Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Energy Fuels Inc (UUUU, Financial) maintains a strong balance sheet with over $200 million in liquidity and zero debt.
- The company is advancing its diversified critical mineral production, including uranium, vanadium, and rare earth elements.
- Energy Fuels Inc (UUUU) has successfully commissioned its Phase 1 rare earth separation plant, producing NdPr on-spec.
- The company has signed favorable long-term uranium contracts with US utilities, reflecting strong market positioning.
- Energy Fuels Inc (UUUU) is ramping up uranium production from multiple mines, targeting 1.1 million to 1.4 million pounds per year by the end of 2024.
Negative Points
- The company reported a net loss of $6.4 million for Q2 2024, driven by higher costs.
- There is substantial equity volatility in the uranium market, which could impact future financial performance.
- Energy Fuels Inc (UUUU) faced logistical challenges, including a temporary halt in shipments through Native American reservations.
- The company did not provide detailed financials during the earnings call, causing some confusion.
- There are ongoing negotiations and uncertainties regarding the Toliara project in Madagascar, which could impact future growth.
Q & A Highlights
Q: Can you give some color on how much pricing power you're seeing from your customer base, given the large scale output that you bring into a market that's displayed by geopolitical turmoil?
A: Mark Chalmers, President, Chief Executive Officer, Director: The pricing power has evolved, especially since the Ukraine conflict. Initially, there was a rush from US utilities to establish long-term contracts, which we signed. The long-term market price has increased to around $80 per pound. Our recent contract reflects favorable terms, allowing us to deliver without substantial capital investments. There is a growing commitment from utilities to sign deals that are attractive for US producers.
Q: Is there a maximum inventory level that you are allowed to keep at site for uranium?
A: Mark Chalmers, President, Chief Executive Officer, Director: No, there is no maximum inventory level at the mill. The material must be adequately stored and stockpiled to eliminate dust. Historically, we have had substantial quantities, and currently, we have around 900,000 pounds of finished and unprocessed material, which continues to increase.
Q: Could you give us any color on how the temporary stop of shipments from Pinyon through Native American reservations might impact your guidance for the year?
A: Mark Chalmers, President, Chief Executive Officer, Director: We are working with the Navajo Nation to address their concerns over safe transport. Historically, there have been tens of thousands of uranium haul trucks across the reservation without incident. We voluntarily paused shipments to ensure comfort and are working towards a resolution. We do not expect long-term delays and are continuing development work at the mine.
Q: During your prepared remarks, you mentioned a uranium sale in July. Is that in addition to the one in June?
A: Mark Chalmers, President, Chief Executive Officer, Director: There may have been a typo. We made one sale in Q2 at $85.90 per pound. In Q1, we made 200,000 pounds of contract sales at around $75 per pound and a spot sale of 100,000 pounds at around $103 per pound. No uranium sales have been made in Q3 yet.
Q: Can you provide an update on the development status of your other assets and when you expect to start stoping?
A: Mark Chalmers, President, Chief Executive Officer, Director: At Pinyon Plain, we are completing development work and can mine ore from sublevels. We plan to ramp up mining later this year. At La Sal and Pandora, we are currently mining uranium and vanadium ores, aiming for around 400,000 pounds per year of uranium. The Whirlwind project is fully licensed and will start mining soon. Nichols Ranch is undergoing delineation drilling and could come online in the next year. We are also considering ore purchases and alternate feed sources.
Q: Given that you will be ramping up mining and running your processing campaign, do you expect your stockpiles to be at similar levels by the end of the year?
A: Mark Chalmers, President, Chief Executive Officer, Director: We aim to reach 1.1 million to 1.4 million pounds of newly mined material by the end of the year. The mill can process more than that. We plan to run the mines aggressively and replenish processed material. If needed, we may pause the mill for a few months and resume later.
Q: How do you view M&A in the uranium space today? Could there be potential opportunities that interest you?
A: Mark Chalmers, President, Chief Executive Officer, Director: We are open to M&A opportunities that make sense, including in the uranium space. While we have been active in the rare earth sector, we have not ignored uranium opportunities. We have acquired certain claims in the La Sal Complex and continue to look for opportunities that align with our long-term strategy.
Q: When should we expect the updated rare earth PFS numbers to be published, and could you provide an initial ballpark for the CapEx assuming higher scale?
A: Mark Chalmers, President, Chief Executive Officer, Director: The initial study for 3,000 tonnes was about $350 million. We have most of the design criteria completed for Phase 2. The exact timing for the updated numbers is not certain, but it is a high priority. We aim to advance this as quickly and efficiently as possible.
Q: Can you speak about the status of the Madagascar negotiations for Toliara and how you plan to fund your capital expenditure on growth projects?
A: Mark Chalmers, President, Chief Executive Officer, Director: Negotiations for the MOU with the Madagascar government are ongoing. We believe the stage is set for successful outcomes. For funding, we have a strong balance sheet and are in discussions with potential offtake partners and government entities for non-recourse financing. Each project will be reviewed on its merits, and we aim for a balanced approach with debt, equity, and offtakes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
