Interview with Interview with Mark Chalmers, President & CEO of Energy Fuels Inc.

Our previous interview: https://www.cruxinvestor.com/posts/energy-fuels-amexuuuu-riding-the-uranium-wave-preparation-for-rare-earths-rebound-5019

Recording date: 21st April 2024

The recently announced merger between Energy Fuels and Base Resources is a transformative transaction that significantly enhances Energy Fuels' position in the rare earths sector. By acquiring the Toliara heavy mineral sands project in Madagascar, Energy Fuels gains access to a world-class asset with the potential to be a long-life, low-cost source of monazite feedstock for its growing rare earths business.

The Toliara project boasts an impressive 1.4 million ton monazite resource, with an additional 800,000 ton inferred resource, making it one of the largest undeveloped deposits globally. Importantly, the monazite is contained within the heavy mineral sands at an average grade of 2%, which is relatively high and should enable low-cost extraction as a byproduct of the titanium and zircon production.

Based on the DFS and PFS studies completed by Base Resources, the Toliara project has the potential to produce 22,000 tons of monazite per year over a multi-decade mine life. At full production, this could generate annual EBITDA of $350-400 million, making it a financially robust operation even before considering the rare earths upside.

For Energy Fuels, securing access to this large-scale, long-life monazite supply is a key step in its strategy to become a leading global rare earths producer. The company is already in the process of commissioning its Phase 1 rare earths separation circuit at the White Mesa Mill in Utah, which will have the capacity to process 2,500 tons of monazite per year. With the addition of Toliara, Energy Fuels will have enough feedstock to support a much larger Phase 2 and 3 expansion, potentially positioning it as one of the largest non-Chinese rare earths producers.

Another benefit of the transaction is the addition of Base Resources' experienced management team and operating expertise. Base has a proven track record of developing and operating heavy mineral sands projects, most notably the Kwale mine in Kenya which has been a consistent cash flow generator. This should help de-risk the development of Toliara and provide valuable knowledge sharing as Energy Fuels ramps up its own rare earths operations.

From a macro perspective, the merger also enhances Energy Fuels' geopolitical positioning. With the US and other Western countries increasingly focused on securing critical mineral supply chains outside of China, having a large-scale rare earths project in Madagascar helps diversify global production. Energy Fuels' White Mesa Mill in Utah is the only licensed and operating conventional uranium mill in the US, making it a strategic asset for domestic processing of uranium and rare earths. The combination of US processing capabilities and non-Chinese monazite feedstock should be highly attractive to Western governments and end-users looking to shore up rare earths supplies.

Overall, the merger with Base Resources checks a lot of boxes for Energy Fuels. It provides a large, long-life source of low-cost monazite feedstock to fuel the company's rare earths ambitions. It adds geographic diversity and operating expertise in heavy mineral sands. And it enhances the company's positioning as a strategic Western supplier of critical materials. For shareholders, the transaction brings significant rare earths exposure and growth potential, complementing Energy Fuels' existing uranium business. As the world focuses on electrification and decarbonization, Energy Fuels is positioning itself to be a key player in supplying the necessary critical minerals, which should create meaningful value over time.

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