Item 8.01 Other Events.
The Company released an updated Preliminary Economic Assessment
(the PEA) today, which has been prepared in accordance with National
Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101),
for its 100%-owned Roca Honda Project (Roca Honda).
Roca Honda is one of the largest and highest grade uranium
projects in the U.S. It is located in northwest New Mexico, adjacent to the
Mount Taylor Mine, which is a large, developed, high-grade uranium mine held by
a wholly-owned subsidiary of San Diego-based General Atomics. The Company is
currently in the process of permitting Roca Honda, so that it can be
ready for development in improved market conditions. Due to Roca Hondas proximity to the Companys 100%-owned White
Mesa Mill, the uranium to be mined at the project is expected to be trucked to
the Companys mill to be processed and concentrated into finished uranium
product that will be sold into the global nuclear energy market. The White Mesa
Mill is the only fully-licensed and operating conventional uranium mill in the
U.S. today.
The new PEA primarily reflects an update to the Roca Hondas
ownership status based on: (i) the Companys acquisition of 4,580-acres of
adjacent properties in August of 2015, and (ii) the Companys acquisition of the
40% ownership interest of the Companys former joint venture partner in May of
2016, thereby increasing the Companys ownership in the Project to 100%.
The
PEA is entitled Technical Report on the Roca Honda Project,
McKinley County, State of New Mexico, USA and is dated October 27, 2016. The
qualified persons who authored the Technical Report are Stuart E. Collins, P.E.,
Robert L. Michaud, P.Eng., Mark B. Mathisen, C.P.G., each of Roscoe Postle
Associates Inc., and Harold R. Roberts, P.E., Executive VP of the Company. The
Technical Report will be filed on SEDAR and will be available under the
Companys profile at www.sedar.com.
In comparing the new PEA with the previous one dated February
27, 2015, the project economics have improved, including estimated operating
costs dropping by 11% to $33.27 per pound of uranium. The PEA also demonstrates
that Roca Honda is expected to have a 9-year production life with an
average annual production rate of 2.6 million pounds of uranium per year. The
first year of production is expected to total 1.4 million pounds of uranium,
followed by an average rate of production of 2.8 million pounds of uranium per
year thereafter. Life-of-mine capital costs (including upfront capital,
sustaining capital, and closure & reclamation) are expected to total $13.88
per pound of uranium.
The mineral resource estimate for the project is unchanged from
the previous February 27, 2015 report, including 1.51 million tons of Measured
and Indicated Mineral Resources with an average grade of 0.48% eU
3
O
8
containing
14.6 million pounds of uranium. Roca Honda is also estimated to contain 1.20
million tons of Inferred Mineral Resources with an average grade of 0.47% eU
3
O
8
containing 11.2 million pounds of uranium.
As previously disclosed in the Companys May 28, 2015 news
release, there is an existing, partially-sunk mine shaft located on the project
which was constructed by Kerr-McGee in 1982 to a depth of 1,478-feet. The
Company expects to evaluate whether this shaft can be utilized. In addition, the
PEA describes a significant historical uranium estimate for the project that is
not included in the current NI 43-101-compliant resource estimates described
above. Because the Company continues to pursue significant cost-saving
initiatives in todays low uranium price environment, the additional work to
convert these historical estimates into current NI 43-101-compliant mineral
resources has not been completed. These historical estimates are not equivalent
to current mineral resources or mineral reserves as defined in NI 43-101. The
historical estimates should not be relied upon, but are considered relevant as
strong potential exists to add resources to the project, and if confirmed, such
resources could be important in the early stages of the project life and cash
flow.
Key assumptions and parameters used in the economic analysis
contained in the PEA include the following: mining at an average rate of 1,090
tons per day, utilizing the Companys White Mesa Mill for processing (which the
PEA notes is a viable uranium mill and has all the necessary impoundment
structures), a sales price of $65 per pound, a $45 million (16%) capital cost
contingency, and no mining of historical resources. These key assumptions and
parameters used in the economic analysis are considered reasonable for economic
extraction of the resources for Roca Honda. Readers should note that the Mineral
Resources disclosed above are not Mineral Reserves, and therefore do not have
demonstrated economic viability. In addition, this PEA is preliminary in nature;
it includes Inferred Mineral Resources that are considered too speculative
geologically to have economic considerations applied to them that would enable
them to be categorized as Mineral Reserves; and there is no certainty that the
economic analysis will be realized.
Key assumptions and parameters used in determining the
Mineral Resources contained in the PEA, include the following: a minimum grade
cut-off of 0.19% U
3
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8
, a minimum mining thickness of six
feet, $241 per ton of operating cost, 95% recovery at the White Mesa Mill, and
no environmental, permitting, legal, title, taxation, socioeconomic, marketing,
political, or other relevant factors that could materially affect the Mineral
Resource estimate. Data verification for the Mineral Resources estimate was
completed by RPA (2010-2011, and 2016) and by Fitch (2004). The data
verification performed by RPA in 2010-2011, included a site visit, review of
historical plans and sections, review of geological reports, review of
historical and more recent drill hole logs, review of survey records, review of
core logging and sampling procedures, spot checks of property boundary markers
and drill hole collar locations, independent checks of counts per second (cps)
of selected drill core samples, comparisons of the drill hole data base to
historical records, and a discussion with Fitch (author of the 2006, 2008, and
2010 Technical Reports). No significant discrepancies were encountered.
The Company is also pleased to announce that it has filed a
prospectus supplement to its effective U.S. registration statement on Form S-3 in order to
reestablish its at-the-market program (ATM). Concurrently, the Company has
entered into a sales agreement with Cantor Fitzgerald & Co. pursuant to
which the Company may, at its discretion from time to time, sell up to $20
million of common shares, with sales only being made on the NYSE MKT at
then-prevailing market prices. The ATM is substantially similar to the one the
Company utilized to raise $3.39 million of cash from September 29, 2015 to March
15, 2016. The prospectus supplement and the accompanying base prospectus
relating to this offering have been filed with the U.S. Securities and
Exchange Commission (SEC) and is available on the SECs website at
www.sec.gov
. Copies of the prospectus supplement and the accompanying
base prospectus relating to this offering, when available, may be obtained from
Cantor Fitzgerald & Co., Attention: Equity Capital Markets, 110 East 59th
Street, New York, New York, 10022, telephone: (212) 829-7122.
In the event
the ATM is utilized, the Company intends to use the net proceeds to provide the
Company with additional financial flexibility and enhanced options with respect
to any or all of the following: (i) to continue to finance the evaluation of
the high-grade uranium and copper mineralization and the previously announced
shaft-sinking at the Companys Canyon mine project in Arizona; (ii) to fund
wellfield construction at the Companys Nichols Ranch ISR Project in Wyoming, as
market conditions warrant; (iii) to continue permitting of the Companys
projects, including Roca Honda and Jane Dough; (iv) to repay principal on
outstanding indebtedness; and/or (v) for general corporate needs and working
capital requirements.
Cautionary Note Regarding Forward-Looking Statements:
Certain information contained in this Current Report on Form 8-K,
including any information relating to: the Company being a leading producer of
uranium in the U.S.; the expected filing of the PEA; Roca Honda being one of the
largest and highest-grade uranium projects in the U.S.; the status of permitting
at Roca Honda and the expectation that the Roca Honda Project can be ready for
development if market conditions improve; any expectations about improvements in
market conditions; the expected processing of resources mined at Roca Honda at
the White Mesa Mill; the results of the resource estimate and economic analysis
in the PEA including its conclusions and assumptions; the successful utilization
of the ATM; the use of proceeds for the ATM; and any other statements regarding
Energy Fuels future expectations, beliefs, goals or prospects; constitute
forward-looking information within the meaning of applicable securities
legislation (collectively, "forward-looking statements"). All statements in this
Current Report on Form 8-K that are not statements of historical fact (including
statements containing the words "expects", "does not expect", "plans",
"anticipates", "does not anticipate", "believes", "intends", "estimates",
"projects", "potential", "scheduled", "forecast", "budget" and similar
expressions) should be considered forward-looking statements. All such
forward-looking statements are subject to important risk factors and
uncertainties, many of which are beyond Energy Fuels ability to control or
predict. A number of important factors could cause actual results or events to
differ materially from those indicated or implied by such forward-looking
statements, including without limitation factors relating to: the Company being
a leading producer of uranium in the U.S.; the expected filing of the PEA; Roca
Honda being one of the largest and highest-grade uranium projects in the U.S.;
the status of permitting at Roca Honda and the expectation that the Roca Honda
Project can be ready for development if market conditions improve; any
expectations about improvements in market conditions; the expected processing of
resources mined at Roca Honda at the White Mesa Mill; the results of the
resource estimate and economic analysis in the PEA including its conclusions and
assumptions; the successful utilization of the ATM; the use of proceeds for the
ATM; and other risk factors as described in Energy Fuels most recent annual
report on Form 10-K and quarterly financial reports. Energy Fuels 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.
Cautionary note to United States investors concerning
estimates of measured, indicated and inferred resources.
This Current
Report on Form 8-K contains certain disclosure that has been prepared in
accordance with the requirements of Canadian securities laws, which differ from
the requirements of U.S. securities laws. Unless otherwise indicated, all
reserve and resource estimates included in this Current Report on Form 8-K have
been prepared in accordance with NI 43-101 and the Canadian Institute of Mining,
Metallurgy and Petroleum
(CIM) classification system. Canadian standards, including
NI 43-101, differ significantly from the requirements of U.S. securities laws,
and reserve and resource information contained in this Current Report on Form
8-K may not be comparable to similar information disclosed by companies
reporting only under U.S. standards. In particular, the term resource does not
equate to the term reserve under SEC Industry Guide 7.
United States
investors are cautioned not to assume that all or any of Measured or Indicated
Mineral Resources will ever be converted into mineral reserves. Investors are
cautioned not to assume that all or any part of an Inferred Mineral Resource
exists or is economically or legally minable. Energy Fuels does not hold any
Reserves as that term is defined by SEC Industry Guide 7. Please refer to the
section entitled Cautionary Note to United States Investors Concerning
Disclosure of Mineral Resources in the Companys Annual Report on Form 10-K
dated March 15, 2016 for further details.
Item 9.01. Exhibits.