UUUU - Energy Fuels (UUUU)(EFR:CA) - Energy Fuels Signs New Supply Agreement to Process Rare Earth Elements
Energy Fuels signed an memorandum of understanding with Hyperion Metals to process monazite sand from Hyperion's Titan Project in Tennessee. The MOU does not specify the quantity of monazite to be processed, but we suspect the arrangement to be similar to Energy Fuels' agreement with Chemours to process 2,500 tons/year by 2022. Further details will become available after Hyperion completes a mineral reserve estimate and other test work later in the year. Hyperion has released results from initial wells of a drilling program that confirm high concentrations of monazite, as well as titanium, zircon and silica.Energy Fuels indicates its intent to ramp up monazite processing at its White Mesa Mill to 15,000 tons/year or greater. The announcement implies that management expects operations to grow rapidly and that future supply intake agreements could be announced. In addition to growing monazite processing, management has expressed an interest in separating rare earth elements (REE) removed from the monazite. President and CEO Mark Chalmers confirmed its intent to separate REEs in a recent C-Suite Interview on Channelchek.com.What does today's announcement mean for the company? Expanding monazite processing and entering rare earth element separating operations are clearly positives for the company. However, it is difficult to estimate the financial impact for the company until operations have begun. There is limited data available on separating REE since 85-95% of REE is supplied by China. Our models include a few million in free cash flow generated by REE, but that number could grow quickly as operations expand. Already, Marc Chalmers has called Energy Fuels' REE operations the "best resource opportunity I've encountered in my 45-year mining career."Rating is market perform, but REE developments are worth monitoring. Risk/reward seem balanced given the current stock price and uranium and vanadium prices. That said, there are several developments that could increase the value of the company quickly and its involvement in REE is at the top of the list. Potential investors in Energy Fuels would be wise to monitor the expansion of these operations and its potential profitability over the next several quarters. Read More >>