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Energy Fuels is on track to begin commercial rare earth concentrate production as soon as 2021

Snapshot

The company supplies uranium (U3O8) to major nuclear utilities and can also produce vanadium from some projects as market conditions allow

Energy Fuels Inc. -

Quick facts: Energy Fuels Inc.

Price: 2.78 CAD

TSX:EFR
Market: TSX
Market Cap: $364.39 m
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  • Largest producer of uranium in the US
  • Leading producer of vanadium used in batteries, steel, and chemical industries
  • Getting into the rare earths business

What Energy Fuels does:

Energy Fuels Inc (TSE:EFR) (NYSEMKT:UUUU), headquartered in Colorado, is a fully-integrated producer of both uranium and vanadium, and owner of the only operating conventional uranium mill at White Mesa in the US.

It supplies uranium (U3O8) to major nuclear utilities and can also produce vanadium from some projects as market conditions allow.

The firm's White Mesa mill has a licensed capacity to produce over eight million pounds of uranium a year, and can generate vanadium when market conditions warrant.  The mill is also licensed for the production of other minerals, including tantalum, which has made it onto the US government's 'critical minerals' list.

The White Mesa mill is also operating under a new processing deal to assist in the cleanup of a formerly producing, Cold war era abandoned uranium mine in New Mexico.

Energy Fuels has said it is in talks with several entities, including the US government, about the potential to recover both light and heavy rare earth elements (REEs) at the mill, as well as uranium from certain natural ores and alternate feed materials.

Meanwhile, the group's Nichols Ranch ISR Project is in operation and has a licensed capacity of two million pounds of U3O8 per year. It is currently producing and has generated over 1.2 million pounds of uranium since 2014. The Alta Mesa ISR project is currently on standby

In addition to the above, Energy Fuels also has one of the largest NI 43-101 uranium resources in the US and several uranium and uranium/vanadium mining projects on standby and in various stages of permitting and development.

How is it doing:

Energy Fuels has said it expects to have between 670,000 and 700,000 pounds of finished uranium and 1.672 million pounds of finished vanadium in inventory at the end of 2020.

The company has also been able to produce a rare earth element (REE) carbonate concentrate on a pilot scale at its 100% owned White Mesa Mill in Utah, which it believes is the first REE concentrate produced from monazite sands at any significant quantity in North America in more than 20 years. 

Energy Fuels noted that it is in negotiations with various parties to procure sources of monazite sands that can potentially be processed on a commercial scale at the Mill for the recovery of REE concentrate and uranium. In addition, it is carrying out ongoing discussions on the possible sale of REE concentrate produced at the Mill to an REE separation facility.

The company ended its third quarter of 2020 with working capital of $44.7 million, a 17% quarter-over-quarter increase, which includes $28.1 million in cash and marketable securities plus $25.6 million of concentrate inventory and work in progress. 

As of October 6, 2020, the company was debt-free for the first time since 2012. 

Inflection points:

  • Commercial rare earth concentrate production possible in 2021
  • Update on government budget proposal
  • Uranium/vanadium price moves

What the broker says:

Following the company’s recent news that it had successfully produced rare earth element (REE) concentrate on a pilot scale at its White Mesa Mill, Noble Capital analyst Mark Reichman said he believes commercial production could begin in 2021 in a note reiterating his 'Market Perform' rating on the stock.

“Energy Fuels moved its rare earth strategy from concept to reality in a period of months and it underscores the versatility of the White Mesa Mill and its role in the domestic critical minerals supply chain. While we would appreciate greater visibility towards profitability, the company's move into the rare earth space is timely and dovetails with public policy priorities to reduce reliance on foreign sources of critical minerals and strengthen domestic supply chains,” he wrote in the note to clients.

The Noble Capital analyst said Energy Fuels would produce concentrates while also recovering uranium from the ore, saying that the rare earth elements found in the concentrate include Cerium, Lanthanum, and high-value magnet metals Neodymium and Praseodymium (NdPr) oxide, which is used in electric vehicles.

As well, Roth Capital published a note to clients on November 12, 2020, which called the company’s recently-announced production of rare earth concentrate at its White Mesa facility “a positive step".

“While this is a small sample size, we believe it is a positive development as it demonstrates the company's potential to follow through on this opportunity. Additionally, we believe the company has moved quicker than expected to address the potential of producing rare earths at White Mesa,” the analyst said.

Roth Capital is maintaining its 'Buy' rating on shares of Energy Fuels.  

What the boss says:

"By using existing infrastructure and technologies at the Mill to recover the uranium and the REEs from monazite sands, we are able to avoid the years of permitting and development, along with the tens, or even hundreds, of millions of dollars of capital that others would be faced with. Assuming the company is able to secure adequate quantities of monazite sands, we expect to be in a position to produce commercial quantities of REE Concentrate by early 2021," Energy Fuels CEO Mark Chalmers said in a recent statement.

He added, “successful testing at scale also demonstrates the importance of the White Mesa Mill in helping the US re-establish its domestic REE supply chain."

Contact Sean at [email protected]

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