Energy Fuels Continues To Build “Mine To Market” U.S. Rare Earth Supply Chain
On April 21, Energy Fuels Inc. (TSX: EFR) and Hyperion Metals Limited (ASX: HYM) reached a memorandum of understanding (MOU) where Hyperion will evaluate its ability to commercially supply monazite sands from its Titan Project in the U.S. state of Tennessee to Energy Fuels’ White Mesa Mill in Blanding, Utah. Energy Fuels plans to become an important player in the rare earth elements (REE) sector by accepting and processing REE ores at White Mesa, which is currently the only licensed and operating uranium and vanadium mill in the United States.
Monazite is one of the four minerals from which rare earths have been commercially produced worldwide. Indeed, more than 80% of all rare earth oxides (REOs) ever mined worldwide have had monazite, bastnaesite or xenotime as their source minerals.
The Titan Project is a heavy mineral sands property which may contain high-value materials like monazite, zircon, high-grade silica, and other refractory materials. Hyperion has nearly completed a 70-hole Phase 3 drilling program on Titan and hopes to announce an initial resource estimate on the project by June 30, 2021.
Energy Fuels and Hyperion will also consider a collaboration where the two parties (and potentially other parties) would form a joint venture, or where Hyperion would make an equity investment in Energy Fuels’ efforts to establish a “mine to market” U.S. rare earth supply chain.
Strategic Importance of Energy Fuels’ Initiative
Energy Fuels’ initiative would reduce U.S. and Canadian dependence on China, allowing western companies and governments to begin sourcing mixed rare earth carbonate and separated oxides from a friendly and reliable source other than China. China currently controls about 90% of the worldwide rare earth separation capacity (e.g., the capacity to transform rare earth mineral concentrates into individual REOs, the precursor step to refining into rare earth metals). The most valuable rare earth oxides, “Magnet Feed REOs,” are essential for the manufacture of permanent magnets which are then used in virtually all electric motors, including in the engines of electric vehicles (EVs).
In December 2020, Energy Fuels entered into a three-year agreement with The Chemours Company (NYSE: CC) whereby Chemours will supply Energy Fuels with a minimum of 2,500 tons per year of natural monazite sands from its Offerman Mineral Sands Plant in the U.S. state of Georgia beginning in 1Q 2021. The first shipments arrived in early March 2021. Energy Fuels estimates that the amount of REEs contained in the monazite sands to be supplied by Chemours represents about 8% of U.S. REE demand, as contained in end-use products.
Energy Fuels plans eventually to process 15,000+ tons of monazite and other sources of ore annually for the recovery of REEs. As such, purchases from Hyperion will add to that amount supplied by Chemours. (It is unclear whether Chemours can increase its monazite sands shipments to Energy Fuels, and if so, by how much.) Other monazite suppliers could also potentially supply material to Energy Fuels’ White Mesa Mill.
Energy Fuels’ processing 15,000+ tons of monazite into a mixed REE carbonate (see below) would equate to around 50% of U.S. REE end-use demand. The White Mesa Mill has a design capacity of, and is licensed to process, 720,000 tons of ore per year, so processing 15,000 tons of monazite concentrate per year would represent only about 2% of its throughput capacity.
Energy Fuels will produce a mixed REE carbonate from the monazite mineral concentrate. In turn, Energy Fuels has reached an accord with Neo Performance Materials Inc. (TSX: NEO) to ship about 80% of its REE carbonate output to Neo’s rare earths separation facility in Estonia where high value individual REOs will be produced. Neo expects to produce 840 tonnes of REOs per year from Energy Fuel’s input REE carbonate stream. Just as the White Mesa Mill has significantly more throughput capacity than it will utilize per its sales contract with Neo, so does Neo have additional capacity on the refining side.
Company Has Around US$50 Million of Net Cash on its Balance Sheet
Energy Fuels’ cash flow deficit has averaged about US$8 million per quarter over calendar year 2020. The company had cash and marketable securities of US$22.4 million as of December 31, 2020 and negligible debt. Energy Fuels has significantly bolstered its balance sheet since year-end 2020 by raising US$30.4 million of equity from January 1, 2021 through March 18, 2021 via at-the-market stock sales.
| (in thousands of US $, except for shares outstanding) | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 |
| Operating Income | ($1,003) | ($9,348) | ($6,470) | ($7,806) | ($40,581) |
| Operating Cash Flow | ($6,902) | ($9,446) | ($7,506) | ($8,324) | ($9,680) |
| Cash – Period End | $22,415 | $28,122 | $28,317 | $25,969 | $17,648 |
| Debt – Period End | $758 | $8,179 | $16,504 | $15,766 | $17,912 |
| Shares Outstanding (Millions) | 134.3 | 130.3 | 120.5 | 114.9 | 100.7 |
Magnet Feed REO prices have increased dramatically over the last year. See table below. If price trends were to reverse their recent momentum, Energy Fuels shares could be affected.
| Rare Earth Oxide Magnet Feed REOs: | 19-Mar-21 | 7-Jul-20 | 19-Mar-20 |
| Neodymium | $105,460 | $43,300 | $41,810 |
| Praseodymium | $77,960 | $42,350 | $44,274 |
| Terbium | $1,532,305 | $666,400 | $613,405 |
| Dysprosium | $465,500 | $271,700 | $271,355 |
Through its MOU with Hyperion, its monazite supply agreement with Chemours, and its separation accord with Neo, Energy Fuels continues to build its REE processing capability. If the company can continue to build out its capabilities and begin to supply REOs to the North American market, as an alternative to REO imports from China, Energy Fuels’ valuation could improve dramatically.
Energy Fuels Inc. last traded at $6.89 on the TSX Exchange.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
