Energy Fuels Inc Q1 FY2021 Earnings Call

Good afternoon ladies and gentlemen, and welcome to the Energy Fuels Q1 2021 Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call has been recorded on Monday, May 17 2021. I would now like to turn the conference over to Mr. Mark Chalmers, President and CEO. Please go ahead.

Thank you for joining our conference call and webcast today. We're excited to share our Q1 achievements as well as accomplishments following the quarter's end. Replays of this presentation will be available on our website for two weeks. We're making significant progress across many areas, and we believe Energy Fuels is emerging as a leader in U.S. critical mineral production. I understand that some of our shareholders have invested in Energy Fuels for various reasons, whether it's uranium, rare earths, or vanadium, which may create some confusion. However, an investment in Energy Fuels represents a unique opportunity in clean energy, low carbon emissions, and critical minerals, which is unparalleled in any other single investment. We have a long and successful history as the largest U.S. producer of uranium, with more production capacity, facilities, resources, and experience than any other U.S.-focused uranium producer. Moreover, one of our facilities can now produce rare earths at scale. This year, we expect to produce an intermediate rare earth product that meets 10% of U.S. requirements, and we're aiming for 50% soon, with the potential to exceed 100% once we secure adequate Monazite feeds. We've started commercial mixed rare earth carbonate production at White Mesa, with our first shipments to Estonia expected in June. We're building relationships with leaders in the rare earth sector and receiving increased global recognition. Our goal is to fully develop an integrated U.S. rare earth supply chain at the White Mesa mill, aiming for low CapEx, low OpEx, and responsibly sourced products. Uranium and vanadium prices are on the rise, enhancing the value of our U.S.-produced inventories, which we've built without purchasing externally. Additionally, we're gaining recognition for our industry-leading recycling programs, which strengthens our positive environmental, social, and governance (ESG) reputation. As I present, you'll control the slides from your device. There will also be a question-and-answer session at the end, with our CFO, General Counsel, VP of Marketing and Corporate Development, and Controller available to assist with any questions. Energy Fuels has robust finances, reporting about $85 million in cash, securities, or inventory as of quarter-end, which includes securities at higher current market prices. We had $350,000 in revenue, primarily from mine cleanup, and posted a net loss of $10.9 million, of which about $3.5 million was non-cash liabilities. We provide guidance for producing between 30,000 and 60,000 pounds of uranium in 2021, with a target inventory exceeding 700,000 pounds, and we aim to produce 2,000 to 3,000 tons of mixed rare earth carbonate. In terms of milestones, we continue to lead the U.S. uranium industry, planning for White Mesa to be the only active uranium production facility this year while maintaining significant inventory of U.S.-produced uranium. We're also making progress on selling non-core uranium assets. On the rare earth side, we're ramping up production and have established a supply relationship with Neo Performance Materials for a U.S.-European supply chain that will source Monazite from Chemours and produce rare earth carbonates at our mill. We're deeply committed to sustainability and have produced a detailed sustainability report available on our website. The Biden Administration's increasing support for nuclear energy is encouraging, as nuclear power contributes significantly to the U.S. energy mix. Our facilities and assets, including the fully owned and debt-free White Mesa Mill, are prepared for upcoming production and enabling us to maintain our market-leading position in uranium production in the U.S. In conclusion, our unique capabilities position us favorably in the uranium and rare earth markets, with plans to enhance the U.S. supply chain for critical minerals. We are enthusiastic about the future and ready to address any questions you may have.

Thank you. Ladies and gentlemen, we’ll now begin the question-and-answer session. Your first question comes from Heiko with Wainwright. Heiko, please go ahead.

Hi, it’s Heiko Ihle with Wainwright. Mark, how are you?

Good, Heiko. You must be in Germany?

I’m indeed. Thanks for taking my questions, and congratulations on your stock being up 50% year-to-date. You're successfully undertaking a pretty wide range of rare earth element operations for the firm; there is natural Monazite ore, there’s European rare earth production initiative to solve that extraction. In fact, just added as part of my question, looking at Page 5 of your presentation actually lists seven talking points for rare earths, and only five for uranium. Share price certainly seems to approve all of this. And I'll reiterate that you're up 50% year-to-date. Now looking ahead, just conceptually, where do you see the firm in three months, three years, and if you would venture or guess even longer-term, is there a world where you essentially not focused on uranium all that much and instead really just do rare earths because there's higher multiples and more demand and whatnot? Or do you think uranium will always be a core thing to Energy Fuels?

Heiko, that's not an easy question to answer real quickly. But look, uranium is always going to be a key focus for us. And again, uranium is why this opportunity exists because our ability to process the rare earth, the Monazite sands for the uranium. I think the key thing from my perspective is that the world needs higher uranium prices, probably in the order of at least 50%, but probably more like 75% to 80%; maybe up to $50 a pound or greater to truly have a sustainable uranium industry. And what we see, what we believe is that rare earth is an opportunity right now; the prices are high enough now to have this sustainability and the profitability, probably equal to the $50 plus uranium prices that will hopefully be around the corner in the not too distant future. So, I don't want to start over-speculating on where we go and how we go. But where we’re going is we're going to cash flows as quickly as we can get to cash flows. And we think that right now, the best way to get there is with the rare earths. So I don't know if that answers your question, but still with the long-term uranium focus as a company.

That's where it does answer the question. Now since you said this question was a long-winded and a big answer. I have a very simple clarification for you. The $13 million you raised under the ATM program in Q2 so far, can you just give us the average price per share?

I think we provided it in our report. I think it was around $6, Dave or Sara, please correct me if I'm wrong, but it was about $6.

Yes, that's correct, Mark, $6.01.

$6.01, wonderful. Thank you guys.

Thank you, Heiko.

Thank you. Your next question comes from Joseph Reagor with ROTH Capital. Joseph, please go ahead.

Hey, Mark, thanks for taking the questions. I guess, first thing on the uranium front, given you just stated to Heiko, you guys want to stay in that business, and the fact that a lot of your peers are out there buying up loose supply? Would you guys consider doing the same? And if you did, would it be only if you could get U.S. supply or would you consider buying international supply just to build your stockpile?

Yes, Joe, we’ll do whatever makes sense. Right now, because we have around 700,000 pounds already of U.S. origin that we produce, and we believe we could build to that with either stockpiles we have at the site that we can process at White Mesa or even from our ISR sites, we're not actively kind of got that in our business plan. Could we? Yes, we could. But look, I think that the fundamentals look good on a hopeful bounce on the uranium price. And we needed to bounce because we need to go back into production. So look, we’ll always keep it open. But right now, with over 700,000 pounds and the ability to increase that to say 800,000 or greater fairly quickly, we're in a pretty good spot right now with our potential lift to increased uranium prices.

Fair enough. On the rare earth front, if you said you guys are starting the scoping studies, especially for like the separation plant possibility. Can you give us any kind of maybe framework of where you think the capital budget is now? A lot has changed since the last time we discussed it, and I just want to make sure it's still kind of in the same ballpark. And then, as you conduct these studies, is there a certain like ROI threshold you need to see from the third-party studies before you would go forward with it? For instance, if the study suggests the ROI is sub-10%, would you guys still pursue it because of the critical nature? Or does it have to meet a certain return for Energy Fuels to spend the money?

Yes, well look I'll start with capital. That's one of the reasons we've started this scoping is to try to get a better idea of what the capital is. We've publicly stated it could be between $150 million to say $250 million; we may be able to do it on the lower end of that, because we may do it in phases. We think though that that's a very attractive strike rate for capital because of the fact that we basically have a cracked and leased facility already paid for and operating right now. To put it into context, you probably would be looking at a $1 billion to $1.5 billion to get a facility that say, let’s say we invested. I’m just using this hypothetical, so don't quote me on this. We think the strike rate for the CapEx is very good. Our initial models indicate that we have robust economics here from an operating cost perspective. We don't yet have really focused on a trigger point for the ROR. But I can just say that, we believe it's higher than what you've mentioned as a low point, and we think it's robust, and we think it's as competitive as it can be outside of China. So, we're very encouraged with what we think a robust economics, both from OpEx and the capital strike rate perspective, and we think that places us in an excellent position here in North America. Okay, thanks. I'll turn it over.

Thank you. It appears there are no further questions at this time. You may proceed.

Okay, well in closing, first, I appreciate your interest in Energy Fuels. As I mentioned, there is no peer for us. If you invest in Energy Fuels, you're getting the whole clean energy story and the critical mineral story with what I believe is a very extraordinary opportunity in critical materials and clean energy. So we're very excited about the future, and we're very focused on the future, and it is our goal to become a multi-billion dollar company fairly quickly if we can execute our strategy the way we think we can execute. There still is always risk in everything you do in this business, but I don't think we could be placed any better at this point in time and look forward to talking to you all in the future. And I hope to have people like Heiko saying, well, you just went up another 50% in the next six months now. I can't predict the future, but we're very excited in Energy Fuels. So again, thank you in closing, and everybody stay safe.

Ladies and gentlemen, this concludes your conference call for today. Thank you for participating; and ask that you please disconnect your lines.