exciting for us. And I’m hoping to show people that we’re building another complete and, hopefully, a significant business in the future for our shareholders, but we will always be first and foremost a Uranium producer.

Matthew Gordon: Okay. Got it. So just on that, because we talked last week about the rare earth components, which again, you know, it took everyone by surprise. What sort of calls are you getting? Are you getting inbound calls from railroad companies saying, can you process? You’re getting inbound phone calls from investors going, what are you doing? What kind of calls are you handling?

Mark Chalmers: A little bit of both, but we’re getting a lot of inbounds from rare earth experts. We’re getting inbound calls from people that have projects around the world. You know, and one of the key inbounds, and I said this on one of my last interviews with you is that dealing with the Uranium forum and radioactive products has been a substantial impediment for a lot of these rare earth companies over decades, and to find out that all sudden you have a facility that’s been around for 40-years and has experience in doing that and has a lot, not all our permits to do a lot of this processing, is out there and open for business people go – you’re connecting the dots.

Now, in the last few days, you have heard that the Department of Energy has released some funds to other companies that are more advanced in rare earths, or you know, as their core business, you know Linus out of Australia got a grant from the government, Mountain Pass Minerals got a grant from the government. I think these are fairly small: I don’t know the exact magnitude, but no, I think they’re, I’m just guessing around USD$5M or something, to design, you know, at least some initial concepts on facilities.

But there are various phases of these projects, of these steps and we think that we were maybe a little late there, but we still have a facility that can do a lot of these things that they need to do anyways. So, look, it has been significant, and I don’t blink when I say that. When I say significant, we’re excited about it. And as I said, we don’t think it gets in the way of our core business. We have got a very large facility. We have got a lot of land. We have got a supportive jurisdiction and we have been doing it for years. You know, I think I told you we have, we have already taken low level material from Mountain Pass for Uranium, from Cabot, Fan Steel. There are other rare earths and there are a few in the queue for the future. So we have been pretty close to it already with the material that we have taken from other sources for the Uranium values.

Matthew Gordon: No, I have to say that I did like that story. I liked that you came up with that idea for a new revenue stream, because we speak to a lot of rare earth companies who talk about, you know, trying to get the railroads stranglehold that China has, in a way, but they’re struggling to get all the components in place to be able to get their business up and running. So no, I think, well done on that one. Interesting to see how you get on with that.

Mark Chalmers: If you go to the World Nuclear Association’s website, and that is a great website. I go to it a lot. There’s a section there on Uranium in rare earths on the World Nuclear Association’s website. So, we’re not jumping off the track here. I mean, this is known, and we’re just planning to capitalise it in a bigger, greater way than we have in the past. So, you know, when you look back to these dependencies on China and Russia and critical minerals and critical materials and all that, just all sudden the band is playing pretty loud here. And if we are still first and foremost a Uranium company, and we can complement this with even something that’s on the World Nuclear Association’s website as a source of Uranium; I’ve said this to you before, why not?

Matthew Gordon: Why not? Why not indeed. Well, look, I know you have got a bit of work there. You were quite clear last time we spoke, you have got a bit of work to do around the economics and trying to understand the process, the options available to you. But as soon as you start understanding those numbers do let us know. I think it is a very exciting space. It’s a very high margins space. It’s a space where there’s a lot of people trying to get their economics to work and I think you could be an important part of that, a nice cog to help them as well. So yes, stay in touch about that one, for sure.

Mark Chalmers: Well, I’m definitely going to let you know, Matt, because you know, I mean, we have got a reasonably sized organisation, but I’ve taken very personal interest in this. I want the market to see that we’re going to do this in a smart way, and we will align with the right kinds of people with the right expertise to show that this is not a flash in the pan. This is a long-term focus that we think can really help the bottom line again, for our shareholders.

Matthew Gordon: Okay. Well Mark, I’m going to let you go because I know you have got a lot of calls lined up, but well done. I think people don’t realise what you have done, that you have got a policy document out of the US government for your industry, which is no mean feat. We just need to see how it is going to benefit the industry, but also benefit you this year. Keep pounding those doors and let us know if something interesting comes up. Okay,

Mark Chalmers: Will do Matt

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If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Energy Fuels company logo

Energy Fuels (NYSE: UUUU) – The White Mesa Mill: A Trump Card Investors Shouldn’t Ignore

The Energy Fuels company logo
Energy Fuels Inc
  • Shares Outstanding: 115M
  • Share price US$1.81 (29.04.2020)
  • Market Cap: US$208M

We’ve conducted and watched a lot of interviews recently in the relatively small, but extremely passionately held and followed uranium space.

Green uranium reacting in a glass vial with a uranium symbol and a nuclear symbol next to it

Passion Or Mania?

Sometimes, for some investors, the word passionate is interchangeable with the word maniacal.

What we have noticed, and have had discussions with institutional investors about, is how this passion (mania) can sometimes negatively affect investment decision making. We will come onto that later in this article.

Another thing that is quite often interchangeable is the statements from the CEOs of junior uranium explorers: “We have uranium in the ground and when the spot price returns our share price is going to through the roof!  We need a little bit more G&A funding while the market returns. Trust me. Just wait.”  I paraphrase, but you get the idea.

Clearly, not all uranium CEOs can be right. The truth of the matter is that the uranium market outlook is irrelevant for some of these companies because they’ll be going underwater even if the uranium spot price hits US$100/lb. Let me put it another way: just as when the gold price is high, like it is now, not all gold explorers and developers feel the benefit. The same is true for uranium.

Uranium: A Complex Space

The uranium industry also has the unwanted accolade of being extremely political.

East VS West still lingers in the mind. The rise and fall of nuclear powerhouses used to signify the nuclear arms race; now, it signifies the energy business. The US continues to fall behind China and Russia in the construction, supply and, in some cases, operation of nuclear reactors for a new wave of nuclear energy demand from all around the world. We are big supporters of the macro story for nuclear energy and therefore the uranium industry, but we are also conscious that we need to make money on our investments.

nobody has understood the inventory levels globally for the past 2-3 years

Share price stagnation has become endemic in the uranium industry. With the spot price of U3O8 only now creeping past the US$30/lbs mark, and with meaningful price discovery unlikely until Q4/20, investors in both uranium juniors and established producers have been left frustrated for the last 2-3 years. Some see the recent mine closures due to the COVID-19 pandemic as the final nail in the coffin for the utility buyers’ strategy. This remains to be seen. We do not understand the inventory levels out there.

A nuclear power station

It is now clear nobody has understood the inventory levels globally for the past 2-3 years. Even the best market commentators, fund managers, and uranium CEOs have been left scratching their heads as to why this clear, macro-driven supply-demand story has been able to defy the odds and cold hard logic. So, whilst it is fun to speculate on the timing, the wisest heads have hunkered down and, in some cases, doubled down on the uranium thesis, retreating from the chattering classes online. There is nothing to do but wait.

The Undeniable Macro Story

The uranium macro story is one that resonates.

There is an appreciation of the statistics pertaining to greenhouse gas emissions and climate change, and the reality is somewhat reassuring: the world will need much more uranium in the near future. Some 450 nuclear reactors in over 30 countries are hungry for uranium. Industry commentator and CEO of Bannerman Resources, Brandon Munro, recently stated that around 50% of total future energy production by 2050 would come from nuclear in an interview with us.

However, this does little to help investors today who are operating in a void. Should they cut their losses and bail, or do they continue playing the waiting game that may be increasingly detrimental to their individual investment strategies, financial security, and even their sanity?

We are told the only people who truly know when uranium will see a surge of demand for new material are utility companies, who have been depleting and replenishing their unknown level of reserves at a highly secretive rate. Speculation about their inventory is rife, with data and hard facts low on the ground. Catalysts have been aplenty, yet failed to even slightly affect the equities markets for the last 3-years. Truth be told, no-one has got this right….yet. So, with the closure of Cameco’s facility at Cigar Lake for an indeterminate period, KazAtomProm’s 3-months shutdown, Rossing and Husabs’ closure in Namibia, and the reduced output in Q1/20 from BHP’s Olympic Dam, could this be the moment uranium investors have been waiting for?

There is one particular piece of knowledge uranium investors MUST come to terms with.

Not All Boats Will Float on A High Tide

Sorry to keep beating this drum.

A sinking ship

There is a chance the uranium company you are currently invested in is going to lose your money. Can you remember why you invested in it? Do those reasons still hold up? Why that company VS its peers? We believe that some uranium companies that we have studied and spoken to will not survive without partnerships being formed and money being injected (money they can’t seem to find), in addition to some luck. Some have inherently flawed models, inexperienced teams, insufficient cash or access to leverage, lacklustre assets, a deficiency of options, and really aren’t positioned to ever get into production!

There is still an undoubtedly exciting upside for the Uranium market, although we are dubious that it will reach the c. $140/lb spot price heights that some are pushing; in fact, in a recent interview, Rick Rule himself expressed his skepticism, as did Brandon Munro in his CRUX Investor interview.

Back to basics

Elaborate ideas are always nice, but pragmatic optimism is usually more rewarding. Last year we had an article written on our platform by regular contributor, a Curious Investor.

Energy Fuels, America’s premier uranium producer (and a potential producer of vanadium), impressed us with its fundamentals: an experienced team who have been there and done it before, sufficient cash to see them through until uranium price discovery, a set of good assets, and the bonus White Mesa Mill, which could give them a strategic advantage, perhaps even a monopoly, over other juniors in the region.

Recently, we spoke with CEO, Mark Chalmers.  We wanted to talk to him about his company’s current situation. First, we’d like to take a look at Energy Fuels’ White Mesa Mill; ‘if you own the mill, you own the region’ is a common quotation. As one of three mills capable of processing uranium in the US, and the only one that is operating, not too many people would argue with Chalmers’ assertion that Energy Fuels is well-placed for when the market turns.

That said, some criticism has been thrown as Chalmers for the strong talk about the conditions under which he would allow US uranium producers to use his mill, and also about the age of the mill. Firstly, in the same position, I’d be surprised if other CEOs didn’t demand the same terms. Plus, he is looking out for his shareholders.

As for the age of the mill, it reminds me of a classic car sale a few years ago. The car sold for c. US$3M. It was a stunning looking car from the 1930s. Then, the buyer complained that there was only one original part in the car and that he had been duped and wanted his money back. There was indeed only one original piece traceable to the car, but it had been maintained and restored several times over the past 80 years. It looked great and ran like clockwork. Mills go through continual maintenance all of the time. We’d be surprised if there was one original part left. White Mesa is vast. It operates, and probably always will, at less than half capacity.

The facts and numbers:

Energy Fuels’ White Mesa Mill:

Arial Photo of White Mesa Mill, Utah
  1. The mill has a licenced capacity of 8Mlbs pa of uranium.
  2. The age of the mill is much discussed (as per above), but again Chalmers doesn’t believe this is an issue. Keeping the mill operational is low cost according to Chalmers. Regular maintenance keeps things ticking. Could it be more efficient? We’d like to know.
  3. It has a peak historical operational capacity of 5Mlbs pa. Chalmers claims the company was and is limited by a lack of feedstock. Tolling is probably the solution but agreeing on a price and terms with other US uranium producers, or aspiring producers, is a hot topic.
  4. Historically, the owner of a mill typically holds the upper hand on pricing for tolling but uranium is a very political and emotive topic, so will there be pressure for Energy Fuels to play ball on pricing? Who knows? Chalmers doesn’t seem to think so.
  5. The mill can generate income independent of uranium and vanadium prices.
  6. In addition to licences to process uranium and vanadium ores, Energy Fuels has around 18 licences to allow them to process additional feeds that are not primary ores. Energy Fuels has received material from producers for several decades, including low-level tolled uranium from Cameco amongst many others. They are currently accepting feed from a uranium mine in New Mexico.
  7. Energy Fuels’ profits from alternate feed are fairly consistent but are not constant. Historically, the company has made anywhere between US$5-15M from alternate feed/clean-up operations. Given enough feed, Energy Fuels could exceed US$15M per year in revenue. The company tries to expand its feed resource by taking part in additional mine clean-ups in the region.
  8. When operational, White Mesa Mill has recycled 4-500,000lbs of uranium per year on average.
  9. White Mesa Mill needs a certain critical mass to be in an optimal state. This is said to be around 1.5-2Mlbs of primary ores per annum, with the capability for an increase proportional to the company’s primary ore levels. The economics of scale mean commercial operations would be best served at 6-8M lbs per annum. It is worth noting this capacity has not been achieved in many years.
  10. The mill is designed to process c. 2000t per day, but investors will want to see this output manifest in reality before they trust the numbers wholeheartedly. Chalmers has stated the mill will not come into play until at least 100,000t of feed is available.
  11. White Mesa Mill has a large enough capacity to process all feedstock “within the region.” This appears to make White Mesa Mill the only gig in town and may give Energy Fuels a unique trump card.
  12. In terms of the toll fee for feedstock from other uranium producers, Chalmers has been explaining to the market how the mill could provide a JV opportunity for the last year. Historically, Energy Fuels would end up with c. 50% of proceeds from tolled ores. These charges would be for processing, marketing, and then sale either to the U.S government, or utility companies via contracts or alternate purchasing arrangements. While this may have been fruitful historically, it remains to be seen whether an arrangement like this can be constructed in the here and now. Possible new arrangements include ores of a high-enough grade being processed for free, and some ores being sold by the producers themselves, rather than Energy Fuels, for a fee. In the past, there were private companies who could turn a good profit off ore tolling, but it remains to be seen whether this is true of today’s market. Will White Mesa Mill pay its way? We’re hearing quite a lot of ‘back in my day’ rhetoric, but we want to see how this applies in a new bull market. Options are one thing, but action is quite another.
  13. Conversations regarding JVs are happening regarding the mill, but there are no concrete arrangements yet. There are several producers interested, but they are currently hunkered down in negative cash flow, so we will see how things develop. The mill becomes much less profitable if market conditions aren’t economically viable, and this is a worry. Low-grade ores from clean-up contracts can only generate so much revenue. Alternate feed can’t be Energy Fuels’ primary source. Based on Q3 financial results, Energy Fuels earned anywhere from US$700,000 up to US$3M for their role in the New Mexico clean up contract.
  14. During its 38-year operating history, the Mill has produced over 45 million pounds of vanadium – or over US$500 million of vanadium at today’s prices.
  15. Energy Fuels is currently in discussions with the Navajo Nation EPA regarding clean-up operations of abandoned uranium mines in operation from 1944 to 1986. ‘Nearly 30 million tons of uranium ore were extracted from Navajo lands under leases with the Navajo Nation,’ and this appears to be a problem White Mesa Mill can help solve.

Energy Fuels’ ISR Facilities

  1. Sitting in situ, Energy Fuels has 100% ownership of both Nichols Ranch ISR Mine & Plant, and Alta Mesa ISR Mine & Plant.
  2. Nichols Ranch has a total licensed capacity of 2 million pounds of uranium per year.
  3. Alta Mesa has a total operating capacity of 1.5 million pounds of uranium per year.

While all these production capacities look impressive, we still haven’t seen if they can be made economic in the market. Only time will tell.

Latest news at Energy Fuels’ mine resources and other assets

The permitting process is continuing at the Roca Honda Project, which is claimed to be able to provide up to 2.7 million pounds of annual uranium production with a 9-year mine life.

However, Chalmers himself admits the completion of permitting is still several years away. Does this mean Roca Honda will be irrelevant in the next bull cycle? Is this true of many of Energy Fuels’ assets? It’s no good having so many strong, high-grade assets if they won’t be ready in time for the company to produce and sell anything.

Chalmers is right in saying that when you have fully constructed, fully permitted mines and production facilities, it costs money to keep them in compliance and good standing. We imagine it has been a battle to keep Energy Fuels’ many costs down, while also keeping as many assets as possible ready to fire at the right moment. We understand Energy Fuels’ status as the most strongly positioned U.S uranium producer, but we wonder if keeping hold of all these assets will benefit the company in the long run.

As far as vanadium goes, the spot price has dropped c. 25% since the start of 2019. Energy Fuels is putting most of its vanadium into inventory. They have produced around 1.5M lbs of high-purity vanadium (c. 99.7%). A small amount has been sold, and they are targeting premium markets than can afford the extra expenditure to acquire such a high-grade resource. While Energy Fuels has shown it is capable of churning out vanadium, the macro story of vanadium appears even more long term than that of uranium. Energy Fuels is painting the picture of itself as a slow burner, but one that could satisfy investors who can live without short-term returns. Is the company telling the market it is stockpiling vanadium the wisest play? We shall see.

General Figures

Chalmers has previously said the spot price needs to be at US$55/lb before Energy Fuels can get moving, and it needs to be at US$65/lb before new acquisitions and growth can take place.

This is clearly some way off, but what would a price like this mean under ideal market conditions? Chalmers sees Energy Fuels becoming a US$1B+ market cap company, meaning the company could be at least a four-bagger for patient investors. Chalmers bases this valuation off Energy Fuels’ portfolio and their long-term production capacity.

Upon completing our review of the company’s current situation, Energy Fuels has demonstrated something to us: even for the uranium producer with the strongest standing in the U.S, the future has elements of uncertainty. If this is the case, imagine what the future looks like for other uranium juniors and producers the world over. This is an industry that is going to have a few winners and many, many losers. Energy Fuels has provided some numbers to back up its claims, but there are many variables before these figures can be realised. Energy Fuels looks like one of the best bets in the sphere of uranium investment, but investors should act with caution before entering a market with pronounced risks and an abundance of companies consigned to failure.

Company Website:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Energy Fuels company logo

Energy Fuels (NYSE: UUUU) – America’s Premier Uranium Producer Enters Rare Earth Elements Space

The Energy Fuels company logo
Energy Fuels Inc.
  • Shares Outstanding: 115M
  • Share price US$1.90 (23.04.2020)
  • Market Cap: US$218.5M

Uranium has been lying in a coma for what seems like an eternity, and uranium investors across the land have been becoming increasingly frustrated.

A nuclear power station

We have all been hoping a white swan moment will make the uranium space finally show some signs of life. Two weeks ago, uranium giant, Cameco, announced its shutdown of Cigar Lake would be extended for an indeterminate period. This tightening of uranium supply came after KazAtomProm’s operational update, which stated that annual production would fall by up to 4,000t uranium from previous expectations.

However, while the U3O8 spot price has risen somewhat, from US$23.50/lbs to c. US$32/lbs, uranium securities have only been mildly rallied by events. It doesn’t seem we are quite on the trajectory for bullish long-term uranium prices just yet.

Despite the current state of the uranium space, the uranium macro story has always been coherent and convincing. 441 nuclear reactors operate around the world; they are, and will always be, hungry for uranium. Many uranium commentators including regular Crux contributor, Brandin Munro, have remarked that this significant, COVID-19-induced disruption to the uranium supply chain has exposed the fragility of international uranium supply.

The reality is that utility companies will only have to change their purchasing habits when they decide their inventories are too depleted. We regularly hear whispering that this is the case, but are yet to see anything concrete. When uranium does go, it’s likely to be quick. Exploration companies are very likely to miss this cycle, and so are those that need a billion-dollar investment and don’t have licences in place.

To this extent, explorers who have an elongated path to production become a lot less investable. The most easily understood uranium companies are existing producers who are well-funded, with good infrastructure, and will be ready when the market moves. These are the companies that are going to secure supply contracts with utility companies. These are the companies that will make investors money. These will be the winners in this uranium cycle.

Energy Fuels: A Uranium Winner

One of these companies is NYSE-listed Energy Fuels, America’s premier producer of uranium and potential producer of vanadium. Another is a TSX-listed uranium producer with assets in West Africa, and income from a zinc JV with Befesa Silvermet, Global Atomic Corp.

In this article, we’re going to look at Energy Fuels. The company has recently made an announcement that further solidifies its status as one of our favourite uranium stories.

Energy Fuels' White Mesa Mill

One of the most important aspects of strong uranium stories is a company’s ability to successfully mitigate risk. One such method is via commodity diversification. Energy Fuels has already managed to mitigate risk with multiple cash streams: vanadium, tolled milling, and cleanup operations.

On April 13, Energy Fuels released news that it is entering an additional space, with an additional potential revenue stream: rare earth element (REE) processing. We decided the time was right to sit down with CEO, Mark Chalmers, and discuss the positive impact this could have on the Energy Fuels story.

Rare Earth Elements – Transformative Economics?

The first thing Chalmers made clear to us is that this is a serious commercial venture, intended to make a significant difference to Energy Fuels’ economics.

Last year, a contributor explored Energy Fuels as an investment proposition on our platform. He identified the White Mesa Mill as a potential gamechanger; we happen to agree. In our opinion, the White Mesa Mill (the only uranium and vanadium mill in operation in the US) is the ace up Energy Fuels’ sleeve. While it can obviously process uranium and vanadium, it is also able to process rare earth elements. It makes clear sense for Energy Fuels to monetise this ability to add value for shareholders and de-risk its business model.

A periodic table with rare earth elements (REEs) highlighted in orange.

Energy Fuels believes the fully licensed and constructed White Mesa Mill will be integral to bringing the rare earth element supply chain back to the U.S. from China. We recently heard from Hexagon Energy Materials (ASX: HXG) CEO, Mike Rosenstreich, and he explained how momentum is building behind these ideas in numerous powerful circles.

However, despite this new venture, Chalmers was keen to emphasise that Energy Fuels’ primary focus remains on uranium and vanadium. The company simply believes it can leverage its existing licenses, infrastructure and capabilities at the mill to add REEs to the production list. It’s an undeniably smart play, and it’s the sort outside of the box thinking that uranium companies need in this still uncertain market. Sweat the assets.

Digging Into The Details

However, like us, investors will want to hear more detail before getting overexcited. What exactly is the White Mesa Mill capable of?

We’ve previously covered Energy Fuels’ mill economics for uranium and vanadium: the two ores it is primarily licenced to treat. What many uranium and vanadium investors won’t know is that over the last 20-years, Energy Fuels has received material from a variety of alternate feed streams, and the company has the appropriate permits for these streams. While the majority of these are low-level natural uranium streams, the company has licences for 17 other streams, and can also recover uranium as a by-product from rare earth producers.

The White Mesa Mill is huge: it is capable of processing 2,000t per day. Will there be any issues separating the ore into different categories? Chalmers insists the mill will be operated on a batch basis; there shouldn’t be any hiccups. Material from numerous different streams will be generated, collected, stored, collated, then processed.

What about logistics? The feed arrangements themselves are still in their early days. This is perhaps the one area of the arrangement we’d like a little more clarity on, but only time will tell. We need to give Energy Fuels time to shore up these arrangements and present us with something concrete. However, one thing is clear: Chalmers is primarily looking at this business model from a toll processing standpoint, the same model Energy Fuels already employs successfully. Does the company have the infrastructure in place to pull this off? Luckily, courtesy of existing facilities for uranium, vanadium, and other feed streams, Energy Fuels has ample tailings storage for additional REE waste. The company is ready to get this play off the ground.

More Reasons To Be Positive

Chalmers then provided more positive news. Members of the US government have encouraged Energy Fuels, and are on board with this rare earth elements play. Being state-backed is always a massive advantage and gives Energy Fuels a competitive edge.

Rare Earth Elements lighting up in a periodic table

The company already has over 500,000lbs of material in inventory, just waiting to be processed at the right time, in the right price environment. This brings us neatly back to the point I made earlier in this article: Energy Fuels has much greater control of its production timescale than other uranium producers. There is little work to do to get into production, so the company can batten down the hatches for as long as necessary and can move the very second the uranium prices change. Other companies will rely on luck to hit the uranium cycle at the right moment. Energy Fuels will need to see prices head towards US$50/lb or even US$60/lb (the same figure Cameco is asking for). Another important factor to keep in mind is that as the uranium spot price rises, so does the value of the existing inventory. That’s growth with zero expenditure necessary. They have possibly seen another US$10M added to their inventory since last week alone.

Current Operations

Right now, Energy Fuels is prioritising desk work; a company this advanced doesn’t have the major fieldwork concerns of its junior peers.

Right now, Chalmers explained the management team is working on optimisations: specifically, mineralogy and pilot testing to ensure that when the time is right, Energy Fuels can move swiftly to enter at a profitable point in the resurrected uranium market.

Chalmers has a level of pragmatism we don’t see in many inexperienced junior management teams. He knows what he doesn’t know; he’s been involved in uranium mining for long enough. His company should have the scale and infrastructure necessary to attract strategic partners and the best minds in the uranium, vanadium, and rare earth elements spaces to propel the company forward.

Chalmers’ Take On The Uranium Market

We were also keen to hear Chalmers take on the current uranium market.

With lots of uranium companies talking about US$40/lbs as a target, Chalmers doesn’t think US$40/lbs will be enough for many companies to produce economically, including uranium-giant Cameco. While there are some dirt cheap projects in Kazakhstan that could be profitable, the rest of the world will need a higher uranium spot price: north of US$50/lbs, closer to US$60/lbs to take “full loading on cost.” We heard similar from the father of the uranium space, ex-Paladin CEO, John Borshoff, in a recent interview with us.

Green uranium reacting in a glass vial with a uranium symbol and a nuclear symbol next to it

Strategically, Kazatomprom would like the price to stay down so they can maintain the uranium monopoly that prompted the triggering of Section 232 last year. Chalmers added that the inflated Kazakh currency has also given them a cost advantage.

Will these supply disruptions and a tightening in uranium inventories finally shake utility companies up? Chalmers seems to think so; after all, “there is less uranium out there than people think.”


All in all, this looks like a prudent move and there is little to fault them on, other than wanting more clarity on what it could mean for the company’s financials, and, ultimately, its shareholders.

Chalmers is showing time and time again that he is making sensible decisions that take many investors by surprise, just like he did with the US$16.6M raise in February. With the benefit of hindsight, that looks like cheaper money in these current market conditions. Let’s hope Chalmers can keep this up, as Energy Fuels’ share price saw big gains this week and finally appears to be heading back in the right direction. Let’s hope uranium is too.

While you’re here, and if the uranium space is your kind of thing, why not read one of our recent uranium articles, or watch our latest uranium interview?

Company Website:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Energy Fuels company logo

Energy Fuels (NYSE: UUUU) – Finding Value When The Market Has Lost Its Mind

The Energy Fuels company logo
Energy Fuels Inc.
  • Shares Outstanding: 115M
  • Share price US$1.90 (23.04.2020)
  • Market Cap: US$218.5M

In this series, we take a look at some of the stocks I think the market has severely undervalued during the COVID-19 crisis. Discount stocks can mitigate some of the risk for investors; that’s if they know what to look for.

Green uranium reacting in a glass container

Energy Fuels – A Uranium Gem

Today, I’m looking at America’s leading producer of uranium (and potential producer of vanadium), Energy Fuels (NYSE:UUUU).

We’ve written several articles detailing the potential of Energy Fuels in the past. For those new to the story, it might be worth checking them out of some context. In addition, there are numerous Energy Fuels interviews on the Crux Investor platform. CEO, Mark Chalmers, has kept us informed on all the latest developments in the story, including a controversial event in mid-February; will investors now be looking back at this much more favourably?

Strong Fundamentals

Several months ago, in an article from one of our contributors, the three most important considerations for uranium investors were considered, with reference to Energy Fuels. There was also a bonus point that some uranium investors may not have thought about before.

A Strong, Experienced Management Team

If a management team hasn’t dealt with uranium before, from permitting, to construction, to production, to sale, then you can walk away now.

Uranium requires specific expert knowledge, given the many problematic idiosyncrasies of the space. One such example is the situation with uranium sales; namely, negotiating long-term contracts, and transporting the radioactive material from a mine to the consumer. These are just two difficult processes that require proven experience, and Energy Fuels’ management team has been there and done it for decades. These look like safe hands. Don’t let companies learn on the job with your money.

What continues to strike me is the general lack of any discussion of the uranium market, itself.  All of the juniors are optimizing and “polishing up their single proposed projects” but what is lacking is an understanding of just how the uranium works (or doesn’t work) and the crucial role of term contracts.  As we have discussed previously in interviews with Brandon Munro, the spot price is a nice indicator of near-term market balance and can be a source of “signaling” of future conditions, but the linkage is weak and can be misleading.

We have been trying to provide a bit of enlightenment regarding the role of term contracts, as well as the process itself, which can be time-consuming especially for junior companies that are not known to the utility fuel managers (one result is the likelihood of a series of small volume agreements until a producer proves it can deliver its product on-time and on-budget).

A vast majority of the juniors are run by either technical/operational types pulled from outside of the industry or financial types that are experienced in raising funds.  Their activities tend to be biased accordingly. Energy Fuel’s experience tells us they won’t have these issues.

An Impressive Portfolio Of genuine Assets

We find Energy Fuels’ portfolio impressive. Energy Fuels has ‘more production capacity, licensed mines and processing facilities, and in-ground uranium resources than any other U.S. producer.

Energy Fuel’s 100% ownership of many promising mines across Arizona, Utah, New Mexico and Wyoming gives them a long list of valuable assets, not to mention a large inventory sitting at surface. While the vanadium market hasn’t exactly been favourable in recent times, the diversification the management team has achieved at Energy Fuels could help mitigate risk, and low-cost environmental clean-up and uranium recycling services, the recently announced rare earth elements processing capability and revenue stream, and potential involvement in the EPA clean-up of Cold-War-era uranium mines, are further examples of Energy Fuels’ multifaceted nature. All of their eggs certainly aren’t in one basket. There is a lot more than uranium at work here, unlike many other producers.

A Bonus?

Energy Fuels’ White Mesa Mill has been discussed at length by Chalmers in an interview with Crux Investor.

Energy Fuels' White Mesa Mill
Energy Fuels’ renowned White Mesa Mill

It is the only fully licensed and operating conventional uranium mill in the United States. This gives Energy Fuels something of a monopoly over the region: their mill is the only gig in town. The old adage is that he who controls the mill controls the district. In this case, this is the only operational mill in the entire United States of America. That puts them in the driving seat for processing of U308 and vanadium in the region, the district, and, perhaps, further afield. Other uranium companies have to march to Energy Fuels’ drum beat or be left out in the cold. Companies will have to pay Energy Fuels for use of their mill or face expensive shipping expenses to mills in foreign countries. Energy Fuels will also have control of the timescale of other companies’ uranium production. If I am a shareholder of UUUU, I’m going to like that news. If I’m invested in one of the companies needing to negotiate a toll mill fee, I’m probably less excited and possibly irritated.

The mill itself has a licenced capacity of 8Mlbs pa of uranium. The most it has operated at is 5Mlbs pa. It can also process multiple lines of ore (c. 17); these are licenced too. The reality is that is likely to only operate at 2Mlbs pa unless they do some meaningful upgrades.

Energy Fuels appears smartly positioned to get into production quickly when the uranium price turns, and might be the reason they made the move to raise money in the market when they did.

Sufficient Capital To Survive The Uranium Bear Market

Even before COVID-19 reared its head, uranium companies were pretty desperate for capital.

Institutional funding was incredibly sparse. With the vast majority of uranium companies now in care & maintenance, including Cameco’s producing asset, Cigar Lake, uranium companies have no cash flow from uranium sales. Until price discovery happens, and the price moves towards US$50/lbs, uranium companies will struggle to survive. Energy Fuels is one of the few uranium producers that still has cash flow, mainly in the form of environmental clean-up operations. The other that springs to mind is Global Atomic; I’ll be talking about that company in the near future.

uranium yellowcake
A photo of yellow cake uranium, a solid form of uranium oxide produced from uranium ore. Yellow cake must be processed further before it is made into nuclear fuel. Courtesy of Energy Fuels Inc.

With COVID-19’s impact on global markets, capital is now incredibly expensive, even more so than before for uranium companies. In mid-February, Energy Fuels announced an agreement with Cantor Fitzgerald & Co; the ‘innovative global financial services firm‘ agreed to purchase, on a bought deal basis, US$16.6M of common shares of the company at a price of US$1.47 per share. At the time, many investors were confused, and even angry, at the decision Chalmers had adopted. Commentators were scrutinising the decision rigorously, claiming Chalmers had raised expensive, very dilutive capital. It’s amazing how things works out. Fast-forward a month, and this suddenly looks like the best deal a uranium company could have made. Energy Fuels is now positioned more strongly than most of its peers. It has the cash to ride out the coronavirus crisis, and to see the company into what is building to be the next long-awaited uranium bull market (hopefully, for investors, in the near future).

These are exciting times again for uranium investors, but pick your team wisely.

Company Website:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Energy Fuels company logo

Energy Fuels (NYSE: UUUU) – I’m back and ready to go (Transcript)

The Energy Fuels Company Logo.
Energy Fuels Inc.
  • Shares Outstanding: 115M
  • Share price US$1.63 (21.04.2020)
  • Market Cap: US$191M

Interview with Mark Chalmers, President & CEO of Energy Fuels (NYSE: UUUU)

We like the uranium space. It’s been nearly a decade of hardship, but there are now signs of life. Uranium has the potential to make investors significant multiples of their initial investments; that’s if they pick a winner rather than a loser. Risk mitigation is key to this, and one of the most important components of certain uranium stories is commodity diversification. Energy Fuels, has mitigated risk with multiple cash streams: vanadium, milling and cleanup operations. Chalmers talks about another potential revenue stream: rare earth processing. This week the company announced it was entering the rare earth element (REE) space.

The first thing Chalmers makes clear is that this is a serious commercial venture. The White Mesa Mill is the ace up Energy Fuels’ sleeve, and if it can process rare earths, it makes sense to monetise this ability.

Energy Fuels believes the fully licensed and constructed White Mesa Mill (the only uranium and vanadium mill in operation in the US), can play a key role in bringing the rare earth element supply chain back to the U.S. from China. Energy Fuels’ primary focus remains on uranium and vanadium, but it believes it can leverage its existing licenses, infrastructure and capabilities at the mill to also produce REEs. Smart.

What exactly is then mill capable of? It is primarily licensed to treat vanadium and uranium ores, but over the past 20 years, Energy Fuels has taken a variety of other feed streams that the company has permits to receive. Most of those are low-level natural uranium streams. The company has licences for 17 other streams, and can also recover uranium from other rare earth producers. White Mesa Mill is extremely large, capable of processing 2,000t per day. The mill will be operated on a batch basis. Material from a variety of different streams will be generated, collected, stored, collated, then processed. The feed arrangements are still in their early days, but Energy Fuels is mainly looking at this from a toll processing standpoint. Energy Fuels has all the tailings storage facilities necessary to make this work. The company is ready to move.

The US government is also on board with the rare earth elements play and has encouraged Energy Fuels’ venture. This is extremely positive news.

We then move to Energy Fuels’ priority. Energy Fuels has plenty of material in inventory (over 500,000lbs), waiting to be processed, so has much greater control of its production timescale than other uranium producers. As the spot price increases, so does the value of the inventory. The company is constantly working on mineralogy and pilot testing to ensure that when the time is right, Energy Fuels can move swiftly to capitalise on a resurrected uranium market. Energy Fuels is clearly ahead of the curve. They know what they don’t know. The company looks like it has the scale to attract strategic partners and the best minds in the uranium space to propel the company forward.

Chalmers doesn’t think US$40/lb will even be enough for uranium-giant, Cameco. there are some projects in Kazakhstan that could be profitable, but for the rest of the world, they need a higher uranium spot price: north of US$50/lb, closer to US$60/lb to take “full-loading on cost.” Companies like Kazatomprom would like the price to stay down so they can maintain a monopoly, and their inflated currency has also given them an advantage. The spot price has risen 25% in the last month or so, and these disruptions may start to shake utility companies up. “There is less uranium out there than people think.”

We Discuss:

  1. Getting into Rare Earths: Why, What’s the Idea?
  2. The Mill’s Capabilities: Setting it up for Different Streams
  3. Arrangements for Rare Earth Feed Stock: Making Money for Energy Fuels
  4. Impact of COVID-19 on the Uranium Market: Rising Share Prices
  5. Genesis of the Idea for Rare Earths and US Government’s Involvement
  6. Process of Understanding Economics and Timings on Moving Forward
  7. Spot Price Movement: When and How Might We See $40 and Over?
  8. Energy Fuels’ Position in the Uranium Space

CLICK HERE to watch the full interview.

Matthew Gordon: Hello, Mark, how are you, sir?

Mark Chalmers: I’m excellent. Matt, how are you? It’s been awhile.

Matthew Gordon: I know, I know. I know. I’m liking that painting behind you; what’s going on there? Is this at home? You are at home, you’re not at the office?

Mark Chalmers: When you’re airing out of your living room, you have just got to find something that looks reasonable behind you.

Matthew Gordon: You didn’t knock that up yourself then?

Mark Chalmers No, I didn’t. I don’t have any artistic skills – I’m a mining engineer.

Matthew Gordon: Okay. Good. Thanks for taking our call. First of all, we listened to the call yesterday with regards to your most recent announcement with regards to getting into the rare earth business. Can you just talk us through that? What is the idea why rare earths?

Mark Chalmers: Look, first of all, we’re very excited about this new opportunity for us, Matt, as I’ve said on the call, we’re first and foremost a Uranium producer and that’s the key focus of the business. But like Vanadium, and some of the other business opportunities that we’re always progressing, we had a lot of inbound calls from various parties that either had rare earth projects or other sources of rare earth, or the US government, and it came a point where we couldn’t turn our head to it. The White Mesa Mill was so uniquely suited with our ability to handle some of these streams, particularly those that have Uranium content, and we have a facility that can handle this low-level material, which is a real problem for other people, but they’re not a problem for us. So we decided to put out that press release. We mentioned that a few weeks ago that were looking at it. And as I said, we would not have done that release and not be pushing this if we didn’t think this has some real opportunities secondary to the Uranium business.

Matthew Gordon: So this isn’t just window dressing: something to say, just to kind of keep your name out there? This is a serious commercial venture.

Mark Chalmers: Absolutely. It’s not window dressing. And I actually think that a lot of the other Uranium guys are quite envious that we have some of this optionality. And as I said, we’re not trying to brand ourselves other than first and foremost a Uranium company, but this is a real opportunity and there is a lot of Uranium tied up in Rare Earth around the world. And why not? Why not if we’re at a head-start to, well most people, that we have this facility. Some of these rare earth opportunities can’t be developed because of the Uranium content, they can’t get the permits to process those ores. I think you’re seeing some backlash with some of the larger rare earth producers in the world. I won’t mention one of them, but they have a facility that they’re getting a lot of backlash from a number NGOs, and I don’t wish harm on anybody, but we have a facility that’s got 40-years of history dealing with these types of materials at White Mesa.

Matthew Gordon: Okay. Look, I don’t think it’s any secret that I like the fact that you have got experience in producing and selling Uranium into the market and the other component and you’ve got cash. I think maybe you got lucky or maybe it was good foresight on your part to raise the cash when you did, but it’s certainly very useful for you now. But the third thing which I liked was the mill. Now, if I’m a shareholder, I’m going to like this a lot. If I’m not, if I’m invested in one of the other companies, at one of your competitor companies, I probably don’t like it so much. But I need to understand what the mill is capable of. It’s an extremely large mill. You’ve got a series of licenses on it. So let me just start with that – what is it licensed to do?

Mark Chalmers : Okay, well look, it is primarily licensed to treat Uranium ores and Vanadium ores but over the course of the last 20 years or so, we’ve taken a number of other feed streams that we’ve had permits to receive. And most of those are low-level natural Uranium streams that could come from a number of things like for example, residues from water treatment plants. We’ve received material from other Uranium producers. We’ve received streams from some of the conversion facilities and whatnot, and recover the Uranium from those streams. So we have the ability to take a number of streams. I think we have  license amendments for 17, currently, streams other than just primary ores. And we have taken some of those streams from other rare earth producers in the past and recovered Uranium from those streams. So this is not new to us but what is the advantage, it’s a large mill; it’s about 2,000 tons per day, but most of these rare earth streams are going to be much smaller than that. So we don’t need the full capacity of the mill to enter this business.

Matthew Gordon: Okay. So you said a few things I want you to explain there. So I’ll come back to the rare earths component in a second, but when you say these streams; you’ve got 17 licenses for different types of streams coming, feeding into the mill, does that mean that these streams operate concurrently with each other or do they… how do you set the mill up to run different streams at the same time?

Mark Chalmers Well, we usually do it in a batch basis so we’ll accumulate some of this material maybe for 6-months or a year or two, and then we’ll do a run on that material through the mill. We actually, at the mill, we have the front end of the mill that you can process some of this material through, but we also have a separate alternate feed circuit that it can enter the mill in a different location or locations. So it’s very flexible, Matt, and I think I’ve told you before, it’s really the reason the White Mesa Mill has survived the test of time is because of the foresight of the people owning the mill to make sure that it was as flexible as possible. So this is not new and it’s been a good secondary business for the facility for decades. And we plan to expand that, I think I’ve said that historically, it’s probably been a USD$5M to say USD$50M a year business, but I don’t see any reason. It cannot be USD$50M a year. Who knows? Maybe more, maybe USD$100 a year extra business in addition to Uranium production.

Matthew Gordon: Okay, we’ve talked in the past about Uranium and Vanadium, people who don’t understand that should go and look at those videos, so let’s get onto the rare earths component here. So rare earths by definition are rare, so therefore they have a high value and potentially high margin. So how, I mean, and I don’t know how much work you’ve done on this, but you are looking at multiple sources of feed. How would those arrangements work? Are they JVs with people? Are they just commissioning you to just process their ore and they take all the upside? How do you make money?

Mark Chalmers :Well, look, yes, that’s it’s still early days as I said on the call yesterday. We’re mainly looking at it from a tow processing perspective. We’re also going to be evaluating a number of opportunities that are presenting themselves to find which streams that are out there that we can process. You know what I mean? One of the things with multiple streams is that it may require  different processing equipment and different sizing of equipment. So it’s very early stages but we’re looking at initially as a tow processing arrangement, but it could be something else. I mean, we mentioned in the call that we weren’t planning to become a miner of rare earths, but again, we’ll just take it a step at a time and see where it leads us.

But the key bit is, is that we’re not going to lose our capability at White Mesa for processing Uranium and Vanadium, it’s likely that we would have a separate circuit that would be literally bolted onto the facility, typically you’re not talking to tonnages that we’d have from processing traditional ores. So as I said, it’s early days, but we’re very excited and the fact that we have the facility, we have the permits, we have the tailings areas that are state of the art; designed for a thousand years, triple line. We have two cells that have a lot of capacity and we’ve been permitting two additional cells. So we’ve been looking far down the path here. And as I said, we’re very excited about this, Matt.

Matthew Gordon: No, I get it. And I get that it’s early days, but I wondered why you’d made the announcement now and therefore, how much do you know because being able to bolt on a circuit and process, presumably a much lower volume of ore, is that the case? You did sort of indicate that a second ago, like by what quantum?

Mark Chalmers: It is going to be very small quantum. I mean, instead of a facility that can process 6,000 to 7,000 tons per year, you could be talking 5,000 tons, 10,000, 20,000 tons; very small quantities relative to what you’d process through Uranium circuit.

Matthew Gordon: Right. But the margins are high because the value is high.

Mark Chalmers: Yes. A lot of it, some of the material may have been pre-concentrated, it may not be. So yes, the reason we made the announcement is that there were so many inbound calls. I mean, literally dozens and dozens of calls here of people saying, do you know what you have? Do you know what a big role White Mesa could play in this space? And I was going from call after call, so we couldn’t turn her head to it. And again, that’s one of the best opportunities when people are calling you and saying, we think this facility could play a role. Now, I don’t talk in absolutes because we’ve got to take it a step at a time but the market seemed to react positively to it. Now, we’ve had a number of different factors over the last few days: the price of Uranium is going up, this supply disruption because of COVID-19, and then we added this. So we’ve had a lot of interest in the stock, a lot of volume, and we’ve been, and we’re still getting, even after that call, a lot of inbounds from other people because of that call.

Matthew Gordon: We’ve been watching. The share price has bounced back up. I think the whole sector has done quite well, obviously. Obviously it’s terrible news; COVID-19 is not a pleasant thing for anyone to have to deal with and it’s affecting a lot of people in very, very negative ways. But for Uranium and Gold, it’s what it needed. It’s reacted strongly to this news, and I guess, with all the negative stuff aside, Uranium CEO’s must be quite pleased with the way the market has reacted. I mean, you guys have been starving for three, four, or five years?

Mark Chalmers Yes, absolutely. And I think I’ve said this to you before too, I usually find that it usually takes a number of small things to add up to a major thing in this business, you know, like you saw the shutdowns on some of these facilities, and then it started in Canada and then you saw it in Namibia and in Kazakhstan, the conversion facility, Cameco shut down their conversion facility. So it all starts building. So then there’s a shortfall of production that people were expecting. Price of Uranium starts to go up. The whole COVID-19 issue has heightened the awareness on dependency on other countries, particularly some of those that are political adversaries, so all this stuff starts feeding, and people start saying that going for the cheapest product isn’t necessarily the best option, and it is not the best option, particularly on a number of critical materials. I’m not talking minerals, I’m talking materials that are necessary for a country like the United States of America to be ready and prepared and have security of supply at different levels to not have that total dependency.

Matthew Gordon: Okay. I’ve got to ask this question – you did the Section 232 petition. You were one of the two, you and Jeff at UR-Energy. Okay. And you’ve been huddled up on Capitol Hill talking to people, knocking on doors and you’ve been pushing the security issue. Has this rare earths story come about because of conversations up on the Hill? Are you getting support for this announcement from the US government? I mean, is there some kind of connection between those two decisions? What was the genesis of this? You got calls, I get it, but what’s the genesis of this idea?

Mark Chalmers: Well, I think the genesis is the awareness over the last several years actually, that we have become overly dependent on a lot of our critical minerals. And they were basically on separate paths, separate but similar paths. Now we’ve been approached by some in government on the rare earths, even a year ago and we expressed interest in it. But again, we don’t want to lose focus; we’re not trying to morph ourselves into something that we’re not. We wanted to keep our main focus on Uranium because that’s our main game. So yes, we have made a lot of contacts with the government. Several of those contacts also have an interest in rare earths and I think, and I believe that a lot of them will be very pleased that we’re being more aggressive on the rare earth front because of particularly what we’ve communicated in the last few weeks. So I think it just highlights, I think that White Mesa has a potential to be a huge critical mineral central. When you look at the critical mineral of Uranium, Vanadium, and now we start expanding into the rare earths themselves which are also critical minerals, where else would you find that in the United States or in the world? And even though we’re still hanging our hat on Uranium first and foremost, as I said, we can’t turn our head to it and it’s a legitimate opportunity. So we’re going to be pursuing it, but when we have to make a choice between one or the other, it’s going to be first Uranium going forward but we’re definitely going to focus on this with at least a few people, a few employees trying to advance this as quickly as they can.

Matthew Gordon: Okay. When are you going to be in a position? Because actually, let’s start with, what is the process that you have to go through to understand the economics as to whether you do invest in a new circuit or some kind of upgrade to the current mill? Because you are going to need to spend some money on this thing, and obviously in this climate, money’s tight. What’s the process and when do you make that decision?

Mark Chalmers Yes. Well, look, you’ve got to start from the material that’s available to be processed. So we’ll start looking at different feeds. We have already got some feeds from other groups that we’re testing to determine what the mineralogy is and what it takes to unlock some of these minerals. We’ve got a full lab at White Mesa. We can do a lot of pilot testing at White Mesa, which gets us again, ahead of everybody else. We also have, and I have had a long relationship with ANSTO in Sydney with testing and on Uranium projects, but they’re also one of the world leaders on rare earths. I’m a firm believer that “you need to know what you don’t know”, remember that little saying –

Matthew Gordon: I love that phrase. Yes.

Mark Chalmers: Yes, but I’ve got a number of contacts with ANSTO. They can provide support where we don’t have the knowledge in some of these areas. There also could be other people here in the United States or Canada that we may tap into. We will go where we can get the best advice, but at the same time we’ve got a head-start with a full laboratory and the ability to pilot material right now, and we are testing rare earth material right now for recovery because we have facilities to do so.

Matthew Gordon: And again, timing – can you give us an idea of timing? Because okay, that’s the process you are going through but people are going to be excited about, look, you talked about USD$50 million earlier, right? So people are going to be excited about, when are we going to start seeing some movement on this?

Mark Chalmers: Yes. Look, there could be movement on this in the coming weeks. We think that it is possible, and I said this on the call, look, some of these streams we think we can treat now, okay? If they’re suitable for our process or our modified process, but we think that this is not multiples of years out, this is just a year or two out for certain processing of certain streams. But again, we are not so far ahead that we can really give any specific dates, but we are far closer to the market than somebody that’s trying to build a facility from scratch, by years and years and probably millions and millions of dollars, maybe hundreds of millions of dollars, I don’t know. It depends on the scale and the size. So we think we’re offering something unique here and scarce. And that’s a good place to be in.

Matthew Gordon: That’s a very good place to be. And so you’re going to, if it is weeks, you pick up the phone and let us know because that’s pretty exciting. That can be very exciting to everyone because if you’re able to in a few weeks, start giving us definition of the process and the numbers and the timing, that would be, that’d be great news indeed.

Mark Chalmers:  Yes, if I could say one thing; look, I mean, as I said, we’ve already started some testing and if we can have a party that we can team with, that we can go public with, we’ll certainly update the market with that at the appropriate time. So but as I said, we do have material from some projects right now that we’re looking at and we’re testing as we speak.

Matthew Gordon: Okay. And just to be clear, because you mentioned that you’ve got a lab facility. This isn’t just regular toll money. You’ve got a lab facility there, you’re dealing with radioactive material. It’s actually quite sophisticated, not just a kind of regular processing mill here we’re talking about.

Mark Chalmers : Look, I mean we’ve got the facility, we’ve got around 60 people at the facility. We have a very sophisticated lab. We have the ability to deal with those streams, dispose of those streams. We’re done testing them. Just a very, very unique position to be in.

Matthew Gordon: Okay. Well let’s move on from that. So thank you very much for explaining what’s going on and what you’re thinking. I do want more from you as it develops, please. The market actually, we touched upon it earlier, Cigar Lake, Kazatomprom, Rossing, even HUSAB are all affected. Between 20Mlbs and 40Mlbs out of the market, just like that, almost in a two-week period. Your share price recovered. Lots of Uranium juniors are feeling the benefits of that. There’s a kind of change in sentiment, so that’s all good. I want to talk to you about what’s the reality of how quickly the spot price moves to a point where you can start making the decision, because you talked about USD$40. USD$40 isn’t going to move the dial for you. How do you think, or do you think Kazatomprom and Cameco would like to control the price and make it remain somewhere around the forties, in which case, what do you do?

Mark Chalmers Yes, look, I don’t think USD$40 is enough for Cameco either. There are some projects in Kazakhstan that probably USD$40 is a nice place to be but I think that we still need that north of USD$50/lbs to be sustainable, and really need closer to USD$60/lbs to be able to take full loading on cost. If you took Cameco’s costs on Cigar Lake or MacArthur, including exploration, development and all that, they’re going to be way above USD$40/lbs. And anyone from Cameco would agree with that. Now going forward, and that’s what most people are looking for right now is they’re going for costs.

So look, I think that companies like Kazatomprom would like it not to go too high so they can kind of maintain their leading role there but they’ve also benefited from the weakening of their currency; this whole Russian oil pump, the pump it out, pushing down the rouble, pushing down the tenge does also give them an advantage. So yes, we do need higher prices, and really anyone in the Western world that says that they can do it at USD$40/lbs sustainably, I really will question them.

I think there may be one project that I know of in Australia; at Olympic Dam and maybe Heathgate Resources, projects might be able to do that at USD$40/lbs, but that’s only a certain amount of production. I mean you look at your man being starting to push towards 200M lbs per year. There’s only so many projects that can produce under that USD$40/lbs positively.

Matthew Gordon: So here’s the question, given what’s going on at the moment, when do you think its going to hit USD$40 and where do you think that’s going to settle?

Mark Chalmers: Well, that’s the big question, but I think we’ve seen that the Uranium price can move up quickly, fairly quickly. I mean, it’s gone up 25% in the last month or so. I think that these disruptions are starting to shake people up and I think it may start shaking up the utilities a bit. I don’t know if it’ll happen, but some people have been saying that Uranium could go past USD$40/lbs pretty quickly. I think there’s less Uranium out there than people think. I think that it’s also apparent to me that what you see the Russians doing with oil and gas, they also want to do with Uranium and nuclear fuel products.

The Russian suspension agreement expires at the end of this year where it was limiting the Russians to 20% of the market with the United States. I think they’d like to expand that. I think that is the absolute wrong thing to do: to allow the Russians that have a larger share of the US market. So that’s going to be an interesting saga to watch unfold over the rest of this year. But so no, it’s a very interesting time and I think it’s a time that a lot of our investors have been waiting for a long time and they’re starting to see how these little things all add up to be big things. So look, I wouldn’t be surprised if we see USD$40/lbs. I don’t know, I don’t want to speculate, but shortly in the next month or two. But we may not.

Matthew Gordon: Yes, I think that’s the big question. We need to see what the utilities are doing, and we’re hearing, we spoke with a Uranium trader, he said that he’s been getting a lot more inbound phone calls, not a lot more trading in terms of volume, small amounts, but where the utilities would typically for him sit back and just watch what the market is doing and watch it settle again, they’ve been one of the first on the phone to him. He’s a reasonably big trader so it’s kind of indicative that they, as you said at the beginning, are perhaps a little bit more unsettled than they were 3-weeks, 4-weeks ago.

Mark Chalmers: Yes, I know. Look, I think that people become complacent on the supply chains. When the price of Uranium moved in 2006/2007, very quickly, it was on the back of supply disruptions, flooding of MacArthur and Cigar Lake, and those were longer term interruptions. I’m not sure how long the COVID interruption will last but it just highlights that there’s no certainty, and it doesn’t mean that one of these mines can’t flood again. It doesn’t mean that there can’t be a civil war or something else that happens that disrupts supply. So yes, look, I think the unfortunate thing about the world, or particularly the United States is they have become addicted to cheap, cheap, cheap. The American consumer, including a lot of companies and including utilities, they go for the cheapest product they can get for the lowest dollars. And I understand why they’re doing that; everybody’s trying to push the best margins they can. But going cheap on everything isn’t necessarily the best plan. Look at what we’ve discovered with in the United States, and in the world actually, how dependent we are for a lot of our pharmaceuticals and other supplies, health supplies and whatnot, the same thing’s happening with energy and let’s watch this space.

Matthew Gordon: Yes. Well, thanks very much. I mean, the thing I wanted to catch up about was the rare earths; we should probably catch up and see what’s going on with the rest of the organisation with regards to the Uranium and Vanadium. Certainly, as this price movement carries on through. I mean, every day feels like a new story to me. There’s always something big going on in Uranium at the moment. After a few years of let’s say quiet, it’s probably very welcome.

Mark Chalmers: Well, look Matt, and also, in our position as Energy Fuels, we’ve got a lot of inventory, and every time that price goes up that inventory becomes more valuable. So we have around currently a little over 500,000lbs of inventory. We expect that to grow to around 700,000lbs of inventory. So if you do your math at 5 to 700,000lbs at USD$25/lbs, and then you do your math at say 5 to 700,000 pounds at USD$40/lbs or USD$45/lbs, we can get a lot of bang out of that. And we’d been hoping to sell that material to the US government and this national stockpile at a premium. And we still hope we can sell that at a premium. But unlike just about anybody else out there, we have inventory and none of the small players have inventory. UR-Energy has some inventory, but we have a lot more inventory than anyone out there in the world outside of the Camecos and the Areva’s we have a substantial amount of inventory. So not only do we have cash in the bank, we’ve got inventory, Uranium, we’ve got an inventory of Vanadium, and we will play those to our best advantage.

Matthew Gordon: Beautiful. I’m sure your shareholders are delighted to hear that. So let’s finish up there. I appreciate your time. I’m glad to see you are well and keeping safe and the family are well. Maybe let’s talk next week because I think next week is going to feel like a whole new story again.

Mark Chalmers : Well I hope so because when the market moves, at least when the market’s moving up, it all feels better, Matt.

Matthew Gordon: It takes away a lot of problems, right? There’s different sorts of questions, different sorts of questions. But yes. Okay, well look, we’ll speak to you soon Mark. Thanks very much for today. I appreciate your time.

Mark Chalmers: Okay, Matt, have a good evening.

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If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

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Energy Fuels (NYSE: UUUU): Uranium Player Enters The Rare Earth Elements Sector

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Energy Fuels Inc.
  • Shares Outstanding: 115M
  • Share price US$1.63 (21.04.2020)
  • Market Cap: US$191M

Energy Fuels is one of our favourite uranium stories. Now, it looks like there’s another reason to feel excited. The company recently announced it is entering the rare earth elements (REE) sector. We sat down with CEO, Mark Chalmers, to discuss the details.

If the uranium space is your kind of thing, why not read one of our recent uranium articles, or watch our latest uranium interview?

Energy Fuels has mitigated risk with multiple cash streams: vanadium, tolled milling and cleanup operations. In this interview, talks about another potential revenue stream: rare earths processing. Last week, the company announced it was entering the rare earth element (REE) space. How will this affect Energy Fuels’ economics? Could this be a catalyst moment for the share price?

We Discuss:

  1. Getting into Rare Earths: Why, What’s the Idea?
  2. The Mill’s Capabilities: Setting it up for Different Streams
  3. Arrangements for Rare Earth Feed Stock: Making Money for Energy Fuels
  4. Impact of COVID-19 on the Uranium Market: Rising Share Prices
  5. Genesis of the Idea for Rare Earths and US Government’s Involvement
  6. Process of Understanding Economics and Timings on Moving Forward
  7. Spot Price Movement: When and How Might We See $40 and Over?
  8. Energy Fuels’ Position in the Uranium Space

Company Website:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Energy Fuels Company Logo.

Energy Fuels (NYSE: UUUU): US$16.6M Deal: Why Now? Chalmers Responds.

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Energy Fuels Inc.
  • Shares Outstanding: 114.5M
  • Share price C$1.82 (24.02.2020)
  • Market Cap: C$187.90M

This is a big one… you definitely need to check it out. We wrote an article giving our take on the situation a few weeks ago.

Why not read one of our recent uranium articles, or watch our latest uranium interview?

Energy Fuels made an announcement last week about a $16.6M Bought Deal, which closed on Thursday. Some shareholders do not seem happy. We sat down to interview Mark Chalmers, CEO of Energy Fuels, to get investors the answers they will demand. This is not an interview uranium investors can afford to miss!

Company Website:

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

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Energy Fuels US$16.6M Deal – What Does It Mean?

A wide photo of U.S President, Donald Trump, in a suit and red tie, making a speech.

Yesterday (February 13th 2020), Energy Fuels, the leading U.S. producer of uranium and potential producer of vanadium, announced an agreement with Cantor Fitzgerald & Co; the ‘innovative global financial services firm‘ has agreed to purchase, on a bought deal basis, US$16.6 million of common shares of the Company at a price of US$1.47 per share. We’ve studied the business model of Energy Fuels before, but what does this latest development mean for Energy Fuels investors and the uranium space as a whole?

Price Discovery On The Horizon?

A man we’ve sat down a lot with recently is Energy Fuels CEO, Mark Chalmers. He has found himself in the Crux hot seat in January 2020, December 2019 and October 2019, and this is just some of our encounters with the uranium veteran. He’s been very transparent with us throughout this bear market and we hope to talk with him next week to get the inside take on this agreement. So, in the meantime, we only postulate as to why Energy Fuels has done this now; what could this mean for the company?

President Trump’s apparent commitment to replenishing uranium reserves and adjusting the American military’s uranium purchasing habits towards full coverage in 2021 has got commentators excited. It proposes a budget of US$150M per annum for the creation of a US uranium reserve, as the administration seeks to help struggling producers of the fuel for nuclear power reactors. What this means precisely in terms of who and where the uranium will be purchase is still unclear. Given the security argument has been used as the main thrust of most discussions, the US uranium producers hope that the entire budget is US only and would not include Canada, Australia, European and African uranium producers and other US-friendly jurisdictions. The one certainty is that it is eventually unlikely to include Kazakhstan and Russia.

In a recent interview with us, Bannerman Resources CEO, Brandon Munro, explained that a behavioral switch by the U.S government could be a catalyst for a uranium market sentiment switch and, therefore, price discovery. So, is Energy Fuels getting into position early and readying itself for action in the near future? The press release seems to suggest so, but we will need to dig deeper than that. Why a bought deal? Who is at the table? Why not use their current cash drawdown facility?

Is this US$150M budget for the creation of a uranium reserve the beginning of uranium price discovery? Do they see a 2-tier system being created? What have they heard that has made them pull the trigger now?

Our Maths:

Munro stated in our interview that the U₃O₈ sector has operated a 20Mlbs deficit in the last few years. His logic went something like this:

  1. The United States military fleet consumes c. 50Mlbs of uranium per annum.
  2. It has been underbuying for the last few years by around 20%, or 10Mlbs.
  3. If it chooses to change its policy from underbuying to full coverage, 10Mlbs of extra demand for U3O8 will result in the current U3O8 deficit being halved.

In all our previous interviews, the absolute minimum spot price uranium CEOs have stated they could produce at (with a very small margin, if any) would be US$50/lb.

Based on this figure, US$150M of investment equates to 3Mlbs total of U₃O₈; not exactly a lot, but it’s a start.

While this clearly won’t be as significant a deficit reduction as Munro speculated, could this decision create momentum and a sentiment shift as we edge towards the next uranium bull market? Could it combine with other industry movers to create great change? We look forward to asking Chalmers. If you have any questions or thoughts, leave them below in the comments, DM us on Twitter (@CruxInvestor) or leave us a message on one of our uranium video interviews on YouTube.

The Early Bird Catches The Worm?

The announcement has certainly caught the market by surprise. It would appear that Energy Fuels may be positioning itself to get producing as quickly as possible. Will it have caught some of its peers out, and will it be able to close the deal? It could be a really valuable weathervane as to what the generalist market is thinking.

In the press release, Energy Fuels states the US$16.6M deal will be used to fund various activities required to increase uranium and/or vanadium production in response to the President of the United States’ budget for the fiscal year of 2021. How does the use of proceeds differ from what was originally planned?

Energy Fuels appears to think this announcement is a big moment. What will Chalmers have to say?

What do you make of all this? Comment below! We want to hear your take.

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If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

A wide photo of U.S President, Donald Trump, in a suit and red tie, making a speech.

Energy Fuels (NYSE: UUUU) – Grabbing a Tiger by the Tail. Uranium Market Goes Wild (Transcript)

Mark Chalmers CEO of Energy Fuels tells us that the Section 232 Petition was an unwanted but necessary process. Speculation is abound as to what the The 90 day Working Group has been asked to do.

What exactly will be decided in 90 days? Will US Uranium production be used only for Department of Defence needs? What does “Domestic Uranium Production Concerns to be Addressed” mean?Plus just how many friends do Mark and Jeff have left in the Uranium community for submitting the Section 232 Petition and paralysing the contract buying market? Is Energy Fuels prepared? Will it use the White Mesa Mill to bend others to its will? Let’s see what Mark Chalmers has to say.

Click here to watch the full interview.

Matthew Gordon: Mark, we spoke back in April.  It feels like a long time ago, and a lot of things have happened, including the Section 232 Petition.  What’s your reaction to all of that?

Mark Chalmers:  I think that firstly when we thought that there was going to be a decision on 12th July, we were expecting a positive decision for good reason, and we didn’t get that immediate relief that we had hoped for, but we’re very encouraged with the fact that two new companies in Colorado, UR Energy and Energy Fuels, filed a petition that now is going in to a new review which is looking at the entire nuclear fuel cycle in the United States at the highest levels of government.  Probably the most extensive review done in three or four decades on the front to the back of the nuclear fuel cycle.

Matthew Gordon: We’re talking about the 90 day Working Group, which was announced in the Presidential Memorandum by Donald Trump.  It wasn’t what you wanted, but are you seeing that as a positive?

Mark Chalmers: Two small companies couldn’t tackle the whole nuclear fuel cycle.  It was too big for us, so we’ve focused mainly on the Uranium front end.  We certainly did mention that other portions of the fuel cycle were challenged.  There’s a number of positives here.  We thought we had line of sight to relief little lead within 24, 48 hours for good reason.

Some of the positives is the Secretary of Commerce said it was a national security issue.  The President agreed with that.  A remedy was put forward. We don’t know exactly what that is, but the report from Commerce will be public in this new review group that’s getting started as we speak.

Matthew Gordon: Donald Trump did say in June 2017, he announced an initiative to revive the nuclear sector.  And this memorandum does talk about nuclear fuel production rather than specifically Uranium.  There’s a lot of moving parts here.  It’s hard it’s deliberately hard for us to all interpret exactly what it means.  I think the language is vague, but let’s try and see what you read into some of this. I think everyone’s claiming a win here.  Everyone’s opinion has changed over time.  Lots of people are claiming wins here, but I want to understand what you think. 

Mark Chalmers: I think that the Department of Defence requires US produced Uranium by treaty.  I think that the memo itself indicates that the complete fuel cycle for defence and our power plants is challenged.  It’s broken.  We don’t have the ability to basically chase… We’ll deal with it in terms of a lot of infrastructure, but our ore infrastructure, but we do have ability to mine Uranium right now and run it on through conversion enrichment, and up into the more highly enriched products with our existing infrastructure.

Now with regard to the Department of Defence they have to purchase Uranium from the United States.  The utilities do not currently have to produce the Uranium from the United States and that’s the differential between it.  And as we know, 99% is being imported into the United States right now, but I think the key grabs from this review is, as we said, we started off with a focus on Uranium mining.  It’s now a larger focus.  The audience, the members of that Working Group are secretary level, Secretary of Defence, Secretary of Interiors, Secretary of Treasury State Department, NRC.  These are all the top of the tree.  It’s basically the President’s cabinets minus a few people like Homeland Security and Health and a few things like that. So it’s floated to the top here.  It wasn’t a no-no.  It was “No, we need more time.”  And I think that was a key element.  They needed more time.

Matthew Gordon: There are a lot of big names involved – Secretary of everything important that’s involved with this and that, but they’re involved in a nuclear fuel production review.  That’s the top line.  I think we’d all agree that there needs to be a lot of discussion around the reactors and subsidies that reactors are receiving.  Where does Uranium fit into that review?  Is it a big piece of this?  They talk about addressing concerns, they don’t talk about addressing US Uranium production in anything other than in relation to the Department of Defence supply.  So what’s your expectation of what this 90 day review’s going to give you versus the rest of the world?

Mark Chalmers: I think that the memorandum and the flavour is that it’s got to be a holistic review.  I think the other thing is that certainly we’re going to pull out where we can participate, is that again the United States consuming one third of the world’s Uranium products, at the front-end Uranium less than one per cent, but then we have conversion on standby.  We have foreknown enrichment. We don’t have ability to go to these higher ends, but at the same time – and this is the important thing that needs to be drawn out. Russia, China are building up their capacity which is well in excess of their requirements.  So here we are not being able to produce a per cent of our requirements, where our foes are going to be able to produce many times greater than they need, so that they can create a global business to take over the entire fuel cycle in the world, including the United States.  This is where the national security issue is very significant. 

There is a huge focus by the United States government on critical minerals which Uranium is one, and okay as a company we also produce Vanadium – which is a critical mineral – and so this is right up the alley of that initiative. So separate from the nuclear fuel cycle you have the critical minerals too.  So look, there’s no certainty on the outcome but we’ve certainly elevated it to a level that it really needs to be at. 

Matthew Gordon: But what do you want out of this review?  Do you want certainty around your position? Do you want certainty for the market?  Do you want to understand what it means for you financially?  What are the specifics around, what do you want from these guys?  They’ve had an initiative for the last two years, but I don’t know what they’ve been doing in the last tow years.  What will they do in 90 days which they didn’t know before?

Mark Chalmers: We’re still looking for that 10, 12 million pounds, up to 10 or 12 million pounds of production under contracts.  We’re not looking at Tirus.  Maybe you don’t call them quotas.  There’s other ways of doing that, but we want long term contracts.

Matthew Gordon:  Who from?

Mark Chalmers: Still a good position to ask for long term contracts.  We are not materially changing what we’re asking for in terms of the certainty and relief at the front end for the Uranium mining side of things.

Matthew Gordon: Who do you want these contracts from?  Do you want them from the Department of Defence or the utilities being made to buy from you?  What are you looking for?

Mark Chalmers: We want long term contracts from utilities, from he Department of Defence.  The Section 232 was a trade initiative. It was focused on trade.  Well now that we’re in this larger Working Group there are other potential fixes that aren’t trade related.  It doesn’t mean that the trade issue’s got to go completely off the table, but it opens up the opportunities on where this could go and how it could potentially be funded looking forward.

So it’s still early days. You’re right, 90 days goes by very quickly.  But we agree with the President’s decision.  Yes, sir, it’s painful, the shares got hit like they did, and not just our shares but everybody in the United States, but we actually agree with the decision and we think the President made the right decision by opening it up to the entire fuel cycle.

Matthew Gordon: At what point did you recognise what could happen?  You started a series of events.  I said to you way back then, I thought it was a really bold, big move for two small companies in this space to go for. But at what point did you recognise that actually this may not go the way you wanted it?  Was it literally the day the memorandum came out or did you know anything before then?

Mark Chalmers: I can’t say publicly but I had for good reason up until the last 24 to 48 hours that we had, very positive signals that we had a good chance of receiving relief of this material for us and the United States Uranium mining industry.  And as said, we had nothing to confirm that. Actually we didn’t have anything positive to confirm it until that memorandum came out.  There were rumours starting to fly.  They were not consistent with what we believed and were we were at, but when the rumours started to fly and people were saying, “Oh, I confirm this or I confirm that,” we didn’t know.  We did not know.  One thing that we do know, and as I said, this got into the White House.  I think that they basically run out of time when the topic of Uranium mining and the other parts of the fuel cycle started to convolute things in terms of really where they should be focused and what decisions they should make.

Matthew Gordon: So you made a statement to me the last time we spoke.  You said you’re a winner and you’re going to make this thing work.  I believe that you believe that and that’s great.  But do you think winners do everything and anything it takes to win?  And if you do, do you think the 232 is the right move for you then and do you still feel that now?

Mark Chalmers: If I had the opportunity to do it again, I would have done it again.  I think that 232 was the right step.  I think it’s right in line with… I said it many times that we will be aggressive but not reckless.  I think that from my perspective and again for good reason we got this thing very, very close to going across the line on our petition.  We’ve got the support of columners.  We’ve got this national security determination.   We knew it wasn’t going to be easy.  In hindsight it’s been more difficult than perhaps I had thought at the beginning of the process, but that’s life isn’t it? 

Matthew Gordon: I think the uncertainty is still there, but we can come to that in a minute.  Do you think you’ve made some enemies along the way?  Your share price has been hit.  Your US colleagues companies have been hit. Utilities weren’t for this move at all.  Who’s out there that’s friendly and who’s talking to you?

Mark Chalmers: I don’t have people that I consider enemies.  I think that the utilities, yeah, they didn’t agree with it.  Everybody has to vote their pocket book, and that includes the utilities.  I’d had a number of utilities tell me “Mark, t’s not personal.  We understand why you did what you did.”  And to this day, with all the number of shareholders I have talked to, yeah, sure, they saw the shares drop by 40% and so.  37% on the day.  No, I’m not happy with that.   No, they’re not happy with that, but I have not had an angry shareholder.

Now, after this video maybe somebody’s angry.  They want to come talk to me, and I welcome them to call me. I welcome them to call me.  I’m an approachable guy and I’m looking for big opportunities for our shareholders, not status quo.

Matthew Gordon: Do you think you’re going to be punished by utilities as a consequence of this?  I know you just said, “Look, it’s not personal,” but will that be reflected in terms of their buying behaviour with contracts going forward?

Mark Chalmers: Absolutely not. There’s a lot of rumours and as I said, when you look at the other Uranium producers in the world, you look at Canada, if you look at Australia – if they had the opportunity to take in a Section 232 route, I will bet you they would have taken that route themselves if they had that opportunity. 

Matthew Gordon: With regards to the narrative, I remember talking with you, I’ve talked to a lot of CEOs of other Uranium companies, talked to funds, talked to a couple of utilities – the narrative obviously knowing what we now know with regards to President Trump’s memorandum, the narrative’s changing.  Everyone’s claiming a win.  Everyone’s claiming that they called it right.   Who do you think actually called it right in all this?  I know you said it wasn’t the outcome that you wanted, but did you see anyone get this right?

Mark Chalmers: You’re right where a lot of people are saying, “Oh, it’s a win for me.”  Everyone says it’s a win and here we are still waiting another 90 days.  I think we’ve called it right because we brought to the attention of the government a fundamental flaw in our fuel cycle and in our national defence with the front end of the fuel cycle.  So I think that in the absence of us filing our Section 232, where would be today with regard to the focus on the fuel cycle?  I think we did what we needed to do.  As I said, I don’t regret doing what we did and there still is uncertainty – and even on the day, I said on the day the rumours start flying, I kept saying to people around me, “This is not consistent with President Trump.  It is not consistent for him to say, “”No, I’m not doing anything.”  So when the memorandum came out, I couldn’t accept that what was in that memorandum was consistent with what I would expect from President Trump and his administration that they would need to look at this in a more detailed way.

Matthew Gordon: He didn’t say no.  He didn’t say yes.  He just bought some time.  It’s part of a much bigger review.  Do you think that review is going to finish in 90 days or probably a bit less than that now?

Mark Chalmers: You’re right, it’s a large review.  All I can say is in the 232 process, they met all of their time constraints.  They were on the day on just about everything that they did.  Now this is a bigger group…

Matthew Gordon: With bigger collective problems, Mark.  You’ve got the utilities with a multitude of different energy sources as well as nuclear.  You’ve got the gas guys.  You’ve got big lobbyists who have been fighting the good fight and they’ve got to appease all of those people.  I guess there’s room for everyone.  It’s a question of who gets what slice of the pie. 

Mark Chalmers: I think we’ve got a tiger by the tail.  There’s no question.  But not all these things have to be solved in a day, and they can’t be solved in a day.  I think that the key things that they need to look at is a phasing of things.  You take further down in the enrichment cycle of the fuel chain.  You’re not going to solve that in a week or month or six months, but we do have things like the conversion and the Uranium mining that can be solved quicker because a lot of the infrastructure…  Well, the infrastructure, a lot of it is in place, a lot of the people are in place. 

Matthew Gordon: Who’s problem is that?  You’re saying they can look at that, but that’s the problem of the company, isn’t it? Why does the review become responsible for getting those companies up and running again?  They can’t affect price other than give uncertainty to utility companies to be able to put some contracts in place.  Is that the way it works?

Mark Chalmers: The one complication with the United States compared to Russia and China, is the US basically privatised the vast majority of the front end of the fuel cycle.  There is no nuclear fuel cycle in the world that doesn’t have government support in virtually every step of that fuel cycle, and that goes with the Russians and that goes with the Chinese.

I think what we have found that privatising the front end of the fuel cycle doesn’t work.  It’s that simple.  So the government has the ability to facilitate in different ways if they think it is a priority of national significance.  It is complicated, as I’ve said, because we’re now not just tied to the Section 232, there are other aspects of it.  If you look at it right now, many of the nuclear utilities have received and are receiving substantial support in the various states that they operate in, substantial support.  We’re talking 100, 150, 200 million dollars per year for two or three reactors. 

Matthew Gordon: That’s at a state level, not a federal level.  Is that right?

Mark Chalmers: That’s the state level.  Look, we’re not trying to unduly burden the fuel cycle with our costs, but I can tell you that when you look at what we asked for, what we’re asking for is very, very small in the scheme of the fuel cycle.  We’re small businesses.  It’s very small.

Matthew Gordon:  What are you looking for?

Mark Chalmers: All of this is taken out of context on what the true costs are.  Now the other thing that’s taken out of context with the true cost is what is the fair value of a pound of Uranium produced by westerners?  It’s not the current $25 per pound of the spot price.  That is a depressed what we call happier pound.  So there’s a lot of ways the maths can be distorted here.

Matthew Gordon: What are you after?  They can help you in different ways.  What are those ways that you would like them to help you with?  Is it around permitting and licencing or is it subsidies?

Mark Chalmers: The main thing we want is contracts.  This is where we haven’t changed our position.  We want contracts.  We want to buy American.  Certainly the Department of Defence has to buy US Uranium.  We’ve got government reactors.  There’re different ways that it can be incentivised.  In the case of our company, we’re unique.  We have Vanadium.  We also do recycling of low level products.  We do one to three reactors a year recycling and we also have been pursing clean up of a nation. 

Matthew Gordon: You’ve got a lot going on.

Mark Chalmers: USD$3.7 billion in trust.

Matthew Gordon: You’re at the front line.  With regards to whether it be state or federal level, subsidies or a bifurcated market or permitting made easier, what precisely do you need?  You’re a producer.  You’ve got a lot of moving parts, a lot of assets.  You’ve got explorers.  They’re all going to need different things because they’re at different stages of evolution.  You’re going to focus on your company. What is it that you want for you and what do you think explorers are going to need? 

Mark Chalmers: There’s a difference.  We have a lot of critical infrastructure that is constructed, that is manned, is operable.

Matthew Gordon: And it’s costing you money today, right?

Mark Chalmers: We need to get money into our coffers and that can happen in a variety of ways.  As I said, I prefer long term contracts.  It’s important to keep producing.  Uranium is a very unique commodity, the technical skills required to find it, to develop it, to process it, are rare to find and if we don’t get supporters to preserve and continue at some level, we will lose those skills.

Now, just for an example, even with the Department of Defence when it comes to things like submarines, aircraft, they continue to build at a certain level just to maintain critical infrastructure and the skills that are necessary for that infrastructure to operate efficiently.  Those are themes that could be followed. And as I said, the one distortion that happens is people assume that Uranium is going to be available forever for $25 a pound and that’s not the case.  Cameco will be gone and the Uranium production in Australia will largely be gone, perhaps with the exception of Olympic Dam.  We need a higher price.  So you’ve got to kind of differentiate between the state-owned enterprises and the western production.  Western production needs to be at $50 a pound or greater to continue. 

Matthew Gordon: But that is determined by the market usually, right? Are you saying that the Government needs to step in and affect price or pay the differential between whatever spot is. I know you want a contract, but you want a contract at +$50.  If the market isn’t at $50, how does the state or federal government help you?

Mark Chalmers: It’s probably a combination of things.  It could be a combination of the Government, it could be a combination of the utilities wearing some of that load.  They’re receiving subsidies as we speak.  We’re not asking for something that others aren’t already receiving here.  We know there’s a challenge, but you’ve got to get back to what I said before – we are the largest consumer in the world and we have zero capability right now.  Is that where we want to be? Now some people will say “I’m fine with that” and I say, “No I’m not fine with it” and I think the average person in DC understands this.

Matthew Gordon: 24 of 60 operating nuclear reactors in the US will struggle to cover their operating costs this time next year.  So they need help and they are getting help now, and you’re saying “I just want a piece of that”.

Mark Chalmers: Correct.  I talked about these state-owned enterprises in Russia and China.  If they didn’t have state support, would they be able to function from the beginning to the end of the fuel cycle and the answer is “no”. 

Matthew Gordon: I just want to ask you about your views about Cameco’s conference call press release last week.  What’s your read on what they had to say?  It hasn’t really moved the market; it hasn’t done anything for equities or buying, so what’s your take on it?

Mark Chalmers: I think my take on Cameco is that they’re challenged right now too and losing, or getting a very small settlement on this lawsuit that they had, it hurt them big time.  I think they’re just reiterating what I’m saying – that they need higher prices or they’re not going to restart. What they’re not saying is if their contracts roll off they’re looking at serious outcomes with Sagar Lake.  Sagar Lake has also got a finite life on it, so it doesn’t have 20 years of life. 

Look, I think Cameco is a great company and I know the management of Cameco.  I think they’re doing the right things and I respect them, and I always say that to anyone that asks me about the Uranium sector.  I say “you’ve got to own some Cameco”.  But, they’re also very challenged right now too, and I think that they recognise the importance of western world production.  I think they kind of suddenly talk about that and they recognise things like critical minerals and having those capabilities. 

So, I guess what I want to say is: they’re doing the right things, they’re challenged like everybody else but, in their benefit right now, they’ve got two things helping them – mainly their longer-term contracts and they’re also benefitting from the foreign exchange right now too.

Matthew Gordon:  We need to remember the macroeconomics for this industry, the Uranium industry, nothing’s changed.  It doesn’t matter Section 232 didn’t give you what you wanted.  It almost doesn’t matter what came out of the 90 day Working Group, because the fundamentals don’t change.  There’s a massive supply/demand gap and it’s getting bigger by the day.  Billions of dollars need spending on infrastructure, so I think people need to just remember that.

Mark Chalmers: I just want to say something else too.  That’s absolutely right and the fundamentals are what the fundamentals are, and everybody kind of over-focuses on Section 232.  I told our shareholders that, “Look, I asked for Section 232 because it is bigger than that.  But I understand why people did bias for Section 232 because it was looking…

Matthew Gordon: Everyone wants that catalyst moment. It’s Section 232, it’s their Working Group, it’s the WNA.  When you’re down, you reach for anything you can.  But I’d say people need to think just a little bit longer than that and it doesn’t matter if it takes another six months, another nine months, another 12 months – it’s coming and it’ll come quickly when it goes.

Let’s talk about your mill. You said the mill is something you can use to leverage your position as the US’s number one Uranium producer.  You think that people will have to come to you and there will be discussions to be had at that point.  Is it one of three potential working mills in the US?

Mark Chalmers: Well, look it’s the only operable, manned producing facility.  There are two other facilities, but both of them haven’t ran for like 40 years.  They’ve been partially reclaimed or, in some instances, people have taken a lot of equipment out, so they’re very dilapidated and not able to come online in quick order.

Matthew Gordon: So that’s good for you. But what does it mean for the other players in the US market?  Do you feel that some of them are in a slightly weaker position?  Are you looking at mergers?  Are you looking at takeovers or JVs? 

Mark Chalmers: The mill puts us in a strong position, particularly with the conventional miners, particularly if anybody wants to produce Vanadium or some of this recycle.  There was a phrase that was used 40 years ago and it says: “he who has the mill owns the district”.  Well, then there was something like 25 mills out the in the United States; well today there is one that operates and functions.  So, you could use that phrase 40 years ago, well you could certainly use it now when you’re the only one who can actually process Uranium today.

Matthew Gordon: What are you going to do? 

Mark Chalmers: The strategy is the same.  We need higher prices for conventional mining.  We’ll always give the main priority for that to be out mines, our ore.  We’re still producing Vanadium right now.  We’re actually shipping low grade ore from a mine that’s on standby in New Mexico right now.  So we’re actually doing some recycling of low grade ores from idle Uranium mines.  We’ll continue to use all those various arrows to improve our cash-flow optionality. 

And that is why that mill survived, because it has that ability to do these side businesses when the price of Uranium was low.  When it comes to others who want to use the mill, we’ll consider that on a case-by-case basis.  It is our facility, it’s probably worth $300-$400M if you replaced it.  We’ve got 70 or 80 people there right now working there.  We’re not going to do it for free. If we consider processing somebody’s ore, we want a fair margin on that and that is entirely reasonable.

Matthew Gordon: You can push that margin out because you know what it’s going to cost them to move it somewhere else? It’s easy maths, right?

Mark Chalmers: Yeah, there’s no place to move it to.  If somebody thinks “we’ll ship you some material and you can get a 10% margin on that and we can use the mill whenever we want to” – no, we’re not doing that.

Matthew Gordon: If investors buy into the macro story, then surely now is the time to go and talk about acquisitions?

Mark Chalmers: In the Section 232 process, with the remedy that we asked for, we were staying away from M&A activity because we were looking for an industry solution.  Not just a solution for UR Energy and Energy Fuels and we are trying to allow enough critical mass for there to be competition amongst the various fuel parties that remain in the United States.  Well, if we’re not going exactly that route and you’re more focused on critical infrastructure and what-not, that direction may change. 

So, we are not opposed to M&A activities if it makes sense and maybe a little less or so than perhaps when we in the actual Section 232 process.  But, I can’t stress, we were looking for an industry solution and a lot of other producers or producer wannabes were riding on our backs hoping we would get that across the line.  So, we’ll be open.

Matthew Gordon: Okay, but you don’t want competition though do you?

Mark Chalmers: Some level of competition is healthy.  We’re certainly not trying to come up with a monopoly. Some people said we’re monopolised by owning the mill, well we’re monopolised by owning the mill because we own it and we pay for it.  If somebody wants to go out and permit and construct a mill somewhere else in the United States, they’re free to do that.

Matthew Gordon: How much cash have you got left?

Mark Chalmers: I can’t say in complete accuracy, but we should have a $40M working capital.  We’re still in a strong position compared to our peers and that’s by choice.  We’re glad we have that position right now.

Matthew Gordon: When you told me you need to cash position, you want to have a cash position, it makes you feel in control, are you going to need to go and raise any more money any time soon?

Mark Chalmers: Well, look we don’t want to raise money at these prices, but it is important in this business to not get too close to the wire, and I think that a lot of people own us because of the fact that we don’t sail too close to the wind.  Particularly when you have the permanent facilities that we have.  They are expensive and you don’t want to get that close, because you can have an event like we saw with how the stock reacted on Section 232.  So, we’re going to try to maintain our strong position as much as possible.

Matthew Gordon:  Do you think your shares were inflated before the 232 announcement?  Do you think people were thinking this could go your way and you’re back down at the level you should be?

Mark Chalmers: Well, I mean that’s debateable.  Personally, I think that we got over-punished, but obviously people were in the shares because they thought there was going to be a positive outcome, the story was so strong.  So, I think if you look at right now, even after the 12th of July, a lot of the Uraniums have come off globally.  There were people who were in the stock, you know, they thought that we had line of sight to positive cashflow and profits.

Matthew Gordon:  What’s next – do you wait for these 90 days? What are you doing during that time – is it business as usual?

Mark Chalmers:  The focus is on what potentially can get us to cashflow quicker, faster inflection points, so we’re going to focus extensively on these working groups.  We’ll spend a lot of time in DC.  We’ll spend a lot of time working with the administration and these various groups that will be participating in, the working group. 

We’re still working on the Hill – we had very strong support on the Hill with Sarah Bruckto, Liz Cheney.  We had 50 Congressmen sign a letter in our support, they sent to the President.  We had 39 of our Native American employees that work at White Mason Mill, on their own initiative, wrote a letter to the President.  We’ll keep pushing every angle we can push but, at the same time, we’re going to be looking at our cost and our burn, and how to best manage our balance sheet to give ourselves plenty of runway here.

Matthew Gordon: You said earlier on, you don’t regret doing it, you would do this again, but has it been a distraction?

Mark Chalmers: It took a lot of our time but, as you pointed out, we’re trying to come up with an inflection point.  We’re trying to make our luck, we’re not trying to just sit on our seat.  There’s a lot of people there that all they’re focused on is just doing nothing and preserving their capital and that’s not making you luck, that’s just waiting. That’s just hope as a strategy. 

We will always try to make our luck and, Matt, as you know I’ve been involved in this business for over 40 years, I’ve produced Uranium all over the world.  Our assets are the best in the world for the size that we fit into in terms of these junior companies. I voted with my feet, I came back from Australia for this opportunity – I’ve no regrets that I did that either.  But it’s a tough business, it’s a tough business and if you’re not tough you shouldn’t be in it.

Matthew Gordon: Well, that’s a great point to finish on – that mining is not easy and it’s been particularly tough….

Mark Chalmers: The whole resource sector is challenged, there’s no question, and certainly with the Section 232 petition, we certainly got some attention on it from all sorts of angles.  As I said, it’s been a big challenge, but I can tell you I sleep well at night, I’m confident but, again, I will not be reckless.

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