Energy Fuels Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited statements are prepared under U.S. GAAP and reported in U.S. dollars. Energy Fuels is an exploration-stage mining company under SEC Industry Guide 7 and states it has no proven or probable reserves under that standard.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0.456 million | $0.395 million | $0.809 million | $0.788 million |
| Operating loss | $8.342 million | $6.470 million | $17.189 million | $14.276 million |
| Net loss | $10.791 million | $8.190 million | $21.701 million | $13.854 million |
| Loss per share | $0.07 | $0.08 | $0.15 | $0.12 |
- Revenue was primarily third-party ore processing fees; the company made no uranium or vanadium sales in the first half. Q2 gross profit was $0.456 million, versus a $0.033 million gross loss in Q2 2020; first-half gross profit was $0.809 million, versus a $0.718 million gross loss.
- Cash and cash equivalents were $79.016 million at June 30, 2021; restricted cash was $20.840 million. Net working capital was $98.77 million. Total assets were $242.180 million and total liabilities were $26.349 million.
- The company reported no remaining short- or long-term debt. Lease liabilities totaled $0.618 million. Asset retirement obligations were $13.671 million, with $20.840 million of collateral posted against $42.29 million of undiscounted reclamation obligations.
- First-half operating cash use was $16.498 million; investing activities provided $1.797 million and financing activities provided $72.163 million. Financing included $67.099 million net proceeds from share issuance. Cash, cash equivalents and restricted cash increased by $58.871 million from year-end.
- Common shares outstanding increased from 134.3 million at December 31, 2020 to 148.6 million at June 30, 2021, principally reflecting ATM issuance and exercises of warrants and options.
Material changes versus prior periods
- First-half net loss increased by $7.847 million. Higher development, permitting and land-holding costs—mainly for rare-earth-element (REE) carbonate production—and a larger non-cash warrant-liability remeasurement loss were key factors. First-half warrant-liability loss was $7.050 million.
- Development, permitting and land-holding expense rose to $5.888 million from $0.737 million in the first half of 2020. Standby costs decreased to $4.253 million from $4.653 million.
- Interest expense fell to $0.030 million from $0.695 million for the first half, following redemption of the convertible debentures in 2020.
- First-half revenue was little changed year over year. The company recorded no inventory impairment in 2021, compared with $1.506 million in the first half of 2020.
Outlook, commentary and risks
- Management said the company had sufficient resources for at least the next 12 months, but warned that prolonged low uranium prices could require additional capital or other funding measures. It reported no material COVID-related shutdowns and said it could withstand shutdowns or depressed share prices for at least 12 months.
- 2021 uranium production guidance was reduced to insignificant quantities, from prior guidance of 30,000–60,000 pounds. The company made no uranium sales commitments for 2021 and expected year-end inventory to remain around 691,000 pounds, subject to market conditions and any U.S. Uranium Reserve purchases. Nichols Ranch, Alta Mesa and conventional mines were expected to remain on standby.
- 2021 mixed REE carbonate guidance was reduced to approximately 700–1,100 tonnes, containing 350–550 tonnes of total rare earth oxides, from prior guidance of 2,000–3,000 tons of carbonate. Management cited a short-term monazite-supply delay. The company produced approximately 12,900 kilograms of TREO carbonate in the first half. Commercial-scale production and shipments under a definitive supply agreement with Neo were announced in July, after quarter-end.
- No vanadium production was expected in 2021. Uranium and vanadium prices, feedstock availability, the economics of restarting production, and execution of REE production and sales remain important uncertainties. The proposed $75 million U.S. Uranium Reserve had not been established, and implementation details were unresolved.
- Key contingencies include challenges to White Mesa Mill permits and corrective action plans, and pending litigation concerning the Pinyon Plain and Daneros projects. The Pinyon Plain appeal could delay mining; the company said potential costs or remediation scope for some matters were not yet determined.
- After quarter-end, Energy Fuels signed an agreement to sell several non-core uranium projects and assets to International Consolidated Uranium. The filing also notes that the first threshold for performance-based stock appreciation rights was met during the first half.
Important facts for investors to verify
- Whether REE feedstock supply, production ramp-up, product specifications, customer shipments and pricing support the revised 2021 outlook.
- Whether uranium-market conditions or government purchasing enable production restarts, and how the proposed U.S. Uranium Reserve will be implemented.
- Cash burn, future funding needs and potential dilution from further ATM or other equity issuance.
- Progress and outcomes in the Pinyon Plain and Daneros appeals and White Mesa Mill proceedings, including any effect on operations or reclamation costs.
- Commodity-price and warrant-liability valuation effects: Q2 and first-half net losses included substantial non-cash fair-value impacts.