ENERGY FUELS INC quarterly report, Q2 FY2023

Energy Fuels Inc. — Q2 2023 Form 10-Q

Reporting period: Three and six months ended June 30, 2023. Amounts are U.S. dollars unless noted. Energy Fuels is a development-stage uranium producer and processor expanding into rare earth elements (REEs); it also holds vanadium inventory and is evaluating medical-isotope recovery.

Financial performance and liquidity

Metric	Q2 2023	Six months 2023	Comparable 2022 period
Revenue	$6.86 million	$26.48 million	$6.47 million Q2; $9.40 million six months
Operating loss	$10.66 million	$11.07 million	$6.71 million Q2; $16.92 million six months
Net income (loss)	$(4.89) million	$109.38 million	$(18.06) million Q2; $(32.79) million six months
Net income (loss) per share	$(0.03)	$0.69	$(0.11) Q2; $(0.21) six months

Q2 revenue included $4.34 million of uranium, $2.27 million of RE Carbonate and $0.26 million of processing and other revenue; no vanadium was sold in the quarter. Costs applicable to revenue were $4.37 million, leaving $2.50 million before other operating expenses. For the first half, uranium revenue was $22.81 million, RE Carbonate $2.27 million, vanadium $0.87 million and other processing revenue $0.53 million. First-half revenue less applicable costs was $13.84 million.

First-half net income was dominated by a $119.26 million gain on the Alta Mesa project and Prompt Fission Neutron asset sales. Excluding this unusual gain, the company reported an operating loss of $11.07 million and other income of $1.19 million. Q2 operating loss widened year over year as higher revenue and lower standby costs were outweighed by increased operating and corporate spending.

Cash flow and liquidity: First-half operating cash use was $4.07 million, investing cash use was $25.41 million and financing cash use was $1.38 million. Cash, cash equivalents and restricted cash totaled $53.05 million at period-end, including $35.59 million of cash and cash equivalents and $17.46 million of restricted cash. Marketable securities were $64.12 million; working capital was $134.36 million. Management said available resources and inventory sales, if needed, should fund planned requirements for at least 12 months.

Balance sheet: Total assets were $372.08 million and total liabilities $16.93 million at June 30. The filing reports no conventional borrowings; liabilities principally include $10.14 million of asset-retirement obligations and lease liabilities. Reclamation collateral of $17.46 million supported $33.00 million of undiscounted asset-retirement obligations. Common shares outstanding were 158.24 million at June 30 and 158.25 million as of August 1.

Material changes and operating developments

• In February, Energy Fuels sold Alta Mesa for $120 million of consideration: $60 million cash and a two-year, 8% secured convertible note with $60 million principal. The note was valued at $59.21 million at June 30. The company also sold its PFN assets to enCore in May for $3.10 million cash.
• The company acquired 17 mineral concessions in Brazil’s Bahia Project for $27.50 million, plus $1.63 million of direct transaction costs. Mineral properties rose to $115.72 million from $83.54 million at year-end.
• Uranium sales were 380,000 pounds in the first half at an average realized price of $60.01 per pound. The company held about 766,000 pounds of finished uranium inventory at June 30 and expected to deliver another 180,000 pounds in Q3 under existing contracts.
• The Mill produced approximately 355 tonnes of partially separated mixed RE Carbonate in the first half, containing about 160 tonnes of total rare earth oxides. It sold 127,185 kilograms of TREO at an average $17.86 per kilogram. RE Carbonate costs were $15.96 per kilogram, versus $17.86 realized revenue per kilogram.
• Vanadium revenue fell to $0.87 million for the first half from $7.71 million in 2022; the company held approximately 906,000 pounds of finished V₂O₅ at June 30. No vanadium production was planned for 2023.

Outlook, commentary and risks

• Management expected 2023 uranium contract deliveries totaling 560,000 pounds at a weighted-average price of $58–$60 per pound, subject to market prices at delivery. Three utility contracts cover 3.0 million pounds through 2030, with options for up to 4.1 million pounds. No new uranium agreements were signed in Q2.
• Management was preparing La Sal, Whirlwind and Pinyon Plain for possible production, potentially as soon as later in 2023, and said new production could reach market within roughly 12–18 months of a positive decision. Nichols Ranch was expected to produce insignificant uranium in 2023 and remain on standby absent stronger conditions or suitable contracts.
• Phase 1 REE separation at the Mill was targeted for late 2023 or early 2024, with estimated capital of about $25 million and planned capacity of approximately 800–1,000 tonnes of separated NdPr oxide annually. Timing and output depend on construction, commissioning, licensing and adequate monazite supply. Phase 2 and Phase 3 plans are longer-term and conditional.
• Management noted uranium-market improvement but also volatility in uranium, vanadium and REE prices. REE prices were mixed or lower during Q2, and vanadium prices declined. RE Carbonate profits are expected to remain minimal until throughput increases and operations are optimized. Radioisotope recovery remains under evaluation, not established commercial production.
• Key risks include commodity-price and contract exposure, mine restart and production execution, REE feedstock availability and separation performance, project permitting and financing, reclamation obligations, and environmental or regulatory challenges. Long-standing challenges to Mill permits and approvals remain; management considers them without merit and does not expect material effects, but potential remediation scope and cost are undetermined and could be significant. Management reported disclosure controls were effective and no material change in internal control during the quarter.

Important facts for investors to verify

• How much of reported first-half earnings and available liquidity depends on the Alta Mesa sale, including the fair value, security, collectability and conversion terms of the enCore note.
• Whether uranium deliveries, realized prices and inventory levels remain consistent with guidance and contract obligations, and whether additional long-term contracts support mine restarts.
• Whether sufficient monazite can be secured and the Mill’s REE separation project can meet its schedule, capital estimate, recovery targets and commercial specifications.
• Whether Bahia Project development, permits, feedstock potential and heavy-mineral economics support the company’s stated plans.
• How operating cash use, planned capital spending, reclamation collateral requirements and any potential equity issuance affect liquidity; first-half operating cash flow remained negative despite reported net income.
• The outcomes and possible costs of outstanding Mill-related administrative challenges, as well as the assumptions underlying the company’s forward-looking production and market expectations.