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

This is Mark Chalmers. I move that KPMG LLP of Denver, Colorado, an independent registered public accounting firm be appointed as auditors of the company until the next annual meeting of the company at such remuneration as shall be fixed by the Board of Directors.

This is David Frydenlund. I second the motion.

Thank you. Is there any discussion on this motion?

This is Julia Hoffmeier. There are no questions at this time.

Thank you very much. As there are no questions, I now call for a vote on the motion before the meeting. All persons eligible to vote may enter their votes by clicking on the proxy voting site link on the left side of your screen at this time. You may cast or change your vote until the vote for all proposals is closed just prior to the termination of the meeting. The next item of business is a vote on a nonbinding advisory proposal to approve the compensation for the named executive officers as disclosed in the proxy statement. I now ask someone to make a motion.

This is Mark Chalmers. I move the following resolution be passed, resolve that the compensation paid to the company's named executive officers has pursuant -- disclosed pursuant to Item 402 of the Regulation S-K, including the compensation, discussion analysis, compensation tables and narrative is hereby approved.

This is David Frydenlund. I second the motion.

Thank you. Are there -- is there any discussion on this motion?

This is Julia Hoffmeier. There are no questions at this time.

Thank you. As there are no questions, I now call for a vote on the motion before the meeting. All persons eligible to vote may enter their votes in Lumi at this time as indicated on your screens. If you have not yet cast your vote on any of the matters to be voted on this meeting, you now can cast your votes. I will pause for about 30 seconds to allow time for all votes to be cast. [Voting]

Okay. Based on the preliminary scrutineer's report, proxies were received from a sufficient number of shares relative to the total number of votes cast at the meeting such that I declare the following: One, with respect to the election of directors, I declare the motion carried and confirm that all of the nominees have been elected as directors of the company to hold office until the close of the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. Each of the nominees for director received more votes for than the number of votes withheld. And accordingly, each of the directors has been duly elected, and none of the directors is required to tender his or her resignation into under the majority voting policy. Two, with respect to the appointment of KPMG LLP of Denver, Colorado, an independent registered public accounting firm, as auditors of the company until the next Annual Meeting of Shareholders at such remuneration as shall be fixed by the Board of Directors. I declare the motion carried. Three, with respect to say-on-pay, the resolution and compensation paid to the company's named executive officers as they close pursuant to Item 402 of Regulation S-K, including the compensation, discussion and analysis compensation tables and narrative discussion was approved by the requisite majority. I hereby direct that a copy of the scrutineers' final voting results be annexed to the minutes of the meeting that a report on voting results we filed on SEDAR in accordance with Section 11.3 of National Instrument 51-102 continuous disclosure obligations and that of Form 8-K in accordance with Item 5.07 be filed on EDGAR pursuant to the filing requirements of the Securities Exchange Act of 1934. That concludes the scheduled business of this meeting. Is there any other business that anyone entitled to vote at this meeting wishes to bring to the attention of the meeting?

This is Julia Hoffmeier. There is no further business to be brought before the meeting.

Thank you. As there's no further business, I declare the meeting terminated. The formal part of this annual meeting of shareholders is now adjourned. I invite you to stay online for a presentation on the company's activities to be given by Mark Chalmers, the President and Chief Executive Officer of the company.

Thank you, Mr. Chair and to all our shareholders that are listening and participating today and our directors and our employees. It's always my pleasure to give an update on the company and our kind of our views looking forward. This first slide, I think most of you have seen this. And I want to remind everybody that we try to update our presentation monthly and put it on our website. So it doesn't always happen right on the month, but typically, once a month, it gets updated. So this picture of -- on the front slide is of the White Mesa Mill, which again, many of you mostly have seen before and this is the center of our critical mineral hub producing the critical materials required for the clean energy transmission, whether it be uranium or vanadium, which it was actually built to produce or now over actually the last 3 years, rare earths looking at advancing our strategy on medical isotopes and our long history of recycling. Next slide. I may be making some forward-looking statements so on this slide, it provides all that disclosure. Next slide. Energy Fuels, as I said, is the leading producer of uranium and vanadium and rare earths creating a clean energy -- creating clean energy for a better world. It's a very exciting spot. Next slide. This slide, and again, I've had this in our presentation for the last few months, just showing the periodic table. And I'd like to point out to people that the entire mining industry has changed dramatically over the last decade or so because we now have a number of new elements that were little attention was paid to if you go back over the last 20, 30 years. And certainly, as you're all aware of, uranium has been our core business and will continue to be to the future within the rare earths and you look down in that -- those -- that the green rare earths are kind of highlighted there are all -- most of them are elements that most of us didn't even know how to pronounce a few years ago. Vanadium again, has been a core part of our business strategy over years and will be in the future. And then lastly, on the periodic chart radium. Next slide. So really, our products are unique. When you make an investment in Energy Fuels, typically you would invest in a uranium-only company or a rare earth company or a vanadium company or perhaps an isotope company, but with Energy Fuels, you get this broad diversification on the things that we either currently produce or plan to produce, whether it would be for the nuclear fuel assemblies for nuclear power, vanadium flow batteries, the permanent electric motors for electric vehicles, wind turbines or even fighter jets. We cover a lot of real estate with the things we produce. If you look at the list of critical minerals, I think it's about 50, we produced at least 10 of the 50 on that list. And I'm proud to say that that's probably more than just about anybody that I know of in the United States for the Americas and perhaps even the world at a single location. Next slide. So all our products are high-value products. Uranium used for carbon-free energy, about 50% of the carbon-free energy. Certainly, we're seeing a renaissance here with people recognizing the need for clean baseload energy particularly with electrification, electric vehicles, rare earths, the critical elements used for the most powerful magnets that come up with the most powerful efficiencies and ranges for both cars and wind generators and other high-tech appliances. Vanadium primarily used for steel hardening, but that more recently, looking at for vanadium flow batteries, which were grid scale renewable energy storage are getting more attention over the last few years. The medical isotopes is really new to us. We've been advancing that for the last 1.5 years or 2 years, focusing on some of these elements that can potentially be used for emerging cancer therapies, which is very exciting space. All of them, and I like to point this out. Everything we do is divided by the fact that most of the products, all the products that we take to the mill contain uranium and other radioisotopes and that -- and they're all the common denominator. So everything that we take to the mill contains uranium and that gives us the ability to do these high-value lines. Recycling, the reason the White Mesa Mill exists today because for a period of years, perhaps a decade or 2, it was able to recycle natural uranium. They kept the facility alive in good standing over a periods of low uranium prices. And that's still -- even though it's a small part of our business, it's a very important part of our business. Financial strength, we always pride ourselves on strong financial strength with strong balance sheet. At the end of the Q1, we had $143 million of working capital, including $104 million of cash, marketable securities and large inventories of both uranium and vanadium. I'll go into more detail later on the strength of that balance sheet and actually how it actually is quite conservative. Next slide. So again, uranium has been our core business, will continue to be our core business going forward. Next slide. So we have significant position in the United States, proven uranium production constructed, fully paid for projects. In this world we live in today with inflation, the cost and the capital cost of starting up a new uranium project from scratch, even if it has its permits is hugely expensive. And Energy Fuels has probably in the order of $1 billion worth of assets in terms of the capital cost to recreate what we have. Certainly, we have White Mesa Mill, that is the center of our critical mineral hub that will do all the elements that I have pointed out on the periodic table or most of them, as we evolve the Pinyon Plain mine in Arizona is in preproduction readiness. And that is a project that I built out in the 1987, when I was working for the old Energy Fuels, which was a private company. We also have the significant Nichols Ranch project in Wyoming, which is still on standby. And then we have La Sal Complex, and I'm not talking about all our projects here, La Sal Complex comprises a number of fully developed mines that are connected in many cases in the town of La Sal or near the town La Sal. But we also have Sheep Mountain, Roca Honda, Bullfrog and that is very material because we really have the projects of several companies, and I think a lot of people don't understand that, that we have the best of the best on the conventional and ISR in the country. Next slide. So last year was a very big year for us with the securing of new long-term sales contracts that run from starting this year to 2030 and that was really on the back of the Ukrainian conflict and we were able to secure 3 long-term contracts. We also sold uranium into the reserve that we sold the first quarter, 300,000 pounds at a very nice price at $61.57, and we're looking at additional contracts at higher pricing looking forward. Now this year, we will deliver about 560,000 pounds near $60 a pound, $58 to $60 a pound this year. And that is really a significant event for us to get back into or going back into primary uranium production at some very, very nice margins. Next slide. So I really like this slide for a lot of reasons. We still trade as uranium company. And we have from looking back a few years, and we currently do trade as uranium company. So we're kind of in the middle of the path of the companies in North America. I mean you look at our market cap around $1 billion working capital. I mean you can look at our peers, and we're very strong on our working capital reported at the end of Q1, 0 debt, and we have substantial assets that would again cost hundreds of millions of dollars, if not $1 billion to replace. We also have large inventories of uranium and vanadium, and I also like to point out on this table, all these companies on this table are uranium producers, but none are advancing the strategy for rare earths or vanadium or medical isotopes or have the ability to recycle. So even though we trade as uranium company, we're much more than that, we're much more diversified than our peers. Next slide. So let's talk about the rare earths. Next slide. So again, I've used this slide previously, but uranium and rare earths go perfectly together, and they go perfectly together for Energy Fuels because the best feeds of rare earths contained uranium and other isotopes and radionuclides, which we can handle at the White Mesa Mill. So this is a remarkable opportunity for our company not just in the Americas, but around the world. And I think there are a lot of people out there that are envious of the fact that we can deal with the contained uranium and recover the uranium and the rare earths feeds that we are out searching for and building a story for. Next slide. So this slide, and I think this should shock people. This is a slide prepared by the Department of Energy and the red shows how dependent the world is. The global rare earth market is on China. So red is China. And you look at the mining, the separation, the refining and the magnets and you can see the stranglehold that China has on the rest of the world. It is our strategy to fill in that gap to where we have full integration in time. It may take a long time to get to Magnets. And we may not get to Magnets, but our goal is for is fully abrasion as we can get in the United States of America. Next slide. So this time line is really quite remarkable because it shows when we first announced we're getting into the rare earth space in April of 2020. So that was just a little over 3 years ago. And our company, I believe, does as much in 1 year as many companies do in 10 years. And so when you look at getting -- or announce you were getting into the rare earth business in April 2020, we began making a carbonate. We began doing partial separations and creating a high-purity mixed rare earth carbonate with NdPr in the grades of around 32% to 34% that we started shipping to Neo and they absolutely love our carbonate. And then in February of this year, we closed the acquisition of a very significant project in Brazil, the Bahia project, that we're doing drilling on and advancing that to be a mine for our company going forward. A Phase 1 separation, and this is really exciting. We are currently installing Phase 1 separation that should be installed by the end of this year, early next year and that will provide somewhere in the order of up to 1,000 metric tons of NdPr per year, given enough feed and that could be up to about 1 million electric vehicles at NdPr for these high-efficiency electric motors. So we're very excited about that. We're doing at a remarkable strike rate of $25 million to put in Phase 1. Now that is being put in the existing SX building, where we currently recover uranium and vanadium and we have made room to also recover the NdPr oxides and Sm plus which is where the heavy fraction reports. So we're also looking at an advancing some of our feasibility work on Phase 2 separation and getting plans to do that and advance that, which would be somewhere in the order of 3x larger than the Phase 1 process. So we are looking for scale. And then lastly, we will and we are going to be piloting the heavies this year, and we're also looking at going to heavy separation of the Dy and the Tb by around 2027. Next slide. So really, when you look at our strategy, and again, remember, uranium is our core business, will continue to be core business, but bolting on the rare earths, we are advancing the strategy of full integration as quickly as we can and faster than anybody else I know here in the United States, but also looking at starting separations, as I said, with Phase 1 later this year or early next year. But we're also looking at things like metal making and magnet making in due course. But -- and we're looking at doing that processing work in the United States in Utah, but we're not -- we're not looking outside of the United States as we did with the purchase of the Bahia project. So we are looking at projects and opportunities globally in the rare earth business and we hope to expand our footprint outside the United States, mainly looking for molecules of monocyte to process at the White Mesa Mill. Next slide. So the Bahia project, as I said, we were able to finally close that in February of 2023 just a few months ago. Very large land position, and it is like 40,000 acres. We've been doing -- we did some Phase 1 expiration on it already. We bought a sonic drill rig which we plan to have in Brazil and operate and treating again later this year. And we're also looking at advancing to both 43-101 and the SK reports for both Canada and the United States in terms of technical reports on the resources, but we see this as a very important stepping stone for us in securing a mine. But we are looking for more mines. Bahia is a great start, and we look to acquire other projects that make sense for our company going forward. Next slide. So just some pictures because again, the pictures are worth 1,000 miles or thousand words. And looking at the upper left-hand corner, where that's carbonate going to Neo and Estonia because there is no commercial separation capacities operating in the United States. There will be soon with the addition and the completion of Phase I looking at the team. The team is very proud. We've got a great team of people at the White Mesa Mill. We couldn't be prouder of them, but we have a great team in the company around the entire Western U.S. that man and operate the projects that we have and are currently being advanced, but we also have a big team here in Lakewood, Colorado. In the lower right-hand corner, is the pilot separation facility that we have in the mill -- at the mill that we do a lot of our test work for scaling up to install and design and install Phase 1 and Phase 2. And one of the key things that we have that is very unique for energy fuels amongst many of our peers as we have the ability to do our test work and are piloting at the White Mesa site. We don't have to go to outside parties and schedule that work in most cases. I mean, sometimes we go out for certain check samples and whatnot. But we have the ability and we have the team, and that is a very unique reason why we move a lot faster than anybody else in this space. Next slide. So why will we be successful when a number of people have had problems: One, we have the ability to deal with radionuclides. We have the infrastructure, we have the permits. And monocyte is a high-value feed, it's very high value with the distributions that has primarily the elements used for high-efficiency electric motors. It is available in mind around the world. It used to be worth nothing now is looked as quite a valuable product. It's very straightforward to process it if you have the ability to deal with radionuclides. It's low cost and capital efficient in terms of utilizing the infrastructure that we have and the knowledge that we have. We are focused on solvent extraction. We have over 40 years of experience with dealing with solvent extraction, and that's why Phase 1 is in the existing SX building, and we're focused on moving through the supply chain towards integration because you really need integration to get the -- to capture the whole value chain of the rare earths business. And lastly, and I'm always proud to say this Utah is a great place to do business, and we're very proud to have the White Mesa Mill in Utah. Next slide. So now let's look at where we fit with sort of the rare earth companies, publicly traded rare earth companies. Again, we're right in the middle of the pack. But remember, that market cap is based on being a uranium producer. We get valued as uranium producers. So we are rapidly trying to go up that chain towards the Iluka, MPs and Lynas' that are multibillion-dollar companies and get recognized that we are going to get there with our rare earth strategy. And I can say that we are going to get there. Now we have a lot of things to do, but it's a very exciting spot. And again, as I said, when you look at the things that we've been able to do with the securing of Bahia, getting to Phase 1 separation, make it a carbonate, shipping it to Estonia. I mean we are really going at incredible speed, as I said, over other people. Next slide. So let's talk about vanadium and the medical isotopes. Next slide. So vanadium, we've always been -- vanadium has been a very significant part of our business strategy, but it's always -- vanadium is a very spiky element, and we've always been typically of a high cost or higher cost producer, but we do have the only conventional vanadium circuit in the United States. And so that is something that is very unique in itself. As I said, it's usually used for steel hardening -- mainly used for steel hardening, but also for grid scale batteries. We produced a couple of million pounds of vanadium in 2019, when the price went up to $30 a pound. And we've been selling a bit of vanadium over the course of the last year and this year. Last vanadium, we sold was nearly $11 per pound. We still have nearly 1 million pounds in inventory that we can sell as the market improves. And we kind of pick our spots, when we sell vanadium, we wait for it to spike up and we sell some vanadiums. But we also have the ability to recover substantial quantities of vanadium from our existing tailings solution at the White Mesa Mill as we do going back into uranium production, where some of our mines are uranium-vanadium mines located in the region or we can go back into primary production of vanadium in due course when it is warranted financially. Now the medical isotopes, again, we've been advancing this the last year, 1.5 years, and it's a very exciting area. And when we're processing uranium, vanadium and rare earths, we solubilized a number of other elements that go into solution. So we are looking at some of those other elements that now look like they have demand for, particularly when you start focusing on these emerging cancer therapies for targeted alpha therapies. Very exciting area, and we're primarily looking at Radium 226, initially 228, and this is a very exciting area. It's still early days, but we are advancing that we have submitted an R&D license application, and we are talking to a number of people around the world on our strategy on medical isotopes. And what a better place or could there be a better place than the White Mesa Mill in Utah. Next slide. So let's talk about the community and some of our recycling activities. Next slide. So again, when you look at what we do, everything we do fits perfectly with ESG. Uranium, the zero-carbon baseload energy, the rare earths for high efficiency, electric vehicles and other technologies, vanadium potentially for grid-scale batteries and high-strength steel and the isotopes in terms of potentially assisting with the treatment or cure of cancer with these elements that, again, have not been on the radar screen for a lot of people for a number of years. And the recycling. When you look at the amount of uranium, vanadium we have recycled over the past couple of decades, it just is really staggering because we have limited a lot of carbon emissions because of those activities and our sustainability report is on the website. We produced that about 1.5 years ago, and it really is ESG on steroids. Next slide. So talk about community outreach, and we are doing more now with community outreach in the region around the White Mesa Mill than we have ever done. We set up the San Juan County Clean Energy Foundation. We made an initial contribution of $1 million to the foundation and are committing ongoing funding equal to 1% of the annual revenues of the mill going forward, which could be very substantial. Grants to date, we've made a grant to American Indian services for $160,000, where we're buying 2 small buses and providing it with some school supplies where they are focused on STEM education for indigenous people. We also funded Canyonlands Field Institute which is a native training program for Native Americans at some of the regional parts. Navajo Nation, we've contributed some money for some of the work that they had -- at some of the small little towns on the reservation. We've also committed to fund a solar energy project on the Dinosaur Museum in Blanding, and we're also making some contributions to the San Juan County High School. So -- and it's just starting to get going here. We're also -- and most of these contributions are focused on education, environment, health, wellness, economic development and native American priorities, and we're very proud of this focus and the good we can do in the region. I'm also very, very excited to say that we have an advisory board -- we have indigenous people on that advisory board and members from the community that help determine what projects we should fund. There's a website that you can go to the San Juan Clean Energy Foundation website and you haven't visited, I asked you to go visit that website. You can Google San Juan Energy Foundation and you'll find it. So we're very excited about that. And we're also continuing to be supportive of helping with the reclamation of a number of mines were never reclaimed or reclaimed poorly from the cold war and we still have visions, where we can do great things with that in itself. Next slide. Let's talk more about financials. Next slide. So in last quarter, Q1, we had earnings of over $110 million. It was a very big quarter for us. We were selling uranium. We're selling vanadium with very strong margins, 58% on the uranium, 37% on the vanadium. The strong balance sheet as I discussed, $144 million at the end of Q1, plenty of cash, lots of cash. But when you look at that working capital number and you adjust for the current price of uranium, vanadium particularly price of uranium, which is going up, you get a big lift at current prices over our book prices. So again, 0 debt. We -- total assets and current assets increased by 37% and 10%, respectively. Total liabilities and current liabilities decreased by 44% and 72%, respectively, and we still have large quantities of finished goods, uranium nearly 850,000 pounds of uranium and nearly 900,000 pounds of vanadium ready to be sold, when the time is right and finished high purity rare earth carbonate as well. Next slide. So when you look at our working capital, again, 0 debt and you look at our uranium inventory we've got 850,000 pounds of finished goods, but we also have in process and stockpiled material that you could add up to 1.2 million pounds or so of uranium that we can bring to the market on top of the finished goods. So it's the delta between the 850 and that 1.24 million. So we're really in a great position to produce more uranium very quickly with what we already have at the mill and then as I said, the strong position with vanadium. And when you look at what we're carrying our uranium inventories on the books is less than $30 a pound. The current price is $54 a pound and starting to go up. So that is a substantial delta in our favor, if we sell those inventories. Vanadium prices have come down a bit, but still higher than what we currently hold vanadium on books. Next slide. So again, I'm repeating myself a little bit, we'll sell at least 560,000 pounds of uranium this year, nearly $60 a pound. And part of that is because we completed the sale to the DOE just this first quarter. But we'll sell another 260,000 pounds into our initial sales contracts here starting this quarter and next quarter. We're continuing to prepare uranium mines to go back into production, to be ready to produce uranium last quarter of this year or early next year. I mean we could produce freshly mined uranium today if we wanted to, but we're really getting things ready to go back into production, optimally later this year. We're also looking at additional long-term uranium contracts. We want uranium contracts at higher pricing than these initial contracts that we've signed. And so we continue to bid and hopefully, we'll secure more contracts this year. We will mainly focus on rare earth production this year. We're not planning to have any uranium or vanadium production this year because of the activity level for the rare earths. We are continuing to produce material that we receive from Chemours, the monocyte, we've already made around this year, and we will continue to build out this rare earth circuit that I talked about with investment about $25 million. We are still advancing, and I hope to be in a position in the not-too-distant future to talk about some rare earth offtakes and continue to advance the Bahia project. So it is a very busy time for Energy Fuels today and going forward. And it's just an exciting time to be involved with this company. Next slide. So really, that is the end of the presentation. And I like this picture because you can see the beautiful sunset and the landscape that we operate in, we take very seriously and feel blessed that we have the ability to work in the jurisdictions that we do at the high standards that we do. And I now would like to open the floor to anybody that might have any questions.

This is Julia Hoffmeier. There are no further questions at this time.

Well, I now would say that this concludes our 2023 Annual Meeting of the Shareholders. We thank you for attending and look forward to your participation again next year, and we look forward to a very exciting next year, and we hope to be updating shareholders with a number of these initiatives as they come to fruition as we build this critical mineral hub that nobody else is even close to building like we are in the United States of America. Thank you very much.