UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE
13a-16 or 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2015.
Commission File Number 001-36204
ENERGY FUELS INC.
(Translation of registrants name into English)
225 Union Blvd., Suite 600
Lakewood, CO 80228
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F
Form 20-F [
] Form 40-F [X]
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Note: Regulation S-T Rule 101(b)(1) only permits the
submission in paper of a Form 6-K if submitted solely to provide an attached
annual report to security holders.
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Note: Regulation S-T Rule 101(b)(7) only permits the
submission in paper of a Form 6-K if submitted to furnish a report or other
document that the registrant foreign private issuer must furnish and make public
under the laws of the jurisdiction in which the registrant is incorporated,
domiciled or legally organized (the registrants home country), or under the
rules of the home country exchange on which the registrants securities are
traded, as long as the report or other document is not a press release, is not
required to be and has not been distributed to the registrants security
holders, and, if discussing a material event, has already been the subject of a
Form 6-K submission or other Commission filing on EDGAR.
INCORPORATION BY REFERENCE
Exhibits 99.1 to 99.3 included with this report on Form 6-K are
expressly incorporated by reference into this report and are hereby incorporated
by reference as exhibits to the Registration Statement on Form F-10 of Energy
Fuels Inc. (File No. 333-194916), as amended or supplemented.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
ENERGY FUELS INC. |
|
|
|
/S/ David C. Frydenlund |
Date: August 7, 2015 |
David C. Frydenlund |
|
Senior Vice President, General Counsel &
Corporate |
|
Secretary |
-2-
INDEX TO EXHIBITS
-3-
Energy Fuels Inc.
Condensed Consolidated Interim Financial Statements
For the three and six months ended
June 30, 2015
and June 30, 2014
(Unaudited)
(Expressed in U.S. Dollars)
ENERGY FUELS INC. |
Condensed Consolidated Interim Statements of Financial
Position |
(Unaudited) |
(Expressed in
thousands of U.S. dollars) |
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
20,757 |
|
$ |
10,410 |
|
Marketable securities |
|
188 |
|
|
284 |
|
Trade and other receivables |
|
3,508 |
|
|
600 |
|
Inventories (Note 6) |
|
26,982 |
|
|
31,306 |
|
Prepaid expenses and other assets |
|
726 |
|
|
478 |
|
Assets held for sale |
|
1,953 |
|
|
1,953 |
|
|
|
54,114 |
|
|
45,031 |
|
Non-current |
|
|
|
|
|
|
Notes receivable |
|
721 |
|
|
682 |
|
Inventories (Note 6) |
|
5,921 |
|
|
2,245 |
|
Investment in Virginia Energy Resources
Inc. |
|
378 |
|
|
380 |
|
Property, plant and
equipment (Note 9) |
|
127,870 |
|
|
65,873 |
|
Intangible assets (Note 7) |
|
12,682 |
|
|
3,882 |
|
Goodwill (Note 5 and 8) |
|
54,711 |
|
|
- |
|
Restricted cash (Note 10) |
|
12,981 |
|
|
16,148 |
|
|
$ |
269,378 |
|
$ |
134,241 |
|
|
|
|
|
|
|
|
LIABILITIES &
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
$ |
6,968 |
|
$ |
4,743 |
|
Deferred revenue |
|
- |
|
|
1,517 |
|
Derivative liability |
|
895 |
|
|
- |
|
Current portion of long-term
liabilities |
|
|
|
|
|
|
Decommissioning liabilities (Note 10) |
|
1,142 |
|
|
121 |
|
Loans and borrowings (Note 11) |
|
3,518 |
|
|
46 |
|
|
|
12,523 |
|
|
6,427 |
|
Non-current |
|
|
|
|
|
|
Deferred revenue |
|
1,700 |
|
|
- |
|
Decommissioning liabilities (Note 10) |
|
16,195 |
|
|
15,170 |
|
Loans and borrowings (Note 11) |
|
31,370 |
|
|
15,786 |
|
|
|
61,788 |
|
|
37,383 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Capital stock (Note 12) |
$ |
338,693 |
|
$ |
232,835 |
|
Contributed surplus |
|
27,251 |
|
|
22,568 |
|
Share purchase warrants
(Note 12) |
|
4,128 |
|
|
4,714 |
|
Deficit |
|
(168,652 |
) |
|
(163,978 |
) |
Accumulated other comprehensive income |
|
2,188 |
|
|
719 |
|
|
|
203,608 |
|
|
96,858 |
|
Non-controlling interests |
|
3,982 |
|
|
- |
|
|
|
207,590 |
|
|
96,858 |
|
|
$ |
269,378 |
|
$ |
134,241 |
|
Commitments and contingencies (Note 15)
Subsequent events (Note 16)
Approved by the Board
(signed) Stephen P. Antony, Director
(signed) Bruce D. Hansen, Director
2
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
2
ENERGY FUELS INC. |
Condensed Consolidated Interim Statements of
Comprehensive Loss |
(Unaudited) |
(Expressed in
thousands of U.S. dollars, except per share amounts)
|
|
|
Three
months ended |
|
|
Six months
ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES (Note 14) |
$ |
23,705 |
|
$ |
13,525 |
|
$ |
31,305 |
|
$ |
24,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES |
|
|
|
|
|
|
|
|
|
|
|
|
Production cost of sales |
|
(12,836 |
) |
|
(7,876 |
) |
|
(16,476 |
) |
|
(15,351 |
) |
Depreciation, depletion and amortization |
|
(850 |
) |
|
(853 |
) |
|
(1,161 |
) |
|
(1,949 |
) |
TOTAL COST OF SALES |
|
(13,686 |
) |
|
(8,729 |
) |
|
(17,637 |
) |
|
(17,300 |
) |
GROSS PROFIT |
|
10,019
|
|
|
4,796 |
|
|
13,668
|
|
|
7,586 |
|
Care and maintenance expenses (Note 14) |
|
(195 |
) |
|
(903 |
) |
|
(3,056 |
) |
|
(1,540 |
) |
Selling, general and
administrative expenses (Note 14) |
|
(3,971 |
) |
|
(4,104 |
) |
|
(7,295 |
) |
|
(9,039 |
) |
Finance income (expense) (Note 14) |
|
(2,071 |
) |
|
647 |
|
|
(1,816 |
) |
|
(2,757 |
) |
Impairment of plant, property
and equipment |
|
- |
|
|
(30,781 |
) |
|
- |
|
|
(30,781 |
) |
Other income (expense) (Note 14) |
|
(6,095 |
) |
|
18 |
|
|
(6,175 |
) |
|
(131 |
) |
NET LOSS BEFORE TAXES
|
|
(2,313 |
) |
|
(30,327 |
) |
|
(4,674 |
) |
|
(36,662 |
) |
Income tax expense |
|
- |
|
|
(1 |
) |
|
- |
|
|
(8 |
) |
NET LOSS FOR THE PERIOD |
|
(2,313 |
) |
|
(30,328 |
) |
|
(4,674 |
) |
|
(36,670 |
) |
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT
OR LOSS |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on
available-for-sale assets |
|
(14 |
) |
|
(68 |
) |
|
(82 |
) |
|
352 |
|
Gains on available-for-sale financial
assets reclassified to profit or loss |
|
- |
|
|
- |
|
|
- |
|
|
(198 |
) |
Share of other
comprehensive income (loss) of Virginia Energy Resources Inc. |
|
- |
|
|
118 |
|
|
7 |
|
|
59 |
|
Foreign currency translation adjustment |
|
242 |
|
|
(746 |
) |
|
1,544 |
|
|
(218 |
) |
TOTAL OTHER COMPREHENSIVE LOSS |
|
228 |
|
|
(696 |
) |
|
1,469 |
|
|
(5 |
) |
COMPREHENSIVE LOSS FOR THE PERIOD |
$ |
(2,085 |
) |
$ |
(31,024 |
) |
$ |
(3,205 |
) |
$ |
(36,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE |
$ |
(0.10 |
) |
$ |
(1.54 |
) |
$ |
(0.22 |
) |
$ |
(1.87 |
) |
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
3
ENERGY FUELS INC. |
Condensed Consolidated Interim Statements of Changes in
Equity |
(Unaudited) |
(Expressed in
thousands of U.S. dollars) |
|
|
Six Months
Ended |
|
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Capital stock (Note
12) |
|
|
|
|
|
|
Balance, beginning of period |
$ |
232,835 |
|
$ |
232,089 |
|
Shares
issued in connection with the acquisition of Uranerz Energy Corporation
(Note 5) |
|
105,673
|
|
|
- |
|
Shares issued for
exercise of stock options |
|
127 |
|
|
139 |
|
Shares
issued for exercise of share purchase warrants |
|
1 |
|
|
607 |
|
Tax recovery from expired
share purchase warrants |
|
57 |
|
|
- |
|
Balance, end of period
|
|
338,693 |
|
|
232,835 |
|
|
|
|
|
|
|
|
Contributed surplus
|
|
|
|
|
|
|
Balance, beginning of period |
|
22,568 |
|
|
21,182 |
|
Share-based compensation (Note 13) |
|
4,180 |
|
|
1,108 |
|
Share purchase warrants
expired |
|
587 |
|
|
- |
|
Tax
expense from expired share purchase warrants |
|
(57 |
) |
|
- |
|
Stock options exercised
(Note 13) |
|
(27 |
) |
|
(19 |
) |
Balance, end of period
|
|
27,251 |
|
|
22,271 |
|
|
|
|
|
|
|
|
Share purchase warrants
(Note 12) |
|
|
|
|
|
|
Balance, beginning of period |
|
4,714 |
|
|
4,838 |
|
Exercised
share purchase warrants |
|
1 |
|
|
(124 |
) |
Share purchase warrants
expired |
|
(587 |
) |
|
- |
|
Balance, end of period
|
|
4,128 |
|
|
4,714 |
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Balance, beginning of period |
|
(163,978 |
) |
|
(120,366 |
) |
Net loss
for the period |
|
(4,674 |
) |
|
(36,670 |
) |
Balance, end of period |
|
(168,652 |
) |
|
(157,036 |
) |
|
|
|
|
|
|
|
Accumulated other comprehensive income
(loss) |
|
|
|
|
|
|
Balance, beginning of
period |
|
719 |
|
|
(610 |
) |
Unrealized gain on
available-for-sale assets |
|
(82 |
) |
|
352 |
|
Gains on
available-for-sale financial assets reclassified to profit or loss |
|
- |
|
|
(198 |
) |
Share of comprehensive
loss of equity-accounted investees |
|
7 |
|
|
59 |
|
Foreign
currency translation reserve |
|
1,544 |
|
|
(218 |
) |
Balance, end of period |
|
2,188 |
|
|
(615 |
) |
|
|
|
|
|
|
|
Total shareholders' equity |
|
203,608 |
|
|
102,169 |
|
|
|
|
|
|
|
|
Non-controlling interest (Note 5) |
|
|
|
|
|
|
Balance, beginning of
period |
|
- |
|
|
- |
|
Non-controlling interest in Arkose upon
acquisition of Uranerz Energy Corp. (Note 5) |
|
3,982 |
|
|
- |
|
Balance, end of period
|
|
3,982 |
|
|
- |
|
|
|
|
|
|
|
|
Total equity |
$ |
207,590 |
|
$ |
102,169 |
|
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
4
ENERGY FUELS INC. |
Condensed Consolidated Interim Statements of Cash
Flows |
(Unaudited) |
(Expressed in
thousands of U.S. dollars) |
|
|
Six Months
Ended |
|
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss for the period |
$ |
(4,674 |
) |
$ |
(36,670 |
) |
Items not involving
cash: |
|
|
|
|
|
|
Depletion, depreciation
and amortization |
|
3,012 |
|
|
4,468 |
|
Stock-based compensation |
|
498 |
|
|
1,108 |
|
Finance (income) expense
(Note 14) |
|
1,816 |
|
|
2,757 |
|
Unrealized foreign currency translation expense |
|
519 |
|
|
(438 |
)
|
Impairment of plant, property and equipment
|
|
- |
|
|
30,781 |
|
Adjustment of decommissioning liability (Note 10) |
|
549 |
|
|
(79 |
)
|
Gain on derivative
liability |
|
(19 |
) |
|
- |
|
Share of
equity-accounted investee |
|
(514 |
) |
|
211 |
|
Other (income) expense
|
|
4,451 |
|
|
- |
|
Cash received for
services not yet provided |
|
183 |
|
|
222 |
|
Changes in operating assets and
liabilities |
|
663 |
|
|
(2,880 |
) |
Expenditures on
reclamation of mineral interests |
|
(1,006 |
) |
|
(131 |
)
|
Interest received |
|
39 |
|
|
30 |
|
|
|
5,517 |
|
|
(621 |
) |
INVESTING ACTIVITIES |
|
|
|
|
|
|
Development
expenditures on property, plant and equipment |
|
(1,028 |
) |
|
(970 |
)
|
Expenditures on exploration, evaluation
and development |
|
(1,133 |
) |
|
(689 |
) |
Deposits received on
assets held for sale |
|
- |
|
|
1,479 |
|
Cash acquired in the acquisition of
Uranerz Energy Corp. (Note 5) |
|
2,459 |
|
|
- |
|
Proceeds from sale of
marketable securities |
|
- |
|
|
415 |
|
Change in cash deposited with regulatory agencies for
decommissioning liabilities, net of interest |
|
5,267 |
|
|
8,708 |
|
|
|
5,565 |
|
|
8,943 |
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
Issuance of common
shares upon exercise of warrants and options, net of share issuance costs
|
|
103 |
|
|
603 |
|
Repayment of borrowings |
|
(17 |
) |
|
(77 |
) |
Interest paid on convertible debentures |
|
(751 |
) |
|
(869 |
) |
|
|
(665 |
) |
|
(343 |
) |
|
|
|
|
|
|
|
INCREASE IN CASH AND CASH
EQUIVALENTS DURING THE PERIOD |
|
10,417 |
|
|
7,979 |
|
Effect of exchange rate
fluctuations on cash held |
|
(70 |
) |
|
83 |
|
Cash and cash equivalents - beginning of period |
|
10,410 |
|
|
6,628 |
|
CASH AND CASH EQUIVALENTS - END OF PERIOD |
$ |
20,757 |
|
$ |
14,690 |
|
|
|
|
|
|
|
|
Non-cash investing and
financing transactions: |
|
|
|
|
|
|
Issuance of secured notes for
acquisition of mineral properties |
|
446 |
|
|
- |
|
Issuance of common
shares for exercise of warrants and options |
|
103 |
|
|
603 |
|
Issuance of common shares, options and
warrants for acquisition of Uranerz Energy Corporation |
|
110,268 |
|
|
- |
|
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
5
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
1. |
REPORTING ENTITY AND NATURE OF
OPERATIONS |
Energy Fuels Inc is incorporated in the Province of Ontario.
Energy Fuels Inc.s registered and head office is located at 2 Toronto Street,
Suite 500, Toronto, Ontario, Canada, M5C 2B6 and its principal place of business
and the head office of the Companys U.S. subsidiaries is located at 225 Union
Blvd., Suite 600, Lakewood, Colorado USA, 80228.
Energy Fuels Inc. and its subsidiary companies (collectively,
the Company or EFI) are engaged in uranium mining and related activities,
including acquisition, exploration and development of uranium and vanadium
bearing properties, and extraction, processing and selling of uranium and
vanadium.
Uranium, the Companys primary product, is produced in the form
of uranium oxide concentrates (U3O8) and sold to
customers for further processing. Vanadium, a co-product of some of the
Companys mines, is also produced and is in the form of vanadium pentoxide
(V2O5). The Company also processes uranium bearing waste
materials, referred to as alternate feed materials.
Statement of Compliance
These condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 Interim Financial Reporting using
accounting policies consistent with the International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board and
IFRS Interpretations Committee. They do not include all the information required
for full annual financial statements and should be read in conjunction with the
consolidated financial statements of the Company as at and for the year ended
December 31, 2014. Selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes to the
Companys financial position and performance since the last annual consolidated
financial statements.
These condensed consolidated interim financial statements were
approved by the Board of Directors of the Company on August 6, 2015.
Transition to U.S. GAAP
In 2013 the Company listed its shares on the NYSE MKT, and
accordingly registered its securities under the Securities Exchange Act of 1934,
as amended (the Exchange Act). This registration subjected the Company to
ongoing reporting requirements under the Exchange Act. Under the
multijurisdictional disclosure system, Canadian issuers that meet the definition
of foreign private issuer under the rules of the United States Securities and
Exchange Commission (the SEC) are permitted to use Canadian disclosure
documents to largely satisfy their reporting requirements with the SEC. The
Company satisfied the requirements for foreign private issuer status until
June 30, 2015, at which time the acquisition of Uranerz Energy Corporation (note
5) caused the Company to have more than 50% of its outstanding voting securities
of record held either directly or indirectly by residents of the United States.
As a result of the Company ceasing to qualify as a foreign
private issuer, the Company will need to comply with the U. S. domestic issuer
reporting regime under the Exchange Act effective as of January 1, 2016. As a
U.S. domestic issuer, the Company will be required to file an annual report on
Form 10-K covering Fiscal 2015. The Company will also, as of January 1, 2016, be
required to file quarterly reports on Form 10-Q and current reports on Form 8-K
under the Exchange Act and to comply with the SEC proxy rules under Section 14
of the Exchange Act and file an associated proxy statement for its Fiscal 2016
annual general meeting.
U.S. domestic issuers are required to prepare their financial
statements that are included in SEC filings in accordance with United States
Generally Accepted Accounting Principles (U.S. GAAP) and report in U.S.
dollars. Accordingly, the Companys annual report on Form 10-K must contain
audited annual financial statements prepared in accordance with U.S. GAAP
covering the fiscal year (and must recast prior financial statements and
selected financial data from IFRS into U.S. GAAP for all periods required to be
presented in the financial statements). The Company is currently evaluating the
impact on its financial statements of the conversion to U.S. GAAP.
6
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
Use of Estimates and Judgments
The preparation of condensed consolidated interim financial
statements requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets
and liabilities, income and expense. Actual results may differ from these
estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgments made by management in applying the
Companys accounting policies and the key sources of estimation uncertainty were
the same as those applied to the consolidated financial statements as at and for
the year ended December 31, 2014 except for as summarized below.
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES |
Significant Accounting Policies
The accounting policies applied by the Company in these
condensed consolidated interim financial statements are the same as those
applied to the consolidated financial statements as at and for the year ended
December 31, 2014 except for as summarized below.
New accounting standards adopted during the current
period
The Company has adopted the following new standards, including
any consequential amendments to other standards, with a date of initial
application of January 1, 2015.
Employee benefits - Share-based payment transactions
Restricted share units (RSUs) (equity settled)
The Company uses a fair value-based method of accounting for
RSUs granted to employees and directors of the Company. Each RSU has the same
value as one common share of the Company based on the five day volume weighted
average trading price. For awards with graded vesting, the fair value of each
tranche, adjusted for expected forfeitures, is recognized over its respective
vesting period as share-based compensation expense in the contributed surplus
account.
Financial instruments
Derivative liability
Derivative liabilities include derivative financial instruments
and are classified as fair value through profit and loss.
4. |
FAIR VALUE MEASUREMENTS FINANCIAL
INSTRUMENTS |
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value hierarchy establishes the
significance of the inputs used in making fair value measurements. The fair
value of financial assets and financial liabilities included in Level 1 are
determined by reference to quoted prices in active markets for identical assets
and liabilities.
The fair value of financial assets and financial liabilities in
Level 2 include valuations using inputs based on observable market data, either
directly or indirectly, other than quoted prices. Level 3 valuations are based
on inputs that are not based on observable market data. The Company has no
financial instruments measured at fair value categorized in Level 3 (valuation
technique using non-observable market inputs) as at June 30, 2015.
7
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
Financial assets and financial liabilities measured at fair
value on a recurring basis include:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Marketable securities |
|
188 |
|
|
- |
|
|
- |
|
|
188 |
|
Derivative liability |
|
- |
|
|
(895 |
) |
|
- |
|
|
(895 |
) |
Convertible debentures |
|
(15,520 |
) |
|
- |
|
|
- |
|
|
(15,520 |
) |
|
$ |
(15,332 |
) |
$ |
(895 |
) |
$ |
- |
|
$ |
(16,227 |
) |
As at June 30, 2015, the fair values of cash and cash
equivalents, restricted cash, short-term deposits, receivables, accounts
payable, accrued liabilities and loans and borrowings approximate their carrying
values because of the short-term nature of these instruments.
5. |
ACQUISITION OF URANERZ ENERGY
CORPORATION. |
On June 18, 2015, the Company completed the acquisition of 100%
of the outstanding shares of Uranerz Energy Corporation (Uranerz). Under the
terms of the acquisition agreement, shareholders of Uranerz received 0.255
common shares of the Company for each share of Uranerz common stock held. Each
outstanding Uranerz option or warrant was converted into an option or warrant
(as applicable) to acquire common shares of the Company, on the same terms and
conditions as were applicable to the stock option or warrant (as applicable)
prior to the acquisition, except that the number of shares subject to the option
or warrant and the exercise price of the option or warrant were adjusted based
on the exchange ratio of 0.255, so as to preserve the economic value of such
options or warrants. The costs of the transaction were $6,487 and are expensed
in other income (expense) and are comprised of cash costs of $2,559 and the
issuance of 889,436 EFI common shares for a total share value of $3,928 for
advisory fees and to settle a portion of required change in control payments.
Uranerz, now a wholly owned subsidiary of the Company, is a
United States based uranium company focused on commercial in-situ recovery
(ISR) uranium exploration, extraction and sales. ISR is a uranium extraction
process that uses a leaching solution to extract uranium from underground
sandstone-hosted uranium deposits. Uranerz controls a large strategic land
position in the central Powder River Basin, where it operates the Nichols Ranch
ISR Uranium Project (Nichols Ranch). The acquisition of Uranerz provides the
Company with current ISR production and the capability to expand ISR production
in the future.
The acquisition was accounted for as a business combination
under IFRS with EFI deemed to be the acquirer, owing to the fact that
post-transaction, Energy Fuels continues to control the board of directors and
senior management positions, and has overall control of the day-to-day
activities of the combined entities. In accordance with IFRS, the accounting for
the acquisition has been done on a preliminary basis taking into account the
information available at the time these consolidated financial statements were
prepared.
The purchase price allocation is preliminary and is therefore
subject to further adjustments prior to the end of the second quarter of 2016
for the completion of the valuation process of the assets acquired and
liabilities assumed. Final valuations of the assets and liabilities are not yet
complete due to the timing of the acquisition and complexities inherent in the
valuation process and may differ materially from the amounts disclosed.
Operations from June 18, 2015 are included in the Companys condensed
consolidated interim financial statements.
The fair value consideration was based on the $4.16 common
share price of the EFI common shares issued on June 18, 2015.
8
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
The following table sets forth the preliminary allocation of
the purchase price to assets and liabilities acquired:
|
|
|
|
|
|
|
|
Purchase price
|
|
|
|
Issuance of
24,457,773 common shares for replacement of Uranerz common shares |
$ |
101,744 |
|
Issuance of 2,690,250 warrants for replacement of Uranerz warrants
|
|
915 |
|
Issuance of 2,040,408 options
for replacement of Uranerz share based options |
|
3,681 |
|
|
$ |
106,340 |
|
Uranerz purchase price allocation |
|
|
|
Cash and cash equivalents |
$ |
2,459 |
|
Inventories
|
|
3,742 |
|
Prepaid expenses and other assets |
|
402 |
|
Property,
plant and equipment (4) |
|
59,723 |
|
Intangible assets - customer contracts |
|
10,600 |
|
Restricted
cash (1) |
|
2,100 |
|
Accounts payable and accrued liabilities |
|
(2,280 |
)
|
Loans and
borrowings |
|
(18,813 |
) |
Decommissioning liabilities |
|
(2,321 |
)
|
Non-controlling interest (3) |
|
(3,983 |
) |
Goodwill (2) |
|
54,711 |
|
Total purchase price |
$ |
106,340 |
|
|
(1) |
Cash, cash equivalents and fixed income securities posted
as collateral for various bonds with state and federal regulatory agencies
for estimated reclamation costs associated with the decommissioning
liability of Nichols Ranch. |
|
|
|
|
(2) |
The Acquisition of Uranerz resulted in Goodwill of
$54,711 which arose principally because of the potential for significant
cost savings and synergies with additional potential for other operating
efficiencies and the optionality resulting from potential changes in
overall economics from changes in the uranium price. |
|
|
|
|
(3) |
The non-controlling interest pertains to Uranerz 81%
owned Arkose Joint Venture (Arkose). Arkose owns exploration assets in
the vicinity of Nichols Ranch. These assets as well as Uranerz other
exploration assets were valued using the precedent transactions
method. |
|
|
|
|
(4) |
The Nichols Ranch property, plant and equipment was
valued using a depreciated replacement cost and the mineral properties were
valued using a discounted cash flow approach based on the life of mine.
Key assumptions used in the discounted cash flow analysis include
discount rates, uranium resources, future timing of production, recovery
rates, and future capital and operating costs. The Companys estimate of
the future uranium sales prices was based on the uranium prices prepared
by industry analysts. Management estimated a uranium price of $37.50/lb
for the period up to December 31, 2015, a price range of $41.25/lb to
$60.00/lb for the period from January 1, 2016 to December 31, 2020 and a
price range of $65.00 after January 1, 2021. The Company used a discount
rate of 8% for the discounted cash flow analysis. Exploration properties
were valued using a precedent transactions analysis based on market data
of previous acquisitions on a price per pound of uranium mineralized
material or price per acre of land. |
Pro forma information
Pro forma results of operations have been prepared as if the
Uranerz acquisition had occurred at January 1, 2015. The pro forma consolidated
financial statement information is not intended to be indicative of the results
that would actually have occurred, or the results expected in future periods,
had the events reflected herein occurred on the dates indicated. Any potential
synergies that may be realized and integration costs that may be incurred have
been excluded from the pro forma financial statement information.
9
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
For the three and six months ended June 30, 2015, pro forma
consolidated revenue and net loss is $34,305 and ($11,014), and $27,505 and
($3,740) respectively. Included in pro forma net loss is a total of $6,487 of
acquisition costs incurred in connection with the acquisition which included
889,436 of common shares of the Company issued for advisory fees and to satisfy
a portion of required change in control payments.
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Concentrates and
work-in-progress |
|
24,045
|
|
|
28,363 |
|
Inventory of ore in stockpiles
|
|
5,921 |
|
|
2,245 |
|
Raw materials and consumables |
|
2,937 |
|
|
2,943 |
|
|
|
32,903 |
|
|
33,551 |
|
Inventories - by duration |
|
|
|
|
|
|
Current |
|
26,982 |
|
|
31,306 |
|
Long-term - ore in stockpiles |
|
5,921 |
|
|
2,245 |
|
|
|
32,903 |
|
|
33,551 |
|
Long-term inventory is stockpiled ore that is not currently
expected to be processed within the next 12 months.
The following is a summary of intangible assets related to
favorable acquired sales contracts for the six months ended June 30, 2015 and
the year ended December 31, 2014:
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
Customer Contracts |
|
$ |
|
|
$ |
|
Cost |
|
|
|
|
|
|
Balance at beginning of period |
|
15,851 |
|
|
15,851 |
|
Fair value of contracts acquired from Uranerz
Energy Corp. (Note 5) |
|
10,600 |
|
|
- |
|
Balance, end of period |
|
26,451 |
|
|
15,851 |
|
|
|
|
|
|
|
|
Accumulated amortization, beginning of period
|
|
11,969 |
|
|
8,079 |
|
Amortization of sales contracts |
|
1,800 |
|
|
3,890 |
|
Accumulated amortization, end of period |
|
13,769 |
|
|
11,969 |
|
|
|
|
|
|
|
|
Carrying amounts |
|
12,682 |
|
|
3,882 |
|
10
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
The following is a summary of goodwill for the six months ended
June 30, 2015:
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Cost |
|
|
|
|
|
|
Balance at beginning of period |
|
- |
|
|
- |
|
Acquisition of Uranerz Energy Corp. (Note 5)
|
|
54,711 |
|
|
- |
|
Balance, end of period |
|
54,711 |
|
|
- |
|
9. |
PROPERTY, PLANT AND
EQUIPMENT |
The following is a summary of property, plant and equipment for
the six months ended June 30, 2015:
|
|
|
|
|
|
|
|
Mineral Properties |
|
|
|
|
|
|
Plant and |
|
|
|
|
|
Care and |
|
|
Pre-development
|
|
|
|
|
|
|
equipment |
|
|
Operating |
|
|
maintenance |
|
|
and non-operating |
|
|
Total |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2015 |
$ |
82,321 |
|
$ |
7,327 |
|
$ |
3,262 |
|
$ |
105,721 |
|
$ |
198,631 |
|
Additions |
|
1,037 |
|
|
- |
|
|
- |
|
|
1,435 |
|
|
2,472 |
|
Acquisition of Uranerz Energy Corp. (Note 5) |
|
30,150 |
|
|
- |
|
|
- |
|
|
29,573 |
|
|
59,723 |
|
Balance at June 30, 2015 |
$ |
113,508 |
|
$ |
7,327 |
|
$ |
3,262 |
|
$ |
136,729 |
|
$ |
260,826 |
|
Depreciation, depletion, disposals and
impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2015
|
|
81,588 |
|
|
7,327 |
|
|
3,262 |
|
|
40,581 |
|
|
132,758 |
|
Depreciation for the period |
|
52 |
|
|
- |
|
|
- |
|
|
- |
|
|
52 |
|
Depletion for the period |
|
146 |
|
|
- |
|
|
- |
|
|
- |
|
|
146 |
|
Balance at June 30, 2015 |
$ |
81,786 |
|
$ |
7,327 |
|
$ |
3,262 |
|
$ |
40,581 |
|
$ |
132,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Book Value |
$ |
31,722 |
|
$ |
- |
|
$ |
- |
|
$ |
96,148 |
|
$ |
127,870 |
|
Pre-development and non-operating properties
The Company enters into exploration agreements from time to
time whereby it may earn an interest in certain mineral properties by issuing
common shares, making cash option payments and/or incurring expenditures in
varying amounts by specified dates.
11
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
The following is a summary of the net book value of
pre-development non-operating property expenses shown by area of interest:
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Conventional
|
|
|
|
|
|
|
Arizona Strip |
|
722 |
|
|
- |
|
Wyoming |
|
44,584
|
|
|
44,388 |
|
New Mexico |
|
21,160 |
|
|
20,752 |
|
|
|
66,466 |
|
|
65,140 |
|
ISR |
|
|
|
|
|
|
Wyoming (1) |
|
29,682 |
|
|
- |
|
|
|
29,682 |
|
|
- |
|
Total |
|
96,148 |
|
|
65,140 |
|
|
(1) |
Includes the Hank, Reno Creek, West North Butte, North
Rolling Pin properties as well as property held by Arkose which was
acquired in the Uranerz transaction. |
12
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
10. |
DECOMMISSIONING LIABILITIES AND RESTRICTED
CASH |
The following table summarizes the Companys decommissioning
liabilities:
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Decommissioning liability,
beginning of period |
|
15,291
|
|
|
13,799 |
|
Revision of estimate (1) |
|
549 |
|
|
2,821 |
|
Acquisition of
Uranerz (Note 5) |
|
2,321 |
|
|
|
|
Transfer of liability associated
with the sale of mining assets |
|
- |
|
|
(536 |
) |
Accretion |
|
183 |
|
|
404 |
|
Reclamation work |
|
(1,007 |
) |
|
(1,197 |
) |
Decommissioning liability, end of period |
|
17,337 |
|
|
15,291 |
|
Decommissioning liability by location: |
|
|
|
|
|
|
Exploration
drill holes |
|
121 |
|
|
121 |
|
White Mesa Mill |
|
10,290 |
|
|
11,075 |
|
Colorado Plateau
|
|
1,634 |
|
|
1,618 |
|
Henry Mountains |
|
501 |
|
|
496 |
|
Daneros |
|
88 |
|
|
87 |
|
Arizona Strip |
|
1,718 |
|
|
1,237 |
|
Sheep Mountain
|
|
664 |
|
|
657 |
|
Nichols Ranch (Acquired as part of the Uranerz
transaction) |
|
2,321 |
|
|
- |
|
|
|
17,337 |
|
|
15,291 |
|
Decommissioning liability: |
|
|
|
|
|
|
Current |
|
1,142 |
|
|
121 |
|
Non-current |
|
16,195 |
|
|
15,170 |
|
|
|
17,337 |
|
|
15,291 |
|
|
(1) |
The revision of estimate resulted from a change in
assumptions and scope of work as well as changes in the risk-free discount
rates used to calculate decommissioning liabilities. Subsequent changes to
the decommissioning liabilities for fully impaired assets are recorded in
profit and loss. |
The decommissioning and reclamation of the White Mesa mill and
U.S. mines are subject to legal and regulatory requirements. Estimates of the
costs of reclamation are reviewed periodically by the applicable regulatory
authorities. The above accrual represents the Companys best estimate of the
present value of future reclamation costs, discounted using risk-free interest
rates ranging from 0.28% to 3.11% based on US Treasury rates of varying lengths
ranging from 1 to 30 years. The total undiscounted decommissioning liability as
at June 30, 2015 is $31,269 (December 31, 2014 - $26,725). Reclamation costs are
expected to be incurred between 2015 and 2041 in the following manner: 2015
2019 - $3,163, 2020 2024 - $2,570, 2025 2035 - $3,862, 2036 2041 -
$21,674.
13
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
Restricted cash, which is held by or for the benefit of
regulatory agencies to collateralize future obligations, is comprised of the
following:
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Restricted cash, beginning of
period |
|
16,148
|
|
|
25,478 |
|
Restricted cash from acquisition
of Uranerz Energy Corp (Note 5) |
|
2,100 |
|
|
- |
|
Refunds and returns for the period (1) |
|
(5,267 |
) |
|
(9,330 |
) |
Restricted cash, end of period |
|
12,981 |
|
|
16,148 |
|
|
(1) |
The Company has cash, cash equivalents and fixed income
securities as collateral for various bonds posted in favour of the State
of Utah, the applicable state regulatory agencies in Colorado and Arizona
and the U.S. Bureau of Land Management for estimated reclamation costs
associated with the White Mesa mill and mining properties. Cash
equivalents are short-term highly liquid investments with original
maturities of three months or less. The restricted cash will be released
when the Company has reclaimed a mineral property. During the six months
ended June 30, 2015, the Company had net refunds and returns of $5,267
from its collateral account (December 31, 2014 -$9,330) primarily as a
result of the restructuring of the Companys surety arrangements and the
reduction of bonding requirements at some of the Companys
projects. |
The contractual terms of the Companys interest-bearing loans
and borrowings, which are measured at amortized cost, and the Companys
convertible debentures, which are measured at fair value, are as follows.
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Current portion of loans and
borrowings: |
|
|
|
|
|
|
Secured note (2) |
|
250 |
|
|
- |
|
Wyoming Industrial
Development Revenue Bond loan (3) |
|
3,227 |
|
|
- |
|
Finance leases and other |
|
41 |
|
|
46 |
|
|
|
3,518 |
|
|
46 |
|
Long-term loans and borrowings: |
|
|
|
|
|
|
Convertible debentures (1)
|
|
15,520
|
|
|
15,740 |
|
Secured note (2) |
|
201 |
|
|
- |
|
Wyoming Industrial
Development Revenue Bond loan (3) |
|
15,623
|
|
|
- |
|
Finance leases and other |
|
26 |
|
|
46 |
|
|
|
31,370 |
|
|
15,786 |
|
|
(1) |
On July 24, 2012, the Company completed a bought deal
public offering of 22,000 floating-rate convertible unsecured subordinated
debentures maturing June 30, 2017 (the Debentures). The Debentures were
issued at a price of Cdn$1 per Debenture for gross proceeds of $21,551
(the Offering). The Debentures are convertible into common shares at the
option of the holder at a conversion price of Cdn$15.00 per common share.
Interest is paid in cash and in addition, unless an event of default has
occurred and is continuing, the Company may elect, from time to time,
subject to applicable regulatory approval, to satisfy its obligation to
pay interest on the Debentures, on the date it is payable under the
indenture (i) in cash; (ii) by delivering sufficient common shares to the
debenture trustee, for sale, to satisfy the interest obligations in
accordance with the indenture in which event holders of the Debentures
will be entitled to receive a cash payment equal to the proceeds of the
sale of such common shares; or (iii) any combination of (i) and
(ii). |
14
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
The Debentures accrue interest,
payable semi-annually in arrears on June 30 and December 31 of each year at a
fluctuating rate, of not less than 8.5% and not more than 13.5%, indexed to the
simple average spot price of uranium as reported on the Ux Weekly Indicator
Price. Interest can be paid in cash or issuance of the Companys common shares.
The Debentures may be redeemed in whole or part, at par plus accrued interest
and unpaid interest by the Company between June 30, 2015 and June 30, 2017
subject to certain terms and conditions, provided the volume weighted average
trading price of the common shares of the Company on the TSX during the 20
consecutive trading days ending five days preceding the date on which the notice
of redemption is given is not less than 125% of the conversion price.
Upon redemption or at maturity, the
Company will repay the indebtedness represented by the Debentures by paying to
the debenture trustee in Canadian dollars an amount equal to the aggregate
principal amount of the outstanding Debentures which are to be redeemed or which
have matured, as applicable, together with accrued and unpaid interest
thereon.
Subject to any required regulatory
approval and provided no event of default has occurred and is continuing, the
Company has the option to satisfy its obligation to repay the Cdn$1 principal
amount of the Debentures, in whole or in part, due at redemption or maturity,
upon at least 40 days and not more than 60 days prior notice, by delivering
that number of common shares obtained by dividing the Cdn$1 principal amount of
the Debentures maturing or to be redeemed as applicable, by 95% of the
volume-weighted average trading price of the common shares on the TSX during the
20 consecutive trading days ending five trading days preceding the date fixed
for redemption or the maturity date, as the case may be. The debentures are
classified as fair value through profit or loss where the debentures are
measured at fair value based on the closing price on the TSX and changes are
recognized in profit and loss. For the six months ended June 30, 2015 the
Company recorded a loss on revaluation of convertible debentures of $890 (June
30, 2014 - $1,914).
|
(2) |
In February 2015 the Company issued a secured note in the
amount of $446 for a 50% interest in a joint operation with an effective
interest rate of 7%. The remaining balance of the note is repayable on the
following schedule: February 13, 2016 ($250), and February 13, 2017
($250). This note is secured by the 50% interest in the joint operation.
The current portion of this note is $250. |
|
|
|
|
(3) |
The Company through its acquisition of Uranerz assumed an
$18,813 loan through the Wyoming Industrial Development Revenue Bond
program (the "Loan"). The Loan has an annual interest rate of 5.75% and is
repayable over seven years, maturing on October 15, 2020. The Loan
originated on December 3, 2013 and called for the payment of interest only
for the first year, with the amortization of principal plus interest over
the remaining six years. The Loan can be repaid earlier than its maturity
date if the Company so chooses without penalty or premium. The Loan is
secured by a charge on most of the assets of the Companys wholly owned
subsidiary, Uranerz, including mineral properties, the processing
facility, and equipment as well as an assignment of all of Uranerz
rights, title and interest in and to its product sales contracts and other
agreements. Uranerz is also subject to dividend restrictions. Principal
and interest are paid on a quarterly basis on the first day of January,
April, July and October. The current portion of the note is
$3,227. |
12. |
CAPITAL STOCK AND CONTRIBUTED
SURPLUS |
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 Series A Preferred shares are
non-redeemable, non-callable, non-voting and with no right to dividends. 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.
15
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
Issued capital stock
The issued and outstanding capital stock consists of Common
Shares as follows:
|
|
June 30,
2015 |
|
|
December 31, 2014
|
|
|
|
Shares |
|
|
Amount $ |
|
|
Shares |
|
|
Amount $ |
|
Balance, beginning of period
|
|
19,677,552 |
|
|
232,835
|
|
|
19,601,251 |
|
|
232,089 |
|
Shares issued for acquisition of
Uranerz Energy Corp. (Note 5) |
|
24,457,773 |
|
|
101,745 |
|
|
- |
|
|
- |
|
Shares issued for
Uranerz Energy Corp. advisory fees |
|
617,832
|
|
|
2,570 |
|
|
- |
|
|
- |
|
Shares issued to employees of Uranerz
Energy Corp. in |
|
271,604 |
|
|
1,358 |
|
|
- |
|
|
- |
|
consideration for
change in control payments |
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for exercise of share
purchase warrants |
|
300 |
|
|
1 |
|
|
61,301 |
|
|
607 |
|
Shares issued for
exercise of options |
|
21,037
|
|
|
127 |
|
|
15,000 |
|
|
139 |
|
Tax recovery from expired share purchase warrants |
|
- |
|
|
57 |
|
|
- |
|
|
- |
|
Balance, end of period |
|
45,046,098 |
|
|
338,693 |
|
|
19,677,552 |
|
|
232,835 |
|
Share Purchase Warrants
|
|
|
|
|
Exercise Price |
|
|
Warrants |
|
Month Issued |
|
Expiry Date |
|
|
Cdn$ |
|
|
Issued |
|
June 2012 |
|
June 22, 2016(1)
|
|
|
13.25 |
|
|
351,025 |
|
June 2013 |
|
June 15, 2016(1) |
|
|
9.50 |
|
|
456,948 |
|
October 2013 |
|
October 16, 2015 |
|
|
8.00 |
|
|
9,290 |
|
|
(1) |
The share purchase warrants were extended one year from
their previous expiration dates. |
|
|
Weighted |
|
|
Number of warrants |
|
|
|
Average |
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
|
June 30, |
|
|
December 31, |
|
|
|
Cdn$ |
|
|
2015 |
|
|
2014 |
|
Balance, beginning of period
|
|
15.61 |
|
|
1,079,069
|
|
|
1,140,370 |
|
Expiration of warrants |
|
29.75 |
|
|
(261,506 |
) |
|
- |
|
Shares issued for exercise of share purchase
warrants |
|
9.50 |
|
|
(300 |
) |
|
(61,301 |
) |
Balance, end of period |
|
11.09 |
|
|
817,263 |
|
|
1,079,069 |
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Balance, beginning of period
|
|
4,714 |
|
|
4,838 |
|
Expiration of warrants |
|
(587 |
) |
|
- |
|
Shares issued for exercise of share purchase
warrants |
|
1 |
|
|
(124 |
) |
Balance, end of period |
|
4,128 |
|
|
4,714 |
|
The 2,690,250 Uranerz replacement warrants have a strike price
of $6.28 and are accounted for as a derivative liability with a fair value of
$895.
16
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
13. |
SHARE-BASED PAYMENTS |
|
|
|
(a) |
Stock options |
The fair value of stock options granted during the six months
ended June 30, 2015 and the 12 months ended December 31, 2014 is as follows:
|
|
Six months ended |
|
|
Year ended |
|
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
|
|
$ |
|
|
$ |
|
Share option
plan expense (1) |
|
499 |
|
|
1,405 |
|
Replacement of Uranerz options (2) |
|
3,681 |
|
|
- |
|
Value of stock options granted |
|
4,180 |
|
|
1,405 |
|
|
(1) |
The Company has established a stock option plan whereby
the Board of Directors may grant options to employees, directors and
consultants to purchase common shares of the Company. The maximum number
of authorized but unissued shares available to be granted under the plan
shall not exceed 10% of its issued and outstanding common shares. The
exercise price of the options is set at the Companys closing share price
on the day before the grant date. |
For the six months ended June 30,
2015, the Company granted 133,150 stock options (December 31, 2014 307,250)
with a fair value of $317 to its employees, directors and consultants recording
stock-based compensation and recorded an expense of $212. These options were
granted with the following vesting conditions: 50% - immediately, 25% - one year
after grant date, 25% - two years after grant date. The fair value of stock
options granted to employees, directors and consultants was estimated on the
dates of the grants using the Black-Scholes option pricing model with the
following assumptions used for the grants made during the six months ended June
30, 2015:
|
Risk-free rate |
0.87% |
|
Expected life |
5.0 years |
|
Expected volatility |
75.1%* |
|
Expected dividend yield |
0.0%*
|
|
* |
Expected volatility is measured based on the
Companys historical share price volatility over a period equivalent to
the expected life of the options. |
|
(2) |
For the six months ended June 30, 2015, the Company
granted 2,040,408 stock options to employees, directors, consultants and
former employees of Uranerz as a replacement for stock options outstanding
at the date the acquisition was completed. The fair value of the
replacement options totaled $3,681 which was included in the consideration
paid of the Uranerz transaction. The fair value of stock options granted
to employees, directors and consultants was estimated on the closing date
of the transaction using the Black-Scholes option pricing model with the
following assumptions: |
|
Risk-free rate |
0.0% to 2.35% |
|
Expected life |
0.05 years to 10 years
|
|
Expected volatility |
18.47 to 93.31%* |
|
Expected dividend yield |
0.0%*
|
|
* |
Expected volatility is measured based on the
Companys historical share price volatility over a period equivalent to the expected life of the options. |
17
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
The summary of the Companys stock options at June 30, 2015 and
December 31, 2014, and the changes for the fiscal periods ending on those dates
is presented below:
|
|
|
|
|
Six months ended |
|
|
|
|
|
|
|
|
Year ended |
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
|
|
|
|
|
|
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Range of |
|
|
Weighted |
|
|
|
|
|
|
Range of |
|
|
Average |
|
|
|
|
|
Exercise |
|
|
Average |
|
|
|
|
|
|
Exercise Prices
|
|
|
Exercise Price |
|
|
Number of |
|
|
Prices |
|
|
Exercise Price |
|
|
Number of |
|
|
|
$ |
|
|
$ |
|
|
Options |
|
|
$ |
|
|
$ |
|
|
Options |
|
Balance, beginning of period
|
|
6.55 -
38.12 |
|
|
10.05 |
|
|
905,413
|
|
|
6.55 - 38.12 |
|
|
12.30 |
|
|
795,318 |
|
Transactions during the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
2.55 -
18.55 |
|
|
6.06 |
|
|
2,173,558
|
|
|
7.80 |
|
|
7.80 |
|
|
307,250 |
|
Exercised(1) |
|
2.55 - 4.44 |
|
|
3.75 |
|
|
(21,037 |
) |
|
7.54 |
|
|
7.54 |
|
|
(15,000 |
) |
Forfeited |
|
7.01 -
31.90 |
|
|
10.61 |
|
|
(25,981 |
) |
|
6.55 - 38.12 |
|
|
12.67 |
|
|
(158,655 |
) |
Expired |
|
9.02 -34.47 |
|
|
15.00 |
|
|
(36,720 |
) |
|
15.08 |
|
|
15.08 |
|
|
(23,500 |
) |
Balance, end of period |
|
2.55 - 34.47 |
|
|
6.92 |
|
|
2,995,233 |
|
|
6.55 - 38.12 |
|
|
10.05 |
|
|
905,413 |
|
|
(1) |
The weighted average price of an option exercised in the
six months ended June 30, 2015 was $3.75 (December 31, 2014
$7.80). |
The following table reflects the actual Canadian Dollar
denominated stock options issued and outstanding as of June 30, 2015:
|
|
Options
outstanding |
|
|
Options
Exercisable |
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
Weighted average
|
|
Exercise price |
|
|
|
|
remaining |
|
|
|
|
|
remaining |
|
(Cdn$) |
|
Quantity |
|
|
contractual life |
|
|
Quantity |
|
|
contractual life |
|
$0.00 to $9.99 |
|
570,450 |
|
|
3.65 |
|
|
436,063 |
|
|
3.52 |
|
$10.00 to $19.99 |
|
371,230 |
|
|
1.86 |
|
|
371,230 |
|
|
1.86 |
|
$20.00 to $29.99 |
|
29,900 |
|
|
0.79 |
|
|
29,900 |
|
|
0.79 |
|
$30.00 to $39.99 |
|
882 |
|
|
0.48 |
|
|
882 |
|
|
0.48 |
|
$40.00 to $49.99 |
|
3,400 |
|
|
0.69 |
|
|
3,400 |
|
|
0.69 |
|
|
|
975,862 |
|
|
|
|
|
841,475 |
|
|
|
|
The following table reflects the actual US Dollar denominated
stock options issued and outstanding as of June 30, 2015:
|
|
Options
outstanding |
|
|
Options
Exercisable |
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
Weighted average
|
|
Exercise price |
|
|
|
|
remaining |
|
|
|
|
|
remaining |
|
($) |
|
Quantity |
|
|
contractual life |
|
|
Quantity |
|
|
contractual life |
|
$0.00 to $9.99 |
|
1,737,088 |
|
|
4.82 |
|
|
1,483,302 |
|
|
1.86 |
|
$10.00 to $19.99 |
|
282,283 |
|
|
2.78 |
|
|
282,283 |
|
|
2.78 |
|
|
|
2,019,371 |
|
|
|
|
|
1,765,585 |
|
|
|
|
|
(b) |
Restricted share
units |
On January 28, 2015, the Companys Board of Directors approved
the issuance of 153,850 RSUs under the Companys 2015 Omnibus Equity Incentive
Compensation Plan (the Compensation Plan). The RSUs are settled in shares of
the Company, and they vest 50% over one year, 25% over two years, and 25% over
three years.
18
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
The following table reflects the restricted share units issued
and outstanding as of June 30, 2015
|
Number of |
|
units |
Balance, December 31, 2014
|
- |
Granted |
153,850 |
Forfeited |
- |
Settled for equity |
- |
Balance, June 30, 2015 |
153,850 |
The fair value of the RSUs at June 18, 2015, the date the plan
was approved, was $450. During the six months ended June 30, 2015 compensation
expense recognized was $133.
14. |
SUPPLEMENTAL FINANCIAL
INFORMATION |
The components of revenues are as follows:
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Uranium concentrates |
$ |
23,641 |
|
$ |
13,454 |
|
$ |
30,636 |
|
$ |
24,673 |
|
Alternate feed materials processing and other |
|
64 |
|
|
71 |
|
|
669 |
|
|
213 |
|
Revenues |
$ |
23,705 |
|
$ |
13,525 |
|
$ |
31,305 |
|
$ |
24,886 |
|
The components of selling, general and administrative expenses
are as follows:
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Intangible asset amortization
|
$ |
(1,255 |
) |
$ |
(1,256 |
) |
$ |
(1,800 |
) |
$ |
(2,383 |
) |
Selling expenses |
|
(91 |
) |
|
(66 |
) |
|
(159 |
) |
|
(145 |
) |
General and administrative |
|
(2,625 |
) |
|
(2,782 |
) |
|
(5,336 |
) |
|
(6,511 |
) |
Selling, general and administrative expenses |
$ |
(3,971 |
) |
$ |
(4,104 |
) |
$ |
(7,295 |
) |
$ |
(9,039 |
) |
The components of finance income (expense) are as follows:
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Interest expense |
$ |
(388 |
) |
$ |
(428 |
) |
$ |
(766 |
) |
$ |
(857 |
) |
Interest income |
|
17 |
|
|
8 |
|
|
39 |
|
|
30 |
|
Accretion expense |
|
(92 |
) |
|
(103 |
) |
|
(183 |
) |
|
(207 |
) |
Gain (loss) on sale of marketable securities
|
|
- |
|
|
- |
|
|
- |
|
|
198 |
|
Foreign exchange |
|
(9 |
) |
|
(7 |
) |
|
(16 |
) |
|
(7 |
) |
Change in value of convertible debentures |
|
(1,599 |
) |
|
1,177 |
|
|
(890 |
) |
|
(1,914 |
) |
Finance income (expense) |
$ |
(2,071 |
) |
$ |
647 |
|
$ |
(1,816 |
) |
$ |
(2,757 |
) |
19
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
A summary of depreciation, depletion and amortization expense
recognized in the consolidated financial statements is as follows:
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Recognized in production cost
of sales |
$ |
(850 |
) |
$ |
(853 |
) |
$ |
(1,161 |
) |
$ |
(1,949 |
) |
Recognized in selling, general and administrative |
|
(1,279 |
) |
|
(1,304 |
) |
|
(1,851 |
) |
|
(2,516 |
) |
Depreciation, depletion and amortization |
$ |
(2,129 |
) |
$ |
(2,157 |
) |
$ |
(3,012 |
) |
$ |
(2,308 |
) |
A summary of other income (expense) recognized in the
consolidated financial statements is as follows:
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Share of equity-accounted
investees, net of tax |
|
527 |
|
|
(62 |
) |
|
514 |
|
|
(211 |
) |
Impairment of equity-accounted investees |
|
(523 |
) |
|
|
|
|
(523 |
) |
|
|
|
Transaction costs |
|
(6,118 |
) |
|
- |
|
|
(6,587 |
) |
|
- |
|
Property tax refund |
|
- |
|
|
- |
|
|
398 |
|
|
- |
|
Other |
|
19 |
|
|
80 |
|
|
23 |
|
|
80 |
|
Other income (expense) |
$ |
(6,095 |
) |
$ |
18 |
|
$ |
(6,175 |
) |
$ |
(131 |
) |
A summary of care and maintenance expenses recognized in the
consolidated financial statements is as follows:
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Arizona Strip |
|
434 |
|
|
300 |
|
|
1,291 |
|
|
405 |
|
Colorado Plateau |
|
185 |
|
|
355 |
|
|
440 |
|
|
539 |
|
Henry Mountains |
|
184 |
|
|
219 |
|
|
308 |
|
|
542 |
|
White Canyon |
|
4 |
|
|
29 |
|
|
14 |
|
|
54 |
|
White Mesa Mill |
|
974 |
|
|
- |
|
|
1,933 |
|
|
- |
|
White Mesa Mill decommissioning liability adjustment (1)
|
|
(1,586 |
) |
|
- |
|
|
(930 |
) |
|
- |
|
Care and maintenance |
$ |
195 |
|
$ |
903 |
|
$ |
3,056 |
|
$ |
1,540 |
|
|
(1) |
The adjustment to decommissioning liability is due to a
change in discount rates. |
15. |
COMMITMENTS AND
CONTINGENCIES |
General legal matters
In November, 2012, the Company was served with a Plaintiffs
Original Petition and Jury Demand in the District Court of Harris County, Texas,
claiming unspecified damages from the disease and injuries resulting from
mesothelioma from exposure to asbestos, which the Plaintiff claims was
contributed to by being exposed to asbestos products and dust while working at
the White Mesa Mill. The Company does not consider this claim to have any merit,
and therefore does not believe it will materially affect the Companys financial
position, results of operations or cash flows. In January, 2013, the Company
filed a Special Appearance challenging jurisdiction and certain other procedural
matters relating to this claim.
In January, 2013, the Ute Mountain Ute tribe filed a Petition
to Intervene and Request for Agency Action challenging the Corrective Action
Plan approved by the State of Utah Department of Environmental Quality (UDEQ)
relating to nitrate contamination in the shallow aquifer at the White Mesa Mill
site. This challenge is currently being evaluated, and may involve the
appointment of an administrative law judge to hear the matter. The Company does
not consider this action to have any merit. If the petition is successful, the
likely outcome would be a requirement to modify or replace the existing
Corrective Action Plan. At this time, the Company does not believe any such
modification or replacement would materially affect the Companys financial
position, results of operations or cash flows. However, the scope and costs of
remediation under a revised or replacement Corrective Action Plan have not yet
been determined and could be significant.
20
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
In April 2014, the Grand Canyon Trust filed a citizen suit in
federal district court for alleged violations of the Clean Air Act at the White
Mesa Mill. In October 2014, the plaintiffs were granted leave by the court to
add further purported violations to their April 2014 suit. The Complaint, as
amended, alleges that radon from one of the Mills tailings impoundments
exceeded the standard; that the mill is in violation of a requirement that only
two tailings impoundments may be in operation at any one time; and that certain
other violations related to the manner of measuring and reporting radon results
from one of the tailings impoundments occurred in 2013. The Complaint asks the
court to impose injunctive relief, civil penalties of up to $38,000 per day per
violation, costs of litigation including attorneys fees, and other relief. The
Company believes the issues raised in the Complaint are being addressed through
the proper regulatory channels and that the Company is currently in compliance
with all applicable regulatory requirements relating to those matters. The
Company intends to defend against all issues raised in the Complaint.
In March, 2013, the Center for Biological Diversity, the Grand
Canyon Trust, the Sierra Club and the Havasupai Tribe (the Plaintiffs) filed a
complaint in the U.S. District Court for the District of Arizona (the District
Court) against the Forest Supervisor for the Kaibab National Forest and the
U.S. Forest Service (the USFS and together with the Forest Supervisor the
Defendants) seeking an order (a) declaring that the USFS failed to comply with
environmental, mining, public land, and historic preservation laws in relation
to the Companys Canyon mine, (b) setting aside any approvals regarding
exploration and mining operations at the Canyon mine, and (c) directing
operations to cease at the mine and enjoining the USFS from allowing any further
exploration or mining-related activities at the Canyon mine until the USFS fully
complies with all applicable laws. In April 2013, the Plaintiffs filed a Motion
for Preliminary Injunction, which was denied by the District Court in September,
2013. On April 7, 2015, the District Court issued its final ruling on the merits in favor of
the Defendants and the Company and against the Plaintiffs on all counts. The
Plaintiffs appealed the District Courts ruling on the merits to the Ninth
Circuit Court of Appeals, and filed motions for an injunction pending appeal
with the District Court. Those motions for an injunction pending appeal were
denied by the District Court on May 26, 2015. Thereafter, Plaintiffs filed
urgent motions for an injunction pending appeal with the Ninth Circuit Court of
Appeals, which were denied on June 30, 2015. Briefing on the appeal on the
merits is ongoing. If the Plaintiffs are successful on their appeal on the
merits, the Company may be required to place the mine on standby pending
resolution of the matter. Such a required prolonged stoppage of mine development
and mining activities could have a significant impact on future operations of
the Company.
Commencing in January 2015, the Company and Uranerz, as well as the former directors of Uranerz, were named
as defendants in a number of shareholder class action suits in the District
Court of Clark County, Nevada and the District Court of Washoe County, Nevada.
These suits generally allege claims for breach of fiduciary duty and related
claims regarding the acquisition of Uranerz by the Company (the Acquisition).
Plaintiffs seek, among other things, rescission of the Acquisition, attorneys
fees and costs. The Company, Uranerz and its former directors deny all
allegations and consider these allegations to be without merit. However, to
avoid the substantial burden, expense, risk, inconvenience and distraction of
continued litigation, in June 2015, the Company, Uranerz and its former
directors entered into a Memorandum of Understanding (MOU) with the Plaintiffs
in the Clark County litigation regarding the settlement of this litigation. The MOU outlines the terms of the
parties agreement in principal to settle and release all claims that were or
could have been asserted in the consolidated action. In consideration for such
settlement and release, on June 10, 2015, Uranerz provided certain additional
disclosures to those contained in its definitive proxy statement/prospectus
relating to the Acquisition. The proposed settlement contemplated in the MOU is
conditioned upon, among other things, execution of an appropriate stipulation of
settlement and final approval by the Court, which is expected to include an
award of Plaintiffs attorneys fees and expenses as part of the settlement. The Washoe County litigation has been stayed pending court approval
of the proposed settlement in Clark County. The
Company does not expect that the terms of any settlement will be material to the
Company. Although the Company has no reason to expect that this matter will not
be fully settled in accordance with the MOU, there can be no assurance at this
time of entering into a stipulation or Court approval of such stipulation.
Mineral property commitments
The Company enters into commitments with federal and state
agencies and private individuals to lease mineral rights. These leases are
renewable annually and are expected to total $2,553 for the year ended December
31, 2015.
21
ENERGY FUELS INC. |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
|
(Unaudited) |
(Expressed in thousands of U.S. Dollars except share and
per share amounts) |
|
Surety bonds
The Company has indemnified third-party companies to provide
surety bonds as collateral for the Companys decommissioning liabilities. The
Company is obligated to replace this collateral in the event of a default, and
is obligated to repay any reclamation or closure costs due.
Issuance of stock options and restricted stock units
(RSU)
On August 6, 2015 the Company granted 3,133 stock options with an exercise price of $3.88 and
31,129 RSUs to its employees, directors and consultants. The options carry a five year life and are vested as follows: 50%
immediately; 25% on August 6, 2016; 25% on August 6, 2017. The RSUs vest as
follows: 50% on January 28, 2016; 25% on January 28, 2017; and 25% on January
28, 2018.
Acquisition of mineral interests
On July 31, 2015 the Company acquired mineral properties
adjacent to its Roca Honda Project from Uranium Resources, Inc. (URI). The
Acquired Properties, which total approximately 4,580 acres (1,854 hectares),
include fee mineral ownership of 640-acres (Section 17), fee ownership of 36
unpatented lode mining claims and a leasehold interest in 131 unpatented lode
mining claims. As consideration for acquiring the Acquired Properties, the
Company has delivered to URI $2,500, $375 of Energy Fuels common shares, the
royalty held by the Company on certain properties included within later phases
of Peninsula Energys Lance Uranium Project in Wyoming, unpatented lode mining
claims adjacent to URIs Church Rock Project and a 4% gross royalty on Section
17, which can be repurchased by Energy Fuels upon payment to URI of $5,000 cash
at any time in the Companys sole discretion prior to the date on which the
first royalty becomes due.
22
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
INTRODUCTION
This Managements Discussion and Analysis (MD&A)
of Energy Fuels Inc. and its subsidiary companies (collectively, Energy
Fuels or the Company) provides a detailed analysis of the
Companys business and compares its financial results with those of the previous
year. This MD&A is dated as of August 6, 2015 and should be read in
conjunction with the Companys condensed consolidated interim financial
statements and related notes for the three and six months ended June 30, 2015
and the Companys consolidated annual financial statements for the year ended
December 31, 2014.
This MD&A was written to comply with the requirements of
Canadian National Instrument 51-102 Continuous Disclosure Obligations. All financial
information in this discussion and analysis is presented in United States
dollars, unless otherwise stated. This MD&A contains certain forward-looking
statements. Refer to the cautionary language at the end of this MD&A
Other continuous disclosure documents, including the Companys
press releases, quarterly and annual reports, technical reports, Annual
Information Form (AIF) and its Annual Report on Form 40-F are available
through its filings with the securities regulatory authorities in Canada at
www.sedar.com (SEDAR) and in the United States at
www.sec.gov/edgar.shtml (EDGAR), and on the Companys
website at www.energyfuels.com.
In this discussion, the terms Company, we, us, and our
refer to Energy Fuels and, as applicable, the Companys wholly-owned
subsidiaries: Energy Fuels Holdings Corp. (previously known as Denison Mines
Holdings Corp.) (EFHC), Magnum Uranium Corp. (Magnum), Titan
Uranium Inc. (Titan), Strathmore Minerals Corp. (Strathmore),
Uranerz (as hereinafter defined) and their respective subsidiaries.
ACQUISITION OF URANERZ
On June 18, 2015 (the Closing Date), the Company
acquired all of the issued and outstanding shares of Uranerz Energy Corporation
(Uranerz), pursuant to an Agreement and Plan of Merger (the Merger
Agreement) dated January 4, 2015 (the Acquisition).
Pursuant to the Merger Agreement, on the Closing Date, each
issued and outstanding share of common stock of Uranerz was canceled,
extinguished, and automatically exchanged for 0.255 common shares of the Company
(the Exchange Ratio). Based on the shares of Uranerz outstanding as of
the Closing Date, the Company issued 24,457,773 shares in exchange for all the
outstanding shares of Uranerz. The Company also issued 617,832 shares of its
common stock to financial advisors and 271,604 shares to former officers and
directors as partial payment of a change of control obligation.
Also, each outstanding option and warrant to acquire common
shares of Uranerz was converted on the Closing Date into an option or warrant to
acquire common shares of Energy Fuels on the same terms and conditions as were
applicable to the option or warrant prior to the transaction, except that the
number of shares subject to the option or warrant was adjusted based on the
Exchange Ratio, and the price was adjusted by taking the original exercise price
and dividing the exercise price by the Exchange Ratio. As a result, effective as
of the Closing Date the Company issued replacement options totaling 2,040,408
common shares and replacement warrants totaling 2,690,250 common shares of the
Company.
Uranerz is a United States based uranium producing company
focused on commercial in-situ recovery (ISR) uranium exploration,
extraction and sales. ISR is a uranium extraction process that uses a leaching
solution to extract uranium from underground sandstone-hosted uranium deposits,
and it is the generally accepted extraction technology used in the Powder River
Basin area of Wyoming. Uranerz controls a large strategic land position in the
central Powder River Basin, where it operates the Nichols Ranch ISR Uranium
Project. The acquisition of Uranerz provides the Company with current ISR
production and the capability to expand ISR production in the future.
The Nichols Ranch ISR Uranium Project is currently licensed to
include the Nichols Ranch Unit and the Hank Unit. Under the licensed plan, a
central processing plant has been built at Nichols Ranch, and a satellite
processing facility is contemplated to be built at the Hank Unit. The Nichols
Ranch central processing plant is fully operational and extraction has commenced
from the initial wellfields in the Nichols Unit. In March 2014, Uranerz
submitted environmental permit and license applications to incorporate the Jane
Dough Unit, which is adjacent to the Nichols Ranch Unit, into the Nichols Ranch
ISR Uranium Project. Uranerz is seeking to amend its environmental permit and
license and to revise its plan of operations for the Nichols Ranch ISR Uranium
Project in order to bring the Jane Dough Unit into extraction operations before
the Hank Unit. Due to the close proximity, fluids produced from the Jane Dough Unit can be delivered directly to the Nichols Ranch
processing facility by pipeline, and an additional satellite processing facility
will not be required. The Uranerz management team has specialized expertise in
the ISR uranium mining method, and a record of licensing, constructing and
operating ISR uranium projects.
- 1 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
The Acquisition was accounted for as a business combination
under International Financial Reporting Standards (IFRS), with Energy
Fuels deemed to be the acquirer. Post-transaction, Energy Fuels continues to
control the board of directors and senior management positions, and has overall
control of the day-to-day activities of the combined entities. The value of the
share consideration was based on the closing price of the Companys shares on
the Closing Date, which was $4.16.
The allocation of the purchase price as of the Closing Date is
based upon Energy Fuels preliminary estimates and certain assumptions with
respect to the fair value associated with the assets and the liabilities
acquired. This preliminary fair value is supported by a preliminary third party
valuation of Uranerz assets. The purchase price allocation remains preliminary
and is therefore subject to further adjustment prior to the end of the first
quarter of 2016, at which time the final valuation process and analysis of
resulting tax effects will be completed. The final fair values of the assets and
liabilities may differ materially from the amounts disclosed below in the
initial purchase price allocation, as further analysis is completed.
The current preliminary aggregate fair values of assets
acquired and liabilities assumed were as follows on the Closing Date:
|
|
|
|
|
|
|
|
Purchase price
|
|
|
|
Issuance of
24,457,773 common shares for replacement of Uranerz common shares |
$ |
101,744 |
|
Issuance of 2,690,250 warrants for replacement of Uranerz warrants
|
|
915 |
|
Issuance of 2,040,408 options
for replacement of Uranerz share based options |
|
3,681 |
|
|
$ |
106,340 |
|
Uranerz purchase price allocation |
|
|
|
Cash and cash equivalents |
$ |
2,459 |
|
Inventories
|
|
3,742 |
|
Prepaid expenses and other assets |
|
402 |
|
Property,
plant and equipment |
|
59,723 |
|
Intangible assets - customer contracts |
|
10,600 |
|
Restricted
cash |
|
2,100 |
|
Accounts payable and accrued liabilities |
|
(2,280 |
)
|
Loans and
borrowings |
|
(18,813 |
) |
Decommissioning liabilities |
|
(2,321 |
)
|
Non-controlling interest |
|
(3,983 |
) |
Goodwill |
|
54,711 |
|
Total purchase price |
$ |
106,340 |
|
OUTLOOK
Overview
With the acquisition of the ISR operation at Nichols Ranch,
Energy Fuels has significantly increased its flexibility to regulate production
in response to future market conditions and to meet the needs of its sales
contracts. At the same time, significant additional production can be brought on
line within months after a production decision is made. This allows the Company
to efficiently fulfil its existing sales commitments and be able to commit to
new sales commitments backed by available production. The Company has the
following production capabilities which can be brought on line and/or production
levels increased over the next 18 months (each of which is more fully described
below):
|
1) |
Nichols Ranch ISR Project. |
|
2) |
Alternate feed materials. |
|
3) |
Pinenut Mine ore that has been mined and is available for
milling. |
|
4) |
The Canyon Mine. |
- 2 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
In response to current market uncertainty, the Company expects
to continue cash conservation efforts until additional sustained improvement in
uranium market conditions is observed. In addition, the Company is continuing to
manage its operations and assets conservatively, maintaining its substantial
uranium resource base, and scheduling uranium production at the White Mesa Mill
and Nichols Ranch as market conditions, cash needs and/or contract delivery
requirements may warrant. This outlook was updated from the three months ended
March 31, 2015 to include the newly acquired ISR operations.
Production and Operations Overview
The Company currently has finished goods inventory and
production capability that exceeds its sales commitments. As a result, both ISR
and conventional production has been and is expected to continue to be scaled
back until such time as market conditions improve and/or the Company requires
cash to meet its business needs. This allows the Company to maintain its readily
available mineral resources for future sales at price levels that we expect to
be higher than current levels and, accordingly, to be able to achieve the
benefit of expected future price increases.
Production and Operations ISR Uranium Assets
The Nichols Ranch facility has been producing uranium since
April 2014. At June 30, 2015 five header houses were in production. The Company
plans to complete three additional header houses during the next 12 months,
which will complete the development of production area #1. The Company also
plans to complete all monitor wells in production area #2. We expect the Nichols
Ranch facility to produce approximately 140,000 pounds of finished goods in the
second half of FY-2015. The timing of production from production area #1 and the
timing of further development of this project beyond FY-2015 will be based on
sales requirements.
Permitting at our adjacent Jane Dough Unit, which will feed the
Nichols Ranch plant, is continuing and is expected to be completed well in
advance of our need to begin wellfield development on this property. Also, our
Hank Unit is now fully permitted for a satellite facility. We are reviewing the
economic viability of utilizing a pipeline from our Hank Unit to the Nichols
Ranch plant, instead of building a satellite facility.
Production and Operations Conventional Uranium Assets
The White Mesa Mill has historically operated on a campaign
basis, whereby mineral processing occurs as mill feed, cash needs, contract
requirements, and/or market conditions may warrant. The Company expects the
current mineral processing campaign at the White Mesa Mill to conclude in the
second half of 2015, resulting in the production of approximately 90,000 pounds
of finished goods in the second half of FY-2015. Once the current campaign
concludes at the White Mesa Mill, the Company expects to continue to receive and
stockpile ore from the Pinenut mine and alternate feed materials. At this time,
the Company does not expect to schedule a mineral processing campaign during the
remainder of FY-2015, though the Company is maintaining the flexibility to
resume processing stockpiled or other materials at the White Mesa Mill should
market conditions or cash needs warrant.
The Company plans to continue mining at the Pinenut mine until
the economic resources are depleted, which is now estimated to occur by the end
of August 2015. The ore mined at the Pinenut mine has been and is continuing to
be shipped to the White Mesa Mill and stockpiled for processing in a future
campaign based on sales requirements.
The Company has re-started its development of the Canyon mine
and has completed necessary upgrades to the infrastructure as well as installed
new mine equipment to optimize shaft sinking rates and subsequent construction
cost savings. The development of the Canyon mine is currently expected to be
completed in time to allow for U3O8 production in FY-2017.
The Company also plans to continue to maintain, and update as
necessary, all permits on its other existing mines. These mines will remain on
standby until market conditions improve or the material can be sold into
long-term contracts at pricing that supports production. Expenditures for
permitting activities for new mines have been adjusted to coincide with expected
dates of production based on price forecasts. The Company plans to continue
priority permitting efforts and spend $1.10 million in FY-2015 on this work. The
Company is continuing to monitor corporate and field overhead to coincide with
these lower levels of activity.
Sales
The Company forecasts the second half of FY-2015 sales to total
approximately 391,667 pounds of U3O8, which will be sold into existing long-term
contracts. Energy Fuels expects to receive an average realized price of $57.05
per pound of U3O8 sold during the second half of FY-2015 across all
of its contracts. The average expected realized price per pound is not subject
to any decrease resulting from declines in future U3O8 spot and/or term prices
due to fixed or minimum floor prices now in effect in each of the Companys
contracts. While the Company does not expect to make any sales into the spot
market during the second half of FY-2015, it will continue to monitor market
conditions for sales opportunities if economically justified and/or to generate
cash for operations and critical development work.
- 3 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
For FY-2016 and FY-2017, the Company forecasts sales under
existing long-term contracts to total approximately 650,000 pounds and 620,000
pounds of U3O8, respectively. The Company expects to complete these sales from
pounds already produced and to be produced from its current operations. The
Company is currently monitoring market conditions for additional sales
opportunities and will pursue economically justified contract leads. Selective
spot sales will be made as necessary to generate cash for operations and
development.
The Company also continues to pursue new sources of revenue,
including new uranium sales contracts and expansion of its alternate feed
business.
Current inventory, purchase commitments and production
estimates
At June 30, 2015 the Company had approximately 650,000 pounds
of finished goods inventory and has a purchase commitment for 150,000 pounds to
be delivered in the third quarter of this year. As discussed above, the Company
expects to produce approximately 230,000 pounds from its facilities during the
second half of 2015. By the end of this fiscal year we expect to have sufficient
finished product to fulfill all delivery requirements for FY-2016 (650,000
pounds).
For FY-2017 deliveries (620,000 pounds) the Company has the
ability to produce approximately 900,000 pounds in FY-2016 and over 1.0 million
pounds in FY-2017, which include deliveries of 200,000 lbs. of U3O8
in each of FY-2016 and FY-2017 under contracts acquired through the acquisition
of Uranerz. The Company plans to produce amounts necessary to fulfil all
of its existing or new sales commitments. In addition, the Company may make
additional sales based on market conditions and/or cash needs, and accordingly,
may adjust production commensurate with sales delivery needs.
Development activities and capital requirements
As discussed above, over the next 12 months the Company plans
to continue to develop the Canyon mine and complete wellfield development
through production area #1 at Nichols Ranch. In addition, the Company may
install additional process circuits at Nichols Ranch to allow the Company to
produce final yellowcake product from its facilities. The Company is also
currently evaluating an accelerated wellfield development program at Nichols
Ranch. Funding for these development programs is expected to come from a
combination of sales of product and future financings.
OTHER 2015 HIGHLIGHTS TO DATE
|
|
On February 6, 2015, the Company announced that it is
preparing to resume development at its high-grade Canyon mine in Arizona.
The Company expects to transition mining personnel from the
currently-producing Pinenut mine to the Canyon mine during Q3-2015, at
which point the Company expects the economic resources at the Pinenut mine
to be depleted. According to the Arizona Strip Technical Report, prepared
in accordance with Canadian National Instrument 43-101 and dated June 27, 2012, the Canyon deposit
is estimated to have approximately 83,000 tons of Inferred Mineral
Resources containing approximately 1.63 million pounds of uranium having
an average grade of 0.98% eU3O8. |
|
|
|
|
|
On February 17, 2015, the Company acquired a 50% interest
in the high-grade Wate uranium deposit (the Wate Project) from
VANE Minerals (US) LLC (VANE). The Wate Project is held in the
Wate Mining Company, LLC joint venture (LLC). The other 50% of the LLC
is held by Uranium One Americas, Inc. As consideration for the 50%
interest in the LLC, the Company paid VANE $0.25 million cash at closing,
along with a $0.50 million non-interest-bearing promissory note, payable
in two equal installments of $0.25 million each on the 1st and 2nd
anniversaries of the note, and a 2% production royalty on the 50% LLC
interest being acquired. The royalty can be purchased by Energy Fuels upon
payment to VANE of an additional $0.75 million. In addition, upon
satisfaction of certain permitting milestones and other conditions, the
amounts due under the note will be accelerated, and the Company will pay
to VANE an additional $0.25 million cash. If Energy Fuels elects not to
make the payments under the note, it will be required to transfer the LLC
interest back to VANE. |
- 4 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
|
|
On July 31, 2015 the Company acquired mineral
properties adjacent to its Roca Honda Project from Uranium Resources, Inc.
(URI). The Acquired Properties, which total approximately 4,580
acres (1,854 hectares), include fee mineral ownership of 640-acres
(Section 17), fee ownership of 36 unpatented lode mining claims
and a leasehold interest in 131 unpatented lode mining claims. As
consideration for acquiring the Acquired Properties, the Company has
delivered to URI $2.5 million cash, $0.38 million of Energy Fuels common
shares, the royalty held by the Company on certain properties included
within later phases of Peninsula Energys Lance Uranium Project in
Wyoming, unpatented lode mining claims adjacent to URIs Church Rock
Project and a 4% gross royalty on Section 17, which can be repurchased by
Energy Fuels upon payment to URI of $5.0 million cash at any time in the
Companys sole discretion prior to the date on which the first royalty
becomes due. |
SUMMARY OF QUARTERLY RESULTS
Results for the eight most recent quarters ending with the
quarter ended June 30, 2015 are:
|
|
June 30 |
|
|
Mar 31 |
|
|
Dec 31 |
|
|
Sept 30 |
|
|
|
2015 |
|
|
2015 |
|
|
2014(1) |
|
|
2014 |
|
$000, except per share data |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Total revenues |
|
23,705 |
|
|
7,600 |
|
|
203 |
|
|
21,164 |
|
Net Income (loss) |
|
(2,313 |
)
|
|
(2,361 |
)
|
|
(10,017 |
)
|
|
3,076 |
|
Basic & diluted net income (loss) per share |
|
(0.10 |
) |
|
(0.12 |
) |
|
(0.51 |
) |
|
0.16 |
|
|
|
June 30 |
|
|
Mar 31 |
|
|
Dec 31 |
|
|
Sept 30 |
|
|
|
2014(2) |
|
|
2014 |
|
|
2013 |
|
|
2013(3) |
|
$000, except per share data |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Total revenues |
|
13,525 |
|
|
11,361 |
|
|
776 |
|
|
24,504 |
|
Net Income (loss) |
|
(30,328 |
)
|
|
(6,342 |
)
|
|
(3,375 |
)
|
|
(70,472 |
)
|
Basic & diluted net income (loss) per share |
|
(1.54 |
) |
|
(0.32 |
) |
|
(0.18 |
) |
|
(4.30 |
) |
(1) |
Includes an impairment loss of $5.08 million. |
(2) |
Includes an impairment loss of $30.78 million. |
(3) |
Includes an impairment loss of $60.26
million. |
RESULTS OF OPERATIONS
General
For the three months ended June 30, 2015, the Company recorded
a net loss of $2.31 million or $0.10 per share, compared to a net loss of $30.33
million or $1.54 per share for the three months ended June 30, 2014.
For the six months ended June 30, 2015 the Company recorded a
net loss of $4.67 million or $0.22 per share compared with a net loss of $36.67
million or $1.87 per share for the six months ended June 30, 2014.
For the three and six months ended June 30, 2014, the Company
recorded an impairment loss of $30.78 million or $1.57 per share related to the
impairment of its White Mesa Mill cash generating unit.
Revenues
The Companys revenues from uranium are largely based on
delivery schedules under long-term contracts, which can vary from quarter to
quarter.
Revenues for the three months ended June 30, 2015 totaled
$23.70 million, of which $23.64 million were sales of 416,667 pounds of uranium
concentrates, all of which were pursuant to term contracts at an average price
of $56.74 per pound. Revenues for the three months ended June 30, 2014 totaled
$13.53 million, of which $13.45 million were sales of uranium concentrates which included the sale of
236,667 pounds of U3O8 pursuant to term contracts at an average price of $58.75
per pound.
- 5 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
Revenues for the six months ended June 30, 2015 totaled $31.31
million, of which $30.64 million were sales of 533,334 pounds of uranium
concentrates, all of which were pursuant to term contracts at an average price
of $57.44 per pound. Revenues for the six months ended June 30, 2014 totaled
$24.89 million, of which $24.67 million were sales of uranium concentrates which
included the sale of 428,334 pounds of U3O8 pursuant to term contracts at an
average price of $57.60 per pound.
Operating Expenses
Production and Cost of Sales
For the three months ended June 30, 2015, due to the Companys
current campaign mode for uranium production, there was no production from the
Companys conventional operations and only 12 days of production from the
recently acquired ISR operations. For the three months ended June 30, 2014, the
Companys uranium production totaled approximately 230,000 pounds of U3O8, of
which 90,000 pounds were from alternate feed materials and 140,000 pounds were
from the Companys Arizona mines.
Cost of goods sold for the three months ended June 30, 2015
totaled $13.69 million, which consisted of $12.84 million of mining and milling
production costs and $0.85 million of depreciation, depletion and amortization.
Cost of goods sold for the three months ended June 30, 2014 totaled $8.73
million, which consisted of $7.88 million of mining and milling production costs
and $0.85 million of depreciation, depletion and amortization. The increase in
cost of goods sold is due to a higher sales volume in Q2-2015 vs Q2-2014.
For the six months ended June 30, 2015, the Companys uranium
production totaled approximately 200,000 pounds of U3O8, of which 110,000 pounds
were from alternate feed materials and other processing and 30,000 pounds were
from the Companys Arizona mines, and 60,000 pounds of U3O8 were processed under
a tolling arrangement for the account of a third party. For the six months ended
June 30, 2014, the Companys uranium production totaled approximately 350,000
pounds of U3O8, of which 220,000 pounds were from alternate feed materials and
130,000 pounds were from the Companys Arizona mines.
Cost of goods sold for the six months ended June 30, 2015
totaled $17.64 million, which consisted of $16.48 million of mining and milling
production costs and costs and $1.16 million of depreciation, depletion and
amortization. Cost of goods sold for the six months ended June 30, 2014 totaled
$17.30 million, which consisted of $15.35 million of mining and milling
production costs and $1.95 million of depreciation, depletion and amortization.
The increase in cost of goods sold is due to a higher sales volume in 2015 vs
2014 and a decrease in production costs associated alternate feed materials.
Selling, General and Administrative
Selling, general and administrative expense includes costs
associated with marketing uranium, the corporate general and administrative
costs, and the non-cash costs of amortization of above-market sales contract
value associated with the acquisition of Denisons US Mining Division in June
2012. General and administrative expenses consist primarily of payroll and
related expenses for personnel, contract and professional services, stock-based
compensation expense and other overhead expenditures. Selling, general and
administrative expenses totaled $3.97 million for the three months ended June
30, 2015 compared to $4.10 million for the three months ended June 30, 2014.
Selling, general and administrative expenses totaled $7.30 million for the six
months ended June 30, 2015 compared to $9.04 million for the six months ended
June 30, 2014.
Amortization of the intangible asset recorded for the U3O8 sales contract values in excess of spot price at the June 29, 2012 acquisition
date of Denisons US Mining Division totaled $1.26 million for the three months
ended June 30, 2015 and the three months ended June 30, 2014. For the six months
ended June 30,2015 intangible asset amortization totaled $1.80 million vs $2.39
million in the six months ended June 30, 2014. The amount for each period is
directly related to the revenue from uranium concentrate volumes sold each
period (discussed above), as all the revenues earned for the periods are from
the contracts acquired.
Selling expenses totaled $0.09 million and $0.16 million for
the three and six months ended June 30, 2015 compared to $0.06 million and $0.15
million for the three and six months ended June 30, 2014.
- 6 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
General and administrative expenses totaled $2.62 million and
$5.34 for the three and six months ended June 30, 2015 compared to $2.79 million
and $6.51 million for the three and six months ended June 30, 2014. The decrease
is mainly attributable to a reduction in share-based payment in 2015 vs
2014.
Care and Maintenance Expenses
The Companys Beaver, Pandora and Daneros mines were placed on
standby in the last quarter of calendar year 2012, as a result of market
conditions. In November 2013 the Company placed shaft sinking operations at its
Canyon mine on standby, and in February 2014 the Company placed its Arizona 1
mine on standby. Costs related to the care and maintenance of these and other
standby mines are generally decreasing due to the Companys increased cost
efficiencies, which are achieved once the mines are placed on standby. Beginning
in the fourth quarter of FY-2014 the mill began operating at a reduced level and
care and maintenance expenses include costs associated with maintaining
operational readiness at the White Mesa Mill while on stand-by or at a reduced
operating level. Changes in the decommissioning liability associated with the
White Mesa Mill are also included in these expenses.
Care and maintenance expenses totaled $0.20 million for the
three months ended June 30, 2015 consisting of $1.78 million related to direct
care and maintenance costs partially offset by reductions in the White Mesa Mill
decommissioning liability totaling $1.59 million, compared with $0.90 million
related to direct care and maintenance costs in the three months ended June 30,
2014.
Care and maintenance expenses totaled $3.06 million for the six
months ended June 30, 2015 consisting of $3.99 million related to direct care
and maintenance costs partially offset by reductions in the White Mesa Mill
decommissioning liability totaling $0.93 million, compared with $1.54 million
related to direct care and maintenance costs for the six months ended June 30,
2014.
The increases in the FY-2015 year-to-date direct care and
maintenance expenses are primarily attributable to maintaining the operational
readiness of the White Mesa Mill. The non-cash change in decommissioning
liabilities at the White Mesa Mill during the first half of FY-2015 is due
primarily to a change in discount rates.
Finance Income and Expenses
Finance expense was $2.07 million for the three months ended
June 30, 2015, and consists primarily of interest expense of $0.39 million,
accretion expense related to the decommissioning liability of $0.09 million and
a decrease in the mark-to-market values of the Companys convertible debentures
(the Debentures) totaling $1.60 million offset by Interest income of $0.02
million.
Finance income was $0.65 million for the three months ended
June 30, 2014, and consists of a change in the mark-to-market values of the
Debentures totaling $1.18 million partially offset by interest expense of $0.43
million and accretion expense related to the decommissioning liability of $0.10
million.
Finance expense was $1.82 million for the six months ended June
30, 2015, and consists of a change in the mark-to-market values of the
Debentures totaling $0.89 million, interest expense of $0.77 million and
accretion expense related to the decommissioning liability of $0.21 million,
partially offset by interest income of $0.04 million.
Finance expense was $2.76 million for the six months ended June
30, 2014, and consists primarily of a change in the mark-to-market values of the
Debentures totaling $1.91 million, interest expense of $0.86 million and
accretion expense related to the decommissioning liability of $0.21 million.
Other Income and Expenses
Other expense was $6.10 million and 6.18 million for the three
and six months ended June 30, 2015 vs $0.02 million and $0.13 million for the
three and six months ended June 30, 2014. Included in other expense are $6.59
million in transaction costs related to the acquisition of Uranerz partially
offset by a refund of property tax of $0.40 million.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2015, the Company had working capital of $41.59
million including $20.76 million in cash and approximately 650,000 pounds of
finished goods inventory. Our contractual deliveries and related sales are based
on delivery schedules which can vary from quarter to quarter. As discussed
above, the Company expects to sell an additional 391,666 pounds of finished goods during the
remainder of the year under existing contracts which will generate significant
cash for our operational needs. The Company believes it has sufficient cash and
resources to meet its current operational needs beyond calendar year 2015. As
discussed above in Outlook, the Company intends to expand and develop its
wellfields and may install additional process circuits at the Nichols Ranch
Project as well as complete development of its Canyon mine. Funding for these
development programs is expected to come from a combination of sales of product
and future financings.
- 7 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
Cash and Financial Condition
Cash and cash equivalents were $20.76 million at June 30, 2015,
compared to $10.41 million at December 31, 2014. The increase of $10.35 million
was due primarily to cash from investing activities of $5.56 million, cash from
operations of $5.52 million, cash used in financing activities of $0.67 million
and loss on foreign exchange on cash held of $0.07 million.
Net cash from investing activities was $5.56 million, which was
primarily related the release of cash deposited with regulatory agencies of
$5.27 million, the $2.46 million cash acquired in the acquisition of Uranerz
combined with expenditures for property, plant and equipment of $1.03 million
and exploration, evaluation, permitting and development activities of $1.13
million.
Net cash used in financing activities was the repayment of
borrowings in the amount of $0.02 million, interest paid on convertible
debentures of $0.75 million combined with $0.10 million of proceeds from the
issue of shares for options and warrant exercised.
Net cash from operating activities of $5.52 million is
comprised of the net loss of $4.67 million for the period adjusted for non-cash
items and for changes in operating assets and liabilities. Significant items not
involving cash were $3.01 million of depreciation and amortization of property,
plant and equipment and intangible assets and a $0.55 million adjustment to the
decommissioning liability at the Companys White Mesa Mill and other mining
properties and $4.45 million of other expense related to the acquisition of
Uranerz.
Contractual Obligations
The Company enters into commitments with federal and state
agencies and private individuals to lease mineral rights. These leases are
renewable annually, and lease payments are expected to total $2.55 million for
the year ended December 31, 2015.
The Company will continue to prudently evaluate its contractual
obligations with respect to mineral properties as well as other associated
commitments with an eye towards deferring those expenses which do not meet
certain criteria. In addition, since the majority of the exploration commitments
are optional, the Company could choose to mitigate or eliminate the obligation
by opting out of the lease or claim.
Contingencies
Legal matters
In November, 2012, the Company was served with a Plaintiffs
Original Petition and Jury Demand in the District Court of Harris County, Texas,
claiming unspecified damages from the disease and injuries resulting from
mesothelioma from exposure to asbestos, which the Plaintiff claims was
contributed to by being exposed to asbestos products and dust while working at
the White Mesa Mill. The Company does not consider this claim to have any merit,
and therefore does not believe it will materially affect the Companys financial
position, results of operations or cash flows. In January, 2013, the Company
filed a Special Appearance challenging jurisdiction and certain other procedural
matters relating to this claim.
In January, 2013, the Ute Mountain Ute tribe filed a Petition
to Intervene and Request for Agency Action challenging the Corrective Action
Plan approved by the State of Utah Department of Environmental Quality (UDEQ)
relating to nitrate contamination in the shallow aquifer at the White Mesa Mill
site. This challenge is currently being evaluated, and may involve the
appointment of an administrative law judge to hear the matter. The Company does
not consider this action to have any merit. If the petition is successful, the
likely outcome would be a requirement to modify or replace the existing
Corrective Action Plan. At this time, the Company does not believe any such
modification or replacement would materially affect the Companys financial
position, results of operations or cash flows. However, the scope and costs of remediation under a revised or
replacement Corrective Action Plan have not yet been determined and could be
significant.
- 8 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
In April 2014, the Grand Canyon Trust filed a citizen suit in
federal district court for alleged violations of the Clean Air Act at the White
Mesa Mill. In October 2014, the plaintiffs were granted leave by the court to
add further purported violations to their April 2014 suit. The Complaint, as
amended, alleges that radon from one of the Mills tailings impoundments
exceeded the standard; that the mill is in violation of a requirement that only
two tailings impoundments may be in operation at any one time; and that certain
other violations related to the manner of measuring and reporting radon results
from one of the tailings impoundments occurred in 2013. The Complaint asks the
court to impose injunctive relief, civil penalties of up to $38,000 per day per
violation, costs of litigation including attorneys fees, and other relief. The
Company believes the issues raised in the Complaint are being addressed through
the proper regulatory channels and that the Company is currently in compliance
with all applicable regulatory requirements relating to those matters. The
Company intends to defend against all issues raised in the Complaint.
In March, 2013, the Center for Biological Diversity, the Grand
Canyon Trust, the Sierra Club and the Havasupai Tribe (the Plaintiffs) filed a
complaint in the U.S. District Court for the District of Arizona (the District
Court) against the Forest Supervisor for the Kaibab National Forest and the
U.S. Forest Service (the USFS and together with the Forest Supervisor the
Defendants) seeking an order (a) declaring that the USFS failed to comply with
environmental, mining, public land, and historic preservation laws in relation
to the Companys Canyon mine, (b) setting aside any approvals regarding
exploration and mining operations at the Canyon mine, and (c) directing
operations to cease at the mine and enjoining the USFS from allowing any further
exploration or mining-related activities at the Canyon mine until the USFS fully
complies with all applicable laws. In April 2013, the Plaintiffs filed a Motion
for Preliminary Injunction, which was denied by the District Court in September,
2013. On April 7, 2015, the District Court issued its final ruling on the merits in favor of
the Defendants and the Company and against the Plaintiffs on all counts. The
Plaintiffs appealed the District Courts ruling on the merits to the Ninth
Circuit Court of Appeals, and filed motions for an injunction pending appeal
with the District Court. Those motions for an injunction pending appeal were
denied by the District Court on May 26, 2015. Thereafter, Plaintiffs filed
urgent motions for an injunction pending appeal with the Ninth Circuit Court of
Appeals, which were denied on June 30, 2015. Briefing on the appeal on the
merits is ongoing. If the Plaintiffs are successful on their appeal on the
merits, the Company may be required to place the mine on standby pending
resolution of the matter. Such a required prolonged stoppage of mine development
and mining activities could have a significant impact on future operations of
the Company.
Commencing in January 2015, the Company and Uranerz, as well as the former directors of Uranerz, were named
as defendants in a number of shareholder class action suits in the District
Court of Clark County, Nevada and the District Court of Washoe County, Nevada.
These suits generally allege claims for breach of fiduciary duty and related
claims regarding the acquisition of Uranerz by the Company (the Acquisition).
Plaintiffs seek, among other things, rescission of the Acquisition, attorneys
fees and costs. The Company, Uranerz and its former directors deny all
allegations and consider these allegations to be without merit. However, to
avoid the substantial burden, expense, risk, inconvenience and distraction of
continued litigation, in June 2015, the Company, Uranerz and its former
directors entered into a Memorandum of Understanding (MOU) with the Plaintiffs
in the Clark County litigation regarding the settlement of this litigation. The MOU outlines the terms of the
parties agreement in principal to settle and release all claims that were or
could have been asserted in the consolidated action. In consideration for such
settlement and release, on June 10, 2015, Uranerz provided certain additional
disclosures to those contained in its definitive proxy statement/prospectus
relating to the Acquisition. The proposed settlement contemplated in the MOU is
conditioned upon, among other things, execution of an appropriate stipulation of
settlement and final approval by the Court, which is expected to include an
award of Plaintiffs attorneys fees and expenses as part of the settlement. The Washoe County litigation has been stayed pending court approval
of the proposed settlement in Clark County. The
Company does not expect that the terms of any settlement will be material to the
Company. Although the Company has no reason to expect that this matter will not
be fully settled in accordance with the MOU, there can be no assurance at this
time of entering into a stipulation or Court approval of such stipulation.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
OUTSTANDING SHARE DATA
At August 6, 2015, there were 45,171,238 common shares issued
and outstanding, 3,507,513 warrants issued and outstanding to purchase a total
of 3,507,513 common shares, and 2,937,377 stock options outstanding to purchase
a total of 2,937,377 common shares and 184,979 restricted share units for a
total of 51,801,107 common shares on a fully-diluted basis. In addition, at June 30, 2015, there were
22,000 Debentures outstanding, convertible into a total of 1,466,667 common
shares.
- 9 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
CONTROLS AND PROCEDURES
Internal controls over financial reporting
The Chief Executive Officer and Chief Financial Officer of the
Company are responsible for designing internal controls over financial reporting
(ICFR) or causing them to be designed under their supervision in order to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with IFRS. The control framework that has been used is the COSO (2013)
framework. The Companys Chief Executive Officer and Chief Financial Officer
have concluded, based on their evaluation of the design of ICFR as of June 30,
2015, that the Companys ICFR provides reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
in accordance with IFRS (except for ICFR related to Uranerz, as discussed below).
Except as described below related to the acquisition of
Uranerz, there were no changes in the Companys internal controls over financial
reporting that occurred during the second quarter of 2015 that has materially
affected, or is reasonably likely to materially affect, the Companys internal
controls over financial reporting.
Disclosure controls and procedures
Disclosure controls and procedures (DC&P) have been
designed to provide reasonable assurance that all relevant information required
to be disclosed by the Company is accumulated and communicated to senior
management as appropriate to allow timely decisions regarding required
disclosure. The Companys Chief Executive Officer and Chief Financial Officer
have concluded, based on their evaluation of the design of the DC&P as of
June 30, 2015, that such disclosure controls and procedures provide reasonable
assurance that material information is made known to them by others within the
Company and are appropriately designed (except for DC&P related to Uranerz, as discussed below).
Acquisition of Uranerz
Effective June 18, 2015, the results of Uranerzs operations
have been included in the consolidated financial statements of the Company. The
Company has not had sufficient time to appropriately review, design or maintain
the internal controls implemented by Uranerz. The Company has therefore elected
to use the exemption available under Canadian National Instrument 52-109 for recently
acquired businesses, to limit the scope of the evaluation of DC&P and ICFR to exclude the
controls, policies and procedures at Uranerz from the June 30, 2015
certification of internal controls. The Company is in the process of integrating
Uranerz operations and will be expanding its DC&P and ICFR compliance program to include
Uranerz within the next year. The financial information for Uranerz is included
in the discussion regarding the acquisition contained in this MD&A and in
Note 5 of the consolidated financial statements. A summary of the financial
information for Uranerz, which was included in the consolidated financial
statements of the Company at June 30, 2015, is provided below:
|
|
Three months ended |
|
|
|
June 30, |
|
|
|
2015 |
|
|
|
$ |
|
Revenue |
|
- |
|
Net loss (1) |
|
(2,578 |
)
|
|
|
June 30, 2015 |
|
Current assets |
|
6,699 |
|
Non-current assets |
|
122,718 |
|
Total assets |
|
129,417
|
|
|
|
|
|
Current liabilities
|
|
(5,610 |
) |
Non-current liabilities |
|
(17,943 |
) |
Total Liabilities |
|
(23,553 |
) |
- 10 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
(1) |
Includes $2.58 million related to change in control
payments. |
CORPORATE GOVERNANCE POLICIES
The disclosure required pursuant to Canadian National Instrument 58-101
Disclosure of Corporate Governance Practices was made by the Company in
its Management Information Circular for its Annual and Special meeting held on
June 18, 2015, which was made available to shareholders and filed on SEDAR and EDGAR
for internet access for public viewing.
Critical accounting estimates and judgments
The preparation of these consolidated financial statements in
accordance with IFRS 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 Companys accounting policies. These judgments
and estimates are based on managements 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:
|
a. |
Reserves and resources |
Proven and probable reserves are the economically mineable
parts of the Companys measured and indicated mineral resources demonstrated by
at least a preliminary feasibility study. The Company estimates its proven and
probable reserves and measured, indicated and inferred mineral resources based
on information compiled by appropriately qualified persons. The information
relating to the geological data on the size, depth and shape of the ore body
requires complex geological judgments to interpret the data. The estimation of
future cash flows related to proven and probable reserves is based upon factors
such as estimates of foreign exchange rates, commodity prices, future capital
requirements and production costs along with geological assumptions and
judgments made in estimating the size and grade of the ore body. Changes in the
proven and probable reserves or measured, indicated and inferred mineral
resources estimates may impact the carrying value of property, plant and
equipment, goodwill, reclamation and remediation obligations, recognition of
deferred tax amounts and depreciation, depletion and amortization.
|
b. |
Depreciation, depletion and amortization of property,
plant and equipment |
Property, plant and equipment comprise a large component of the
Companys assets and, as such, the depreciation and amortization of those assets
have a significant effect on the Companys financial statements. Depreciation
and amortization of property, plant and equipment used in production is
calculated on a straight line basis or a unit-of-production basis as
appropriate.
Plant and equipment assets depreciated using a straight-line
basis results in the allocation of production costs evenly over the assets'
useful life defined as a period of time. Plant and equipment assets depreciated
on a units-of-production basis results in the allocation of production costs
based on current period production in proportion to total anticipated production
from the facility.
Mineral property assets are amortized using a
unit-of-production basis that allocates the cost of the asset to production cost
based on the current periods mined ore as a proportion of the total estimated
resources in the related ore body. The process of making these estimates
requires significant judgment in evaluating and assessing available geological,
geophysical, engineering and economic data, projected rates of production,
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 Companys property, plant and equipment and the recorded amount of
amortization, depletion and depreciation.
|
c. |
Valuation of long-lived assets |
The Company undertakes a review of the carrying values of
property, plant and equipment and intangibles 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 discounted net cash flows. An impairment loss is recognized when the
carrying value of those assets is not recoverable. In undertaking this review,
management of the Company is required to make significant estimates of,
amongst other things, future production and sale volumes, forecast commodity
prices, future operating and capital costs and reclamation costs to the end of
the mine or mills life. These estimates are subject to various risks and
uncertainties, which may ultimately have an effect on the expected
recoverability of the carrying values of plant, property and equipment and
intangibles.
- 11 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
Management uses judgment in applying the acquisition method of
accounting for business combinations and in determining fair values of the
identifiable assets and liabilities acquired. The value placed on the acquired
assets and liabilities, including identifiable intangible assets, will have an
effect on the amount of goodwill or bargain purchase gain that the Company may
record on an acquisition. Changes in economic conditions, commodity prices and
other factors between the date that an acquisition is announced and when it
finally is consummated can have a material difference on the allocation used to
record a preliminary purchase price allocation versus the final purchase price
allocation which can take up to one year after acquisition to complete.
|
e. |
Decommissioning liabilities |
Decommissioning liabilities are recorded as a liability when
the asset is initially constructed. The Company has accrued its best estimate of
its share of the cost to decommission its 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 the Companys decommissioning liability could differ from
amounts provided. The estimate of the Companys obligation is subject to change
due to amendments to applicable laws and regulations and as new information
concerning the Companys operations becomes available. The Company is not able
to determine the impact on its financial position, if any, of environmental laws
and regulations that may be enacted in the future.
|
f. |
Determination of significant
influence |
Management determines its ability to exercise significant
influence over an investment in shares of other companies by looking at its
percentage interest and other qualitative factors including but not limited to
its voting rights, representation on the board of directors, participation in
policy-making processes material transactions between the Company and the
associate, interchange of managerial personnel, provision of essential technical
information and operating involvement.
|
g. |
Determination whether an acquisition represents a
business combination or asset purchase |
Management determines whether an acquisition represents a
business combination or asset purchase by considering the stage of exploration
and development of an acquired operation. Consideration is given to whether the
acquired properties include mineral reserves or mineral resources, in addition
to the permitting required and results of economic assessments.
Future Accounting Changes
Transition to U.S. GAAP
In 2013, the Company listed its shares on the NYSE MKT, and
accordingly registered its securities under the Securities Exchange Act of 1934,
as amended (the Exchange Act). This registration subjected the Company to
ongoing reporting requirements under the Exchange Act. Under the
multijurisdictional disclosure system, Canadian issuers that meet the definition
of foreign private issuer under the rules of the United States Securities and
Exchange Commission (the SEC) are permitted to use Canadian disclosure
documents to largely satisfy their reporting requirements with the SEC. The
Company satisfied the requirements for foreign private issuer status until
June 30, 2015, at which time the acquisition of Uranerz caused the Company to have more than 50% of its outstanding voting securities
of record held either directly or indirectly by residents of the United States.
As a result of the Company ceasing to qualify as a foreign
private issuer, the Company will need to comply with the U. S. domestic issuer
reporting regime under the Exchange Act effective as of January 1, 2016. As a
U.S. domestic issuer, the Company will be required to file an annual report
on Form 10-K covering Fiscal 2015. The Company will also, as of January 1, 2016,
be required to file quarterly reports on Form 10-Q and current reports on Form
8-K under the Exchange Act and to comply with the SEC proxy rules under Section
14 of the Exchange Act and file an associated proxy statement for its Fiscal
2016 annual general meeting.
- 12 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
U.S. domestic issuers are required to prepare their financial
statements that are included in SEC filings in accordance with United States
Generally Accepted Accounting Principles (U.S. GAAP) and report in U.S.
dollars. Accordingly, the Companys annual report on Form 10-K must contain
audited annual financial statements prepared in accordance with U.S. GAAP
covering the fiscal year (and must recast prior financial statements and
selected financial data from IFRS into U.S. GAAP for all periods required to be
presented in the financial statements). The Company is currently evaluating the
impact on its financial statements of the conversion to U.S. GAAP.
The IASB issued the following new and revised standards and
amendments, which are not yet effective which may have future applicability to
the Company:
As a result of the conversion to U.S. GAAP, the following new
standards, and amendments to standards and interpretations, will not be
effective for the fiscal year ended December 31, 2015, and have not been applied
in preparing the Company's second fiscal quarter unaudited condensed
consolidated interim financial statements.
IFRS 15 Revenue from Contracts with Customers
On May 28, 2014 the IASB issued IFRS 15 Revenue from Contracts
with Customers. The new standard is effective for annual periods beginning on or
after January 1, 2017. Earlier application is permitted. IFRS 15 will replace
IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty
Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18
Transfer of Assets from Customers, and SIC 31 Revenue Barter Transactions
Involving Advertising Services. The Company intends to adopt IFRS 15 in its
financial statements for the annual period beginning on January 1, 2018. The
extent of the impact of adoption of the standard has not yet been determined.
IFRS 9 Financial Instruments
On July 24, 2014 the IASB issued the complete IFRS 9 (IFRS 9
(2014)). IFRS 9 (2014) introduces new requirements for the classification and
measurement of financial assets. Under IFRS 9 (2014), financial assets are
classified and measured based on the business model in which they are held and
the characteristics of their contractual cash flows. The Company intends to
adopt IFRS 9 (2014) in its financial statements for the annual period beginning
on January 1, 2018. The extent of the impact of adoption of the standard has not
yet been determined.
Amendments to IFRS 11
On May 6, 2014 the IASB issued Accounting for Acquisitions of
Interests in Joint Operations (Amendments to IFRS 11). The amendments require
business combination accounting to be applied to acquisitions of interests in a
joint operation that constitute a business. The amendments apply prospectively
for annual periods beginning on or after January 1, 2016. The Company intends to
adopt the amendments to IFRS 11 in its financial statements for the annual
period beginning on January 1, 2016. The extent of the impact of adoption of the
amendments has not yet been determined.
Amendments to IAS 16 and IAS 38
On May 12, 2014 the IASB issued amendments to IAS 16 Property,
Plant and Equipment and IAS 38 Intangible Assets. The amendments made to IAS 16
explicitly state that revenue-based methods of depreciation cannot be used for
property, plant and equipment. This is because such methods reflect factors
other than the consumption of economic benefits embodied in the asset. The
amendments in IAS 38 introduce a rebuttable presumption that the use of
revenue-based amortization methods for intangible assets is inappropriate. This
presumption could be overcome only when revenue and consumption of the economic
benefits of the intangible asset are highly correlated or when the intangible
asset is expressed as a measure of revenue. The Company intends to adopt the
amendments to IAS 16 and IAS 38 in its financial statements for the annual
period beginning on January 1, 2016. The extent of the impact of adoption of the
amendments has not yet been determined.
- 13 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
Amendments to IFRS 10 and IAS 28
On September 11, 2014 the IASB issued Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture (Amendments to
IFRS 10 and IAS 28). The amendments address an acknowledged inconsistency
between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with
the sale or contribution of assets between an investor and its associate or
joint venture (JV). Specifically, under the existing consolidation standard the
parent recognises the full gain on the loss of control, whereas under the
existing guidance on associates and JVs the parent recognises the gain only to
the extent of unrelated investors interests in the associate or JV. The main
consequence of the amendments is that a full gain/loss is recognised when the
assets transferred meet the definition of a business under IFRS 3 Business
Combinations. A partial gain/loss is recognised when the assets transferred do
not meet the definition of a business, even if these assets are housed in a
subsidiary. The Company intends to adopt these amendments in its financial
statements for the annual period beginning on January 1, 2016. The extent of the
impact of adoption of the amendments has not yet been determined.
Amendments to IAS 1
On December 18, 2014 the IASB issued amendments to IAS 1
Presentation of Financial Statements as part of its major initiative to improve
presentation and disclosure in financial reports (the Disclosure Initiative).
These amendments will not require any significant change to current practice,
but should facilitate improved financial statement disclosures. The Company
intends to adopt these amendments in its financial statements for the annual
period beginning on January 1, 2016. The extent of the impact of adoption of the
amendments has not yet been determined.
ADDITIONAL IFRS FINANCIAL PERFORMANCE MEASURES
The Company has included the additional IFRS measure Gross
Profit in the financial statements. Management noted that Gross Profit
provides useful information to investors as an indication of the Companys
principal business activities before consideration of how those activities are
financed, sustaining capital expenditures, corporate and exploration and
evaluation expenses, finance income and costs, and taxation.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) |
Fair value hierarchy: |
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value hierarchy establishes the
significance of the inputs used in making fair value measurements. The fair
value of financial assets and financial liabilities included in Level 1 are
determined by reference to quoted prices in active markets for identical assets
and liabilities.
The fair value of financial assets and financial liabilities in
Level 2 include valuations using inputs based on observable market data, either
directly or indirectly, other than quoted prices. Level 3 valuations are based
on inputs that are not based on observable market data. The Company has no
financial instruments measured at fair value categorized in Level 2 or 3
(valuation technique using non-observable market inputs) as at June 30,
2015.
As at June 30, 2015, the fair values of cash and cash
equivalents, restricted cash, short-term deposits, receivables, accounts payable
and accrued liabilities approximate their carrying values because of the
short-term nature of these instruments.
Financial assets and financial liabilities measured at fair
value on a recurring basis include:
- 14 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Marketable securities |
|
188 |
|
|
- |
|
|
- |
|
|
188 |
|
Derivative liability |
|
- |
|
|
(895 |
) |
|
- |
|
|
(895 |
) |
Convertible debentures |
|
(15,520 |
) |
|
- |
|
|
- |
|
|
(15,520 |
) |
|
$ |
(15,332 |
) |
$ |
(895 |
) |
$ |
- |
|
$ |
(16,227 |
) |
Credit risk relates to cash and cash equivalents and trade and
other receivables and arises from the possibility that any counterparty to an
instrument fails to perform. The Company only transacts with highly-rated
counterparties and a limit on contingent exposure has been established for any
counterparty based on that counterpartys credit rating. The Companys sales are
attributable mainly to three multinational utilities. As at June 30, 2015, the
Companys maximum exposure to credit risk was the carrying value of cash and
cash equivalents, trade receivables and taxes recoverable.
Liquidity risk is the risk the Company will not be able to meet
the obligations associated with its financial liabilities. The Company manages
liquidity risk through the management of its capital structure. The Company has
$41.59 million of working capital as at June 30, 2015 (December 31, 2014 -
$40.12 million). Accounts payable and accrued liabilities, current portion of
notes payable and current taxes payable are due within the current operating
year. The Companys financial liabilities and other commitments are listed in
Notes 11 and 15.
The following are the contractual maturities of financial
liabilities (undiscounted) outstanding as at June 30, 2015:
|
|
< 1 year |
|
|
1 to 2 years |
|
|
2 to 5 years |
|
|
Thereafter |
|
|
Total |
|
Accounts payable and accrued
liabilities |
$ |
3,164 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
3,164 |
|
Loans
and borrowings |
|
3,192 |
|
|
4,725 |
|
|
24,924 |
|
|
3,816 |
|
|
36,657 |
|
|
$ |
6,356 |
|
$ |
4,725 |
|
$ |
24,924 |
|
$ |
3,816 |
|
$ |
39,821 |
|
(e) |
Foreign 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.
The following table summarizes, in United States dollar
equivalents, the Companys major foreign currency (Cdn$) exposures as of June
30, 2015:
Cash and cash equivalents |
$ |
646 |
|
Accounts payable and accrued liabilities |
|
(1,767 |
) |
Loans and borrowings |
|
15,520 |
|
Total |
$ |
14,400 |
|
The table below summarizes a sensitivity analysis for
significant unsettled currency risk exposure with respect to the Companys
financial instruments as at June 30, 2015 with all other variables held
constant. It shows how net income would have been affected by changes in the
relevant risk variable that were reasonably possible at that date.
|
|
Change for |
|
|
Increase (decrease) in other |
|
|
|
Sensitivity Analysis |
|
|
comprehensive income |
|
Strengthening net earnings
|
|
+1% change in
U.S. dollar |
|
$ |
180 |
|
Weakening net earnings |
|
-1% change in U.S. dollar |
|
|
($180) |
|
- 15 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
The Company is also exposed to an interest rate risk associated
with the Debentures which is based on the spot market price of
U3O8. The Company does not use derivatives to manage
interest rate risk. The following chart displays the interest rate at various
U3O8 price levels.
UxC U3O8 Weekly Indicator Price |
|
Annual Interest Rate |
|
Up to $54.99 |
|
8.50% |
|
$55.00 $59.99 |
|
9.00% |
|
$60.00 $64.99 |
|
9.50% |
|
$65.00 $69.99 |
|
10.00% |
|
$70.00 $74.99 |
|
10.50% |
|
$75.00 $79.99 |
|
11.00% |
|
$80.00 $84.99 |
|
11.50% |
|
$85.00 $89.99 |
|
12.00% |
|
$90.00 $94.99 |
|
12.50% |
|
$95.00 $99.99 |
|
13.00% |
|
$100 and above |
|
13.50% |
|
QUALIFIED PERSON
The disclosure of scientific and technical information
regarding Energy Fuels properties in this MD&A was prepared under the
supervision of Stephen P. Antony, P.E. President and Chief Executive Officer of
Energy Fuels, who is a Qualified Person in accordance with the requirements of
National Instrument 43-101.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This MD&A contains forward looking information and forward
looking statements within the meaning of applicable Canadian and United States
securities laws. Those statements appear in a number of places in this MD&A
and include, but are not limited to, statements and information regarding the
Companys current intent, belief or expectations primarily with respect to: the
Companys business objectives and plans; exploration and development plans and
expenditures; estimation of mineral resources and reserves; mineral grades;
Energy Fuels expectations regarding additions to its mineral reserves and
resources through acquisitions and development; success of the Company's
permitting efforts, including receipt of regulatory approvals, permits and
licenses and treatment under governmental regulatory regimes and the expected
timeframes for receipt of such approvals, permits, licenses and treatments;
possible impacts of regulatory actions; capital expenditures; expansion plans;
success of the Company's mining and/or milling operations; availability of
equipment and supplies; availability of alternate feed materials for processing;
the Companys processing technologies; future production costs, including costs
of labor, energy, materials and supplies; future effective tax rates; future
benefits costs; future royalties payable; the outcome and possible impacts of
disputes and legal proceedings in which the Company is involved; the timing and
amount of estimated future production, including Energy Fuels expectations
regarding expected price levels required to support production and the Companys
ability to increase production as market conditions warrant; sales volumes and
future uranium and vanadium prices and treatment charges; the Companys
expectations with regard to obtaining term sales contracts; future trends in the
Companys industry; global economic growth and industrial demand; global growth
in and/or attitudes towards nuclear energy; changes in global uranium and
vanadium and concentrate inventories; expected market fundamentals, including
the supply and demand for uranium and vanadium; the Companys and industrys
expectations relating to future prices of uranium and vanadium; currency
exchange rates; environmental risks; reclamation costs, including unanticipated
reclamation expenses; collateral requirements for surety bonds; title disputes
or claims; the adequacy of insurance coverage; and legal proceedings and the
potential outcomes therefrom.
- 16 -
ENERGY
FUELS INC. |
Managements Discussion and Analysis |
Three and Six Months Ended June 30, 2015 |
(Expressed in
thousands of U.S. Dollars, Unless Otherwise Noted) |
In certain cases, forward looking statements can be identified
by the use of words such as plans, expects or does not expect, is
expected, is likely, budget, scheduled, estimates, forecasts,
intends, anticipates or does not anticipate, continue, or believes,
and similar expressions, or variations of such words and phrases or statements
that certain actions, events or results may, could, would, might or
will be taken, occur or be achieved.
Forward-looking statements are based on the opinions and
estimates of management as of the date such statements are made. Energy Fuels
believes that the expectations reflected in this forward-looking information are
reasonable but no assurance can be given that these expectations will prove to
be correct, and such forward-looking information included in this MD&A
should not be unduly relied upon. This information speaks only as of the date of
this MD&A. Readers are cautioned that it would be unreasonable to rely on
any such forward looking statements and information as creating any legal
rights, and that the statements and information are not guarantees and may
involve known and unknown risks and uncertainties, and that actual results are
likely to differ (and may differ materially) and objectives and strategies may
differ or change from those expressed or implied in the forward looking
statements or information as a result of various factors. Such risks and
uncertainties include risks generally encountered in the development and
operation of mineral properties and processing facilities such as: risks
associated with mineral and resource estimates, including the risk of errors in
assumptions or methodologies; risks associated with estimating production,
forecasting future price levels necessary to support production, and the
Companys ability to increase production in response to any increases in
commodity prices; uncertainties and liabilities inherent in mining operations;
geological, technical and processing problems, including unanticipated
metallurgical difficulties, ground control problems, process upsets and
equipment malfunctions; risks associated with labour disturbances and
unavailability of skilled labour; risks associated with the availability and/or
fluctuations in the costs of raw materials and consumables used in the Company's
production processes; risks associated with environmental compliance and
permitting, including those created by changes in environmental legislation and
regulation and delays in obtaining permits and licenses that could impact
expected production levels or increases in expected production levels; actions
taken by regulatory authorities with respect to mining and processing
activities; risks associated with the Companys dependence on third parties in
the provision of transportation and other critical services; title risks; risks
associated with the ability of the Company to extend or renew mineral leases on
favorable terms or at all; risks associated with the ability of the company to
negotiate access rights on certain properties on favorable terms or at all; the
adequacy of insurance coverage; uncertainty as to reclamation and
decommissioning liabilities; the ability of the Companys bonding companies to
require increases in the collateral required to secure reclamation obligations;
the potential for, and outcome of, litigation and other legal proceedings,
including potential injunctions pending the outcome of such litigation and
proceedings; the ability of Energy Fuels to meet its obligations to its
creditors; risks associated with the Companys relationships with its business
and joint venture partners; failure to obtain industry partner, government and
other third party consents and approvals, when required; competition for, among
other things, capital, acquisitions of mineral reserves, undeveloped lands and
skilled personnel; failure to complete proposed acquisitions and incorrect
assessments of the value of acquisitions; risks posed by fluctuations in
exchange rates and interest rates, as well as general economic conditions; risks
inherent in the Companys and industrys forecasts or predictions of future
uranium and vanadium price levels; fluctuations in the market prices of uranium
and vanadium, which are cyclical and subject to substantial price fluctuations;
failure to obtain suitable term contracts for the sale of uranium; the risks
associated with asset impairment as a result of decreases in uranium prices;
risks associated with lack of access to markets and the ability to access
capital; the market price of Energy Fuels securities; public resistance to
nuclear energy or uranium mining; and uranium industry competition and
international trade restrictions.
The Company cautions that the foregoing list of assumptions,
risks and uncertainties is not exhaustive. Additional information on these and
other factors which could affect operations or financial results are included
under the heading Risk Factors in the Companys Annual
Information Form dated March 18, 2015 available at
http://www.sedar.com, and in its Annual Report on Form 40-F
and Uranerz' Annual Report on Form 10-K, both
available at http://www.sec.gov/edgar.shtml. The
forward-looking statements and forward-looking information contained in this
MD&A and the documents incorporated by reference herein are expressly
qualified by this cautionary statement. The Company does not undertake any
obligation to publicly update or revise any forward looking statements to
reflect actual results, changes in assumptions or changes in other factors
affecting any forward looking statements or information except as expressly
required by applicable securities laws. If the Company does update one or more
forward looking statements, no inference should be drawn that the Company will
make additional updates with respect to those or other forward looking
statements.
Cautionary Note to United States Investors Concerning
Estimates of Measured, Indicated and Inferred Resources: This MD&A may
use the terms Measured, Indicated and Inferred Resources. United States
investors are advised that, while such terms are recognized and required by
Canadian regulations, the United States Securities and Exchange Commission does not recognize
them. Inferred Mineral Resources have a great amount of uncertainty as to
their existence, and as to their economic and legal feasibility. It cannot be
assumed that all or any part of an Inferred Mineral Resource will ever be
upgraded to a higher category. Under Canadian rules, estimates of Inferred
Mineral Resources may not form the basis of feasibility or other economic
studies. United States investors are cautioned not to assume that all or any
part of Measured or Indicated Mineral Resources will ever be converted into
Mineral Reserves. United States investors are also cautioned not to assume that
all or any part of an Inferred Mineral Resource exists, or is economically or
legally mineable.
- 17 -
CONSENT OF STEPHEN P. ANTONY
I consent to the inclusion in the Managements Discussion and
Analysis of Energy Fuels Inc. (the Company) for the three and six months ended
June 30, 2015 (the MD&A), of references to my name with respect to the
disclosure of scientific and technical information regarding the Companys
properties (the Technical Information).
I also consent to the incorporation by reference in the
Companys Registration Statement on Form F-10 (No. 333-194916), as amended,
filed with the United States Securities and Exchange Commission, of the
references to my name and the Technical Information in the MD&A.
.
/s/ Stephen P. Antony
Name: Stephen P. Antony, P.E.
Title: President
and Chief Executive
Officer, Energy Fuels Inc.
Date: August 7, 2015
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Stephen P. Antony, Chief Executive Officer of Energy
Fuels Inc., certify the following:
1. |
Review: I have reviewed the interim
financial statements and interim MD&A (together, the interim
filings) of Energy Fuels Inc. (the issuer) for the
interim period ended June 30, 2015. |
|
|
2. |
No misrepresentations: Based on my
knowledge, having exercised reasonable diligence, the interim filings do
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated or that is necessary to make a
statement not misleading in light of the circumstances under which it was
made, with respect to the period covered by the interim filings. |
|
|
3. |
Fair presentation: Based on my knowledge,
having exercised reasonable diligence, the interim financial statements
together with the other financial information included in the interim
filings fairly present in all material respects the financial condition,
results of operations and cash flows of the issuer, as of the date of and
for the periods presented in the interim filings. |
|
|
4. |
Responsibility: The issuers other
certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (DC&P) and internal control over
financial reporting (ICFR), as those terms are defined in National
Instrument 52-109 Certification of Disclosure in Issuers Annual and
Interim Filings, for the issuer. |
|
|
5. |
Design: Subject to the limitations, if any,
described in paragraphs 5.2 and 5.3, the issuers other certifying officer
and I have, as at the end of the period covered by the interim
filings: |
|
(a) |
designed DC&P, or caused it to be designed under our
supervision, to provide reasonable assurance
that: |
|
(i) |
material information relating to the issuer is made known
to us by others, particularly during the period in which the interim
filings are being prepared; and |
|
|
|
|
(ii) |
information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it
under securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities legislation;
and |
|
(b) |
designed ICFR, or caused it to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with the issuers
GAAP. |
- 2 -
5.1 |
Control framework: The control framework
the issuers other certifying officer(s) and I used to design the issuers
ICFR is the Internal Control Integrated Framework (2013) issued
by the Committee for Sponsoring Organizations of the Treadway
Commission. |
|
|
5.2 |
N/A |
|
|
5.3 |
Limitation on scope of design: The issuer
has disclosed in its interim MD&A |
|
(a) |
the fact that the issuers other certifying officer and I
have limited the scope of our design of DC&P and ICFR to exclude
controls, policies and procedures of a business that the issuer acquired
not more than 365 days before the last day of the period covered by the
interim filings; and |
|
|
|
|
(b) |
summary financial information about the business that the
issuer acquired that has been consolidated in the issuers financial
statements. |
6. |
Reporting changes in ICFR: The issuer has
disclosed in its interim MD&A any change in the issuers ICFR that
occurred during the period beginning on April 1, 2015 and ended on
June 30, 2015 that has materially affected, or is reasonably likely
to materially affect, the issuers ICFR. |
Date: August 7, 2015
Signed (Stephen P.
Antony)
Stephen P. Antony
Chief Executive Officer
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Daniel G. Zang, Chief Financial Officer of Energy
Fuels Inc., certify the following:
1. |
Review: I have reviewed the interim
financial statements and interim MD&A (together, the interim
filings) of Energy Fuels Inc. (the issuer) for the
interim period ended June 30, 2015. |
|
|
2. |
No misrepresentations: Based on my
knowledge, having exercised reasonable diligence, the interim filings do
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated or that is necessary to make a
statement not misleading in light of the circumstances under which it was
made, with respect to the period covered by the interim filings. |
|
|
3. |
Fair presentation: Based on my knowledge,
having exercised reasonable diligence, the interim financial statements
together with the other financial information included in the interim
filings fairly present in all material respects the financial condition,
results of operations and cash flows of the issuer, as of the date of and
for the periods presented in the interim filings. |
|
|
4. |
Responsibility: The issuers other
certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (DC&P) and internal control over
financial reporting (ICFR), as those terms are defined in National
Instrument 52-109 Certification of Disclosure in Issuers Annual and
Interim Filings, for the issuer. |
|
|
5. |
Design: Subject to the limitations, if any,
described in paragraphs 5.2 and 5.3, the issuers other certifying officer
and I have, as at the end of the period covered by the interim
filings: |
|
(a) |
designed DC&P, or caused it to be designed under our
supervision, to provide reasonable assurance
that: |
|
(i) |
material information relating to the issuer is made known
to us by others, particularly during the period in which the interim
filings are being prepared; and |
|
|
|
|
(ii) |
information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it
under securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities legislation;
and |
|
(b) |
designed ICFR, or caused it to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with the issuers
GAAP. |
- 2 -
5.1 |
Control framework: The control framework
the issuers other certifying officer(s) and I used to design the issuers
ICFR is the Internal Control Integrated Framework (2013) issued
by the Committee for Sponsoring Organizations of the Treadway
Commission. |
|
|
5.2 |
N/A |
|
|
5.3 |
Limitation on scope of design: The issuer
has disclosed in its interim MD&A |
|
(a) |
the fact that the issuers other certifying officer and I
have limited the scope of our design of DC&P and ICFR to exclude
controls, policies and procedures of a business that the issuer acquired
not more than 365 days before the last day of the period covered by the
interim filings; and |
|
|
|
|
(b) |
summary financial information about the business that the
issuer acquired that has been consolidated in the issuers financial
statements. |
6. |
Reporting changes in ICFR: The issuer has
disclosed in its interim MD&A any change in the issuers ICFR that
occurred during the period beginning on April 1, 2015 and ended on
June 30, 2015 that has materially affected, or is reasonably likely
to materially affect, the issuers ICFR. |
Date: August 7, 2015
Signed (Daniel G. Zang)
Daniel G.
Zang
Chief Financial Officer
Energy Fuels Announces Quarterly Results for the Three Months
Ended June 30, 2015
|
Completion of acquisition of Uranerz Energy
Corporation, adding existing, permitted in situ
recovery (ISR) production to the Companys portfolio
|
|
|
|
Strong cash balance, working capital position, sales
revenue, & gross profit |
|
Production at Pinenut Mine extended into Q3-2015
|
|
Newly acquired Nichols Ranch Project provides Energy
Fuels with significant near-term production scalability and the
flexibility to regulate production in response to market
conditions |
|
|
|
Recent acquisition of properties adjacent to the
Companys Roca Honda project in July 2015 which contain significant
historical uranium resources, additional exploration potential, and
the availability to historic mine infrastructure.
|
Lakewood, Colorado August 7, 2015
Energy Fuels Inc. (NYSE MKT:UUUU; TSX:EFR) (Energy Fuels
or the Company) today reported its financial results for the three months
ended June 30, 2015. The Companys Quarterly Consolidated Financial Statements,
along with Managements Discussion and Analysis are available through its
filings with the securities regulatory authorities in Canada on the System for
Electronic Document Analysis and Retrieval (SEDAR) and may be viewed at
www.sedar.com, and in the United States on the Electronic Document
Gathering and Retrieval System (EDGAR) which, along with the Companys
quarterly report on Form 6-K, may be viewed at www.sec.gov/edgar.shtml,
and on the Companys website at www.energyfuels.com. Unless noted
otherwise, all dollar amounts are in US dollars.
Stephen P. Antony, the Companys President and CEO, stated:
Energy Fuels continues to execute our disciplined, flexible business plan, as
we strengthen our position as a leading U.S. uranium producer. As our second
quarter results demonstrate, Energy Fuels current uranium production, cash
position, balance sheet, sales contract portfolio, and production scalability
continue to differentiate us from our peers in the U.S. uranium space. In
addition, we made two tactical acquisitions since the end of the first quarter
of 2015 Uranerz Energy Corporation, and properties adjacent to our Roca Honda
Project that provide us with flexibility, additional premium-priced sales
contracts with major nuclear utilities, enhanced project economics, and the
ability to increase both near-term and future production. Although uranium
prices have been generally flat during the summer, we are encouraged by
continued strong long-term market fundamentals, including the first Japanese
nuclear reactor expected to restart soon, the continued aggressive build-out of
Chinas nuclear sector, large uncovered utility demand in the mid- to long-term,
and dropping production at certain uranium mines.
1
Financial and Operational Highlights for the Three Months
ended June 30, 2015:
|
$23.71 million of total revenue was realized by the
Company. |
|
Gross Profit of $10.02 million from mining and milling
operations was realized by the Company, representing a gross profit margin
of approximately 42%. |
|
A net loss of $2.31 million was realized by the Company.
|
|
416,667 pounds of U3O8 sales were
completed by the Company at an average realized price of $56.74 per pound,
pursuant to existing term contracts. |
|
At June 30, 2015, the Company had $41.59 million of
working capital, including cash and cash equivalents of $20.76 million and
approximately 650,000 pounds of uranium concentrate inventory. The
Companys contractual deliveries and related sales are based on delivery
schedules which can vary from quarter to quarter. As discussed below, the
Company expects to sell an additional 391,667 pounds of
U3O8 during the remainder of the year under existing
contracts, which will generate significant cash for the Companys
operational needs. |
|
On June 18, 2015, the Company acquired all of the issued
and outstanding shares of Uranerz Energy Corporation (Uranerz). Uranerz
is currently producing from its 100%-owned Nichols Ranch Project, an in
situ recovery (ISR) operation located in Wyomings Powder River
Basin. Upon completion of the transaction on June 18, 2015, shareholders
of Uranerz received 0.255 common shares of Energy Fuels for each share of
Uranerz common stock held. |
|
In June 2015, the Company joined the Russell 2000®,
Russell 3000®, Russell Global®, and Russell Microcap® Indices, thereby
enhancing the Companys visibility in the marketplace. |
|
The Company has resumed development at its high-grade
Canyon Mine, located in northern Arizona, including the installation of
new mine equipment to optimize shaft sinking rates and subsequent
construction cost savings. The development of the Canyon mine is currently
expected to be completed in time to allow for U3O8
production in FY-2017. The Company expects to transition mining
personnel from the Pinenut mine to the Canyon mine during Q3-2015.
|
|
On July 31, 2015, the Company acquired key mineral
properties adjacent to its Roca Honda Project in New Mexico from Uranium
Resources Inc. (URI). The properties, which total 4,580 acres, provide
the Company with significant historical uranium resources, the potential
use of existing onsite mine infrastructure including a partially-sunk
historic mine shaft, and the opportunity for enhanced project economics.
In consideration for the properties, the Company delivered to URI at
closing: $2.5 million in cash, $375,000 of Energy Fuels common shares; a
royalty on properties in a later phase of Peninsula Energys Lance Uranium
Project; unpatented lode mining claims adjacent to URIs Church Rock
Project; and a 4% gross royalty on one section (640-acres), which can be
repurchased by Energy Fuels upon payment to URI of $5.0 million cash at
any time in the Companys sole discretion prior to the date on which the
first royalty becomes due. |
|
On July 16, 2015, the State of Wyoming granted the
Company approval for a major revision to the existing mining permit for
its 100%-owned Sheep Mountain Project, including expansion of surface and
underground mining. This is considered a major milestone in the permitting
process for this facility. The Sheep Mountain Project is one of the
largest uranium development projects in the U.S. today. |
|
On July 21, 2015, the U.S. Bureau of Land Management
(BLM) issued a Final Environmental Assessment (EA) and granted its
approval for the Plan of Operations for the Companys 100%- owned Hank ISR
Uranium Project in Wyoming. The issuance of the EA and approval of the
Plan of Operations were the final major regulatory approvals required for
the Hank Unit. The Hank Unit is licensed to be developed in the future as
a satellite operation to the Companys 100%-owned Nichols Ranch ISR Plant. The Company continues to evaluate
other production options, including connecting the Hank Unit to the Nichols
Ranch ISR Plant via a pipeline. |
2
Selected Summary Financial Information:
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
$000, except per share data |
|
June 30, 2015 |
|
|
June 30, 2015 |
|
Results of Operations: |
|
|
|
|
|
|
Total revenues |
$ |
23,705 |
|
$ |
31,305 |
|
Gross profit |
|
10,019 |
|
|
13,668 |
|
Net income (loss) |
|
(2,313 |
) |
|
(4,674 |
) |
Basic and diluted earnings (loss) per share |
|
(0.10 |
) |
|
(0.22 |
) |
|
|
As at June 30, |
|
|
As at December 31, |
|
$000's |
|
2015 |
|
|
2014 |
|
Financial Position: |
|
|
|
|
|
|
Working capital |
$ |
41,591 |
|
$ |
38,604 |
|
Property, plant and equipment |
|
127,870 |
|
|
65,873 |
|
Total assets |
|
269,378 |
|
|
134,241 |
|
Total long-term liabilities |
|
49,265 |
|
|
30,956 |
|
Overview:
With the acquisition of the ISR operation at Nichols Ranch,
Energy Fuels has significantly increased its flexibility to regulate production
in response to future market conditions and to meet the needs of its sales
contracts. At the same time, significant additional production can be brought on
line within months after a production decision is made. This allows the Company
to efficiently fulfil its existing sales commitments and be able to commit to
new sales commitments backed by available production. The Company has the
following production capabilities which can be brought on line and/or production
levels increased over the next 18 months (each of which is more fully described
below):
|
1) |
Nichols Ranch ISR Project. |
|
2) |
Alternate feed materials. |
|
3) |
Pinenut Mine ore that has been mined and is available for
milling. |
|
4) |
The Canyon Mine. |
Production and Operations ISR Uranium Assets
The Nichols Ranch facility has been producing uranium since
April 2014. At June 30, 2015 five header houses were in production. The Company
plans to complete three additional header houses during the next 12 months,
which will complete the development of production area #1. We expect the Nichols
Ranch facility to produce approximately 140,000 pounds of finished goods in the
second half of FY-2015. The timing of production from production area #1 and the
timing of further development of this project beyond FY-2015 will be based on
sales requirements.
3
Permitting at our adjacent Jane Dough Unit, which will feed the
Nichols Ranch plant, is continuing and is expected to be completed well in
advance of our need to begin wellfield development on this property. Also, our
Hank Unit is now fully permitted as a satellite facility to Nichols Ranch.
Production and Operations Conventional Uranium Assets
The White Mesa Mill has historically operated on a campaign
basis, whereby mineral processing occurs as mill feed, cash needs, contract
requirements, and/or market conditions may warrant. The Company expects the
current mineral processing campaign at the White Mesa Mill to conclude in the
second half of 2015, resulting in the production of approximately 90,000 pounds
of finished goods in the second half of FY-2015. Once the current campaign
concludes at the White Mesa Mill, the Company expects to continue to receive and
stockpile ore from the Pinenut mine and alternate feed materials. At this time,
the Company does not expect to schedule a mineral processing campaign during the
remainder of FY-2015, though the Company is maintaining the flexibility to
resume processing stockpiled or other materials at the White Mesa Mill should
market conditions or cash needs warrant.
The Company plans to continue mining at the Pinenut mine until
the economic resources are depleted, which is now estimated to occur by the end
of August 2015. The ore mined at the Pinenut mine has been and is continuing to
be shipped to the White Mesa Mill and stockpiled for processing in a future
campaign based on sales requirements.
The Company has re-started its development of the Canyon mine
and has completed necessary upgrades to the infrastructure as well as installed
new mine equipment to optimize shaft sinking rates and subsequent construction
cost savings. The development of the Canyon mine is currently expected to
be completed in time to allow for U3O8 production in
FY-2017.
The Company also plans to continue to maintain, and update as
necessary, all permits on its other existing mines. These mines will remain on
standby until market conditions improve or the material can be sold into
long-term contracts at pricing that supports production. The Company plans to
continue priority permitting efforts and spend $1.10 million in FY-2015 on this
work.
Sales
The Company forecasts the second half of FY-2015 sales to
total approximately 391,667 pounds of U3O8, which will be sold into existing long-term contracts. Energy
Fuels expects to receive an average realized price of $57.05 per pound of U3O8 sold during the second half of FY-2015 across all of its contracts.While the Company does not expect to make any sales into the
spot market during the second half of FY-2015, it will continue to monitor
market conditions for sales opportunities if economically justified and/or to
generate cash for operations and critical development work.
For FY-2016 and FY-2017, the Company forecasts sales under
existing long-term contracts to total approximately 650,000 pounds and 620,000
pounds of U3O8, respectively, which include
deliveries of
200,000 lbs. of U3O8 in each of
FY-2016 and FY-2017 under contracts acquired through the acquisition of
Uranerz.
4
Current inventory, purchase commitments and production
estimates
At June 30, 2015 the Company had approximately 650,000 pounds
of finished goods inventory and has a purchase commitment for 150,000 pounds to
be delivered in the third quarter of this year. As discussed above, the Company
expects to produce approximately 230,000 pounds from its facilities during the
second half of 2015. By the end of this fiscal year we expect to have sufficient
finished product to fulfill all delivery requirements for FY-2016 (650,000
pounds).
For FY-2017 deliveries (620,000 pounds) the Company has the
ability to produce approximately 900,000 pounds in FY-2016 and over 1.0 million
pounds in FY-2017. The Company plans to produce amounts necessary to fulfil all
of its existing or new sales commitments.
Development activities and capital requirements
As discussed above, over the next 12 months the Company plans
to continue to develop the Canyon mine and complete wellfield development
through production area #1 at Nichols Ranch. In addition, the Company may
install additional process circuits at Nichols Ranch to allow the Company to
produce final yellowcake product from its facilities. The Company is also
currently evaluating an accelerated wellfield development program at Nichols
Ranch. The Company plans to fund its development activities through a
combination of sales of product and future financings.
Stephen P. Antony, P.E., President & CEO of Energy
Fuels, is a Qualified Person as defined by National Instrument 43-101
and has reviewed and approved the technical disclosure contained in this news
release.
About Energy Fuels: Energy Fuels is a leading
integrated US-based uranium mining company, supplying
U3O8
to major nuclear utilities. Energy Fuels operates two of Americas key uranium
production centers,
the White Mesa Mill in Utah and the Nichols Ranch Processing
Facility in Wyoming. The White Mesa Mill is the only conventional uranium mill
operating in the U.S. today and has a licensed capacity of over 8
million pounds of
U3O8 per year. The
Nichols Ranch Processing Facility, acquired in the Companys
acquisition of Uranerz Energy Corporation, is an in situ
recovery (ISR) production center with a licensed
capacity of 2 million pounds of
U3O8 per year.
Energy Fuels also has the largest NI 43-101 compliant
uranium resource portfolio in the U.S. among producers, and
uranium mining projects located in a number of Western U.S. states, including
two producing mines, mines on standby, and mineral properties in various stages
of permitting and development. The Companys common shares are listed on the
NYSE MKT under the trading symbol UUUU, and on the Toronto Stock Exchange
under the trading symbol EFR.
ADDITIONAL IFRS FINANCIAL PERFORMANCE MEASURES
The Company has included the additional IFRS measure of
Gross Profit in the financial statements and in this news release. Management
noted that Gross Profit provides useful information to investors as an
indication of the Companys principal business activities before consideration
of how those activities are financed, sustaining capital expenditures, corporate
and exploration and evaluation expenses, finance income and costs, and taxation.
5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This news release contains certain Forward Looking
Information and Forward Looking Statements within the meaning of applicable
Canadian and United States securities legislation, which may include, but is not
limited to, statements with respect to the future financial or operating
performance of the Company and its projects and with respect to the market
outlook, including: production and sales forecasts; expected timelines for the
development of projects; the Companys expectations as to longer term
fundamentals in the market and price projections; the Companys expectations as
to expenditures and cost reductions; the Companys ability to preserve its cash
resources, maintain its resource base and be able to restart production as
market conditions warrant; the ability of the Company to realize the expected
benefits of the acquisition of Uranerz and to become or maintain its position as
a leading uranium company in the United States. Generally, these forward-looking
statements can be identified by the use of forward-looking terminology such as
plans, expects does not expect, is expected, is likely, budget
scheduled, estimates, forecasts, intends, anticipates, does not
anticipate, or believes, or variations of such words and phrases, or state
that certain actions, events or results may, could, would, might or
will be taken, occur, be achieved or have the potential to. All
statements, other than statements of historical fact, herein are considered to
be forward-looking statements. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements express or implied by the
forward-looking statements. Factors that could cause actual results to differ
materially from those anticipated in these forward-looking statements include:
risks associated with estimating production, forecasting future price levels
necessary to support production, and the Companys ability to increase
production in response to any increases in commodity prices; risks inherent in
the Companys and industrys forecasts or predictions of future uranium prices;
risks of delays in obtaining permits and licenses that could impact expected
production levels or increases in expected production levels; risks in meeting
expected timelines for the development of projects; government and third party
actions with respect to supplies of secondary sources of uranium; fluctuations
or changes in the market prices of uranium; risks associated with the
integration of Uranerz; and the other factors described under the caption Risk
Factors in the Companys Annual Information Form dated March 18, 2015, which is
available for review on SEDAR at www.sedar.com, and in its Form 40-F and Uranerz'
Form 10-K, both of which are
available for review on EDGAR at www.sec.gov/edgar.shtml. Forward-looking
statements contained herein are made as of the date of this news release, and
the Company disclaims, other than as required by law, any obligation to update
any forward-looking statements whether as a result of new information, results,
future events, circumstances, or if managements estimates or opinions should
change, or otherwise. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly, the reader is
cautioned not to place undue reliance on forward-looking statements.
The Company assumes no obligation to update the information
in this communication, except as otherwise required by law. Additional
information identifying risks and uncertainties is contained in Energy Fuels
filings with the various securities commissions which are available online at
www.sec.gov and www.sedar.com. Forward-looking statements are provided
for the purpose of providing information about the current expectations, beliefs and plans of the
management of Energy Fuels relating to the future. Readers are cautioned that
such statements may not be appropriate for other purposes. Readers are also
cautioned not to place undue reliance on these forward-looking statements, that
speak only as of the date hereof.
6
Investor Inquiries:
Energy Fuels Inc.
Curtis Moore
VP Marketing
and Corporate Development
(303) 974-2140 or Toll free: (888) 864-2125
investorinfo@energyfuels.com
www.energyfuels.com
7
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