Made in the USA
Energy Fuels Inc, (UUUU) operates the White Mesa mill in Utah, which is the only conventional uranium mill in the US. Given the prevailing weak market conditions, EFR is constraining production and optimising its pipeline of uranium projects. As a result, we expect EFR to be well positioned to ramp up production once demand and prices improve. With its recent acquisition of Strathmore Minerals, EFR could become a dominant player in the US and a mid-tier global producer.
Only conventional uranium mill in the US
EFR’s 100%-owned White Mesa mill is the only conventional mill in operation within the US and has the capacity to produce up to 8Mlb U3O8 per annum. In addition, the mill has a co-recovery vanadium circuit, as vanadium is commonly found in the uranium bearing ore from the Colorado Plateau area. More importantly, the mill is the only facility in North America with the current capability to process low-cost alternate feeds such as uranium bearing tailings or residues from uranium conversion. During FY13, EFR produced 1.2Mlb of U3O8, making it the second largest US producer and it has the potential to increase its annual production as market conditions improve.
Recent acquisition of Strathmore Minerals
On 3 September 2013, EFR announced the completion of the all share acquisition of Strathmore Minerals, in which Strathmore shareholders received 1.47 common shares of Energy Fuels for each share of Strathmore. As a result of this deal, EFR acquired Strathmore’s 60% interest in the 28.7Mlb U3O8 Roca Honda project, which is within trucking distance to the White Mesa mill, and the 10.9Mlb U3O8 Gas Hills project located near EFR’s Sheep Mountain project in Wyoming. The deal makes EFR one of the largest players in the US uranium market with an overall resource at 127Mlb of U3O8 (when considering all measured, indicated and inferred categories).
Outlook: Tightening supply-demand balance
Given the current depressed uranium prices, EFR will continue to evaluate market conditions and adjust its operations accordingly. The company guides FY14e production of 0.4-0.5Mlb (c 50% reduction from FY13) with an additional 0.3Mlb purchased at spot market prices to fulfil existing sales contracts. We expect to see higher production rates should prices improve on the back of potential restart of some Japanese reactors and the recent expiration of the HEU agreement.
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