Fresh after the closing of its acquisition of Strathmore Minerals, Energy Fuels (TSE:EFR) is keenly optimistic that uranium prices will recover enough to get high-potential projects into production.
The gem in that deal is the Roca Honda project in the Grants Uranium District, expected to eventually feed its flagship White Mesa Mill located near the corner of Arizona, Utah, New Mexico and Colorado.
Strathmore had moved Roca Honda along to the advanced stages of permitting and now the final piece of paper is "well within site."
On a conference call Friday afternoon, the company provided no specific financial guidance, but said it expects uranium sales to reach one million pounds this fiscal year. It says low uranium prices haven't had much impact on the company because it has locked production into term contracts.
Price weakness is scuttling the development of projects around the world, but president and CEO Steve Antony thinks his company is better positioned to react than most when a rebound does happen.
"A lot of these projects are contigent on higher spot prices," said Antony on the call.
If the spot price of uranium bounces from the current $34 per pound level, Energy Fuels has six fully-permitted mines on standby, including Utah's Henry Mountain. It has three long-term contracts in the $57 per pound range, while its average sale price in the latest quarter was $58.75 per pound, a significant premium on the spot price.
The company predicts prices can soar as high as $75 per pound and will make a decision on the construction timeline for Roca Honda collectively with its Japanese partner, Sumitoro, which has a 40% stake.
"You wouldn't break ground unless prices were at sufficient levels," chief financial officer Graham Moylan said on the call. "The great thing about Roca Honda is that there has already been a great deal of work done on it."
Sumitoro will contribute one of two new directors to Energy Fuel's board as part of its burgeoning relationship with the company.
Under the terms of the acquisition, Energy Fuels, responsible for a quarter of all U.S. uranium production, acquired all of the issued and outstanding shares of Strathmore, effective August 30. The arrangement stated that Strathmore shareholders would receive 1.47 common shares of Energy Fuels for each common share of Strathmore held, granting them approximately a one-fifth ownership stake in Energy Fuels.
Now that the transaction is complete, Energy Fuel's enterprise value will be close to $200 million. Shares have risen more than 11 per cent so far this year.
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