NetworkNewsWire
Editorial Coverage: Reliance on foreign and malign sources for
critical materials is a national security risk.
Though the United States is by far the largest consumer of
uranium in the world, the country imports nearly 100% its uranium,
much from state-owned foreign sources, strangling domestic
suppliers and creating a hazardous situation for the U.S. supply
chain and electrical grid. Many Americans may well know of the
country’s near-100% dependence on China for critical rare earth
elements. However, most may not realize that America is also nearly
100% dependent on uranium imports—increasingly imported from
entities owned by the governments of Russia, China and their
allies. Like rare earth elements, uranium is designated by the U.S.
government as critical to the nation's security and economic
prosperity, and the Department of Interior warned, “This dependency of the United States on
foreign sources [of uranium] creates a strategic vulnerability for
both its economy and military to adverse foreign government action,
natural disaster, and other events that can disrupt supply of these
key minerals.” Energy Fuels Inc. (NYSE American: UUUU)
(TSX: EFR) (UUUU
Profile), the United States’ leading domestic producer
of uranium, has led the charge in efforts to warn the U.S.
government about the security threats to uranium supply chain
disruption, and also recently announced that it is working to help
bring rare earth processing back to the U.S. by leveraging its
White Mesa Mill. If the U.S. fails to act, 20% of the nation’s
electricity — and 55% of its clean, carbon-free electricity — may
become hostage to malign foreign sources of uranium, and recent
events show that any supply chain disruption, malicious or
well-intentioned, can have a devastating impact. Major companies
across all segments have recognized the importance of streamlining
supply chains, including Tesla (NASDAQ: TSLA), a
company that relies on rare earth elements (REEs) to power its
vehicles. Reliable, low-cost sources for uranium production exist
in the United States, as well as from free-market allies.
Canada-based Cameco (NYSE: CCJ) (TSX: CCO) is one
of the largest global providers of the uranium fuel needed to
produce clean energy, and Australian BHP Group (NYSE:
BHP) provides needed minerals across the globe.
Headquartered in Phoenix, Arizona, leading international mining
company Freeport-McMoRan (NYSE: FCX) conducts a
significant mining operation in North America, specializing in
copper, gold, and molybdenum. The United States and its allies have
the resources and know-how to produce uranium and rare earths, and
it’s time to end risky market dominance by Russian and Chinese
state-owned and subsidized enterprises.
To view an infographic of this editorial, click here.
Policy Makers Urged to Consider Domestics
The current global health crisis has revealed the nation’s
Achilles heel of dependency on foreign sources for critical
materials. America’s reliance on crucial medicines and supplies
from adversarial nations such as China has sounded the alarm for
U.S. policy makers to think and plan smarter. The current crisis
has also shown that the U.S. has a dangerous reliance on certain
foreign sources of critical minerals and energy. Most people know
about the country’s extreme reliance on China for REEs, which are
found in products as varied as cell phones, electric vehicles, wind
turbines and military systems that defend America. Not as many
people know that the country is now nearly 100%
reliant on imports of uranium for its nuclear power plants. If
nothing changes, over 50% of this uranium and nuclear fuel may come
from state-owned entities in Russia, Kazakhstan, Uzbekistan, and
China in just a few years.
U.S. nuclear power plants currently generate
55% of the nation’s carbon‐free electricity and produce nearly 20%
of the nation’s overall electricity needs. In fact, nuclear power
is the only currently available and affordable low-carbon power
source that meets significant baseload electricity demands,
simultaneously reducing air pollution and providing a viable
solution to climate change. As global electricity demand continues
to soar, nuclear power has been shown in multiple scientific studies to be the cleanest and
most economical way to produce reliable electricity. According to
the World Nuclear
Association (WNA), there are 441 operable reactors globally,
with another 54 units under construction and 439 in various stages
of planning; in addition, the WNA has identified a potentially
massive gap in uranium supply and demand through 2040 of 1 billion
pounds. Further increases in global electricity demand could easily
spur significant new nuclear power development, including the
commercialization of small modular reactors in the next few years.
These potential demand drivers indicate that the United States’
uranium appetite is only increasing, yet the country is becoming
increasingly dependent on adversarial sources for this critical
mineral.
Hope on the Horizon for Domestics
Few other companies have been more proactive or outspoken about supply chain risks than
Energy Fuels Inc. (NYSE American: UUUU) (TSX:
EFR). Based in Lakewood, Colorado, Energy Fuels is the
country’s largest producer of uranium and the leading conventional
producer of vanadium—both designated as critical minerals by the
U.S. government. Energy Fuels’ uranium production portfolio looms
large in the U.S., boasting more uranium production facilities,
more production capacity and more in-ground resources than any
other domestic uranium producer. In fact, the company’s assets have
produced over one-third of all U.S. uranium over the past 15 years,
making Energy Fuels uniquely positioned to quickly increase
production to meet increased demand.
Energy Fuels has seen success in its efforts to convince the
U.S. government of the strategic importance of the domestic uranium
mining industry. President Trump’s recently announced FY-2021
executive budget request allocates $150 million per year for the
next 10 years to create a strategic U.S. uranium reserve. This
funding is expected to provide considerable support to established
U.S. uranium producers such as Energy Fuels, and significantly
enhances the security and independence of the nation’s electric
supply. This $1.5 billion
strategic initiative comes on the heels of a July 2019
Presidential Memorandum that ordered the creation of the U.S.
Nuclear Fuel Working Group to "examine the current state of
domestic nuclear fuel production to reinvigorate the entire nuclear
fuel supply chain, consistent with United States national security
and nonproliferation goals." The working group has not released its
findings, but it is believed that government actions are now
underway to protect vital U.S. uranium infrastructure, spur
domestic production and preserve the country’s energy
independence.
Expertise and Assets Built for Scale
As the country’s leading diversified uranium miner,
Energy
Fuels is uniquely positioned to capitalize on these
initiatives. Energy Fuels utilizes both conventional and in-situ
recovery (ISR) technology to produce uranium from three strategic
facilities:
- The highly strategic White Mesa Mill in Utah is the only
conventional uranium mill in the U.S. and is centered around the
largest and highest-grade conventional uranium mines and projects
in the country. The White Mesa Mill has a licensed capacity to
produce over 8 million pounds of U3O8 per year and provides
immediate scalability as uranium demand increases. The White Mesa
Mill also has other diverse business opportunities, including being
the only facility in North America capable of recycling
uranium-bearing alternate feed materials and vanadium production
(Energy Fuels was the leading U.S. producer of vanadium in 2019)
which is essential in production of high-grade steel and holds
promise in high-capacity batteries. Evaluations are also currently
underway to utilize the mill in processing of critical rare earth
elements (REEs).
- Nichols Ranch Plant (ISR) is in the productive Powder River
Basin district of Wyoming and has a total licensed capacity of 2
million pounds of U3O8 per year. Nichols Ranch has produced 1.2
million pounds of U3O8 since commissioning in 2014, and it has
significant future expansion potential from 34 fully licensed
wellfields containing significant in-ground uranium resources.
- Located on over 200,000 acres of private land in Texas, the
fully licensed and constructed Alta Mesa Plant (ISR) has a total
operating capacity of 1.5 million pounds of uranium per year and
produced nearly 5 million pounds of U3O8 between 2005 and 2013.
This low-cost production facility is currently on standby,
maintained in a state of readiness to respond to expected increases
in demand.
Energy
Fuels’ portfolio of production facilities and resources poises
the company to significantly benefit from strategic government
initiatives, increasing global demand and increasing global prices.
The company possesses both expertise and assets that can be
immediately scaled to capitalize on the impending opportunity. As
of Dec. 31, 2019, the company had a war chest of $17.7 million in
cash and marketable securities, as well as an additional $22.8
million of immediately marketable inventory, including 515,000
pounds of uranium and 1.6 million pounds of vanadium. Increasing
commodity prices in 2020 so far have significantly increased the
value of this inventory. In 2020, Energy Fuels added an additional
$19.1 million of cash to its treasury.
Not only does Energy Fuels stand to benefit from the
government’s shift toward domestic uranium production, but
the company also
recently announced its intent to evaluate the production of REEs at
its White Mesa Mill. Subject to the program’s success,
the mill will be utilized to receive and process multiple varieties
of REE ores—a task which, historically, could only be completed
with the help of Chinese state-owned companies. The U.S. government
has designated REEs as vital in the nation’s national defense
strategy and—similar to its focus on domestic uranium
production—intends to designate funds to empower private American
companies to develop REE production. Energy Fuels’ latest
initiative places it in an advantageous position to assist the
country in lessening its dependence on Chinese companies for the
processing of REEs. The company believes REE production, alongside
its leadership in uranium production, will fortify its already
strong industry
position.
Emerging Opportunities for Uranium
Producers
Nearly all the uranium that fuels the United States’ nuclear
power plants is imported, placing 20% of the nation’s power output
in jeopardy. Historically, these imports mainly came from
free-market allies such as Canada and Australia. However, in the
coming years, uranium imports are expected to mainly come from
Russian and Chinese sources whose state-owned companies flood the
global market, drive free-market companies out of business and
threaten national security—but there is hope on the horizon. With
new government initiatives in motion, America’s strategic uranium
supply chain will be secure and free from foreign influence. These
initiatives have the potential to spur a resurgence in uranium
markets and an abundance of new opportunity for companies such as
Energy Fuels. However, the global uranium equity market is
concentrated and relatively small. There are a few uranium
explorers and developers, but they require many years of licensing
and hundreds of millions of dollars to get permits, build
infrastructure, and achieve production status. While there are only
limited opportunities to directly participate in proven producers,
Energy Fuels is one of those proven uranium producers, with assets
and capabilities that are truly unmatched in the country today.
Looking Ahead to Secure Supply
Major companies across all segments have recognized the
importance of streamlining supply chains, and some stand to benefit
from the country’s prioritization of domestic production,
including:
Tesla (NASDAQ: TSLA), which recently participated in
a blockchain pilot to see whether the technology could
accelerate its cargo pick-up procedures, has been passionate about
intensifying its competitive edge by vertically articulating its
supply chain. CEO Elon Musk’s strategy has been used as a
blueprint by others in the business community for achieving an
efficient, streamlined supply chain. Similar attention to America’s
supply of rare earth elements—including efforts to shore up its
supply—must be addressed to ensure the continuity of the United
States’ clean power supply.
Canada-based Cameco (NYSE: CCJ) (TSX: CCO) is
one of the largest global providers of the uranium fuel needed to
energize a clean-air world. The company’s competitive position is
based on a controlling ownership of the world’s largest high-grade
reserves and low-cost operations. Utilities around the world rely
on nuclear fuel products to generate power in safe, reliable,
carbon-free nuclear reactors.
With global headquarters in Melbourne, Australia, BHP
Group (NYSE: BHP) is a world-leading resources company.
The company extracts and processes minerals, oil and gas, and has
more than 72,000 employees and contractors, primarily in Australia
and the Americas. Company products are sold worldwide, with sales
and marketing led through Singapore and Houston, Texas.
Freeport-McMoRan (NYSE: FCX) is one of the
world’s largest publicly traded copper producers. Operating seven
open-pit copper mines in North America, the company reports
significant undeveloped North American reserves and resources. With
a portfolio of potential long-term development initiatives, FCX
shows potential to benefit from the United States’ refocused
efforts on domestic producers.
As the United States government recognizes the importance of
avoiding overreliance on foreign and malign sources for critical
materials, major domestic companies stand to benefit.
For more information on Energy Fuels, visit Energy Fuels
Inc. (NYSE American: UUUU) (TSX: EFR)
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