Energy Fuels (NYSE: UUUU) CEO Mark Chalmers on the Section 232 Petition & the Company’s Large Portfolio of U.S. Uranium-Vanadium Projects Ready to Quickly Scale Up in an Improving Uranium Market

February 5, 2019

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of Energy Fuels (TSX: EFR)(NYSE: UUUU), Mr. Mark Chalmers. Mark, good morning to you. How are you?

Mark Chalmers: Great. Good morning to you, Gerardo.

Gerardo Del Real: Thank you so much for taking time today. We were joking off air that you're already up 5% and we just now finally got the interview going. It's been weeks in the making, so thanks again for taking the time. You've done an incredible job of positioning Energy Fuels to benefit both from the uranium upside, which I think 2019 is going to be one of the most exciting years in the space, and also from the vanadium side. I want to talk about both of those commodities and talk a little bit about the macro backdrop and then we'll get into company specific talk. But before all of that, I would love for you to introduce yourself and talk a little bit about your extensive background, because there's a lot there.

Mark Chalmers: Yeah, thanks. I'm happy to do that. Firstly, I've been in this business for over 40 years and I started as a uranium-vanadium miner, believe it or not, back in '76. So that's where I started off in the business and worked about half of my career in the United States, working with both conventional and in-situ recovery different projects, which is unique. Most people either have experience in one or the other. And then I spent the last half of my career, up until the last couple of years ago, based out of Australia. I was working with projects in Australia, Southern Africa. I was involved with the Langer Heinrich and Kayelekera mines so I was in charge of operations for Paladin Energy and also a number of projects in Kazakhstan.

My experience and perspective of the uranium and vanadium business is not just what I call in the patch, it's global. Having worked these projects all over the world gives me a really good insight into things like cost and productivity and technology and also gives me a very large network of people that I've worked with around the world. I'm a diehard in this business and I love it and I've worked with some of the best and biggest entrepreneurs in this space. I always like to say that I've learned what a lot of them have done right in positioning companies, but I've also learned what they've done wrong when it comes to things like debt, not securing long-term contracts, or getting caught with foreign exchange issues. Energy Fuels is a company that I came back to because I believe it was well positioned for the future.

Gerardo Del Real: Let's talk about that positioning. Not only are you the number one uranium producer in the US, and not only are you the only primary vanadium producer in the US, you're also helping lead the charge on this 232 investigation in regards to uranium imports. That's going to be a big catalyst, I believe, here in the coming months. Energy Fuels deserves a lot of credit for being as proactive as it's been. Can you provide a brief synopsis of the 232 investigation and how Energy Fuels has led that forward?

Mark Chalmers: Yeah. Well, the 232 is something that we joined with Ur-Energy and the two of us were petitioners and we filed a petition with the US Department of Commerce. I think the real simple grab here is United States consumes at least a third of the world's uranium. So a third of the uranium consumed in the world is United States of America and we're only producing 1% or less of our requirement. So that's really the grab. Does that make sense for a super power like United States of America to be that dependent on imports?

Now, a lot of our imports, or about a half of the imports are coming from our allies like Canada and Australia. We're not really trying to overly focus on those countries. But we're really focusing on a lot of our foes, former communist countries and the increases in imports that they continue to increase over time. And when you start seeing production reducing in Canada with the shutdown of McArthur River and the shutdown of the Ranger mine in Australia, that increase in imports from our foes is going to continue and going to increase over time, not decrease. So that is really the focus of section 232 with both our companies as petitioners.

Gerardo Del Real: Well said. You mentioned the assets and you mentioned Energy Fuels as being a vehicle that you were excited to come back to and that you've obviously helped position for what I think is going to be a historic bull run. Anybody that's involved in the resource space, specifically in the uranium space knows that although bear markets are violent to the downside, we are probably leaving that and headed towards what I think is going to be another violent move to the upside. I think it started in late 2018 and is going to carry on to 2019. Can we talk about the assets within the Energy Fuels portfolio on the uranium side?

Mark Chalmers: Well, as I said, looking at the world from Australia over the last 15 years I certainly knew what companies had what and what companies had what assets in what state of readiness, so that was a big driver on coming back to the US. We have a large portfolio of assets, both conventional and in-situ recovery really spanning from Wyoming down to the Four Corners region all the way down into Southern Texas.

We've got that geographic diversity in terms of the different states and jurisdictions. We've got multiple projects that are fully permitted, fully constructed, fully paid for, and in a number of cases they were producing from Nichols Ranch up in Wyoming right now at a reduced rate. We're producing from the White Mesa Mill, and we're also producing from La Sal complex as we speak.

Now, the majority or a large portion of those assets are uranium-only assets that are just solely produced or developed for the uranium content, but about a quarter of our assets also have the vanadium content as well.

Gerardo Del Real: Excellent. Let's talk about the vanadium assets. Can you speak to that a bit? Q4, I believe, back in production. Can you give us a brief overview there?

Mark Chalmers: Yeah, well the White Mesa Mill has a long history of producing vanadium from conventional primary ore sources. It's produced nearly 50 million pounds of vanadium over its 40-year history and we re-initiated production late in the fourth quarter of '18. In the first instance, we're recovering vanadium from our tailings facilities in our holding ponds that have a lot of solubilized vanadium. So it was low cost to start that production up and we're currently producing. We will be informing the market as we're progressing, but we're very pleased with how things are progressing right now. We are still doing some, what we're calling test mining at one of our properties called La Sal Mine and we've got people there right now mining uranium, vanadium ores, but using XRFs rather than the traditional probe, they're focusing on vanadium. So we're really looking at from a couple different directions and new directions that we haven't done in the past.

Our focus is to make Energy Fuels a sustainable, low-cost producer of vanadium for years to come in the future.

Gerardo Del Real: Excellent. There's also pretty unique land clean up and copper recovery opportunity. Can you speak to that? Because I know that gets overshadowed often with the quality of assets in the uranium and vanadium side of it.

Mark Chalmers: Yeah. First and foremost, we are a uranium producer. When you look at the ability to generate revenue, probably 60-70% of that is focused on uranium. So we don't want people to think that we're changing the direction of the company without really still keeping the focus on uranium production. But after vanadium, because vanadium, again, certainly at current pricing can quite substantially contribute to our cash flow, but we also have the ability to recycle low level radioactive products. And for example, last year we were able to generate about $7 million of revenue recycling product. We recycled the equivalent of a reactor’s worth of fuel last year, in 2018 alone. In 2017, we recycled about two reactors of fuel through this what we call alternate business.

Now, we're trying to expand that a bit further into cleanup of abandoned uranium mines. We think that, again, that goes well as a secondary or third business potentially in time. It's not subject to uranium prices because most times we get a fee for that. But we're also looking at cleanup of abandoned uranium mines, particularly around the vicinity of the White Mesa mill, where the EPA has already collected over $1.7 billion in trust for clean-up of abandoned uranium mines. And White Mesa mill is ideally positioned to assist with that when the time's right.

Gerardo Del Real: Excellent. Well said. What's the working capital and the share structure look like right now, Mark?

Mark Chalmers: Right now we've got in cash and working capital, we're right in that $45-50 million mark, so we're very well positioned with cash or working capital. We're very proud because we think that is a very unique position when you compare it to our peers. We've got about 90 million shares on issue, so we're in and around a market cap of about $300 million. We've got really good liquidity, we're generally trading, between the New York Stock Exchange and the Toronto Exchange, we're trading $4-5 million a day. So we plan to continue to have a very strong cash position. We do not want to draw down those funds unnecessarily, and we plan to replenish those funds in the short-term focus on the vanadium sector of the business because we're producing vanadium as we speak. So long as vanadium prices stay up in the order or the range that we're currently talking about, we're very excited about what that does to us this year in 2019.

Gerardo Del Real: One last question for you, Mark. I know that it's important that you're able to scale and respond quickly to increased demand if we get the bull market that the optimists among us, including myself, think we're going to get on the uranium side of it. Can you talk just a little bit about how quick and how low cost, and the scalability factor with Energy Fuels because I think it's critical for speculators and investors in the uranium space to understand that.

Mark Chalmers: Well, we believe we can scale up quicker, faster than any of our peers. We say that we can go between 2 to 3 million pounds in probably 12 to 18 months and that would be bringing on both our in-situ recovery operations and some of our conventional operations. We can do that with limited capital. The biggest drain on cash there would be on working capital because you have to hire people and get these projects back into full steam. Once you get past that 2 to 3 million pounds, you have to look at some of our larger projects like Roca Honda where we're going to need larger capital. We go over about 3 million pounds per year, we've got to start looking at a couple hundred million dollars in a few years, number of years – not 10 years, but certainly 3, 4, 5 years to go that next step where we can probably be in the 4 to 5 to 6 million pounds a year range under full tilt conditions.

Gerardo Del Real: Fantastic, Mark. Anything else that you'd like to add?

Mark Chalmers: Well, the main thing I'd say is we had a really good year last year. Our shares performed very well, we made the Russell and that really helped with the liquidity, and we don't want to be just a one year wonder. We want to continue to go into '19 with strong performance for our shareholders and be in the best position of all our peers when it comes back into uranium production and capitalize on this vanadium market right now as we're doing.

Gerardo Del Real: Well, I sense it's going to be an exciting 2019 with a lot of news flow and hopefully you're kind enough to come back on and keep us updated.

Mark Chalmers: I'll come back.

Gerardo Del Real: Appreciate it, Mark.

Mark Chalmers: I look forward to it.

Gerardo Del Real: Thank you so much.

Mark Chalmers: Thank you.

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