Energy Fuels Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Unaudited financial statements are presented in U.S. dollars; amounts below are in millions unless stated otherwise.
Business context
Energy Fuels produces uranium and vanadium and is ramping up rare earth element (REE) carbonate production at its White Mesa Mill. The company also processes third-party uranium-bearing materials and is evaluating REE separation and medical-isotope opportunities. Its Nichols Ranch and Alta Mesa in-situ recovery operations remained on standby. The company describes itself as a development-stage issuer under SEC mining disclosure rules.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $2.93 | $0.72 | $12.34 | $1.52 |
| Gross margin | $1.40 | $(0.01) | $4.50 | $0.80 |
| Operating loss | $(13.66) | $(8.38) | $(30.58) | $(25.57) |
| Net loss | $(9.25) | $(7.96) | $(42.04) | $(29.66) |
| Loss per share | $(0.06) | $(0.05) | $(0.27) | $(0.21) |
- Revenue mix: Q3 revenue included $1.67 million from RE Carbonate, $1.07 million from vanadium concentrates and $0.19 million from alternate-feed processing and other sources. Nine-month revenue included $8.78 million from vanadium and $2.12 million from RE Carbonate.
- Cash flow: Operating cash outflow was $29.45 million for the first nine months, versus $21.98 million a year earlier. Investing cash outflow was $12.67 million; financing provided $7.46 million. Cash, cash equivalents and restricted cash declined to $98.08 million from $132.82 million at year-end 2021.
- Liquidity and balance sheet: Working capital was $122.33 million. Cash and cash equivalents were $77.09 million, marketable securities $11.63 million and restricted cash $20.99 million. Total assets were $279.08 million; total liabilities were $19.22 million, including a $14.75 million asset-retirement obligation. No borrowings are shown on the balance sheet.
- Other financial items: Nine-month other loss of $11.46 million primarily reflected a $13.72 million decline in the fair value of equity investments, partly offset by foreign-exchange gains. Those investments were valued at $22.87 million at quarter-end, down from $38.54 million at December 31, 2021.
Changes versus the prior comparable period
- Revenue rose substantially, mainly due to vanadium inventory sales and increased RE Carbonate shipments; however, operating and net losses widened for the nine-month period.
- Nine-month selling, general and administrative expense increased to $16.99 million from $10.16 million, primarily from professional fees, higher staffing and share-based compensation. Standby costs increased to $10.36 million from $6.50 million.
- Nine-month operating cash use increased, while financing proceeds fell to $7.46 million from $99.99 million in 2021, when the company raised substantial equity capital.
- Year-to-date vanadium revenue was $8.78 million; the company reported selling approximately 642,000 pounds of V2O5 inventory at a weighted-average net price of $13.69 per pound.
Outlook, commentary and risks
- Management expected 2022 uranium recovery of 130,000–140,000 pounds, an increase from prior guidance of 100,000–120,000 pounds. The company had three new long-term uranium contracts with U.S. utilities, signed in May, with deliveries scheduled from 2023 through 2030. It was also awaiting results on an offer to the U.S. Uranium Reserve Program.
- The second 2022 REE processing campaign was delayed to November and expected to continue into Q1 2023. Management forecast approximately 205 tonnes of partially separated RE Carbonate for 2022 and another approximately 410 tonnes attributable to Q1 2023; combined expected production was equivalent to about 831 tonnes of non-separated RE Carbonate. Management cautioned that REE profits would likely remain limited until feed throughput is increased and optimized.
- The company planned no 2022 vanadium production and was evaluating a possible restart in 2023 or later. Uranium and vanadium prices fell during the quarter; management cited commodity-price volatility, uncertain supply and demand, geopolitical and trade risks, and dependence on suitable long-term sales contracts.
- The proposed Bahia, Brazil mineral-sands acquisition covers 17 concessions and has a total purchase price of $27.50 million. The company had paid $5.50 million in deposits by quarter-end; closing remained subject to Brazilian government approval and was expected in Q4 2022 or Q1 2023.
- Management said existing resources were sufficient to fund its business plan for at least 12 months. This is a forward-looking statement, not a guarantee; cash use, project spending and potential equity issuance remain relevant to liquidity and dilution.
- Contingencies include challenges to White Mesa Mill permits and a dispute concerning a license amendment. The company said it did not expect these matters to materially affect results, but potential remediation costs under a revised groundwater plan were undetermined and could be significant. Asset-retirement obligations had a $42.91 million undiscounted estimate, with $20.99 million of collateral posted.
Important facts for investors to verify
- Progress and economics of REE production, including feedstock availability, throughput, product quality, sales prices and the timing and cost of planned separation capacity.
- Delivery requirements and pricing terms under the three uranium contracts, and whether any uranium-reserve sale was awarded or completed.
- Cash burn, future capital needs, ATM share issuance and the effect of the Bahia acquisition’s remaining purchase price on liquidity.
- Changes in fair values of the company’s equity investments, which materially affected nine-month earnings.
- Status and possible costs of White Mesa Mill permitting challenges, reclamation obligations and related collateral requirements.