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Energy Fuels builds inventory for vanadium sales, is the driving force in the US uranium mining industry

The company looks forward to once again demonstrating its ability to execute when the US uranium market rebounds

Energy Fuels Inc. - Energy Fuels builds inventory for vanadium sales and is the driving force in the US uranium mining industry
For the quarter, the company had $41.1 million of working capital, 500,000 pounds of uranium inventory, and 1,150,000 pounds of vanadium finished goods inventory

Energy Fuels Inc (TSE:EFR) (NYSEMKT:UUUU) CEO Mark Chalmers said Monday that the company continues to be happy with its vanadium production, while also continuing to be the “driving force” in the US uranium mining industry. 

Headquartered in Colorado, Energy Fuels is a fully-integrated producer of both uranium and vanadium, and owner of the only operational conventional uranium mine in the US.  

In a statement accompanying the company’s third-quarter numbers, Chalmers said: “We continue to be very happy with our vanadium production campaign; except prices continued to fall during the quarter. At the current time, we are mainly building inventory for later sale, while purities and recoveries remain high.”

Investors responded well, with the stock climbing 2% to US$2.04 a share midday Thursday on the NYSE MKT in New York, while it was 2.30% higher at C$2.67 in Toronto.

READ: Energy Fuels casts its eyes on uranium and vanadium as it continues to bolster its projects

Chalmers said the company continued discussions to potentially sell vanadium at premium prices to customers who require higher purities.

“If vanadium prices do not make a recovery in the next few months, we will evaluate shutting down production to save this valuable asset for later recovery,” said Chalmers.

The Energy Fuels boss said that during the third quarter, the company continued to be the driving force in the US uranium mining industry as “we continue to encourage the US government and President Trump to support a renaissance in US uranium production.”

On July 12, President Trump created the US Nuclear Fuel Working Group, which comprises 13 cabinet-level and other major government agencies, and directed them to develop recommendations on "reviving and expanding" domestic nuclear fuel production, including uranium mining.

The deadline for the Working Group to provide recommendations has been extended to November 10.

“We remain confident of a positive outcome for the company and our industry,” said Chalmers.

“Because Energy Fuels is currently the largest US uranium producer, with the most operational production, licensed capacity, and in-ground uranium resources among producers in the US, we expect to be a significant beneficiary of any action taken by the US government,” he added.

The firm owns and operates a mill and conventional mines that can produce up to 8 million pounds of uranium per year.

New processing deal at the White Mesa Mill

"As previously announced, we are continuing to fulfill a new processing agreement at the White Mesa Mill, under which we are assisting in the cleanup of a formerly producing uranium mine in New Mexico,” said Chalmers.

“While we expect to generate significant incremental income from this project, perhaps more importantly, we are successfully demonstrating to the US Environmental Protection Agency (EPA) and the Navajo Nation that we can be their partner in the cleanup of Cold War era abandoned uranium mines in the Four Corners Region of the US. We look forward to potentially seeing 'trucks rolling' in the not too distant future,” he added.

For the quarter ended September 30, the company had $41.1 million of working capital, including $14.7 million in cash, $7.8 million in marketable securities, 500,000 pounds of uranium finished goods inventory, and 1,150,000 pounds of vanadium finished goods inventory.

Vanadium production totaled 530,000 pounds of V2O5 for the quarter, and the company expects to continue to produce 160,000 to 200,000 pounds of V2O5 per month through the fourth quarter, subject to suitable sales prices.

Uranium production totaled 16,000 pounds of U3O8 during the quarter. The company said it didn’t complete any uranium sales during the quarter.

For the third quarter, the company reported a loss of $6.9 million, or $0.07 per share, compared to a loss of $13.8 million, or $0.16 per share during the same period a year earlier.

“During 2018 and 2019, we selectively invested in a number of critical path items at our uranium production facilities and mines in order to significantly enhance their production readiness,” said Chalmers.

Waiting for the starting gun

“If and when the starting gun goes off, either due to the President acting on the recommendations of the US Nuclear Fuel Working Group or generally improving uranium market conditions, we are very well positioned to quickly and cost-effectively increase production and capture those higher prices,” he added.

The Energy Fuels boss pointed out that since 2006, uranium production facilities currently owned by Energy Fuels have supplied roughly 35% of all uranium produced in the US.

“Our people and facilities have demonstrated, time and again, that we can respond to rapidly evolving market conditions, most recently when we commenced vanadium production within just a few months of a production decision,” said Chalmers. “We look forward to once again demonstrating our ability to execute when the US uranium market rebounds."

"Market Perform" rating

Meanwhile, analysts at Noble Capital said in a note to clients that the company’s third quarter results were in line with expectations.

“Due to low commodity prices, we expect the company to continue building inventories although we do expect modest revenue from processing alternate feed materials,” said the Noble Capital analysts.   

“We have increased our 2020 loss estimate to $0.12 per share from $0.05 per share to reflect lower sales,” they added.

The Noble Capital analysts said they were maintaining their “Market Perform” rating based on the potential for constructive recommendations from the appointed working group.

“A broad range of remedies are possible and include direct support to US uranium producers and nuclear power operators, incentives for US utilities to purchase uranium sourced in the United States, tax incentives and/or policy and regulatory reforms that are supportive of the industry," said the analysts.  

—(Adds stock quote, analyst comments) —

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

Quick facts: Energy Fuels Inc.

Price: 2.59 CAD

TSX:EFR
Market: TSX
Market Cap: $257.29 m
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Energy Fuels Inc (TSE:EFR) (NYSEMKT:UUUU) CEO Mark Chalmers tells Proactive Investors that the Colorado-based uranium-mining company is pleased with President Donald Trump's decision to commence a new review of the domestic nuclear fuel supply chain. In a written memo, Trump said he did...

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