Categories: Energy
Topics: General Energy

Energy Fuels (NYSE: UUUU) VP Curtis Moore on Entry into Rare Earths, Geopolitics and Uranium & Strengthening the Balance Sheet

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 (NYSE: UUUU)(TSX: EFR), Mr. Curtis Moore. Curtis, how are you?

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

Gerardo Del Real: I'm well. Staying inside, washing my hands, wearing my mask if I do go outside, and busy as always. Everyone healthy on your end?

Curtis Moore: Yep, everything's good over here. We're moving things forward pretty well at Energy Fuels these days, too.

Gerardo Del Real: That's excellent news. You had some news here recently that I want to touch on. It was received well by the market. You're strengthening the balance sheet, eliminating debt and, of course, growing the uranium inventories. 

We could get into that, but before we do so, I want to ask you to just give us a brief macro overview of what you're hearing in the uranium space. A lot of excitement, a lot of chatter. What's come your way that you believe would be of note?

Curtis Moore: Of course, the biggest news in the uranium sector has just been all the production cuts that we've seen around the world. That includes Kazakhstan. Kazakhstan produces about 40% of the world's uranium and their country has basically been shut down now for a month or two, I believe. They've extended their shutdowns again. Their previous guidance was to produce about 60 million pounds of uranium this year. Well, if you shut that down for two, three, four, six months, you can see that is a huge bite taken out of the supply side of uranium.

I think that uranium's been one of the better performing commodities out there this year. Prices rose 30% there in that March, April time frame. They kind of flattened out, even drifted down a little bit – as did stock prices – but I think there's a good chance that there could be another leg up, since we've actually seen prices rise for a couple of days now. Small bits, but I think these supply cuts are starting to take effect.

Gerardo Del Real: Good stuff. Let's talk rare earths while we're talking macro. Obviously, geopolitical tensions between the US and China continue to escalate. There doesn't seem to be a lot of goodwill from either side right now. Which of course means that at any point – and we've seen this back in 2010 – we could have another situation where the rare earth supply chain is weaponized in a more aggressive fashion by China.

Energy Fuels made it a point to note that it was making an entry into the space and it thought it could do so at a relatively low cost with a good return on investment. What are your thoughts about the rare earth space and what is Energy Fuels doing to advance that goal?

Curtis Moore: You're exactly right. Rare earths are definitely seeing some renewed interest these days. I think I told you before, we've been looking at rare earths for probably about a year now. I can't get into too many details yet, but we're making some pretty phenomenal progress, we think.

Phase one of our entry into the rare earth space is to basically take rare earth ores and other rare earth-bearing streams, and process those to remove the uranium and thorium from those streams, which is our basic business as a uranium mining company, then produce a rare earth concentrate that can then be sold to a rare earth separation facility. We're making some great progress, both on the technical and commercial aspects of that. We're really trying to make this into a cashflow generating business in the very near term.

The nice thing about it, what we're looking to do won't cost a lot of money. We're basically doing what we do for our main business, which is to recover uranium. This is just recovering uranium and thorium and other radioactive elements from these streams and producing a concentrate that the separator can deal with.

Gerardo Del Real: So, it sounds like we should get more specific soon. Would that be accurate?

Curtis Moore: Yes, I think so. Absolutely.

Gerardo Del Real: All right, let's talk uranium. You've been growing the inventory and you've also done a great job of strengthening the balance sheet and cutting down on debt. Can you speak to each of those?

Curtis Moore: Sure. We're back to producing a little bit of uranium at the White Mesa Mill. Last year, we focused on vanadium. Of course, that was a huge success for us, except on the commercial side. We actually produced 1.8 million pounds of V205 of last year in a new process at the White Mesa Mill, and it was done very low cost. We got the highest purity product that we've gotten in the mill's history. But unfortunately, the price of vanadium collapsed. So we're sitting on 1.6 million pounds of V205. 

On the uranium side, we're back to producing a little bit of uranium. I think our current guidance is 125,000 to 175,000 pounds. When you add that onto our inventory that we reported at the end of 2019, we're going to end up 2020 with almost 700,000 pounds of uranium. Even at today's prices, we're talking $22, $23 million of uranium inventory that's liquid. We could sell it tomorrow if we wanted to. 

We're also very hopeful that uranium prices are going to be going up as we've seen and they're going to keep going up, or there's going to be some demand coming from the US government, for instance to a supply that US uranium reserve, which would be hopefully at much higher prices than we're seeing in the market today. It's some great levers that we have to uranium prices that we can capitalize on immediately.

Gerardo Del Real: Well said. Let's talk about the debt reduction. You've done a brilliant job of continuing what you said you would do. Can you speak to that a bit?

Curtis Moore: Yeah, we have these convertible debentures that come due at the end of the year. So we're addressing them, we're paying them off. Our intent is to pay them off with cash. We're also trying to avoid a big, disruptive financing or anything like that to address those. We're trying to address them in a quiet and in a reasonable manner. 

We still expect to be debt-free by the end of 2020. That's an enviable place. There's a lot of companies out there, and I won't name names, but they're incurring a lot of debt right now. The interest rate and the carrying cost of that debt is high, and it may hit them all at once. They may not have a big debt burden right now, but those numbers just keep adding up and up and up. It's going to have to be addressed at some point in the future.

Our goal is to be debt-free and to not incur any other debt until we have a very, very clear pathway to being able to finance that debt and pay for that debt, whether it's through a contract with a utility or something like that. It's tough for explorers and developers to have debt. We're very proud to be able to get rid of that.

Gerardo Del Real: Well, you know what Mr. Buffett says about the tide coming in, right? That's where you see who's swimming naked.

Curtis Moore: Right.

Gerardo Del Real: One last question for you, Curtis, before I let you go. I want to thank you for your time, but one last question. This administration and, frankly, Presidential candidate Biden, both sides have been pretty eager and enthusiastic about promoting a clean energy stimulus package that of course will involve infrastructure. But we know that with 232 and the recommendations that were made, that there was supposed to be a big emphasis in re-establishing the uranium sector here in the United States. Have you heard anything else from the administration in regards to that?

Curtis Moore: Of course the administration and the Department of Energy, they are pushing hard for this. Phase one of their effort to bring the industry back is the creation of the US uranium reserve, and they're looking for $150 million per year. Unfortunately, in today's bit of a toxic political environment in the United States, if one side is for something, the other side is automatically against it.

With that being said, there is bipartisan support in Congress to fund this reserve. In the first version of the House bill they just passed in committee, there was no funding for the uranium reserve. However, that doesn't mean that it couldn't be added later, the Senate's still working on that. We're very optimistic that something will come of this.

Look, what we're talking about here in the results of the Nuclear Fuel Working Group, it's nonpartisan. We're pretty sure that that same report is going to be very useful to a Biden administration, if there is a Biden administration, right? This is not going to be the end of the story at all. Because like I said, both sides are in favor of clean energy, both sides want to make sure that our military has the material it needs to perform its mission, and a big part of that involves uranium.

There's the funding of the uranium reserve. Another thing to look out for is the renegotiation of the Russian Suspension Agreement that's going on right now. Again, I can't get into it too much, but right now the governments of the US and Russia are in heavy negotiations on how to extend the RSA. This is an agreement that has limited imports of Russian uranium into the United States to 20% of our needs. The administration wants to reduce that over the long-term. I think the US Is putting the screws to Russia, which is good. We need to be able to build up our own domestic capabilities and not just rely on Russia for our nuclear fuel. 

Commerce did put out a report just a few weeks ago that basically said that if the two sides are not able to come to an agreement by August 4th – now that's two weeks away at this point or less than two weeks away –

Gerardo Del Real: Right.

Curtis Moore: The Department of Commerce is willing to consider actually canceling the entire agreement, which they can do unilaterally, which would become very interesting for our market. If the Department of Commerce cancels the RSA, that means that tariffs of 115% would come into play for all imports of nuclear fuel into the United States. That's big. I don't think anybody really wants to see that, least of all US utilities.

Look, we don't want to see utilities have to bear that burden, but we also need to make sure that Russia agrees to reasonable terms under which they can import uranium and nuclear fuel into the United States. That's certainly something to keep an eye on here in the next few weeks.

Gerardo Del Real: Curtis, thank you for that. I said I was going to let you go, I'm not letting you go yet. I did have a reader that wrote in and asked why insider holdings of Energy Fuels were where they are. I have not looked recently. It sounded like they're not very high. Can you speak to that really quick and can you respond to that?

Curtis Moore: Yeah, sure. I think part of it is that if you see companies that have very high insider holdings, oftentimes those executives received founder shares, or they had a big chunk of the company when the company was first founded. In our case, we only started getting shares as a portion of our bonus, just a couple of years ago. Look, as much as I would love to go get multimillion dollar bonus awards and shares [laughs], it takes a while for that to build up.

We have had a lot of open market buying, by both board members and executives, and that's what we're doing. We're not a bunch of super wealthy people. Each of us, we have significant holdings, at least from our own personal standpoint, that represents a fairly big chunk of our own personal net worth in some of our cases, myself included.

Oftentimes, when you see those big insider holdings, it's because those shares were granted to those executives, either through large bonuses or founder shares. We just haven't had that in our company in place, except for the last couple of years.

Gerardo Del Real: So what you're telling me, Curtis, is that you and the team did not allot yourself 20 million founder shares at a 10th of a penny each?

Curtis Moore: Exactly. Now if anybody on our board is listening, I would very much encourage them to grant us $20, $30 million, just a performance bonus. I'll be happy to take that [laughs].

Gerardo Del Real: Thanks for the interview, Curtis. Thanks for the interview. Curtis, thanks a lot, I really appreciate the update. That was thorough, well spoken as always, and insightful. Thank you, and we'll chat again soon, okay?

Curtis Moore: Yep, sounds good. Thanks again, Gerardo.

Gerardo Del Real: Thank you.