Energy Fuels (TSX: EFR) VP Curtis Moore On Solving the Domestic Rare Earth Puzzle

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Vice President of marketing and corporate development for Energy Fuels, Mr. Curtis Moore. Curtis, how are you today?

Curtis Moore: I'm doing great, Gerardo. How are you?

Gerardo Del Real: I am well. I want to thank you for coming on, on such short notice. Energy Fuels has been extremely busy on multiple fronts, both the uranium front, which of course is the flagship business. And we'll talk about that here in a bit, but you just had some really important news on the rare earth front. And I want to have a conversation because I'm getting a lot of questions from people that see the potential opportunity, but don't quite understand what rare earths are, the difference between the various rare earths. And of course, how Energy Fuel is now is positioned to enter the commercial rare earth business in Q1 of 2021, which is an extremely big deal. Not just for the company and shareholders but, as you mentioned in the most recent release, it's the beginning of a potential real success story for local communities, for native Americans, for conservation groups, the state of Utah, and the US. I thought that was well put, so congratulations on that front.

Curtis Moore: Thank you. Thank you. We are absolutely over the moon on this opportunity. It's kind of interesting how it all happened. We weren't even thinking about rare earths about a year ago and this opportunity quite frankly, sort of dropped into our lap. I'll back up a little bit, give you a little background. I think you asked what are rare earths, and what are they used for. Basically, it's a series of 15 kind of unusual elements on the periodic table and also includes, I believe it's yttrium and scandium, those are also sometimes lumped in with rare earths. But regardless they're used in a whole host of clean energy and advanced technologies, wind turbines, electric vehicles, cellphones, advanced optics. They're not a lot of rare earths are needed in those applications, but they are needed in small quantities.

And so, one of the reasons this is so important is that China basically dominates about 90% of all rare earth production in the world today. And so the US government under both Democrat and Republican administrations have been trying to figure out ways to restore at least some semblance of a rare earth supply chain. Because another very important use for rare earth is in defensive military applications. I think I read somewhere that every F-35 fighter jet in the American plane fleet, fighter jet fleet contains about 850 pounds of rare earth. So, these are really important for national defense purposes. And so, basically about a year ago some companies started approaching us, the US government approached us, and started inquiring about what our capabilities might be in rare earth, in our White Mesa Mill in Utah.

We hadn't really looked into it, but the more we started looking into it, we find that one of the best rare earth minerals and ores in the world is a mineral called monazite. And all this monazite is currently being shipped to China, but it has very, very high rare earth concentrations. And it also has very high concentrations of the very valuable rare earths in it. It also has high concentrations of uranium, and a lot of companies aren't able to handle the uranium. So, this material is simply being shipped to China right now. Well, that's our business, is handling a feed that have uranium, ores that have uranium. So, where we fit in is that we're able to remove the uranium, recover it, sell it into the nuclear fuel cycle. Then also produce a mixed rare earth carbonate that's ready for separation, a very important step in the rare earth process. So, again, we're thrilled about what we're capable of doing just right now, just in a few months.

Gerardo Del Real: You mentioned the national security issues around rare earths, and why it's so important for the US and other regions around the world to develop an independent critical metal supply chain and an independent rare earth supply chain. The national security implication, just to be clear for everybody, is the fact that although the rare earths market is a small market, the applications for the rare earths are of an extremely sensitive nature, and can often lend itself to the hacking of technology, the reverse engineering of technology, and we're talking very sensitive technologies. And that is why there is such an emphasis in establishing a domestic rare earth supply chain. Is that accurate, Curtis?

Curtis Moore: Yeah, that sounds accurate to me.

Gerardo Del Real: How does Energy Fuels now take this three year supply agreement where you're looking to acquire a minimum of 2,500 tonnes per year of natural monazite sands? How do you take those sands and separate them? And what are the specific types of rare earths that you'll be processing?

Curtis Moore: Yeah. So, what we're doing, that was the big news that we had this week, was that we've entered into a three-year supply agreement with the Chemours Company, which is a large company that does heavy mineral sand operations in Florida and Georgia. And these are mineral sand operations where their primary product is zirconium and titanium, but they also produce this natural monazite ore, which is very high in rare earths. And so what we're able to do is receive that monazite, we process it through our White Mesa Mill. We remove the uranium and other radionuclides associated with it, and what we're doing is that we're producing at least initially a mixed rare earth carbonate. Which is basically a rare earth concentrate that is the stage right before rare earth separation, sort of the next stage in the process is separation. Now we are not currently going to be doing separation at the White Mesa Mill.

We're going to be selling this carbonate to customers, likely in Europe. However, it really makes a whole lot of sense to get involved in some of the downstream rare earth processing, which we're looking into very seriously right now. The next step would be separation. The great thing about monazite is that it has a very high values of two of the rare earths, the neodymium and the praseodymium. Those are used in these very strong, permanent magnets. They're the most valuable of the rare earth elements. And the monazite actually has about 22% to 23% NdPr associated with that on a total rare-earth oxide basis. In addition, some of the other important rare earths are what are known as the SEGs plus the heavy rare earths. And those are also extremely valuable.

But one of the tricky aspects of those, as I understand, is that there's just such small quantities that are actually required, but they're really extremely important for military applications. And so this monazite that we're acquiring is about, I believe, it's 14.4% SEG plus heavies. And again, as we understand, these are some of the best distributions of the valuable rare earths in this monazite compared to any other mineral around the world. And so, we've got people that are approaching us right now saying, "Wow, we had no idea that you guys had these capabilities. You guys might be the missing link in the rare earth supply chain." So, again, this is a key business for us. Again, we're going to crawl before we walk and run. So, first we're going to be doing this carbonate and selling it, but we hope to move on to further rare earth projects in the future.

Gerardo Del Real: You mentioned the carbonate being a key ingredient in the manufacture of high strength, permanent magnets. And this is important because these are the type of magnets and motors that are essential for the clean tech revolution, right? The pivot into clean tech. Everything from electric vehicles, wind turbines, renewable energy generation. You can't do that without these metals, correct?

Curtis Moore: Correct. Yeah. This is why it's so critical. With the country moving into more electric vehicles, under a new Biden administration, I think we have the Governor from a Michigan is going to be the energy secretary. The former Governor of Michigan. Jennifer Granholm, that's her name. And we understand that she's looking to increase use of electric vehicles around the country, wind turbines, renewable energy is certainly going to become much more prominent in the new administration. So, I think that having a domestic supply chain for these raw materials needed for these clean energy applications is going to be critical.

Gerardo Del Real: Pun intended. And I completely agree, Curtis. Let's talk about the flagship business, which of course is uranium. We've seen a surge in the quality uranium names recently. Not a coincidence. There's not a lot of quality names. And we know that when there's a rotation back into the sector, it's a lot of capital chasing what's a relatively limited amount of opportunities out there. I got to get your take on the uranium space and the recent closures we had. Some COVID infections at a facility, and that's played a large part in the move higher. The one thing we still haven't seen as the spot price really take off, where do you think we are in the uranium – what I'm calling a bull market. I joked last time that I thought I was a smart guy by calling for one this year, being that everybody else had called for one for the last five.

And last time you and I spoke a month or so ago, I thought I got it wrong again, but it looks like I may have gotten a little lucky here in the last several weeks. It looks sustainable, and it looks like it's on.

Curtis Moore: Yeah. Well, it's funny because that's a good example about this uranium market. When things happen, they happen really, really quickly. You're right. We chatted a month ago and things were kind of looking a little flat, and I didn't know when we're going to see things, but then all of a sudden everybody's stock is up 50% in the last month. And yeah. And I'm glad you pivoted back to uranium, because that is always first and foremost going to be our main business. Yes, we're extremely excited about rare earths, but we're only able to get involved in the rare earth industry due to our uranium capabilities. And again, Energy Fuels, we've been the number one uranium producer in the United States for the last several years. Our assets have produced, I think it's the second most uranium in the United States since about 2006. Putting us only second to Cameco. We're really clearly the leader in uranium, for sure.

And we're excited to see what's happening in those markets. You mentioned that Cameco's Cigar Lake, they announced that they're going to be shutting down again, due to some COVID infections. That's the biggest mine in Canada. It's actually the only mine actually operating right now in North America. So again, North America is going to have no uranium production. We're seeing the Ranger Mine in Australia. This has been planned for a long time, but it's shutting down permanently in January. That's been one of the biggest suppliers uranium around the world. There's a mine in Niger owned by owned by Orano, formerly Areva, that's shutting down permanently. We're just seeing more and more pressure on the supply side that is just going to make that bounce back, I think, all the more dramatic when it happens. We are actually seeing the stock price tick up a little bit right now. I think that it could be the beginning of run in uranium prices.

Gerardo Del Real: Couldn't agree more, Curtis. It's end of the year. What can shareholders expect in 2021 from the company?

Curtis Moore: Yeah. So, again, we're always going to be a uranium miner first, but our focus right now is to get this rare earth business off the ground. And this is kind of what we were looking for. We talked about rare earths, we talk about vanadium, which is, we've been really the number one producer of vanadium in the United States last year. We talked about land cleanup, and cleaning up these legacy mines in the Navajo nation. What it's really intended to do is to create this nice baseline of cashflow for the company to make us cashflow positive, while allowing us to keep this uranium option we have alive.

We've got the best uranium assets in the United States, it provides a wonderful option. But the problem is that the uranium cycles can often be pretty long. And in the meantime, you have to incur some shareholder dilution to keep that option alive. Well, we're hoping to make that go away through these other business lines, while also keeping that uranium option alive. So again, rare earth news, I think we're going to have more news maybe even before the end of the year, but yeah. Yeah, there's great things to come for us in 2021.

Gerardo Del Real: I noticed you're still out looking to secure more monazite sand ore. Correct?

Curtis Moore: Correct. Yes. There's definitely more monazite available to us. It is produced around the world. There's a very high grade monazite produced in Western Australia. You may have seen for our press release that the monazite ore that we're acquiring from Chemours is about 55% our total rare earths. Again, that's the grade, right? So, it's 55% grade. And as a mining guy, you understand just how high grade that is, and how valuable that stuff would be. The material in Western Australia is over 60% rare earth. So, we're talking to some folks in Australia, we're talking to some folks in Africa about the possibility of acquiring their monazite. And the thing is that a little monocyte goes a long way. So we're not going to be importing millions of tonnes of monazite.

Our kind of initial, short to mid-term goals is to process 15,000 tonnes of monazite per year, which would cover like 50% of US demand. So, 15,000 tonnes is nothing compared to... White Mesa Mill can process 720,000 tonnes per year of uranium ore. So 15,000 tonnes is nothing in terms of throughput. So, yeah. We're going to keep looking for more monazite and try to make a big splash in the US rare earth space.

Gerardo Del Real: I can't think of a better timing to be both a uranium producer and obviously rolling in the production capacity for rare earths. I think your timing is excellent, Curtis, and I think 2021 is going to be a fun and profitable year. Thank you again for your time. Anything else that you'd like to add, Curtis?

Curtis Moore: Nope, I think that's it. I appreciate your having me on, Gerardo.

Gerardo Del Real: Thanks so much. We'll chat in a few weeks. It sounds like.

Curtis Moore: Sounds good.

Gerardo Del Real: All right.