Energy Fuels' Curtis Moore

Curtis Moore, VP Marketing and Corporate Development for Energy Fuels, explains changes in global uranium and nuclear markets, a surprise high-grade copper discovery in northern Arizona, and how 2017 could be the turning point for uranium prices.
Energy Fuels Inc. (TSX:EFR,NYSEMKT:UUUU) is the second largest supplier of uranium in the United States, and the only U.S.-based uranium producer with both conventional production and in situ uranium recovery (“ISR”) operations. The company owns the only conventional uranium mill operating in the country and a large portfolio of high-quality conventional and ISR uranium properties. Energy Fuels believes it offers excellent leverage to rising uranium prices and is well-positioned to capitalize on the growing need for more clean energy and domestic uranium supplies.
In recent news, Energy Fuels announced that it had recently obtained U.S. Environmental Protection Agency (“EPA”) approval for the expansion of its currently operating Nichols Ranch ISR Project in Wyoming. In addition, chemical assay results have confirmed more high-grade uranium at its Canyon Mine in Arizona, as well as a surprise discovery of very high-grade copper mineralization.
Investing News Network: Some analysts and industry leaders are calling 2017 a breakout year for uranium. Where do you see the market headed in the coming year and the longer term?
Curtis Moore: 2017 has indeed been busy in uranium markets. If you go back just to December 1, 2016, the market was in the doldrums. The spot price was at 12-year lows, and not far above the all-time lows for uranium on an inflation-adjusted basis. The market was oversupplied. And, buyers had no sense of urgency to enter the market. But in December, the market started showing some signs of life. Major production cuts have been announced, and the world continues to demand more uranium to fuel growth in nuclear energy, particularly in Asia. Traders and utilities became more active participants in the market in December and January. As a result of these small changes in the market, the price of uranium increased almost 50 percent in just two and a half months. In fact, until very recently, spot prices have ticked up almost every day this year, showing how quickly and dramatically things can change in uranium markets. Markets have settled back a bit recently. But, we think we will see more strength throughout the year, and we believe that the worst is behind us.

The bottom line is that, while markets are currently oversupplied to some extent, over the longer- term production needs to be incentivized. Today’s spot prices don’t incentivize current production, and they are far away from incentivizing new production or new project development. I would say that the incentive price for existing production is probably in the $40 to $50 per pound range, and new production probably needs $65 per pound or more. So, there is the potential for considerably more upside ahead of us.
INN: Kazatomprom recently announced a planned 10-percent cut in production. Considering that Kazakhstan is responsible for 40 percent of the uranium production worldwide, what impact do you expect this move will have on the market?
CM: This was a major announcement in January. Kazakhstan has grown to become the world’s largest producer of uranium, so this is going to remove about five or six million pounds of uranium out of the market this year, and hopefully beyond. Total global uranium requirements are currently in the neighborhood of 200 million pounds per year, so the Kazakh news is significant. It is also revealing that the world’s largest and lowest cost producer is feeling pain in this market. It indicates to me that today’s market is simply not rational to support long-term uranium production. It is important to note that utilities make comprehensive forecasts on future supply and demand for uranium. Before the Kazakh news, most analysts were forecasting production increases in Kazakhstan this year and in upcoming years. So, this was big news that many did not expect. And, I think we are going to see more production cuts as legacy contracts expire and for as long as uranium prices remain below about $40 or $50 per pound. These production cuts, combined with increasing demand, should set the stage for the next market recovery. Then, the question will become whether the uranium mining industry will be able to respond to increased demand and prices. History tells us it probably won’t, which will place further upward pressure on prices. Those companies that have operating, permitted and developed projects, and who have shown they can reliably produce and sell uranium should be rewarded in this next supercycle.
INN: Focusing more specifically on the U.S. uranium market and energy markets, we have seen a series of legislative action in states like New York, Illinois, and discussion in Connecticut to aid existing nuclear plants with subsidy programs. Would you be able to comment on the current state of the market in the United States with utilities, and the outlook under the new Trump administration?
CM: We have indeed seen some good news coming out of the United States. When you look at uranium and nuclear markets, a big driver today is obviously Asia. However, the U.S. remains the world’s largest nuclear market and uranium consumer, at least until China surpasses us in the mid-2020’s. The big surprise for me was Illinois passing legislation to save three nuclear power plants. Almost everyone assumed those units would be closing in 2017 and 2018, including the established market forecasters. But then, virtually out of nowhere, Illinois acted. From a uranium supply standpoint, it was almost like the U.S. built three new nuclear power plants in Illinois in December.

Longer term, both at the state level and under the new Trump administration, I hope to see additional plants receive similar treatment, many of which are struggling with low gas prices and renewable subsidies. Policymakers are also beginning to recognize the value of nuclear energy in cutting carbon emissions and reducing air pollution, while also providing baseload energy and grid stability. They are also finally beginning to realize some of the limitations of renewables. I am hopeful that both state and federal governments will start to take action to ensure the United States remains a leader in clean, nuclear energy.
INN: How is Energy Fuels positioned to take advantage of the upcoming changes in the uranium market both in the United States and abroad?
CM: We believe we are uniquely positioned to take advantage of these new market dynamics. We are a well-known and reliable U.S. producer with two operating production facilities in Utah and Wyoming. We have a third production facility sitting on standby in Texas, which is ready to go back into production once the uranium price incentivizes it. We also have a number of other permitted and developed projects that can go back into production. And, we are a proven supplier that is well known among utilities, as opposed to some of the newer explorers and developers in the market. It’s one thing to talk about producing, but it’s another to actually produce and deliver finished product to customers.
As you mentioned, we expect to be the second largest uranium producer in the U.S. in 2016, behind Cameco. But, we believe we have the ability to rapidly increase production significantly as prices rise, and that no other company offers a similar suite of current production, high-quality assets, in-ground uranium resources, and leverage to uranium prices. We believe we are clearly the “go to” uranium producer in the United States.
INN: Energy Fuels’ Canyon Mine in northern Arizona has some of the highest-grade uranium in the United States and is expected to be cost competitive with some of the best underground uranium mines in the world. Late last year, you announced the discovery of high-grade copper mineralization at the Canyon Mine. How do you expect this discovery to impact the project economics, and when do you foresee production commencing?
CM: The Canyon Mine is an extremely exciting mine for us. We believe that we can produce uranium from the Canyon Mine at a cost that is competitive with some of the best conventional mines in the world today. We are currently engaged in an underground drilling program, and we are finding more and more high-grade uranium at this deposit. It is fully permitted, almost fully developed, and will be ready to go into production once the market incentivizes it. That said, we do not know if we are going to put it into production in 2017, or at some later date. If today’s market stays flat or declines, we are likely to put it on standby. But, we believe that prices are going to increase, and that should allow us to put it into production at that time.
I think it is important to realize that the Canyon Mine is different from a lot of other mines. It is fully permitted, it is almost fully developed, and it is ready to go. This is unlike other projects out there that need to be permitted, need financing, need a mill or processing facility, and need to be developed. There is still a long road ahead of them before they can actually go into production. Most of these milestones have already been achieved at our Canyon Mine.

And then there’s copper. Copper was an unexpected discovery at Canyon. We are finding copper grades that have so far averaged about 6 to 8 percent, including several smaller intercepts between 20 and 30-plus percent copper. This is extremely high-grade copper, and I believe it is likely one of the highest-grade copper discoveries in the world in recent years. If we are able to monetize the copper and produce a salable product, we believe it has the potential to further improve the economics of this project. We are continuing the drill program at the Canyon Mine, and we expect to produce a new resource estimate in the next several months, including both uranium and copper. With uranium prices up significantly over the past few months, you can see why we’re so enthusiastic about this project.
INN: You have also been producing on the Nichols Ranch ISR Project in Wyoming’s Powder River Basin since 2014. Can you give us any production figures for 2016, and production guidance for 2017?
CM: For 2016, we expect the Nichols Ranch Project to have produced about 335,000 pounds of uranium. For 2017, our current guidance for Nichols Ranch is to produce about 350,000 pounds of uranium. But, we are not at full production at this facility due to today’s low prices. At higher prices, Nichols Ranch could get up to about 600,000 to 800,000 pounds of production per year. We also recently announced that we are very close to receiving all of our permits for the Jane Dough project, adjacent to Nichols Ranch. In 2017, we expect to have nine wellfields and header-houses in operation at Nichols Ranch. We have four more wellfields and header-houses in front of us at Nichols Ranch, for a total of thirteen. However, the Jane Dough approval is important, as those wellfields will be the next ones to go into production after the thirteen at Nichols Ranch, and connecting directly into the Nichols Ranch plant. In addition, Jane Dough has one million more pounds of uranium in the ground than Nichols Ranch. Then, we have the Hank project fully-permitted as a satellite facility after Jane Dough. So, we have a lot of ISR runway ahead of us in Wyoming.
INN: Are there any other major catalysts on the horizon for Energy Fuels in 2017?
CM: We are still performing a drill program in the Canyon Mine, so we will have more information about the uranium and copper mineralization at that project. We expect to put out a new NI 43-101 technical report, or preliminary economic analysis, later this year. Other catalysts mostly relate to the market. I think we might see more production cuts ahead, maybe even out of Kazakhstan. I am hopeful that we’ll see more reactors restart in Japan. In fact, a Japanese think tank recently predicted that 14 reactors would be operating by March 31, 2018 under their base-case scenario. That means 11 restarts in the coming year or so. I am also hopeful for a couple of changes in U.S. government policy, including the potential for a reduction or elimination of sales of uranium out of the U.S. Department of Energy. So, we believe we have a lot to be excited about in 2017.
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