ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our financial statements for the three years ended December 31, 2023 and the related notes thereto. The purpose of this Item 7 is: (i) to provide material relevant to an assessment of the financial condition and results of operations of Energy Fuels Inc., including an evaluation of the amounts and certainty of cash flows from operations and from outside information sources; and (ii) to focus specifically on material events and uncertainties known to management that are reasonably likely to cause reported financial information not necessarily indicative of future operating results or of future financial condition. This Discussion and Analysis contains forward-looking statements 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, including, but not limited to, those set forth in “Part I, Item 1A. Risk Factors” and elsewhere in this Annual Report. See “Item II, 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. References to “Cdn$” refer to Canadian dollars, “Aus$” refer to Australian dollars and “$” to U.S. dollars.
Operations Update and Outlook for 2024
Overview
The Company continues to believe that uranium supply pressure and demand fundamentals point to higher sustained uranium prices in the future. The Company believes that the advancement of reliable nuclear energy, fueled by uranium, is experiencing a global resurgence with an increased focus by governments, policymakers, and citizens on decarbonization, electrification, and security of energy supply. In addition, Russia’s invasion of Ukraine and the entry into the uranium market by financial entities purchasing uranium on the spot market to hold for the long-term has the potential to result in higher sustained spot and term prices and, perhaps, induce utilities to enter into more long-term contracts with non-Russian producers, like Energy Fuels, to foster security of supply, avoid transportation and logistic issues, and ensure more certain pricing.
In 2022, we entered into three long-term uranium contracts with major U.S. utilities. To deliver under these contracts, the Company readied three of its permitted and developed conventional uranium mines, Pinyon Plain, La Sal and Pandora, located in Arizona and Utah for uranium production in late Q4-2023. At the start of 2024, all three uranium mines have commenced production. Once production is fully ramped up at Pinyon Plain, La Sal and Pandora by mid- to late-2024, the Company expects to be producing uranium at a run-rate of approximately 1.1 to 1.4 million pounds per year. The Company stockpiles ore from production at its three conventional mines for processing in late 2024 or in 2025, subject to market conditions, contract requirements and the Mill’s schedule and will continue to produce uranium from its alternate feed recycling program, which is expected to total approximately 150,000 pounds of finished U3O8 in 2024. Total uranium production for 2024 is expected to be between 150,000 to 500,000 pounds of finished U3O8, depending on the timing of ramp up of production at the Company's Pinyon Plain, La Sal and Pandora mines.
Along with the sites in production, the Company is preparing two additional mines in Colorado and Wyoming (Whirlwind and Nichols Ranch) for expected production within one year and advancing permitting on several other large-scale U.S. mine projects in order to increase uranium production in the coming years in response to strong uranium market conditions. If strong market conditions continue as expected, the Whirlwind and Nichols Ranch mines could potentially increase Energy Fuels' uranium production to a run-rate of over two million pounds of U3O8 per year as early as 2025. In 2024, the Company also plans to advance permitting and development on the Roca Honda, Sheep Mountain and Bullfrog projects, which could expand the Company's uranium production to a run-rate of up to five million pounds of U3O8 per year in the coming years. The Company also expects to commence an ore buying program from third-party miners in 2024, which is expected to further increase the Company's uranium production profile. Until such time when the Company has ramped back up to commercial uranium production, it can rely on its uranium inventories including its recent purchases of U.S. origin uranium on the spot market to fulfill its new contract requirements.
The Company’s decision to ramp-up uranium production at this time was driven by several favorable market and policy factors, including strengthening spot and long-term uranium prices, increased buying interest from U.S. nuclear utilities, U.S. and global government policies supporting nuclear energy to address global climate change, and the need to reduce U.S. reliance on Russian and Russian-controlled uranium and nuclear fuel. Underscoring these positive trends, attendees at the recently concluded World Climate Action Summit of the 28th Conference of the Parties of the U.N. Framework Convention on Climate Change Summit (“COP28”) hosted in Dubai, UAE from November 30, 2023 to December 12, 2023, emphasized the need for more nuclear energy, fueled by uranium, to lower global carbon emissions and help address climate change. According to a December 1, 2023 U.S. Department of Energy (“DOE”) news release, more than 20 countries on four continents, including the
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U.S., pledged to triple nuclear energy output by 2050, recognizing “the key role of nuclear energy in achieving global net-zero greenhouse gas emissions by 2050 and keeping the 1.5-degree goal within reach.”
The Company continually seeks new sources of revenue, including through its emerging REE business, as well as new sources of Alternate Feed Materials and new feed processing opportunities at the Mill that can be processed without reliance on uranium sales prices. The Company also expects to produce at a run-rate of 1.0 – 2.0 million pounds of vanadium per year starting as early as 2025, assuming the La Sal and Whirlwind mines are brought into production as contemplated, which could be held as in-process inventory or processed into finished V2O5 available for sale into improving markets.
The Company is seeking additional sources of natural monazite sands to supply feedstock to its emerging REE projects (in addition to the recent acquisition of the Bahia Project discussed in Note 7 – Property, Plant and Equipment and Mineral Properties). The Company is also evaluating the potential to recover radioisotopes from its existing process streams for use in the development of TAT medical isotopes for the treatment of cancer and continues its support of U.S. governmental activities to assist the U.S. uranium mining industry, including expanding the U.S. Uranium Reserve Program, supporting efforts to restore domestic nuclear fuel capabilities, and advocating for the responsible sourcing of uranium and nuclear fuel.
We continually evaluate the optimal mix of production, inventory and purchases in order to retain the flexibility to deliver long-term value.
Mill Activities
During the year ended December 31, 2023, the Mill focused on its mixed RE Carbonate production and produced approximately 355 tonnes of high purity, partially separated mixed RE Carbonate, containing approximately 160 tonnes of TREO while working to secure additional monazite ore feedstock to increase production. During the year ended December 31, 2023, the uranium recovered from processing monazite ore was retained in-circuit and was not packaged as final U3O8 product. The Mill did not recover any vanadium in 2023.
The Company purchased an additional 480 tonnes of monazite from Chemours that it expects to receive in early 2024, which the Company expects to process for the recovery of uranium and production of 25 – 35 tonnes of separated NdPr oxide and 10 – 20 tonnes Sm+ RE Carbonate upon commissioning of the Mill’s Phase 1 REE separation circuit in early 2024 (see “Rare Earth Element Initiatives” below). No vanadium production is currently planned during 2024, though the Company continually monitors its inventory and vanadium markets to guide future potential vanadium production.
The Company is also actively pursuing opportunities to process additional sources of natural monazite sands, new and additional Alternate Feed Material sources, and new and additional low-grade mineralized materials from third parties in connection with various uranium clean-up programs.
Conventional Mine Activities
During the year ended December 31, 2023, the Company performed rehabilitation and development work on its La Sal Complex and Whirlwind and Pinyon Plain Projects in preparation for production at those mines, including engineering, procurement, construction management, increased development activities, significant workforce expansion and needed rehabilitation of surface and underground infrastructure. As of the date of this Annual Report, the Company has commenced production at the La Sal mine, Pinyon Plain Project and Pandora mine. Once production is fully ramped up at the three mines, which is currently planned for mid- to late-2024, the Company expects to be producing uranium at a run-rate of approximately 1.1 to 1.4 million pounds per year. Ore mined from these three mines during 2024 will be stockpiled at the Mill for processing that is anticipated to start in late 2024 or in 2025, subject to market conditions, contract requirements and the Mill’s schedule.
The Company expects to continue rehabilitation and development work at its Whirlwind mine as it is prepared for future production. Although the timing of the Company’s plans to extract and process mineralized materials from the Whirlwind mine will be based on current contract requirements, inventory levels, sustained improvements in general market conditions, procurement of suitable sales contracts and/or the continuation of the U.S. Uranium Reserve Program or similar government programs, the Company currently expects the Whirlwind mine, along with the Company’s Nichols Ranch ISR project, to commence uranium production within one (1) year, which could increase Energy Fuels' uranium production to a run-rate of over two (2) million pounds of U3O8 per year starting in 2025, if strong market conditions continue as expected.
In 2024, the Company also plans to advance permitting and development on its Roca Honda Project, a large, high-grade conventional project, in New Mexico, its Sheep Mountain Project, a large conventional project in Wyoming, and its Bullfrog Project in Utah, which could expand the Company’s uranium production to a run-rate of up to five million pounds of U3O8 per year in the coming years. The Company is also continuing to maintain required permits at its other conventional projects,
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including the Energy Queen mine and Sheep Mountain Project. All these projects serve as important pipeline assets for the Company’s future conventional production capabilities, as market conditions may warrant.
In addition to the Company’s uranium business, the Company will also continue to advance its REE program at the Mill in 2024, along with the Mill’s uranium production, to fully capitalize on the Mill’s unique and valuable capabilities. As previously announced, the Mill is in the process of installing its Phase 1 capacity to produce up to 1,000 tonnes of NdPr oxide per year, subject to receipt of sufficient monazite feed. This capacity is expected to be completed in Q1 2024. At the current time, the Company expects to produce roughly 25 – 35 tonnes of NdPr oxide plus approximately 10 – 20 tonnes of an Sm+ RE Carbonate in Q2 2024, as it ramps-up and optimizes the newly installed circuit.
ISR Extraction and Recovery Activities
Although the Company expects to produce insignificant quantities of U3O8 in the year ending December 31, 2024 from Nichols Ranch, the Company plans to undertake exploration and development activities in 2024 to expand the resources at the Nichols Ranch Project and to further develop a wellfield to be ready for potential recommencement of production in late 2024 or in 2025, if strong market conditions continue as expected. The Company currently holds 34 fully permitted, undeveloped wellfields at Nichols Ranch, including four additional wellfields at the Nichols Ranch wellfields, 22 wellfields at the adjacent Jane Dough wellfields, and eight wellfields at the Hank Project, which is fully permitted to be constructed as a satellite facility to the Nichols Ranch Plant.
Inventories
As of December 31, 2023, the Company had approximately 685,000 pounds of finished uranium inventories located at certain conversion facilities in North America. Additionally, the Company has approximately 436,000 pounds of additional U3O8 contained in stockpiled Alternate Feed Materials and other ore inventory at the Mill that can potentially be recovered relatively quickly in the future, as general market conditions may warrant. During the year ended December 31, 2023, the Company purchased 220,000 additional pounds of uranium and sold 300,000 pounds of uranium to the U.S. Uranium Reserve Program and another 260,000 pounds under a uranium term contract.
The Company sold 79,344 pounds of vanadium during the year ended December 31, 2023. As of December 31, 2023, the Company holds approximately 905,000 pounds of finished V2O5 in inventory, and there remains an estimated 1.0 to 3.0 million pounds of additional solubilized recoverable V2O5 remaining in tailings solutions awaiting future recovery, as market conditions may warrant.
Sales Update and Outlook for 2024
The Company sells uranium into its existing long-term contracts and continually evaluates selling a portion of its inventories on the spot market in response to future upside uranium price movements. The Company also continually evaluates the potential to purchase uranium on the spot market to replace sold inventory, meet contract obligations and gain exposure to future price increases.
Uranium Sales
The Company entered into four uranium sale and purchase agreements in 2022: three with major U.S. nuclear utilities and one with the U.S. Uranium Reserve Program. Under these contracts, the Company sold 560,000 pounds of U3O8 during 2023 with a weighted-average sales price of $59.42 per pound, which was partially subject to the then-prevailing market prices at the time of delivery.
The three utility contracts require deliveries of uranium between 2023 and 2030, with base quantities totaling 3.0 million pounds of uranium over the period, and up to 4.1 million pounds of uranium if all remaining options are exercised. Having observed a marked uptick in interest from nuclear utilities seeking long-term uranium supply, the Company remains actively engaged in pursuing additional selective long-term uranium sales contracts.
In January 2023, the Company completed the sale of 300,000 pounds of its uranium inventories located at the Metropolis Works uranium conversion facility (“ConverDyn”) to the U.S. Uranium Reserve Program for $18.47 million ($61.57 per pound), which resulted in a gross profit of $35.85 per pound of uranium. In May 2023, the company sold 80,000 pounds of its inventories located at the Cameco Corporation conversion facility in Blind River, Ontario, Canada for $4.34 million ($54.19 per pound). In September 2023, the Company sold an additional 180,000 pounds of its U3O8 inventory located at the Cameco Corporation conversion facility in Blind River, Ontario, Canada for $10.47 million ($58.18 per pound). During January 2024, the Company sold 200,000 pounds of uranium into its existing portfolio of long-term contracts. One of the Company's utility customers has the option to purchase an additional 100,000 pounds of uranium from Energy Fuels in 2024. The Company holds
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uncommitted inventory and, with the benefit of future production, will continue to evaluate additional spot and/or long-term uranium sales opportunities during 2024 and beyond.
To provide the Company with additional flexibility to fulfill its contract obligations and gain direct exposure to potential future uranium price increases, the Company purchased 100,000 pounds of U.S. origin uranium on the spot market for $81.00 per pound in late 2023.
Vanadium Sales
As a result of then strengthening vanadium markets, during the year ended December 31, 2023, the Company sold approximately 79,344 pounds of the Company’s existing inventory of V2O5 at a weighted average sales price of $10.98 per pound of V2O5. The Company expects to sell its remaining finished vanadium product when justified into the metallurgical industry, as well as other markets that demand a higher purity product, including the aerospace, chemical, and potentially the vanadium battery industries. The Company expects to sell to a diverse group of customers in order to maximize revenues and profits. The vanadium produced in the 2018/19 Pond Return campaign was a high-purity vanadium product of 99.6%-99.7% V2O5. The Company believes there may be opportunities to sell certain quantities of this high-purity material at a premium to reported spot prices. The sales during February and March 2023 were at a $0.60 per pound premium to the average spot price for V2O5.
The Company intends to continue to selectively sell its V2O5 inventory on the spot market as markets warrant but will otherwise continue to maintain its vanadium in inventory.
Rare Earth Sales
During the year ended December 31, 2023, the Company sold approximately 153,353 kilograms of RE Carbonate at an average price of $18.57 per kilogram of RE Carbonate, to Neo for separation at Silmet. At the current time, the Company expects to produce roughly 25 – 35 tonnes of NdPr oxide plus approximately 10 – 20 tonnes of an Sm+ RE Carbonate in Q2 2024, as it ramps-up and optimizes the Mill’s newly installed Phase 1 separation circuit, all of which it intends to sell to Neo.
While the Company continues to make progress on its mixed RE Carbonate production and additional funds are spent on process enhancements, improving recoveries, product quality and other optimization, profits from this initiative are expected to be minimal until such time when monazite throughput rates are increased and optimized. Throughout this process, the Company is gaining important knowledge, experience and technical information, all of which are valuable for current and future mixed RE Carbonate production and planned future production of separated REE oxides and other advanced REE materials at the Mill or elsewhere.
Rare Earth Element Initiatives
The Company is in advanced discussions with several sources of natural monazite (in addition to the Bahia Project) to secure additional supplies of monazite sands by offtake or otherwise, which if successful, would be expected to allow the Company to increase REE production.
The Company continues to make progress toward full REE separation capabilities at the Mill to produce both “light” and “heavy” separated REE oxides in the coming years. Energy Fuels is also proceeding with the modification and enhancement of its infrastructure at the Mill (“Phase 1”) to expand its “light” REE separation facilities to be capable of producing commercial quantities of separated NdPr oxide in early 2024, followed by planned further enhancements to expand NdPr production capability (“Phase 2”) and to produce separated Dy, Tb and potentially other REE materials in the future (“Phase 3”) from monazite and potentially other REE process streams.
In 2022, the Company began construction on its “Phase 1” REE separation facilities, which includes modifications and enhancements to the SX circuits at the Mill. “Phase 1” is expected to have the capacity to process approximately 8,000 to 10,000 MT of monazite per year, producing roughly 4,000 to 5,000 MT TREO, containing roughly 800 to 1,000 MT of recoverable separated NdPr oxide per year. Because Energy Fuels is utilizing existing infrastructure at the Mill, “Phase 1” capital is expected to total between $16 million and $18 million, or approximately $7 million to $9 million less than our initial $25 million budget. “Phase 1” is expected to be operational in 2024, subject to receipt of sufficient monazite supply and successful construction and commissioning.
During “Phase 2,” Energy Fuels expects to expand its NdPr separation capabilities, with an expected capacity to process roughly 30,000 to 50,000 MT of monazite per year, depending on the availability of monazite and expected recovery of approximately 15,000 to 25,000 MT of TREO, containing approximately 3,000 to 5,000 MT of NdPr oxide per year, or sufficient NdPr for 1.5 to 5.0 million EVs per year. “Phase 2” is also expected to add a dedicated monazite “crack-and-leach”
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circuit to the Mill’s existing leach circuits, which may be constructed as the first stage of Phase 2, prior to construction of the expanded NdPr separation capabilities. The Company expects to complete “Phase 2” in 2027, subject to licensing, financing, and receipt of sufficient monazite feed.
During “Phase 3,” Energy Fuels expects to add “heavy” REE separation capabilities, including the production of Dy, Tb, and potentially other REE oxides and advanced materials. The Company will also evaluate the potential to produce La and Ce products. Monazite naturally contains higher concentrations of “heavy” REEs, including Dy and Tb, versus other REE-bearing ores, like bastnaesite, mainly due to the presence of another REE-bearing phosphate mineral called “xenotime.” “Phase 3” is expected to enable Energy Fuels to produce separated Dy, Tb, and potentially other “light” and “heavy” products. The Company also expects to have additional “heavy” REE feedstock stockpiled from “Phase 1” and “Phase 2.” During these earlier phases, the Company expects to produce NdPr oxide and an Sm+ “heavy” REE concentrate, which the Company will either sell or stockpile as feed for “Phase 3” REE separation. For reference, the monazite the Company has analyzed to date contains roughly 1% to 3% Dy and Tb, so 10,000 MT of monazite is expected to contain roughly 100 to 300 MT of Dy and Tb. The Company expects to complete “Phase 3” in 2028, subject to licensing, financing, and receipt of sufficient feed. Alternatively, the Company may delay Phase 2 and combine Phase 2 and Phase 3 separation capability.
In addition, the Company completed its purchase of the Bahia Project in Brazil on February 10, 2023. The Bahia Project is a well-known HMS deposit that has the potential to supply 3,000 – 10,000 tonnes of natural monazite sand concentrate per year to the Mill for decades for processing into high-purity REE oxides and other materials. While Energy Fuels’ primary interest in acquiring the Bahia Project is the REE-bearing monazite, the Bahia Project is also expected to produce large quantities of high-quality titanium (ilmenite and rutile) and zirconium (zircon) minerals that are also in high demand.
Natural monazite of 3,000 – 10,000 tonnes of monazite contains approximately 1,500 – 5,000 tonnes of TREO, including 300- 1,000 tonnes of NdPr and significant commercial quantities of Dy and Tb. The Company is focused on monazite at the current time, as it has superior concentrations of these four critical REEs compared to other REE-bearing minerals. These REEs are used in the powerful neodymium-iron-boron (“NdFeB”) magnets that power the most efficient electric vehicles (“EVs”), along with uses in other clean energy and defense technologies. For reference, a typical EV utilizes approximately one (1) to two (2) kilograms of NdPr oxide in its drivetrain. Based on this assumption, monazite from the Bahia Project alone is expected to supply enough NdPr oxide to power 150,000 to 1 million EVs per year. The uranium contained in the monazite, which is expected to be comparable to typical Colorado Plateau uranium deposits, will also be recovered at the Mill.
The acquisition of the Bahia Project is a part of the Company’s efforts to build a large and diverse book of monazite supply for its rapidly advancing REE processing business. The Company expects to procure monazite through Company-owned mines like the Bahia Project, joint ventures or other collaborations, and open market purchases, like the Company’s current arrangement with The Chemours Company. The Company is currently in advanced discussions with several additional current and future monazite producers around the world to supply Energy Fuels’ initiative.
Collaboration with RadTran on Recovering Medical Isotopes for Advanced Cancer Therapies
On July 28, 2021, the Company announced the execution of a Strategic Alliance Agreement with RadTran, a technology development company focused on closing critical gaps in the procurement of medical isotopes for emerging TAT cancer therapeutics and other applications. Under this strategic alliance, the Company is evaluating the feasibility of recovering Th-232, and Ra-226 from its existing RE Carbonate/uranium and uranium process streams at the Mill and, together with RadTran, is evaluating 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/or Ra-226 would then be sold to pharmaceutical companies and others to produce Pb-212, Ac-225, Bi-213, Ra-224 and/or Ra-223, which are the leading medically attractive 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, therefore recycling back into the market material that would otherwise be lost to disposal for use in treating cancer. See “Part I, Item 1. Business Overview” for a more detailed discussion of this initiative.
The Company currently has an R&D license for the recovery of R&D quantities of Ra-226 at the Mill, issued by DWMRC in 2023. It is expected that the potential recovery and concentration of R&D quantities of Th-232, Ra-228 and/or Th-228 will also require similar R&D licenses or amendments to the existing Ra-226 R&D license and that the potential recovery and concentration of commercial quantities of Th-232, Ra-228, Th-228 and/or Ra-226 will require additional licensing by DWMRC at the Mill.
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The San Juan County Clean Energy Foundation
On September 16, 2021, the Company announced its establishment of the Foundation, a fund specifically designed to contribute to the communities surrounding the Mill in southeastern Utah. Energy Fuels deposited an initial $1 million into the Foundation at the time of formation and now provides ongoing funding equal to 1% of the Mill’s revenues, thereby providing an ongoing source of funding to support local priorities. The Foundation focuses on supporting education, the environment, health/wellness, and local economic development in the City of Blanding, San Juan County, the White Mesa Ute Community, the Navajo Nation and other area communities.
A seven-person Advisory Board, comprised of local citizens from San Juan County, evaluates grant applications on a quarterly basis and makes recommendations to the Foundation’s Managers for final review and approval, who are currently the President and Chief Executive Officer and the Executive Vice President and Chief Legal Officer of the Company. As of the December 31, 2023, the Foundation has awarded 15 grants totaling $323,210, of which $236,710 was committed to American Indian initiatives.
Sale of Alta Mesa property to enCore Energy
On November 14, 2022, the Company announced that it had entered into a definitive agreement to sell three wholly-owned subsidiaries that together hold the Alta Mesa ISR Project to enCore Energy Corp. for total consideration of $120 million. The proceeds from the transaction are expected to help the Company fully finance much of its uranium, REE, vanadium and medical isotope business plans for the next 2 to 3 years while minimizing dilution to shareholders. The transaction closed on February 14, 2023. See “Part I, Item 1. Description of Business - Material Transactions”for a more detailed discussion of this transaction.
Known Trends or Uncertainties
The Company has had negative net cash flows from operating activities and net losses in previous years, in part due to depressed uranium and vanadium prices, along with low quantities of monazite to process into salable RE Carbonate, which has not allowed the Company to realize economies of scale. We are not aware at this time of any trends or uncertainties that have had or are reasonably likely to have a material impact on revenues or income of the Company, other than: (i) recent strengthening of uranium markets, which could result in the Company selling inventories and future production at increased prices and/or signing additional contracts with nuclear utilities for the long-term supply of uranium; (ii) U.S. government laws and programs, including a potential ban on Russian uranium imports and efforts to restore domestic nuclear fuel capabilities, which could result in improved uranium sales prices; (iii) volatility of prices of uranium, vanadium, REEs and our other primary metals; and (iv) the Company’s REE and TAT radioisotope initiatives, which, if successful, could result in improved results from operations in future years. We are not aware at this time of any events that are reasonably likely to cause a material change in the relationship between costs and revenue of the Company.
Continued Efforts to Minimize Costs
Although the Company is pursuing two new initiatives - its REE and TAT radioisotope initiatives - in addition to its existing uranium and vanadium products, and is restarting operations at three of its uranium and uranium/vanadium mines and taking other steps to advance its uranium production capabilities, which will require the Company to grow certain of its operations, the Company will nevertheless continue to seek ways to minimize the costs of all its operations where feasible while achieving these objectives and maintaining its critical capabilities, manpower and properties.
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Results of Operations
The following table summarizes the results of operations for the years ended December 31, 2023 and 2022 (in thousands of U.S. dollars, except per share amounts):
Years Ended December 31, Increase Percent
Revenues
Alternate Feed Materials, processing and other 931 1,615 (684) (42) %
Costs applicable to revenues
Costs applicable to uranium concentrates 15,318 — 15,318 *
Costs applicable to vanadium concentrates 551 3,769 (3,218) *
Other operating costs and expenses
Accretion of asset retirement obligations 1,192 1,556 (364) (23) %
Other income (loss)
Income tax expense (276) — (276) *
Basic net income (loss) per common share $ 0.63 $ (0.38) $ 1.01 *
Diluted net income (loss) per common share $ 0.62 $ (0.38) $ 1.00 *
*Not meaningful.
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The following table sets forth selected operating data and financial metrics for the years ended December 31, 2023 and 2022.
Years Ended December 31, Increase Percent
Volumes sold
Realized sales price
Uranium concentrates ($/lb.) $ 59.42 $ — $ 59.42 *
Costs applicable to revenues
Uranium concentrates ($/lb.) $ 27.35 $ — $ 27.35 *
*Not meaningful.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
For the year ended December 31, 2023, we earned net income of $99.76 million or $0.63 per share compared to net loss of $59.94 million or $0.38 per share for the year ended December 31, 2022. The changes between periods was due to (i) a gain of $119.26 million recognized on the sale of our Alta Mesa ISR Project in February 2023 and sale of our PFN tool in May 2023; (ii) an increase in revenues of $25.41 million due the sales of uranium concentrates for $33.28 million during 2023, partially offset by lower sales of vanadium concentrates of $7.91 million between periods; (iii) lower standby costs between periods of $5.75 million due to the Alta Mesa divestiture and lower standby costs incurred at the Company’s Colorado Plateau mines and the Mill; (iv) a net gain of $4.45 million during the year ended December 31, 2023 compared to a loss of $17.26 million for the year ended December 31, 2022 related to mark-to-market investments and marketable securities accounted for at fair value between periods; (v) a realized gain on the early redemptions and sale of our Convertible Note of $1.43 million during the year ended December 31, 2023; (vi) an increase in interest income, net of $5.86 million between periods due to interest earned on marketable debt securities and our Convertible Note, partially offset by (a) higher total costs applicable to revenues of $10.34 million due to increased revenues; (b) higher exploration, development and processing costs between periods of $6.19 million associated with our Bahia and Whirlwind Projects, as well as continued progression of the RE Carbonate production program at the Mill; (c) higher selling, general and administrative expenses between periods of $2.43 million due to increased salaries and benefits in connection with additional headcount associated with the current and future growth in activity in our uranium and REE operations between periods; and (d) lower unrealized gain on foreign currency of $1.64 million between periods.
Revenues
Uranium concentrates
Revenues from uranium concentrates were $33.28 million for the year ended December 31, 2023 due to the completed total sales of 560,000 pounds of our inventories to the U.S. Uranium Reserve Program and a major U.S. nuclear utility at a weighted-average sales price of $59.42 per pound of U3O8. There were no revenues from uranium concentrates for the year ended December 31, 2022.
Vanadium concentrates
Revenues from vanadium concentrates decreased by $7.91 million to $0.87 million for the year ended December 31, 2023 from $8.78 million for the year ended December 31, 2022 primarily due to lower volumes sold and lower realized prices between periods. Lower sales volumes (calculated as the change in year-to-year sales volumes times the prior period realized price) accounted for an approximate $7.69 million decrease in vanadium revenue between periods. Lower realized prices (calculated
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as the change in the year-to-year average realized price times current year sales volumes sold) accounted for an approximate $0.21 million decrease in vanadium revenue between periods.
RE Carbonate
Revenues from RE Carbonate increased by $0.73 million to $2.85 million for the year ended December 31, 2023 from $2.12 million for the year ended December 31, 2022 primarily due to increased volumes sold, partially offset by lower realized prices. Higher sales volumes (calculated as the change in year-to-year sales volumes times the prior period realized price) accounted for an approximate $1.54 million increase in RE Carbonate revenue between periods. Lower realized prices (calculated as the change in the year-to-year average realized price times current year sales volumes sold) accounted for an approximate $0.81 million decrease in RE Carbonate revenue between periods.
Alternate Feed Materials processing and other
Revenues from Alternate Feed Materials, processing and other decreased by $0.68 million to $0.93 million for the year ended December 31, 2023 from $1.62 million for the year ended December 31, 2022 primarily due to lower Alternate Feed Materials received and processed between periods.
Costs Applicable to Revenues
Costs applicable to uranium concentrates
Costs applicable to uranium concentrates were $15.32 million for the year ended December 31, 2023 due to the completed sales for a total of 560,000 pounds of our finished U3O8 concentrate to the U.S. Uranium Reserve Program and a major U.S. nuclear utility at a weighted average cost of $27.35 per pound. There were no costs applicable to uranium concentrates for the year ended December 31, 2022.
Costs applicable to vanadium concentrates
Costs applicable to vanadium concentrates decreased by $3.22 million to $0.55 million for the year ended December 31, 2023 from $3.77 million for the year ended December 31, 2022 primarily due to lower volumes sold partially offset by increased weighted average costs per pound sold between periods. Lower sales volumes (calculated as the change in year-to-year sales volumes times the prior period weighted average cost) accounted for an approximate $3.30 million decrease in costs applicable to vanadium concentrates between periods. Higher weighted average costs per pound (calculated as the change in the year-to-year weighted average cost per pound times current year sales volumes sold) accounted for an approximate $0.08 million increase in costs applicable to vanadium concentrates between periods.
Costs applicable to RE Carbonate
Costs applicable to RE Carbonate increased by $0.99 million to $2.31 million for the year ended December 31, 2023 from $1.32 million for the year ended December 31, 2022 primarily due to increased volumes sold, as well as higher weighted average costs per kilogram. Higher sales volumes (calculated as the change in year-to-year sales volumes times the prior period weighted average cost per kilogram) accounted for an approximate $0.95 million increase in costs applicable to RE Carbonate revenues between periods. Higher weighted average costs per kilogram (calculated as the change in the year-to-year weighted average cost per kilogram times current year sales volumes sold) accounted for an approximate $0.04 million increase in costs applicable to RE Carbonate between periods.
Underutilized capacity production costs applicable to RE Carbonate
Underutilized capacity production costs applicable to RE Carbonate were $2.76 million for the year ended December 31, 2022. The underutilized capacity production costs were due to low throughput rates as the Mill ramps up to commercial-scale production of RE Carbonate. To date, the Mill has focused on producing commercially salable RE Carbonate at low throughput rates and has shipped its resulting product to Silmet. The Mill expects to increase its throughput rates as its supplies of monazite sands increase. There were no underutilized production capacity costs applicable to RE Carbonate for the year ended December 31, 2023.
Other Operating Expenses
Exploration, development and processing
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Exploration, development and processing costs increased by $6.19 million to $15.53 million for the year ended December 31, 2023 from $9.35 million for the year ended December 31, 2022. Higher exploration, development and processing costs between periods were primarily related to expenses for our Bahia and Whirlwind Projects and other development projects, as well as continued progression of the RE Carbonate production program at the Mill, which includes net realizable value adjustments to RE Carbonate inventory.
While we expect the amounts relative to the items listed above have added future value to the Company, the Company expenses these costs in part due to the fact that the Company has not established Proven Mineral Reserves or Probable Mineral Reserves as defined by S-K 1300 or NI 43-101 through the completion of a feasibility or pre-feasibility study for any of the Company’s projects as of the year ended 2023, with the exception of its Sheep Mountain and Pinyon Plain Projects.
Standby
Standby costs related to the care and maintenance of the standby mines are expensed along with standby costs incurred when the Mill in standby status is operating at minimal levels of production or packaging.
Standby costs decreased by $5.75 million to $7.48 million for the year ended December 31, 2023 from $13.22 million for the year ended December 31, 2022 primarily due to the Alta Mesa divestiture on February 14, 2023, as well as lower costs incurred at the Company’s Colorado Plateau mines and the Mill between periods.
Selling, general and administrative (excluding share-based compensation)
Selling, general and administrative expenses (excluding share-based compensation) increased by $2.45 million to $23.29 million for the year ended December 31, 2023 from $20.85 million for the year ended December 31, 2022 primarily due to increased salaries and benefits in connection with additional headcount associated with the current and future growth in activity in our uranium and REE operations, partially offset by reduced contract and professional services between periods. Our headcount increased to 147 full-time employees as of December 31, 2023 from 129 full-time employees as of December 31, 2022.
Share-based compensation
Share-based compensation was relatively consistent at $4.63 million and $4.64 million for the years ended December 31, 2023 and 2022, respectively.
Other Income (Loss)
Gain on sale of assets
For the year ended December 31, 2023, we recognized a gain on sale of assets of $119.26 million related to the sale of our Alta Mesa ISR Project to enCore for total consideration of $120 million consisting of $60 million cash and the $60 million Convertible Note, as well as the completed sale of our PFN tool utilized at Alta Mesa to enCore for total cash consideration of $3.10 million. See Note 7 – Property, Plant and Equipment and Mineral Properties for more information.
Other income (loss)
Other income (loss) for the year ended December 31, 2023 was $13.14 million income, net. These amounts primarily consist of mark-to-market unrealized gains on investments accounted for at fair value including marketable securities of $14.94 million, partially offset by a realized loss of $10.49 million due to decreased share prices since acquisition related to our investment in CUR following the completion of IsoEnergy's acquisition of CUR, upon which the Company does not exercise significant influence over IsoEnergy and the investment is no longer accounted for as an equity method investment. As a result, there is a change to the prospective accounting for this investment whereby it is accounted for as a marketable security. Additionally, income consisted of a realized gain on the redemptions and sale of our Convertible Note of $1.43 million and a gain on foreign exchange of $0.42 million.
Other income (loss) was $15.37 million loss, net for the year ended December 31, 2022. These amounts primarily consist of a mark-to-market loss on investments of $16.81 million, partially offset by a gain on foreign exchange of $2.06 million.
Income tax expense
Income tax expense was $0.28 million for the year ended December 31, 2023 due to the gain related to the sale of our Alta Mesa ISR Project including cash received for early redemption and sale of the Convertible Note.
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Year Ended December 31, 2022 compared to Year Ended December 31, 2021
Refer to “Part I, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion on the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
Funding of Major Cash Requirements
Our primary short-term and long-term cash requirements are to fund working capital needs and operating expenses (including our contractual lease, decommissioning and other obligations as described in “Contractual Obligations” below), capital expenditures and potential future growth opportunities through ongoing initiatives such as our REE program, Bahia Project, REE oxide separation project, TAT radioisotope initiative and operational readiness at our Whirlwind and Nichols Ranch mines as well as potential business and property acquisitions.
We expect to be able to fund working capital and operating expenses, capital expenditures and currently planned growth initiatives over the next 12 months through available cash balances and product inventory sales, if needed. We may also increase our working capital through issuances of Common Shares pursuant to the ATM in appropriate circumstances. We intend to continue to pursue the acquisition of monazite mineral rights and other uranium producing assets.
Shares Issued for Cash
The Company has an ATM in place, which allows the Company to make Common Share distributions to the extent qualified under a U.S. shelf registration statement on Form S-3 and one or more prospectus supplements. The Company’s current U.S. shelf registration statement was declared effective on March 18, 2021 and permits the Company to sell any combination of Securities (as defined therein) in one or more offerings having an aggregate offering price of up to $300.00 million. Most recently, on January 3, 2022, we filed a prospectus supplement with the SEC to our U.S. shelf registration statement, qualifying for distribution up to $50.00 million in additional Common Shares under the ATM. Sales made pursuant to the above noted U.S. shelf registration statement and prospectus supplement are made on the NYSE American at then-prevailing market prices, or any other existing trading market of the Common Shares in the U.S. During the year ended December 31, 2023, we issued 4,047,832 shares for net proceeds of $31.81 million under our ATM. See Note 9 – Capital Stock for more information.
Working Capital and Future Requirements for Funds
As of December 31, 2023, the Company had working capital of $222.34 million, including $57.45 million in cash and cash equivalents, $133.04 million in marketable securities, approximately 685,000 pounds of uranium finished goods inventory and approximately 905,000 pounds of vanadium finished goods inventory. The Company believes it has sufficient cash and resources to carry out its business plan for at least the next twelve months.
We manage our liquidity risk through the management of our working capital and capital structure.
Cash and Cash Flows
The following table summarizes our cash flows (in thousands):
Year Ended December 31,
Net cash used in operating activities $ (15,409) $ (49,702)
Net cash used in investing activities $ (23,853) (7,065)
Net cash provided by financing activities $ 30,415 7,870
Less: restricted cash related to assets held for sale $ — (3,590)
Plus: release of restricted cash related to sale of assets $ 3,590 —
Net change in cash, cash equivalents and restricted cash $ (5,245) (52,553)
Cash, cash equivalents and restricted cash, beginning of period $ 80,269 132,822
Cash, cash equivalents and restricted cash, end of period $ 75,024 $ 80,269
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Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Net cash used in operating activities
Net cash used in operating activities decreased by $34.29 million to $15.41 million for the year ended December 31, 2023 from $49.70 million for the year ended December 31, 2022 primarily due to sales of uranium concentrates of $33.28 million, partially offset by higher selling, general and administrative expenses and higher exploration, development and processing expenses between periods.
Net cash used in investing activities
Net cash used in investing activities increased by $16.79 million to $23.85 million for the year ended December 31, 2023 from $7.07 million for the year ended December 31, 2022 primarily due to increased purchases of marketable securities for $163.19 million between periods, the acquisition of the Bahia Project and additions to mineral properties for $29.27 million, as well as increased additions to property, plant and equipment primarily related to the REE oxide separation project and equipment for readying the Pinyon Plain for Production of $13.44 million, partially offset by $56.88 million in proceeds from the sale of the Alta Mesa ISR Project and PFN tool, maturities of marketable securities of $79.04 million and proceeds of $60.89 million from the early redemptions and sale of the Convertible Note. See Note 7 – Property, Plant and Equipment and Mineral Properties for more information.
Net cash provided by financing activities
Net cash provided by financing activities increased by $22.55 million to $30.42 million for the year ended December 31, 2023 from $7.87 million for the year ended December 31, 2022 primarily due to increased net proceeds of $23.93 million for the issuance of Common Shares for cash under the ATM between periods, partially offset by increased cash paid to settle and fund employee income tax withholding due upon exercise of stock appreciation rights of $1.52 million. See Note 9 – Capital Stock for more information.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Refer to “Part I, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Cash Flows” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion on cash and cash flows for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2023 (in thousands).
Year Ended December 31,
The Company entered into commitments with federal and state agencies and private individuals to lease surface and mineral rights. These leases are primarily renewable annually and are expected to total $1.60 million for the year ended December 31, 2024.
CRITICAL ACCOUNTING ESTIMATES
The preparation of these consolidated financial statements in accordance with U.S. GAAP requires the use of certain critical accounting estimates and judgments that affect the amounts reported. It also requires management to exercise judgment in applying the Company’s accounting policies. These judgments and estimates are based on management’s best knowledge of the relevant facts and circumstances taking into account previous experience. Although the Company regularly reviews the estimates and judgments made that affect these financial statements, actual results may be materially different.
Significant estimates made by management include:
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a. Development Stage
The Company has established the existence of multiple Mineral Resources and extracts and processes saleable uranium from its operations and has established Proven Mineral Reserves or Probable Mineral Reserves, as defined under SEC S-K 1300, at each of its Sheep Mountain and Pinyon Plain Projects. As a result, 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 on at least one material property.
As the Company’s material properties having only Mineral Resources are still in the exploration stage, the Company continues to expense most amounts that would normally be capitalized and subsequently depreciated or depleted over the life of Mineral Reserve-based mining operations. Items, such as the construction of wellfields and related header houses, additions to recovery facilities and advancement of properties, are expensed in the period incurred. As a result, the Company’s consolidated financial statements may not be directly comparable to the financial statements of mining companies having numerous Mineral Reserves in the development stage or production stage.
b. Resource and reserve estimates utilized
The Company utilizes estimates of its Mineral Resources and Mineral Reserves based on information compiled by Qualified Persons, as defined by S-K 1300. Geological information relating to the size, depth and shape of the deposits requires complex geological judgments to interpret. The estimation of future cash flows related to Mineral Resources and Mineral Reserves is based upon a number of factors, such as estimates of future uranium prices, future construction and operating costs and geological assumptions and judgments made in estimating the size and grade of the Mineral Resource or Mineral Reserve. Changes in the Mineral Resource and Mineral Reserve estimates may impact the carrying value of mining and recovery assets, goodwill, reclamation and remediation obligations and depreciation and impairment.
Following the SEC’s codification of S-K 1300, which represented significant changes by the SEC to the existing mining disclosure framework to better align it with international industry and regulatory practice, the Company, in March 2022, filed for the first time joint S-K 1300/NI 43-101 Technical Report Summaries for the following Projects: Sheep Mountain, Nichols Ranch, Alta Mesa, Pinyon Plain, Roca Honda, Bullfrog and La Sal, thereby replacing their previously filed NI 43-101 reports. In response to three SEC Staff Comments set forth in a letter to the Company, dated December 21, 2022, the Company filed amended joint S-K 1300/NI 43-101 technical report summary for the Sheep Mountain and Nichols Ranch Projects as Exhibits 96.1 and Exhibit 96.5 to its Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”), which are also filed as Exhibits 96.1 and 96.5 to this Annual Report. The Company also replaced its February 22, 2022 “Technical Report on the Pinyon Plain Project, Coconino County, Arizona, USA” with the Project’s first Prefeasibility Study, filed as Exhibit 96.2 to its 2022 Annual Report and also is S-K 1300/NI 43-101 compliant, which is also filed as Exhibit 96.2 to this Annual Report. These three new technical report summaries have resulted in the following material adjustments to the Mineral Reserve and Mineral Resource estimates, as compared to the estimates set out in the Company’s Annual Report for the year ended December 31, 2021:
•Pinyon Plain: the Measured Mineral Resources (uranium) decreased from 55,000 pounds of U3O8 to 0.0 pounds of U3O8; the Indicated Mineral Resources (uranium) decreased from 2,347,000 pounds of U3O8 to 703,000 pounds of U3O8; the Inferred Mineral Resources (uranium) decreased from 126,000 pounds of U3O8 to 48,000 pounds of U3O8; the total uranium Mineral Resources decreased from 2,528,000 pounds of U3O8 to 751,000 pounds of U3O8; and the average grade of the uranium Mineral Resources increased from 0.85% U3O8 to 0.89% U3O8;
•Pinyon Plain: the Measured, Indicated and Inferred Mineral Resources related to copper remained unchanged;
•Pinyon Plain: the Proven Mineral Reserves (uranium) increased from 0.0 pounds U3O8 to 50,800 pounds of U3O8; the Probable Mineral Reserves (uranium) increased from 0.0 pounds U3O8 to 1,517,000 pounds of U3O8; the total uranium Mineral Reserves increased from 0.0 pounds of U3O8 to 1,567,800 pounds of U3O8 at an average grade of 0.58% U3O8; and
The Mineral Resources attributed to the Alta Mesa Project, which was sold to enCore on February 14, 2023, See “Part I, Item 1. Description of Business - Material Transactions,” remain in this disclosure because they were held by the Company on December 31, 2022. At the time of the filing of this disclosure they will no longer be attributed to the Company.
Mineral Resources were reported for non-material properties in 2021 and were not covered by the joint S-K 1300/NI 43-101 reports. No changes have been made to the materiality of these properties and no Mineral Resources were reported in 2022.
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c. Depreciation of mining and recovery assets acquired
For mining and recovery assets actively extracting and recovering uranium, we depreciate the acquisition costs of the mining and recovery assets on a straight-line basis over our estimated lives of the mining and recovery assets. The process of estimating the useful life of the mining and recovery assets requires significant judgment in evaluating and assessing available geological, geophysical, engineering and economic data, projected rates of extraction and recovery, estimated commodity price forecasts and the timing of future expenditures, all of which are, by their very nature, subject to interpretation and uncertainty.
Changes in these estimates may materially impact the carrying value of the Company’s mining and recovery assets and the recorded amount of depreciation.
d. Impairment testing of mining and recovery assets
We undertake a review of the carrying values of our mining and recovery assets whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts determined by reference to estimated future operating results and undiscounted net cash flows. An impairment loss is recognized when the carrying value of a mining or recovery asset is not recoverable based on this analysis. In undertaking this review, we are required to make significant estimates of, among other things, future production and sale volumes, forecasted commodity prices, future operating and capital costs and reclamation costs to the end of the mining asset’s life. These estimates are subject to various risks and uncertainties, which may ultimately have an impact on the expected recoverability of the carrying values of mining and recovery assets. We have not recorded an impairment loss related to our mining and recovery assets for the years ended December 31, 2023, 2022 and 2021.
e. Asset retirement obligations
Asset retirement obligations are recorded as a liability when an asset that will require reclamation and remediation is initially acquired. For disturbances created on a property owned that will require future reclamation and remediation, we record asset retirement obligations for such disturbance when occurred. We have accrued our best estimate of the cost to decommission our mining and milling properties in accordance with existing laws, contracts and other policies. The estimate of future costs involves a number of estimates relating to timing, type of costs, mine closure plans and review of potential methods and technical advancements. Furthermore, due to uncertainties concerning environmental remediation, the ultimate cost of our decommissioning liability could differ from the amounts provided. The estimate of our obligation is subject to change due to amendments to applicable laws and regulations and as new information concerning our operations becomes available. We are not able to determine the impact on its financial position, if any, of environmental laws and regulations that may be enacted in the future. Additionally, the expected cash flows in the future are discounted at our estimated credit-adjusted risk-free rate based on the periods the Company expects to complete the reclamation and remediation activities. Differences in the expected periods of reclamation or in the credit-adjusted risk-free rates used could have a material difference in the actual settlement of the obligations compared with the amounts provided.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to risks associated with commodity prices, interest rates and credit. Commodity price risk is defined as the potential loss that we may incur as a result of changes in the market value of uranium, vanadium, and REEs. Interest rate risk results from our debt and equity instruments that we issue to provide financing and liquidity for our business. Credit risk arises from the extension of credit throughout all aspects of our business. Industry-wide risks can also affect our general ability to finance exploration, and development of exploitable resources; such effects are not predictable or quantifiable. Market risk is the risk to the Company of adverse financial impact due to changes in the fair value or future cash flows of financial instruments as a result of fluctuations in interest rates and foreign currency exchange rates.
Commodity Price Risk
Our profitability is directly related to the market price of uranium, vanadium, REEs and HMC recovered. We may, from time to time, undertake commodity and currency hedging programs, with the intention of maintaining adequate cash flows and profitability to contribute to the long-term viability of the business. We anticipate selling forward in the ordinary course of business if, and when, we have sufficient assets and recovery to support forward sale arrangements, and forward sale arrangements are available on suitable terms. There are, however, risks associated with forward sale programs. If we do not have sufficient recovered product to meet our forward sale commitments, we may have to buy or borrow (for later delivery back from recovered product) sufficient product in the spot market to deliver under the forward sales contracts, possibly at higher prices than provided for in the forward sales contracts, or potentially default on such deliveries. In addition, under forward contracts, we may be forced to sell at prices that are lower than the prices that may be available on the spot market
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when such deliveries are completed. Although we may employ various pricing mechanisms within our sales contracts to manage our exposure to price fluctuations, there can be no assurance that such mechanisms will be successful. There can also be no assurance that we will be able to enter into term contracts for future sales of uranium, vanadium, RE Carbonate, separated REE oxides or other REE products or HMC at prices or in quantities that would allow us to successfully manage our exposure to price fluctuations.
Interest Rate Risk
The Company is exposed to interest rate risk on its cash equivalents, deposits, and restricted cash. The Company does not use derivatives to manage interest rate risk. Our interest income is earned in U.S. dollars and is not subject to currency risk.
Currency Risk
The foreign exchange risk relates to the risk that the value of financial commitments, recognized assets or liabilities will fluctuate due to changes in foreign currency rates. The Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign currency exchange rates. As the U.S. Dollar is the functional currency of our U.S. operations, the currency risk has been reduced. We maintain a nominal balance in Canadian dollars and Brazilian Real, resulting in a low currency risk relative to our cash and cash equivalent balances. We also hold equity marketable securities in Canadian dollars.
The following table summarizes, in U.S. dollar equivalents, the Company’s major foreign currency (Cdn$/R$) exposures as of December 31, 2023 (in thousands):
Cash and cash equivalents $ 754
Marketable securities 21,407
The table below summarizes a sensitivity analysis for significant unsettled currency risk exposure with respect to our financial instruments as of December 31, 2023 with all other variables held constant. It shows how net income would have been affected by changes in the relevant risk variables that were reasonably possible at that date (in thousands).
Change forSensitivity Analysis Increase (decrease) in Net income
Strengthening net earnings +1% change in US dollar / Cdn$ or R$ $ 298
Weakening net earnings -1% change in US dollar / Cdn$ or R$ $ (298)
Credit Risk
Credit risk relates to cash and cash equivalents, trade, and other receivables that arise from the possibility that any counterparty to an instrument fails to perform. The Company primarily transacts with highly rated counterparties and a limit on contingent exposure has been established for any counterparty based on that counterparty’s credit rating. As of December 31, 2023, the Company’s maximum exposure to credit risk was the carrying value of cash and cash equivalents and trade and note receivables.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ENERGY FUELS INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Financial Statements:
Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022 162
Notes to the Consolidated Financial Statements 167
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Energy Fuels Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Energy Fuels Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
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and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Asset retirement obligation costs
As discussed in Note 8 to the consolidated financial statements, the Company recorded an asset retirement obligation (ARO) liability of $10.9 million as of December 31, 2023. The estimate of future costs involves a number of estimates relating to timing, planned decommissioning activities, and review of potential methods and technical advancements.
We identified the evaluation of the future costs for decommissioning activities as a critical audit matter. Specialized skills and knowledge were required to evaluate the Company’s determination of decommissioning activities and their related costs to satisfy ARO. In addition, the ARO was sensitive to minor changes to significant assumptions, such as decommissioning cost.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s ARO process, including certain controls related to the estimation of decommissioning costs. We tested the determination of the planned decommissioning activities used in the estimate by inquiring of management, inspecting minutes of the board of directors, and reviewing underlying documentation. We involved environmental professionals with specialized skills and knowledge, who assisted in evaluating the Company’s planned remediation activities for certain sites and changes in the liability and assumptions from those used in the prior period, including comparing the Company’s planned remediation activities to those communicated to regulatory authorities.
/s/ KPMG LLP
We have served as the Company’s auditor since 2017.
Denver, Colorado
February 23, 2024
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ENERGY FUELS INC.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Expressed in thousands of U.S. dollars, except per share amounts)
Years Ended December 31,
Revenues
Uranium concentrates $ 33,278 $ — $ —
Alternate Feed Materials, processing and other 931 1,615 1,725
Costs applicable to revenues
Costs applicable to uranium concentrates 15,318 — —
Costs applicable to vanadium concentrates 551 3,769 48
Underutilized capacity production costs applicable to RE Carbonate — 2,758 531
Other operating costs and expenses
Other income (loss)
Income tax expense (276) — —
Items that may be reclassified in the future to income (loss)
Foreign currency translation adjustment — (3,889) (365)
Other comprehensive loss — (3,889) (365)
Net income (loss) attributable to:
Non-controlling interests (106) (95) (93)
Comprehensive income (loss) attributable to:
Non-controlling interests (106) (95) (93)
Basic net income (loss) per common share (Note 10) $ 0.63 $ (0.38) $ 0.01
Diluted net income (loss) per common share (Note 10) $ 0.62 $ (0.38) $ 0.01
See accompanying notes to the consolidated financial statements.
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ENERGY FUELS INC.
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars, except share amounts)
December 31,
ASSETS
Current assets
Prepaid expenses and other current assets 2,522 9,529
Property, plant and equipment, net (Note 7) 26,123 12,662
Operating lease right of use asset 1,219 1,376
LIABILITIES & EQUITY
Current liabilities
Accounts payable and accrued liabilities (Note 13) $ 10,161 $ 6,929
Operating lease liability 199 59
Deposits for assets held for sale — 6,000
Asset retirement obligation and other liabilities held for sale (Note 8) — 5,636
Deferred revenue 332 —
Equity
Accumulated other comprehensive loss (1,946) (1,946)
Commitments and contingencies (Note 14)
See accompanying notes to the consolidated financial statements.
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ENERGY FUELS INC.
Consolidated Statements of Changes in Equity
(Expressed in thousands of U.S. dollars, except share amounts)
Shares Amount
Other comprehensive loss — — — (365) (365) — (365)
Shares issued for the vesting of restricted stock units 478,781 — — — — — —
Shares issued for exercise of stock appreciation rights 5,643 — — — — — —
Contributions attributable to non-controlling interest — — — — — 311 311
Shares issued for the vesting of restricted stock units 362,350 — — — — — —
Shares issued for exercise of stock appreciation rights 3,635 — — — — — —
Contributions attributable to non-controlling interest — — — — — 126 126
Shares issued for the vesting of restricted stock units 312,662 — — — — — —
Shares issued for exercise of stock appreciation rights 267,592 — — — — — —
Contributions attributable to non-controlling interest — — — — — 83 83
See accompanying notes to the consolidated financial statements.
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ENERGY FUELS INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
Years Ended December 31,
OPERATING ACTIVITIES
Unrealized foreign exchange (gain) loss (431) (2,080) 129
Realized loss on investments 10,491 — —
Realized gain on marketable securities (1,141) — —
Realized gain on convertible note redemptions and sale (1,430) — —
Change in value of warrant liabilities — — 8,078
Changes in current assets and liabilities
Prepaid expenses and other current assets 423 (8,886) (257)
INVESTING ACTIVITIES
Additions to property, plant and equipment (15,437) (1,996) (1,368)
Additions to mineral properties (6,782) — —
Acquisition of mineral properties (22,491) — —
Maturities of marketable securities 79,041 — 2,554
Purchase of investments without a readily determinable fair value (1,324) — —
Deposits for assets held for sale — 6,000 —
Proceeds from convertible note redemptions and sale, net 60,887 — —
Net cash provided by (used in) investing activities (23,853) (7,065) 3,186
FINANCING ACTIVITIES
Issuance of common shares for cash, net of issuance costs 31,813 7,886 106,208
Cash received from exercise of stock options 970 753 2,375
Cash received from exercise of warrants — — 9,840
Cash received from non-controlling interest 83 126 311
Less: restricted cash related to assets held for sale — (3,590) —
Plus: release of restricted cash related to sale of assets 3,590 — —
Net change in cash, cash equivalents and restricted cash (5,245) (52,553) 91,837
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 186 $ 25 $ 54
Non-cash investing and financing transactions:
Issuance of common shares for consulting services $ — $ 205 $ 242
Acquisition of convertible note 59,457 — —
See accompanying notes to the consolidated financial statements.
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ENERGY FUELS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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”) as a co-product of uranium at the White Mesa Mill (the “White Mesa Mill” or the “Mill”), from certain of its Colorado Plateau properties and at times from solutions in its Mill tailings impoundment system, each as market conditions warrant. 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 to its existing infrastructure for the potential production of separated REE oxides. Additionally, the Company is evaluating the potential to recover radioisotopes from its existing uranium process streams at the Mill for use in targeted alpha therapy (“TAT”) therapeutics for the treatment of cancer.
With its uranium, vanadium, REE and potential 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; REEs are used to manufacture permanent magnets for electric vehicles (“EVs”), wind turbines and other clean energy and modern technologies. Energy Fuels produces both. Concurrently, the Company's recycling program (known as its “Alternate Feed Program”), works to reduce the levels of new production and natural disturbances needed to meet global energy demand by recycling feed sources that would have otherwise been lost to direct disposal and extracting additional valuable minerals from them. In short, through its uranium and REE production and long-standing recycling program, Energy Fuels works to help address global climate change by producing materials that ultimately reduce reliance on carbon dioxide (“CO2”) emitters, such as fossil fuels, while also ensuring that materials already extracted but only partially utilized are instead used to the fullest extent practicable so as to limit the global mining footprint and reduce the number of constituents ultimately disposed of. Additionally, certain 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.
As of December 31, 2023, 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
The Company's 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 and the Bahia Project (defined in Note 7 – Property, Plant and Equipment and Mineral Properties) located in Brazil. The Company's Nichols Ranch Project (including the Jane Dough and Hank Satellite deposits) is an ISR project located in Wyoming.
As of December 31, 2023, the Company was performing rehabilitation and development work on its La Sal, Whirlwind and Pinyon Plain Projects, as well as exploration drilling and analysis at its Bahia Project. Other conventional mining projects in the vicinity of the Mill and Sheep Mountain are on standby and are being evaluated for continued mining and other activities and/or are in the process of being permitted. The Mill continues to receive third-party uranium-bearing mineralized materials from mining and other industry activities for its own processing and recycling, while also expanding its REE initiatives and pursuing its TAT cancer-fighting therapeutics initiatives.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and are presented in thousands of U.S. dollars (“USD”), except for share and per share amounts. Certain footnote disclosures, where indicated, have share prices that are presented in Canadian dollars (“Cdn$”).
Use of Estimates
The preparation of the Company’s consolidated financial statements in accordance with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. The Company must make these estimates and assumptions because certain information used is dependent on future events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on generally accepted methodologies.
The more significant areas requiring the use of management estimates and assumptions relate to expectations of the future prices of uranium and REE as well as estimates of recoverable mineral resources that are the basis for future cash flow estimates utilized in assessing fair value for business combinations and impairment calculations; the determination of whether an acquisition represents a business combination or an asset acquisition; the use of management estimates and assumptions related to environmental, reclamation and closure obligations; marketable securities and derivative instruments; and share-based compensation expense. Actual results may differ significantly from these estimates.
Principles of Consolidation
These consolidated financial statements include the accounts of the Company together with subsidiaries controlled by the Company. Intercompany transactions, balances and unrealized gains and losses on transactions between the Company and its subsidiaries are eliminated. Management has evaluated how the Company is organized and managed and has identified that the Company is organized and managed as one segment. The functional currency of the Company’s operations is the USD.
Extracting and Recovery Activities While in the Development Stage
The Company extracts or recovers mineralized uranium from mining activities, mill tailings, pond solutions and Alternate Feed Materials, resulting in saleable uranium concentrates from its Mill and, when operating, its Nichols Ranch Project. While the Company has established the existence of multiple Mineral Resources and extracts and processes saleable uranium from these operations, the Company has only established proven or probable Mineral Reserves, as defined under SEC S-K 1300, at its Sheep Mountain and Pinyon Plain projects.
Costs incurred before the establishment of proven and probable reserves are expensed and classified as development expense. As a result, the Company’s consolidated financial statements may not be directly comparable to the financial statements of mining companies in the development stage having multiple Mineral Reserves or in the production stage.
Impairment of Long-Lived Assets
The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Mineral properties are monitored for impairment based on factors such as mineral prices, government regulation and taxation, the Company's continued right to explore the area, exploration reports, assays, technical reports, drill results and its continued plans to fund exploration programs on the property.
At each reporting date, the Company conducts a review of potential triggering events for all its mineral properties. When events or changes in circumstances indicate that the related carrying amounts may not be recoverable, the Company carries out a review and evaluation of its long-lived assets in accordance with its accounting policy. Impairment losses are recognized in profit or loss.
Recoverability is measured by comparing the undiscounted future net cash flows to the net book value. When the net book value exceeds future net undiscounted cash flows, the fair value is compared to the net book value and an impairment loss may be measured and recorded based on the excess of the net book value over fair value. Fair value for operating mines is determined using a combined approach, which uses a discounted cash flow model for the existing operations and non-operating properties with available cash flow models and a market approach for the fair value assessment of non-operating and exploration properties where no cash flow model is available. Future cash flows are estimated based on quantities of
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recoverable mineralized material, expected uranium or REE prices (considering current and historical prices, trends and estimates), production levels, operating costs, capital requirements and reclamation costs, all based on life-of-mine plans. In estimating future cash flows, assets are grouped at the lowest level, for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company's estimates of future cash flows are based on numerous assumptions, and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, uranium prices, production levels, costs and capital are each subject to significant risks and uncertainties.
No impairment of property, plant and equipment and mineral properties were recorded during the years ended December 31, 2023, 2022 and 2021.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value. Restricted cash is excluded from cash and cash equivalents and is included in other current or long-term assets, depending on the nature of the restriction. See Note 8 – Asset Retirement Obligations and Restricted Cash for more information.
Marketable Securities
Marketable debt securities consist of excess cash invested in U.S. government notes, U.S. government agencies and tradeable certificates of deposits. The Company classifies and accounts for its marketable debt securities under the fair value option. After consideration of the Company's risk versus reward objectives, as well as its liquidity requirements, the Company may sell these debt securities prior to their stated maturities. As management views these securities as available to support current operations, the Company classifies highly liquid securities with maturities beyond 12 months as current assets under the caption Marketable securities on the Consolidated Balance Sheet. The Company received a secured convertible note (the “Convertible Note”) as partial consideration for the Alta Mesa Transaction (defined in Note 7 – Property, Plant and Equipment and Mineral Properties). The Company elected the fair value option for the Convertible Note, as it had the option of converting the principal due into fully paid and non-assessable common shares of enCore Energy Corp. (“enCore”). During the year ended December 31, 2023, the Convertible Note was partially redeemed and the remaining principal balance was sold. Subsequent to initial recognition, marketable debt securities are measured at fair value and changes therein are recognized as a component of Other income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Marketable equity securities consist of investments in publicly traded equity securities. The Company classifies and accounts for its marketable equity securities as available-for-sale. Subsequent to initial recognition, marketable equity securities are measured at fair value and changes therein are recognized as a component of Other income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company evaluates its estimate of expected credit losses based on historical experience and current and forecasted future economic conditions for each portfolio of customers. As of December 31, 2023 and 2022, the Company did not have an allowance for expected credit losses for trade accounts receivable.
Inventories
Inventories are valued at the lower of average cost or net realizable value. Net realizable value represents the estimated future sales price of the product based on current and long-term prices, less the estimated costs to bring the product to sale. Inventories are comprised of stockpiles or raw materials, work-in-process inventories and finished goods. Expenditures related to the extraction and recovery of uranium concentrates and depreciation of the acquisition cost of the Extracting and Recovery Operations are inventoried as stockpiles and in-process and concentrate inventories.
Property, Plant and Equipment
Recognition and measurement
Property, plant and equipment is measured at cost less accumulated depreciation and any accumulated impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, when it is replaced, and the cost of the replacement asset is expensed.
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Depreciation
Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives less the salvage value of assets. The estimated useful lives of the Company's assets range from 3 to 15 years depending upon the asset type. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations or changes in attitudes or interpretations of such laws and regulations relating to environmental matters, restoration and abandonment requirements, economic conditions and supply and demand for the Company’s services in the areas in which it operates. When assets are placed into service, management makes estimates with respect to useful lives and salvage values that it believes are reasonable. When assets are retired or sold, the resulting gains or losses are reflected in current earnings as a component of other income or expense. Salvage values, method of depreciation and useful lives of the assets are reviewed at least annually and any change in estimate is applied prospectively.
Non-Operating Assets
Non-operating assets consist of mineral properties and rights, along with data and analyses related to the properties, which are in various stages of evaluation and permitting. Costs to acquire the non-operating assets are capitalized at cost or fair value if such assets were acquired as part of a business combination.
Mining activities for non-operating assets involve the search for minerals, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Expenditures incurred in relation to such mining activities include costs which are directly attributable to researching and analyzing existing exploration data; conducting geological studies, exploratory drilling and sampling; examining and testing extraction and treatment methods; and completing pre-feasibility and feasibility studies. Such expenditures are expensed as incurred.
Mineral properties, that are not held for production, and any related surface access to the minerals generally require periodic payments and/or certain expenditures related to the property in order for the Company to retain its interest in the mineral property (collectively, “Holding Costs”). The Company expenses all Holding Costs in the period they are incurred.
Stand-by Properties
Stand-by properties are mineral properties that have extracted mineral resources in the past but are currently non-operating or properties, which could extract mineral resources in the future. Expenditures related to these properties are primarily related to maintaining the assets and permits in a condition that will allow re-start of the operations or development given appropriate commodity prices. All costs related to stand-by assets are expensed as incurred.
The Mill operates on a campaign basis. When the Mill is not recovering material, all related costs are expensed as incurred.
Leases
The Company accounts for leases under Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification (“ASC”) Topic 842, Leases, which requires leases to be recognized as assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The Company recognizes in the balance sheet a liability to make lease payments (the lease liability) and the right-of-use asset representing the right to the underlying asset for the lease term. For leases with a term of twelve months or less, the Company has made an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities.
Investments
Investments Accounted for at Fair Value
The Company accounts for equity method investments over which the Company exerts significant influence, but not control, over the financial and operating policies through the fair value option of FASB ASC Topic 825, Financial Instruments. The Company elected the fair value option based on practical expedience, variances in reporting timelines and cost-benefit considerations. The cost of such investments is measured at the fair value of the assets given up, shares issued and liabilities assumed at the date of acquisition plus costs directly attributable to the acquisition. Subsequent to initial recognition, they are measured at fair value. The fair value of the investee’s common shares is measured based on its closing market price. The Company uses the Black-Scholes option pricing model to estimate the fair value of its investment in warrants with the following assumptions: (i) the investee’s closing market price on the valuation date, (ii) the risk-free interest rate computed based on the U.S. Treasury yield, (iii) an expected term equal to the remaining contractual term, (iv) a dividend yield of zero, and (v) the expected stock price volatility calculated based on the historical volatility of the common shares of the investee.
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Changes in the fair value of these investments are recognized in Other income (loss) in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 6 – Investments for more information.
Investments Without a Readily Determinable Fair Value
The Company measures equity investments without readily determinable fair values at cost, less any impairment, adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. See Note 6 – Investments for more information.
Asset Retirement Obligations
The Company’s asset retirement obligations (“ARO”) relate to expected mine, wellfield, plant and mill reclamation and closure activities, as well as costs associated with reclamation of exploration drilling. The Company’s activities are subject to numerous governmental laws and regulations. Estimates of future reclamation liabilities for ARO are recognized in the period when such liabilities are incurred. These estimates are updated on a periodic basis and are subject to changing laws, regulatory requirements, technology and other factors, which will be recognized when appropriate. Liabilities related to site restoration include long-term treatment and monitoring costs and incorporate total expected costs net of recoveries. Expenditures incurred to dismantle facilities, restore and monitor closed resource properties are charged against the related ARO.
The present value of AROs is measured by discounting the expected cash flows using a discount factor that reflects the credit-adjusted risk-free rate of interest, while taking into account an inflation rate. The ARO liability is accreted to full value over time through periodic accretion charges recorded to operations as accretion expense. The Company adjusts the estimate of the ARO for changes in the amount or timing of underlying future cash outflows. The impact of these adjustments to the ARO amounts are expensed as incurred.
Warrant Liabilities
The Company issued several tranches of warrants for various equity transactions in 2016 all of which were either settled or expired in 2021 and thus, no longer outstanding as of December 31, 2022 and 2023. The Company accounted for its warrants issued in accordance with FASB ASC Topic 815, Derivative and Hedging (“ASC 815”), which required instruments within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. In accordance with ASC 815, the Company classified the warrants as liabilities. The warrants were subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of Other income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company estimated the fair value of these warrants using market prices, if available, or the Black-Scholes option pricing model. The Black-Scholes option pricing model is based on the estimated market value of the underlying common stock at the measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on, and expected volatility of the price of the underlying common stock.
Revenue
Sale of goods
Revenue from the sale of mineral concentrates is recognized when control transfers to customers at amounts to which the Company expects to be entitled. For uranium concentrates, revenue is typically recognized when delivery is evidenced by book transfer at the applicable uranium storage facility. For vanadium concentrates, revenue is typically recognized when delivery is evidenced by book transfer at the applicable vanadium storage facility. For RE Carbonate, revenue is typically recognized when delivery of the mixed RE Carbonate material has arrived at the applicable separations facility.
Rendering of services
Revenue from the delivery of mineralized material received from the clean-up of a third-party uranium mine or for other Alternate Feed Materials is typically recognized upon delivery to the White Mesa Mill. Revenue from toll milling services is recognized as material is processed in accordance with the specifics of the applicable toll milling agreement. Revenue and unbilled accounts receivable are recorded as related costs are incurred using billing formulas included in the applicable toll milling agreement.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
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Share-Based Compensation
The Company measures share-based compensation awards exchanged for director, employee and contractor services at fair value on the date of the grant and expenses the awards in the Consolidated Statements of Operations and Comprehensive Income (Loss) over the requisite employee service period. The fair value of restricted stock units (“RSUs”) is based on the Energy Fuels’ closing stock price on the date of grant. The fair value of stock appreciation rights (“SARs”) with market conditions is based on a Monte Carlo simulation performed by a third-party valuation firm. The fair value of stock options is determined using the Black-Scholes valuation model. Share-based compensation expense related to awards with only service conditions having a graded vesting schedule is recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards, while expense for all other awards are recognized on a straight-line basis. The Company’s estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, the Company's performance and related tax impacts.
Foreign Currency
Transactions in foreign currencies are translated to the respective functional currency of the Company’s subsidiaries and joint ventures at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate as of the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognized in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated.
The assets and liabilities of entities whose functional currency is not the U.S. dollar are translated into the U.S. dollar at the exchange rate as of the reporting date. The income and expenses of such entities are translated into the U.S. dollar using average exchange rates for the reporting period. Exchange differences on foreign currency translations are recorded in Other comprehensive income (loss). The Company’s functional currency is the U.S. dollar.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recorded based on differences between the financial statement carrying values of existing assets and liabilities and their respective income tax bases (temporary differences), and losses carried forward. Deferred income tax assets and liabilities are measured using the enacted tax rates which will be in effect when the temporary differences are likely to reverse. The effect on deferred income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted.
The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized. When the Company concludes that all or part of the deferred income tax assets are not realizable in the future, the Company makes an adjustment to the valuation allowance that is charged to income tax expense in the period such determination is made.
Net Income (Loss) per Share
The Company presents basic income (loss) per share data for its common shares, calculated by dividing the income (loss) attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is determined by adjusting the income (loss) attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potential dilutive instruments based on the number of common shares that would be issuable if the end of the period was also the end of the performance period required for the vesting of the awards. Potentially dilutive instruments include stock options, restricted stock units, stock appreciation rights and warrants, which are included in the diluted income (loss) per share calculation using the treasury stock method.
Recently Issued Accounting Standards
Segment Reporting
In November 2023, the FASB issued Accounting Standard Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU requires annual and interim disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure
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of segment profit or loss as well as the amount and composition of other segment items. The Company will adopt this standard prospectively on January 1, 2024 and does not expect a material impact on the Company's consolidated financial statements.
Income Tax Disclosures
On December 14, 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures.” This ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The Company will adopt this standard prospectively on January 1, 2025 and does not expect a material impact on the Company's consolidated financial statements.
3. MARKETABLE SECURITIES
The Company has elected the fair value option for its marketable debt securities and records these instruments on the Consolidated Balance Sheet at their fair value including interest income. Changes in fair value and interest income are recorded in Other income (loss) in the 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 December 31, 2023 and 2022 are due in one to two years. 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:
Cost Basis Gross Unrealized Losses Gross Unrealized Gains Fair Value
(1) As of December 31, 2023 and 2022, marketable debt securities are comprised primarily of U.S. Treasury Bills and Government Agency Bonds.
4. RECEIVABLES
The components of trade and other receivables are as follows:
December 31,
Trade receivables $ 406 $ 92
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During the year ended December 31, 2014, the Company received two notes with a combined principal totaling $1.05 million due in 2018 in connection with the sale of certain assets previously recorded as held for sale. The note with principal totaling $0.50 million was collected during the year ended December 31, 2018. Alternatively, the note with a principal payment of $0.55 million due November 7, 2018 was not paid and the Company notified the issuing party (“Default Party”) of its default on November 9, 2018. The Company has an allowance for credit losses of $0.22 million as of December 31, 2023 and 2022 against the collectability of this note. The promissory note is secured by all issued and outstanding stock of the Default Party and all of the assets sold to the Default Party.
5. INVENTORIES
Inventories consisted of the following items:
December 31,
Concentrates and work-in-progress $ 35,807 $ 35,476
Inventory of ore in stockpiles 3,072 940
Raw materials and consumables 1,841 4,204
6. INVESTMENTS
As of December 31, 2022, the Company owned a 17.4% interest in Consolidated Uranium Inc. (“CUR”) and a 13.5% interest in Virginia Energy Resources, Inc. (“Virginia Energy”). The Company had significant influence, but not control, over these investments. As such, Virginia Energy and CUR were accounted for as equity method investments with the fair value option elected and classified as Investments on the Consolidated Balance Sheet. Changes in value of these investments are included in Other income (loss) in the Consolidated Statement of Operations and Comprehensive Income (Loss). For the years ended December 31, 2023, 2022 and 2021, the Company had a net unrealized gain of $4.98 million, an unrealized loss of $16.81 million and a unrealized gain of $6.31 million, respectively.
On January 24, 2023, CUR acquired 100% of the issued and outstanding common shares of Virginia Energy in for 0.26 common shares of CUR for every one 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.
On December 5, 2023, IsoEnergy Ltd. (“IsoEnergy”) acquired all of the issued and outstanding common shares of CUR (the “CUR Shares”). Pursuant to the arrangement, CUR’s shareholders received 0.500 common shares of IsoEnergy for every CUR Share. When converted, the Company's CUR Shares results in an approximate ownership interest in IsoEnergy of 5.0%. On October 19, 2023, IsoEnergy completed its marketed private placement offering of 8,134,500 subscription receipts of IsoEnergy (the “Subscription Receipts”) at a price of Cdn$4.50 per Subscription Receipt; in order to retain its post-arrangement ownership interest in IsoEnergy, the Company purchased 406,650 Subscription Receipts for Cdn$1.83 million. Each outstanding Subscription Receipt has been converted into one common share of IsoEnergy. Following completion of this arrangement, the Company owned 8,501,424 shares of IsoEnergy for an approximate ownership interest of 5.0% as of December 5, 2023.
Upon completion of this arrangement, the Company does not have significant influence over IsoEnergy as a result of no representation on the Board of Directors of IsoEnergy and its reduced ownership interest. Therefore, the investment is no longer accounted for as an equity method investment. The Company's judgment regarding the level of influence over its equity method investments includes considering key factors such as the Company's ownership interest, representation on the Board of Directors and participation in the policy-making decisions of equity method investees. As such, the Company's shares in IsoEnergy are accounted for as marketable securities with the fair value option elected on its Consolidated Balance Sheet and changes in value are included in Other income (loss) in the Consolidated Statement of Operations and Comprehensive Income (Loss).
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CUR
As of December 5, 2023 and December 31, 2022, the fair value of the Company’s investment in CUR was $23.63 million and $16.50 million, respectively.
Pursuant to Rule 3-09 of Regulation S-X (“Rule 3-09”), the Company is required to file separate audited financial statements of CUR if either the investment test or income test as set forth in that rule equals or exceeds the 20% level individually. As of December 31, 2022, the income test was met at the 20% significance level for CUR. The Company will amend this Annual Report to include as an exhibit the separate audited financial statements for the year ended December 31, 2022 and unaudited financial statements for the period ending December 5, 2023.
In accordance with Rule 4-08(g) of Regulation S-X (“Rule 4-08(g)”), the summarized financial information for CUR is set forth below on a one-quarter lag, which precedes the date of the Company’s investment for the year ended December 31, 2021. CUR prepares its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and uses Cdn$ as its reporting currency. As such, the Company has made certain adjustments to CUR’s summarized financial information to address differences between IFRS and GAAP that materially impact the summarized financial information and to convert such information to US$.
September 30,
Non-current liabilities $ 319 $ —
Twelve Months Ended September 30,
Net loss and net loss attributable to the entity $ (8,902) $ (17,890) $ (4,570)
Virginia Energy
The fair value of the Company's investment in Virginia Energy was $3.39 million and $2.83 million as of January 24, 2023 and December 31, 2022, respectively.
Pursuant to Rule 3-09, the Company is required to file separate audited financial statements of Virginia Energy if either the investment test or income test as set forth in that rule equals or exceeds the 20% level individually. As of December 31, 2021, the income test was met at the 20% significance level for Virginia Energy. Exhibit 99.1 to this Annual Report includes separate audited financial statements for the year ended December 31, 2021 and unaudited financial statements for the twenty-three day period ended January 23, 2023 and the year ended December 31, 2022 of Virginia Energy.
In accordance with Rule 4-08(g), summarized financial information for Virginia Energy is set forth below on a one-quarter lag. Virginia Energy prepares its financial statements in accordance with IFRS. The Company determined that no adjustments to Virginia Energy’s summarized financial information were necessary to address differences between IFRS and GAAP that materially impact the summarized financial information.
Current liabilities $ 2 $ 223
Non-current liabilities $ 2 $ 2
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Tate Transition Metals Ltd
On November 29, 2023, the Company entered into an agreement with Tate Transition Metals Ltd (“Tate”) whereby the Company subscribed for 199,000 Subscription Ordinary Shares for Aus$1.99 million, which represents a 19.9% interest in Tate. As of December 31, 2023, Tate was included in Investments on the Consolidated Balance Sheet for $1.36 million and is accounted for as an investment without a readily determinable fair value. The Company does not have significant influence in its investment in Tate.
7. PROPERTY, PLANT AND EQUIPMENT AND MINERAL PROPERTIES
The following is a summary of property, plant and equipment, net:
Estimated December 31,
Light trucks and utility vehicles 5 years 3,256 2,867
Office furniture and equipment 4 - 7 years 1,754 1,585
Total property, plant and equipment $ 62,048 $ 45,836
Property, plant and equipment, net $ 26,123 $ 12,662
As of December 31, 2022, the net book value of the property, plant and equipment attributable Alta Mesa, which the Company sold to enCore effective February 14, 2023, was $8.21 million and is included in Property, plant and equipment and other assets held for sale, net on the Consolidated Balance Sheet.
For the years ended December 31, 2023, 2022 and 2021, the Company recognized depreciation expense of $2.75 million, $3.27 million and $3.19 million, respectively, in Exploration, development and processing and Standby in the Consolidated Statements of Operations and Comprehensive Income (Loss).
For the years ended December 31, 2023, 2022 and 2021, the Company capitalized $0.10 million, $0.24 million and $0.10 million, respectively, of depreciation expense related to the Mill that was included in the capitalized costs to inventory on the Consolidated Balance Sheet.
The following is a summary of mineral properties:
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December 31,
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 heavy mineral sands 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 acquisitions 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 Sheet as of December 31, 2022 and reclassified to Mineral properties upon closing within the Consolidated Balance Sheet. 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 Alta Mesa, which was classified as “held for sale” on the Consolidated Balance Sheet as of December 31, 2022, for total consideration of $120 million (the “Alta Mesa Transaction”), paid as follows:
a.$60 million in cash, which included $6 million prior to closing and $54 million at closing; and
b.$60 million 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 fully paid and non-assessable 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 enCore 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 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 15 – Fair Value Accounting for more information on the fair value of the Convertible Note.
As a post-closing condition of the Alta Mesa Transaction, enCore was required to replace the $3.59 million of reclamation bonds then in place for Alta Mesa. Upon replacement, the original bonds were released and the Company received back the underlying collateral during the year ended December 31, 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
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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 $0.50 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 December 31, 2023, the Company has not purchased, leased and/or licensed a PFN tool.
Disposal of Certain Properties
On July 15, 2021, the Company and CUR jointly announced the signing of a definitive asset purchase agreement (the “Agreement”) for CUR to acquire a portfolio of the Company's non-core conventional uranium projects located in Utah and Colorado, including the Daneros mine, the Tony M mine, the Rim mine, the Sage Plain project, and several U.S. Department of Energy leases (the “Sale”).
On October 27, 2021 (the “Closing Date”), the parties closed the Sale in accordance with the terms of the Agreement, as a result of which the aforementioned properties and leases were transferred to CUR in exchange for the following consideration:
•$2,000,000 in cash on the Closing Date;
•the issuance of 11,860,101 common shares of CUR, constituting 19.9% of the outstanding CUR common shares immediately after the Closing Date, at a price per share of Cdn$2.95 equal to the closing price of the CUR common shares on the TSXV on the last trading day immediately prior to issuance;
•an additional Cdn$3,000,000 in cash payable on or before the 18-month anniversary of the Closing Date (“Second Payment”);
•an additional Cdn$3,000,000 in cash payable on or before the 36-month anniversary of the Closing Date (“Third Payment” and together with the Second Payment, the “Deferred Cash Payments”); and
•the commitment to make production payments on a per-project basis totaling Cdn$5,000,000 as set forth pursuant to individual production payment agreements executed on the Closing Date.
As part of the Agreement, the Company has entered into a mine operating agreement pursuant to which it will act, through its indirect wholly owned subsidiary Energy Fuels Resources (USA) Inc., as Operator to the Sale projects in accordance with a program and budget determined annually, in exchange for which the Company will receive reimbursement for all direct costs in addition to an overhead allocation and management fee. In addition, the Company has entered into a toll milling agreement pursuant to which it will process all ore mined from the properties at the Mill, in exchange for which the Company will receive reimbursement of direct costs in addition to a milling fee. Pursuant to an investor rights agreement, for so long as the Company’s equity ownership in CUR remains at or above 10%, it will be entitled to equity participation rights to maintain its pro-rata equity ownership in the Company and to appoint one nominee to the CUR Board of Directors. The Company’s CEO was appointed to the CUR Board of Directors at the Closing Date.
These non-core conventional uranium project assets had no carrying value at the Closing Date. The Company recognized a gain on the disposal of $35.73 million at the Closing Date and subsequently derecognized asset retirement obligations of $0.27 million prior to December 31, 2021 upon being legally released from being the primary obligor under the liabilities. For a period of three years, if CUR issues common shares or other securities convertible into common shares in a private placement or prospectus offering, the Company has the right to accelerate a portion of the Deferred Cash Payments, in cash or securities, up to a maximum amount equal to the product of (i) the gross proceeds of the financing multiplied by (ii) the Company’s then current cumulative percentage ownership of CUR common stock on a non-diluted basis prior to the completion of the financing (the “Acceleration Right”). On November 22, 2021, CUR completed such a financing under which the Company elected its Acceleration Right and received 1,875,085 common shares of CUR and 937,542 warrants to purchase common shares of CUR which are exercisable for a period of two years from issuance at a price of Cdn$4.00. The receipt of these CUR common shares and warrants satisfied the Second Payment in full and satisfied Cdn$1.97 million of the Third Payment.
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8. ASSET RETIREMENT OBLIGATIONS AND RESTRICTED CASH
Asset Retirement Obligations
The following table summarizes the Company’s asset retirement obligations:
December 31,
Asset retirement obligations, beginning of period $ 9,595 $ 13,687
Held for sale(1) — (5,410)
Disposal of Alta Mesa asset retirement obligations(1) (79) —
Asset retirement obligations, end of period $ 10,922 $ 9,595
(1)Asset retirement obligations held for sale as of December 31, 2022 were related to Alta Mesa and are included as Asset retirement obligation and other liabilities held for saleon the Consolidated Balance Sheet. Disposal of Alta Mesa retirement obligations is related to the accretion expense incurred on these obligations through the closing date and is included within Gain on sale of assets on the Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 7 – 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. The above provision represents the Company’s estimate of the present value of future reclamation costs, discounted using credit adjusted risk-free interest rates ranging from 11.62% to 12.88% and inflation rates ranging from 2.25% to 3.97%. The total undiscounted decommissioning liability as of December 31, 2023 and 2022 is $33.38 million and $42.91 million, respectively.
The upward revision of estimate of $0.21 million for the year ended December 31, 2023 includes net changes in estimated costs of future reclamation activities. These revisions were recognized in Property, plant and equipment, net on the Consolidated Balance Sheet and will be depreciated over the useful life of the related asset.
The downward revision of estimate of $0.24 million for the year ended December 31, 2022 includes net changes in estimated costs of future reclamation activities. These revisions were recognized in Exploration, development, permitting, and land holding and Standby costs in the Consolidated Statement of Operations and Comprehensive Income (Loss).
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 14 – Commitments and Contingencies for more information.
The following table summarizes the Company’s restricted cash:
December 31,
Restricted cash, beginning of period $ 17,449 $ 20,305
Additional collateral posted 130 734
Held for sale — (3,590)
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9. 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 years ended December 31, 2023, 2022 and 2021, the Company issued 4,047,832, 769,779 and 16,627,512 Common Shares, respectively, under its ATM offering for net proceeds of $31.81 million, $7.89 million and $106.21 million, respectively.
Share Purchase Warrants
The following table summarizes the Company’s share purchase warrants denominated in U.S. dollars. These warrants are accounted for as derivative liabilities, as the functional currency of the entity issuing the warrants, Energy Fuels Inc., is Cdn$.
(1)The warrants issued in September 2016 were classified as Level 1 under the fair value hierarchy. Each warrant was exercisable until September 20, 2021 and entitled the holder thereof to acquire one common share upon exercise at an exercise price of $2.45 per common share. These warrants are accounted for as a derivative liability, as the functional currency of the entity issuing the warrant is Cdn$.
On September 20, 2021, 149,807 warrants issued in September 2016 expired unexercised.
10. BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
The following is a reconciliation of weighted average common shares outstanding:
Years Ended December 31,
Effect of shares issued for exercise of share purchase warrants — — 1,737,981
Basic and diluted income (loss) per common share
The calculation of basic and diluted income (loss) per share after adjustment for the effects of all potential dilutive common shares, calculated as follows:
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Years Ended December 31,
Basic net income (loss) per common share $ 0.63 $ (0.38) $ 0.01
Diluted net income (loss) per common share $ 0.62 $ (0.38) $ 0.01
For the years ended December 31, 2023, 2022 and 2021, 0.11 million, 0.06 million and 6.87 million stock options, restricted stock units, and warrants, respectively, and the potential conversion of the Convertible Debentures 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 of 1.85 million, 2.45 million, and 1.67 million for the years ended December 31, 2023, 2022, and 2021, respectively as they are contingently issuable based on specified market prices of the Company’s stock which were not achieved as of the end of each period.
11. SHARE-BASED COMPENSATION
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 December 31, 2023, a total of 16,265,915 common shares were authorized for future equity incentive plan awards.
The Company’s share-based compensation expense, by type of award, is as follows:
Years Ended December 31,
(1)The fair value of the RSUs granted under the Compensation Plan for the years ended December 31, 2023, 2022 and 2021 was estimated at the date of grant, using the stated market price on the NYSE American.
(2)Share-based compensation is recorded in Selling, general and administration in the Consolidated Statements of Operations and Comprehensive Income (Loss).
As of December 31, 2023, there were $0.19 million, $0.84 million and $0.31 million of unrecognized compensation costs related to the unvested stock options, RSU awards and SARs, respectively, to be recognized over a weighted average period of 1.03 years, 1.87 years, and 0.67 years, respectively.
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 RSU unvested activity is as follows:
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Number of Shares Weighted Average Grant Date Fair Value
Forfeited — —
The total fair value of RSUs that vested and were settled for equity was $3.00 million, $2.93 million and $2.67 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Stock Appreciation Rights
The Company grants SARs to executives and eligible employees.
2019 Stock Appreciation Rights Grants
During the year ended December 31, 2019, the Company’s Board of Directors issued SARs under the Compensation Plan with a fair value of $1.25 per SAR. These SARs are intended to provide additional long-term performance-based equity incentives for the Company’s senior management. The SARs are performance-based because they only vest upon the achievement of performance goals designed to significantly increase shareholder value.
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 $2.92 (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 performance goals: as to one-third of the SARs granted, automatically upon the 90-calendar-day volume-weighted average price (“VWAP”) of the Company’s Common Shares on the NYSE American equaling or exceeding $5.00 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 $7.00 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 $10.00 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 22, 2020. The first two tranches of these vesting performance goals were met prior to the year ended December 31, 2023.
2022 Stock Appreciation Rights Grants
During the year ended December 31, 2022, the Company’s Board of Directors issued SARs under the Compensation Plan. The fair value of the SARs granted during the year ended December 31, 2022 was estimated at the date of grant using a Monte Carlo simulation.
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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 FMV of the Company’s Common Shares on the date of exercise and $6.47 (the Grant Price at the time of grant). The term of the SARs grant is five years, with SARs vesting only upon the achievement of the following performance 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 may be exercised by the holder for an initial period of one year from the date of grant; the date first exercisable being January 25, 2023. As a result, the SARs granted in the first quarter of 2022 for 2021 performance are a long-term equity incentive and are 100% performance based.
2023 Stock Appreciation Rights Grants
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 FMV of the Company’s Common Shares on the date of exercise and $7.36 (being the greater of (i) the VWAP of the Company’s Common Shares on the NYSE American for the five trading days immediately prior to the date of grant, and (ii) the Grant Price). Fair Market Value as used herein means the closing price of the Common 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 26, 2024.
The following table with the following weighted average assumptions used to determine fair values:
Years Ended December 31,
Risk-free interest rate 3.58 % 1.68 %
Expected life (in years)(1) 5.00 years 4.98 years
Expected dividend yield — % — %
Weighted average grant date fair value $ 3.45 $ 3.99
(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.
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A summary of the Company’s SARs activity is as follows:
Expired — —
The total intrinsic value for exercised SARs was $3.55 million, $0.05 million and $0.26 million for the years ended December 31, 2023, 2022 and 2021, respectively.
A summary of the Company’s unvested SARs activity is as follows:
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Number of Shares Weighted Average Grant Date Fair Value
Granted — —
Forfeited — —
Vested — —
Vested — —