Energy Fuels Inc (TSE:EFR, NYSEMKT:UUUU) has in a series of quick-fire investor updates predicted an upturn in operations through 2016, and added future expansion possibilities via two separate acquisitions.
The American uranium group predicted that in 2016 it would produce some 950,000 pounds of uranium, which says will be a ‘significant increase’ compared to last year.
Some 550,000 pounds are expected to be sold under existing long-term contracts, and those deals are expected to see better prices than last year too.
Selective spot sales are also expected, and the cash generated from such sales would be used to fund operations, construction and resource evaluation activities, Energy Fuels told investors.
Looking further forward, the company added that by 2017 it expects to have existing inventory or expected production to meet all of its commitments to sell 620,000 pounds of uranium under its existing long-term contacts, and those sales would be priced at higher levels than it saw in 2015.
MESTENA URANIUM ACQUISITION TO ‘CEMENT’ DOMINANT POSITION
This morning it also reported the signing of a definitive agreement to acquire Mestena Uranium LLC, which operates the Alta Mesa ISR (in-situ recovery) project, in Texas.
The share-based deal is expected to ‘cement’ Energy Fuels position in as the dominant integrated uranium producer in the US. Alta Mesa is fully permitted and operational, and it has a well-established track record of lower cost uranium production, it added.
It has an operating capacity of 1.5mln pounds per annum, but it is currently on standby due to current market conditions. Energy Fuels highlighted that Alta Mesa could be put into commercial level production with limited capital within six months, should it a production decision be made.
Along with the facilities, Energy Fuels also acquires a large, 195,501 acre, land package with future uranium resource potential.
Paul Goranson, Energy Fuels executive vice president, who runs in-situ recovery operations in Wyoming, previously oversaw the Alta Mesa operation for several years.
Overall, the acquisition will see the group’s possible production capacity rise to 11.5mln pounds per year.
“We believe this transaction creates significant value for our shareholders, as we are acquiring operational processing facilities and permitted resources, which would otherwise take many years and tens of millions of dollars to permit and construct ourselves,” said Stephen Antony, Energy Fuels chief executive.
“In my view, Mestena was the next logical acquisition in growing Energy Fuels' ISR capability.
“We look forward to closing the transaction within the next few months."
ACQUIRING REST OF ROCA HONDA
On Friday, Energy Fuels announced it has signed a non-binding letter of intent with Sumitomo Corp to acquire the 40% of the Roca Honda project that it didn’t already own.
Energy Fuels will subsequently own 100% of Roca Honda, which is one of America’s largest and highest grade uranium projects.
It comes after the uranium company purchased adjacent properties, which are also believed to have resource potential.
In better market conditions Roca Honda would be expected to have a nine year mine life, with what Energy Fuels describes as ‘an attractive cost profile’ with total production estimated at around 25mln pounds.
The deposit is located within shipping distance to Energy Fuels’ White Mesa mill, which could process the material.
Energy Fuels agreed to pay Sumitomo $1mln in cash and $1.5mln in shares, and committed to pay a further $4.5mln upon Roca Honda’s first commercial uranium production.
Sumitomo is, according to Energy Fuels, divesting a number of development-stage mining assets around the world in order to focus more resources on producing assets.
"We have appreciated Sumitomo's participation in the Roca Honda project over the years as a valued joint venture partner,” Antony said in a statement. “We understand and respect Sumitomo's decision to change its business focus.
“We will be very pleased to be able to obtain complete control over this major project on the terms negotiated with Sumitomo."
Antony highlighted that Roca Honda is a world-class uranium project in the advanced stages of permitting, and said it is a particularly important asset because of the proximity of the White Mesa mill.
“The Roca Honda project is an important factor in our strategy of combining large-scale optionality and leverage to improving uranium markets with our lower-cost production from the Nichols Ranch project, alternate feed materials and certain of our Arizona Strip conventional properties.”
Energy Fuels PRODUCTION ABOVE GUIDANCE FOR 2015
Energy Fuels informed investors on Monday that production for 2015 amounted to 468,000 pounds, above prior company guidance.
It sold a total of 1.075mln pounds of uranium in the year. Of that 1.025mln pounds were sold under contact at an average price of $57.39 per pound, while 50,000 pounds were sold on the spot market at $37.35 per pound.
Energy Fuels expects gross profit margins to have improved in the figures for 2015, compared to 2014, and said it expects to report a working capital position as at December 31 2015 of between $30mln and $40mln.
A non-cash write off is expected to be between $55mln to $60mln to reflect continued weakness in uranium prices, the values of previously acquired uranium properties and the decrease in the company’s market capitalisation.
As a result the company told investors that once it factors in higher standby costs related to the White Mesa mill and increased development costs for the Nichols Ranch and Canyon projects, it expects to report a net loss between $75mln and $85mln.