America’s Supply Chains in Jeopardy
NetworkNewsWire Editorial Coverage: Reliance on foreign and malign sources for critical materials is a national security risk.
The United States is by far the largest consumer of uranium in the world, yet the country imports nearly all of its uranium from state-owned and subsidized foreign sources, squeezing domestic suppliers and putting the U.S. supply chain in jeopardy. Uranium is designated by the U.S. government as vital to the nation’s security and economic prosperity, and the Department of Interior warned, “This dependency of the United States on foreign sources 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’ largest domestic producer of uranium, has led recent efforts to warn the U.S. government about the security threats to uranium supply chain disruption and the vital importance of having a sustainable domestic uranium sector. 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, benign or intentional, can have devastating impact. Business takes supply chain security seriously, and government should too. Major logistics corporations such as XPO Logistics (NYSE: XPO) are solely devoted to providing supply chain solutions to the most successful business entities in the world. Similar attention to the nation’s supply of uranium must be addressed to ensure the continuity of the United States’ clean power supply. 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. UK-based Rio Tinto PLC (NYSE: RIO) produces uranium in addition to a myriad of other mineral resources, and Australian BHP Group (NYSE: BHP) provides needed minerals across the globe. The United States and its allies have the resources and know-how to produce uranium, and it’s time to end dangerous market dominance by Russian and Chinese state-owned and subsidized enterprises.
The current global health crisis has revealed the nation’s soft underbelly of vulnerability to foreign sources of critical materials. America’s reliance on crucial medicines and supplies from adversarial nations such as China has sounded a clarion call for U.S. policy makers to think and plan smarter. The current crisis has also revealed 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 rare earth elements (REEs), which are found in products as varied as cell phones, 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 may come from state-owned entities in Russia and China in the coming 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 baseload electricity demands, simultaneously reducing air pollution and mitigating 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 supply/demand gap through 2040 of 1 billion pounds. Any increase in global electricity demand could easily spur significant new nuclear power development. These are just a few of the triggers that may drive increased demand for uranium, yet the United States is becoming increasingly dependent on adversarial sources for this critical mineral.
Leading the Charge
No other company has been more proactive or outspoken about uranium 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 of which are designated as critical minerals by the U.S. government. Energy Fuels’ uranium production portfolio stands apart in the U.S., boasting more uranium production facilities, more production capacity and more in-ground resources than any other uranium producer in the United States. 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 new demand.
Energy Fuels has seen success in its efforts to get the U.S. government to recognize the strategic importance of the domestic uranium mining industry. President Trump’s recently announced FY-2021 executive budget request includes $150 million per year for the next 10 years to create a strategic U.S. uranium reserve. This 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.
Unmatched U.S. Assets
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 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 and critical rare earth elements (REE’s), as well as alternate feed materials recycling.
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 has the production facilities and resources to potentially be a major beneficiary of 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, plus $22.8 million of immediately marketable inventory, including 515,000 pounds of uranium and 1,600,000 pounds of vanadium. In 2020, Energy Fuels added an additional $19.1 million of cash to its treasury.
While Energy Fuels stands to benefit from the government’s shift toward domestic uranium production, the company also recently announced its intent to evaluate the production of REE’s at its White Mesa Mill. If the program is successful, 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 companies. The U.S. government has designated REE’s as critical in the nation’s national defense strategy and—similar to its focus on domestic uranium production—intends to empower private American companies to develop REE production capabilities through the allocation of funds. Energy Fuels’ announcement is well-timed, placing it in an advantageous position to assist the company in lessening its dependence on Chinese companies for the processing of REE’s. The company believes REE production, alongside its leadership in uranium production, will fortify its already strong industry position.
The company has scheduled a conference call for Wed., April 15 at 4:15 EST to discuss its recent REE announcement. To join the webcast, please dial 1-888-664-6392 (toll free in the U.S. and Canada) or 416-764-8659. A link to a recorded version of the proceedings will be available shortly after the webcast by calling 1-888-390-0541 (toll free in the U.S. and Canada) or 416-764-8677 and entering the code 201052#. This recording will be available until April 21, 2020.
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. The good news is that with new government initiatives in motion, America’s strategic uranium supply chain will be protected 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 into production. 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.
Supply Chain and Natural Resource Companies
XPO Logistics (NYSE: XPO) is a top-ten global logistics provider of cutting-edge supply chain solutions to the most successful companies in the world. The company operates as a highly integrated network of people, technology and physical assets in 30 countries, with 1,504 locations and approximately 100,000 employees. XPO uses its network to help more than 50,000 customers manage their goods most efficiently throughout their supply chains.
Canadian-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.
Founded in 1873 and headquartered in London, UK, Rio Tinto PLC (NYSE: RIO) engages in the exploration, mining and processing of mineral resources. It operates through multiple business segments: iron ore, aluminum, copper and diamonds, energy and minerals, and other operations. The energy and minerals segment includes businesses with products such as uranium, borates, salt and titanium dioxide feedstock together with coal operations.
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.
For more information on Energy Fuels, visit Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR)
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