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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number: 001-36204
ENERGY FUELS INC.
(Exact name of registrant as specified in its charter)
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Ontario, | Canada | 98-1067994 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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225 Union Blvd., Suite 600 | |
Lakewood, | Colorado | 80228 |
(Address of principal executive offices) | (Zip Code) |
(303) 974-2140
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Shares, no par value | UUUU | NYSE American |
| EFR | Toronto Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒
As of August 1, 2023, the registrant had 158,248,796 common shares, without par value, outstanding.
ENERGY FUELS INC.
FORM 10-Q
For the Quarter Ended June 30, 2023
INDEX
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PART I – FINANCIAL INFORMATION |
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PART II – OTHER INFORMATION |
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SIGNATURES |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report and the exhibits attached hereto (the “Quarterly Report”) contain “forward-looking statements” and “forward-looking information” within the meaning of applicable United States (“U.S.”) and Canadian securities laws (collectively, “forward-looking statements”), which may include, but are not limited to, statements with respect to Energy Fuels Inc.’s (the “Company” or “Energy Fuels”): anticipated results and progress of our operations in future periods; planned exploration, if warranted; development of our properties; plans related to our business, including our rare earth element (“REE”) initiatives, including our recent acquisition of the South Bahia property in Brazil (the “Bahia Project”) and our planned development of capabilities for the commercial separation of REEs at our White Mesa Mill (the “White Mesa Mill” or the “Mill”) in Utah; any plans we may have with respect to the recovery of radioisotopes for use in the production of medical isotope therapeutics; any plans we may have to evaluate the ramp-up of production at any of our uranium and/or uranium/vanadium properties; and the expected costs of production of any properties that may be ramped up. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, schedules, assumptions, future events, or performance (often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,” “is likely,” “budgets,” “scheduled,” “forecasts,” “intends,” “anticipates” or “does not anticipate,” “continues,” “plans,” “estimates,” or “believes,” and similar expressions or variations of such words and phrases or statements stating that certain actions, events or results “may,” “could,” “would,” “might,” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements.
Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. We believe that the expectations reflected in these forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct, and such forward-looking statements included in, or incorporated by reference into, this Quarterly Report should not be unduly relied upon. This information speaks only as of the date of this Quarterly Report.
Readers are cautioned that it would be unreasonable to rely on any such forward-looking statements as creating any legal rights, and that the forward-looking statements are not guarantees and may involve known and unknown risks and uncertainties, and that actual results are likely to differ (and may differ materially), and objectives and strategies may differ or change, from those expressed or implied in the forward-looking statements as a result of various factors. Such risks and uncertainties include, but are not limited to: global economic risks, such as the occurrence of a pandemic, political unrest or wars; risks associated with the restart of any of our uranium and uranium/vanadium mines; risks associated with our ramp-up to commercial production of an REE carbonate (“RE Carbonate”), our steps to enhance and modify our existing facilities at the Mill to allow for the commercial separation of REEs, and risks associated with the exploration and development of our recently acquired South Bahia Project in Brazil; risks associated with the potential recovery of radioisotopes for use in the production of medical isotope therapeutics; and risks generally encountered in the exploration, development, operation, closure and reclamation of mineral properties and processing and recovery facilities. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation the following risks:
•global economic risks, including the occurrence of unforeseen or catastrophic events, such as political unrest, wars or the emergence of a pandemic or other widespread health emergency, which could create economic and financial disruptions and require us to reduce or cease operations at some or all of our facilities for an indeterminate period of time, and which could have a material impact on our business, operations, personnel and financial condition;
•risks associated with Mineral Reserve and Mineral Resource estimates, including the risk of errors in assumptions or methodologies and changes to estimate disclosure rules and regulations;
•risks associated with estimating mineral extraction and recovery, forecasting future price levels necessary to support mineral extraction and recovery, and our ability to increase mineral extraction and recovery in response to any increases in commodity prices or other market conditions;
•uncertainties and liabilities inherent to conventional mineral extraction and recovery and/or in situ recovery (“ISR”);
•risks associated with our ramp-up to commercial production of RE Carbonate our planned implementation and operation of REE separation facilities, and potentially other REE and REE-related value-added processes and facilities, at the Mill or elsewhere including the risk: that we may not be able to produce RE Carbonate or separated REE oxides that meet commercial specifications at commercial levels or at all, or at acceptable cost levels; of not being able to secure adequate supplies of uranium and REE-bearing ores in the future at satisfactory costs to us; of not being able to increase our sources of uranium and REE-bearing ores to meet future planned production goals; of not being able to sell the RE Carbonate and/or separated REE oxides we produce at acceptable prices to us; of not being able to successfully construct and operate potential other downstream REE activities, including metal-making and alloying, in the future, which are currently being
evaluated; of legal and regulatory challenges and delays; and the risk of technological or market changes that could impact the REE industry or our competitive position;
•risks associated with the newly established uranium reserve program for the U.S. (the “U.S. Uranium Reserve Program”), being subject to appropriation by the U.S. Congress, and the expansion of the U.S. Uranium Reserve Program;
•risks associated with current federal, state and local administrations and changes thereto, including a lack of support of mining, uranium mining, nuclear energy or other aspects of our business, such as the new U.S. Uranium Reserve Program;
•geological, technical and processing problems, including unanticipated metallurgical difficulties, less than expected recoveries, ground control problems, process upsets, and equipment malfunctions;
•risks associated with the depletion of existing Mineral Resources through mining or extraction without replacement with comparable Mineral Resources;
•risks associated with identifying and obtaining adequate quantities of other uranium-bearing materials not derived from conventional material and sourced by third parties (“Alternate Feed Materials”) and other feed sources required for the operation of our Mill;
•risks associated with labor costs, labor disturbances, and unavailability of skilled labor;
•risks associated with the availability and/or fluctuations in the costs of raw materials and consumables used in our production processes;
•risks and costs associated with environmental compliance and permitting, including those created by changes in environmental legislation and regulation, and delays in obtaining permits and licenses that could impact expected mineral extraction and recovery levels and costs;
•actions taken by regulatory authorities with respect to mineral extraction and recovery activities;
•risks associated with our dependence on third parties in the provision of transportation and other critical services;
•risks associated with our ability to obtain, extend or renew land tenure, including mineral leases and surface use agreements, on favorable terms or at all;
•risks associated with our ability to negotiate access rights on certain properties on favorable terms or at all;
•risks associated with potential information security incidents, including cybersecurity breaches;
•risks that we may compromise or lose our proprietary technology or intellectual property in certain circumstances, which could result in a loss in our competitive position and/or the value of our intangible assets;
•risks associated with our ongoing ability to successfully develop, attract and retain qualified management, Board members and other key personnel critical to the success of our business, given that the number of individuals with significant experience in the uranium, vanadium, REE and radioisotope industries is relatively small;
•competition for, among other things, capital, mineral properties, and skilled personnel;
•the adequacy of our insurance coverage;
•uncertainty as to reclamation and decommissioning liabilities;
•the ability of our bonding companies to require increases in the collateral required to secure reclamation obligations;
•the potential for, and outcome of, litigation and other legal proceedings, including potential injunctions pending the outcome of such litigation and proceedings;
•our ability to meet our obligations to our creditors and to access credit facilities on favorable terms;
•risks associated with our relationships with our business and joint venture partners;
•failure to obtain industry partner, government, and other third-party consents and approvals, when required;
•failure to complete and integrate proposed acquisitions, or incorrect assessment of the value of completed acquisitions, including our newly acquired mineral concessions at the Bahia Project;
•risks associated with a Brazilian federal or state government enacting a conservation unit or environmental protection area or implementing a management plan in connection with an existing or future such unit or area that could impact planned production at or restrict the Company’s ability to or prevent the Company from mining significant portions of the Company’s Bahia Project;
•risks associated with fluctuations in price levels for heavy mineral sands and their components, including the prices for ilmenite, rutile, titanium and zircon, which could impact planned production levels or the feasibility of production of heavy mineral sands and monazite from our Bahia project in Brazil, and which could impact our planned monazite supply for our RE Carbonate and planned REE oxide production at the Mill;
•risks posed by fluctuations in share price levels, exchange rates and interest rates, and general economic conditions;
•risks inherent in our and industry analysts’ forecasts or predictions of future uranium, vanadium, copper (if and when produced) and REE price levels, including the prices for RE Carbonates, REE oxides, REE metals and REE metal alloys;
•market prices of uranium, vanadium, copper (if and when produced) and REEs, which are cyclical and subject to substantial price fluctuations;
•risks associated with future uranium sales, if any, being required to be made at spot prices, unless we are able to continue entering into new long-term contracts at satisfactory prices in the future;
•risks associated with our vanadium sales, if any, generally being required to be made at spot prices;
•risks associated with our RE Carbonate sales and potential REE oxide sales, if any, being tied in whole or in part to REE spot prices;
•failure to obtain suitable uranium sales terms at satisfactory prices in the future, including spot and term sale contracts;
•failure to obtain suitable vanadium sales terms at satisfactory prices in the future;
•failure to obtain suitable copper (if and when produced) or REE sales terms at satisfactory prices in the future;
•risks associated with any expectation that we will be successful in helping the U.S. Environmental Protection Agency (“EPA”) and Navajo Nation address the clean-up of historic abandoned uranium mines;
•risks associated with asset impairment as a result of market conditions;
•risks associated with lack of access to markets and the ability to access capital;
•the market price of our securities;
•public and/or political resistance to nuclear energy or uranium extraction and recovery;
•risks associated with inaccurate or nonobjective media coverage of our activities and the impact such coverage may have on the public, the market for our securities, government relations, commercial relations, permitting activities and legal challenges, as well as the costs to us of responding to such coverage;
•risks associated with potential impacts of public perceptions on our commercial relations;
•uranium industry competition, international trade restrictions and the impacts they have on world commodity prices of foreign state-subsidized production, and wars/conflicts influencing international demand and commercial relations;
•risks associated with foreign governmental actions, policies, laws, rules and regulations, and foreign state-subsidized enterprises, with respect to REE production and sales, which could impact REE prices available to us and impact our access to global and domestic markets for the supply of REE-bearing ores and the sale of RE Carbonate and other REE products and services to world and domestic markets;
•risks associated with our involvement in industry petitions for trade remedies and extension of the Russian Suspension Agreement, including costs of pursuing such remedies and the potential for negative responses/repercussions from various interest groups, consumers of uranium, and participants in other phases of the nuclear fuel cycle domestically and abroad;
•risks associated with governmental actions, policies, laws, rules and regulations with respect to nuclear energy or uranium extraction and recovery;
•risks related to potentially higher than expected costs related to any of our projects or facilities;
•risks related to our ability to potentially recover copper from our Pinyon Plain uranium project mineralized materials;
•risks related to stock price, volume volatility and recent market events;
•risks related to our ability to maintain our listings on the NYSE American and the Toronto Stock Exchange (“TSX”);
•risks related to our ability to maintain our inclusion in various stock indices;
•risks related to dilution of currently outstanding shares from additional share issuances, depletion of assets, etc.;
•risks related to our securities, including securities regulations, and our lack of dividends;
•risks related to our issuance of additional freely tradable common shares of the Company (“Common Shares”) under our At-the-Market (“ATM”) program or otherwise to provide adequate liquidity in depressed commodity market situations;
•risks related to acquisition and integration issues, or related to defects in title to our mineral properties;
•risks related to our method of accounting for equity investments in other companies potentially resulting in material changes to our financial results that are not fully within our control;
•risks related to conducting business operations in foreign countries including heightened risks of expropriation of assets, business interruption, increased taxation, import/export controls, or unilateral modification of concessions and contracts;
•risks related to any material weaknesses that may be identified in our internal controls over financial reporting. If we are unable to implement/maintain effective internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, negatively affecting the market price of our common stock;
•risks of amendment to mining laws, including the imposition of any royalties on minerals extracted from federal lands, the designation of national monuments, mineral withdrawals or similar actions, which could adversely impact our affected properties or our ability to operate our affected properties; and
•risks related to our potential recovery of radioisotopes at the Mill for use in the development and production of emerging targeted alpha therapy (“TAT”) cancer therapeutics, including any expectation that: such potential recovery will be feasible or that the radioisotopes will be able to be sold on a commercial basis; all required licenses, permits and regulatory approvals will be obtained on a timely basis or at all; the cancer treatment therapeutics will receive all approvals and will be commercially successful; and the risk of technological or market changes that could impact the TAT industry or our competitive position.
Such statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, the following assumptions: that there is no material deterioration in general business and economic conditions; that there is no unanticipated fluctuation of interest rates and foreign exchange rates; that the supply and demand for, deliveries of, and the level and volatility of prices of uranium, vanadium, REEs and our other primary metals, radioisotopes and minerals develop as expected; that uranium, vanadium and REE prices required to reach, sustain or increase expected or forecasted production levels are realized as expected; that our proposed RE Carbonate production or any other REE activities, our proposed radioisotope program, or other potential production activities will be technically or commercially successful; that we receive regulatory and governmental approvals for our development projects and other operations on a timely basis; that we are able to operate our mineral properties and processing facilities as expected; that we are able to implement new process technologies
and operations as expected; that existing licenses and permits are renewed as required; that we are able to obtain financing for our development projects on reasonable terms; that we are able to procure mining equipment and operating supplies in sufficient quantities and on a timely basis; that engineering and construction timetables and capital costs for our development and expansion projects and restarting projects on standby are not incorrectly estimated or affected by unforeseen circumstances; that costs of closure of various operations are accurately estimated; that there are no unanticipated changes in collateral requirements for surety bonds; that there are no unanticipated changes to market competition; that our Mineral Reserve and Mineral Resource estimates are within reasonable bounds of accuracy (including with respect to size, grade and recoverability) and that the geological, operational and price assumptions on which these are based are reasonable; that environmental and other administrative and legal proceedings or disputes are satisfactorily resolved; that there are no significant changes to regulatory programs and requirements that would materially increase regulatory compliance costs, bonding costs or licensing/permitting requirements; that there are no significant amendments to mining laws, including the imposition of any royalties on minerals extracted from federal lands; that there are no designations of national monuments, mineral withdrawals or similar actions, which could adversely impact any of our material properties or our ability to operate any of our material properties; that there are no conservation units or environmental protection areas or management plans that could impact planned production at or restrict the Company’s ability to or prevent the Company from mining significant portions of the Company’s Bahia Project; and that we maintain ongoing relations with our employees and with our business and joint venture partners.
This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the section heading: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by applicable law, we disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Statements relating to “Mineral Reserves” or “Mineral Resources” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the Mineral Reserves and Mineral Resources described may be profitably extracted in the future.
Market, Industry and Other Data
This Quarterly Report contains estimates, projections and other information concerning our industry, our business and the markets for our products. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research, as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry and general publications, government data and similar sources.
We qualify all forward-looking statements contained in this Quarterly Report by the foregoing cautionary statements.
CAUTIONARY NOTE TO INVESTORS CONCERNING
DISCLOSURE OF MINERAL RESOURCES AND RESERVES
We are a U.S. domestic issuer for United States Securities and Exchange Commission (“SEC”) purposes, a majority of our outstanding voting securities are held by U.S. residents, we are required to report our financial results in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and our primary trading market is the NYSE American. However, because we are incorporated in Ontario, Canada and also listed on the TSX, this Quarterly Report also contains or incorporates by reference certain disclosure that satisfies the additional requirements of Canadian securities laws that differ from the requirements of U.S. securities laws.
All mineral estimates constituting mining operations that are material to our business or financial condition included in this Quarterly Report, and in the documents incorporated by reference herein, have been prepared in accordance with both 17 CFR Subparts 220.1300 and 229.601(b)(96) (collectively, “S-K 1300”), the SEC’s mining disclosure framework effective as of 2021, and Canadian National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”), a rule developed by the Canadian Securities Administrators (the “CSA”) that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Furthermore, all mineral estimates constituting mining operations that are material to our business or financial condition included in this Quarterly Report are supported by pre-feasibility studies and/or initial assessments prepared in accordance with both the requirements of S-K 1300 and NI 43-101. S-K 1300 and NI 43-101 both provide for the disclosure of: (i) “Inferred Mineral Resources,” which investors should understand have the lowest level of geological confidence of all mineral resources and thus may not be considered when assessing the economic viability of a mining project and may not be converted to a Mineral Reserve; (ii) “Indicated Mineral Resources,” which investors should understand have a lower level of confidence than that of a “Measured Mineral Resource” and thus may be converted only to a “Probable Mineral Reserve”; and (iii) “Measured Mineral Resources,” which investors should understand have sufficient geological certainty to be converted to a “Proven Mineral Reserve” or to a “Probable Mineral Reserve.” Investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves as defined by S-K 1300 or NI 43-101. Investors are cautioned not to assume that all or any part of an Inferred Mineral Resource exists or is economically or legally mineable, or that an Inferred Mineral Resource will ever be upgraded to a higher category.
For purposes of S-K 1300 and NI 43-101, the Company is classified as a development stage issuer because it is engaged in the preparation of Mineral Reserves for extraction on at least one material property.
All mineral disclosure reported in this Quarterly Report has been prepared in accordance with the definitions of both S-K 1300 and NI 43-101.
PART I
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
ENERGY FUELS INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited) (Expressed in thousands of U.S. dollars, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Revenues | | | | | | | |
Uranium concentrates | $ | 4,335 | | | $ | — | | | $ | 22,805 | | | $ | — | |
Vanadium concentrates | — | | | 5,295 | | | 871 | | | 7,707 | |
RE Carbonate | 2,271 | | | 449 | | | 2,271 | | | 449 | |
Alternate Feed Materials, processing and other | 257 | | | 723 | | | 529 | | | 1,248 | |
Total revenues | 6,863 | | | 6,467 | | | 26,476 | | | 9,404 | |
Costs applicable to revenues | | | | | | | |
Costs applicable to uranium concentrates | 2,337 | | | — | | | 10,052 | | | — | |
Costs applicable to vanadium concentrates | — | | | 2,102 | | | 551 | | | 3,331 | |
Costs applicable to RE Carbonate | 2,030 | | | 222 | | | 2,030 | | | 222 | |
| | | | | | | |
Underutilized capacity production costs applicable to RE Carbonate | — | | | 1,095 | | | — | | | 2,758 | |
Total costs applicable to revenues | 4,367 | | | 3,419 | | | 12,633 | | | 6,311 | |
Other operating costs and expenses | | | | | | | |
| | | | | | | |
Exploration, development and processing | 3,820 | | | 1,219 | | | 6,916 | | | 2,392 | |
Standby | 1,607 | | | 3,323 | | | 3,894 | | | 6,798 | |
| | | | | | | |
| | | | | | | |
Accretion of asset retirement obligations | 274 | | | 510 | | | 620 | | | 904 | |
| | | | | | | |
Selling, general and administration | 7,458 | | | 4,703 | | | 13,481 | | | 9,919 | |
Total operating loss | (10,663) | | | (6,707) | | | (11,068) | | | (16,920) | |
| | | | | | | |
Other income (loss) | | | | | | | |
Gain on sale of assets (Note 5) | 2,807 | | | — | | | 119,257 | | | — | |
Other income (loss) (Note 11) | 2,971 | | | (11,352) | | | 1,190 | | | (15,869) | |
Total other income (loss) | 5,778 | | | (11,352) | | | 120,447 | | | (15,869) | |
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Net income (loss) | (4,885) | | | (18,059) | | | 109,379 | | | (32,789) | |
| | | | | | | |
Basic and dilutive net income (loss) per common share (Note 8) | $ | (0.03) | | | $ | (0.11) | | | $ | 0.69 | | | $ | (0.21) | |
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Items that may be reclassified in the future to income (loss) | | | | | | | |
Foreign currency translation adjustment | — | | | (3,488) | | | — | | | (1,722) | |
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Other comprehensive loss | — | | | (3,488) | | | — | | | (1,722) | |
Comprehensive income (loss) | $ | (4,885) | | | $ | (21,547) | | | $ | 109,379 | | | $ | (34,511) | |
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Net income (loss) attributable to: | | | | | | | |
Owners of the Company | $ | (4,861) | | | $ | (18,054) | | | $ | 109,404 | | | $ | (32,783) | |
Non-controlling interests | (24) | | | (5) | | | (25) | | | (6) | |
| $ | (4,885) | | | $ | (18,059) | | | $ | 109,379 | | | $ | (32,789) | |
Comprehensive income (loss) attributable to: | | | | | | | |
Owners of the Company | $ | (4,861) | | | $ | (21,542) | | | $ | 109,404 | | | $ | (34,505) | |
Non-controlling interests | (24) | | | (5) | | | (25) | | | (6) | |
| $ | (4,885) | | | $ | (21,547) | | | $ | 109,379 | | | $ | (34,511) | |
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See accompanying notes to the condensed consolidated financial statements.
ENERGY FUELS INC.
Condensed Consolidated Balance Sheets
(unaudited) (Expressed in thousands of U.S. dollars, except share amounts)
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 35,592 | | | $ | 62,820 | |
Marketable securities (Notes 3 and 13) | 64,120 | | | 12,192 | |
Trade and other receivables, net of allowance for credit losses of $223 and $223, as of June 30, 2023 and December 31, 2022, respectively | 2,930 | | | 519 | |
Inventories (Note 4) | 32,978 | | | 38,155 | |
Prepaid expenses and other current assets | 4,312 | | | 9,529 | |
Property, plant and equipment and other assets held for sale, net (Note 5) | — | | | 12,375 | |
Total current assets | 139,932 | | | 135,590 | |
Other long-term receivables | 1,532 | | | 1,537 | |
Inventories (Note 4) | 2,127 | | | 2,465 | |
Operating lease right of use asset | 1,304 | | | 1,376 | |
Investments accounted for at fair value (Note 13) | 17,373 | | | 19,329 | |
Property, plant and equipment, net (Note 5) | 17,427 | | | 12,662 | |
Mineral properties (Note 5) | 115,715 | | | 83,539 | |
Convertible note (Notes 3 and 13) | 59,206 | | | — | |
Restricted cash (Note 6) | 17,459 | | | 17,449 | |
Total assets | $ | 372,075 | | | $ | 273,947 | |
| | | |
LIABILITIES & EQUITY | | | |
Current liabilities | | | |
Accounts payable and accrued liabilities (Note 11) | $ | 5,449 | | | $ | 6,929 | |
Operating lease liability | 120 | | | 59 | |
| | | |
Deposits for assets held for sale | — | | | 6,000 | |
Asset retirement obligation and other liabilities held for sale (Note 6) | — | | | 5,636 | |
| | | |
| | | |
Total current liabilities | 5,569 | | | 18,624 | |
| | | |
Operating lease liability | 1,224 | | | 1,319 | |
Asset retirement obligations (Note 6) | 10,136 | | | 9,595 | |
| | | |
Total liabilities | 16,929 | | | 29,538 | |
Equity | | | |
Share capital Common shares, without par value, unlimited shares authorized; shares issued and outstanding 158,238,796 and 157,682,531 as of June 30, 2023 and December 31, 2022, respectively | 699,851 | | | 698,493 | |
Accumulated deficit | (346,716) | | | (456,120) | |
Accumulated other comprehensive loss | (1,946) | | | (1,946) | |
Total shareholders' equity | 351,189 | | | 240,427 | |
Non-controlling interests | 3,957 | | | 3,982 | |
Total equity | 355,146 | | | 244,409 | |
Total liabilities and equity | $ | 372,075 | | | $ | 273,947 | |
| | | |
Commitments and contingencies (Note 12) | | | |
See accompanying notes to the condensed consolidated financial statements.
ENERGY FUELS INC.
Condensed Consolidated Statements of Changes in Equity
(unaudited) (Expressed in thousands of U.S. dollars, except share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total Shareholders' Equity | | Non-Controlling Interests | | Total Equity |
| Shares | | Amount | | | | | |
Balance as of December 31, 2022 | 157,682,531 | | | $ | 698,493 | | | $ | (456,120) | | | $ | (1,946) | | | $ | 240,427 | | | $ | 3,982 | | | $ | 244,409 | |
Net income (loss) | — | | | — | | | 114,265 | | | — | | | 114,265 | | | (1) | | | 114,264 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Share-based compensation | — | | | 1,186 | | | — | | | — | | | 1,186 | | | — | | | 1,186 | |
Shares issued for exercise of stock options | 34,219 | | | 72 | | | — | | | — | | | 72 | | | — | | | 72 | |
Shares issued for the vesting of restricted stock units | 312,662 | | | — | | | — | | | — | | | — | | | — | | | — | |
Cash paid to fund employee income tax withholding due upon vesting of restricted stock units | — | | | (918) | | | — | | | — | | | (918) | | | — | | | (918) | |
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Balance as of March 31, 2023 | 158,029,412 | | | $ | 698,833 | | | $ | (341,855) | | | $ | (1,946) | | | $ | 355,032 | | | $ | 3,981 | | | $ | 359,013 | |
Net loss | — | | | — | | | (4,861) | | | — | | | (4,861) | | | (24) | | | (4,885) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Share-based compensation | — | | | 1,554 | | | — | | | — | | | 1,554 | | | — | | | 1,554 | |
Shares issued for exercise of stock options | 45,126 | | | 312 | | | — | | | — | | | 312 | | | — | | | 312 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Shares issued for exercise of stock appreciation rights | 164,258 | | | — | | | — | | | — | | | — | | | — | | | — | |
Cash paid to settle and fund employee income tax withholding due upon exercise of stock appreciation rights | — | | | (848) | | | — | | | — | | | (848) | | | — | | | (848) | |
| | | | | | | | | | | | | |
Balance as of June 30, 2023 | 158,238,796 | | | $ | 699,851 | | | $ | (346,716) | | | $ | (1,946) | | | $ | 351,189 | | | $ | 3,957 | | | $ | 355,146 | |
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Balance as of December 31, 2021 | 156,262,199 | | | $ | 685,903 | | | $ | (396,271) | | | $ | 1,943 | | | $ | 291,575 | | | $ | 3,951 | | | $ | 295,526 | |
Net loss | — | | | — | | | (14,729) | | | — | | | (14,729) | | | (1) | | | (14,730) | |
Other comprehensive income | — | | | — | | | — | | | 1,766 | | | 1,766 | | | — | | | 1,766 | |
| | | | | | | | | | | | | |
Shares issued for cash by at-the-market offering | 413,751 | | | 4,260 | | | — | | | — | | | 4,260 | | | — | | | 4,260 | |
Share issuance cost | — | | | (96) | | | — | | | — | | | (96) | | | — | | | (96) | |
Share-based compensation | — | | | 862 | | | — | | | — | | | 862 | | | — | | | 862 | |
Shares issued for exercise of stock options | 135,926 | | | 328 | | | — | | | — | | | 328 | | | — | | | 328 | |
Shares issued for the vesting of restricted stock units | 362,350 | | | — | | | — | | | — | | | — | | | — | | | — | |
Cash paid to fund employee income tax withholding due upon vesting of restricted stock units | — | | | (884) | | | — | | | — | | | (884) | | | — | | | (884) | |
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Shares issued for consulting services | 6,022 | | | 51 | | | — | | | — | | | 51 | | | — | | | 51 | |
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Balance as of March 31, 2022 | 157,180,248 | | | $ | 690,424 | | | $ | (411,000) | | | $ | 3,709 | | | $ | 283,133 | | | $ | 3,950 | | | $ | 287,083 | |
Net loss | — | | | — | | | (18,054) | | | — | | | (18,054) | | | (5) | | | (18,059) | |
Other comprehensive loss | — | | | — | | | — | | | (3,488) | | | (3,488) | | | — | | | (3,488) | |
Shares issued for cash by at-the-market offering | 356,028 | | | 3,808 | | | — | | | — | | | 3,808 | | | — | | | 3,808 | |
Share issuance cost | — | | | (86) | | | — | | | — | | | (86) | | | — | | | (86) | |
Share-based compensation | — | | | 1,147 | | | — | | | — | | | 1,147 | | | — | | | 1,147 | |
Shares issued for exercise of stock options | 24,326 | | | 67 | | | — | | | — | | | 67 | | | — | | | 67 | |
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Shares issued for consulting services | 5,183 | | | 55 | | | — | | | — | | | 55 | | | — | | | 55 | |
Shares issued for exercise of stock appreciation rights | 3,635 | | | — | | | — | | | — | | | — | | | — | | | — | |
Cash paid to settle and fund employee income tax withholding due upon exercise of stock appreciation rights | — | | | (11) | | | — | | | — | | | (11) | | | — | | | (11) | |
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Balance as of June 30, 2022 | 157,569,420 | | | $ | 695,404 | | | $ | (429,054) | | | $ | 221 | | | $ | 266,571 | | | $ | 3,945 | | | $ | 270,516 | |
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See accompanying notes to the condensed consolidated financial statements.
ENERGY FUELS INC.
Condensed Consolidated Statements of Cash Flows
(unaudited) (Expressed in thousands of U.S. dollars)
| | | | | | | | | | | |
| Six Months Ended |
| June 30, |
| 2023 | | 2022 |
OPERATING ACTIVITIES | | | |
Net income (loss) for the period | $ | 109,379 | | | $ | (32,789) | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | |
Depletion, depreciation and amortization | 1,319 | | | 1,679 | |
Share-based compensation | 2,740 | | | 2,009 | |
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Accretion of asset retirement obligations | 620 | | | 904 | |
Revision and settlement of asset retirement obligation | — | | | (445) | |
Unrealized foreign exchange (gain) loss | (325) | | | (1,340) | |
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| | | |
| | | |
Unrealized loss on investments accounted for at fair value | 2,189 | | | 16,837 | |
Gain on sale of assets | (119,257) | | | — | |
Other, net | 76 | | | 87 | |
| | | |
Changes in current assets and liabilities: | | | |
Marketable securities | (335) | | | 172 | |
Inventories | 5,515 | | | 1,784 | |
Trade and other receivables | (2,373) | | | (675) | |
Prepaid expenses and other current assets | (1,348) | | | (6,594) | |
Accounts payable and accrued liabilities | (2,269) | | | (2,987) | |
| | | |
| | | |
Net cash used in operating activities | (4,069) | | | (21,358) | |
INVESTING ACTIVITIES | | | |
Additions to property, plant and equipment | (5,467) | | | (705) | |
Additions to mineral properties | (3,055) | | | — | |
Acquisition of mineral properties | (22,374) | | | — | |
| | | |
Purchases of marketable securities | (67,775) | | | (11,435) | |
Maturities of marketable securities | 16,405 | | | — | |
| | | |
| | | |
Proceeds from sale of assets | 56,859 | | | — | |
Net cash used in investing activities | (25,407) | | | (12,140) | |
FINANCING ACTIVITIES | | | |
Issuance of common shares for cash, net of issuance costs | — | | | 7,886 | |
| | | |
Cash paid to fund employee income tax withholding due upon vesting of restricted stock units | (918) | | | (884) | |
| | | |
Cash received from exercise of stock options | 384 | | | 395 | |
Cash paid to settle and fund employee income tax withholding due upon exercise of stock appreciation rights | (848) | | | (11) | |
| | | |
| | | |
Net cash provided by (used in) financing activities | (1,382) | | | 7,386 | |
Effect of exchange rate fluctuations on cash held in foreign currencies | 50 | | | (21) | |
Plus: release of restricted cash related to sale of assets | 3,590 | | | — | |
Net change in cash, cash equivalents and restricted cash | (27,218) | | | (26,133) | |
Cash, cash equivalents and restricted cash, beginning of period | 80,269 | | | 132,822 | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | 53,051 | | | $ | 106,689 | |
| | | |
| | | |
| | | |
| | | | | | | | | | | |
| Six Months Ended |
| June 30, |
| 2023 | | 2022 |
Non-cash investing and financing transactions: | | | |
Issuance of common shares for consulting services | $ | — | | | $ | 106 | |
Acquisition of convertible note | $ | 59,259 | | | $ | — | |
| | | |
Supplemental disclosure of cash flow information: | | | |
| | | |
Cash paid during the period for interest | $ | 13 | | | $ | 17 | |
Increase (decrease) in accounts payable and accrued liabilities for property, plant and equipment and mineral properties | $ | 734 | | | $ | (182) | |
See accompanying notes to the condensed consolidated financial statements.
ENERGY FUELS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) (Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)
1. THE COMPANY AND DESCRIPTION OF BUSINESS
Energy Fuels Inc. was incorporated under the laws of the Province of Alberta and was continued under the Business Corporations Act (Ontario).
Energy Fuels Inc. and its subsidiary companies (collectively “the Company” or “Energy Fuels”) are together engaged in conventional and in situ recovery (“ISR”) uranium extraction, recovery and sales of uranium from mineral properties and the recycling of uranium-bearing materials generated by third parties, along with the exploration, permitting and evaluation of uranium properties in the United States (the “U.S.”). As a part of these activities, the Company also acquires, explores, evaluates and, if warranted, permits uranium properties. The Company’s final uranium product, uranium oxide concentrate (“U3O8” or “uranium concentrate”), known more commonly as “yellowcake,” is sold to customers for further processing into fuel for nuclear reactors. The Company also produces vanadium pentoxide (“V2O5”), along with uranium at the White Mesa Mill (the “White Mesa Mill” or the “Mill”), from certain of its Colorado Plateau properties as market conditions warrant and at times from solutions in its Mill tailings impoundment system. The Mill is also ramping up to commercial production of rare earth element (“REE”) carbonate (“RE Carbonate”) from various uranium- and REE-bearing materials acquired from third parties and is working on modifications and enhancements at the Mill for the potential production of separated REE oxides. Additionally, the Company is evaluating the potential to recover radioisotopes from its existing process streams at the Mill for use in targeted alpha therapy (“TAT”) therapeutics for the treatment of cancer.
With its uranium, vanadium, REE and potentially radioisotope production, the Mill is working to establish itself as a critical minerals hub in the U.S. Uranium is the fuel for carbon-free, emission-free baseload nuclear power – one of the cleanest forms of energy in the world. The REEs produced are used to manufacture permanent magnets for electric vehicles, wind turbines and other clean energy and modern technologies. The Company’s uranium and REE production and recycling helps Energy Fuels play a part in addressing global climate change and reducing air pollution. Additionally, the radioisotopes, which the Company is evaluating for recovery from its uranium processing streams, have the potential to provide the isotopes needed for emerging TAT cancer-fighting therapeutics.
The Company is a “development stage issuer” as defined by S-K 1300, as it is engaged in the preparation of Mineral Reserves for extraction of at least one material property.
Mining Activities
Mining activities consist of the Mill, multiple conventional mining projects and an ISR mining project (complete with an ISR recovery facility on standby). The conventional mining projects are located on the Colorado Plateau, including the Pinyon Plain, Whirlwind, La Sal, Bullfrog, Arizona Strip and Roca Honda Projects, all of which are in the vicinity of the Mill, as well as the Sheep Mountain Project located in Wyoming. The ISR project is the Nichols Ranch Project (which includes Jane Dough and Hank Satellite deposits) located in Wyoming.
As of June 30, 2023, the Company is performing rehabilitation and development work on its La Sal, Whirlwind and Pinyon Plain projects. Other conventional mining projects in the vicinity of the Mill and Sheep Mountain are on standby and are being evaluated for continued mining activities and/or are in the process of being permitted. The Mill continues to receive third-party uranium-bearing mineralized materials from mining and recycling activities, such as the Mill's alternate feed program, for processing, continues to expand its REE initiatives, and continues to develop its cancer therapeutics initiatives.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information and should be read in conjunction with the consolidated financial statements and notes thereto and the summary of significant accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 8, 2023, as amended on March 30 and June 1, 2023.
These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. These unaudited
condensed consolidated financial statements are presented in thousands of U.S. dollars, except for share and per share amounts. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included are adequate to make the information presented not misleading.
In management’s opinion, these unaudited condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows on a basis consistent with that of the Company’s audited consolidated financial statements for the year ended December 31, 2022. However, the results of operations for the interim periods may not be indicative of results to be expected for the full fiscal year.
Principles of Consolidation
These unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. Certain prior period amounts have been reclassified in order to conform to the current period presentation. These reclassifications had no effect on the reported results of operations.
3. MARKETABLE SECURITIES
The Company elected the fair value option for its marketable debt securities and convertible note for which changes in fair value and interest income are recorded in Other income (loss) in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The fair value option was elected for these marketable debt securities, as the Company may sell them prior to their stated maturities after consideration of the Company’s risk versus reward objectives, as well as its liquidity requirements. The stated contractual maturity dates of marketable debt securities held as of June 30, 2023 and December 31, 2022 are due in one to two years. The convertible note was received as partial consideration for the Alta Mesa Transaction (defined in Note 5 – Property, Plant and Equipment and Mineral Properties). The Company elected the fair value option for the secured convertible note, as it has the option of converting the principal due into fully paid and non-assessable common shares of enCore Energy Corp. (“enCore”). Marketable equity securities are measured at fair value as of each reporting date, and realized and unrealized gains (losses) and interest income are recorded in Other income (loss) in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
The following table summarizes our marketable securities by significant investment categories as of June 30, 2023:
| | | | | | | | | | | | | | |
| Cost Basis | Gross Unrealized Losses | Gross Unrealized Gains | Fair Value |
Marketable debt securities(1) | $ | 63,019 | | $ | — | | $ | 212 | | $ | 63,231 | |
Convertible note(2) | 59,457 | | (251) | | — | | 59,206 | |
Marketable equity securities | 2,876 | | (1,987) | | — | | 889 | |
Total marketable securities | $ | 125,352 | | $ | (2,238) | | $ | 212 | | $ | 123,326 | |
(1) Marketable debt securities are comprised primarily of U.S. government agency bonds.
(2) The Convertible note was received as partial consideration in the Alta Mesa Transaction (defined in Note 5 – Property, Plant and Equipment and Mineral Properties) and is valued using a binomial lattice model using Level 3 inputs. See Note 5 – Property, Plant and Equipment and Mineral Properties and Note 13 – Fair Value Accounting for more information.
The following table summarizes our marketable securities by significant investment categories as of December 31, 2022:
| | | | | | | | | | | | | | |
| Cost Basis | Gross Unrealized Losses | Gross Unrealized Gains | Fair Value |
Marketable debt securities(1) | $ | 11,435 | | $ | (310) | | $ | — | | $ | 11,125 | |
Marketable equity securities | 2,876 | | (1,809) | | — | | 1,067 | |
Total marketable securities | $ | 14,311 | | $ | (2,119) | | $ | — | | $ | 12,192 | |
(1) Marketable debt securities are comprised primarily of U.S. government agency bonds.
4. INVENTORIES
Inventories consisted of the following items:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Concentrates and work-in-progress | $ | 32,978 | | | $ | 35,476 | |
Inventory of ore in stockpiles | 256 | | | 940 | |
Consumables | 1,871 | | | 4,204 | |
Total inventories | $ | 35,105 | | | $ | 40,620 | |
| | | |
| | | |
| | | |
| | | |
| | | |
5. PROPERTY, PLANT AND EQUIPMENT AND MINERAL PROPERTIES
The following is a summary of property, plant and equipment, net:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
| Cost | | Accumulated Depreciation | | Net Book Value | | Cost | | Accumulated Depreciation | | Net Book Value |
Property, plant and equipment | | | | | | | | | | | |
Nichols Ranch | $ | 29,210 | | | $ | (21,238) | | | $ | 7,972 | | | $ | 29,210 | | | $ | (20,221) | | | $ | 8,989 | |
| | | | | | | | | | | |
Pinyon Plain | 2,437 | | | (784) | | | 1,653 | | | 1,617 | | | (714) | | | 903 | |
Equipment and other | 20,273 | | | (12,471) | | | 7,802 | | | 15,009 | | | (12,239) | | | 2,770 | |
Property, plant and equipment total | $ | 51,920 | | | $ | (34,493) | | | $ | 17,427 | | | $ | 45,836 | | | $ | (33,174) | | | $ | 12,662 | |
As of December 31, 2022, the net book value of the property, plant and equipment attributable to Alta Mesa was $8.21 million, which was included in Property, plant and equipment and other assets held for sale, net on the Condensed Consolidated Balance Sheets.
The Company recognized depreciation expense of $0.66 million and $0.87 million for the three months ended June 30, 2023 and 2022, respectively, and $1.32 million and $1.68 million for the six months ended June 30, 2023, and 2022, respectively. Depreciation expense is included in Exploration, development and process and Standby in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
For the three months ended June 30, 2023 and 2022, the Company capitalized $0.08 million and $0.05 million, respectively, of depreciation expense related to the Mill and Pinyon Plain that was included in the capitalized costs to inventory and mineral properties on the Condensed Consolidated Balance Sheet. For the six months ended June 30, 2023 and 2022, the Company capitalized $0.16 million and $0.05 million, respectively, of depreciation expense related to the Mill and mineral properties that was included in the capitalized costs to inventory and mineral properties on the Condensed Consolidated Balance Sheet.
The following is a summary of mineral properties:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Mineral properties | | | |
Sheep Mountain | $ | 34,183 | | | $ | 34,183 | |
Bahia Project | 29,130 | | | — | |
Uranerz ISR properties | 25,974 | | | 25,974 | |
Roca Honda | 22,095 | | | 22,095 | |
Pinyon Plain | 3,046 | | | — | |
Other | 1,287 | | | 1,287 | |
Mineral properties total | $ | 115,715 | | | $ | 83,539 | |
Bahia Project
On February 10, 2023, the Company closed on two purchase agreements to acquire a total of 17 mineral concessions in the State of Bahia, Brazil totaling approximately 37,300 acres or 58.3 square miles (the “Bahia Project”). Under the terms of the purchase agreements, the Company entered into mineral rights transfer agreements with the sellers to acquire the 17 mineral sand concessions.
The total purchase price under the purchase agreements was $27.50 million, which consisted of deposit payments of $5.90 million due upon reaching certain stipulated milestones and the remaining $21.60 million due at closing. Upon final payment on February 10, 2023, the transfer and assignment of the mineral rights was completed (the “Bahia Closing”). Additionally, the Company incurred direct deal costs related to such asset acquisition of $1.63 million. The purchase deposit payments and direct transaction costs were capitalized as Prepaid expenses and other current assets in the Consolidated Balance Sheets as of December 31, 2022 and reclassified to Mineral properties upon closing within the Condensed Consolidated Balance Sheets. The Bahia Closing followed the Brazilian Government’s approval of the transfers to Energy Fuels’ wholly owned Brazilian subsidiary Energy Fuels Brazil Ltda.
Alta Mesa Transaction
On February 14, 2023, the Company closed on its sale to enCore of three wholly-owned subsidiaries that together held Energy Fuels' Alta Mesa ISR Project for total consideration of $120 million (the “Alta Mesa Transaction”), paid as follows:
a.$60 million cash, which included $6 million prior to closing and $54 million at closing; and
b.$60 million in the Convertible Note, payable in two years from the closing, bearing annual interest of eight percent (8%). The Convertible Note is convertible at Energy Fuels’ election into enCore common shares at a conversion price of $2.9103 per share, being a 20% premium to the 10-day volume-weighted average price of enCore shares ending the day before the Closing (the “Conversion Option”). enCore is currently traded on the TSX-V and NYSE American. The Convertible Note is guaranteed by enCore and fully secured by Alta Mesa. Unless a block trade or similar distribution is executed by Energy Fuels to sell the enCore common shares received on conversion of the Convertible Note, Energy Fuels will be limited to selling a maximum of $10 million of common shares per thirty (30)-day period.
The Company recognized a gain on sale of assets from the Alta Mesa Transaction of $116.50 million, which is calculated as the total fair value of the consideration received of $119.46 million consisting of $60 million in cash and the Convertible Note with a fair value of $59.46 million, less the net book value attributable to the Alta Mesa ISR project assets and liabilities after working capital adjustments of $3.40 million, net of transaction costs. Receipt of the Convertible Note represents a non-cash investing activity at its initial fair value. See Note 13 – Fair Value Accounting for more information on the fair value of the Convertible Note.
In addition, after the closing of the transaction, enCore was required to replace the $3.59 million of reclamation bonds that existed for the Alta Mesa project, which the Company received during the six months ended June 30, 2023. The Company reclassified $3.59 million cash as a release of collateral from those bonds from Property, plant and equipment and other assets held for sale, net to cash and cash equivalents on its Condensed Consolidated Balance Sheets.
In connection with the Alta Mesa Transaction, on May 3, 2023, the Company completed the sale of its Prompt Fission Neutron assets, including the underlying contracts, technology, licenses and intellectual property (collectively, the “PFN Assets”), to enCore in exchange for cash consideration received at closing of $3.10 million, which resulted in a gain of $2.75 million. At closing, the PFN Assets, which the Company had purchased in 2020 for cash consideration of $0.5 million, had a net book value of $0.35 million. The PFN Assets were used exclusively at the Alta Mesa ISR Project. Should the Company have the need for the use of a PFN tool in the future, the Company retained a 20-year usage right as a condition of this sale during which, subject to the availability of the PFN Assets, the Company has the right to purchase, lease and/or license at least one fully functional PFN tool and all related and/or required equipment, technology and licenses, as reasonably requested, on commercially reasonable terms and conditions no less favorable than those offered by enCore to third parties. As of June 30, 2023, the Company has not purchased, leased and/or licensed a PFN tool.
6. ASSET RETIREMENT OBLIGATIONS AND RESTRICTED CASH
Asset Retirement Obligations
The following table summarizes the Company’s asset retirement obligations:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Asset retirement obligations, beginning of period | $ | 9,595 | | | $ | 13,687 | |
Revision of estimate | — | | | (238) | |
Accretion of liabilities | 620 | | | 1,556 | |
| | | |
Held for sale(1) | — | | | (5,410) | |
Disposal of Alta Mesa asset retirement obligations (1) | (79) | | | — | |
Asset retirement obligations, end of period | $ | 10,136 | | | $ | 9,595 | |
| | | |
| | | |
| | | |
| | | |
(1)Asset retirement obligations held for sale as of December 31, 2022 are related to Alta Mesa and are included as asset retirement obligation and other liabilities held for sale on the Condensed Consolidated Balance Sheets. Disposal of Alta Mesa asset retirement obligations are related to the accretion expense on Alta Mesa through the closing date and is included within Gain on sale of assets on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 5 – Property, Plant and Equipment and Mineral Properties for more information.
The Company’s asset retirement obligations are subject to legal and regulatory requirements. Estimates of the costs of reclamation are reviewed periodically by the Company and the applicable regulatory authorities.
Restricted Cash
The Company has cash, cash equivalents and fixed income securities as collateral for various bonds posted in favor of the applicable state regulatory agencies in Arizona, Colorado, New Mexico, Texas, Utah and Wyoming, and the U.S. Bureau of Land Management and U.S. Forest Service for estimated reclamation costs associated with the White Mesa Mill, Nichols Ranch, Alta Mesa and other mining properties. The restricted cash will be released when the Company has reclaimed a mineral property, sold a mineral property to a party having assumed the applicable bond requirements, or restructured the surety and collateral arrangements. See Note 12 – Commitments and Contingencies for more information.
The following table summarizes the Company’s restricted cash:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Restricted cash, beginning of period | $ | 17,449 | | | $ | 20,305 | |
Additional collateral posted, net | 10 | | | 734 | |
| | | |
Held for sale(1) | — | | | (3,590) | |
Restricted cash, end of period | $ | 17,459 | | | $ | 17,449 | |
(1)Restricted cash held for sale is related to Alta Mesa and is included as Asset retirement obligation and other liabilities held for sale on the Condensed Consolidated Balance Sheets. See Note 5 – Property, Plant and Equipment and Mineral Properties for more information.
7. CAPITAL STOCK
Authorized Capital Stock
The Company is authorized to issue an unlimited number of Common Shares without par value, unlimited Preferred Shares issuable in series and unlimited Series A Preferred Shares. The Preferred Shares issuable in series will have the rights, privileges, restrictions and conditions assigned to the particular series upon the Board of Directors approving their issuance. The Series A Preferred Shares issuable are non-redeemable, non-callable, non-voting and have no right to dividends.
Issued Capital Stock
During the three and six months ended June 30, 2022, the Company issued 0.36 million and 0.77 million Common Shares, respectively, under its At-the-Market (the “ATM”) program offering for net proceeds of $3.72 million and $7.89 million, respectively, after share issuance costs. No Common Shares were issued under the ATM program during the three and six months ended June 30, 2023.
8. BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted income (loss) per Common Share
The calculation of basic and diluted loss per share after adjustment for the effects of all potential dilutive Common Shares, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net income (loss) attributable to owners of the Company | $ | (4,861) | | | $ | (18,054) | | | $ | 109,404 | | | $ | (32,783) | |
| | | | | | | |
Basic weighted average common shares outstanding | 158,137,420 | | | 157,491,807 | | | 158,034,370 | | | 157,044,331 | |
Dilutive impact of stock options and restricted stock units | — | | | — | | | 1,156,936 | | | — | |
Diluted weighted average common shares outstanding | 158,137,420 | | | 157,491,807 | | | 159,191,306 | | | 157,044,331 | |
| | | | | | | |
Basic net income (loss) per common share | $ | (0.03) | | | $ | (0.11) | | | $ | 0.69 | | | $ | (0.21) | |
Diluted net income (loss) per common share | $ | (0.03) | | | $ | (0.11) | | | $ | 0.69 | | | $ | (0.21) | |
For the three months ended June 30, 2023 and 2022, a weighted average of 1.50 million and 1.55 million, respectively, stock options and restricted stock units (“RSUs”) have been excluded from the calculation of diluted net loss per common share, as their effect would have been anti-dilutive. For the six months ended June 30, 2023 and 2022, with a weighted average of 0.31 million and 1.52 million, respectively, stock options and RSUs have been excluded from the calculation of diluted net income (loss) per common share, as their effect would have been anti-dilutive. In addition, the Company excluded stock appreciation rights (“SARs”) of 2.30 million and 2.45 million, respectively, for the three months ended June 30, 2023 and 2022, as well as 2.31 million and 2.31 million, respectively, for the six months ended June 30, 2023 and 2022, as they are contingently issuable based on specified market prices of the Company’s Common Shares, which were not achieved as of the end of each period.
9. SHARE-BASED PAYMENTS
The Company maintains an equity incentive plan, known as the 2021 Amended and Restated Omnibus Equity Incentive Compensation Plan (the “Compensation Plan”), for directors, executives, eligible employees and consultants. Existing equity incentive awards include employee non-qualified stock options, RSUs and SARs. The Company issues new Common Shares to satisfy exercises and vesting under its equity incentive awards. As of June 30, 2023, a total of 15,823,880 Common Shares were authorized for future equity incentive plan awards.
The Company’s share-based compensation expense, by type of award, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
RSUs(1) | $ | 1,162 | | | $ | 488 | | | $ | 1,806 | | | $ | 972 | |
SARs | 304 | | | 550 | | | 740 | | | 896 | |
Stock options | 88 | | | 109 | | | 194 | | | 141 | |
Total share-based compensation expense(2) | $ | 1,554 | | | $ | 1,147 | | | $ | 2,740 | | | $ | 2,009 | |
(1)The fair value of the RSUs granted under the Compensation Plan for the three and six months ended June 30, 2023 and 2022 was estimated at the date of grant, using the stated market price on the NYSE American.
(2)Share-based compensation is included in Selling, general and administration in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
Restricted Stock Units
The Company grants RSUs to directors, executives and eligible employees. Awards for executives and eligible employees are determined as a target percentage of base salary and generally vest over three years. Holders of unvested RSUs do not have voting rights on those RSUs. The RSUs are subject to forfeiture risk and other restrictions. Upon vesting, the employee is entitled to receive one Common Share of the Company for each RSU at no additional payment.
A summary of the Company’s non-vested RSUs activity is as follows:
| | | | | | | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value |
| | | |
| | | |
| | | |
| | | |
Non-vested, December 31, 2022 | 747,425 | | | $ | 4.77 | |
Granted | 450,232 | | | 7.36 | |
Vested | (448,883) | | | 4.24 | |
Forfeited | (7,019) | | | 6.18 | |
Non-vested, June 30, 2023 | 741,755 | | | $ | 6.64 | |
The total intrinsic value and fair value of RSUs that vested and were settled for equity was $3.38 million for the six months ended June 30, 2023.
Stock Appreciation Rights
The Company may grant SARs to directors, executives and eligible employees.
On January 26, 2023, the Company’s Board of Directors issued SARs under the Compensation Plan, which are intended to provide additional long-term equity incentives for the Company’s senior management.
Each SAR granted entitles the holder to receive, upon a valid exercise, payment from the Company in cash or Common Shares (at the sole discretion of the Company) in an amount representing the difference between the fair market value (“FMV”) of the Company’s Common Shares on the date of exercise and $7.36 (the closing market price or “Grant Price” at the time of grant). Fair Market Value as used herein means the closing price of the Shares on the TSX or the NYSE American on the last trading day immediately prior to the date of exercise. The term of the SARs grant is five years, with SARs vesting only upon the achievement of the following goals: as to one-third of the SARs granted, automatically upon the 90-calendar-day VWAP of the Company’s Common Shares on the NYSE American equaling or exceeding $12.00 for any continuous 90-calendar-day period; as to an additional one-third of the SARs granted, automatically upon the 90-calendar-day VWAP of the Company’s Common Shares on the NYSE American equaling or exceeding $14.00 for any continuous 90-calendar-day period; and as to the final one-third of the SARs granted, automatically upon the 90-calendar-day VWAP of the Company’s Common Shares on the NYSE American equaling or exceeding $16.00 for any continuous 90-calendar-day period. Further, notwithstanding the foregoing vesting schedule, no SARs were able to be exercised by the holder for an initial period of one year from the Date of Grant, the date first exercisable being January 24, 2024.
The fair value of the SARs granted during the six months ended June 30, 2023 was estimated at the date of grant using a Monte Carlo simulation with the following weighted average assumptions:
| | | | | |
Risk-free interest rate | 3.58 | % |
Expected life(1) | 5.0 years |
Expected volatility(2) | 55.00 | % |
Expected dividend yield | — | % |
Weighted average grant date fair value | $ | 3.45 |
(1)Monte Carlo analysis of SARs assumes employee suboptimal exercise at first vesting time for each tranche.
(2)Expected volatility is measured based on the Company’s historical share price volatility over a period equivalent to the expected life of the SARs.
A summary of the Company’s SARs activity is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (Years) | | Intrinsic Value |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Outstanding, December 31, 2022 | 2,452,768 | | | $ | 4.07 | | | | | |
Granted | 308,333 | | | 7.36 | | | | | |
Exercised | (536,094) | | | 2.92 | | | | | |
Forfeited | (10,826) | | | 4.74 | | | | | |
Expired | — | | | — | | | | | |
Outstanding, June 30, 2023 | 2,214,181 | | | $ | 4.80 | | | 2.19 | | $ | 3,710 |
Exercisable, June 30, 2023 | 556,049 | | | $ | 2.92 | | | 0.56 | | $ | 1,846 |
A summary of the Company’s non-vested SARs activity is as follows:
| | | | | | | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value |
| | | |
| | | |
| | | |
| | | |
Non-vested, December 31, 2022 | 1,360,625 | | | $ | 2.81 | |
Granted | 308,333 | | | 3.45 | |
Vested | — | | | — | |
Forfeited | (10,826) | | | 3.25 | |
Non-vested, June 30, 2023 | 1,658,132 | | | $ | 2.92 | |
Employee Stock Options
The Company, under the Compensation Plan, may grant stock options to directors, executives, employees and consultants to purchase Common Shares of the Company. The exercise price of the stock options is set as the higher of the Company’s closing share price on the NYSE American on the last trading day before the grant date and the five-day volume weighted average price (“VWAP”) on the NYSE American ending on the last trading day before the grant date. Stock options granted under the Compensation Plan generally vest over a period of two years or more and are generally exercisable over a period of five years from the grant date, such period not to exceed 10 years.
The fair value of the stock options granted under the Compensation Plan for the six months ended June 30, 2023 was estimated at the date of grant, using the Black-Scholes Option Valuation Model, with the following weighted average assumptions:
| | | | | |
Risk-free interest rate | 3.90 | % |
Expected life | 3.25 years |
Expected volatility(1) | 74.21 | % |
Expected dividend yield | — | % |
Weighted average grant date fair value | $ | 3.92 | |
(1)Expected volatility is measured based on the Company’s historical share price volatility over a period equivalent to the expected life of the stock options.
A summary of the Company’s stock option activity is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Range of Exercise Prices | | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (Years) | | Intrinsic Value |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Outstanding, December 31, 2022 | $1.70 - $8.41 | | 767,678 | | | $ | 3.24 | | | | | |
Granted | 5.34 - 7.36 | | 139,211 | | | 7.12 | | | | | |
Exercised | 1.70 - 4.79 | | (106,757) | | | 3.75 | | | | | |
Forfeited | 3.89 - 7.36 | | (29,747) | | | 6.79 | | | | | |
Expired | 3.89 - 6.47 | | (7,506) | | | 5.57 | | | | | |
Outstanding, June 30, 2023 | $1.76 - $8.41 | | 762,879 | | | $ | 3.74 | | | 2.03 | | $ | 2,038 | |
Exercisable, June 30, 2023 | $1.76 - $8.41 | | 591,144 | | | $ | 2.82 | | | 1.36 | | $ | 2,031 | |
A summary of the Company’s non-vested stock option activity is as follows:
| | | | | | | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value |
| | | |
| | | |
| | | |
| | | |
Non-vested, December 31, 2022 | 140,586 | | | $ | 4.12 | |
Granted | 139,211 | | | 3.64 | |
Vested | (78,316) | | | 3.73 | |
Forfeited | (29,747) | | | 3.83 | |
Non-vested, June 30, 2023 | 171,734 | | | $ | 3.96 | |
As of June 30, 2023, there were $0.39 million, $2.34 million, and $0.69 million of unrecognized compensation costs related to the unvested stock options, RSUs and SARs, respectively. This expense is expected to be recognized over a weighted average period of 1.44 years, 2.25 years and 0.78 years respectively.
10. INCOME TAXES
As of June 30, 2023, the Company maintained a full valuation allowance against its net deferred tax assets. The Company continually reviews the adequacy of the valuation allowance and intends to continue maintaining a full valuation allowance on its net deferred tax assets until there is sufficient evidence to support the reversal of all or a portion of the allowance. Should the Company’s assessment change in a future period, it may release all or a portion of the valuation allowance, which would result in a deferred tax benefit in the period of adjustment. The Company will recognize the tax gain on the Alta Mesa Transaction under the installment method of accounting. This method will result in a deferral of a portion of the tax gain until the year in which the remaining proceeds are received.
For the three months ended June 30, 2023, the Company did not record income tax benefit on loss before tax of $4.89 million. For the six months ended June 30, 2023, the Company did not record income tax on income before taxes of $109.38 million. As of June 30, 2023, the Company estimates that approximately $8.37 million of Net Operating Loss carryforwards will be utilized during the 2023 tax year. For the three and six months ended June 30, 2022, the Company did not record an income tax benefit on a loss before taxes of $18.06 million and $32.79 million, respectively. The effective tax rate was 0% for each of the three and six months ended June 30, 2023 and 2022, which was a result of the full valuation allowance on net deferred tax assets.
11. SUPPLEMENTAL FINANCIAL INFORMATION
The components of other income (loss) are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Unrealized gain (loss) on investments accounted for at fair value | $ | 770 | | | $ | (13,419) | | | $ | (2,189) | | | $ | (16,837) | |
Unrealized gain (loss) on marketable securities | 10 | | | (282) | | | 335 | | | (171) | |
Realized gain on maturities of marketable securities | 214 | | | — | | | 214 | | | — | |
Unrealized loss on convertible note | (53) | | | — | | | (251) | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Foreign exchange gain | 293 | | | 2,345 | | | 319 | | | 1,132 | |
| | | | | | | |
Interest income, net and other | 1,737 | | | 4 | | | 2,762 | | | 7 | |
Other income (loss) | $ | 2,971 | | | $ | (11,352) | | | $ | 1,190 | | | $ | (15,869) | |
The components of trade and other receivables are as follows:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Trade receivables | $ | 2,406 | | | $ | 92 | |
| | | |
Notes receivable, net | 343 | | | 343 | |
Other | 181 | | | 84 | |
Total receivables | $ | 2,930 | | | $ | 519 | |
| | | |
| | | |
| | | |
| | | |
| | | |
The components of accounts payable and accrued liabilities are as follows:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Accounts payable | $ | 1,585 | | | $ | 3,224 | |
Payroll liabilities | 2,121 | | | 2,929 | |
Accrued capital expenditures | 755 | | | 22 | |
Accrued property taxes | 392 | | | 240 | |
Accrued operating expenses | 430 | | | 409 | |
Other accrued liabilities | 166 | | | 105 | |
Accounts payable and accrued liabilities | $ | 5,449 | | | $ | 6,929 | |
12. COMMITMENTS AND CONTINGENCIES
General Legal Matters
Other than routine litigation incidental to our business, or as described below, the Company is not currently a party to any material pending legal proceedings that management believes would be likely to have a material adverse effect on our financial position, results of operations or cash flows.
White Mesa Mill
In 2011, the Ute Mountain Ute Tribe filed an administrative appeal of the Utah Division of Air Quality’s (“UDAQ”) decision to approve a Modification to the Air Quality Approval Order at the Mill. Then, in 2013, the Ute Mountain Ute Tribe filed a Petition to Intervene and Request for Agency Action challenging the Corrective Action Plan approved by the State of Utah Department of Environmental Quality (“UDEQ”) relating to nitrate contamination in the shallow aquifer at the Mill. In August 2014, the Ute Mountain Ute Tribe filed an administrative appeal to the Utah Division of Radiation Control’s (“DRC”) Radioactive Materials License Amendment 7 approval regarding alternate feed material from Dawn Mining. The challenges remain open at this time and may involve the appointment of an administrative law judge (“ALJ”) to hear the matters. The Company does not consider these actions to have any merit. If the petitions are successful, the likely outcome would be a requirement to modify or replace the existing Air Quality Approval Order, Corrective Action Plan or license amendment, as
applicable. At this time, the Company does not believe any such modifications or replacements would materially affect its financial position, results of operations or cash flows. However, the scope and costs of remediation under a revised or replaced Air Quality Approval Order, Corrective Action Plan and/or license amendment have not yet been determined and could be significant.
The UDEQ renewed in January 2018, then reissued with minor corrections in February 2018, the Mill’s radioactive materials license (the “Mill License”) for another ten years and the Groundwater Discharge Permit (the “GWDP”) for another five years, after which further applications for renewal of the Mill License and GWDP are required to be submitted. During the review period for each application for renewal, the Mill can continue to operate under its existing Mill License and GWDP until such time as the renewed Mill License or GWDP is issued. Most recently, on July 15, 2022, the routine GWDP renewal application was submitted to UDEQ for consideration.
In 2018, the Grand Canyon Trust, Ute Mountain Ute Tribe and Uranium Watch (collectively, the “Mill Plaintiffs”) served Petitions for Review challenging UDEQ’s renewal of the Mill License and GWDP and Requests for Appointment of an ALJ, which they later agreed to suspend pursuant to a Stipulation and Agreement with UDEQ, effective June 4, 2018. The Company and the Mill Plaintiffs held multiple discussions over the course of 2018 and 2019 in an effort to settle the dispute outside of any judicial proceeding. In February 2019, the Mill Plaintiffs submitted to the Company their proposal for reaching a settlement agreement. The proposal remains under consideration by the Company. The Company does not consider these challenges to have any merit and, if a settlement cannot be reached, the Company intends to participate with UDEQ in defending against the challenges. If the challenges are successful, the likely outcome would be a requirement to modify the renewed Mill License and/or GWDP. At this time, the Company does not believe that any such modification would materially affect its financial position, results of operations or cash flows.
On August 26, 2021, the Ute Mountain Ute Tribe filed a Petition to Intervene and Petition for Review challenging the UDEQ’s approval of Amendment No. 10 to the Mill License, which expanded the list of Alternate Feed Materials that the Mill is authorized to accept and process for its source material content. Then, on November 18, 2021, the Tribe filed its Request for Appointment of an ALJ, followed shortly thereafter by a stay on the request in accordance with a Stipulation and Agreement between the Tribe, UDEQ and Company. Discussions between the Company and the Tribe are ongoing in an effort to resolve the dispute and other outstanding matters without formal adjudication. However, the Company does not consider this action to have any merit. If the stay is lifted, an ALJ is appointed and the petition is successful, the likely outcome would be a requirement to modify or revoke the Mill License amendment. At this time, the Company does not believe any such modification or revocation would materially affect its financial position, results of operations or cash flows.
Mineral Property Commitments
The Company enters into commitments with federal and state agencies and private individuals to lease mineral rights. These leases are renewable annually, and, as reported in the Company’s Form 10-K for the year ended December 31, 2022, renewal costs for the remainder of 2023 are expected to total approximately $1.13 million.
Surety Bonds
The Company has indemnified third-party companies to provide surety bonds as collateral for the Company’s asset retirement obligations. The Company is obligated to replace this collateral in the event of a default and is obligated to repay any reclamation or closure costs due. As of June 30, 2023, the Company has $17.46 million posted as collateral against an undiscounted asset retirement obligation of $33.00 million. As of December 31, 2022, the Company has $21.04 million posted as collateral against an undiscounted asset retirement obligation of $42.91 million.
Commitments
The Company is contractually obligated under a Sales and Agency Agreement appointing an exclusive sales and marketing agent for all vanadium pentoxide produced by the Company.
13. FAIR VALUE ACCOUNTING
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Fair value accounting utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The Company’s financial instruments include cash, restricted cash, accounts receivable, accounts payable and current accrued liabilities. These instruments are carried at cost, which approximates fair value due to the short-term maturities of the instruments. Allowances for doubtful accounts are recorded against the accounts receivable balance to estimate net realizable value.
As of June 30, 2023 and December 31, 2022, the fair values of cash, restricted cash, short-term deposits, receivables, accounts payable and accrued liabilities approximate their carrying values because of the short-term nature of these instruments.
The Company’s investments in marketable equity securities are publicly traded stocks measured at fair value and classified within Level 1 and Level 2 in the fair value hierarchy. Level 1 marketable equity securities use quoted prices for identical assets in active markets, while Level 2 marketable equity securities utilize inputs based upon quoted prices for similar instruments in active markets. The Company’s investments in marketable debt securities are valued using quoted prices of a pricing service and, as such, are classified within Level 2 of the fair value hierarchy. The Company’s investments accounted for at fair value consisting of Common Shares are valued using quoted market prices in active markets and, as such, are classified within Level 1 of the fair value hierarchy. The Company’s investments accounted for at fair value consisting of warrants are valued using the Black-Scholes option model based on observable inputs and, as such, are classified within Level 2 of the hierarchy.
The Company’s convertible note was received as part of the consideration received for the Alta Mesa Transaction was valued as of February 14, 2023 upon closing of that transaction using a binomial lattice model. The fair value calculation uses significant unobservable inputs, including: (i) volatility 60%, and (ii) yield of 9.5%. The Company used the same binomial lattice model to value the Convertible Note as of June 30, 2023. As of June 30, 2023, the fair value calculation uses significant unobservable inputs, including: (i) volatility of 60%, and (ii) yield of 10.0%. Increases or decreases in the volatility and/or the selected yield can result in an increase or decrease in the fair value of the Convertible Note.
The following tables set forth the fair value of the Company’s assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy as of June 30, 2023 and December 31, 2022. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| | | | | | | | | | | | | | | | | | | | | | | |
June 30, 2023 | Level 1 | | Level 2 | | Level 3 | | Total |
Cash equivalents(1) | $ | — | | | $ | 23,236 | | | $ | — | | | $ | 23,236 | |
Investments accounted for at fair value | 17,366 | | | 7 | | | — | | | 17,373 | |
Marketable debt securities | — | | | 63,231 | | | — | | | 63,231 | |
Convertible note | — | | | — | | | 59,206 | | | 59,206 | |
Marketable equity securities | 860 | | | 29 | | | — | | | 889 | |
| | | | | | | |
| | | | | | | |
| $ | 18,226 | | | $ | 86,503 | | | $ | 59,206 | | | $ | 163,935 | |
(1) Cash equivalents are comprised of United States Treasury Bills and Government Agency Bonds purchased within three months of their maturity date.
| | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2022 | Level 1 | | Level 2 | | Level 3 | | Total |
Cash equivalents(1) | $ | — | | | $ | 30,336 | | | $ | — | | | $ | 30,336 | |
Investments accounted for at fair value | 19,263 | | | 66 | | | — | | | 19,329 | |
Marketable debt securities | — | | | 11,125 | | | — | | | 11,125 | |
Marketable equity securities | 1,033 | | | 34 | | | — | | | 1,067 | |
| | | | | | | |
| | | | | | | |
| $ | 20,296 | | | $ | 41,561 | | | $ | — | | | $ | 61,857 | |
(1) Cash equivalents are comprised of United States Treasury Bills and Government Agency Bonds purchased within three months of their maturity date.
Changes in Level 3 Fair Value Measurements
The following table is a reconciliation of the beginning and ending balance recorded for the Convertible Note classified as Level 3 in the fair value hierarchy.
| | | | | |
Beginning balance, February 14, 2023 | $ | 59,457 | |
Unrealized loss included in other income (loss) | (251) | |
Ending balance, June 30, 2023 | $ | 59,206 | |
As of June 30, 2023, the difference between the fair value of the Convertible Note and the unpaid principal amount is $0.79 million.
Investments Accounted for at Fair Value
The fair value of the investments is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company. As of December 31, 2022, the Company held a 17.4% ownership interest in its investment in CUR and a 13.5% ownership interest in its investment in Virginia Energy Resources Inc. (“Virginia Energy”). These investments provide the Company with the ability to have significant influence, but not control, over their operations. The Company has elected the fair value option for each of these investments. As of December 31, 2022, the fair value of the Company’s investments in CUR and Virginia Energy were $16.50 million and $2.83 million, respectively.
On January 24, 2023, CUR acquired 100% of the issued and outstanding common shares of Virginia Energy for 0.26 common shares of CUR per common share of Virginia Energy. As a result, the Company’s 9,439,857 common shares of Virginia Energy were converted into 2,454,362 million common shares of CUR (the “Conversion”). Following the Conversion, the Company owned 16,189,548 common shares of CUR, which represented an ownership interest of 16.7% in CUR as of closing. As of June 30, 2023, the fair value of the Company’s investment in CUR was $17.37 million, which represented an ownership interest of 16.3%.
For the three months ended June 30, 2023 and 2022, the Company had an unrealized gain of $0.77 million and an unrealized loss of $13.42 million, respectively. The Company had an unrealized loss of $2.19 million and $16.84 million, respectively, for the six months ended June 30, 2023 and 2022. The unrealized gain (loss) related to these investments is included in Other income (loss) in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).
14. REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS
All revenue recognized is a result of contracts with customers either through uranium and vanadium sales contracts, an RE Carbonate agreement or Alternate Feed Material processing and other waste disposal agreements. The Company had satisfied all of its performance obligations as of June 30, 2023.
15. RELATED PARTY TRANSACTIONS
Robert W. Kirkwood, a member of the Company’s Board of Directors, is a principal of the Kirkwood Companies, including Kirkwood Oil and Gas LLC, Wesco Operating, Inc. and United Nuclear LLC (“United Nuclear”). United Nuclear owns a 19% interest in the Company’s Arkose Mining Venture, while the Company owns the remaining 81%. The Company acts as manager of the Arkose Mining Venture and has management and control over operations carried out by the Arkose Mining Venture. The Arkose Mining Venture is a contractual joint venture governed by a venture agreement dated as of January 15, 2008 and entered into by United Nuclear and Uranerz Energy Corporation, a wholly owned, indirectly held subsidiary of the Company.
On October 27, 2021, the Company began providing services to CUR under a mine operating agreement. Under this agreement, the Company earned $0.18 million and $0.13 million for the three months ended June 30, 2023 and 2022, respectively. The Company earned $0.45 million and $0.40 million during the six months ended June 30, 2023 and 2022, respectively under this agreement. As of June 30, 2023 and December 31, 2022, $0.18 million and $0.08 million was due from CUR, respectively. Additionally, the Company has accrued $1.53 million and $1.58 million as of June 30, 2023 and December 31, 2022, respectively, in Other long-term receivables related to deferred cash payments for production thresholds pursuant to the terms of the asset purchase agreement with CUR.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes, which have been prepared in accordance with U.S. GAAP, included elsewhere in this Quarterly Report on Form 10-Q. Additionally, the following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2022. This Discussion and Analysis contains forward-looking statements and forward-looking information that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. See “Cautionary Statement Regarding Forward-Looking Statements.”
All dollar amounts stated herein are in U.S. dollars, except share and per share amounts and currency exchange rates unless specified otherwise.
Operations Update and Outlook for 2023
Overview
We responsibly produce several of the raw materials needed for clean energy and advanced technologies, including uranium, rare earth elements (“REEs”) and vanadium.
Our primary product is U3O8 (also known as natural uranium concentrate or yellowcake), which, when further processed, becomes the fuel for the generation of clean nuclear energy. According to the Nuclear Energy Institute, nuclear energy provides nearly 20% of the total electricity and more than 50% of the clean, carbon-free electricity generated in the U.S. The Company generates revenues from extracting and processing materials for the recovery of uranium, vanadium and REEs for our own account, as well as from toll processing materials for others.
Our natural uranium concentrate is produced from multiple sources:
•Conventional recovery operations at the White Mesa Mill (the “White Mesa Mill” or “Mill”), including:
◦Processing ore from uranium mines; and
◦Recycling of Alternate Feed Materials, which are uranium-bearing materials that are not derived from conventional ore; and
•In Situ Recovery (“ISR”) operations.
The Company is also currently producing an intermediate REE product called mixed RE Carbonate. In 2020, the Company began evaluating the potential to recover REEs at the Mill. By October 2020, the Company had produced a mixed RE Carbonate, ready for separation, on a pilot scale from natural monazite sands. In December 2020, the Company entered into a contract to acquire natural monazite sands from a heavy mineral sands operation in Georgia, for the recovery of uranium and production of a commercially salable mixed RE Carbonate containing approximately 71% total rare earth oxide (“TREO”) on a dry basis. In March 2021, the Company began ramping up commercial-scale production of mixed RE Carbonate from these natural monazite sands. In July 2021, the Company announced the signing of a definitive supply agreement and began commercial shipments of RE Carbonate to a separation facility in Europe, which is the next step in producing usable REE products. On February 10, 2023, the Company closed on its previously announced mineral rights transfer agreements to acquire 17 mineral sand concessions in the State of Bahia, Brazil totaling approximately 37,300 acres or 58.3 square miles (the “Bahia Project”). Based on significant historical drilling performed to date, it is believed that the Bahia Project holds significant quantities of heavy minerals, including monazite, that will feed Energy Fuels’ quickly emerging U.S.-based REE supply chain. See “Rare Earth Element Initiatives,” below for more information.
The Company is in discussions with other entities around the world to acquire additional supplies of natural monazite sands and has worked with U.S. government agencies and national laboratories on various REE initiatives. The Company is modifying and enhancing its existing solvent extraction (“SX”) circuits at the Mill to be able to produce fully separated REE oxides, including NdPr oxide, in addition to uranium, as soon as late-2023 or early-2024. The Company is also evaluating other downstream REE activities, including metal-making and alloying at the Mill or elsewhere in the U.S., and is actively pursuing federal grants to help fund such efforts.
The Company also has a long history of conventional vanadium recovery at the Mill. The Company has several existing mines that contain vanadium resources, and the Mill has produced considerable quantities of vanadium during its operating history. From late 2018 to early 2020, the Company completed a campaign to recover vanadium from solutions in the tailings management system at the Mill (“Pond Return”) from which it recovered over 1.8 million pounds of high-purity V2O5.
Finally, pursuant to a strategic alliance with a technology development company, the Company is evaluating the feasibility of recovering radioisotopes from the Mill’s existing process streams for use in the development of medical isotopes for the potential treatment of cancer. This involves evaluating the potential to recover Th-232, and Ra-226 from the Company’s existing RE Carbonate and uranium process streams at the Mill and the feasibility of recovering Ra-228 from the Th-232, Th-228 from the Ra-228 and concentrating Ra-226 at the Mill. Recovered Ra-228, Th-228 and Ra-226 would then be sold to pharmaceutical companies and others to produce Pb-212, Ac-225, Bi-213, Ra-224 and Ra-223, which are the leading medically-attractive targeted alpha therapy (“TAT”) isotopes for the treatment of cancer. Existing supplies of these isotopes for TAT applications are in short supply, and methods of production are costly and currently cannot be scaled to meet the demand created as new drugs are developed and approved. This is a major roadblock in the research and development of new TAT drugs as pharmaceutical companies wait for scalable and affordable production technologies to become available. Under this initiative, the Company has the potential to recover valuable isotopes from its existing process streams for use in treating cancer, thereby recycling back into the market valuable materials that would otherwise not be recoverable.
The Mill, located near Blanding, Utah, processes ore mined from the Four Corners region of the United States, as well as Alternate Feed Materials that can originate worldwide. The Mill is the only operating conventional uranium mill in the U.S. and the only operating facility in the U.S. with the ability to recover vanadium from primary ore sources. The Mill is licensed to process an average of 2,000 tons of ore per day and to produce approximately 8.0 million pounds of U3