Energy Fuels(UUUU) - 2020 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Condensed Consolidated Financial Statements Energy Fuels Inc. reported a reduced $5.7 million net loss in Q1 2020, driven by lower operating costs and financial instrument gains, despite decreased revenue, and improved its balance sheet Condensed Consolidated Statements of Operations (Q1 2020 vs Q1 2019) | Financial Metric | Three months ended March 31, 2020 ($) | Three months ended March 31, 2019 ($) | | :--- | :--- | :--- | | Total Revenues | $393,000 | $1,670,000 | | Total operating loss | ($7,806,000) | ($10,122,000) | | Net loss | ($5,664,000) | ($12,134,000) | | Basic and diluted loss per share | ($0.05) | ($0.13) | Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2020 ($) | December 31, 2019 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $23,537,000 | $12,810,000 | | Total current assets | $53,504,000 | $43,172,000 | | Total assets | $184,928,000 | $175,720,000 | | Total current liabilities | $18,405,000 | $22,638,000 | | Total liabilities | $39,966,000 | $45,113,000 | | Total equity | $144,962,000 | $130,607,000 | Condensed Consolidated Statements of Cash Flows (Q1 2020 vs Q1 2019) | Cash Flow Activity | Three months ended March 31, 2020 ($) | Three months ended March 31, 2019 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,324,000) | ($11,553,000) | | Net cash provided by investing activities | $2,200,000 | $9,950,000 | | Net cash provided by financing activities | $18,572,000 | $2,511,000 | - In Q1 2020, the company recorded an inventory impairment loss of $1.08 million, compared to $1.18 million in Q1 2019[40] - The company completed a bought deal public offering of 11.30 million common shares in February 2020, receiving net proceeds of $15.14 million; additionally, 2.39 million shares were issued under the ATM program for net proceeds of $3.96 million in Q1 2020[59] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the $5.7 million Q1 2020 net loss to low commodity prices, while pursuing rare earth element opportunities and engaging with the U.S. Uranium Reserve initiative, supported by $19.1 million in equity financing - The company is evaluating entry into the rare earth element (REE) market, leveraging the White Mesa Mill's capabilities to process REE-bearing ores and materials, potentially creating a domestic REE supply chain and reducing reliance on China[108][110] - The U.S. President's 2021 Budget proposes creating a Uranium Reserve with $150 million in annual funding for 10 years to purchase domestically produced uranium, a direct response to the company's Section 232 petition and the Nuclear Fuel Working Group's findings[114][115] Uranium & Vanadium Production and Outlook | Metric | Q1 2020 Actual (lbs) | FY 2020 Guidance (lbs) | | :--- | :--- | :--- | | U3O8 Recovered | 5,900 | 125,000 - 175,000 | | V2O5 Recovered | 67,000 | N/A (Pond Return suspended) | - The company has no uranium sales commitments for 2020 and is fully unhedged, positioning it to benefit from potential price increases; all 2020 production is expected to be added to inventory[126][136] - At March 31, 2020, the company had working capital of $35.10 million, including $23.54 million in cash and significant uranium and vanadium inventories; management believes it has sufficient resources for at least the next twelve months[160] Recent Developments Recent developments include managing COVID-19 impacts, raising $15.14 million in financing, exploring rare earth element market entry, and noting progress on the U.S. Uranium Reserve initiative - The company believes it is well-capitalized to withstand potential facility shutdowns or depressed share prices resulting from the COVID-19 crisis for at least the next twelve months[106] - On February 20, 2020, the company closed a bought deal public offering, issuing 11.3 million common shares at $1.47 per share for net proceeds of $15.14 million[107] - The company is exploring entry into the rare earth element (REE) market, leveraging its White Mesa Mill to potentially process ores and eliminate the need to ship them to China[108][110] - The President's 2021 Budget proposes a $150 million annual appropriation for 10 years to establish a U.S. Uranium Reserve, supporting domestic production; this action follows recommendations from the U.S. Nuclear Fuel Working Group[114] Market Update Uranium spot prices rose 10% in Q1 2020 to $27.30 per pound and continued climbing due to COVID-19 related production cuts, while vanadium prices also increased amid supply concerns Commodity Price Changes | Commodity | Q1 2020 Change | Price on April 30/May 1, 2020 ($/lb) | | :--- | :--- | :--- | | Uranium (U3O8) Spot | +10% (to $27.30/lb) | $33.75/lb | | Vanadium (V2O5) Europe | +5% (to $5.58/lb) | $6.88/lb | - Significant uranium production cuts were announced post-quarter in Canada, Kazakhstan, and Namibia due to the COVID-19 crisis, contributing to a price increase of over 30% between March 1 and April 30, 2020[118] Results of Operations Q1 2020 net loss improved to $5.7 million from $12.1 million in Q1 2019, despite lower revenues, primarily due to reduced development expenses and a positive swing in other income from financial instrument gains - Revenues for Q1 2020 were $0.39 million, entirely from fees for receiving third-party ore, compared to $1.67 million in Q1 2019, which included $1.17 million from vanadium sales[144] - Development, permitting, and land holding costs decreased sharply to $0.68 million in Q1 2020 from $4.34 million in Q1 2019, as the prior year included costs for a V2O5 test-mining program and production ramp-up[147] - Standby costs increased to $1.92 million in Q1 2020 from $1.08 million in Q1 2019, mainly due to reduced recovery activities at the White Mesa Mill[150] - Other income was $2.49 million in Q1 2020, compared to a loss of $1.68 million in Q1 2019; the positive swing was mainly due to gains on the fair value of convertible debentures and warrant liabilities, and foreign exchange gains[156][157] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from unhedged uranium and vanadium commodity prices, interest rate fluctuations on convertible debentures tied to uranium prices, and Canadian dollar currency exposure - The company is fully exposed to uranium and vanadium spot prices as all long-term uranium contracts have expired and no new contracts are in place[187][188] - Interest rate risk on the Convertible Debentures is tied to the UxC U3O8 price, ranging from 8.5% annually for prices up to $54.99/lb to 13.5% for prices at or above $100/lb[189][190] - The company has a net exposure of approximately ($1.85) million to the Canadian dollar as of March 31, 2020, primarily through its convertible debentures[192] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2020, due to a material weakness, with a remediation plan underway for completion by fiscal year-end 2020 - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2020, due to a material weakness identified in the 2019 annual report[196] - A remediation plan is underway to address the material weakness, with completion expected prior to the end of fiscal 2020[198] PART II – OTHER INFORMATION Legal Proceedings The company reports no new material pending or threatened litigation beyond what was previously disclosed in its 2019 Form 10-K and current Form 10-Q - There are no new material legal proceedings that would likely have a material adverse effect on the company beyond those already disclosed[200] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2019 - No material changes from the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2019 have occurred[202] Mine Safety Disclosure Mine safety disclosures required by Regulation S-K Item 104 are included in Exhibit 95.1 of this quarterly report - Mine safety disclosures required by Regulation S-K Item 104 are included in Exhibit 95.1 of this report[207]