White Mesa is the only other facility that
I know of in the world outside of that facility,
they can do effectively the same thing. I
am extremely excited about this, and this
is one of the best opportunities I've seen
in my entire career.
I’ve spoken to 5 companies, you are going
to be tolling through your mill, which is
great news.
Yes, that's a very interesting news because
none of them have called us to ask us about that.
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We spoke earlier today to Mark Chalmers, CEO
of Energy Fuels. They are on the NYC and also
on the TSX-V. They are a Uranium producer
in the US. We discussed the US House Appropriations
Committee’s decision to block the Uranium
reserve funding and what the implications
are for the market and for Mark's company.
We also discuss and paying down 50% of the
convertible debenture; the rest of it being
due at the end of this year, and how he is
going to be able to deal with that.
We look at Rare Earths. Looking forward, Mark
seems quite excited about some of the things
that they are putting in place. We have spoken
recently about Constantine Karayannopoulos
involvement with Neo and obviously, formally
Molycorp Inc as well. We look at M&A activity,
the possibility of it, new entrants from ASX
companies buying up US assets, what Mark's
views on that are, plus a variety of other
topics. So do take a look in the description
below at some of the things discussed, anything
that is interesting to you in particular,
click the number beside the topic, that's
called a timestamp. That will jump you to
that part of the video, otherwise enjoy everything
what Mark has to say.
Mark Chalmers, how are you doing, sir?
Very good, Matt, how are you?
I'm excellent. I haven't spoken to you since
we were at AUSIMM online virtual conference
together. How did that go?
It went really well, Matt, and I've mentioned
to you that that's an event that I've chaired
for 15 consecutive years, and I was very pleased
that we got it up this year. 15th year in
a virtual format, and we had a very good attendance
and some really excellent speakers.
And that's tough, going from an actual, in-person
type conference to doing something virtual.
But you had some amazing people on there.
We have been watching back some of these sessions.
It was a good session. So thank you for putting
that on, first of all,
My pleasure. And we tried to broaden it out
a bit more this year with things like the
small modular reactors. And that was popular,
broadening that out a bit.
Yes, definitely. it's quite good, we try to
do it as well, which is trying to help educate
people about Uranium. Because what we're seeing
now is a lot more well, new investors coming
into the world of investing, but also generalist
investors who perhaps haven't considering
Uranium before. All of them are asking questions,
which it's easy for people like yourself,
or certainly even us to forget that people
are coming into this new. All of this is good,
good information. But we are not here to talk
about AUSIMM. We are here to talk about Energy
Fuels. I want to start specifically with the
recent announcement by the US House of Appropriations
to say no to the funding of the Uranium reserve.
How do you feel about that?
Well, look, it was something that we didn't
want to have him say no to, but it's not like
no-no. They zeroed it and they basically said
they didn't have enough information from the
Department of Energy on how the program would
be implemented. And the belief that DOE is
trying to answer those questions as we speak.
The DOE is also looking for other sources
of funding the reserve. Secretary Brouillette
has been out publicly saying that he has very
strong support for the Uranium reserve. The
Senate is behind it, or at least the Republicans
in the Senate are behind it. So, it is a setback,
but it really reflects on the differences
between the Republican party in the United
States and the Democrats. But we are making
progress with the government bipartisan-wise,
because of the dependency on Russia for Uranium
products and in China. There is progress being
made it just isn't every day that you make
a step forward, but we are making steps forward,
more steps forward than backwards.
Are you saying that the House turned that
down purely on political reasons or did someone
not do their homework and provide the information
that had been requested?
Yes, it is a combination of those things.
We are certainly doing everything we can you
to get it back into the House bill and ‘unzero’
it. But, these appropriations are like trading
exercises between the both parties and different
people's interests, but we have very strong
support in the Senate and the DOE and this
increasing threat of Russia and China, particularly
Russia for nuclear fuel products. So a lot
of, or a number of Democrats are recognising
that, but some of the Democrats are opposing
it for other reasons and that's politics
That’s politics. So, talk to me about, so
that's not in your control, it was never in
your control. It was something that you highlighted,
but you have got to focus on things that are
in your control. What are you doing that you
can manage?
Well, let's look at a lot of the work we have
done through the Section 232 process of the
Nuclear Fuel Working Group, in the strong
policy statement that the nuclear working
group report that came out of the working
group, that is still helping us on a lot of
fronts, not just in appropriations, but also
in some of the negotiations on the Russian
Suspension Agreement. Basically, the Working
Group said that it is a national security
issue, receiving so much of our Uranium from
imports and particularly from Russia, so that
is helping us in other areas. And, we're still
pushing on all fronts: appropriations and
our participation in the negotiation of the
Russian suspension agreement. But we are managing
the company on the company basis alone, not
dependent on government support. We have seen
some increases in Uranium prices over the
last couple of months. They have flattened
out lately. You've got to multitask in this
business, if you don't multitask you will
not survive, but we are in very good position
amongst our peers, and we are very excited
about the future.
Sticking with the government components, if
we may, you have, over the past couple of
years, been talking to people in DC, up on
the Hill, as the phrase goes. Have you made
relationships, or have you made useful relationships?
And at what point do you start cashing in
on those? Because at the moment they're not
giving you what you want.
Yes. The cashing in is the difficult part.
We certainly have the strong relationships
in the push of the administration. There there's
some indirects here that we are cashing in
on, and the Nuclear Fuel Working Group is
one of them. Take the Russian Suspension agreement;
that expires at the end of this year. And
there are active negotiations on that front.
But for example, one of the key issues with
the Russian Suspension is that the Nuclear
Fuel Working Group says that we're overly
dependent on Russia and state-owned enterprises.
So that's a very strong policy document, basically
prepared by about half of the president's
cabinet. And, that's something very powerful
to use in those negotiations. It is not always
completely clear to particularly, some of
our investors, but we are punching above our
weight in DC on a lot of these fronts. It
is frustrating because it has taken a lot
of time and we haven't seen the money in hand
yet, but it is getting through people's minds
that we are overly dependent on critical minerals,
particularly Uranium, Vanadium and Rare Earths
in the United States right now.
The strategic minerals, the critical minerals
component is really interesting to me. There
are relationships that are being formed or
have been formed, they are recognising this.
But my view on this is, politicians - they
always want something from you. They aren't
necessarily going to give you anything back.
You're making them, you're giving them a topic
that they can promote themselves and their
own agendas on, but do you seriously think
that Energy Fuels is going to be able to capitalise
on this? For instance, you have been talking
about Rare Earths recently, are you hearing
things which make you think we need to lean
a little bit towards Rare Earths, because
those are the sorts of noises coming from
the Hill?
You've heard me say it many times that we
are first and foremost a Uranium production
company, but we do think that the Rare Earths
sector fits very nicely in what we do, our
core business, because we can recover the
Uranium from a lot of these Rare Earths. A
lot of our political supporters on the Uranium
reserve and the nuclear fuel cycle are also
the exact same supporters for reducing our
dependency on China for Rare Earths. It all
fits nicely together. And there is no company
out there in the United States. None. Not
one that has got the optionality, when you
deal with these critical materials as Energy
Fuels, with the mill and the Vanadium and
the potential for us to be, we believe, commercially
producing Rare Earth concentrate in the quite
near term.
It’s a lot of these indirects. But that
a lot of the people that have been supporting
the Nuclear Working Group and the production
of nuclear products in the United States,
when they see that White Mesa Mill could have
multiple uses in the critical area they're
delighted. They're actually delighted to know
that.
For people who are new to this, you're talking
about the White Mesa Mill, which you control.
And it's the only mill in the district which
actually can cope with Uranium, Vanadium and
Rare Earths.
And before we skip away from the RSA, the
Russian Suspension Agreement, the date is
31st of December, end of this year. A decision
needs to be announced. or any time between
now. Have you heard anything about what is
being discussed? Are they going to come up
with a decision anytime soon or are they going
to leave it to the last minute? And if so,
what type of deal do you think we are going
to see as a result?
Mark Chalmers That's the big question. Look,
there is, and I can't go into details because
a number of people that are participating
can only go into so much detail, but I can
say this: there is a push by the government
to reduce quantities of Uranium coming into
the United States, where there is a push by
the Russians and the utilities to increase
the quantities of a Uranium coming into the
United States. So those are completely, oppositely
opposed. Okay. And that is a rub. And as I
said earlier, the Nuclear Fuel Working Group
report says that we shouldn't be increasing
or dependency on Russia. There was a preliminary
administrative review that was completed a
month or so ago by the Department of Commerce,
and they basically said that the conclusion
of this agreement, what has largely been gained
by some of these people that want more Uranium
coming into the United States, and that shook
up the utilities and it should shake up the
utilities and the Russians.
It is moving forward. it is a high priority
for the government. it's a high priority for
all the stakeholders in those renegotiations
and negotiations. But I will say: watch this
space, because it is probably, well, without
a doubt, getting the most attention, in my
opinion right now in the, in the Uranium space
globally. And that the preliminary administrative
review that said that even though the agreement
that's in place right now was, people were
abiding by it, the fact that it was expiring
and that a number of utilities and the Russians
were over-contracting greater than the 20%,
is creating some ripples in the water right
now.
You say watch this space. Do you mean watch
this space in terms of timing? Do you think
it's imminent? Or watch this space because
you think the terms will change.
Well, look, the deadline is the end of this
year, 31st of December, 2020, but the administrative
review process is ongoing and it was supposed
to, I believe, terminate in early August,
and now that's been extended by another couple
months. It's just very much in the works right
now. And, the outcomes are not certain, but
it is getting a lot of attention. And, there's
really 2 camps: to reduce the quantities coming
into the United States or increasing the quantities,
and the Nuclear Fuel Working Group is basically
saying it shouldn't be increased. It should
be extended or decreased. These are the kinds
of things that indirectly are pieces to the
puzzle, that we were very much drivers of,
as Energy Fuels, and it is helping us right
now on other fronts that are less transparent
because of the nature of the negotiations.
But it is now also apparent the battle you
are fighting, because you've got an argument
of national security; critical minerals to
the US, being self-sufficient, which is one
position. And the other position, where one
of the parties in all of this was not aligned
and that's the utilities, taking a commercial
decision, and you would argue short-sightedly,
because they wanted the cheapest possible
product. They want more of this, more and
cheaper, for longer. So that was the battle
that you were fighting. And these guys had
big, deep pockets in terms of their lobbyists.
That seems to me a big part of what was going
on and all of this.
We have very good relationships with many
of the utilities and I've delivered Uranium
to many of them for decades. But yes, the
utilities are looking at cost and they are
trying to manage their businesses as they
have to. So, that for a small company like
Energy Fuels, and the Uranium industry, because
it's not just Energy Fuels fighting this battle,
but mainly Energy Fuels has taken the biggest
position, in pushing it forward. We have,
as I've always used that phrase of, we punched
above our weight. These utilities are very
significant organisations with multiples and
multiples of billions of revenue per year.
So that's why I said, we're going to keep
pushing on all those fronts. We're not going
to give up. We are not going to give up. But
at the same time, we're going to manage our
business based on the market fundamentals.
Big discussion. Lots of unknowns: timing is,
well we know that there is a stop date at
the end of this year for the RSA, and that
seems a big moment for utilities, as is the
US election, and that's another big moment.
And I know that there's a consensus that nuclear
is part of the solution for both sides of
the house, but the Democrats a little bit
less so than the Republicans, I'm hearing
from you. So even the utilities will be wanting
to understand what the outcome of that election
is, but that then has an impact on timing
because the dust doesn't usually settle from
a US election until February, March, and then
maybe there's a shakeup, even if the incumbents
stay in. So, what does that do for timing
around utilities’ decision-making, term
contracts, et cetera, how do you feel about
that?
When you look at it, there's a lot of uncertainty,
and uncertainty is uncertainty. So we're preparing
ourselves for any eventuality. We did pay
down half of our convertible debt and we're
looking at the other half on how to best address
that. We're increasing our inventories. But
we do think that, there's uncertainty, but
that if there's an administration change,
they are talking more negatively about hydrocarbons
than they are nuclear, and to a certain extent
that is supportive of nuclear as being important
to get to zero carbon emissions. So, I don't
want to speculate, over speculate here, Matt.
But you've seen over time that we are a company
that positions ourselves aggressively but
not recklessly when it comes to the overall
picture of the company and we will be the
survivor or one of the survivors in this space
because of the way we manage the company now
and going forward.
And so one last macro point. So you producers.
You're a producer, right? The largest in the
US. The Cameco’s of this world, and even
the Kazatomproms of this world; you have relationships
with utilities all around the world, and you
can't bad mouth them. You've got relationships,
professional relationships with these guys,
but it's been a deeply frustrating process
for all producers for the last couple of years,
has it not? To have this fight, this debate
around pricing. You need a certain price to
be able to get back into production and you
need to be incentivised to do so. So, going
back to the question, which is, what do you
think the timing is for what utilities recognising
that if they don't push the button soon, you
guys aren't going to be able to get back into
production and give them the pounds that they
need when they want it?
Yes, those are the trade-offs. And some of
the utilities understand that and appreciate
that. Some of the utilities don't think that
total dependence on the Russians is fine.
Even companies like Cameco. Some think, ‘well,
we'll be totally dependent on our allies,
and we have no Uranium production in Canada
right now’. The production is dwindling
in Australia with the shutdown of Ranger;
well, it will be at the beginning of 2021.
So, the Western world, that's the clash. It
really is the state-owned enterprises vs the
Western world - that's the clash. You need
higher prices, substantially higher prices
for the entire world, including the Western
world to continue to survive in the Uranium
industry. Some of the state-owned enterprises
may be a little less so, even though a lot
of them are not as a low-cost is people want
to think. So that that's the clash. Do you
want a diverse supply chain, or do you just
want to get all your products at state-owned
prices? So, yes, that's the uncertainty there.
Let's talk about something you just mentioned,
which is, obviously you've partly paid down
the convertible which is due at the end of
this year. You paid down some USD$10.4M, USD$10.3M.
You have got the same due at the end of the
year. So why did you go early on the payment
and what are you going to do about the end
of the year payment?
We wanted to show the market that we were
managing that convertible debt, and that was
about $10M Canadian. And we thought it was
a prudent step to pay half of it. We are still
looking at how to best address the other half.
We have the ability to convert that into shares.
And it's like a 20-days VWAP at about a 5%
discount at the end of the year, if we elect
to do that or pay it off in cash. But, Matt,
I've told you; having been in this business
over 40-years, I've seen these companies get
in trouble because of debt on a number of
occasions. And that is an area that is close
to my heart, to not get over-leveraged on
debt. And at the same time, there are a number
of the Uranium guys that are taking on more
convertible debt, and we're going the opposite
direction, which is a differentiator. No one
else that I know of in our space has actually
been paying off debt. They have been taking
on more debt as they go forward. So, watch
it. We will pick our moment and we will address
the debt no later than the end of the year,
maybe sooner. But we want to make sure that
we do it on our terms
Is selling down some of your inventory a possibility?
Because looking at the numbers, if you've
got about USD$21M to USD$23M worth of Uranium,
you've got about USD$8M to USD$9M of Vanadium.
I know the prices are low, but if needs must,
would you consider selling that down?
Anything is possible. We like holding the
inventory because we think the market is poised
to reward us for having that inventory. By
the end of this year, we'll have in the order
of close to 700,000lbs of inventory close.
So, it's our objective not to sell the inventory
down until the prices are at higher levels.
Yes, look, there's a number of ways to address
the debt, but we would really like to see
the continued increases in Uranium and Vanadium
prices, particularly Uranium prices to get
a bigger lift out of the out of that inventory.
Do you think it would be cheaper to refinance
your debt rather than pay it off or sell off
inventory? Because the upside on inventory
could be more significant?
The inventory we carry, it is the like, for
Uranium, it is like USD$23/lbs, and currently
price is around USD$33/lbs. That is how we
carry it on our books for counting purposes.
So, we've got about a $10/lbs lift you just
on the Uranium price itself. That's material
to us. We think there is more upside for inventory
than downside. You don't get any money in
your accounts, any more interest bearing on
your account, so we're pretty comfortable
having this inventory that we can liquidate
quite quickly if we need to when the time
is right.
But there's some good news, Mark. I've solved
your problem because I've spoken to, for cashflow,
I have spoken to 5 companies who are going
to be tolling through your mill, which is
great news.
Yes. That's very interesting news because
none of them have called us to ask us about
that.
Oh.
It seems like every week I see another, press
release or something that shows a picture
of our mill and they didn't even ask permission
to use the picture of the mill. I need to
clean this up because it is not right for
people to just assume that they are going
to have access to the mill, because they don't
have access to the mill. We have no milling
agreements at this point in time. In the event
that we do decide we're going to give, we
probably won't give out a milling agreement,
we will announce that, but for all of our
investors or any investors in any of these
other companies, no one has access to the
mill except for Energy Fuels. So yes, it's
amazing how they all chime in and show pictures
of the mill and how it's close by, inferring
that they have access to it, but they don't.
I just wanted to put that to you, because
you've spoken to it least a couple of times
before, you've been very clear with me, but
we keep seeing it, and I just wanted to give
you the chance to respond. And that's the
most direct you have been with us, so I do
appreciate that as well. One more thing, if
I may. The other thing that is happening is
there is a lot of Australian ASX-listed juniors
coming and picking up Uranium assets in the
US, and they're getting funded. They are raising
money off the back of this. Why haven't all
of these Uranium assets in the US been picked
up before?
Well, there is a lot of Uranium assets in
the United States and a lot of these properties
that people are picking up, they're not permitted.
Now there may be 1 or 2 that are permitted,
but a lot of them are not permitted. And over
the last 20-years or so in our case, we've
picked up… well, many of our projects are
permitted, have a long-term production history
and recent production histories, there's only
so much space in the market. Getting permits
is very, very difficult. And there are other
companies that do have some permitted assets.
I don't know. To pick up unpermitted assets,
to not having access to the mill, very speculative
investments. They have been raising money
on it. And frankly, a lot of projects on the
Colorado Plateau are of lesser risk and probably
easier to get to market than a lot of these
other Uranium deposits that some people are
promoting outside of the United States. There's
a long production history in the US. So there's
different investment risks for different groups
of investors. So, just, all I would say is
people need to know what they are investing
in. If they are comfortable with that, that's
fine. That's their choice.
It is always their choice. Why didn't you
pick them up?
We don't need any more assets. We have assets
in about what?- 6 or 7 different States. Most
of our assets are permitted. Most of them
recently had been worked and the underground
workings are in good shape. The mill has been
operable. Nickel’s ranch has been operable.
Alta Mesa. So, we don't need to own the Western
United States. It is costly and there's a
point where, it just makes absolutely no sense
to have more assets.
“Some questions sent in: wouldn't it make
sense for Energy Fuels to now step in as a
buyer. They need ore at the White Mesa mill.
They want Uranium, they want Vanadium. The
Sunday mine complex is basically next door.
This might be a fun ride going forward.”
Any plans?
I'm not going to say we are not going to buy
Uranium in the future, because that's the
history of the district. But to put it in
to perspective, over the last 10 or 15-years
there have been times when we have had milling
agreements and we have perhaps bought some
ore from people, but it turned out to be just
a very small percentage of the production
that came out of White Mesa mill. And I don't
know the exact number, but probably in the
order of maybe 10% of the production that
came out of White Mesa came from other mine
that were not owned by our company. So now
look, that that can be variable, but the reason
why we haven't paid a lot of attention to
this market is, 1) the prices are too low,
and 2) historically other people may have,
the aspirations of becoming producers, but
very few can actually really contribute in
a material way in the mill. Now, the price
Uranium is USD$75/lbs or something like that,
that could change to some extent, but we already
have a number of mines ready to go, that we
have operated within the last year. And these
mines that were mined 30, 40-years ago, and
nobody has mined them since; I hate to think
of the condition they're in.
Is that a no?
So, look, we still control the district with
our White Mesa mill, 100% owned. And that's
because we have spent the money to keep it
in good working order over all these years.
Anyone who wants to build another mill, they
can go out and get the permits and construct
another mill for several hundred million dollars.
That is always open to the realm of possibilities.
So that a ‘no plans anytime soon to go and
have a conversation around M&A with Western
Uranium and Vanadium?’
Well, it's subject to change: if, for example,
if the US government decided, or the price
of Uranium increases to a level where it's
economic to have those discussions, I'm not
saying we're not going to have those discussions
because if we can get material into the mill
and that helps us, we're not going to,why
would we turn our head to that? We will not
turn our head to that, but I'm just saying
that right now we have no agreements with
anyone. Still, no one should just assume they
have access to the mill right now. They should
not assume that. And, but things can change.
And we are absolutely in the driver's position
with the mill. And the material from our projects
will take first priority over anybody else's
material.
Mark. Good catch up. Thank you very much for
that.
We didn’t talk much about the Rare Earths.
Oh, yes. Sorry, you're right. Let's do it.
It’s a great spot for us, Matt, and a huge
differentiator. So we're still advancing our
efforts on the Rare Earths. I hope to have
more news flow on that front in the coming
months. It has by no means gone away. People
that I know say, ‘Oh, they'll never do anything
there’. I tell them – they are full of
baloney. We're going to do things in the Rare
Earths space. And, it is certainly getting
a lot of attention, it certainly has by-partisan
support, the Rare Earths and the dependency
on China. So, all I can say is, watch this
space. But we are advancing things, but we
can only unveil things as we close them out.
But we're still testing material at White
Mesa and we're getting a lot of interest in
it.
And so if you talk to people in the Rare Earth
sector, those that know about what we are
doing and our aspirations you'll find that
many of them will say that we are in a very
unique spot here. Very unique spot. The market
is recognising that right now.
And I have got to ask you, only because I'm
so pleased at the way I can pronounce this,
which is, how our discussions with Constantine
Karayannopoulos?
Well Constantine is an advisor to us. He just
recently went from non-executive chairman
to CEO of Neo Performance Materials, that's
a company that he founded and developed back
in what, 25-years ago? Constantine and I talk
on a routine basis, and Brock O’Kelly, and
so we've got a very good relationship with
those 2 gentlemen, and both of them worked
for Mountain Pass and Moly Corp. And if you
saw, Mountain Pass Materials announced that
they're going to list a USD$1.5Bn Rare Earths
company on the Mountain Pass deposit and operations.
And that, that got some attention in the market,
and that's why that we're not getting any
differentiated value with our peers in the
Uranium space, but then we have this. What
I consider a very significant opportunity
in the Rare Earth space and still be able
to recover Uranium from those streams.
So, basically what we're proposing to do is
exactly what CNNC is doing in China right
now; trading monocyte streams of material,
recovering the Uranium and going through the
stream of further downstream Rare Earth processing.
And White Mesa is the only other facility
that I know of in the world, outside of that
facility that can do effectively the same
thing in given some time. So, watch it, watch
it. And I am extremely excited about this,
and this is one of the best opportunities
I've seen in my entire career in the Rare
Earth space and how it blends in with Energy
Fuels, so watch it.
We will, we will watch it. We are excited
by it. We have spoken to enough Rare Earth
companies. We know the restrictions that they
have around processing outside of China. So,
I do get that. I'm eager to see what does
happen over the next few months, this side
of Christmas, hopefully, in terms of how you
are moving that one forward and who you are
having those conversations with. So, keep
us up to date. Pick up the phone like you
always do.
We will keep you up to date. And as I have
always said, yes, some exciting times ahead.
It's a tough business, but you have got to
know how to navigate it. And I won't say that
I know exactly how to navigate it at all times,
but after over 40-years in this business you
got to be tough. You have got to be tenacious.
And you have got to be aggressive, but not
reckless.
