Energy Fuels(UUUU) - 2020 Q4 - Annual Report

Preamble Cautionary Statement Regarding Forward-Looking Statements This section cautions that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements concerning future results, operations, and plans, including REE initiatives and the potential U.S. Uranium Reserve[11] - These statements are subject to a wide range of risks and uncertainties that could cause actual results to differ materially. Key risks include global economic disruptions (like pandemics), challenges in commercializing REE carbonate production, and uncertainty surrounding U.S. government support for the domestic uranium industry[14][15][16] - Assumptions underlying these statements include stable economic conditions, expected supply and demand for uranium, vanadium, and REEs, timely regulatory approvals, and the technical and commercial success of new ventures[17] Cautionary Note to United States Investors Concerning Disclosure of Mineral Resources This section clarifies that mineral resource disclosures follow Canadian NI 43-101, not U.S. SEC Industry Guide 7 standards - The Company's mineral reserve and resource estimates are prepared in accordance with Canadian NI 43-101 standards, which differ significantly from the requirements of SEC Industry Guide 7[21][22] - Under SEC Industry Guide 7, mineralization cannot be classified as a "reserve" unless it is economically and legally producible at the time of determination, a standard which the Company's properties do not currently meet[22] - The Company confirms that for the year ended December 31, 2020, it does not have any mineral "reserves" within the meaning of SEC Industry Guide 7[26] - The SEC adopted a new rule, effective for the Company's 2021 annual report, to modernize mining property disclosures and align them more closely with international standards like NI 43-101. The full effect of this new rule on the Company's disclosures is not yet known[25] Glossary of Technical Terms This section defines key technical terms related to mineral extraction, geology, and processing used in the report Glossary of Regulatory Agencies and Exchanges This section lists acronyms and full names for relevant regulatory agencies and stock exchanges Part I Description of Business Energy Fuels is a U.S.-based leader in uranium and vanadium extraction, diversifying into Rare Earth Elements (REE) production - The company is engaged in uranium extraction and recovery through conventional and ISR methods, and also recovers vanadium. Key assets include the White Mesa Mill (conventional), Nichols Ranch Project (ISR), and Alta Mesa Project (ISR)[47] - In a major strategic shift, the company entered the Rare Earth Elements (REE) market. It secured a three-year agreement with Chemours to acquire a minimum of 2,500 tons of monazite sands annually, with plans to commence commercial production of a marketable mixed REE carbonate in 2021 at the White Mesa Mill[61][82] - The company is actively supporting U.S. government initiatives to bolster the domestic uranium industry, including the establishment of a strategic U.S. Uranium Reserve, which received $75 million in funding in December 2020[76] - In 2020, the company became debt-free after redeeming all outstanding Convertible Debentures[79] 2020 Production Summary | Product | Amount Recovered | | :--- | :--- | | Uranium (U3O8) | ~196,500 lbs | | Vanadium (V2O5) | ~67,000 lbs | Business Overview The company operates ISR and conventional uranium facilities, including the White Mesa Mill, and diversified into REE production - The company's ISR operations consist of the Nichols Ranch Project (Wyoming) and the Alta Mesa Project (Texas), both of which are fully permitted but currently on standby pending improved market conditions[48][51] - The White Mesa Mill is the only operating conventional uranium mill in the U.S. and serves as a central processing hub for the company's conventional assets. It can also recover vanadium and process alternate feed materials[52][53] 2020 Production by Facility | Facility | U3O8 Recovered (lbs) | V2O5 Recovered (lbs) | | :--- | :--- | :--- | | Nichols Ranch Project | ~6,000 | 0 | | White Mesa Mill | ~190,500 | ~67,000 | - The company holds a portfolio of conventional uranium and uranium/vanadium projects in various stages of permitting and standby, including Pinyon Plain (AZ), Roca Honda (NM), and Sheep Mountain (WY)[57][64] The Company's Rare Earth Elements Business The company is strategically entering the REE market, processing monazite sands at White Mesa Mill for REE carbonate production - Entered into a three-year supply agreement with Chemours to acquire a minimum of 2,500 tons per year of natural monazite sands, a high-grade REE ore[61] - Established an agreement in principle with Neo Performance Materials to process the monazite into an REE Carbonate at the White Mesa Mill and ship it to Neo's separation facility in Estonia[62] - The monazite processing will utilize less than 0.4% of the Mill's licensed ore throughput capacity, allowing for concurrent uranium and vanadium operations[66] - The company is focused on producing Neodymium and Praseodymium (NdPr), key components for high-strength magnets used in electric vehicles and wind turbines[68] Uranium, Vanadium, and REE Markets This section details market conditions for uranium, vanadium, and REEs, noting price trends and demand drivers Uranium Spot Price (U3O8) Trend in 2020 | Date | Price per lb | | :--- | :--- | | Dec 31, 2019 | $24.85 | | May 2020 (High) | $33.85 | | Dec 31, 2020 | $30.40 | - The U.S. produced only a fraction of its uranium needs in 2019, requiring approximately 48.3 million lbs while producing only about 8,098 lbs through Q1 2020[98] Vanadium Spot Price (V2O5) Trend in 2020 | Date | Price per lb | | :--- | :--- | | End of 2019 | $5.33 | | Feb 14, 2020 (High) | $7.13 | | End of 2020 | $5.40 | - The company holds approximately 1,672,000 pounds of vanadium in inventory as of year-end 2020, awaiting stronger market prices[116] - Prices for key REEs Neodymium-Praseodymium (NdPr) oxide rose approximately 45% in China during 2020, reflecting growing demand for clean energy applications[112] Risk Factors The company faces significant industry, regulatory, business, and financial risks, including commodity price volatility and operational challenges - Industry Risks: The company's profitability is highly sensitive to cyclical and volatile market prices for uranium, vanadium, and REEs. Many of its properties are not economic at current prices and contain no mineral reserves under SEC Industry Guide 7[143][148] - Regulatory Risks: The business is subject to extensive and costly federal, state, and local regulations. A change in U.S. administration could negatively impact support for mining, nuclear energy, and the U.S. Uranium Reserve[149][153] - Business Risks: The new REE business faces risks including securing adequate monazite supply, achieving commercial production specifications, and contracting sales at satisfactory prices. The White Mesa Mill's operation depends on securing sufficient feed materials[172][189] - Financial & General Risks: The company has a history of negative cash flows and may require additional financing. Global economic events, like the COVID-19 pandemic, could disrupt operations, supply chains, and financial markets[197][225] Unresolved Staff Comments The company reports no unresolved staff comments - None[234] Description of Properties This section details the company's ISR and conventional uranium properties, including resource estimates under NI 43-101 standards Total Mineral Reserves (NI 43-101) | Category | Tons (000s) | Grade (% eU3O8) | Pounds eU3O8 (000s) | | :--- | :--- | :--- | :--- | | Probable | 7,453 | 0.123% | 18,365 | Total Mineral Resources - Uranium (NI 43-101) | Category | Pounds eU3O8 (000s) | | :--- | :--- | | Measured | 8,092 | | Indicated | 69,185 | | Inferred | 48,996 | Total Mineral Resources - Vanadium (NI 43-101) | Category | Pounds V2O5 (000s) | | :--- | :--- | | Measured | 25,946 | | Indicated | 5,727 | | Inferred | 8,562 | Uranium & Vanadium Recovery History (2016-2020) | Year | U3O8 Recovered (000 lbs) | V2O5 Recovered (000 lbs) | | :--- | :--- | :--- | | 2020 | 197 | 67 | | 2019 | 70 | 1,807 | | 2018 | 917 | 0 | | 2017 | 1,571 | 0 | | 2016 | 1,015 | 0 | The Nichols Ranch Project The Nichols Ranch Project is a fully permitted ISR uranium facility in Wyoming, currently on standby with depleted wellfields - A fully permitted ISR facility in Wyoming, currently on standby after depleting existing wellfields[283][343] - Recovered approximately 6,000 pounds of U3O8 in 2020[289] Nichols Ranch Mineral Resources (NI 43-101) | Category | Tons (000s) | Grade (% eU3O8) | Pounds eU3O8 (000s) | | :--- | :--- | :--- | :--- | | Measured | 280 | 0.140% | 784 | | Indicated | 2,770 | 0.114% | 6,171 | | Inferred | 593 | 0.100% | 1,184 | The Alta Mesa Project The Alta Mesa Project is a fully-licensed ISR uranium facility in South Texas, currently on standby awaiting market improvement - A fully-licensed ISR facility in South Texas with a 1.5 million lbs/year capacity, currently on standby[355][381] - Historically produced 4.6 million pounds of U3O8 from 2005 to 2013[384] Alta Mesa Mineral Resources (NI 43-101) | Category | Tons (000s) | Grade (% eU3O8) | Pounds eU3O8 (000s) | | :--- | :--- | :--- | :--- | | Measured | 123 | 0.151% | 371 | | Indicated | 1,512 | 0.107% | 3,246 | | Inferred | 6,963 | 0.121% | 16,793 | The White Mesa Mill The White Mesa Mill is the only operational conventional uranium mill in the U.S., now processing REEs and vanadium - The only operational conventional uranium mill in the U.S., with a licensed capacity of over 8 million lbs of U3O8 per year[408][409] - Diversified capabilities include processing conventional ore, vanadium, alternate feed materials, and REEs[414][417] White Mesa Mill 2020 Production & 2021 Outlook | Product | 2020 Actual Production | 2021 Planned Production | | :--- | :--- | :--- | | Uranium (U3O8) | ~190,000 lbs | ~45,000 lbs | | Vanadium (V2O5) | ~68,000 lbs | 0 lbs | | REE Carbonate | ~4 metric tons (pilot) | 2,000 - 3,000 tons | The Pinyon Plain Project The Pinyon Plain Project is a high-grade, partially developed underground uranium and copper project in Arizona, currently on standby - A high-grade, partially developed underground uranium project in Arizona with a completed 1,470-foot shaft[453][500] - The deposit contains significant copper mineralization, which is expected to be recoverable as a byproduct at the White Mesa Mill[486][501] Pinyon Plain Mineral Resources (NI 43-101) | Category | Resource | Tons (000s) | Grade | Contained Pounds (000s) | | :--- | :--- | :--- | :--- | :--- | | Measured & Indicated | Uranium (U3O8) | 139 | 0.88% | 2,434 | | | Copper (Cu) | 101 | 5.93% | 11,939 | | Inferred | Uranium (U3O8) | 18 | 0.38% | 134 | | | Copper (Cu) | 5 | 5.90% | 570 | Legal Proceedings The company faces multiple legal and regulatory challenges concerning its White Mesa Mill, Pinyon Plain, and Daneros Mine operations - The White Mesa Mill faces challenges from the Ute Mountain Ute Tribe and environmental groups regarding its Corrective Action Plan and renewed operating licenses (Radioactive Materials License and GWDP)[810][812] - The Pinyon Plain Project is subject to an ongoing legal appeal in the U.S. Ninth Circuit Court of Appeals from environmental groups and the Havasupai Tribe, which could delay mining activities[813][814][815] - The Daneros Mine's amended Plan of Operations, approved by the BLM in 2018, is being challenged by environmental groups in an appeal to the IBLA[816] Mine Safety Disclosure Mine safety disclosures are provided in Exhibit 95.1 of the Annual Report - Mine safety disclosures are included in Exhibit 95.1 of this Annual Report[819] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details the company's common stock trading, dividend policy, equity compensation plans, and stock performance - The company's common shares are listed on the NYSE American (UUUU) and the Toronto Stock Exchange (EFR)[823] - The company has never paid a cash dividend and does not expect to in the foreseeable future[824] Equity Compensation Plan Information (as of Dec 31, 2020) | Category | Shares to be Issued Upon Exercise | Weighted-Average Exercise Price (US$) | Shares Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | Equity plans approved by security holders | 4,423,766 | $2.92 | 9,343,422 | Selected Financial Data This section provides a five-year summary of key financial data, highlighting trends in revenues, net loss, and assets Selected Financial Data (in thousands of $) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,658 | $5,865 | $31,721 | $31,046 | $54,552 | | Net loss | $(27,872) | $(38,094) | $(25,362) | $(27,990) | $(39,864) | | Basic and diluted net loss per share | $(0.23) | $(0.40) | $(0.30) | $(0.39) | $(0.70) | | Total assets | $183,236 | $175,720 | $196,766 | $185,338 | $196,457 | | Total long-term obligations | $13,376 | $22,475 | $43,059 | $48,175 | $46,487 | Management's Discussion and Analysis of Financial Condition and Results of Operations This MD&A section details 2020 financial performance, including reduced net loss and improved liquidity, and outlines 2021 production plans Financial Performance Summary (in millions of $) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total Revenues | $1.7 | $5.9 | | Operating Loss | $(24.6) | $(40.6) | | Net Loss | $(27.9) | $(38.1) | | Net Loss per Share | $(0.23) | $(0.40) | - The decrease in net loss in 2020 was primarily due to a lower inventory impairment charge ($1.6M in 2020 vs. $14.4M in 2019) and lower development costs[904][909] - The company's liquidity improved significantly, ending 2020 with $40.2 million in working capital, including $20.2 million in cash. This was driven by net proceeds of $52.4 million from equity issuances[932][938] - In 2020, the company redeemed all outstanding convertible debentures, becoming debt-free[873][874] 2021 Production & Inventory Outlook | Item | Expected Amount | | :--- | :--- | | U3O8 Production | 30,000 - 60,000 lbs | | V2O5 Production | 0 lbs | | REE Carbonate Production | 2,000 - 3,000 tons | | Year-End U3O8 Inventory | 720,000 - 750,000 lbs | Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to commodity price, interest rate, currency, and credit risks - The company is highly exposed to commodity price risk, as all future uranium sales will be at market prices due to the expiration of all long-term contracts[955] - Currency risk exists due to financial instruments and cash held in Canadian dollars (Cdn$). As of December 31, 2020, the net exposure was approximately $3.77 million[957][958] - Credit risk is managed by transacting with highly-rated counterparties, with most sales historically made to major nuclear utilities, which pose a low risk of non-payment[960] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements and accompanying notes for the past three years Consolidated Statement of Operations (Year ended Dec 31, in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | | Total Revenues | $1,658 | $5,865 | $31,721 | | Total Operating Loss | $(24,627) | $(40,581) | $(21,312) | | Net Loss | $(27,872) | $(38,094) | $(25,362) | | Basic and Diluted Net Loss per Share | $(0.23) | $(0.40) | $(0.30) | Consolidated Balance Sheet (As of Dec 31, in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | Total Current Assets | $52,472 | $43,172 | | Total Assets | $183,236 | $175,720 | | Total Current Liabilities | $12,314 | $22,638 | | Total Liabilities | $25,690 | $45,113 | | Total Equity | $157,546 | $130,607 | Consolidated Statement of Cash Flows (Year ended Dec 31, in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(32,178) | $(44,378) | | Net Cash Provided by Investing Activities | $3,581 | $22,575 | | Net Cash Provided by Financing Activities | $36,584 | $20,359 | | Net Change in Cash | $8,094 | $(1,401) | Part III Directors, Executive Officers and Corporate Governance This section details the company's Board of Directors, executive officers, and corporate governance practices, including the Audit Committee - The Board of Directors consists of eight members, with seven determined to be independent. J. Birks Bovaird serves as the independent Chair[1142][1429] - The company's executive officers include Mark S. Chalmers (President & CEO) and David C. Frydenlund (CFO, General Counsel & Corporate Secretary)[1165] - The company has adopted a Code of Business Conduct and Ethics applicable to all directors, officers, and employees[1174] - The Audit Committee is composed of three independent directors: Bruce D. Hansen (Chair), J. Birks Bovaird, and Alexander G. Morrison. Both Mr. Hansen and Mr. Morrison are qualified as financial experts[1180] Executive Compensation This section details the executive compensation program, including base salary, bonuses, equity awards, and 2020 performance outcomes - Executive compensation is composed of base salary, cash bonuses (STIP), and long-term equity awards (LTIP), benchmarked against a peer group of mining and energy companies[1190][1207] - For 2020 performance, the combined STIP weighting was 120% of target, and the combined LTIP weighting was 127.5% of target, reflecting strong achievement in strategic goals and share price performance[1258][1279] 2020 NEO Compensation Summary | Name | Title | Salary (US$) | Share-Based Awards (US$) | Non-Equity Incentive (US$) | Total Compensation (US$) | | :--- | :--- | :--- | :--- | :--- | :--- | | Mark S. Chalmers | President & CEO | $400,000 | $510,000 | $240,000 | $1,170,750 | | David C. Frydenlund | CFO & General Counsel | $287,116 | $292,858 | $137,816 | $725,742 | - The CEO-to-median-employee pay ratio for 2020 was approximately 18 to 1[1309] - The company has a share ownership requirement for non-employee directors, an insider trading policy that restricts hedging, and an incentive compensation claw-back policy[1379][1283][1284] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details common share ownership by directors and NEOs, and information on equity compensation plans - As of March 18, 2021, there were 140,565,924 common shares outstanding[1410] Beneficial Ownership of Directors and NEOs (as of March 18, 2021) | Group | Total Beneficial Ownership | Percent of Class | | :--- | :--- | :--- | | Current Directors and NEOs as a Group (12 total) | 2,765,812 shares | 1.97% | - The annual burn rate under the Equity Incentive Plan was 1.2% for 2020, 3.4% for 2019, and 2.0% for 2018[1390] Certain Relationships and Related Transactions and Director Independence This section discloses material transactions with related parties and confirms the independence of most board members - Director Robert W. Kirkwood is a principal of United Nuclear LLC, which owns a 19% interest in the Arkose Mining Venture, a joint venture with the Company. United Nuclear contributed $0.13 million to the venture's expenses in 2020[1422][1423] - Director Benjamin Eshleman III is President of Mesteña LLC, and his family entities hold royalty and surface use agreements related to the Alta Mesa Project. No royalty payments were made in 2020 due to the project being on standby[1424][1425] - Seven of the eight directors are determined to be independent. Mark S. Chalmers, the President and CEO, is the only non-independent director[1429] Principal Accountant Fees and Services This section details fees paid to the independent accounting firm, KPMG LLP, for audit and tax services Principal Accountant Fees (KPMG LLP) | Fee Category | 2020 | 2019 | | :--- | :--- | :--- | | Audit Fees | $520,000 | $1,271,396 | | Tax Fees | $30,204 | $23,097 | | All Other Fees | Nil | Nil | - The significant decrease in audit fees from 2019 to 2020 is because the 2019 fee included $656,000 for the company's first Internal Controls Over Financial Reporting (ICFR) audit, which was not required for the 2020 fiscal year[1438] Part IV Exhibits and Financial Statement Schedules This section lists all documents filed as exhibits and financial statement schedules for the Form 10-K report Form 10-K Summary The company reports no Form 10-K summary - None[1450]