Interview with Mark Chalmers, President & CEO of Energy Fuels (NYSE: UUUU)

We like the uranium space. It's been nearly a decade of hardship, but there are now signs of life. Uranium has the potential to make investors significant multiples of their initial investments; that's if they pick a winner rather than a loser. Risk mitigation is key to this, and one of the most important components of certain uranium stories is commodity diversification. Energy Fuels, has mitigated risk with multiple cash streams: vanadium, milling and cleanup operations. Chalmers talks about another potential revenue stream: rare earths processing. This week the company announced it was entering the rare earth element (REE) space.

The first thing Chalmers makes clear is that this is a serious commercial venture. The White Mesa Mill is the ace up Energy Fuels' sleeve, and if it can process rare earths, it makes sense to monetise this ability.

Energy Fuels believes the fully licensed and constructed White Mesa Mill (the only uranium and vanadium mill in operation in the US), can play a key role in bringing the rare earth element supply chain back to the U.S. from China. Energy Fuels' primary focus remains on uranium and vanadium, but it believes it can leverage its existing licenses, infrastructure and capabilities at the mill to also produce REEs. Smart.

What exactly is then mill capable of? It is primarily licensed to treat vanadium and uranium ores, but over the past 20 years, Energy Fuels has taken a variety of other feed streams that the company has permits to receive. Most of those are low-level natural uranium streams. The company has licences for 17 other streams, and can also recover uranium from other rare earth producers. White Mesa Mill is extremely large, capable of processing 2,000t per day. The mill will be operated on a batch basis. Material from a variety of different streams will be generated, collected, stored, collated, then processed. The feed arrangements are still in their early days, but Energy Fuels is mainly looking at this from a toll processing standpoint. Energy Fuels has all the tailings storage facilities necessary to make this work. The company is ready to move.

The US government is also on board with the rare earth elements play and has encouraged Energy Fuels' venture. This is extremely positive news.

We then move to Energy Fuels' priority. Energy Fuels has plenty of material in inventory (over 500,000lbs), waiting to be processed, so has much greater control of its production timescale than other uranium producers. As the spot price increases, so does the value of the inventory. The company is constantly working on mineralogy and pilot testing to ensure that when the time is right, Energy Fuels can move swiftly to capitalise on a resurrected uranium market. Energy Fuels is clearly ahead of the curve. They know what they don't know. The company looks like it has the scale to attract strategic partners and the best minds in the uranium space to propel the company forward.

Chalmers doesn't think US$40/lb will even be enough for uranium-giant Cameco. there are some projects in Kazakhstan that could be profitable, but for the rest of the world, they need a higher uranium spot price: north of US$50/lb, closer to US$60/lb to take "full-loading on cost." Companies like Kazatomprom would like the price to stay down so they can maintain a monopoly, and their inflated currency has also given them an advantage. The spot price has risen 25% in the last month or so, and these disruptions may start to shake utility companies up. "There is less uranium out there than people think."  

Company page: http://www.energyfuels.com/

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