Energy Fuels Inc. (NYSE MKT:UUUU) (TSE:EFR) earned a gross profit of US$10.02 million from mining and milling operations for the second quarter of 2015, while also reporting a solid balance sheet and continuing to position the company for significant increased production when uranium markets rebound.
Even as it incurred a net loss of US$2.31 million (fully diluted 10 cents per share), on revenue of US$23.71 million, EF sold 416,667 pounds of U3O8 at an average price of US56.74/lb. for the three months to June 30 for a margin of 42%. Much of the loss stemmed from about $6 million related to one-time expenditures related to its June 18, 2015 acquisition of Uranerz Energy Corporation.
EF believes it has sufficient cash and resources to carry out its business plan beyond calendar year 2015 and as of June 30, 2015, the Company had $41.59 million of working capital, including cash and cash equivalents of $20.76 million and 650,000 pounds of uranium concentrate inventory.
EF, which joined the Russell 2000, Russell 3000, Russell Global, and Russell Microcap indices in June, enhancing its visibility in the marketplace, expects to sell an additional 391,667 pounds of U3O8 during the remainder of the year under existing contracts at an average price of $57.05/lb., which will generate significant cash for the Company’s operational needs.
“Energy Fuels continues to execute our disciplined, flexible business plan, as we strengthen our position as a leading U.S. uranium producer. As our second quarter results demonstrate, Energy Fuels’ current uranium production, cash position, balance sheet, sales contract portfolio, and production scalability continue to differentiate us from our peers in the U.S. uranium space. In addition, we made two tactical acquisitions since the end of the first quarter of 2015 – Uranerz Energy Corporation, and properties adjacent to our Roca Honda Project – that provide us with flexibility, additional premium-priced sales contracts with major nuclear utilities, enhanced project economics, and the ability to increase both near-term and future production. Although uranium prices have been generally flat during the summer, we are encouraged by continued strong long-term market fundamentals, including the first Japanese nuclear reactor expected to restart soon, the continued aggressive build-out of China’s nuclear sector, large uncovered utility demand in the mid- to long-term, and dropping production at certain uranium mines,” said Energy Fuels’ president and CEO, Stephen P. Antony.
For FY-2016 and FY-2017, the Company forecasts sales under existing long-term contracts to total approximately 650,000 pounds and 620,000 pounds of U3O8, respectively, also at price considerably higher than today’s spot price.
While uranium spot prices have edged up since last summer, they are still far off from their heyday back before the Japanese earthquake and tsunami led to the shutdown of all the reactors in Japan. Prior to that event, uranium spot prices were above $70 per pound.
Energy Fuels said that for the long-term, the company continues to believe that the fundamentals of the nuclear energy sector will result in uranium demand surpassing supply. But in response to the short-term uncertainty, it will continue its cash conservation efforts until additional sustained improvement in uranium market conditions are seen.
EF says production at the company's White Mesa mill will end in the second half of 2015, resulting in the production of approximately 90,000 pounds of finished goods in the second half of FY-2015, and about 300,000 lbs. for FY-2015 in its entirety. In addition, the company provided guidance of 140,000 lbs. of production for the second half of FY-2015 from its recently acquired ISR operations. Nevertheless, the Company is maintaining the flexibility to resume processing stockpiled or other materials at the White Mesa Mill should market conditions or cash needs warrant.
As EFs recent acquisition of the Nichols Ranch project from Uranerz Energy and other pipeline projects advance, the company has gained operational flexibility and a diversified production of conventional, ISR and, alternate feed to allow production ramp up as soon as prices warrant. Meanwhile, the company can rely on strategic contracts, generating prices that remain well above spot for the near term.
Energy Fuels has also recently completed an acquisition at an attractive price of some 4,580 acres of key mineral properties adjacent to its Roca Honda Project in New Mexico from Uranium Resources (NASDAQ:URRE) containing historic Uranium Resources and mine infrastructure. The new properties have added to Roca Honda’s exploration potential while also improving project economics thanks to the additional Uranium Resources, increased mine life, and potential mine synergies. The presence of a partially-sunk mine shaft constructed by Kerr-McGee in 1982 to a depth of 1,478 feet on the Acquired Properties may be available for use, said Energy Fuels, which could drop capital requirements and reduce operating costs.
Energy Fuels operates the only operating conventional uranium mill in the U.S and boasts the largest NI 43-101 uranium resource portfolio in the U.S. among producers. In 2014, Energy Fuels was the second largest uranium producer in the USA; only Cameco produced more.