Energy Fuels Q4 2023 Earnings Call Transcript

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February 26, 2024

There are 4 speakers on the call.

Operator

Good morning. My name is Joelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Energy Fuels Fiscal Year 2023 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. Mr. Chalmers, you may begin your conference.

Speaker 1

Thank you, Joel, for that introduction and good morning or afternoon wherever you're joining this call from. I really appreciate you joining the conference call and webcast today for Energy Fuels 2023 annual results. We are very excited to discuss what has been an extraordinary 2023 and a very busy start to Q1 of 'twenty four. For those that cannot join the call today, we'll have replays of this presentation available for 2 weeks on our website either later today or tomorrow. I don't believe I have ever been more excited to update you on both our 2023 results as well as a snapshot of where we are driving the company in 2024.

Speaker 1

I hope it is apparent based on our actions that Energy Fuels has emerged as the up and coming leader in U. S. Uranium and critical mineral production at a time when this has never been more important. Many of you have heard me say we will always be aggressive, but not reckless and I believe 2023 is the testament of how our company is striving to build a world significant uranium critical mineral company in a way that is unique to Energy Fuels assets and our expertise. In short, we believe 2023 clearly demonstrates that we are company builders, not promoters.

Speaker 1

Our goal is to become a company that generates sustainable and significant high margin cash flows from the production of advanced critical materials centered around uranium and other elements found in nature with uranium. 2023 represents a major step in that direction. Just a few highlights from the press release and year end financials, net income of nearly $100,000,000 $222,000,000 of working capital, dollars 37,000,000 in sales of both uranium, vanadium, Mariner Earth and no debt. We have over $1,000,000,000 worth of assets. If you add or you can add another $45,000,000 of liquidity if you look at our inventories at current market prices.

Speaker 1

In short, the company is achieving record uranium based profits and has never been stronger financially with over $250,000,000 of liquidity based on today's commodity market prices. All this is happening while we have been restarting mining at 3 of our mines, We began preparing 2 additional mines for future restarts. We have secured or in the process of securing future additional rare earth feeds of world significance and we're advancing our Phase 1 separation capacity to be commissioned in April as well as our radioisotope initiatives. We are financing most of these through cash flows for growth and diversification milestones organically with limited shareholder dilution. I am aware of no other uranium focused company that can say this.

Speaker 1

Before I start the presentation, I want to remind you that you are controlling the presentation from your own device and I'll try to remember to tell you when to advance with next slide. There will be time for question and answers at the end of the presentation. Dave Friedland, our Executive Vice President, Chief Legal Officer Nate Bennett, our Interim CFO and Chief Accounting Officer and Curtis Moore, our Senior Vice President of Corporate Development and Marketing will be available to answer any questions I cannot answer. So let's jump right into the presentation. Now most of you have seen the slide of White Mesa in Utah.

Speaker 1

This is a hub of our critical mineral strategy. We can recover uranium, rare earths, vanadium, potentially medical isotopes and has a long history of recycling. And this again like our results is an extraordinary asset for the company. Next slide. I may be making some forward looking statements and those are included on slide 2 of this presentation.

Speaker 1

Next slide. So this is what's extraordinary about what we're doing is we are a uranium focused company and we are creating these other opportunities all centered around our uranium production capability with rare earths vanadium, recycling and the medical isotope. So again, I don't know of any other company outside of China that can say this and do this the way we're doing it. Next slide. Everything we do is a high value product line uranium.

Speaker 1

And I want to point out that energy fuels has been the leading U. S. Producer. In the last 5 years, 2 thirds of all uranium produced in the United States come from energy fuels. We're restarting the 3 uranium mines I mentioned and producing ore as we speak at a run rate of between £1,100,000 and £1,400,000 per annum by the end of this year.

Speaker 1

So we're mining ore right now at 3 operations and we're getting other operations ready to advance as market conditions support. We have over £10,000,000 of license production capacity, rare earths used for the critical elements for the powerful electric magnets required for electric vehicles, wind and other high-tech appliances. In April, we will be and have the capacity to produce up to 1,000 metric tons per year of separated NDPR oxide which is equivalent to the amount of elements required for the high efficiency electric motors for up to 1,000,000 electric vehicles. Vanadium again a critical element mainly used for high strength steel, but it's also got substantial attention for grid scale batteries. We have the only primary producer of vanadium recovery plant in North America, medical isotopes, which are critical for emerging cancer therapies and the ability to recover radium while we're processing uranium and rare earths, is a very exciting place for us.

Speaker 1

Recycling and I've said this to most of you that have listened before, the fact that we've been able to recycle uranium and vanadium at the White Mesa Mill is why the mill has remained in good standing with the expertise for 40 years. Financial strength, I hit the high points already, $222,000,000 in working capital at the end of the year. That includes a lot of cash and marketable securities and significant uranium and vanadium inventories. Next slide. So I'll talk about our financial highlights in a bit more detail here.

Speaker 1

Next slide. So again, I know I'm repeating myself a bit, but $100,000,000 of net income, 0.63 dollars per share driven by uranium. We sold £560,000 in 2023 with a gross profit of $18,000,000 In addition, we sold the Alta Mesa uranium property and associated PFN tools which were non core for a gain of $120,000,000 So those strong earnings have been funding our growth of uranium and rare earth activities and sales as we ramp up our uranium production and developing our ability to bolt on of commercial rare earth separation capabilities, again over a $250,000,000 in liquidity at current commodity prices. So when you look at our working capital and I think this is the envy of the sector because we are so strong with 0 debt and have assets that can come on with limited capital. And you look at the and as I said, if you include for the value of our current inventories, it's north of that $250,000,000 At year end, we had nearly £700,000 of finished uranium, £900,000 of finished vanadium and about 11 tons of separated pure rare earth carbonate.

Speaker 1

In addition, we have over £400,000 of uranium as raw materials which is ready for processing. So we have £1,100,000 of uranium in finished good or ready for processing. Next slide. So uranium highlights. Next slide.

Speaker 1

So look and I've already talked about we sold the £560,000 at a 54% gross margin. It's a very nice margin. That comprised £300,000 to the U. S. Government sales at $61 a pound and we also sold £260,000 under long term contracts that weighted out at around $57 per pound.

Speaker 1

We also brought the LaSalle complex which includes the Pandora mine and Beaver mines and the Pinon Plain Mine in Arizona back into production and as I already said between £1,100,000 to £1,400,000 per year by the end 2024. We're expecting to produce now when we mine these mines, we bring the ore to the mill and await it it into a way for processing. But in 2024, we're projecting between 150,000 to £500,000 of finished goods to be processed at the mill. And it all depends on as we commission the Phase 1 separation plant when we start producing and we hope to do better than that, but that's the ranges that we're giving right now. And as I mentioned earlier, we're getting 2 additional mines ready for potential production in 2024, 2025 Nichols Ranch in Whirlwind.

Speaker 1

I talked about our uranium inventory of £1,100,000, £700,000 of that's finished and the other is material ready for processing, which a lot of that will be processed this year. Next slide. We're building up our ability to produce around £2,000,000 of annual production by 2025 and again this is with limited capital £2,000,000 at the mines I mentioned including the ones that we're getting ready. And this will also include some alternate feed production which only energy fuels can do and we're also planning on having an ore purchase agreement from 3rd party miners that are in full compliance also this year to secure feed from those that would like to actually monetize ore that they have in mines that are owned by them. In addition to starting up these mines, we are reinitiating exploration drilling and delineation at Nichols Ranch, the ISR project and underground delineation drilling at our Pinon Plain mine in Arizona.

Speaker 1

On top of all that, we're advancing permits at our large Roca Honda mine in New Mexico, Sheep Mountain in Wyoming and the Bullfrog projects in Utah and those have the potential to produce £4,000,000 an additional £4,000,000 of uranium per year in the coming years. In 2024, we sold £200,000 under contract at $50 per pound at a 51% margin and that was under contracts. And these contracts have floor and ceilings and escalate with prices as the prices go up. So they went up materially higher than last year. But in addition, because we have uranium inventory, we sold £100,000 on two transactions that averaged $102.88 a pound at a gross margin of 64 percent.

Speaker 1

So if you combine the contract sales in the spot sales, we've sold £300,000 at an average price of about $84 a pound already in Q1 of this year. For the remainder of 2024, we're going to continue to monitor spot market sales opportunities. We also have potentially a sale for another £100,000 under contract, but we are going to look at how we can take the inventory we have, the alternate fleet we have and continue to take advantage of the spot sales combined with our contract portfolio which only our contracts are about 25%, 30% of our production capacity at the £2,000,000 per year. Next slide, rare earths, lot going on in the rare earth space. Next slide.

Speaker 1

So I want to emphasize too that the rare earth production does not diminish the company's uranium production capabilities. We produced high purity mixed rare earth carbonate this year and sold to Neo for about $3,000,000 We're completing Phase 1 separation this quarter. We plan to be commissioning that on April 1. We've been telling the market that was going to cost about $25,000,000 Right now, it looks like it's going to come in between $16,000,000 $18,000,000 $7,000,000 to $9,000,000 under budget, which is rare to hear in today's inflationary environment. We're very proud of that and have the capacity to produce up to 1,000 tons per year of NDPR oxide subject to receipt of sufficient monazite.

Speaker 1

And we also expect to be producing around 25 tons to 35 tons of separated NDPR oxide. While we're doing this, we're also advancing our Phase II and Phase III separation capabilities and that is whatever we design it to be, but it will be between 3 to 5 times the capacity of Phase 1 with a separate crack and leach facility and the ability to separate disposium, interbium and other heavies in Phase 3. Next slide. So we've also been very active at securing low cost monazite supply chains during 2023. We secured the Bahia project in Brazil, which has the potential to produce between 3000 to 10000 tons per year of monazite to provide material to White Mesa for decades.

Speaker 1

We're currently doing exploration and securing our mining permits. It's a very well defined heavy mineral sand deposit and we have a new sonic drill rig that the guys are being trained on as we speak and potential for production in 2026. In addition, recently we announced a non binding MOU for a very significant deposit in Australia, in Victoria, Australia where we would have 49% ownership and have access or secure 100% of the monazite from that project. The project has the potential to supply between 7,000 to 12, 14,000 tons of monozite per year for decades. So we are looking at significant scale.

Speaker 1

It has all major licenses and permits in place and is in advanced stages to go into construction. It's well defined. And as I said, we will secure the rights to all the monocyte and potential production in 2026. So I've been saying for a long time, we're securing our sources of rare earth and we'll continue to do so in an opportunistic way. And right now with the price of uranium being so high and the price of monocyte or particularly the rare earth oxides, NDPR disposing of YbV being lower is a great time to acquire these rare earth projects because the prices are down because they've been beaten up.

Speaker 1

So that puts us in a unique opportunity to capitalize on the strength of our balance sheet and the fact that we've been profitable and we plan to do everything we can to continue to be profitable going forward. Next slide, vanadium and medical isotope highlights. Next slide. Again, we have the only primary production facility for vanadium. It's probably number 4 on our list of our market strategy, but we have the ability to produce and refine substantial quantities of V2O5.

Speaker 1

We did sell a little bit of vanadium earlier in the year at a gross margin of 37%. And I want to emphasize gross margins, 37% versus up to 60% when we're doing these spot sales. And we're still evaluating when the price of vanadium comes up, how we can respond accordingly. We have about the £900,000 of finished V2O5 and we plan to sell it as the price when the price goes up, typically over $10 a pound, we'll sell some more vanadium, but we also have the ability to recover £1,000,000 to £3,000,000 of vanadium from our tailings. And when we're mining LaSalle and Pandora, we're also mining uranium vanadium ore.

Speaker 1

So we very much are in the vanadium business, but we will capitalize on vanadium business when the price of vanadium is higher. Next slide. Medical isotope highlights, we have an R and D license to recover radium-two twenty six. We're also looking at an R and D license to recover radium-two twenty eight and the company continues to advance this. We are completing engineering on a pilot facility to produce research and development quantities of Radium-two twenty six to be tested by end users.

Speaker 1

Next slide. So we'll talk a bit about our recycling and our commitment to the community. Next slide. Community outreach. We continue to share our success with our neighboring communities.

Speaker 1

We have set up the San Juan County Clean Energy Foundation where we initially made a contribution of $1,000,000 into that the foundation account and have agreed to ongoing funding equal to 1% of annual revenues from the White Mesa Mill. We've made grants up to around $300,000 thus far. A lot of this has gone to various initiatives with indigenous communities in the region with American Indian Services, a native guide program with Canyonlands, putting a solar project on the dinosaur museum. We've spent and funded the Navajo Nation chapters, a couple of the chapters, fine arts of San Juan County and high schools and whatnot. So anyways, all these programs are focused on education, environment, health, wellness, economic advancement and as I said, significant focus on Native American priorities.

Speaker 1

The mills recycling programs continue to reduce carbon emissions and save the world's finite resources and we're very proud of how this all fits together. Next slide. So 2024 guidance in focus, I already mentioned that we're planning to produce £150,000 to £500,000 of finished uranium production. Now remember, we still have substantial inventories of uranium and vanadium to sell. We're going to do everything we can to beat those guidance numbers, but that's our guidance numbers right now.

Speaker 1

When it comes to Q1 'twenty four sales, I talked about the £200,000 that we sold under contract at around $75 a pound and the 100,000 pounds that we sold at over $100 a pound for a weighting of around £300,000 $84,000 $85 per pound. We're going to look at uranium sales for the remainder of 2024 on an opportunistic basis. We have another potential sale of £100,000 under contract this year. We're going to continue to ramp up our production at our uranium mines that I already mentioned, the 3 mines that are currently in production, including on top of that alternate feed and an ore purchase agreement. We're looking at preparing Nichols Ranch and whirlwind to also go back into production to get us up to approximately £2,000,000 of uranium production per year.

Speaker 1

And again, with limited capital, limited capital, we're commissioning or will be commissioning soon the Phase 1 separation circuit. And this is a world material size circuit. It is larger than NIO's Silma facility in Estonia. So we're very excited about that. And as I said, under budget, we're continuing with the engineering at Phase 1 and Phase 2, advancing the Bahia project in Brazil, continue to evaluate, finalize our due diligence on the Donald project in Australia.

Speaker 1

And on top of that, we're looking for other opportunities. So to say that we've been busy last year, this year is an understatement. I've never been busier. I've never been in a position where our company has been stronger and we are going for it people. We are going for it, but we are going for it in a responsible way to build long term value using our assets, our people, our expertise and our momentum in a way that nobody else can do like energy fuels.

Speaker 1

Thank you very much. Happy to be open for any questions from the floor.

Operator

Thank Your first question comes from Mike Deem with NOBLE Capital Markets. Please go ahead.

Speaker 2

All right. Thank you. Good morning. Mark, well, let me a couple of questions. Let me start with the rare earth elements.

Speaker 2

Some of the verbiage in the press release talks about the 25 tons to 35 tons of NDPR oxide in the second quarter. And then it says that you expect to begin processing uranium after that. Is the implication that you probably are not going to be doing more in EPR oxide after the Q2?

Speaker 1

Yes, Michael. That's correct. I mean, right now, the only source of monozite we have is from Chemours. And so we have secured about 500 tons of material that's ready to be processed to allow us to commission Phase 1. And so, yes, we plan to just to commission the Phase 1 plant and then switch it back switch the mill back over to uranium production and we plan to run as much uranium through the mill, particularly at a period where the price uranium is so high to maximize the revenue and profitability while we're securing larger longer term sources of monocytes.

Speaker 1

So, again, right now, rare earth prices are quite a bit down from where they were a year or 2 ago and we're going to maximize our do this Phase 2, Phase 3 engineering. We'll continue to advance Bahia potentially the Donald project in Australia and other projects to be ready to bring in significant quantities at world scale, but we'll be pushing the uranium through in the meantime.

Speaker 2

Is there kind of a date in mind when you have a go decision on Phase 2 while you're doing all this prepping?

Speaker 1

Well, what we're doing is getting the engineering completed. We'll have to submit that to the state of Utah. And so it's from our perspective, we're doing all that work right now. The go decision is get the engineering done, be ready to submit it to the regulatory bodies. And so we're not holding back on that at all.

Speaker 2

Can you talk a little bit more about the under budget on Phase 1? And specifically, would that have any implications for the cost of the Phase 2 expansion?

Speaker 1

Well, I think the key thing about Phase 1 and the fact that we're doing this work in Utah, a low cost of doing business area with very, very skilled people that understand solvent extraction that, yes, we were able to do a lot of that work internally in a very efficient way. And it does I think it does bode well for Phase 2 and Phase 3. I don't want to extrapolate out that far on those at this point in time because Phase 1 is where we actually added additional solvent extraction capabilities in the existing Essex building at the mill. So Phase 2, Phase 3 will be completely separate new facilities, so it will require complete new buildings and whatnot, where Phase 1 didn't require all that. But again, I think it bodes well when you look at what we can do in a jurisdiction like Utah, Southern Utah as compared to others in the other parts of the world, particularly in places like Australia, where people are seeing significant cost overruns on their projects.

Speaker 2

And then one question on uranium and I'll get back in queue. And I almost hate to ask this because you've done so much, but given what's going on with uranium prices, if we were to try and expand even faster, what are the bottlenecks to getting production going even faster than what you're projecting?

Speaker 1

Well, on our existing sort of stable or permitted projects, there really aren't any bottlenecks. We can get up to the £2,000,000 per year. When you start going greater than that for us, it requires a combination of couple of things. It requires larger capital expenditures and it also requires securing some of these additional permits on things like Roca Honda, Bullfrog and Sheep Mountains partially permitted. So our bottlenecks is we can get to about that £2,000,000 maybe a little higher with capital investment.

Speaker 1

But to go to £5,000,000 per year, we're going to need both significant capital investment and additional permits from our for our company.

Speaker 2

All right. Thank you, Mark.

Speaker 1

Thank you.

Operator

Your next question comes from Joseph Reagor with Roth MKM. Please go ahead.

Speaker 3

Hey, Mark and team, thanks for taking the questions. So, first thing, on that $16,000,000 to $18,000,000 guide for the total cost for the Phase 2. How much of that was spent as of year end, so we can kind of have an idea what's left for this year?

Speaker 1

Let me ask Nate Bennett, our interim CFO, Chief Accounting Officer. Nate, can you give me a number of what was spent to year end?

Speaker 2

Yes, I can pipe in there. So we have spent $8,200,000 through the end of 2023 and the rest of that will be spent in 2024.

Speaker 3

Okay. Thanks. That's helpful. And then looking at the as you're doing the separation of it as well with this, what do you expect kind of the pricing to be on these 25 to 55 tons that you're going to sell?

Speaker 1

Well, because it's Joe, because you're talking very small quantities and everything, it really isn't even appropriate to say what the pricing is going to be on it right now. We one of the reasons that we're securing these other large projects is that we get both the revenue from the heavy mineral sands and absolutely low cost, in some case no cost for monazite. So with Chemours, we've said this publicly, We've been working with them to kind of reconcile the fact they've been short on supplying this monocyte. And so we're going through a couple exercises there on how we rectify that. It's not over yet.

Speaker 1

So I'm not prepared to tell you what it's going to cost for this run, this small run. But what it does demonstrate is it will demonstrate that we can do this commercially at the required purities if everything goes as per our plans and that in itself is extremely material. We will secure additional monocyte and that's all part of our strategy is how we come up with a blended price that is very attractive in a world perspective.

Speaker 3

Okay, fair enough. And then I realized with the uranium production guidance that it's all dependent on when you get started with producing. But can you tell us what are the assumptions that lead to like the £150,000 versus the 5 £100,000 like is there a certain month that you would need to start up by to get the 500 and then a certain month you're assuming is the latest start up to get the 150?

Speaker 1

Yes. It's really timing. We're going to get this Phase 1 commissioned, as I mentioned, running this 500 tons through it. And when that is complete, we'll flip the mill over to uranium production. And depending on how much time is remaining in the year, we will put more uranium through if we're able to flip that sooner rather than later.

Speaker 1

We have the alternate feed and the sources to basically get well in that range. And we're also planning to be delivering or currently delivering feed from our other mines like LaSalle and soon the other sites like Pinon Plains. So there's a lot of moving parts of just making sure the timing is in order. It's all coming together and we're just being what I believe quite conservative giving that range at this point in time. It's my personal goal and I make that it's a personal goal to do better than that, but we just have to see how the year kind of rolls out here.

Speaker 3

Okay. And one final one. So you contracted near term to sell an additional £100,000 this quarter at kind of spot prices. Are you planning to do more of that in Q2, Q3, Q4 or are you guys planning to just stick to the long term contracts?

Speaker 1

It is our goal to sell uranium as we have it, taking into account what our contracted deliveries are looking out next year and following years, and maximize the benefit of these higher prices in a way that others can't because they don't have 1, the inventory 2, the ability to produce this year. So, just watch this space. I don't want to make promises that I can't keep, but we are going to be looking at how to absolutely maximize our company position with these higher uranium prices.

Speaker 3

Okay, sounds good. Thanks, Mark. I'll turn it over.

Operator

There are no further questions at this time. Please proceed.

Speaker 1

Yes. I just like to thank those of you that have joined the call. I hate to use the word extraordinary too many times, but we really are on a focused path for a long term critical mineral hub. There really is no investment like energy fuels that can on the back of uranium, adding on the ability to produce the rare earths for a very significant world significant strategy is our objective. Look at our balance sheet, look at the fact that we're producing uranium now, we've got very good margins on our uranium sales and cost.

Speaker 1

It is a very exciting time and I cannot tell you, as I said at the beginning of the call, how excited I am to present this story and just watch this vehicle because we are focusing on building a and we're doing it step by step. So thank you very much. And again, I look forward to further updates in due course during the year.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your

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