Energy Fuels Reports Gross Profit of $15.97 Million in 2014

Energy Fuels Inc. (NYSEMKT:UUUU,TSX:EFR) reported financial results for the year ended December 31, 2014. The Company earned $46.25 million in total revenue, with a gross profit of $15.97 Million from mining and milling operations. A strong balance sheet was also reported, including $38.60 million of working capital.

As quoted in the press release:

Financial and Operational Highlights:

$46.25 million of total revenue was realized by the Company.
Gross Profit of $15.97 million from mining and milling operations was realized by the Company, representing a gross profit margin of approximately 35%.
A net loss of $43.61 million was realized by the Company, primarily due to non-cash and other items, including impairment of assets of $35.86 million discussed below.
800,000 pounds of U3O8 sales were completed by the Company at an average realized price of $57.19 per pound, all pursuant to existing term contracts.
942,000 pounds of U3O8 were produced from the Company’s White Mesa Mill sourced from conventional ore, alternate feed materials and other processing, of which 85,000 pounds were for the account of a third party.
At December 31, 2014, the Company had $38.60 million of working capital, including cash and cash equivalents of $10.41 million and 808,210 pounds of uranium concentrate inventory.
The Company announced that it has entered into a definitive agreement with Uranerz Energy Corporation, to acquire all of the issued and outstanding shares of common stock of Uranerz. Upon completion of the transaction, the Company is expected to emerge as the largest integrated producer of uranium focused on the United States.
The Company announced that it is preparing to resume development at its high-grade Canyon mine in Arizona. According to a June 2012 technical report prepared in accordance with Canadian National Instrument NI 43-101 (“NI 43-101″), the Canyon Mine is estimated to have 1.63 million pounds of uranium contained in 83,000 tons of Inferred Mineral Resources with an average grade of 0.98% U3O8.
The Company acquired a 50% interest in the Wate Project, a high-grade uranium deposit located in Arizona. According to a March 10, 2015 technical report prepared in accordance with NI 43-101, the Wate Project is estimated to have 1.12 million pounds of uranium contained in 71,000 tons of Inferred Mineral Resources with an average grade of 0.79% U3O8.
As previously reported, the Company tested its plant, property and equipment related to the White Mesa Mill Cash Generating Unit for impairment in Q2 2014, and recognized an impairment loss of $30.78 million. The Company also recorded an impairment loss of $5.08 million in Q4 2014 on an asset reclassified as an asset held for sale.

Stephen P. Antony, President and CEO of Energy Fuels commented: “In 2014, we successfully executed our business plan, we strengthened our balance sheet, we increased our gross profitability, and we exceeded the annual production and operations guidance from our last annual financial statements.”

“Now with our proposed acquisition of Uranerz, we are about to emerge as the leading uranium mining company focused on the United States. The timing for this transaction is right, especially with the strengthening of uranium spot prices we saw in the fall of 2014 – a strengthening which has continued into 2015. After our acquisition of Uranerz is completed, we believe we will be well positioned in the U.S. to capitalize on improving uranium prices, because we will have two production centers, integrated conventional and in-situ recovery (“ISR”) production capabilities, and projects in our portfolio that allow us to increase uranium production as prices rise. We believe the long-term fundamentals of the uranium industry remain as strong as ever, as the World continues to invest heavily in nuclear energy. Energy Fuels has the staying power, production capability, and project portfolio that should allow us to successfully capitalize on the strong uranium market fundamentals we see in the future.”

Corporate Highlights:

For the 12 months ended December 31, 2014, Energy Fuels continued to strengthen its position as one of the leading uranium producers in the United States despite low uranium spot prices and general weakness in the overall commodity market. Energy Fuels focused on U3O8 production at its White Mesa Mill in Utah, uranium mining operations at its mines in Arizona, strengthening its balance sheet, asset rationalization, and improving the Company’s ability to increase uranium production in the future as market conditions warrant.

During FY-2014, Energy Fuels produced 942,000 pounds of U3O8 from its White Mesa Mill, which is the only conventional uranium mill operating in the United States. Uranium production during FY-2014 was sourced from both conventional ore (552,000 lbs.) and alternate feed materials and other processing (390,000 lbs.). In Arizona, the Company continued ore production at its Pinenut mine, completed ore production at its Arizona 1 mine in early 2014 at which point the mine was placed on standby status, and announced that it was planning to resume development at its high-grade Canyon mine in Q2-2015. The Company continued to deliver uranium into its three existing term contracts with realized prices of $57.19 per pound, which is a significant premium to the current spot price. In addition, the Company continued to focus its uranium property portfolio on uranium projects that significantly contribute to future scalability, including permitting at the Sheep Mountain, Roca Honda, and Henry Mountains Projects. The Company also acquired a 50% interest in the high-grade Wate uranium project in Arizona and disposed of certain non-core assets, including the sale of a 50% interest in its Copper King gold/copper project in Wyoming and the sale of other non-core uranium assets along the Colorado/Utah border. Furthermore, the Company strengthened its working capital position through the replacement of its $28.17 million regulatory bonding portfolio, and releasing $12.34 million of previously restricted cash.

In furtherance of these objectives, the Company also announced that it has entered into a definitive agreement with Uranerz Energy Corporation, pursuant to which it would acquire all of the issued and outstanding shares of common stock of Uranerz, on the basis of 0.255 common shares of the Company for each share of Uranerz common stock held. The acquisition is subject to regulatory and stock exchange approvals as well as the approvals of the Shareholders of the Company and the shareholders of Uranerz at meetings to be held later this year. The agreement contains customary deal support provisions, including a reciprocal break fee of $5.00 million payable if the acquisition is not completed under certain circumstances. In addition, the agreement includes customary and reciprocal non-solicitation covenants, as well as a reciprocal right to match any superior proposal that may arise. Upon completion of the transaction, the Company is expected to emerge as the largest integrated producer of uranium focused on the United States. Through this acquisition, the Company will become the only integrated conventional and ISR producer focused on the United States, and one of only three publicly-traded uranium producers in the World with both conventional and ISR production centers in its portfolio.

Outlook for FY-2015

Energy Fuels intends to continue to strengthen its position as the leading uranium mining company focused on the United States. The Company expects to accomplish this through:

Pursuing the completion of the Company’s acquisition of Uranerz.
Continuing the current Mill campaign to process alternate feed materials into mid-2015.
Continuing mining at the Pinenut Mine until the economic resource is depleted, which is expected to occur in mid-2015. Pinenut ore is expected to be stockpiled at the Mill and processed in 2016.
Resuming development on the Canyon Mine in the second quarter of 2015.
After mid-2015, continuing activities at the White Mesa Mill (except for mineral processing), and maintaining the facility in a state of readiness for the purpose of restarting mineral processing operations in 2016, or earlier as market conditions and contract delivery requirements may warrant.
Maintaining “standby” mines in a state of readiness for the purpose of restarting ore production as market conditions may warrant.
Continuing ongoing business development activities, including permitting and development of existing projects.
Evaluating the potential to further acquire uranium properties in the United States.

In response to current market uncertainty, the Company expects to continue cash conservation efforts until additional sustained improvement in uranium market conditions is observed. In addition, the Company is continuing to manage its operations and assets conservatively, maintaining its substantial uranium resource base, and scheduling uranium production at the White Mesa Mill as market conditions warrant.

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