The Energy Report - Thu, Mar 23, 2017

As Uranium Price Turns, Insiders Stock Up on Energy Fuels

Analysts watching the uranium market agree that as prices for U3O8 turn around, Energy Fuels' U.S.-based assets, including its conventional and in-situ recovery operations at the Canyon Mine and Nichols Ranch, respectively, make it a good bet for investors. The company's management team and directors must agree because they have upped their share ownership in anticipation.

White Mesa Mill

In a letter to shareholders that Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.MKT) released on March 16, President and CEO Stephen Antony cited trends he believes bode well for uranium producers like Energy Fuels, including production cutbacks by major producers including Cameco in 2016 and Kazakhstan's state-owned Kazatomprom in early 2017.

"I would contend that when the World's largest and lowest-cost uranium producers are feeling the pain of today's prices, you know this current market pricing is categorically unsustainable," Antony wrote. Other signs that uranium prices will soon turn around include increased demand for U3O8 as new reactors come on-line, the demand for clean energy sources, and the American desire for energy independence.

Antony concluded his letter by noting that he and other members of the company's management team and board of directors had recently purchased additional shares of Energy Fuels stock. "We believe in this company, we believe in a uranium price recovery," he wrote.

Though Rob Chang of Cantor Fitzgerald acknowledges the challenges Energy Fuels has faced in coping with depressed uranium prices, he states in a March 10 research report that "we continue to view Energy Fuels as our top leverage play to the upcoming uranium recovery."

Chang expanded on his thesis in an interview with Uranium Investing News published March 16, saying Energy Fuels offers "the best leverage to the uranium price, in our opinion. . .they have the capability to produce anywhere between 3 to maybe 7 million pounds, depending on what the uranium price is, because they have a lot of assets. Many of them can be turned on within six months to maybe two years of the first decision, which means that if the uranium price jumps they will be able to respond in time to take advantage of the higher uranium price."

Given its ability to move quickly, Chang believes Energy Fuels "will be in a good position to capitalize."

Analyst Joe Reagor of ROTH Capital Partners also believes Energy Fuels is placed well to capitalize on a market turnaround in 2017. In a March 10 research note, Reagor cited company guidance for "an additional 200,000 pounds of contract sales in 2017."

He also noted that "We believe the Canyon mine could provide significant catalysts for UUUU throughout 2017. We anticipate the company will release an updated technical report on the resource estimate at the project in the middle of this year. Additionally, we believe management will begin providing information on the timing and cost of constructing the mine as well as provide metallurgical test data on the recently discovered high-grade copper portion of the deposit later this year."

In his March 1 Gold Newsletter, Brien Lundin noted that Energy Fuels "is continuing to encounter high-grade uranium and copper in its exploration program at its Canyon mine in northern Arizona." Assays from the mine "bode well for Canyon's ability to provide high-grade ore to Energy Fuels' White Mesa mill."

Lundin also commented that "Energy Fuels has enjoyed a resurgence as the uranium price has posted a mile rebound in recent months. In the expectation that this trend continues, the company is a buy near current levels."

In his research report Chang noted that, "For FY/17, the company expects to complete deliveries of 520,000 lbs U3O8 consisting of four contracts comprising 320,000 lbs under long term contracts and 200,000 lbs under a spot contract priced at the average spot price of uranium for the five weeks prior to the December 31, 2017 delivery date."

The analyst also noted that at Canyon, "the company is expecting to complete shaft sinking activities to a total depth of 1,400 feet later this month. The evaluation of core samples is on-going, recall that the best uranium intercepts (based on chemical assays and grade thickness) included 6.0 feet of mineralization with an average grade of 16.99% U3O8 and 46.0 feet of mineralization with an average grade of 1.37% U3O8."

Energy Fuels just announced that it has received the final license amendment from the U.S. Nuclear Regulatory Commission for the expansion of the Nichols Ranch project. With this amendment, the company now "holds all of the permits, licences and approvals required to expand the Nichols Ranch ISR project into the Jane Dough wellfields in the future."

Rob Chang commented on March 23 that "the expansion into Jane Dough allows for future long run production or upside optionality. . .there will be nine header houses expected to be in operation at Nichols Ranch for FY/17, with an additional four expected to be built in the future. Once the thirteen are operating, Energy Fuels expects to advance production into the Jane Dough wellfield, which contains twenty-two header houses that can be connected to the Nichols Ranch plant."

In a March 10 press release outlining Energy Fuels' 2016 results, the company reports $54.55M in revenue, 1,150,000 pounds of U3O8 sales completed "at an average realized price of $47.42 per pound," and 1,015,000 pounds of U3O8 recovered.

1) Tracy Salcedo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: Energy Fuels Inc. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
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