Uranium has risen 30% from the very low prices of late last year and a
trio of analysts agrees that Energy Fuels is in position to take advantage of
a rising price environment.
Uranium's 30% rise from the low of $17.75/lb on Nov. 30, 2016, is fueled
by a number of supply and demand factors that has industry watchers
optimistic that the tide has turned. On the supply side, Kazakhstan's
state-owned Kazatomprom announced in January that it would cut production by
10%; the company supplies 40% of the world's uranium. The company also
announced the opening of a trading office in Switzerland. That could help
placing the material in the market on a more orderly basis. Justin Chan, an
analyst with Numis Securities, told Proactive Investors that "Kazatomprom's
establishment of Swiss marketing arm suggests that inventory management may
become a policy tool. An inventory policy rather than direct supply would see
it act as more of a swing producer or swing seller, using inventory and
production levels to influence the uranium price."
Industry watchers also found hope in Rick Perry's Senate confirmation
hearings as U.S. Secretary of Energy in January when he said that he would
take a hard look at the Department of Energy's practice of bartering uranium.
This bartering is believed to place between 5 and 8 million pounds of uranium
into the market annually.
On the demand side, there are currently 60 nuclear reactors under construction
worldwide and another 160 planned, according to the World Nuclear Association, and existing reactors are
having their lives extended. In the U.S., "over 75 reactors have been
granted license renewals which extend their operating lives from the original
40 out to 60 years, and operators of most others are expected to apply for
similar extensions," reports the Association. In December, the state of
Illinois passed a bill providing subsidies for the operation of three
reactors run by Excelon; the reactors had been expected to shutter in 2017
and 2018.
Macquarie Bank analysts wrote in a Jan. 20 report, "With the closure
of a large number of nuclear power plants announced earlier in 2016 on
economic grounds, legislative actions in New York and Illinois keeping some
of these open will provide both more optimism and spot market demand into
2017."
Additionally, it is believed that the Trump administration's pledge to
make the U.S. energy independent will encourage the development of more
nuclear power reactors.
Japan's restart of nuclear power reactors is also a factor on the demand
side. According to the World Nuclear Association, "five Japanese nuclear
power reactors have already cleared inspections confirming they meet the new
regulatory safety standards and have resumed operation. Another 19 have
applied to restart." The Institute of Energy Economics, Japan estimates that "seven Japanese nuclear power
reactors are likely to be in operation by the end of next March [2017] and 12
more one year later."
Energy
Fuels Inc. (EFR:TSX; UUUU:NYSE.MKT) is positioned to take advantage of
the rising tide for uranium by continuing to explore and develop its
properties. On Feb. 17, it reported that the Environmental Protection Agency (EPA)
issued an aquifer exemption for the Jane Dough wellfield at the Nichols Ranch
project in Wyoming; this allows for future in situ recovery. The wellfield,
according to the company, is important in sustaining "long-term uranium
production at Nichols Ranch. . .once all thirteen header-houses in the
Nichols Ranch wellfield have been constructed, the Company expects to advance
production into the Jane Dough wellfield, which will be connected to the
Nichols Ranch Plant."
Colin Healey, an analyst with Haywood Securities, noted that the
"receipt of EPA concurrence on the Aquifer Exemption for the Jane Dough
resource area represents positive incremental progress and de-risking of EFR's
Wyoming ISR uranium production pipeline. . .Jane Dough is part of EFR's
currently producing Nichols Ranch ISR project, and hosts a contained resource
of 3.6 Mlb U3O8 (1.5 Mt grading 0.11% U3O8), which will add substantially to
the permitted resources at the project once final approvals and regulatory
authorizations are in place (expected in coming months), increasing the
permitted total contained uranium by more than 100%."
"EFR will continue measured production from its ISR operations
pending uranium price improvement, but remains very well positioned to ramp
up production in an improving uranium price environment, where we are looking
for a sustainable material improvement in supply/demand fundamentals over the
course of the next 2-3 years and beyond," Healey wrote.
Rob Chang of Cantor Fitzgerald noted on Feb. 17 that "while expected,
the approvals from the EPA and the WDEQ are necessary milestones in the
development of Jane Dough. We continue to view Energy Fuels as our top
leverage play to the uranium recovery."
Energy Fuels is also continuing to explore its Canyon Mine in northern
Arizona. On Feb. 2, Energy Fuels released assay results that confirm that it is
"continuing to discover large and high-grade areas of uranium
mineralization, which the Company expects will result in a larger recoverable
uranium resource than what is currently described in the existing technical
report for the Canyon Mine." Energy Fuels also stated that it is
"continuing to discover additional zones of high-grade copper
mineralization, both inside and outside the areas of potentially recoverable
uranium mineralization."
In an earlier release of high-grade eU3O8 drill results at Canyon Mine,
Energy Fuels noted that "These drilling results continue to increase the
Company's level of confidence that production costs from the Canyon Mine have
the potential to be low-cost and competitive with the best underground
uranium mines globally, including mines in Canada, based on
industry-published cost estimates. In addition, the possibility of recovering
copper and silver as co-products of uranium recovery has the potential to
make the economics of the Canyon Mine even better."
Stephen P. Antony, president and CEO of Energy Fuels stated, "Core
drilling at the Canyon Mine continues to produce exciting and, in some cases,
unexpected results for both uranium and copper. This is certainly a
fascinating deposit that appears to be full of valuable metals in multiple
zones. This is particularly exciting, as uranium prices are showing recent
strength."
Heiko Ihle with Rodman & Renshaw noted, "While we had initially
envisioned Canyon as an eventual high-grade uranium mine, we remain impressed
by the continued strong copper grades encountered at the site. . .we expect
additional near-term drilling results to serve as a potential catalyst for
Energy Fuels in 1H17."
"Energy Fuels is a strategic U.S. uranium producer that is poised to
take advantage of future U3O8 price improvements. Notably, Energy Fuels is
the only United States producer of uranium utilizing both ISR and
conventional mining methods. In our view, this places the firm at a distinct
advantage among its peers, since management has the ability to scale production
based on the uranium market," Ihle added.
"Although the uranium market has remained depressed as a whole, we
feel that Energy Fuels has accumulated a strong combination of both
conventional and ISR projects that should provide investors with strong leverage
to potentially increasing uranium prices going forward," Ihle concluded.
Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and
provides services to Streetwise Reports as an employee. She owns, or members
of her immediate ho9usehold or family own, shares of the following companies
mentioned in this article: None. She is, or members of her immediate
household or family are, paid by the following companies mentioned in this
article: None.
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Additional
Disclosures for this Content
Disclosures from Haywood Securities, Energy Fuels Inc., Feb. 17,
2017
Analyst Certification: I, Colin Healey, hereby certify that the views
expressed in this report (which includes the rating assigned to the issuer�s
shares as well as the analytical substance and tone of the report) accurately
reflect my/our personal views about the subject securities and the issuer. No
part of my/our compensation was, is, or will be directly or indirectly
related to the specific recommendations.
Of the companies included in the report the following Important
Disclosures apply:
Haywood Securities, Inc. has reviewed lead projects of Energy Fuels Inc.
(UUUU-AMEX) and a portion of the expenses for this travel may have been
reimbursed by the issuer.
Haywood Securities, Inc. or an Affiliate has managed or co-managed or
participated as selling group in a public offering of securities for Energy
Fuels Inc. (UUUU-AMEX) in the last 12 months.
Haywood Securities, Inc. or an Affiliate has received compensation for
investment banking services from Energy Fuels Inc. (UUUU-AMEX) in the past 12
months.
Cantor Fitzgerald, Energy Fuels Inc., Feb. 17, 2017
Disclosures as of February 6, 2017
CFCC has provided investment banking services or received investment banking
related compensation from Energy Fuels within the past 12 months.
The analysts responsible for this research report have, either directly or
indirectly, a long or short position in the shares or options of Energy
Fuels.
The analyst responsible for this report has visited the material
operations of Energy Fuels. No payment or reimbursement was received for the
related travel costs.
Analyst certification: The research analyst whose name appears on this
report hereby certifies that the opinions and recommendations expressed
herein accurately reflect his personal views about the securities, issuers or
industries discussed herein.
The author of this report is compensated
based in part on the overall revenues of CFCC, a portion of which are
generated by investment banking activities. CFCC may have had, or seek to
have, an investment banking relationship with companies mentioned in this
report. CFCC and/or its officers, directors and employees may from time to
time acquire, hold or sell securities mentioned herein as principal or agent.
Although CFCC makes every effort possible to avoid conflicts of interest,
readers should assume that a conflict might exist, and therefore not rely
solely on this report when evaluating whether or not to buy or sell the
securities of subject companies.
Rodman & Renshaw, Energy Fuels Inc., Feb. 3, 2017
I, Heiko F. Ihle, CFA and Jake Sekelsky , certify that 1) all of the
views expressed in this report accurately reflect my personal views about any
and all subject securities or issuers discussed; and 2) no part of my
compensation was, is, or will be directly or indirectly related to the
specific recommendation or views expressed in this research report; and 3)
neither myself nor any members of my household is an officer, director or
advisory board member of these companies.
None of the research analysts or the research analyst�s household has a
financial interest in the securities of (including, without limitation, any
option, right, warrant, future, long or short position).
As of December 31, 2016 neither the Firm nor its affiliates beneficially
own 1% or more of any class of common equity securities of Energy Fuels Inc.
Neither the research analyst nor the Firm has any material conflict of
interest in of which the research analyst knows or has reason to know at the
time of publication of this research report.
The research analyst principally responsible for preparation of the report
does not receive compensation that is based upon any specific investment
banking services or transaction but is compensated based on factors including
total revenue and profitability of the Firm, a substantial portion of which
is derived from investment banking services.
The Firm or its affiliates did receive compensation from Energy Fuels Inc.
for investment banking services within twelve months before, and will seek
compensation from the companies mentioned in this report for investment
banking services within three months following publication of the research
report.
The Firm does not make a market in Energy Fuels Inc. as of the date of
this research report.