Energy Fuels helping to restore US rare earth production

Largest producer of uranium in the US Leading producer of vanadium used in batteries, steel, and chemical industries Recovering rare earth elements (REEs) at White Mesa mill in Utah 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 Utah. 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 started 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 2 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 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: In its most recent development, Energy Fuels revealed that it has teamed up with Neo Performance Materials (TSE:NEO) on a new US and European rare earth production initiative. The program will produce value-added rare earth products from natural monazite sands, which is a byproduct of heavy mineral sands mined in the southeastern US. Energy Fuels will process the monazite sands into a mixed rare earth carbonate in Utah to use as feedstock for Neo’s rare earth separation facility in Estonia. The firm is also evaluating the potential to develop separation facilities in the US. In December 2020, Energy Fuels announced that it is set to become the first US company in more than 20 years to produce a marketable mixed rare earth element (REE) concentrate ready for separation on a commercial scale. This comes after the company reported that it has entered into a three-year supply agreement with The Chemours Company to acquire a minimum of 2,500 tons per year of natural monazite sands from the Offerman Mineral Sand Plant in Georgia. Energy Fuels has started to process the monazite sands at White Mesa, while also recovering the contained uranium, which it believes represents an important step toward re-establishing a fully integrated US REE supply chain. The goal is to process at least 15,000 tons of monazite per year for the recovery of REEs and uranium, which would represent about 2% of White Mesa’s throughput capacity. Energy Fuels expects to gradually ramp-up production of an intermediate REE product called "mixed REE carbonate." This product will then advance to REE separation, which is the next stage in the REE value chain. Upon successful ramp-up, the company plans to commercially produce an REE product at a stage more advanced than any other US company. Energy Fuels plans to sell its mixed REE carbonate to Neo Performance which will process the material at its facility in Europe and manufacture separated REE products available to US and European markets.  Energy Fuels currently 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. Looking at its financials, the debt-free company's latest results showed it had working capital of $40.2 million as of December 21. 2020, more than double the amount of a year earlier. The figure comprised $22.4 million of cash and marketable securities, and $27.6 million of inventory -- including nearly 690,700 pounds of uranium valued at around $23.79 per pound, and 1,672,000 pounds of high-purity vanadium valued at around $5.11 per pound.  For 2020, Energy Fuel's uranium production totaled around 196,500 pounds of U3O8, the most stable form of uranium oxide, and vanadium production totaled roughly 67,000 pounds of V2O5, or vanadium oxide, extensively used as a catalyst in many industrial chemical reactions. What the broker says: On March 3, 2020, analysts at Noble Capital Markets reiterated a ‘Market Perform’ rating on Energy Fuels shares, a day after the uranium firm announced its outtake agreement with Neo Performance Materials.  The Noble analysts noted that Neo will take 80% of the rare earth products processed from monazite sand by Energy Fuels’ White Mills plant and that the agreement includes a put option for Energy Fuels to sell the remaining 20% as well as a right of first refusal option for Neo for additional monazite purchases. “The agreement will only use only 2% of White Mill capacity, leaving room to expand either monazite/rare earth operations or start-up uranium operations,” the analysts wrote in a note to clients. The analysts pointed out that Energy Fuels and China are the world’s only producers of monazite: “Other mills may follow Energy Fuel's lead, but UUUU will have a first-mover advantage should the fledgling industry take off. Should the company move to start separating rare earth elements, it could be especially lucrative for the company.” Going forward, the Noble analysts said they expect that the processing of rare earth elements will generate several million dollars in free cash flow for Energy Fuels. They added: “However, with excess capacity at the mill, it is not hard to see this free cash flow estimate expand quickly with new agreements. With no other monazite processing plants to use as a comparison, we have not yet factored the agreement into our models. Instead, we simply view the movement into monazite processing as a positive step with large potential.” Inflection points: Commercially produce an REE product more advanced than any other US company Update on government budget proposal Uranium/vanadium price moves What the boss says: "We believe Energy Fuels has done more to restore US  rare earth production in one year than others have achieved in many years," the company's CEO Mark Chalmers said in a recent statement. "Less than one year ago, Energy Fuels announced that we were entering the US rare earth space. Now, we are receiving shipments of rare earth bearing ore and are in the process of ramping up for commercial production of an intermediate rare earth product at a stage more advanced than any other US company. "We intend to optimize our production of a mixed rare earth carbonate and then move on to developing our own ability to manufacture separated rare earth products at our plant in Utah. Our ultimate goal is to stand-up a fully-integrated US rare earth supply chain that is globally competitive, quicker than any other US company," he added. Contact the author: patrick@proactiveinvestors.com Follow him on Twitter @PatrickMGraham