Categories: Energy / General Market Commentary
Topics: General Energy / General Market Commentary

Energy Fuels (NYSE: UUUU) VP Curtis Moore on What Trump's $1.5 Billion Uranium Reserve Plan Means for the US Uranium Industry

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the VP of Marketing and Corporate Development for Energy Fuels (NYSE: UUUU)(TSX: EFR), Mr. Curtis Moore. Curtis, how are you?

Curtis Moore: I'm doing great, Gerardo. How are you?

Gerardo Del Real: I am fantastic. It's a busy time, I imagine. And I know you've been busy behind the scenes. 

There was some news this morning that on the surface seems very positive. I'm going to get your take because it's one of the more informed takes in the space. And then I'm going to play devil's advocate with you a bit. The announcement of course is President Trump's 10-year, $1.5 billion plan to establish a US uranium reserve. There are a lot of details that we should go over. 

Before we get into that, I want to talk a bit about your background for those not familiar with you, Curtis.

Curtis Moore: Sure, no problem. Yeah, really appreciate you having me on, Gerardo, and I look forward to talking to your listeners about the great news that we had today. 

I've worked for Energy Fuels since about 2007. So I'm in, whatever that is, my 13th or 14th year. I am the VP of Marketing and Corporate Development. So that means that I mainly do sales of uranium to nuclear utilities or, in the case of today's news, possibly the US Government. I also do investor relations. I'm an attorney. I've been in the industry for a long time. Yeah, hopefully I can help inform your listeners.

Gerardo Del Real: Excellent. You obviously wear a lot of hats. You've had to wear a bear market hat for your tenure here with Energy Fuels. Right? 

Curtis Moore: Very true. I know. Pretty much all uranium companies are cut to the bone these days. So yeah, we all have about 10 jobs.

Gerardo Del Real: Yeah. You came on in 2007. You picked a heck of a time. Let's talk about the announcement and let's go in order because I think that the reaction has been somewhat muted, which is interesting to me. I don't know if people appreciate the momentum that is clearly building as far as this administration's support to actually move the ball forward, which will eventually, obviously, lead to clarity for the utilities to step back in. 

But let's go in order. Can we talk about the budget and what that looks like and what the next step is as far as getting that money appropriated? Because like we talked off air, this is the administration seeking the money. It's not written in stone. Is that accurate?

Curtis Moore: That is accurate. Now we're pretty confident that the money will likely be there, but yes, it still needs to be appropriated.

Gerardo Del Real: Excellent. The second point, this would be for fiscal year 2021, which begins in October. I think a lot of people mistakenly have assumed that this isn't anything that's going to be material until actual year 2021. Can you touch on that a bit, Curtis?

Curtis Moore: Yeah, definitely. As you said, there was a budget that was announced by President Trump and his administration yesterday, and it included $150 million per year of government purchases of uranium for the next 10 years. And yes, like you said, the first tranche of purchases would happened in fiscal year 2021, which for the US government begins on October 1st of 2020, which is just nine months from now.

The money does have to be appropriated. But we think that this uranium for nuclear fuel is a major priority for not just the Trump administration, we think the US government. We think this is a bipartisan effort simply because the alternative is just to become increasingly dependent on Russian and Chinese uranium and nuclear fuel. We get 20% of our electricity in the United States from nuclear, but the worst part about it is our military needs uranium and nuclear fuel for our aircraft carriers and submarines, nuclear deterrent, military micro reactors. There's a lot of other government uses for uranium. So do we want to become dependent on Russia for those uses? 

We're extremely encouraged by what we saw yesterday. We're also hearing that this may be the first of many announcements. We don't know necessarily what's coming up next, but this is a really nice first step for us.

Gerardo Del Real: Now, when you say the first of potentially many announcements, are you referencing the Nuclear Fuel Working Group? Is that what you're alluding to there?

Curtis Moore: Exactly, yes. There's been several statements made by as high level of folks as Energy Secretary Dan Brouillette saying that they think that they're going to announce the results of the US Nuclear Fuel Working Group that Trump created back in July as a result of our Section 232 on uranium, that us and Ur-Energy initiated with their findings and recommendations. Now we don't know what else is out there. We don't know if there's going to be more for US uranium miners. 

Yesterday's announcement, for Energy Fuels in particular, we're very happy. If that's all that comes out, I think we're still going to be just fine. That $150 million probably doesn't get spread around to a lot of different companies.

If there's one company in the United States that's going to receive that money, we think it's Energy Fuels simply because we have facilities that are operating today. They're producing uranium today, including the only remaining conventional uranium mill in the United States that also produces vanadium and other critical minerals. We're looking at some rare earth recovery, that sort of thing. It just has a lot of strategic attributes that we think if there's going to be money out there for a facility, it will be White Mesa and also our Nichols Ranch because you're also trying to make sure you maintain capabilities, you're maintaining jobs, expertise and all that.

Not to keep kind of going on here, but there was a statement, as you mentioned, in the Department of Energy's Nuclear Energy Office, which stated that the intent of this money is to support at least two uranium facilities in the United States. Right now there's really only three uranium facilities that are operating. Our White Mesa mill, Nichols Ranch, and Ur-Energy's Lost Creek. If that $150 million get split up among those three facilities equally, well that's $100 million for Energy Fuels.

Gerardo Del Real: Well said. Let me play devil's advocate a bit. I noticed, and you just mentioned it, that you're entertaining the possibility of processing certain rare earth minerals. Now, obviously rare earths are in the news. It's a hot topic. It trends well. Let's get to find out whether there is meat on that bone. 

How serious is Energy Fuels about the possibility of processing certain rare earth minerals? And to push a little further, which ones – the lights, the heavies – and why now?

Curtis Moore: Well, we've been approached by a number of entities. I can't go into it too much, but we've been approached by a number of entities, including some government entities inquiring about our capabilities at the White Mesa mill. What could be allowed under our licenses out there? We operate under a source material license with the state of Utah that has quite a few limitations about what it is that we're able to do. 

But in looking at some of the entities that have approached us and the types of fees that they're talking about, we think that we can play a role in this. Again, I can't go into it too much. I would say it's definitely in its infancy at this point. But we do think that we have a lot to offer, not just to some private companies, but also the US Government on rare earths.

Gerardo Del Real: Without getting into details about who has approached you and where those discussions are, let's talk about what you are able to do. I asked a question – would you be looking to process the lights, the heavies, a combination of both? Obviously, depending on which rare earth minerals you decide you want to move forward on, it's going to dictate the type of support that you get from government agencies because a lot of these minerals go into very sensitive applications, right? 

Can you speak to what Energy Fuels is capable of doing, not what it's going to do now, not what it's in discussions about, but what it's capable of doing?

Curtis Moore: Yeah. Again, these discussions are very early at this stage. The White Mesa mill is a uranium processing facility that also has the ability to produce vanadium. W have tailings facilities already built at the White Mesa mill. The White Mesa mill, in a lot of respects I've heard it described, it's just like big chemistry set. And it's very flexible. We have a lot of expertise that's out there in various mineral recovery. Again, it's early. I wouldn't say that we're going to be processing rare earths tomorrow. But in the next few years, depending on where things go and depending on the approvals that we might get with the state of Utah, we'll have to see where it goes.

Gerardo Del Real: Is the company looking at potentially any accretive acquisitions, given the state of the sector right now. Right? Everybody is in hurry up and go mode frankly, but going nowhere. Right? It seems like everybody just spinning its wheels, but there are some opportunities out there that me as just a general resource investor, somebody that watches the sector, just are no-brainers, frankly. 

Is the company looking at any accretive acquisitions or are you happy with the portfolio as it stands right now?

Curtis Moore: We're pretty happy, at least as it relates to our US portfolio. We have three operating production facilities, or at least operational. We have two that are operating and one that is operational. 

We have, we think, the lowest cost production in the United States. It's proven. If you look at even just our White Mesa mill, it's produced an average of about a million pounds of uranium per year over the last, I don't know, decade or something like that. These are good proven facilities. There's a lot of resources left to recover at all of these facilities. We're not necessarily looking at any more US facilities because quite frankly, they're fairly similar to what we already have. So do we want to go add a fourth, fifth similar facility like we already have? And they'd all be ISR facilities, right?

We're not necessarily looking at anything like that right now. We do have the ability in the very short term. Again, if we say had the ability to sell uranium at say $65 per pound, we could probably get our production up to 2.5, 3 million pounds per year within a year and a half or 2 years, which is quicker than anybody else and larger scale to anybody else. And if we had another couple of years after that, within say 5 or 6 years of today, we could probably get production up to 5 or 6 million pounds per year with our existing facilities. I'd say that we're going to stick with what we have right now and then see what the future brings.

Gerardo Del Real: Curtis, I know that you are very active in discussions on and off the record with potential end buyers and users. Has that activity picked up? What's your sense, as far as the utilities go, what's your sense of interest level and how close we are to that step change that the sector needs to start moving the needle forward and getting some real momentum behind the sector as opposed to people like myself that are speculating and have been quite frankly for the last year and a half that the risk-reward proposition is as compelling as any out there? But yet here we are right in 2020 still waiting. 

What's the interest level like out there and how close do you think we are to actually making that step change turn that we need?

Curtis Moore: Well, that's a really good question. As you say, I do talk to utilities and end users. I also read, of course, all the trade publications and news that comes out. I would say that right now utilities are I believe speaking to some of the larger suppliers about their long-term needs. I think as it relates to us and Ur-Energy and maybe some of the smaller US producers, I don't think there's a whole lot of movement on the US utilities buying from us because they think that the government's going to step in and save the day, which arguably it will. So they can continue to go out and keep buying cheap stuff from Russia and Kazakhstan or wherever.

Again, I hear rumors that there is an uptick in long-term contracting. My sense is that it's probably mostly with the larger producers like Kazatomprom and Cameco, Uranium One, BHP in Australia and that sort of thing. It's certainly starting to turn just because I think their inventories are getting run down a little lower than they'd like to see them. I do think that there is going to be a step change just in the global market. 

Now again, the great thing about being a US producer is that we have some real movement on the government side to support US uranium producers that's separate from those other global opportunities. I think it's going to slowly change around the world and that's certainly positive for the other guys out there, but we're certainly happy to be a US producer right now

Gerardo Del Real: For the average speculator out there, what should they be looking at that in your eyes – you're an expert at this, Curtis – is meaningful activity? Everybody always talks about the spot price and it seems like it's going to be in the $24-handle forever, right? But what should people be following? What should people be paying attention to?

Curtis Moore: Well, certainly if you see a utility sign a long-term contract with a smaller producer that could be the dam breaking. And I would put us in that category as well. I think we're probably one of the more viable and reliable smaller producers out there. If you saw us say, announce that we had a long-term contract with a major US utility, that would be a major signal for folks to look for. 

Aside from that, spot prices are a limited indicator of what the market is doing. I think Cameco is usually pretty good with their announcements on what they see going on out there and they just had their conference call a few days ago that was very positive. I think they're seeing upticks in long-term contracting and they basically said that they need to go acquire, I forgot what the number was, 30 or 32 million pounds of uranium this year. Now a big chunk of that will come from their ownership of some Kazakh mines, but they're still going to be big buyers of uranium. 

Now, the problem with that sometimes is that they'll be out buying uranium off the market, right? They'll have private discussions with certain entities that people just don't hear about. So they may go buy some uranium that doesn't even get reported and so it doesn't move to spot price. Again, pricing and price discovery in uranium is imperfect, but the dam can definitely break very quickly. 

Again, you've got to look at the long-term supply and demand fundamentals, which I think ultimately drive prices and drive the day. I don't have a great answer for you about, "Okay, here's the day it's going to happen." But things are turning right now. I really think they are turning today.

Gerardo Del Real: No, I thought that was a great answer and frankly it's the reason you've hung around since 2007. Right, Curtis?

Curtis Moore: Yep. You can't get too caught up in the emotion of the day for sure.

Gerardo Del Real: Agreed. Lastly, I would be doing you and Energy Fuels shareholders a disservice if I didn't ask you, what can shareholders and potential shareholders look forward to that we haven't discussed in this interview?

Curtis Moore: Yeah, again, I think that hopefully we're going to be able to see more clarity on what this budget means and what additional announcements there might be. Like I said, we've heard from a number of sources including the Energy Secretary himself, that there's more to come from the Nuclear Fuel Working Group. And one of our biggest champions in this whole process is Senator John Barrasso out of Wyoming. He put out an announcement yesterday that was along the lines of, "Alright, that's a good start guys."

Because while we think that this announcement is good for say, Energy Fuels and probably Ur-Energy, if we want an industry in the United States that's capable of supplying a decent amount of our requirements, we need to do more than this, right? I mean, it's good for us and good for probably Ur-Energy, but it's probably not good for anybody else. 

We think that the Senator and our other champions in Congress and DC are going to keep pushing for more. Hopefully there is more so other folks can participate in this upswing. I'd say keep an eye open for that in the next coming weeks and months.

Gerardo Del Real: Curtis, thank you so much for your time. Insightful as always, and I'm looking forward hopefully to having you back on soon if we get further announcements. Thanks again.

Curtis Moore: Happy to do it. All right, have a good day, Gerardo. Thank you.

Gerardo Del Real: You as well, Curtis. Take care.

Curtis Moore: All right. Bye.