Energy Fuels Inc. (AMEX:UUUU) Q4 2023 Earnings Call Transcript
Energy Fuels Inc. (AMEX:UUUU) Q4 2023 Earnings Call Transcript February 26, 2024
Energy Fuels Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning. My name is Joelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Energy Fuels Fiscal Year 2023 Conference Call. [Operator Instructions] Thank you. Mr. Chalmers, you may begin your conference.
Mark Chalmers: Thank you, Joelle, for that introduction, and good morning or afternoon, wherever you're joining this call from. I really appreciate you joining the conference call and webcast today for Energy Fuels 2023 annual results. We are very excited to discuss what has been an extraordinary 2023 and a very busy start to Q1 of '24. For those that cannot join the call today, we'll have replays of this presentation available for two weeks on our website either later today or tomorrow. I don't believe I have ever been more excited to update you on both our 2023 results as well as a snapshot of where we are driving the company in 2024. I hope it is apparent based on our actions that Energy Fuels has emerged as the up-and-coming leader in U.S. uranium and critical mineral production at a time when this has never been more important.
Many of you have heard me say we will always be aggressive but not reckless. And I believe 2023 is a testament of how our company is striving to build a world-significant uranium critical mineral company in a way that is unique to Energy Fuels, assets and our expertise. In short, we believe 2023 clearly demonstrates that we are company builders, not promoters. Our goal is to become a company that generates sustainable and significant high-margin cash flows from the production of advanced critical materials centered around uranium and other elements found in nature with uranium. 2023 represents a major step in that direction. Just a few highlights from the press release and year-end financials, net income of nearly $100 million, $222 million of working capital, $37 million in sales of both uranium vanadium, rare earths and no debt.
We have over $1 billion worth of assets. If you add or you can add another $45 million of liquidity, if you look at our inventories at current market prices. In short, the company is achieving record uranium based profits and has never been stronger financially, with over $0.25 billion of liquidity based on today's commodity market prices. All this is happening while we have been restarting mining at three of our mines, we begin preparing two additional mines for future restarts. We have secured or in the process of securing future additional rare earth feeds of world significance, and we're advancing our Phase 1 separation capacity to be commissioned in April as well as our radioisotope initiatives. We are financing most of these through cash flows for growth and diversification milestones organically with limited shareholder dilution.
I am aware of no other uranium-focused company that can say this. Before I start the presentation, I want to remind you that you are controlling the presentation from your own device, and I'll try to remember to tell you when to advance with next slide. There will be time for questions and answers at the end of the presentation. Dave Frydenlund, our Executive Vice President and Chief Legal Officer; Nate Bennett, our Interim CFO and Chief Accounting Officer; and Curtis Moore, our Senior Vice President of Corporate Development and Marketing, will be available to answer any questions I cannot answer. So let's jump right into the presentation. Now most of you have seen the slide of White Mesa in Utah. This is a hub of our critical mineral strategy.
We can recover uranium, rare earth, vanadium, potentially medical isotopes and has a long history of recycling. And this, again, like our results is an extraordinary asset for the company. Next slide. I may be making some forward-looking statements, and those are included on Slide 2 of this presentation. Next slide. So this is what's extraordinary about what we're doing is we are a uranium focused company and we are creating these other opportunities all centered around our uranium production capability with rare earth vanadium recycling and the medical isotope. So again, I don't know of any other company outside of China that can say this and do this the way we're doing it. Next slide. Everything we do is a high-value product line uranium.
And I want to point out that Energy Fuels has been the leading U.S. producer in the last five years, two-thirds of all uranium produced in the United States come from Energy Fuels. We're restarting the three uranium mines I mentioned in producing ore as we speak, at a run rate of between 1.1 million and 1.4 million pounds per annum by the end of this year. So we're mining ore right now at three operations, and we're getting other operations ready to advance as market conditions support. We have over 10 million pounds of licensed production capacity. Rare earth used for the critical elements for the powerful electric magnets required for electric vehicles, wind and other high-tech appliances. In April, we will be and have the capacity to produce up to 1,000 metric tonnes per year of separated NdPr oxide, which is equivalent to the amount of elements required for the high-efficiency electric motors for up to 1 million electric vehicles.
Vanadium, again, a critical element, mainly used for high strength steel, but also got substantial attention for grid scale batteries. We have the only primary producer of vanadium recovery plant in North America, medical isotopes, which are critical for emerging cancer therapies and the ability to recover radium while we're processing uranium and rare earth is a very exciting place for us. Recycling, and I've said this to most of you that have listened before, the fact that we've been able to recycle uranium and vanadium at the White Mesa Mill is why the mill has remained in good standing with the expertise for 40 years. Financial strength. I hit the high points already $222 million and working capital at the end of the year. That includes a lot of cash and marketable securities and significant uranium and vanadium inventories.
Next slide. So I'll talk about our financial highlights in a bit more detail here. Next slide. So again, I know I'm repeating myself a bit but $100 million of net income, $0.63 per share, driven by uranium. We sold 560,000 pounds in 2023 with a gross profit of $18 million. In addition, we sold the Alta Mesa uranium property and associated PFN tools which were noncore for a gain of $120 million. So those strong earnings have been funding our growth of uranium and rare earth activities and sales as we ramp up our uranium production and developing our ability to bolt-on of commercial rare earth separation capabilities, again, over $0.25 billion in liquidity at current commodity prices. So when you look at our working capital, and I think this is the envy of the sector because we are so strong with 0 debt and have assets that can come on with limited capital.
And you look at the -- and as I said, if you include for the value of our current inventories, it's north of that $250 million. At year-end, we had nearly 700,000 pounds of finished uranium, 900,000 pounds of finished vanadium and about 11 tonnes of separated pure rare earth carbonate. In addition, we have over 400,000 pounds of uranium as raw materials, which is ready for processing. So we have 1.1 million pounds of uranium and finished good or ready for processing. Next slide. So uranium highlights. Next slide. So look, I've already talked about we sold the 560,000 pounds at a 54% gross margin. It's a very nice margin. That comprised 300,000 pounds to the U.S. government sales at $61 a pound and we also sold 260,000 pounds under long-term contracts that weighted out at around $57 per pound.
We also brought the La Sal Complex, which includes the Pandora mine and Beaver mines and the Pinyon Plain Mine in Arizona back into production. And as I already said, between 1.1 million to 1.4 million pounds per year by the end of 2024. We're expecting to produce, now when we mine these mines, we bring the ore to the mill and it awaits for processing. But in 2024, we're projecting between 150,000 to 500,000 pounds of finished goods to be processed at the mill, and it all depends on as we commission the Phase 1 separation plant when we start producing, and we hope to do better than that, but that's the range that we're giving right now. And as I mentioned earlier, we're getting two additional mines ready for potential production in 2024, '25 Nichols Ranch and Whirlwind.
I talked about our uranium inventory of 1.1 million pounds, 700,000 pounds of that finished and the other is material ready for processing, which a lot of that will be processed this year. Next slide. We're building up our ability to produce around 2 million pounds of annual production by 2025. And again, this is with limited capital, 2 million pounds at the mines I mentioned, including the ones that we're getting ready. And this will also include some alternate feed production, which only Energy Fuels can do. And we're also planning on having an ore purchase agreement from third-party miners that are in full compliance also this year to secure feed from those that would like to actually monetize or that they have in mines that are owned by them.
In addition to starting up these mines, we are reinitiating exploration, drilling and delineation at Nichols Ranch, the ISR project and underground delineation drilling at our Pinyon Plain Mine in Arizona. On top of all that, we're advancing permits at our large Roca Honda mine in New Mexico, Sheep Mountain in Wyoming and the Bullfrog projects in Utah, and those have the potential to produce 4 million pounds, an additional 4 million pounds of uranium per year in the coming years. In 2024, we sold 200,000 pounds under contract at 50 -- $75 per pound at a 51% margin and that was under contracts. And these contracts have floor and ceilings and escalate with prices as the prices go up. So they went up materially higher than last year. But in addition, because we have uranium inventory, we sold 100,000 pounds on two transactions that average $102.88 a pound at a gross margin of 64%.
So if you combine the contract sales in the spot sales, we've sold 300,000 pounds at an average price of about $84 a pound already in Q1 of this year. For the remainder of 2024, we're going to continue to monitor spot market sales opportunities. We also have potentially a sale for another 100,000 pounds under contract but we're going to look at how we can take the inventory we have, the alternate feed we have and continue to take advantage of the spot sales combined with our contract portfolio, which only our contracts are about 25%, 30% of our production capacity at the 2 million pounds per year. Next slide. Rare earth, a lot going on in the rare earth space. Next slide. So I want to emphasize too that the rare earth production does not diminish the company's uranium production capabilities.
We produce high-purity mixed rare earth carbonate this year and sold to Neo for about $3 million. We're completing Phase 1 separation this quarter. We plan to be commissioning that on April 1. We've been telling the market that was going to cost about $25 million. Right now, it looks like it's going to come in between $16 million and $18 million, $7 million to $9 million under budget, which is rare to hear in today's inflationary environment. We're very proud of that and have the capacity to produce up to 1,000 tonnes per year of NdPr oxide subject to receipt of sufficient monocyte, and we also expect to be producing around 25 to 35 tonnes of separated NdPr oxide. While we're doing this, we're also advancing our Phase 2 and Phase 3 separation capabilities, and that is whatever we design it to be but it will be between 3x to 5x the capacity of Phase 1 with a separate crack and leach facility and the ability to separate dysprosium and terbium and other heavies and Phase 3.
Next slide. So we've also been very active at securing low-cost monocyte supply chains during 2023. We secured the Bahia project in Brazil, which has the potential to produce between 3,000 to 10,000 tonnes per year of monocyte to provide material to White Mesa for decades. We're currently doing exploration and securing our mining permits. It's a very well-defined heavy mineral sand deposit, and we have a new Sonic drill rig that the guys are being trained on as we speak and potential for production in 2026. In addition, recently we announced a non-binding MOU, for a very significant deposit in Australia, in Victoria, Australia, where we would have 49% ownership and have access, or secure 100% of the monazite, from that project. The project has the potential, to supply between 7,000 to 14,000 tons, of monazite per year for decades.
We are looking at significant scale. It has all major licenses and permits in place, and is in advanced stages to go into construction. It's well-defined. As I said, we will secure the rights to all the monazite and potential production in 2026. So, I've been saying for a long time, we're securing our sources of rare earths, and will continue to do so in an opportunistic way. Right now, with the price of uranium being so high and the price of monazite, or particularly the rare earth oxides, NdPr, dysprosium terbium, being lower It's a great time to acquire these rare earth projects, because the prices are down, because they've been beaten up. So that puts us in a unique opportunity, to capitalize on - the strength of our balance sheet, and the fact that we've been profitable.
And we plan to do everything we can, to continue to be profitable going forward. Next slide, the vanadium and medical isotope highlights. Next slide, again, we have the only primary production facility for vanadium. It's probably number four on our list of our market strategy, but we have the ability, to produce and refine substantial quantities of V2O5. We did sell a little bit of vanadium earlier in the year, at a gross margin of 37%. And I want to emphasize gross margins, 37% versus up to 60%, when we're doing these spot sales. And we're still evaluating, when the price of vanadium comes up how we can respond accordingly. We have about 900,000 pounds of finished V2O5, and we plan to sell it as the price - when the price goes up. Typically, over $10 a pound, we'll sell some more vanadium.
But we also have the ability, to recover 1 to 3 million pounds of vanadium from our tailings. And when we're mining La Sal and Pandora, we're also mining uranium-vanadium ores. So, we very much are in the vanadium business, but we will capitalize on the vanadium business, when the price of vanadium is higher. Next slide, medical isotope highlights. We have an R&D license to recover Radium-226. We're also looking at an R&D license, to recover Radium-228. The company continues to advance this. We're completing engineering on a pilot facility, to produce research and development quantities of Radium-226 to be tested by end users. Next slide. We'll talk a bit about our recycling and our commitment, to the community. Next slide. Community outreach.
We continue to share our success with our neighboring communities. We have set up the San Juan County Clean Energy Foundation, where we initially made a contribution of $1 million into the foundation account, and have agreed to ongoing funding equal to 1% of annual revenues from the White Mesa Mill. We've made grants up to around $300,000 thus far. A lot of this has gone to various initiatives with indigenous communities in the region, with American Indian Services, our Native Guide program with Canyonlands, putting a solar project on The Dinosaur Museum. We've spent and funded the Navajo Nation Chapters, a couple of chapters, Fine Arts in San Juan County, and High Schools and whatnot. So anyways, all these programs are focused on education, environment, health, wellness, economic advancement, and as I said, significant focus on Native American priorities.
The Mills recycling programs continue to reduce carbon emissions and save the world's finite resources. And we're very proud of how this all fits together. Next slide. So 2024 guidance and focus. I already mentioned that we're planning to produce 150,000 to 500,000 pounds of finished uranium production. Now remember, we still have substantial inventories, of uranium and vanadium to sell. We're going to do everything we can to beat those guidance numbers, but that's our guidance numbers right now. When it comes to Q1, '24 sales, I talked about the 200,000 pounds that, we sold under contract at around $75 a pound, and the 100,000 pounds that we sold at over $100 a pound for a weighting, of around 300,000 pounds at $84, $85 per pound. We're going to look at uranium sales for the remainder of 2024 on an opportunistic basis.
We have another potential sale of 100,000 pounds, under contract this year. We're going to continue to ramp up our production at our uranium mines that, I already mentioned, the three mines that are currently in production, including on top of that, alternate feed, and an ore purchase agreement. We're looking at preparing Nichols Ranch and Whirlwind, to also go back into production, to get us up to approximately 2 million pounds, of uranium production per year. And again, with limited capital, we're commissioning, or will be commissioning soon, the Phase 1 separation circuit. And this is a world material size circuit. It is larger than Neo's Silmet facility in Estonia. So, we're very excited about that. And as I said, under budget, we're continuing with the engineering of Phase 1 and Phase 2, advancing the Bahia project in Brazil, continue to evaluate and finalize, our due diligence on the Donald project in Australia.
And on top of that, we're looking for other opportunities. So, to say that we've been busy last year, this year is an understatement. I've never been busier. I've never been in a position, where our company has been stronger. And we are going for it, people. We're going for it, but we're going for it in a responsible way, to build long-term value using our assets, our people, our expertise, and our momentum in a way, that nobody else can do like Energy Fuels. Thank you very much. Happy to be open for any questions from the floor.
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