Energy Fuels Inc. (EFR) Earnings Call Transcript & Summary

Good morning. My name is Sylvia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Energy Fuels conference call. [Operator Instructions] Thank you. Mr. Chalmers, you may now begin.

Thank you, Sylvia, and welcome, everybody, to the Energy Fuels conference call. We're excited to be here today to talk to you about the progress we've made on rare earths at White Mesa Mill. And I just want to highlight that rare earth is a complement to our uranium business, vanadium business and our recycling business. So it really fits nicely with our organization. Today, joining me will be Dave Frydenlund, our General Counsel and CFO, and Curtis Moore, our VP of Marketing and Corporations. I just want to remind everybody today that you will be driving the slides, so you'll have to toggle them to advance the slides. And also I will potentially be making some forward-looking statements, and these are included at the back of the presentation. I also want to just highlight that as the first slide shows that we -- it's our goal and our objective to be making commercial quantities of our rare earth carbonates and extracting uranium in the first quarter of 2021, which is not very far off. We're also looking at doing some NdPr separation on-site as soon as this coming year. And we're also in the process of evaluating dedicated rare earth separation capabilities and potentially other downstream processing. Next slide. As many of you are aware, we announced yesterday that we had inked up a 3-year supply agreement with Chemours. We're very excited about that because we think it's a significant event in the rare earth industry, not just in the United States, but in the world. Most of you are familiar that rare earths are used for a number of clean energy and advanced technologies, particularly with electric vehicles and wind power, cellphones, computers. So it really is -- rare earths are the future of not just United States but of the world. We believe, as I said earlier, that this is a complement to our market-leading U.S. production capability. Natural monazite is the highest value rare earth in terms of grade and uranium content in the world, and that is a real differentiator in the rare earth business. And in addition to this new opportunity for us, we provide clean tech businesses and the likes of the uranium, our core business, vanadium and also continue to focus on assisting the EPA of cleanup abandoned uranium mines. Next slide. Look at the concept of using the White Mesa Mill for rare earth production is very simple. It's licensed. It's constructed. It's operating. We have a long history of responsibly producing uranium, vanadium and the recycling over 4 decades, and this is unique in the fact that these monazite ores contain substantial amounts of uranium, so we can recover the uranium and that also allows us to recover the rare earths. We look at this in effectively 2 phases. The first phase is between now and into 2021. And this agreement that we've signed with Chemours represents approximately 10%, think of this, 10% of the U.S. mixed carbonate in the United States. So this is a very material first step for our company. And so we think that it is really a great step and particularly with just a short period of time that we've been in the rare earth business, which is 8 months. No one is moving quicker, faster than we are. We're also excited about the work we've been doing with the Department of Energy on the coal-based resources because that's a nice complement, too, to what we're doing. And as I said a few minutes ago, we're looking at moving on to separation, which is the next step in the process, including possible recovery of cerium. Now looking to Phase 2. Phase 2 is not that far off either. Just a few years out. It is our goal to supply 50% of the U.S. separated, separated rare earth oxide demand in the United States. And again, looking at the fact that we announced in April this year, we think this is absolute rocket speed. So we -- it's our goal to increase the quantities of a natural monazite ore that's available to us. We are talking to a number of parties on that front. And as I mentioned, how we combine that with the DOE's programs and looking at the additional infrastructure we have and almost all this work we're doing is with existing infrastructure that we currently have. And that is, again, something that is very, very exciting, because of the value that the mill provides, not just for our core business, uranium, the vanadium and the recycling, but with the rare earth, it's just remarkable. So -- but we are definitely looking at separation and potential metal making and alloys very shortly. We hope to maybe even be in the scoping studies in 2021. Next slide. Look, many of you have seen this slide before. But the White Mesa Mill is -- has proven critical mineral production capabilities, and it continues to emerge as probably one of the most significant pieces of infrastructure in the United States, and perhaps one of the most significant in the world when it comes to critical mineral production. It's the only conventional uranium and vanadium mill in the United States. We're very proud of that, as I mentioned, fully licensed, constructed and operating today. We have probably in the order of 60, 70 employees working at White Mesa today. It's a large facility. It's capable of producing 2,000 tons per day of uranium feeds. It has the tailings capacity currently constructed, 1.5 million tons of currently constructed, and we're adding additional permitted capability to have somewhere in the order of almost 5 million tons of constructed or permitted triple line, state-of-the-art tailings facilities. Got a long history. It's produced about $2 billion worth of uranium, vanadium and recycling over its 40-year history. It's been upgraded a number of times. We are very proud of the exceptional record it has with regard to environmental stewardship and regulatory compliance, and as I said a little earlier, a long history of handling these types of ores and materials. So we are uniquely qualified to do this work. And we are also very experienced with a number of the steps that are in the rare earth processes, including things like solvent extraction and equipment. So we have the expertise on-site as well. Next slide. White Mesa. There have been a number of people that have told us this. It is the missing link for rare earth supply in the United States, missing link. And again, that is why it is so significant. The monazite ores are very high-grade in terms of rare earth content. Typically, the type of ores that we're securing or at least are covered in the initial supply agreement, our 50% to 60% of total rare earth, and they have about 0.2% to 0.3% uranium, which the uranium grade is effectively the same grades as we mine at a number of the nearby mines in the district. One of the advantages of monazite is the -- not only the high grade, but it also is relatively simply -- simple to process as compared to other rare earth materials. It can be produced at the mill with the existing licenses to recover the uranium and the rare earths. And so again, this is where -- it's a different separation from others in the fact that what other people's problem is actually our core business. As I mentioned earlier, with the tailings capacity, we have ample existing capacity and permitted capacity. When we start talking about, say, in the order of 10,000 tons of monazite ore, that represents just 1% or 2% of the mill's capacity and tailings capacity and as I mentioned, state-of-the-art facilities. Successful, when we started in April, we were doing lab scale, and we've been progressively upgrading the scale of that, and we moved from lab scale to 4 1-ton lots, and we're now moving up to 20, 25-ton scale. So we're ramping up very quickly. And the other thing that is really remarkable is that it only costs us to get into a position to commercially go into making a rare earth carbonate concentrate about $2 million, and that literally blows the socks off of most people that we could use existing infrastructure, and some of that money was reagents. So $2 million is sort of a -- almost an overstatement of what it really costs in terms of any other modifications we made to the mill. So really, Energy Fuels is completely focused on clean, green technologies and the future. And we are very focused on best practice, on minimizing the amount of waste we have and position this incredible facility for the future. Next slide. Now let's talk a little bit about the monazite from Chemours. I mentioned the high grade and high value of the Chemours' material between 53% and 55%, has a very, very favorable distribution of NdPr, and this is the elements that are used for high-efficiency magnets and electric motors that are used in cars like the Tesla electric cars and wind generation. It also has a very high grade of heavies, around 14%. And I mentioned the contained uranium, and because of the processing that we're doing, we're actually able to reduce the amount of material that goes to tailings facility by about 50% because that material, the rare earth is -- actually advances to these other separation steps. So this is -- and again, this is one of the key differentiators because a number of other companies are focused on basanite, which is not as favorable in terms of grade. It's not as favorable in terms of processing, and it is a real differentiator and the fact that this is our focus, and this is also a focus of China. With CNNC in China, they focused on monazite for the very same reasons we're focusing on it, and we're basically trying to replicate what the Chinese are doing. Next slide. Now this slide, the steps. And again, I just want to highlight how rapid our progress has been. April 2020, 8 months ago, we announced entrance in the business. We started signing up some of the world's most successful experts in the rare earth business in the entire world with Constantine Karayannopoulos at Neo, who worked previously at Molycorp as well; Brock O'Kelley from the Colorado School of Mines; Jack Lifton. I think this has really gotten a lot of attention from people that have been following the rare earth business. In September, we received this DOE grant for the coal-based resources. There's a number of characteristics very similar to monazite. So it fits nicely with what we're doing. In October -- and we got a lot of play on a video that we set around with a press release on our first rare earth carbonate at pilot scale. And that really woke a lot of people up with what we're doing, and we're starting to commence this work on the next step, which is a separated NdPr. And we'll see where we go with existing infrastructure at the mill in 2021. And then with the execution of the supply agreement with Chemours for 2,500 tons minimum over 3 years, this was an excellent first stop now -- or start. Now we're looking to hopefully upscale that with Chemours. They have indicated that they can hopefully increase those quantities over time, perhaps maybe 2, 2.5x. So we'll have to see how we can work with them to upscale this. We are in discussions with a number of other players. Now the next slide, the pilot scale, and this is the video that I was talking about. And I think I watched this about 50 times because I loved it so much. And we believe that this was some of the first mix of rare earth carbonates produced in the United States at this type of scale in 20 years. And so we're very excited about that. And this was just the very first step. I'm not sure if you can control that and click on the little video, but it still requires some further watering -- or dewatering after the filter press through centrifuge, but then the product is ready for rare earth separation. So again, a picture is worth a thousand words. Next slide. Near term objectives. I've touched on a few of these. We executed this first supply agreement. We're looking to commence commercial production at scale. And so we're going from the lab scale to 4 tons to 20 tons to thousands of tons in 2021. We're actively out there, as I mentioned, securing additional sources of natural monazite ores. We believe they're out there. We believe they're out there, and if people want to do business with us, we think that we have at least a very significant opportunity to get to that 50% of our target production or goal production fairly quickly. I mentioned the NdPr separation test on a test basis. We're continuing to work with the DOE on this coal-based program that we mentioned. And lastly, for 2021, and I think this should get people very excited, we're going to start seeking collaboration with auto manufacturers, renewable energy companies and others to look at rebuilding the entire U.S. rare earth supply chain. And we think we are ahead of the pack, particularly with where we are with our rare earth carbonate. And we're going to start talking to some of these people, and we hope and believe that this is going to be exciting for them as well. United States production, reestablished and processing and moving forward to separation and potential metals and alloys. Okay. Next slide. So as I said, we're on track to produce the carbonate. On a dry basis, it's about 71% total rare earth. We expect to process at least the minimum of that 2,500 tons in 2021. We will recover the uranium. That will be sold as a nuclear fuel cycle, and the material we make will be ready for separation. And it is, again, very similar to the supply chain that China is already doing. We -- now that we've completed the agreement with Chemours and their operations are in Florida and Georgia, and it was previously being sold and shipped to China for processing. So we're very, very happy that they signed this agreement with us. We think it's an endorsement of our capabilities in the future. And as I said, when it comes to other parties, there are people around the world, particularly in Australia, Africa, Brazil that are currently shipping material to China, and we hope some of that, and we're not looking for all of it potentially, but some of that will come our way. And lastly, we are in ongoing negotiations to sell our rare earth carbonate to separation facilities starting to sell that, hopefully, early or mid-2021. So look, long term, I mentioned this sort of Phase 2, which is that 2023, 2024. We're really focused on securing the feeds and having full integration. It is most economic to do this all in one spot. It doesn't make a lot of sense to make one product and ship it to Europe or ship it to China or ship it to some other distant location, because you eat up a lot of costs in transportation costs. So it's very important to have full integration, and we believe that this separation circuit at White Mesa, being able to do all these steps, is very important to the economics of the plan long term. We believe that we can design and construct or modify our existing facility for relatively very attractive capital costs compared to others, maybe in the order of $100 million for the separation circuit. And if you start looking at metals and alloy circuits, perhaps it's somewhere in the order of $50 million to $75 million to construct now. We still have to do engineering studies to confirm this, but we will be focused on best available technologies to get the most cost-effective and most environmentally friendly outcomes here on all steps of the way. And we have secured the expertise from a group in Europe that basically built out a lot of the infrastructure, designed and helped construct the infrastructure in China, and we're very excited to have them coming on board to help us in the future, potentially with the scoping study in 2021. Next slide. So look, I think you all know -- or a lot of you know where White Mesa is. It's south of Blanding in Utah. It has excellent access. It has extensive history, as I mentioned earlier, dealing with uranium and other feeds, and it's something we're very proud of. 50% of the workforce is -- approximately, it's native American. So we hope to grow both employment in Utah and San Juan County, in particular, for the future and hire a lot of additional native Americans as well. As I said earlier, we have an exceptional track record on environmental stewardship and regulatory compliance. We have about 5,500 acres of private land. And for decades, we've been one of the largest employers and taxpayers in San Juan County, one of the poorest counties in United States. And we hope these initiatives increase employment by -- in the order of 100 new jobs in time, good pay, benefits -- having benefits with those jobs in the county, which will make a remarkable difference to that part of the world when it comes to employment, both for native Americans and others in -- living in the county. Next slide. So this is just sort of a graphic that shows this Phase 1, Phase 2, short term up to 2021, the agreement with Chemours, the making of the carbonate at White Mesa and then moving to separation and looking for global customers. That's the first step, Phase 1. And then looking midterm, looking for full integration and using White Mesa Mill every step of the way where we can. And this is what should get people excited. If you've seen the progress we've made in the last -- since this April, and then you look at this midterm, we are doers. We're not promoters. We're focused on getting things done and getting things done with focus and the right expertise and the right consideration for the environment. That is who Energy Fuels is all about. So that is really my last slide. You can tell from my voice that I'm very excited about this. I've told people, this is probably one of the most exciting opportunities in my entire career. And I've been in this business for 45 years, at least uranium business, and I hope you share in some of that excitement. I'd now like to open it up for questions from the floor. So we're available to answer questions right now.

[Operator Instructions] And your first question will be from Heiko Ihle at H.C. Wainwright.

Why don't you dream with me a bit? Dream with me a bit here, and I have this question based on Slide 3 of your presentation. If things go well, how could this whole thing break down in revenue for rare earths, vanadium, uranium in, call it, 10 years? I mean what's the technical capabilities of the asset to actually get this throughput done?

Well, Heiko, I think the number one capability is our ability to handle the uranium and the radioactivity and the material, even though it's low radioactivity. So I think our -- the first ability of the facility is that we have the ability and the history of dealing with that and extracting the uranium. So that's the number one thing. But the other thing we have is the site itself, the infrastructure at the site, things like the power, the water, the equipment, like the solvent extraction circuit shops, laboratory equipment, expertise. People that are used to doing these -- the cracking and leach is just that. It's cracking and leaching the rare earth and extracting uranium. So these are all things that we're used to doing. The mill, as I mentioned, was -- is substantially larger than we need for the rare earth side. We're talking about small tonnages. I mean even if we get to, say, the 50% of the United States requirements, you're only still talking about a couple of percent, 2% or 3% of the actual throughput of the mill and the ability to handle the tailings. So it's a lot of pieces to it. We have the ability to do things like heat for heating leach, but it's just the synergies between the existing infrastructure, a lot of which we can use looking to the future.

Yes. Building on what you just said, can you just provide a little bit of color on the replacement value of White Mesa? And also, how much have you put at -- like you as an Energy Fuels and [ in that sense ] so far?

Well, the replacement value is kind of hard to determine completely, because it is -- there hasn't been a new mill built in the United States for a long time, but we estimate it at probably USD 300 million to USD 400 million, assuming you had the permits and the plans to build it today. The reality is it would take probably at least a decade, if you could get it permitted before you could do that. There have been -- the mill was originally built in '79 '80, but between then and now over the 40 years, there have been a number of upgrades to the mill in terms of things like instrumentation. A lot of the tankage was replaced. We've built these triple line designed for 1,000 year cells, cells 4A, 4B, and we're permitting these other cell 5A and 5B. So there have been a number of improvements to the site over the course of the years. But certainly, the biggest investment was when it was constructed in that about 1980 time period.

Next question will be from Mark Reichman at NOBLE Capital Markets.

Well, it seems to me that to really realize the full economic value, you probably will want to invest in a separation circuit and REE metals and alloys circuit, which looks like it would be kind of $150 million to $175 million. So 2 questions related to that. One, how do you -- do you see trying to strike offtake agreements with the likes of Tesla and others to kind of backstop the financing before you would move to that stage? And then second, right now, you'd mentioned that the existing plan would only take up about 2% of the throughput capacity based on U.S. rare earth demand, but obviously, that will grow. That's kind of a moving target. So eventually, it seems like you're dedicating a greater percentage of White Mesa Mill's capacity. So do you think you've got the -- all the pieces in place to kind of go all-in on rare earth?

Yes. Yes, we think we have all the key pieces. And like you said, the separation, the metals and alloys, there is some specialty equipment there that we'd have to add to get full integration. But no, we think we're off to a great start. And look, it will -- Mark, it will it will evolve over time. The first thing is we've got a kind of line up the supply, long-term supply agreements. And as I said, I think we've had a number of inbounds on that front. But I think if we're not really ready, who's better ready, okay? I think we've got the facility. We got the people. We got the infrastructure, and we got the ability to utilize so much of this equipment as possible to reduce the strike rate. Even if you talk about separation plant and metals and alloys, $150 million, $175 million are in that order when we finally get an engineered number for that. When you add the fact that the mill already exists, I mean our strike rate for capital is just a fraction of what others would have to spend to start off from scratch.

Yes, much less the permitting and everything else and the track record of safe operations. So just moving more to the near term then. And I know that you've kind of provided kind of the percentages of the total rare earth oxides and the monazite. But like, for example, in just a ton of monazite, what would the cost be? And then what do you think you would sell that carbonate, the resulting carbonate from that ton of monazite for to a separator?

Yes. I mean I don't want to get too much into the cost, Mark. But like -- I mean, just in general, orders of magnitude, and if you look at like a monazite equivalent -- Chemours equivalent through separation. Now every step you take, you get a value add. But like through the separated steps, the general values of the contained recoverable, not looking at everything in material, the ore, it's between $5,000 to maybe $7,500 a ton equivalent. Like if you look at -- here comes a ton and how much is -- can you recover through the separation step. The off-site separation is expensive for us because we have to ship it to another country. Because it doesn't exist here in the United States, you have to ship it to another country, so you incur a cost to do that and then separate it at another facility and get another group involved in the process. The Chinese do it all in one spot for obvious reasons, just to get the synergies of doing everything in close proximity to each other. So -- but we think, Mark, that we're going to be very, very world competitive, one of the lowest costs outside of China for a number of reasons that, one, we're using the monazite, as I mentioned earlier, it's favorable to process. Two, it's got the grade. Three, Utah is a great place to do business. Power costs at -- in Utah are like 1/3 of what they are in Australia. People costs are about half of what they are in Australia. There's abundance of water at the mill or at least our existing water rights. And you start adding all these things together -- and the existing infrastructure that's in place, you start adding these things together, and I think you come out with a very good outlook in the future when it comes to how we fit in from a competitive basis with others.

Well, I agree. These seem to be the necessary first steps to building a much larger and growing business.

Your next question will be from Colin Healey at Haywood Securities.

It sounds to me like -- it sounds like you're not ready to talk about the processing economics. I just want to make sure, when you say you're starting commercial production, does that mean you're going to be declaring commercial production and showing the revenue in the financials? Or is this going to be the revenue and costs capitalized? Are we going to see these numbers at the end of Q2, let's say?

Dave, as our CFO, why don't you answer that question?

Thanks, Mark. Yes, we're ramping up to commercial production. When we go to commercial production, if we're successful in getting agreements for separation, we'll show those costs and revenues on the financials. To the extent we haven't tied down separation, we will be holding our carbonate and inventory. But that should all be showing up on the financials next year.

And I want to...

Yes. Right. Okay. Yes, sorry, go ahead.

Yes. Colin, I just want to emphasize, too, that this first 10% is just the first step, okay? We want to keep ramping that up and get the economics of scale working in our favor. But we do believe if we get an offtake for the next step of separation at reasonable prices, that it's probably something like a breakeven at the mill level, the first step in that order. So we think that's a good place to be, particularly with these initial small quantities, the 10%. But if you can -- we can get to where we can double, triple, it starts ramping up very quickly in terms of cash flow.

Okay. Yes, I know it's kind of uncertain. I just -- I -- based on your discussions with potential separation facilities, I mean that you must have kind of indicative carbonate prices to make the decision to start to process. So -- but you kind of answered the question. I guess you're saying potentially breakeven based on your internally estimated costs, and that would carry through 2021, I guess, unless you start to feed more ore. Is that a fair assumption?

Generally, where we're at, what we're thinking is that this first, we get the flywheel turning, we start building up the scale. As I mentioned, people like Chemours have indicated that in time, they can upgrade more quantities to us. Some of the other people we're talking to are also talking about some reasonable quantities. And really all kind of the optimal economic outcome has to be increase in the quantities and at the same time, having those next steps at the mill to get the economics. But we see those as very achievable. And we also see that when we start engaging some of these other downstream users that I mentioned earlier, there's a number of ways we can get there from a financing perspective and really see this thing optimize, hopefully, fairly quickly as we secure more feed.

Right. Okay. And when you mentioned the statistic 50% of total U.S. mixed recarbonate demand, is that U.S. demand as it appears in end products that are used in the United States? Or is that based on U.S. manufacturing demand requirements?

Curtis?

Yes. I believe that it's actually -- it's not an end-use products because rare earths, in terms of the value of the end-use products, is something like $2.6 trillion or something like that. So yes, we're not producing at those levels, of course. But no, it would be in the actual consumption in the United States and manufacturing, I believe.

Right. Okay. And yes, the reason I asked that question is because I was just trying to double check the disruptive like, price impact on REEs. But if it's U.S. manufacturing requirements, understanding that's much lower than product -- end product requirements. It doesn't sound like it would affect repricing in the way it might have if you interpret it the other way. Okay. I think I'm good. You don't have anything about -- that you could talk about in terms of margins after investing in a separation facility? Like anything in Phase 2 that would -- that you would be using to make a construction decision or an investment decision in a $100 million plant? Like is there a fair pricing threshold?

It's very variable. But I can tell you that with the latest upfront in some of the earth prices looks very attractive. And we don't envision -- I think one of the beliefs is that it's going to be very difficult for the world outside of China to be competitive with the Chinese when it comes on producing these rare earth products as you go through the supply chain. And our belief is that for all the reasons I mentioned before, we feel we can be right in there, be very competitive even at the published Chinese prices. Now that can be very volatile as we know, and history has shown. But we're gearing towards the most economic position we can get it, because we fully appreciate that being low on the cost curve is very important. And we do not believe we'll be high on the cost curve with what we're seeing today. But it all is driven on, like I said, getting that flywheel moving. The Chinese got into the [ treating ] of monazite just a few years ago, and we're just kind of replicating that. I mean probably not at the scale. We're not looking at the scale of the Chinese. We're really mainly focused on, let's look at how we can put ourselves in a good position in the United States right now. And that's where we're at.

Right. And is there any way that you could tell me, not necessarily for your operation, but for, let's say, a generic 15,000 tons per year feed monazite or operation that had a $100 million separation facility? What kind of revenue would be -- would you be generating based on, I guess, the recoveries and that you would be getting from that ore given the grades that you've given?

I'd say hundreds of millions of dollars. Look, you can figure out sort of crudely from some of these pricing things, but if you have 15,000 tons of 50% 55% and that puts you at 7,000 tons or 7,500 tons of recovered total rare earths or somewhere in that order. And you can multiply times the NdPr at about 0.22 or so -- and you can start getting some ideas of what it would look like.

Yes. I know that's -- those are contained numbers, though. So I was just trying to get an idea from your answer what you were expecting in terms of recoveries. Because that's the math I'm trying to do, but the recoveries are going to be at some haircut on that basic math. Okay. Well, yes, I think that's it for me.

Next question will be from Joseph Reagor at ROTH Capital Partners.

I think most of what I wanted to touch on is already been asked. But I guess, thinking longer term, you were saying that it might be $100 million to get into the separation business. What would you need to see in order to make that kind of decision? And if it were that number, how would you guys go about financing that?

Well, as I said earlier, we we've got to have the feed to justify the investment. I think that once we have the feed or at least line of sight to the feed, I think that it becomes a fairly straightforward process. Now when it comes to financing, there's a number of different options, and we can partner with somebody, we can joint venture, we can bank finance. We were not necessarily looking at equity, but if you look at it, that's basically what a Mountain Pass has generated a bunch of equity for about $500 million minus used equity and/or an offtaker on the downstream. So we haven't gotten that far. But as I said, given the adequate feed, we don't think it will be a long stretch on how to finance it and what options might be in front of us. So we're not worried about being able to finance the next steps given adequate feed, looking to the future.

Okay. Maybe just kind of a slightly different approach to part of it. When you guys think about these types of investments, is there like an IRR threshold or something that you're looking to minimally achieve in order to make larger capital investments?

Yes. I think most people would look at an IRR of 20%-ish or something. But again, I don't want to be nailed down exactly what our investment criteria will be at this stage. We are looking at materials that have been declared like a national emergency because there's a shortage of it. I don't know what role, if any, that the government might play in this. There may be some options for loan guarantees with the U.S. government. Maybe the government decides they want to buy some of these materials for their own uses or stockpiles. So there's just a lot of moving pieces here that -- and I think it's not really material to get into any detail at this point in time.

Next question will be from Frederick Kozak at InvestorIntel.

Mark, not to get too into the weeds on the economic side. But can you maybe just expand a little bit on how you are processing the ore in your facility? Obviously, your facility has significant capacity at 2,000 tons per day. How does that work? And how does that drive your economics?

Well, how does it work? We -- I don't want to get into all the details. Obviously, as you said, not get into the weeds, but yes, we're basically using an existing tankage and infrastructure for things like creating the heat for the lead circuit. It's basically -- we're looking at a caustic crack using caustic soda, and we heat that, and we basically liberate the uranium and the rare earth, and we take it through the process from there. So it's -- we're pretty much focused on existing kind of known means of processing using the existing infrastructure. And so we use the solvent extraction to recover our uranium. So it's this standard process technologies using existing equipment. And as I said, $2 million or so, just minor, minor little bits and pieces here and pumps and whatnot, minimal modifications to existing equipment to achieve these initial outcomes.

Okay. So when you talk about just running on a breakeven basis next year, are you batching, what, 1,000 ton batches? Or how do you get to sort of that breakeven number?

Yes. Look, I don't want to get into batch sizes and everything. I mentioned going from 4 tons to 20 tons. And a lot of it's going to depend on the schedule that Chemours has for being able to deliver this material. But it will be going into 100 tons, 500 tons, 1,000 tons over the course of the year as we get more experienced as we ramp this up.

Okay. Okay. Just one more quick question. When you're transporting the ore from Florida or Georgia, are there any transportation issues, any permitting issues that you guys have to deal with? I know you've been doing this for a while.

Not that I know off the top of my head. Dave, Curtis, I don't think there's any -- this is just normal business for us.

[Operator Instructions] And your next question is a follow-up from Mark Reichman at NOBLE Capital Markets.

Yes. My follow-up is, in order to make the investment in the separation in the alloy circuits, what level of production would you need to be at to justify that kind of investment? In other words, would 15,000 tons do it? Or would you need to be producing at a higher rate to justify the investment?

Yes. Yes, Mark, again, I don't want to get into that kind of detail, but I can tell you that 15,000 tons of feed would definitely do it. Could be much less in quantity, in my opinion, to start really looking at, at least certain investments. I don't want to be nailed down on quantities, but I think that 15,000 tons of monazite feed would definitely do it. But as I said, I want to be more accurate than that. Until we still need to get engineered reviews on, we'll probably look at a scoping study in 2021. As I mentioned, some of the feedback we've been getting is coming from people like Neo and Constantine and Jack and Brock O'Kelley, who's been in the rare earth business for decades and decades. So some of these numbers that we're using are more just based on their experience. So -- but until we can look at those in detail, give ourselves some credits on things like the infrastructure that's already in place, the cost of labor, as I mentioned, things like that, it's really impossible to kind of tag this with any accuracy.

Next question -- I'm sorry. At this time, sir, we have no further questions. Please proceed.

Well, in closing, I just again, want to thank people for their interest in this project. We're not leaving the uranium industry. We believe we're best positioned than any company in the United States on the uranium front, and we still are very proud of the strong balance sheet we have and no debt, but this is an exciting space. I always tell people that we will be aggressive, but not reckless. We know how to align with the right people, and -- but we're going to be entrepreneurial here, and we're thinking big and -- but I can guarantee that we will be focusing on getting the best value to our shareholders in any way we can and also do the right things for the United States when it comes to critical materials. And also, we will continue to focus on trying to assist with the cleanup of the Navajo Nation, which is a very personal issue for me. So we've got a lot of things in play with Energy Fuels. And we think this is -- differentiates us from the peer group, because there is no peer group for Energy Fuels with what we do and how we do things. So again, thank you for your interest. Have a great day. Stay safe and look forward to giving more updates, hopefully, in the not-too-distant future on all things uranium, rare earths and some of these other things we're working on. Thank you. Bye.

Thank you, sir. Ladies and gentlemen, this does indeed concludes your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.