Energy Fuels Inc (UUUU) 2022 Q2 法說會逐字稿

My name is Michelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Energy Fuels' Q2 2022 conference call. (Operator Instructions) Thank you. Mr. Chalmers, you may begin.

Thank you, Michelle. And good afternoon, everyone. It's always a pleasure to have people joining us for our Q2 call and webcast today. We're excited to discuss our Q2 achievements as well as the significant accomplishments we continue to make. And as always, we have a lot to talk about. For those who cannot join the call today, there will be replays of the presentation available for two weeks on our website either later today or tomorrow.

We continue to make extraordinary progress on many fronts. And I believe there's no question that Energy Fuels has clearly emerged as a clear leader in US critical mineral production at a time when this has never been more important.

Today, I have the Q2 highlights embedded in our updated corporate presentation. But before I begin, I just want to remind people that you're controlling the slides from your own device and I'll endeavor to tell you when to advance to the next slide. I don't always accomplish that, but I'll do my best.

As Michelle mentioned, there will be questions at the end of the presentation, and Dave Frydenlund, our Executive Vice President and Chief Legal Officer, as well as our new CFO, Tom Brock, which I'm very pleased to have him join us today, will be available to answer any questions I cannot answer. So let's get going.

This first slide, you guys have -- most of you have seen this and, again, a picture of the White Mesa Mill, which is really our flagship asset for the company and our critical mineral hub, where we can produce uranium, rare earth elements, vanadium and hopefully soon medical isotopes and do our recycling.

Next slide. I may be making some forward-looking statements throughout this presentation. And basically the disclaimers are at the back of the presentation.

Next slide. So again, most of you have seen this. Energy Fuels really is -- there's no peer group to Energy Fuels because typically you invest in a uranium only company or rare earth company or maybe an isotope only or vanadium only company.

In Energy Fuels, we have all these in our investment strategies, but they all contain one common denominator, uranium or radionuclides. So that's a common denominator. We also have a long history of recycling. And financial strength, we always pride ourselves on strong financial strength and zero debt.

Next slide. Now just jumping right into the financial highlights, we have and continue to have a robust balance sheet, with around $134 million of working capital. This includes $86.4 million of cash and cash equivalents and $11.8 million of marketable securities. It does not include the CUR shares that are currently escrowed.

Product inventories, we have $28.6 million of inventories of uranium and vanadium at really book value. If you adjusted those prices to current commodity prices, that's around $43 million, nearly $44 million. For the quarter, we had $6.5 million of revenues. We reported a net loss of $18.1 million, but nearly $13.4 million of that was non-cash mark-to-market decrease in the value of some of our investments, which really were consolidated uranium in Virginia Energy shares.

So it was really, if you subtract the $13.4 million from the $18 million you end up with about $5 million. Vanadium sales, during the half of this year, we sold 575,000 pounds of V2O5 at an average price of $13.44 per pound. So we made a little nice profit off of those sales of vanadium.

Next slide. We're also excited to talk about that we entered into three new long-term contracts in May for deliveries between 2023 and 2030. Base quantities are GBP3 million, but it could be as high as GBP4.2 million if they exercise all their options. They have a hybrid pricing. Both the floors and ceilings are indexed to inflation, and we also have exposure to rising uranium prices.

We're also pleased to announce that we did submit a proposal to sell uranium to the US Department of Energy, the DOE. This is the first time the DOE has had a proposal to buy uranium in approximately 50 years. So this is a very important move by the US government and, if accepted, could result in significant revenues from uranium sales this year.

Rare earth, we produced around 205 metric tons of mixed rare earth carbonate containing between 30% to nearly 35% NdPr. And we are maintaining our guidance of about 650 tonnes to a 1,000 tonnes of carbonate in 2022. A large reason we've been under on our carbonate production is we still had shortfalls of receiving product from Chemours, but we're working through those issues.

Brazil acquisition. I think this is a really important acquisition for our company because we now have a mine that contains rare earths. And it's a very large land package, about 58 square miles in the Bahia state of Brazil. And it has the potential to supply significant quantities of monazite for decades to White Mesa Mill. And we continue to have numerous discussions with several other monazite suppliers.

Next slide. Let's move on to some management highlights in Q2. We're very, very excited that we're continuing to grow the expertise in the company, and we appointed Dr. John Uhrie, effective August 1. So he's only been on the job for about a week and a half as COO.

Dr. Uhrie has significant experience in mining and mineral processing. He was formerly VP of Metals Exploration Development for Doe Run. He also held significant roles with RMP Global, Newmont Mining and Freeport McMoRan, and he has his PhD in Metallurgical Engineering. So we're really looking forward to those skill sets being put to work right now with the company.

And as I mentioned, Tom Brock came on effectively as CFO on Monday, August 8, and Tom has extensive experience in oil and gas, previously served as Vice President and Chief Accounting Officer of Extract Oil and Gas and also had worked for American Midstream Partners. So we're really excited about having two new executives join the team to help us go forward with our plans.

And lastly, David Frydenlund was appointed Executive Vice President and Chief Legal Officer and Corporate Secretary, effective August 8. So we are building out our team. We have been hiring other employees as well, and we're going into absolutely a growth mode.

Next slide. So again, this slide, again, a number of you have seen it, just our footprint from Wyoming to Texas. Nuclear power is on the come back, and 20% of our electricity comes from nuclear, 55% of our carbon-free energy comes from nuclear, but it's never been really more exciting to be in the uranium industry and the future of nuclear, again, is very bright.

Next slide. Again, our frontline of production assets, the White Mesa Mill, which is really our critical mineral hub, Ulta Mesa on standby, ISR in Texas, Nichols Ranch ISR in Texas and our Pinion Plain Mine in Arizona.

Next slide. So look, I'll talk a little bit more about the booking of these uranium sales contracts providing revenues, cash flows from -- starting next year. I think there's a lot of tailwinds that are really starting to push things along here with US utilities, at sustainable pricing.

One, the intermediaries are starting to buy physical uranium. Certainly the Russian invasion of Ukraine, as unfortunate as that is, is really putting the focus on security of supply. And then when you look at some of the moves by the US Department of Energy and the US government when it comes to rebuilding the nuclear fuel cycle, it's all pointing in the right direction. And it's been a long way.

Energy Fuels offers reliable sources of uranium in the United States. We have an excellent track record of on-time, on-budget deliveries and production, and that is a major attraction to these utilities. I already talked about the base quantity of these three contracts being GBP3 million, total up to GBP4.2 million.

And I said it was hybrid pricing with escalation for inflation, which is really creating a number of issues, as I'm sure all of you are aware, in the world as a whole. And the pricing formula maintains exposure to uranium upside while also limiting downside. And also, as I mentioned, very excited about putting our proposal to sell uranium to the DOE with potential for revenue -- substantial revenue this year.

Next slide. So, we periodically update this market position, we still trade as a uranium company. We're still in the middle of the pack. I always like to point out that looking at our working capital, zero debt, uranium inventories, plus we have vanadium inventories that we produce, we didn't buy it. Most people have bought their inventories.

But there really is no peer group for Energy Fuels because when you look at those green tick marks going to the right, all these peers that we get measured to are uranium focused companies. None of them have rare earths, none of them have the ability to produce vanadium, none of them are advancing medical isotopes and none of them have the ability to recycle like Energy Fuels. So I still say, you get significant coverage in all things critical elements when you invest in Energy Fuels.

Next slide. I've talked about this previously. But for those that may be new to this story, rare earths and uranium fit perfectly together and my dear friend, Constantine Karayannopoulos from Neo Performance calls us potentially the missing link in US rare earth element production. And that's because of the way we're approaching our rare earth business coupled with uranium.

First of all, monazite is very high grade, and because it's naturally radioactive and has uranium and thorium, we can address that at the White Mesa Mill. It also has the highest concentrations of the magnetic rare earths, which incidentally are what drives these high-efficiency electric motors and cars and wind turbines. And White Mesa is the only facility in North America able to process monazite, recover the uranium and also produce rare earth products.

So when you look at this next thought point here, kind of looking at the timeline over the last year or so, you can see where we started processing commercially mixed rare earth carbonate. We started pilot separation of rare earth oxides and producing very high-purity NdPr.

In March, we started making a carbonate that was very high grade, nearly 32% to 34% NdPr in the carbonate that we've been shipping to Neo. In May, we secured or are in process of securing -- we haven't closed yet, but we will soon on the Bahia project in Brazil and we still plan to build out light separations at White Mesa Mill and heavy separations in the next few years.

Next slide. So I've already touched on the magic ingredient of rare earth called monazite, it's a superior mineral and we think it's the right place to be for all the right reasons. It is a low cost by-product from heavy mineral sands mines, similar to what we are purchasing in Brazil at Bahia. So currently the fee is in the order of 50% to 60% total rare earth oxides, which is extremely high grade, high value.

But most importantly, it has the high grades of the big value chains, which is the NdPr, the heavies. The basket value, recovered basket value is over $20,000 a tonne. If you compare that to basanite, which also has fairly high grades of NdPr, but very light on the heavies, the basket value is around $8,500 dollars a tonne. So grade is king in rare earths just like the rest of the mining industry. And also the ability to recover those rare earths in the monazite is easier than basanite.

Next slide. So again, the White Mesa Mill, the most advanced story for processing rare earth in the USA Today. It's the only facility, as I said, that is able to process and recover rare earths from monazite. The uranium, which is a problem for most, is not a problem for us. Matter of fact, it is a value add. It's highly scalable.

We won't touch -- just a fraction of the percent of the production capability of the White Mesa Mill. And it generates very little waste because when you recover 50%-some REO, you're taking half of that as a value-add product versus half going to tailings.

Next slide. So a bit more on Bahia. It puts us in a position to potentially produce maybe as high as 10,000 tonnes of monazite. I talked about it being a very, very significant land position. And basically the monazite is contained and goes with the heavy mineral sand mineralization, the ilmenite, rutile, zircon.

We think there's really keen interest for a heavy mineral sand concentrate with other parties. The mineralization is near surface. It has a lot of drill holes. We know that it has on average of nearly 3% monazite and potential for significant expansion going forward. We also have a number of other concessions that we're looking at and some of those concessions have mining permits in place.

In the next six months, we're going to be doing substantial amount of drilling. We have secured a -- or are securing a sonic drill rig. We plan to drill about 100 drill holes, nearly 22 meters to 23 meters deep when historically the drill holes have only been around 6 meters deep.

So we're going to drill a lot deeper and we hope to find substantial quantities of additional heavy mineral sands below the 6 meters is what we acquired the property or acquiring the property on 6 meter depth, but we'll see how that goes. But we're drilling nearly four times deeper with a much more heavy duty and sophisticated drill rig. And we plan to turn that into an NI 43-101 in due course. So watch this space. We're very excited about securing Bahia.

Next slide. So again, some of you -- many of you have seen this slide. How we built out the supply chain at small commercial scale very quickly with our relationship with Chemours and Neo. And we were able to do that quicker than most people thought was possible. But we are absolutely going forward with full integration in the United States, but we plan to continue to have a very strong relationship with Neo.

We need monazite and Bahia is a big part of that puzzle. But I still hope and plan to have other updates over the course of the next few months with other sources of monazite hopefully coming to the White Mesa Mill.

Next slide. Just pictures and I always say this -- most people declare victory on the rare earth business when they have a beaker of rare earths. And we declare victory, at least initially, when we ship it out in bulky bags to Neo at commercial scale. So again, advancing very quickly.

Next slide. So where do we fit in? Kind of with the rare earth public companies, we still fit in the middle when it comes to market cap, but it is still our goal to chase MP and Lynas and even Iluka -- even though Iluka is advancing towards rare earth production. But with the focus mainly on monazite, we think there is substantial upside to become a multi-billion dollar company in due course. And so that is still absolutely what we're focused on while producing uranium and perhaps vanadium.

So speaking of vanadium, I mentioned we did have sales of nearly 600,000 pounds of vanadium at $11.44, which was somewhere near around $7 million of vanadium at $11.44. The price of vanadium is back to $8 a pound. So we caught a wave, which is exactly per the plan of having inventories available for sale when the price of vanadium moves. Because when it moves, it moves up fast and it moves down fast.

So we're still excited about our vanadium capabilities. We still have the ability and we still have over a million pounds to sell when the time is right. And we still have the ability to go back into vanadium production with recycling from our tailings solutions when we decide we want to do that.

Next slide. Medical isotopes from thorium and uranium. Again, this was fairly new to the strategy. But it is exciting and we're getting a lot of attention from a lot of people. We signed this strategic alliance agreement with RadTran, and we're focused on these alpha emitting isotopes, which are in short supply. So it's still early days, but it is moving quickly, hopefully have further updates in due course. But don't -- look at this and watch it because it is a very exciting new area for our company.

Next slide. Just a bit more on our financial strength. With our strong working capital position, our uranium inventories and our vanadium inventories, and again, we carry the uranium on the books about $24 a pound and vanadium at about $6 a pound. So when you look at the current price of uranium & vanadium, you can see at current prices where we get a nice lift if we decided to liquidate those inventories right now.

We're still planning to produce between 100 and 200 -- a 120,000 pounds of uranium from alternate feeds this year, which will take us up to around 800,000 pounds at year end, assuming we don't sell any of that inventory. And I just want to continue to highlight that we have zero debt.

Next slide and final slide and I'll open it up for questions. There really is no company like Energy Fuels with exposure to several critical minerals, which, as I indicated, never been critical than they are today. Uranium, we have really unmatched ability to respond with low-cost US uranium production from our proven assets and paid for assets. We have more production facilities and capacity and experience than any other US company.

The rare earths, again, moving forward very, very quickly, very excited and we see the key element here. We've pretty much technically gone through all the steps to get through separations. Have high confidence we can do that. We are doing it right now. We just need the monazite. And so we're building up that story. And as I said, hope to report more in due course.

Vanadium, still, again, a smaller part of our business model, but it's an important element of our business model. I talked about the medical isotopes, watch this space, the recycling and our strong financial strength -- we'll always have strong financial strength. And remember what I always say, we will be aggressive but not reckless.

So now, I'd like to open it up for any questions anyone on this call would like to ask us.

(Operator Instructions) Heiko Ihle, H.C. Wainwright.

Hi, Mark and team. This is Marcus Giannini calling in for Heiko. Thanks for taking my questions. There was a sentence in your release that we found intriguing stating having recently secured three long term uranium contracts with major US utilities, the company is beginning to perform the work needed to recommence production at one or more of its mines and ISR facilities starting as soon as 2023.

So I guess, just out of curiosity, how much work are you planning to do this year? Are you able to quantify your expenditures for that? And do you need a lot of labor for this? And are you having a hard time finding workers by any chance given the current situation?

Yeah. Look, we're working at probably three or four of our projects right now getting ready for production. We haven't designated which projects we're going to start up first. But we are doing quite a bit of work and looking in terms of how much are we spending. I'm just pulling a number out of my backside, but maybe up to $5 million or $6 million, $7 million, that kind of expenditure.

A lot of these projects have set for a number of years and they need some work. We have hired people to do that work and I'm going to say it's in the order of around 20 people -- 15, 20 people, to be focused on getting these projects back into production or being ready to go into production.

The contracts that we've signed, again, 2023 is the start of one or two of those contracts. And it's just sort of getting the flywheel turned up. But yes, watch this space. We are planning to have at least one mine open and advancing for new production. That hasn't happened yet. But yes, there is work being done at several projects getting ready for production because we'd like to build on that contract portfolio going forward and open up several mines.

Okay, perfect. Thanks for the clarification. Lastly, you have over a million pounds of vanadium left. You sold some for an average of $13.44 per pound in the first half, but then stopped giving pricing. Do you have a fixed sum where you would restart sales or is this a moving target more or less depending on the balance sheet that month? How much lead time do you need for these sales given logistics?

Yes. Look, the thing about vanadium, it's very slippery. And yeah, we don't really have any intent to sell any vanadium at $7, $8 a pound, but to sell it, we can probably sell it in a week when the price hits the right levels. But when you look at the current price at $8, and you saw a little spike and we cut -- sold $7 or $8 million of vanadium at $13. That's exactly the kind of strategy that we're trying to execute. So we'll sell it when it makes sense and we'll hold it when it doesn't make sense to sell it.

Alright, perfect. That's it for me. Thanks again, for taking our questions.

My pleasure.

(Operator Instructions) Puneet Singh, Eight Capital.

Thanks for taking my question. I see a line in here about evaluating and installing a smaller, light separation circuit. What needs to happen for you to get that going in the next 18 to 24 months? Can you expand a little bit more on that?

Yeah. Well, because we're separating in the lab at lab scale, and we're also doing a commercial separation of the lanthanum removal [step], we've gained a lot of expertise and knowledge about that next step of separation. Now White Mesa is a solvent extraction facility and we have been doing solvent extraction for uranium and vanadium for four decades. So we're very comfortable with that.

One of the concepts is that we could perhaps do some separations of rare earths in our existing solvent extraction building. That's the concept. It's a very large building. We have potential of maybe adding a second or maybe a third floor with additional upsize separation cells, SX cells, bigger than what we're using in the laboratory but maybe smaller than what we would be using in our full-scale commercial separation facility, which we are planning on being in the order of about 10,000 tonnes of REO.

So it's kind of a new idea, but it's absolutely not out of the question that we might be able to do that very quickly because we are licensed to do solvent extraction, and we're currently doing solvent extraction of rare earths. Why not look at another intermediate step?

So it's, I guess that's probably the most flavor I can give on it at the moment. But it is absolutely not out of the question that in a period of 12 to 18 months, that we could be taking the next step. And we think that it would be quite interesting if we do that. We haven't really decided yet 100% if we're going to do it. But we're going to definitely consider it.

Okay. I think it would be interesting just for the market to see that. But yes, thanks for that color.

Marshall Barrel, Bl-SH Financial.

Yes. Thank you for taking my call, and congratulations, Mark, the progress you're making in these various areas. I have a couple questions. One of them, on the US government's RFP for uranium. Have they announced any kind of timetable for making any contract awards?

Curtis Moore, who is probably on this call -- I don't know if you'll jump in or not -- I think it's a couple months. (multiple speakers)

Yes, two months. I think it was mentioned that we would expect to hear something back by September 30 or October 1.

And would that be for deliveries this calendar year?

Yes, it would be. I believe the RFP mentioned that deliveries would have to, I believe, occur within 60 days after an award. So that would certainly get within 2022.

Yes. Okay. Thank you. And then on the -- you mentioned no debt. And I remember seeing, I think in the press release, there was in the financial statements, it showed some long-term debt, something like $13 million? Can you explain that, please?

Yes. Look, I think most of that is reclamation liabilities that are not funded. I don't have the exact numbers, but about half are reclamation liabilities. We are cash back, but then we have some bonds for other reclamation liabilities. Tom Brock, do you have anything to add to that?

No, you're exactly on point there, Mark.

So that's what it is. It's reclamation liabilities, but half of those are backed by cash or plus or minus half.

Okay. Thank you very much.

Thank you.

Thank you. There are no further questions at this time. Please continue.

All right. Well, look, again, always our pleasure. We're reaching for the stars here. We're going big, but not reckless, as I said earlier. We do not see anything standing in the way of us expanding our business plan. As we're doing now in leaps and bounds in the coming years, we've got to secure various steps along the way.

It doesn't happen easily or for free. But we're very excited where we're taking this company and we hope to continue to provide really significant updates to the market as we advance. And appreciate the fact that people that are shareholders of the company -- we want to value create for our shareholders and go forward.

We're also very excited about the progress that we're making with our foundation in San Juan County, our clean -- San Juan County Clean Energy Trust. The advancements that we're making in the local communities, the new jobs we're creating in the local communities, we're very excited about all things Energy Fuels and, again, appreciate your support and interest in our company. Thank you very much.

Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line, and have a great day.