EFR:CC - Energy Fuels: Left For Dead Unjustifiably

2023-04-18 07:07:35 ET

Summary

• Energy Fuels is predominantly a uranium story. When uranium reaches $60lbs, this stock will rapidly move higher.
• Energy Fuels has a clean balance sheet with no debt and more than $60 million of cash.
• UUUU is primed to move higher. But I make the case that its driver will be uranium prospects, and not its rare earth minerals portfolio.

Investment Thesis

Energy Fuels ( UUUU ) is predominantly a uranium story, with a significant interest in vanadium's prospects.

Indeed, I believe that any other topic of discussion here asides from uranium are a distraction. That's not to say that Energy Fuels' vanadium or its rare earth portfolio couldn't eventually be a needle mover, but in the near-term, everything boils down to uranium.

And investors' highly anticipated moment when uranium reaches $60/lb.

Why Energy Fuels? Why Now?

As noted already, Energy Fuels' prospects are tied to uranium prices.

Indeed, even though Energy Fuels' balance sheet holds close to 1 million pounds of vanadium, this inventory level carries a gross market value of approximately $10 to $13 million.

Hence, for Energy Fuels realistically, its prospects are tied to uranium prospects.

The bull thesis has to form a view and answer in the affirmative the following question. Can the great energy transition, which seeks to reduce our dependency on fossil fuels gain further traction in 2023-2024, and lead uranium prices to strengthen and move higher?

As you know, uranium is not the only solution to the great energy transition, but it is one solution . Uranium energy is extremely reliable. It's flexible. High scalable and cheap. And importantly, uranium doesn't emit CO2 back into the atmosphere, as all its bi-product is contained within the uranium rock.

And still, the fact of the matter is that for many uranium bulls (myself included), is that even although more and more media stories about uranium prospects continue to surface, not to mention government polls showing widespread public amiability towards uranium fuel, as well as Energy Fuels' management stating this the Q4 earnings call :

[...] the changes in the wins that are happening with the U.S. government having bipartisan support for nuclear energy.

And yet, despite all the reasons why uranium prices should be showing more strength, for now, uranium prices remain stubbornly stuck at around $51.

2023 Prospects Discussed

In January, Energy Fuels sold 300,000 lbs of uranium to the US Government's uranium reserve for $61.57/lb, which brought Energy Fuels approximately $18.5 million in revenues.

Followers of the uranium sector will be aware that Energy Fuels wasn't the only company chosen. But the fact that it was one of the companies chosen , speaks volumes of its prospects.

Therefore Energy Fuels expects its inventories to end 2023 with approximately 587,000 pounds of uranium.

Recall, Energy Fuels right now isn't being operated with the goal of maximizing profitability. Indeed, for now, while uranium prices remain sub-$60/lb, Energy Fuels is unlikely to press ahead and ramp up production, because it's simply not profitable to mine for uranium at the uranium current price level.

Nevertheless, if uranium prices were to start to strengthen, all of a sudden, this stock which has been left for dead, could rapidly reprice higher.

The Bottom Line

Energy Fuels is not expected to ramp up uranium production in 2023.

Ultimately, given that Energy Fuels doesn't hold any debt on its balance sheet together with Energy Fuels having more than half a million pounds of uranium on its balance sheet, means that the catalyst for this stock is the moment that uranium prices start to strengthen and move to $55/lb and higher.

With nothing holding back Energy Fuels, asides from uranium's price, investors will have to sit and wait. Something that most investors, asides from a few, have any inclination to do.

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