Energy Fuels – America’s Leading Conventional Producer of Uranium
Overview
Energy Fuels Inc. (TSX:EFR) is a Toronto, Ontario based uranium and vanadium mining, production, and development company with production assets located in Utah and Arizona, and standby mines and development projects located in Colorado, Utah, Arizona, and Wyoming. Energy Fuels is listed on the TSX under the trading symbol ‘EFR’. In June 2012, Energy Fuels acquired all of Denison Mines‘ production assets and mining operations in the United States. Its primary strategic asset is the White Mesa Mill, the only conventional operating uranium processing facility in the United States. Additionally, the company has producing uranium mines in Arizona, along with standby mines and advanced stage development projects in Arizona, Utah, Colorado, and Wyoming.
Investment Highlights
- The White Mesa Mill is the only conventional uranium and vanadium mill in the U.S.
- One of the largest holders of NI 43-101 compliant uranium and vanadium resources in the U.S.
- Skilled and experienced management team
- Low-cost uranium production from alternate feed sources
- Significant vanadium byproduct
- Portfolio of operating and fully-developed mines in the Western U.S.
- Existing long-term uranium sales contracts with utilities
Key Properties
White Mesa Mill
The White Mesa Mill is the only fully-licensed and operating conventional uranium mill in the United States, and one of only three in North America. The facility has a licensed capacity of 2,000 tons per day and can produce up to 8 million lbs. of U3O8 (uranium) per year. White Mesa also has a co-recovery circuit to produce vanadium from Colorado Plateau ores, and an alternate feed circuit to process other uranium-bearing materials, such as those derived from uranium conversion and other metal processing from third party producers, thus enhancing the mills long term economic viability.
White Mesa is strategically located in Blanding, Utah, central to the uranium and uranium/vanadium mines of the Four Corners region of the United States. The mill was constructed in 1980 by Energy Fuels Nuclear Inc. In 2007, a $31 million modernization of the facility was completed. The White Mesa Mill utilizes sulfuric acid leaching and a solvent extraction recovery process. The uranium produced is purchased by utility companies and shipped to conversion facilities as the next step in the production of fuel for nuclear power. The vanadium is shipped mostly to steel and alloy manufacturers.
Arizona 1
The Arizona 1 Mine is a producing uranium mine located in northern Arizona, approximately 35 miles south of the town of Fredonia, Arizona. The mine site for this high-grade “breccia pipe” deposit has less than 20 acres of total surface disturbance and is situated on land managed by the U.S. Bureau of Land Management (“BLM”). Originally approved by BLM in 1988, the Arizona 1 Mine has been in active production since late 2009, producing up to 300 tons of ore per day that is processed at Energy Fuels’ White Mesa Mill. Through October 2012, Arizona 1 had mined a total of approximately 89,000 tons of ore, at an average grade of 0.62% U3O8, containing 1.1 million lbs. of U3O8.
Mining at the Arizona 1 mine is expected to continue through the end of 2013, after which the resources will likely have been mined out. At this time, the mine will be scheduled for reclamation. The nearby Canyon and Pinenut properties will be evaluated to take advantage of existing infrastructure, and labor resources while the reclamation of the Arizona 1 property is undertaken; thereby leading to a potential seamless transition back into the region’s uranium and vanadium production.
Pinenut
The Pinenut Mine is a producing uranium mine located in northern Arizona, approximately 35 miles south of the town of Fredonia, Arizona. The mine site for this high-grade “breccia pipe” deposit has less than 20 acres of total surface disturbance and is situated on land managed by the U.S. Bureau of Land Management (“BLM”). Ore production at Pinenut should begin during the third calendar quarter of 2013.
The potentially economic grade intercepts at the Pinenut deposit occur between depths from 880 ft to 1,370 ft. According to a 2012 technical report, Inferred Mineral Resources at the Pinenut deposit are estimated to include 95,000 tons grading 0.54% eU3O8 containing 1,037,000 pounds U3O8. Some high-greade mineralization was mined in the 1980s (526,000 lbs. U3O8), prior to Pinenut being placed on standby.
Canyon
The Canyon Mine is a fully-permitted uranium mine located in northern Arizona approximately 6-miles south of Tusayan, Arizona. Energy Fuels is currently refurbishing and upgrading the existing infrastructure at the mine site, including a head-frame, hoist, and partially sunk shaft. Energy Fuels expects to begin ore production at the Canyon Mine in 2015.
The Canyon deposit is essentially vertical with an average diameter of less than 200 ft., but it is considerably narrower through the distinct Coconino and Hermit horizons (80 ft.). The cross sectional area is probably between 20,000 ft.2 and 25,000 ft. The pipe extends for at least 2,300 ft. from the Toroweap limestone to the upper Redwall horizons. The ultimate depth of the pipe is unknown.
Mineralization extends vertically both inside and outside the pipe over some 1,700 vertical feet, but ore grade mineralization has been found mainly in the Coconino, Hermit, and Esplanade horizons and at the margins of the pipe in fracture zones. Uranium mineralization at Canyon is concentrated in three stratigraphic levels: Coconono, Hermit/Esplanade, and a lower zone. Mineralization extends vertically from a depth of 600 ft. to over 2,100 ft. Intercepts range widely up to several tens of feet with grades in excess of 1.00% U3O8. Twenty-two drill holes from surface encountered uranium mineralization averaging 100 ft. of 0.45% U3O8.
According to a 2012 technical report, Inferred Mineral Resources at the Canyon mine are estimated to include 82,800 tons grading 0.98% eU3O8 containing 1,629,000 pounds U3O8. All Mineral Resources were classified as Inferred given the drill hole spacing and orientation with respect to the continuity of the mineralization.
Sheep Mountain
The Sheep Mountain Project is located approximately eight miles south of Jeffrey City, Wyoming. It is comprised of 179 unpatented mining claims comprising approximately 3,205 acres and approximately 640 acres of State of Wyoming lease, and 630 acres of private lease lands. The combined land holdings comprise some 4,475 acres. The Sheep Mountain Project includes the Congo Pit, a proposed open pit development, and the reopening of the existing Sheep Mountain Underground mine.
Although alternatives were considered, the recommended uranium recovery method includes the processing of mined materials via an on-site heap leach facility. Permitting and licensing of the project is well-advanced. A Plan of Operations was submitted to the Bureau of Land Management (BLM) in June 2011, and the BLM is currently preparing an Environmental Impact Statement (EIS) for the project.
The Sheep Mountain Project contains approximately 12.9 million tons of measured and indicated resources5 at an average grade of 0.12% U3O8 (30.3 million lbs. U3O8). Mining will be completed by both underground and open pit methods. Mined product from the underground and open pit mine operations will be commingled at the stockpile site located near the underground portal and in close proximity to the pit. At the stockpile the mine product will be graded, blended, and then conveyed via a covered overland conveyor system to the heap leach pad where it will be stacked on a double-lined pad for leaching.
Concentrated leach solution will be collected in a double lined collection pond and then transferred to the mineral processing facility for extraction and drying. The final product produced will be a uranium oxide, commonly referred to as “yellowcake”.
The currently planned mine life of the open pit is 15 years with an additional 5 years allotted for mine closure and reclamation. The estimated mine life of the underground operation is 11 years. The heap leach facility will be designed to accommodate both the mined material from the open pit and underground mine operations over the entire operating life of the two operations.
The preferred development sequencing of the Sheep Mountain Project is planned to be an open pit and underground conventional mine operation with on-site mineral processing featuring an acid heap leach and solvent extraction recovery facility. Development will begin with the operation of the open pit and heap leach facility and later bring the underground mine into operation 4-5 years later. This approach defers a substantial amount of initial capital, minimizes risk, and allows for a gradual startup of site activities while maximizing resource recovery. Additionally it optimizes fixed costs of both personnel and facilities.
The Sheep Mountain Project, if implemented, would be profitable under current economic conditions. Under the base case (preferred alternative and US $65 per pound selling price) the project is estimated to generate an IRR of 35% before taxes and has an NPV of over 118 million dollars US at a 10% discount rate.
The technical risks related to the project are low as the mining and recovery methods are proven. The mining methods recommended have been employed successfully at the project in the past. Risks related to permitting and licensing the project are also low as the project is a brown-field development located in a state which tends to favor mining and industrial development. The project has been well received locally, and will provide substantial revenues for Fremont County and the State of Wyoming, while providing much needed long-term employment for the region.
Summary
Energy Fuels is Canadian uranium production and mining company with significant property holdings throughout the Western United States. The company has several producing (and standby) uranium and uranium-vanadium mines, with more development projects entering pre-feasibility and feasibility stages. It also boasts the only conventional uranium processing mill in the United States, which also has the capacity to extract uranium and other heavy metals from waste rock from third party producers, thereby enhancing the economic returns of the mill.
Management
Stephen P. Antony – President and Chief Executive Officer
Over the last 33 years Mr. Antony has held senior positions in both the technical and managerial sectors within the mining industry. In the mid-1980’s he entered the uranium business with Mobil Oil’s Mining and Mineral group, during which time he developed the reclamation plan for Mobil’s El Mesquite ISL operation in south Texas. He joined Energy Fuels Nuclear, Inc. (EFN) in 1986 as the company was growing to become the largest U3O8 producer in the US, peaking at more than five million pounds annually. Mr. Antony served as director of Technical Services for the company where he authored many of the feasibility studies for the expansion of EFN’s highly successful Breccia Pipe Mine projects in the Arizona Strip. Subsequent to his employment with EFN, Mr. Antony held a brief position with Power Resources, Inc (PRI) as Vice President of Business Development. He then consulted to Cameco Corp. on due diligence prior to their acquisition of PRI, which Cameco undertook as part of their strategy to become a significant uranium producer in the US. Mr. Antony was most recently Chief Operating Officer of Energy Fuels, responsible for the daily operations of the Company, including all aspects of uranium property exploration, ore production and mill processing. He was appointed President and CEO on April 1, 2010. Mr. Antony, is a registered professional engineer, and is a graduate of the Colorado School of Mines, and holds a Masters of Business Administration (MBA) from the University of Denver.
Harold R. Roberts – Executive Vice President and Chief Operating Officer
Mr. Roberts is Chief Operating Officer for Energy Fuels. He was previously the Executive Vice President – U.S. Operations for Denison Mines Corp. Prior to his employment with Denison, Mr. Roberts was the President of Energy Fuels Nuclear, Inc. Throughout his career Mr. Roberts has held various positions related to operations oversight, project development, and permitting of mining operations. Mr. Roberts obtained his Bachelor of Science degree in Civil Engineering from Montana State University in 1975, and is a Registered Professional Engineer in several western States.
Gary R. Steele – Executive Vice President, Corporate Marketing
Over a 39 year career, Mr. Steele has held a wide range of management positions in both the technical and commercial areas of the mining industry. A coal industry veteran with over 20 years experience, he worked in engineering and operating roles, both underground and surface, and was Director of Utility Marketing for a large Powder River Basin, Wyoming, coal producer, negotiating fuel supply and transportation contracts with major US utilities. He was also designated a member of the corporate M&A due diligence team. This mining experience was followed by 15 years in the investment management business, and the establishment of Steele Capital Advisors, an advisory firm managing investment portfolios for private clients, and specializing in mineral industry opportunities. Mr. Steele joined Energy Fuels in 2006, and is responsible for economic and project evaluation, and utility marketing at Energy Fuels. Mr. Steele is a registered professional engineer and an engineering graduate of the Colorado School of Mines. He also holds an MSc. in Mineral Economics from the Colorado School of Mines.
Graham G. Moylan – Chief Financial Officer
Mr. Moylan is an experienced finance professional and brings to Energy Fuels many years of combined experience across mining, capital markets, finance and accounting in both Canada and the United States. Prior to joining Energy Fuels, Mr. Moylan was a Director with Dundee Capital Markets’ investment banking group for seven years, gaining significant financing and M&A transaction experience within the uranium sector. Prior to joining Dundee Capital Markets, Mr. Moylan was employed by KPMG LLP in their New York and Northern Virginia offices. Mr. Moylan began his career with IBM Canada in their finance group in Toronto. Mr. Moylan is a licensed Certified Public Accountant (Colorado) and has Honours Bachelor of Arts and Master of Management and Professional Accounting degrees from the University of Toronto.
David C. Frydenlund – Senior Vice President Regulatory Affairs, General Counsel and Corporate Secretary
Mr. Frydenlund is Senior Vice President Regulatory Affairs, General Counsel and Corporate Secretary of Energy Fuels. Mr. Frydenlund’s chief responsibilities include all legal and regulatory matters relating to the Company’s activities. His expertise extends to NRC, EPA, State and Federal regulatory and environmental laws and regulations. From 1997 to July 2012, Mr. Frydenlund was Vice President Regulatory Affairs, Counsel and Corporate Secretary of Denison Mines Corp., and its predecessor International Uranium Corporation (IUC), and was also a director of IUC from 1997 to 2006. From 1996 to 1997, Mr. Frydenlund was a Vice President of the Lundin Group of international public mining and oil and gas companies, and prior thereto was a partner with the Vancouver law firm of Ladner Downs (now Borden Ladner Gervais) where his practice focused on corporate, securities and international mining transactions law. Mr. Frydenlund was also an adjunct professor, corporate law, at the University of British Columbia Faculty of Law from 1990-1994. Mr. Frydenlund holds a bachelors degree from Simon Fraser University, a masters degree from the University of Chicago and a law degree from the University of Toronto.
