Q4 2023 Energy Fuels Inc Earnings Call
Participants
Mark Chalmers; President & CEO; Energy Fuels Inc.
Nate Bennett; Interim CFO, Chief Accounting Officer; Energy Fuels Inc.
Mike Heim; Analyst; Noble Capital Markets
Joseph Reagor; Managing Director, Senior Research Analyst; Roth Capital Partners LLC
Presentation
Operator
Good morning. My name is Joel, 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 conference.
Mark Chalmers
Thank you, Joel, 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 will 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 2022 results as well as a snapshot of where we are driving the company in 2024.
I hope it is apparent based on our actions, the Energy Fuels has emerged as the up-and-coming leader in U.S. uranium and critical mineral protection 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 minerals 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, and sales of both uranium vanadium or rare earth and no debt, we have over a billion dollars 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 base profits and has never been stronger financially with over a quarter billion dollars 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 radio isotope 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 Iranian 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'm trying to remember to tell you when to advance with next slide, there will be time for question and answers at the end of the presentation.
Dave Friedland, our Executive Vice President, 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 this 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 on 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, they 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 in Energy Fuels has been the leading US producer in the last five years, two thirds of all uranium produced in United States come from Energy Fuels. We're restarting the three uranium mines I mentioned and producing ore as we speak at a run rate of between 1.1 and $1.4 million 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 of licensed production capacity wearers 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 a 1,000 metric tons per year. I've 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.
But medium 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 our emerging cancer therapies and the ability to recover radium for a while. We're processing uranium and rare earth is a very exciting place for us. Recycling, and I've said this too, 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 in working capital at the end of the year. That includes a lot of cash and marketable securities in 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 in 2023 with a gross profit of $18 million. In addition, we sold the Alta Mesa uranium property and associated PFM tools, which were non-core for a gain of $120 million. So those strong earnings have been funding our growth of uranium and rare earth activities in sales as we ramp up our uranium production and developing our abilities of on our commercial rare earth separation capabilities, again, over a quarter billion dollars in liquidity by current commodity prices.
So when you look at our working capital and I think is the envy of the sector because we are so strong with zero debt and have assets that can come on with limited capital. And you look at the and as I said, if you include fork, the value of our current inventories, it's north of that $250 million. At year end, we had nearly $700,000 of finished uranium, $900,000 of finished vanadium and about 11 tons of separated pure on rare earth carbonate. In addition, we have over $400,000 of uranium as raw materials, which is ready for processing. So we have $1.1 million of uranium and finished goods or ready for processing.
Next slide.
So uranium highlights Next slide. So look at I've already talked about, we sold the 500, £60,000 added 54% gross margin. So very nice margin that comprise $300,000 to the US government sales at $61 a pound, and we also sold $260,000 under long-term contracts that weighted out at around $57 per pound. We also brought the LaSalle complex, which includes the Pandora mine and Beaver mines and opinion main pinion plain mine in Arizona back into production. And as I already said, between 1.1 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 in a way that it is or waits for processing.
But in 2024, we're projecting between 150,000 to 500,000 pounds have finished goods to be processed at the mill. And it all depends on as we commission the Phase one separation plant. But when we start producing and we hope to do better than that. But that's the ranges that we're giving right now. And as I mentioned earlier, we're getting two additional mines ready for potential production in 2024, 25 nickels 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 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 a 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 where also I'm 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 opinion, plain mine in Arizona. On top of all that we are advancing permits at our large Roca Honda mine in New Mexico, Sheep Mountain, Wyoming in 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 or $75 per pound at a 51% margin.
And that was under contracts and these contracts have floors and ceilings and escalate with prices as the prices go up. So they went up materially higher then last year. But in addition, because we have uranium inventory. We sold $100,000 on two transactions that averaged $102.88 a pound at a gross margin of 64%. So if you combine contract sales in spot sales, we've sold $300,000 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 under contract, but we are going to look at how we can take the inventory. We have the alternate feed we have and 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, there's lot going on in the rare earth space .Next slide. So I want to emphasize too that 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 Neal for about $3 million. We're completing Phase 1 separation of this quarter. We plan to be commissioning that on April first, 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, seven 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 monocytes.
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 two and Phase three separation capabilities, and that is whatever we designed it to be, but it will be between three to five times the capacity of Phase one with a separate crack and leach facility and the ability to separate Esposito and terbium and other heavies in 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 tonnws per year of monocytes to provide material to White Mesa for decades. We're currently doing exploration in securing our mining permits a very well defined on heavy mineral sands 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 monetization from that project. The project has the potential to supply between 7,000 to 12, 14,000 tonnes, a monocyte per year for decades. So we are looking at significant scale. It has all major licenses and permits in place it is in advance stages to go into into construction. It's well defined.
And as I said, we will secure the rights to all the monocyte and potential production in 2026. So I've been saying for a long time, we're securing our sources of rare earth, and we'll continue to do so in an opportunistic way.
And right now with the price of uranium being so high and the price of monocyte or particularly the rare earth oxides, NdPr, disposing terbium being lower is a great time to acquire these rare earth projects because the prices are down as 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, 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 the spot sales, and we're still evaluating when the price of vanadium comes up, how we can respond accordingly. We have about a $900,000 of finished V2O5 and we plan to sell it as the price. When the price goes up, it typically over $10 a pound will sell some more vanadium, but we also have the ability to recover one to $3 million of vanadium from our tailings. And when we're mining LaSalle and Pandora, we're also mining uranium vanadium ore. So we very much are in the vanadium business, but we will capitalize on the net interest business when this the price of vanadium is higher.
Next slide, medical isotope highlights. We have an R & D license to recover Radium two to six. We're also looking at an R&D license recover Radium two to eight, and the company continues to advance this and we are completing engineering on a pilot facility to produce research and development quantities of Radium two to six to be tested by end users.
Next slide.
So 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 accounting Clean Energy Foundation, where we initially made a contribution of $1 million into that 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 DigiTest communities in the region with American Indian services as a native guide program with Canyon Land's putting a solar project on the dinosaur museum. We've spent and funded the Navajo Nation chapters, a couple of chapters, fine arts, 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, a significant focus on Native American priorities. The Mills recycling programs continue to reduce carbon emissions in, say, 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 of finished uranium production. Now, remember, we still have substantial inventories of uranium and vanadium to sell, and 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 a Q1 24 sales, I talked about the 200,000 pounds that we sold under contract at around $75 a pound and 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.
And 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 in an ore purchase agreement. And we're looking at preparing Nichols Ranch wind to also go back into production to get us up two approximately 2 million pounds of uranium production per year. And again, with limited capital limited capital we're commissioning will be commissioning soon.
The Phase 1 separation circuit. And this is a world material size circuit. It is larger than and Neose Silmet facility in Estonia. And so we're very excited about that. And as I said, under budget. We're continuing with the engineering of Phase one and Phase two. Advancing the Bahia project in Brazil continue to evaluate finalize our due diligence on the Donlin 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 people, we are going for that work going forward 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.
Question and Answer Session
Operator
(Operator Instructions)
Mike Heim, Noble Capital Markets.
Mike Heim
All right. Thank you. Good morning, Mark, want to eliminate a couple of questions. Let me start with the rare earth elements. Some of the verbiage in the press release talks about the 25 to 35 tons of NdPr oxide in the second quarter and then and then says that you expect to begin processing uranium after that is the implication that you probably are not going to be doing more NdPr oxide after the second quarter?
Mark Chalmers
Yes, Michael, that's correct. I mean, right now we are the only source of monocyte we have is from Kim Moores. And so we have secured about 500 tonnes of material that's ready to be processed to allow us to commission Phase one and on. And so so yes, we plan to just to commission the Phase one plant and then switch it back, switch the mill back over to uranium production and we plan to run as much uranium through the mill, particularly at a period where the price of uranium is so high to maximize revenue and profitability on while we're securing larger longer-term sources of monocytes.
So again, right now, rare earth prices are quite a bit down from where they were a year or two ago.
And we're going to maximize our profitability by pushing as much uranium through that mill in the meantime, but we'll continue to do this Phase two, Phase three engineering. We'll continue to advance Bahia potentially of the Donlin project in Australia and other projects to be ready to bring in significant quantities at world scale on. But we'll be we'll be pushing the uranium through.
In the meantime.
Is there kind of a date in mind when you have a go decision on Phase two, while you're doing all this prepping and what we're what we're doing is getting the engineering completed on we'll have to submit that to the state of Utah.
And so from our perspective, we're doing all that work right now on the go decision is get the engineering done be ready to submit it to the regulatory bodies, um and um, so we're not we're not holding back on that at all.
Mike Heim
Can you talk a little bit more about the under budget on Phase one? And specifically, would that have any implications for the cost of the Phase two expansion?
Mark Chalmers
Well, I think I think the key thing about on Phase one and the fact that we're doing this work in Utah, a low cost of doing business area with very, very skilled people that understand solvent extraction on that that Tom?
Yes, we were able to do a lot of that work internally in a very efficient way. And it does I think it does bode well for Phase 2and Phase 3. I don't want to extrapolate out that far on those at this point in time, because Phase one is where we actually added additional solvent extraction capabilities in the existing SX building at the mill so Phase two Phase three will be completely separate new facilities. So it will require complete new buildings and whatnot from Phase one didn't require all that.
But again, I think it bodes well when you look at what we can do in a jurisdiction like Utah, Southern Utah as compared to others in the other parts of the world, particularly in places like Australia, where people are seeing significant cost overruns on their projects.
And then one question on uranium and I'll get back in queue. And I almost hate to ask this because you've done so much. But given what's gone on with uranium prices, if we were to trying to expand even faster, what are the bottlenecks to getting production going and faster than what you're projecting well on our existing sort of stable of permitted projects on there really aren't any bottlenecks.
We can get up to that 2 million pounds per year. And when you start going greater than that for us. It requires a combination of a couple of things. It requires larger capital expenditures, and it also requires securing some of these additional permits on things like Roca Honda on Bullfrog and cheap mountains, partially permitted.
So our bottlenecks as we get to about that 2 million pounds, maybe a little higher with capital investment on but to go to 5 million pounds per year, we're going to need both significant capital investment and additional permits from our for our Company.
Mike Heim
Thank you.
Operator
Joseph Reagor, Roth MKM.
Joseph Reagor
Hey, Mark and team. Thanks for taking the questions. And so first thing on that $16 million to $18 million guide for the total cost of the Phase two, how much of that was spent as of year end. So we can kind of have an idea of what's left for this year?
Mark Chalmers
Let me ask Nate Bennett, our interim CFO, Chief Accounting Officer. Nate, do can you give me a number what was spent year end?
Nate Bennett
Yes, I can. Yes, I can pipe in there. So we've spent $8.2 million through the end of 2023, and the rest of that will be spent in 2024.
Joseph Reagor
Perfect, thanks. That's helpful. And then looking at the synergies. But as you're doing this separation of it as well with us on what do you expect kind of the pricing to be on this 25 to 35 tons that you're going to sell?
Mark Chalmers
Well, because it's Joe, because you talk in very small quantities and everything, it really is even appropriate to say what the pricing is going to be on it right now on. We are one of the one of the reasons that we're securing these other large projects is that we get from the both the revenue from the heavy mineral sands and absolutely low cost, in some case, no cost for monocyte. So so with Kim or as we said this publicly, we've been working with them to kind of reconcile the fact they've been short on supplying this monocyte.
And so we're going through a couple some exercises there on how we rectify that. It's not over yet. So I'm not prepared to tell you what it's going to cost for this run, the small run. But what it does demonstrate it will demonstrate that we can do this commercially at the required purities if everything goes as per our plans and that itself is extremely material, we will secure additional monocyte, and that's all part of our strategy is how we come up with a blended price that is very attractive in a world perspective.
Okay.
Fair enough. And then, Tom, I realize with the uranium production guidance that it's all dependent on when you get started with producing, but can you tell us what are the assumptions that lead to like the 100 to 2,000 pounds versus the 500,000 pounds like is there a certain month that you would need the start-up work by to get the 500 and then a certain month you're assuming is the way to sort of to get the one 50?
Yes, it's really it is really timing. We're going to get it is phase one commissioned, as I mentioned, running this 500 tons through it. And when that is complete, we'll flip the mill over to uranium production. And depending on how much time is remaining in the year, we will put more Iranian through if it if we're able to flip that sooner rather than later on, we have on the alternate feed and the sources on to basically well get well in that range. And we're also planning to be delivering are currently delivering feed from our other mines like South and soon the other sites like pinion plane so on.
So there's a there's a lot of moving parts of just making sure the timing is an order.
It's all coming together and we're just being what I believe, quite conservative giving that range at this point in time.
It's my personal goal.
And I take that make that it's a personal goal to do better than that, but it we just have to see how the year kind of rolls out here.
Okay.
And one final one eight. So use contracted near term to sell an additional GBP100,000 this quarter, it kind of spot prices from here. Are you planning to do more of that in Q2, Q3, Q4, or are you guys planning to stick to the long-term contracts?
It is our goal to opportunistically sell uranium as we have it on E&O taking into account what our contracted deliveries are looking out next year and following years on and maximize the benefit of these higher prices in a way that others can't because they don't have one the inventory to the ability to produce this year. So just watch this space, I don't want to make promises that I can't keep, but we are going to be looking at how to absolutely maximize our company position with these higher grain prices.
Okay.
Sounds good.
Joseph Reagor
Thanks, Mark. I'll turn it over.
Operator
(Operator Instructions) There are no further questions at this time. Please proceed.
Mark Chalmers
Yes, I'd just like to thank those of you that have joined the call. I hate to use the word extraordinary too many times, but we really are on a focused path for a long-term critical mineral hub. There really is no investment like Energy Fuels they can on the back of uranium, adding on the ability to produce rare earth for a very significant world.
Significant strategy is our objective look at our balance sheet look at the fact that we're producing uranium now, we've got very good margins on our uranium sales and cost on. It is a very exciting time, and I cannot tell you as I said at the beginning of the call, how excited I am to present this story and just just watches watches vehicle because we are focusing on building a company, we are not promoters.
If you want us to be promoters, we're not going to be promoters because we're building a company and we're doing it step by step. So thank you very much. And again, I look forward to further. It's in due course during the year.
Operator
Ladies and gentlemen, this concludes your conference call for today. We thank you enough that you please disconnect your lines.
