Categories: Energy / General Market Commentary
Topics: General Energy / General Market Commentary

Energy Fuels (NYSE: UUUU) VP Curtis Moore on PFN Technology Acquisition & the “Extraordinarily Positive” Nuclear Fuel Working Group Report

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the VP of Marketing and Corporate Development for Energy Fuels (NYSE: UUUU)(TSX: EFR), Mr. Curtis Moore. Curtis, how are you today?

Curtis Moore: I'm doing great, Gerardo. Nice to join you again.

Gerardo Del Real: It's been a few weeks. A lot of news in the uranium space. You had some news today that I got some questions about, and I wanted to pass those along. Let's get right into the headline, “Energy Fuels Enters into Agreement to Acquire Prompt Fission Neutron (PFN) Bore Hole Logging Technology and Equipment; Securing Control over this Critical Technology for US ISR Uranium Production.” 

I'm impressed you managed to fit that all in one news release headline. Let's get right into the details. Give me the premise for this acquisition. Then let's get into the labeling of the technology as critical because I definitely got some questions about that.

Curtis Moore: Yeah, absolutely. That was quite a headline. About as long as you want to go. But yeah, this is something we're really excited about, simply because this is a technology that is really needed in order to properly develop and produce from ISR projects, particularly in the United States. Now keep in mind, I'm not a geologist or a technical guy, so I'm going to be giving you the high level view of what this means from my standpoint. 

As I understand it, what PFN technology does is that it gives you better data on the ore that you're running into in your drill holes. They can be used for exploration. In fact, this technology was used to discover the Beverley Mine down in South Australia, which is even producing today. It's a wonderful ISR mine. But it's also used quite a bit, in fact, in pretty much all the ISR projects in the United States, simply because it just gives you that better data on ore grade for all your drill holes. There's a significant amount of disequilibrium that you run into, particularly in the United States and, as I understand, with the younger uranium deposits, geologically speaking. So this just gives you real time data as you're doing your drill holes, rather than having to go back and take samples back to the lab and do a detailed analysis of that.

We now have the technology. We have some PFN equipment, even before this. And I think most of the US producers probably have some as well. But now we have all the intellectual property, we have all the plans, all the specifications. We're now the ones that are able to service and maintain other people's PFN equipment and license future equipment. It's something that we certainly needed for our own operations, but I think it's also going be something that we can monetize and license out to other US producers in particular.

Gerardo Del Real: That's a great overview, Curtis. That was one of the questions that I received actually, was whether or not you would be monetizing the patent, the licenses, the royalties and whether or not this was technology that you could generate revenue from. Did you want to speak to that in detail a bit more?

Curtis Moore: Yeah, we believe it is. Before we acquired this, we were likely to have to go to the previous owner and pay them to maintain and upgrade and help us operate our PFN tools. Now we have that ability to, of course, handle it internally. Then anybody else who uses the same technology – and I think that it's most of the folks here, certainly, in the United States, and honestly also around the world – they're now going to have to come to us. We do intend to monetize this. And if things come back in the United States like we think that they will, especially with the recommendations in the Nuclear Fuel Working Group, I think that we're going to have a fairly quick payback on this acquisition.

Gerardo Del Real: Let's talk about that. The price, it was relatively cheap, $500,000. Why the impetus now? Was there an urgency because of the quality of the deal, or is it something that you plan on putting to use imminently?

Curtis Moore: Yeah, it basically came up for sale recently. The previous owners of it have been looking to sell it, and sell the equipment and the technology. We just saw an opportunity and decided to jump on it. I think $500,000 is a pretty inexpensive number. As I understand this, the same package was going for a few million dollars just a few years ago. Yeah, we got it for $500,000 US. And again, I think it's going to more than pay for itself very, very quickly.

Gerardo Del Real: Oh, that was my next question is if you had to replace it and buy the equipment brand new, what that looked like. Now obviously you're saying in the order of a couple of million dollars.

Curtis Moore: Yeah, that's what the equipment plus the technology I think went for a few years ago. It did come with a quite a bit of just equipment, including a couple of logging trucks, computers, PFN tools, generators, and other technology. I think just the equipment alone probably is worth $500,000. And then on top of that we have the rights to the technology. Again, I think we're going to be able to monetize that in the future as we help other people with their projects.

Gerardo Del Real: Excellent. How are the lines of communication with the US government now that we have the Nuclear Fuel Working Group recommendations laid on the table and both sides of the aisle obviously looking to see what opportunities there may be there? Has the communication increased? Is it steady? Are you seeing interest out there?

Curtis Moore: Yeah, I mean I'm not going to go into too many details, but there's definitely a lot of interest in examining multiple ways to help the US uranium industry. The Nuclear Fuel Working Group report, I have a feeling that a lot of people misunderstood what that really represented. In our view this is extraordinarily positive. Because what it did, it just laid out this nearly irrefutable case as to why the United States needs to have a healthy uranium and nuclear fuel industry. Because if we don't do this, we're going to basically be ceding control of the global nuclear industry, and even the US nuclear industry, to some of our geopolitical foes like Russia.

So it laid out a menu of items that politicians and policymakers can choose from. We've already seen that President Trump has requested money for this US uranium reserve. On top of that, they've said that they recommended increasing the size of the American assured fuel supply, which is basically backup fuel for US nuclear power plants, and a whole host of other things that they can do to support this industry. I think it's the strongest support and commitment from the US government in many, many decades. Again, from our perspective and from what we're seeing right now, it's almost like they're just willing to do what it takes to make sure that the US industry comes back. So we're excited to see what comes up here in the coming weeks and months.

Gerardo Del Real: We chatted recently, Energy Fuels announced that it was making an entry into the rare earth space. Anything to report there?

Curtis Moore: Not right now. We are making a lot of headway, but nothing that is ready to announce yet. So stay tuned. I'll just say that.

Gerardo Del Real: Fair. You also announced Q1 financials on May the 1st, 2020. What does the treasury look like? I believe it was something along the lines of $48 million. I'm working off of memory here, so excuse me if my memory is incorrect.

Curtis Moore: Yeah, it was in that range. I'd have to go look to see exactly what the numbers were. But we do have a robust balance sheet. Yeah, it was $48 million, I believe, of cash, marketable securities and inventory. I think the interesting thing for your listeners to note is our inventory, the value, it's carried on our balance sheet basically at the lower of then prevailing market prices or costs.

Gerardo Del Real: Right.

Curtis Moore: So our uranium inventory is actually being carried at like $23 per pound, which I think we have 520,000 pounds at March 31st. But as I'm sure you know, the current spot price is $34 per pound. And I believe the vanadium is being carried at, if I'm not mistaken, around $6 per pound. And the current spot price of vanadium is higher than that. I think that if you apply today's commodity values, the value of our inventory is probably worth another $5 to $7 million. I think we've got by far the healthiest balance sheet of certainly anybody in the United States. I think that will certainly help us going forward.

Gerardo Del Real: Any immediate plans to put some of that cash to work in the field at any of the significant projects that you have? Or are you waiting to get more clarity on which direction the DOE and the US government takes?

Curtis Moore: Yeah, we're waiting to get more clarity. We haven't signed any contracts yet. There hasn't been any announcements of any sort of purchasing by the government or anything like that. We're not going to run out and just based on the Nuclear Field Working Group report for instance, run out and start ramping up production. We're waiting for real firm commitments before we do that. 

But honestly, we are far more ready than basically anybody else in the US uranium space. We did spend the last couple of years in, we called it our uranium readiness program, where we were investing some capital in our projects just to make sure that when the gun goes off, we will be ready to go out and start increasing production very, very quickly. Quicker than anybody else in the United States.

Gerardo Del Real: I giggled because I sense a real uranium bull market and the reason I sense that is you're the second person to tell me that this week, Curtis.

Curtis Moore: Very good, yup. I have a feeling it's turning.

Gerardo Del Real: I love it. Listen, thank you so much for the thorough update. I'm looking forward to having you back on. I think the news flow and the news cycle obviously is going to continue to advance robustly, so thanks for the time today. I really appreciate it.

Curtis Moore: You're very welcome. Look forward to chatting with you soon.

Gerardo Del Real: All right. Take care, Curtis.