Energy Fuels Inc. Q1 2023 Earnings Call
I also think the title of our quarterly press release speaks volumes net income of $114 million and.
And $143 million in working capital nearly $20 million of uranium vanadium sales and the commencement of development of air separation capabilities in Utah.
Today I will elaborate on these accomplishments during the quarter and provide some details on what I believe the rest of the year looks like and it's also pleasing to say that we had a very good day on the <unk> on that.
With our stock today.
I haven't seen where it closed out but it was up somewhere in the order of 8% for the day and so we've been on a really nice run here with people starting to realize how important the uranium business is and the rare Earth business is and our role and where we plan to take this company.
Before I begin I also want to remind people that you are controlling the presentation from your own device.
And I will endeavor to tell you when to advance to the next slide.
There will be questions at the end of the presentation as Brian mentioned.
And David <unk>, our executive Vice President and Chief Legal Officer, Tom Brock, our CFO and Curtis Moore senior VP of corporate development and marketing will be available to answer any questions I cannot answer.
So, let's just go ahead and jump into the presentation.
Right now so.
On this.
First slide and again many of you have seen this slide before picture of White Mesa.
In southern Utah, There really is no peer group to compare to because nobody does what we do with uranium production for vanadium isotopes and recycling.
So next slide.
I may be making some forward looking statements and those are included on this page next slide.
Yeah.
Energy fuels is the leading producer of uranium in the United States and has been for a number of years as well as vanadium and advancing rapidly with a rare earth and all of these elements basically.
Help create a cleaner clean energy for a better world.
Next slide.
Now I've talked about the periodic table.
Previously.
And looking at these specialty elements that nobody cared about looking back even 10 years ago, whether it be uranium rare Earths vanadium.
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Or radium and so it is a new era.
Probably mentioned to some of you that might be on this call that when you look at a career in the mining business. It has changed dramatically because there is these new elements that if you went back 2030 years ago people were focused on things like copper and gold and coal and uranium and other elements, but today.
There's this whole suite of new elements.
<unk> things like lithium cobalt graphite in addition to the rare Earth that people just really didn't care about next slide.
So all of our product lines are high value.
Business businesses uranium.
For nuclear energy.
In the order of 50% of the zero carbon electricity in the United States and there's a lot of.
Very encouraging news coming out of places like China, starting to amp up and ramp up there.
Their nuclear power in the country as well as many other countries around the world, including the United States and the focus on small modular reactors rare Earth Youre hearing a lot about rare earth. When it comes to electric vehicles and uses of these powerful magnets that are also used for wind generation and other high tech appliances.
Ms <unk>.
And ADM getting increasing attention for grid scale batteries.
Primarily used for high strength steel.
Medical isotopes that we continued to advance.
Potentially four.
Emerging cancer therapies for.
New therapies under development and under review by the FDA.
We also have had a long history of recycling and again a lot of this is not new for you. Many of you on this call, which basically kept the white Mesa mill opened during periods of low prices.
<unk> always pride ourself in finance with our financial strength and zero debt and pleased to say that we have $143 million in working capital at the end of Q1, including 104 million of cash and marketable securities and significant inventories of uranium and vanadium.
Next slide.
So now I'd like to just talk about the Q1 highlights next slide.
So this is really pleasing to talk about the fact that we had earnings of $114 million. Now. This is significant people and I think that the share price really recognized it today didn't recognize as much yesterday, but in my opinion. This is <unk>.
Probably and to the best of my abilities. This is probably one of the best quarters. This company or the predecessor companies has ever had since the days when the white meat. Some mill was built.
So sure it was primarily due to the sale of the automation of property, but it certainly gave us a really nice boost to our balance sheet in the queue and really puts us in a perfect opportunity going forward, we had gross margins on <unk>.
Around 57% on our product sales, which included 58% margin on our uranium and 37% on our vanadium cells.
Our strong balance sheet to $143 $44 million.
Again.
In total $44 million of cash cash equivalence and marketable securities of about $60 million and $38 million product inventory and if you adjust that product inventory for current values at current commodity prices, it's well north of $50 million zero debt, we have more.
Infrastructure than anyone I know of.
In United States when it comes for uranium production and soon to be rare Earths production at larger scale.
Total assets in current assets increased by 37% and 10% respectively.
Total liabilities and current liabilities decreased by 44% and 72% respectively.
At the end of the quarter, we had nearly 850000 pounds.
Finished uranium.
About 900000 pounds of finished vanadium in 250 tonnes of finished high purity.
Partially separated mixed rare earth carbonate in inventory.
Next slide.
So uranium transactions.
We've announced that we sold the 300000 pounds to the U S. Uranium reserve gross proceeds of nearly $18 $5 million at $61 57, with the basis of uranium prices about $26 per pound. So we got a gross margin of 57 <unk>.
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35, $36 per pound, we also purchased some U S origin uranium about 120000 pounds for around $50 per pound because we're trying to make sure. We've got plenty of inventories to cover all our requirements over the next few years as we ramp up our uranium production.
We are very advanced at re Furbishing and developing our conventional uranium vanadium mines in both Colorado and Arizona.
Lasalle complex.
The Whirlwind mine and opinion plain mine.
In Arizona, and we will ramp up production based on our contract requirements inventory levels and market conditions, when we decide to do this.
In February February 15th we completed the sale of the <unk> project to encore for $120 million with that we received a cash payment of $60 million, we have a $60 million note.
Two years that secured and convertible and bears an interest rate of 8%.
Just a few days ago, we sold for completed sale of our PSA in Pompe fission nuclear technology to Oncor energy for $3 $1 million, we purchased that during COVID-19 for about $500000 and we no longer needed.
The PFM technology, but we did secure or have rights for 20 year usage of that technology in the future if needed so.
So we had a gain of about 275 million on the sale of the <unk> and again I think that all shows different ways, how we've creatively than creating and building to our balance sheet through various different ways that others haven't tried to even attempt to build their balance sheet the way.
We've been trying to do so.
Uranium inventory.
Have the 850000 pounds of finished inventory, but we have nearly 400000 pounds of in circuit and other raw materials at the mill totaling nearly 125 million pounds of uranium either finished or in circuit or raw materials.
So we are in excellent position when it comes to our uranium inventory.
And also I want to note that even though we did sell the Ulta Mesa project, we are absolutely not going to have the uranium business and we are looking for other potential opportunities in the uranium space.
Globally.
Next slide.
So, let's talk a bit about the rare earth.
So we produced in the Q about 250 metric tons of high purity, partially separated.
Carbonate.
Containing around 115.
Metric tons of total roof oxides and this is the most advanced rare earth materials being produced commercially in the United States and this is also around 32% maybe 35% in DPR. So it is really good stuff that we're producing now.
Now the phase one <unk> separation project is well underway, we hope to have completed in Q4 of 2023 or perhaps Q1 of 2024.
And this is where we are we're advancing the ability to separate in our existing solvent extraction building to produce separated rare earth oxides.
And DPR oxide and SME plus.
Concentrate that can be further.
Sold in other markets and we expect the capacity to be in the order of given enough secured feed a modest around 802 <unk>.
Tons metric tons are separated in DPR.
<unk> per year.
This work is well advanced at the mill.
Most major components have been ordered and are expected to be delivered at the mill in Q3, and we expect that the cost to put in what we call phase one.
Our ability to separate app and in the existing sx facilities to be approximately $25 million, which is an incredible strike rate.
Next slide.
So with in addition to phase one we are doing engineering studies.
On a phase two which is estimated it could be in operation around 2026, and this would be somewhere in the order of three times plus phase one so very material scale.
And we're advancing that.
We also in phase two would include a dedicated separate crack and Leach circuit at the mill.
And allow to have both the uranium vanadium circuits at the mill completely separate from the crack and leach facilities during phase two.
Phase III, which we are targeting somewhere in around that 2027 time period.
We'll also be doing engineering on that and we're planning to do further test work on that this year, where we'll be focused on the heavy rare earth oxides, primarily DIY in TB disposing and <unk>, which are also very important for electrification and it helps and improves the heat.
Aspects of the high efficiency permanent magnet motors.
February 13, we completed the acquisition of the Bahia project in Brazil.
That is the heavy mineral sand deposit that we secured we announced back in May It took a while for us to get it closed.
It's a very large land position encompassing about 60 square miles.
It has the potential to produce between 3000 to 10000 tons of metric tons of modest like per year. So about eight to 10000 metric tons.
Is what we.
We believe that will be the capacity of the phase one.
Correct Leach and separation in phase one.
Earth program. So we also completed.
About 2266 meters of Sonic drilling.
The here, we also purchased a sonic drill rig that will be transported to Brazil in the next month or so and we are.
Looking at advancing and doing more drilling starting in Q3 of this year.
And we are also very much looking at other acquisitions similar to Bahia and other parts of the world, including the United States.
Next slide.
We will talk a bit about vanadium, we had some small vanadium sales during the quarter, we were able to secure average sales price of about $2 98, so nearly $11 per pound.
We also were able to obtain a gross margin on vanadium cells of about 37%.
And we.
We have what we call the carbide plan, which is that we hold vanadium until the vanadium prices go up and then we sell it.
And that is a very effective way to sell vanadium, because it's such a spiky element to put into the market. We still have in the order of 900000 pounds of finished vanadium.
And inventory and we have the ability to go back into vanadium production quite quickly if we decide to do so and we have between EMEA into 3 million pounds, perhaps more of solubilize vanadium in our tailings solutions.
Next slide.
So, let's talk a bit more about the working capital the $143 million of working capital zero debt.
<unk> talked about the uranium inventory of both finished uranium inventory and inventory we have on the ground at the mill.
Around a 125 million pounds and the vanadium inventory.
But if you adjust all these inventories to current prices.
Would get an uplift in that working capital of somewhere in the order of 20% to $25 million because if you look at this table.
Uranium inventory, we have on the books to finished goods is currently valued at about $29 19 per pound with the current uranium price currently being about $54 a pound. So when we sell uranium at current prices or higher prices, we have a very significant margin.
And the same thing for vanadium.
But the other thing I want to highlight to people that when you look at our working capital at $143 million when you adjust it for the current value of inventories the investments like we have like consolidated uranium. The note on convertible note that we have with encore.
Non core the interest on that note. The fact that we sold the piece in our uranium sales are beginning this year in 2023 and continue on for eight years.
<unk> and <unk>.
Outstanding.
<unk> financially.
And probably better than any of our peers that I know of so we are in a great space here.
And we have a lot of levers to pull.
When we need it and these not just our current working capital, but other sources of investments that we have going forward.
Next slide.
So when you look at our 2023 guidance and focus.
If you look at the uranium sales that we sold to the U S government and our initial contracts.
We plan to sell around 560000 pounds of uranium in 2023 and expected sales price of nearly $60 a pound 58% to 60% blended price. So again, if you look at the value of our uranium inventories on the books you can see that we are going to have a really.
Really nice margin.
We will put when we decided to put a new uranium project under into production at least one project in late 'twenty, three or 'twenty four may be more depending on the market. We continue to seek out additional long term supply agreements at increasing and higher.
Prices, we will build our book.
Aggressive, but not reckless way.
In 2023, we're mainly focusing on the rare earth.
In terms of processing. So we're not planning at this point in time.
To produce any uranium ore vanadium, but we could if we wanted to we will continue to process some of the rare earth.
We expect to produce a process during the year in the order of around 600 metric tons of monocyte.
And we also are advancing in constructing this phase one separation circuit that I've already talked about and we will.
I talked about that the expected processing capacities around that 802000 metric tons per year of in DPR at about a $25 million investment.
We're also going to be looking and talking to people about rare Earth off takes we will continue to advance the Bahia project, particularly with our own drill rig the sonic rig and we look to.
And we have engaged various consultants and were looking at preparing SK <unk> hundreds initial assessments and 43 101 technical reports.
And the last slide is really pretty sunset in the vicinity of our White Mesa mill in San Juan County.
All I can say is we've got such great opportunities ahead of us.
Were well funded as I've gone through we will be aggressive not reckless and I look forward to further updates and I will now open it up for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchtone phone.
You will hear a threefold pumps.
Your request if you would.
To withdraw your question press the star followed by the number itself. If you are using a speaker phone. Please lift the handset before pressing into Q.
One moment. Please for your first question.
Your first question comes from Heiko.
With H C. Wainwright. Please go ahead.
Hey, Mark how are you.
Good Heiko how are you.
So Beth to answer your earlier question to yourself the stock closed at <unk>.
655, so up eight 5%.
Company realized gross total gross margin of 57% on your on your sales during the quarter and that consists of 58% of uranium 30%, 37% of vanadium, where do you think this figure could go for the remainder of the year and what if any efficiency or the phone.
<unk> that you are utilizing to possibly get them up a little bit more.
Well Heiko a lot depends on the prices of uranium.
A lot of our uranium contracts or hybrid so they can go up and down but they have.
Floors and ceilings on them.
Think there'll be <unk>.
Pretty steady at that.
Now because of the inventories we have.
When we're looking at the various uranium projects that we can put into production.
We do have some production that is probably in the order of around 35% to $40 per pound. So I would say that they should be probably pretty.
Daddy for the year.
Curtis do you want to make any comments in that regard.
Yes.
How are you.
I'm just going to say, we put out guidance for our remaining sales. This year of 54 to $58 per pound on that extra 260000 pounds.
So, yes, I think like Mark said for the rest of this year. It will be steady late later when we have to.
Put in produced material into these contracts.
Assuming we don't get an uplift in prices you would see those margins go down but I think there is extremely strong justification to believe that uranium prices are going to go up and we're going to capture that value in our existing contracts because we have market related components in those contracts plus future contracts that will be hopefully secured at higher prices.
So that was favorable so.
So heiko, we also we tried to make sure we're trying to build.
Margins of.
$2025, a pound, but it really depends on how the market's responding and whatnot. So.
But yes, we're very pleased with what we can secure.
Both the combination of our sales.
Our new uranium production, our inventory and the ability to add in uranium production from both rare Earth and alternate feed. So we are a different story when it comes to how you build the book in terms of where our margins can be.
Very good.
Changing gears, a 180 degrees you always have a million things going on with the farm right now I find that pretty impressive and commendable.
Some longer term thinking where do you see management's time broken down in a couple of years between uranium vanadium and rare Earths and then if you could also maybe percentage wise, where do you see financial investments going by segment over the next.
Couple of quarters.
Yes.
That's a tough question to answer with a lot of accuracy, but but look I think right now.
When you look at our time.
I would say when you look at what we've got in Wyoming, what we've got in.
With our conventional mines and stuff, it's probably around.
60, 40 or something in that order.
60% or 40% uranium somewhere in that order now when you look to the future any rollout the future a lot depends on.
Both of those markets right.
And price goes crazy or the rare Earth business.
Continues to do well.
We'll have to we'll flex it according to getting the best margins the best return for our shareholders.
We'll be dynamic for the circumstances and and Thats one of the things that you can appreciate that.
Energy fuels, you'll get a much more diversified investment.
Where we have some flexibility to shift.
Swing a bit depending on which markets we should spend our time on so.
I don't know if I can answer it any more accurately than that at this point in time, but it will always be driven on the best outcome for our shareholders.
Brian always cognizant that.
Wasn't going to be a scientific answer to this I mean, obviously youre very big shareholder yourself, So I would assume that.
This is going to be very much driven by shareholders.
Thanks, a lot I appreciate the questions I'll get back in queue.
Thank you Heiko.
Thank you again, if you wish to ask a question. Please press star followed by the number one.
Next question, we have Joseph Reagor with Roth Encana.
Hey, Mark and team thanks for taking the questions.
I guess.
First of all Mark you mentioned that.
Obviously, you are not moving away from being a uranium company and that you are looking at opportunities there.
Do you think.
Some of the assets that are still in the portfolio might not make the most sense for you guys and could potentially.
Selling assets.
Generate cash to buy a different asset.
At this point in time, the existing assets Joe that we have.
Not planning so any of them at this point in time.
They're good assets.
In fact, we're looking at.
Re initiating we've actually re initiated permitting on.
Further permitting evaluation on a number of them, including Roca Honda and sheet Mountain.
And we feel that there is a big value lift just by advancing those and getting those fully permitted now the sheet Mountain project is fully permitted to mine, but to go to the Sweetwater mill. This nearby we're looking at evaluating whether that could potentially be heap leach. So so we're not planning to sell anything.
At this time.
But again whatever we do.
We will be focusing on trying to.
Lift and improve whatever.
Estimates that we have or assets that we have and we will do that dynamically.
As is prudent for the circumstances in the market.
Okay Fair enough and then.
Some of the assets that you do have.
What do you think.
A maximum production rate you guys can reach would be between the nickels ranch facility and the weight Mesa mill.
If pricing were to cooperate.
Well when you look at it.
Including Lasalle when opinion plane.
When you look at them I tell people that without major capital investments.
We can get up to around 2 million pounds per year, because most of these projects are fully constructed fully paid for they don't require a lot of capital they require some working capital, but if you start say the uranium market really gets.
Improves and really frothy.
In terms of demand for uranium.
And we started investing say hundreds of another 100 or $200 million, maybe $300 million in capital, we could take it up to somewhere in the order of 5 million pounds per year. So the beauty and the place we're at that such a sweet spot right now is having the flexibility to <unk>.
Call on these different.
Projects that we have base.
Based on whatever contracts, we have in place in the market with limited new capital which has.
Becoming very expensive as you can appreciate.
Yeah to me about it so.
I guess last thing is on the phase one for the railroad separation plant.
Are you guys planning to put out like.
Pega or feasibility study or something before you go forward with it or are you just using the internal study.
We're doing it all internally.
We've been cracked.
Cracking and leaching with the material that we've received Moore's.
And we've got really all of the data that we.
We need in terms of crack in Leach, we have a very.
Extensive and long term.
Piloting we've done on the FX and we feel that if we were to do those studies at this point in time, it really be kind of a waste of time because of the limited strike rate of.
$25 million or less really.
With regard to the capital cost so we're comfortable doing that on our own and out of treasury, because it's a low strike rate for us.
Okay. Thanks for taking my questions I'll turn it over.
Thank you there are no further questions at this time I'll turn the call back over to Mr. <unk> for any remarks.
Well in closing.
I really appreciate the opportunity to.
Update everyone Who's on this call who may be listening to this call later on the outstanding results that we had this quarter and I'm very proud of that we've got a great team people are working hard and they're working smart and there is a very very bright future ahead for our company because of the things we're doing.
There really is no peer group as I said earlier, but again, we appreciate the support of our shareholders and we really like to have days like today.
Because of these changing improving markets for the critical minerals and also having good results. So thank you very much for your time and look forward to giving further updates in due course and no later than next quarter, but we plan to continue to to move forward and update the market as often.
As we can when we got material news flow. Thank you very much.
Ladies and gentlemen, this concludes your conference call for today.
Thank you for participating and ask that you. Please disconnect your lines.
Okay.
Yes.