Q2 2023 Energy Fuels Inc Earnings Call
Yeah.
[music].
Good afternoon and welcome.
So the energy sector.
Second quarter 2000.
23 conference call all lines.
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Thank you very much for the introduction and good morning or afternoon, depending on where you are joining from and.
I wanted to thank everyone for joining the energy fuels Q2, 'twenty three conference call and webcast today.
We're always excited to discuss our results and our significant accomplishments that we continue to make up for those who cannot join the call. Today. There will be replays of this presentation are available for two weeks on our website, starting later today or tomorrow.
Every quarter I say, we are making remarkable progress on many fronts and this quarter is no different energy fuels is likely one of the biggest success stories on de carbonization electrification, while we also emerge as a clear leader in U S. Critical mineral production and this is at a time.
What it has never been more important.
We are a unique investment no. Other company I know has the ability to advance uranium vanadium and rare earth production capabilities, while at the same time advancing our medical isotope aspirations and we're doing this while we continue to maintain a very strong balance sheet.
With zero debt.
Today I will elaborate on these accomplishments for the quarter and provide detailed so what I think the rest of the year will look like.
I also want to remind everyone that you are controlling your slides to the presentation from your own device and I'll try to remember to tell you when to say next slide.
There will be time for questions at the end of the presentation and <unk>.
During the question and answer session, Dave Friedland, our executive Vice President Chief Legal Officer, and Tom Brock, our CFO will be available to answer any questions I cannot answer so let's jump into the presentation.
This first slide showing the picture of the remarkable White Mesa mill, which is the critical mineral hub. It's our main asset for the company producing critical materials for the clean energy transition and there is really no facility like that I know of in the world.
Next slide.
I may be making some forward looking statements and those are included in this slide number two.
Next slide.
So energy fuels is a leading U S producer of uranium vanadium and rare earth elements, creating clean energy for a better world.
Next slide.
And I've talked about the periodic table before but it is also good to talk about it again, because I want to remind people of all these new elements that are required for decarbonization and electrification that nobody even talked about 10 or 15 20 years ago in energy fuels.
Between our uranium activities rare Earth axioms vanadium.
And potential to recover radium for medical isotopes is going to be or currently is or will be able to recover between eight and 10 of these elements on the periodic table and I don't know of any other company that we'll be able to say they'll be able to recover that many elements in due course, so it's very important.
It's the future of decarbonization electrification and we're very proud of that and the way that we've been able to place and position the white makes a mill and our assets to do this effectively next slide.
So.
Again, just to remind people uranium for nuclear energy, which provides 50% of the U S zero carbon electricity, which is very important for de carbonization and it's almost impossible to meet the goals of Decarbonising without nuclear energy.
Rare Earth critical elements used for the powerful magnets used in electric vehicles wind and other high Tech appliances.
And it is truly remarkable if you want the highest efficiency electric vehicle it needs to.
To be the most efficient.
Canadian primarily used for high strength steel that also used in Guinea, increasing uses for grid scale batteries the medical isotopes.
As I mentioned, we are advancing our strategy to recover primarily radium 226, and two to eight four emerging cancer therapies.
We also continue to recycle uranium and vanadium bearing materials and nobody else in the U S has the ability to do that like energy fuels and it's been an important part of our business.
And up and down markets, particularly down markets and we're always very proud of our financial strength with significant cash and inventories and I'll talk about that more later.
Next slide so now for the Q2 highlights.
And the picture of the opinion plain buying that I built in 1987, and that's really again, a remarkable deposit next slide.
So we ended the quarter June 30th with 134 million of working capital.
That is made up of 35 million of cash 64 million of marketable securities and $33 million up product inventory, if you adjust to current.
Commodity prices you could easily add another 18 or so million dollars to that working capital at current market value of that inventory as I mentioned zero debt, which we're very proud of because we have probably somewhere in the order $1 billion with the assets.
And we still hold seven.
766000 pounds of finished uranium about 900000 pounds finish vanadium and about 37 tons of finished high purity, partially separate rare earth carbonate in inventory.
Next slide.
Yeah.
During Q2, we did sell some uranium to a major U S nuclear utility about 80000 pounds that was around.
$4 $3 million at around $54, a pound and about a gross par profit and I wanted to highlight this with a gross margin of about 46%.
We're still producing or we're still reading.
For conventional uranium vanadium mines that includes the Lasalle complex.
Beaver shaft, the whirlwind and opinion plain mine in Arizona.
And final production decisions on these projects will be made based on our inventory levels and market conditions.
We also sold P. F N technology to encore for $3 $1 million, we had bought the P. S. In for around 500000 pounds, we made a gain of $2 75 million on the sale of the <unk>, but we also have the rights to use that if we need it in the future and right now we don't have any projects that require that.
And so we made some nice little profit on the sale of the <unk>.
And in addition to the 766000 pounds of finished uranium inventories, we have nearly 400000 pounds of uranium in circuit and in raw materials at the White Mesa mill. So we really have in the order of $1 2 million pounds of uranium in the inventory and in circuit.
And raw materials next slide.
Rare Earth production.
We produced approximately 99 metric tons of high purity, partially separated rare earth carbonate from monocyte and that included approximately 44 metric tons of total rare Earth oxides, and we're producing the most advanced rare earth materials being produced in the United States today.
Our phase one <unk> separation project, which should be operational last quarter. This year or first quarter next year. We're very excited about that we are modifying enhancing the existing solvent extraction circuit at the mill to produce separated oxides and I think this is the only.
Example of this that I know of in the World will have a uranium circuit vanadium circuit and rare Earths circuit all in one building, we expect to have that.
Production capacity of the circuit of up to 1000 metric tons of N DPR per year.
Development work has begun we have ordered most components that are expected to be delivered in Q3, and we expect the phase one.
Cost two to build out the separation plant to be a remarkable $25 million, which is absolutely very low cost relative to others, because we're doing it in existing infrastructure.
Next slide.
Our phase two separation project, we're doing a further engineering work on that.
To be in a position given enough monazite feed.
Around 2026 to produce three to four times with the Phase one project is capable of doing the phase II project will also include a standalone crack and Leach circuit at the mill.
Enabling us to produce.
And refine both rare earth and uranium and vanadium at the same time.
Phase III is focus on heavies, but we do plan to do heavy separations later this year in the laboratory and that will be focus on the DIY and the T. B, which are two very valuable heavy rare earth required to make the most robust electric engines that are more heat.
Have more heat sensor capabilities than the DIY and the TBE or are the disposal and the turbine excuse me the end DPR sorry.
We also acquired the Bahia project in February and.
And we're advancing that.
We have this substantial land position around 60 square miles.
The potential in time to produce between 3000 to 10000 tons of monocytes and we've done our phase one drilling we have purchased a drill rig we have people being trained on that rig right now and we're shipping that rig down too.
<unk> Brasil here in the next month or so and we will start our phase II drilling campaign with our own rig.
Next slide vanadium sales, we didn't make any vanadium sales in Q2, but we still have the ability to go back into vanadium production.
Quite quickly and we.
But the what we did sell in Q1, we sold and it was about a 37% margin and it's still an important part of our business plan, but it's not the main focus of the company, but it is the only conventional vanadium processing facility in the United States and as I said, we have nearly <unk> of approximately 900000 pounds of it.
And inventory next slides and again looking at our working capital the $134 million of working capital and zero debt I mentioned, the uranium inventory that we have both finish process and in progress and the vanadium inventories and if you adjust for current prices the inventories.
In your $20 million more than what's included in the working capital and I wanted to add that it does not include it does not include our note that we hold with hunk or some of our other investments. So we are in a very very strong and enviable position with our balance sheet.
Next slide.
So looking at our guidance, we will sell approximately 560000 pounds of uranium this year at an average price of between 58 to $60 a pound we already sold.
300000 pounds to the U S. Uranium reserve, we sold 80000 pounds I mentioned earlier it will sell another 180000 pounds, which is equivalent to about another $10 million of revenue that is already contracted to be sold.
We expect to put at least one new uranium mine in production later this year early next year, we're seeking additional long term supply agreements at higher prices.
And we're really focused on the rare earth sector at the mill this year, we're not.
Planning to produce any Iranian vanadium in 2022, we still plan to process around 600 metric tons of monocyte and recover around 150 to 170 metric tons of <unk> in 'twenty, three and we plan to advance.
And commission our phase one separation plant later this year or early next year.
We are also seeking rare earth off takes.
We're looking to continue to build our supply of modest we continue to talk to a number of parties.
Our advanced discussions with a number of them it will be a really good day, when I can give more information on that and advancing.
A project because I mentioned earlier and we will advance it through SK 1300 assessment reports and 43 101. So in closing next slide just the sunsetting instead.
In southern Utah.
Very pretty picture here and I'd like to open it up for any questions anyone may have.
Thank you ladies and gentlemen, we will now begin the question and answer session.
Have a question. Please press the star followed by the one that you touched on.
You will hear Ritchie Tom Tom.
Questions will be taken in the order receipt.
Should you wish to cancel your request please press the star followed.
Your first question is from Heiko.
Please ask your question.
Hey, Mark can you hear me okay.
Yeah, you find heiko.
Perfect I'm, calling up from some little island don't in Italy, So apologies if the reception isn't all that great anyway.
Yes, I'm excited for all these arrows in your future to have somebody so let's keep that going.
Walking through the 403000 pounds.
Raw materials work in progress inventory.
Walk me through where you might stand by the end of the year, both even all the vanadium level as well, but also use real weight level. Please.
You want to walk ease of walking through and that's the 400000 of.
Raw materials.
In unfinished uranium.
Correct like under the Europe lines Okay.
Well, we're not planning to do any additional finished product of uranium this year HEICO.
We mentioned the 400000 pounds, because we have alternate feet, but we also have.
Various uranium ores for example, we have material that came from the Mountain Theater project and it's sitting in stockpile at <unk>.
At the mill.
And we can process that when we decide we want to process that too to make that 400000 pounds into finished goods to complement the 760000 pounds, we already have.
We're mainly focused on the rare earth.
Of getting this phase one up and running during the last half of this year and early next year and then we're looking at a potential mill run.
In the next year or two when we decided we wanted to do the mill run for uranium ores and potentially vanadium ores.
That's helpful. Thank you.
Gulfport, maybe some longer term expectations as well.
Yes.
As we said when we look at the.
Let's start with the uranium business.
We have the assets.
To get up to between one and a half and 2 million pounds of uranium production per year, we want to build that out when we get more contracts right now our contracts are going to be in the order of around 500000 pounds. A year. So we really don't have the need and lesser price uranium goes up substantially.
To produce a whole lot more than that 500000 pounds per year.
So we're going to continue to underpin that with more contracts, but we can get up to that one and a half to 2 million pounds with limited capital really just working capital now on the rare Earth front.
We have the ability or will have the ability.
In Q1 to produce up to 1000 metric tons of Andy PR we.
We believe we're starting to have line of sight to.
To get to maybe half of that.
We hope its not guaranteed but we hope to be able to get up to about half of that looking to 2024, and we plan to continue to build.
Additional feeds are monocyte, hopefully in a material way to get phase one completely booked out and at full capacity in the next year or so Meanwhile, we will continue to engineer and permit were required for phase two which will be three to four X.
Phase one.
And that will all be subject to securing a significant amount of modest to require the build out of phase II and so but we are aggressively when we start looking at who we're talking to in the kind of quantities.
That we're talking to the various parties.
We think this phase two.
<unk> secured enough feed.
It is very possible.
In the not too distant future, but we still got to get a few more of these coordinates.
Wind up here in and binding.
Arrangements and commitments.
That's helpful. Thank you.
Moving on from all of that I mean, one sentence in your release really struck my curiosity. When you were talking about you know the engineering at the end.
Hansman subtle planes for the MTR.
And I assume the same probably holds true for most people on this call when you're trying to get the 3000 metric tons by the end of this 26 with your phase two.
Maybe walk me through some of the investments.
What exactly you have to spend on your plans in the future it year by year as much.
And also more term voluntary impacts that you were just mentally working with what you're sort of expecting to see.
Yeah, well the.
The phase one as I said, that's around $25 million and that gets us up to say up to 1000 tons of N DPR per year.
And that's low because we're doing the crack and leach in the mill and we're using existing Sx building.
For the separation stage, so that's very low and it is but it's a very attractive strike rate obviously on capital. We do not have all the final engineering completed on phase two but we believe it could be between 250 to maybe $350 million.
Somewhere in that order.
That would provide a facility that would do three to 4000 tonnes a year of N DPR, but it doesn't mean that the phase one facility also wouldn't still potentially be operational but the phase III facility will include its own crack and Leach circuit.
So we don't have to do any flip flopping of the current uranium vanadium meal.
Between uranium runs and restaurants, so we believe that.
Our operating costs are going to be low and really as competitive if not as low as anybody outside of China.
And.
But we have to show that we have secured enough monocyte to run that on through.
Fair enough. That's very helpful. I will stop hogging the question queue here and get back in queue, but thanks, so much for answering the questions.
Keep on going all the different directions that youre going I think it's very impressive.
Thank you Heiko.
Thank you. Your next question is from Mike Heim from Noble capital markets. Please ask your question.
Thanks, Hi, Mark.
You just said that you believe your operating cost cost for the.
N D P or should be as low as anybody outside of China. If I were to look at Linux or one of those and talk about gross margins, which we've never really talked about is it reasonable to be thinking about 50, 60, maybe even 70%.
Okay.
Well, yes.
It depends a lot Michael on I mean.
We have and again the reason, we havent gone into real details as we're still well we have a good handle on what we believe they are but we're still doing some of our engineering studies, but we believe that.
They're robust margins.
A big part and I talked about this before and had been criticized a bit before but it depends what you acquire your monocyte four and we're looking at a blended price of monocyte.
That includes purchasing and from our own sources sort of a hybrid model different. So those are all factors that come up with what the ultimate cost is but but yes. I believe we are going to be in the same order of competitiveness of others.
People that you just mentioned and others.
And really a lot of it's going to be focused on the fact that we're operating in a area that has low water cost low power cost.
Very good people skills labor skills.
In the United States and compared to Australia.
Yes very.
Very favorable jurisdiction for low operating capital costs.
No I can do the math.
100 metric tonnes or 1 million kilograms.
Potential of $65 million, if we were running at peak or so, but that's just for the N D. P. R.
During phase one what happens to the other heavy or.
Can they still be sold off or will you kind of inventory till you get to do they.
They can the SME, plus we call it <unk> plus and heavier.
We will make a concentrate they can either be sold.
Or we can hold it and the most likely scenario is we will probably hold it.
Because really the D y and the T b.
Or a couple of the elements that particularly U S. Government is very very interested in and actually a lot of people in the world are very interested in those those elements. So.
You know as I said it's.
It's.
Very tricky business here.
<unk>.
And I believe that the Chinese continued to manipulate the market at some level.
Because they want to continue to be the dominant force in rare Earths in the world and so we're trying.
To position ourselves in a way that provides us an decoupled.
From.
Or to have our own COO.
Capabilities internal as much as possible.
Can you give us any indication how much the N D. P R.
Represents in terms of the overall value of the heavy metals have yeah.
Andy PR and it varies because not all ore sources have.
Have heavies in them for example, basanite has very little heavies, but indeed PR is generally speaking around 75% of the total value.
Of the rare Earth oxides that you recover a lot of people try to count.
Element in the like in the rare Earth feeds.
We really count.
Neodymium praseodymium dysprosium <unk> and so the heavies are generally about 25% of that value and the N. D. P. R is around 75% it could be 80%, 70% somewhere in that order.
Okay and final question for me you said twice that talking about phase two and phase III, if you get enough month to date.
Does that imply that you feel if contracts are lived up to you have enough for what you wanted to do with phase one.
Well as I said I think.
We're rounding up with him.
Believing us.
Around 50% of our sort of line of sight to phase one.
We are talking to multiple parties and and I know I've said this before but were talking to probably half a dozen different groups and.
And in those those all have the potential any one of them to fill up phase one, but again, we've got to get them signed up one of the things I found is it a number of parties that that we're kind of looking at where and who they could do business with a lot of them have come back to us because they feel.
That energy fuels offer something that others don't and the main thing we offer is operating in the United States of America processing in the United States of America and also.
Being able to operate in an environment, where we don't have to pay these extraordinary.
Operating costs like Youre seeing currently in Australia.
Okay, Alright, thank you Mark.
Thank you once again, ladies and gentleman that is star one should you wish to ask your question. Your next question is from Joseph <unk> from.
Please ask your question.
Hey, Mark and team thanks for taking the questions.
So we're it's Joe.
So first thing.
And a lot of the stuff I wanted to touch on already was but just kind of a little bit of a housekeeping thing.
Your your G&A expense seems.
That the last four quarters, it's been quite a bit elevated is there anything driving that or is that kind of like the new normal.
Well.
The new normal as we are under increased operational activities across the company.
So we've.
Tired I think.
Last since the beginning of year I think we've hired like 30 30 some people.
We're developing a new.
Number of different projects and different locations, we're capitalizing some of that but it's I think it's just the new normal of getting the flywheel going.
On the various <unk>.
Projects that we have so.
Doesn't just happen without making it happen and when you go from more of a standby mode to an operational mode.
Theres a certain amount of burn rate that you just have to increase to get there.
And Tom I don't know if you Tom Brock our CFO who's on the line I don't know if he has anything to add there.
Mark Thanks, and thanks for the question.
I agree as we move out of the standby care and maintenance mode into an earnings mode of course, we've upgraded some talent added more boots on the ground to those.
Those projects that are underway.
And I'd also add in that G&A you've got.
For the three months ended.
Six months ended June 30, <unk> got stock based compensation.
$2 7 million, so with additional heads comps additional.
But again that's noncash.
Okay.
That's helpful.
Second thing there were some reports a couple of weeks back.
About there being a potential moratorium on mining uranium for certain section of Arizona.
Does that impact you guys in any way or all or all of your assets like outside that that specific area.
We don't believe so because we have valid existing rights we've.
We have a number of assets.
That are fully permitted ready to go like opinion plane, we're advancing that right now and.
We're just full tilt on that project.
There is discussion of a monument, we havent heard exactly what the outcome is going to be there, but we do not believe it's going to change our activities at all with the opinion plain mine.
Period.
Okay, so to be clear your assays outside where the proposed monument is or no no doubt it has exemption.
Inside.
But it is a project it is fully permitted.
<unk> been supported by the U S Forest service for 35 years, they've defended that so we believe the valve existing rights.
Our sound and we're going to go forward with the project, Dave Friedman, our legal counsel is on the call. Dave do you have any comments.
Mark I think you summarized it.
Under the law you you can't the president cannot.
Any national monument proclaimed.
<unk> developed existing rights the area, where our minds in Arizona are subject to mining withdrawal right now which is subject to build existing rights. We've established valid existing right with you, but not upheld by the court for the opinion plain mind. So we expect that those will be honored and if a new mine.
This proposed.
Okay I appreciate the clarity there in it.
I was under the impression you guys were exempt, but I just wanted to make sure we're clear on it.
And then kind of a last thing you know as you guys look at.
Current operating expenses and growing the business.
How should we think about.
When you guys will start to sell extra inventory or restart operations at every at the point, where you guys do have a fixed price in mind, even if you can't disclose it or is there a fixed timeline that you guys are aiming for.
How should we think about that.
Well, where we're really kind of focus on building a book, where we have leased at $20 margin on our uranium production.
As you can see with number of our inventory sales, we're getting more than that currently with a lot of our inventories now a lot of that's come from alternate feed but we're trying to build a book with at least that $20 margin.
Likely more with some of our operations like pinion plane. So.
But that's kind of how we're trying to approach it is.
Everybody's got to get to a point, where they're making money here.
And.
We were not out there to do recreational mining, but we're just trying to build the book end and really frankly.
With the increased cost the difficulty of getting additional labor reagents.
We really need uranium prices to go up.
Somewhere in the seventies plus.
Before we will continue to build that book.
Okay. Thanks, I appreciate the color I'll turn it over.
Yeah.
Once again that is star one should you wish to ask a question.
Your next question is from from.
Oh, sorry.
Please ask your question.
Mark Niger.
We're about five.
5% of the uranium worldwide.
The mine is owned by a French company.
Do you have any intelligence as to what might break there.
Looking at I mean, Theres certainly unrest.
<unk> going on in Niger.
It does it's a country that has a long history of uranium production read and.
And but I really don't I'm, not close enough to the coal face there to figure out where that's going.
But it does.
Highlight a number of things doesn't it that when you look at where the uranium comes from around the World places like knee share in <unk>.
Russia, Kazakhstan and Uzbekistan.
You know there's risk in a lot of these developing countries. So.
Yes, I don't have any real optics, I mean, I've been reading some of the releases for my global Tom mix and others.
But I don't have a crystal ball and where that's going.
Oh replacement and passion.
You say any implications on current prices is that what you're saying, yes, yes, yes.
Yeah well.
I think that.
Whenever you look at historically, if you look at the uranium market.
When the price starts to move it usually isn't any one thing I mean, if you go back to 2005 and six.
We had a number of floods in Athabasca.
Had some flooding in at the range of mine in Australia.
And so a lot of times the number of these things working in concert really can move the price now I think that our COO.
A number of things that are likely to move the price is one the price is too low for replacing uranium at current prices.
You've got the increasing demand you got reactors staying online you've got Japan firing up and then you have something like <unk>.
Putting a bit of a red flag over that country and I think when you start looking at these things in concert it has the potential to really move the price where it should be which is that 70 or north of 70 to get additional new production coming to the market cost of Brooklyn. Thank you very much sir.
Thank you Reed.
Thank you.
There are no further questions at this time. Please proceed sir.
Alright, well.
Firstly again, thank you for your interest in energy fuels.
It is a unique story as I said earlier.
We're working hard we're working really hard as a company were working well as a company.
And we have got what I believe is an extraordinary future.
It's.
It's difficult out there to.
To actually deliver new production and our company is a company that delivers new production, we're not a promotion promotional company.
And we're trying to build these fundamentals on something that will.
Basically capitalize on the clean energy tech going forward and the energy transition and I think we're well on our way and but I do appreciate our shareholders and the support of our shareholders. So thank you very much and have a good day.
Thank you.
Ladies and gentlemen.
Has now ended.
You all for joining you may all disconnect.
Okay.