Good afternoon, and welcome, to the Energy Fuels’ Second Quarter 2023 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. [Operator Instructions] Thank you. I will now hand the call over to Mr. Chalmers, CEO of Energy Fuels. You may begin your conference.

Thank you very much for the introduction. And good morning or afternoon, depending on where you're joining from. And I want to thank everyone for joining the Energy Fuels Q2 '23 conference call and webcast today, we are always excited to discuss our results and our significant accomplishments that we continue to make. For those that cannot join the call today there will be replays of this presentation available for two weeks on our website starting later today or tomorrow. Every quarter, I say we're making remarkable progress on many fronts and this quarter is no different, Energy Fuels is likely one of the biggest success stories on decarbonisation, electrification, while we also emerge as a clear leader in U.S. critical mineral production. And this is at a time when it has never been more important. We are a unique investment. No other company I know has the ability to advance uranium, vanadium and rare earth production capabilities, while at the same time advancing our medical isotope aspirations. And we're doing this while we continue to maintain a very strong balance sheet with zero debt. Today, I'll elaborate on these accomplishments for the quarter and provide details of what I think the rest of the year will look like. I also want to remind everyone that you are controlling your slides to the presentation from your own device, and I'll try to remember to tell you when to say next slide. There will be time for questions at the end of the presentation and during the question and answer session, Dave Frydenlund, our Executive Vice President, Chief Legal Officer, and Tom Brock, our CFO will be available to answer any questions I cannot answer. So let's jump into the presentation. This first slide showing a picture of the remarkable White…

[Operator Instructions] Your first question is from Heiko Ihle from H.C. Wainwright. Please ask your question.

Hey, Mark, can you hear me okay?

Yes, you're fine, Heiko.

Perfect. I'm calling in from some little island zone in Italy. So apologies if the receptions and all that great. Anyways, excited for all these arrows in your future to have some money. So let's keep that going. Walking through the 403,000 pounds of U3O8 that you have in raw materials work in progress inventory. Walk me through where we might stand by the end of the year, both -- even on the vanadium level as well, but also a U3O8 level, please?

You want to walk -- you want me to walk you through in the 400,000 of raw materials in unfinished uranium?

Correct, like end of the year plans?

Okay. Well, we're not planning to do any additional finished product of uranium this year Heiko. We mentioned the 400,000 pounds because we have alternate feet, but we also have various uranium ores. For example, we have material that came from the Mount Taylor project, and it's sitting in stockpile at the mill. And we can process that when we decide we want to process that to make that 400,000 pounds into finished goods to complement the 760,000 pounds we already have. We're mainly focused on the rare earths of getting this Phase 1 up and running during the end last half of this year and early next year. And then we're looking at a potential mill run in the next year or two, when we decided we want to do the mill run for uranium ores and potentially vanadium ores.

That's helpful. Thank you. You want to go for maybe some longer term expectations as well?

Yes. As we said, when we look at the let's start with the uranium business, we have the assets to get up to between 1.5 and 2 million pounds of uranium production per year. We want to build that out when we get more contracts. Right now our contracts are going to be in the order around 500,000 pounds a year. So we really don't have the need unless the price uranium goes up substantially, to produce a whole lot more than that 500,000 pounds per year. So we're going to continue to underpin that with more contracts. But we can get up to that 1.5 to 2 million pounds with limited capital, really just working capital. Now on the rare earth front, we have the ability or we'll have the ability in Q1 to produce up to 1000 metric tons of NdPr. We believe we're starting to have line of sight to get to maybe half of that. We hope is not guaranteed but we hope to be able to get up to about half of that looking to 2024 and we plan to continue to build additional feeds a monazite hopefully in a material way to get Phase 1 completely booked out in at full capacity in the next year or so. Meanwhile, we'll continue to engineer and permit where required for Phase 2 which will be 3x to 4x the Phase 1. And that'll all be subject to securing a significant amount of monazite to require the build out of Phase 2. And so -- but we are aggressively when we start looking at who we're talking to, and the kind of quantities that we're talking to the various parties, we think that Phase two, security enough feed is very possible in the not too distant future. But we still got to get a few more of these coordinates lined up here in binding arrangements and commitments.

That's helpful. Thank you. Moving on, from all of that, mean, one sentence in your release really struck my curiosity, when you were talking about the engineering of the end enhancements for the plants for the NdPr. And I assume the same probably holds true for most people on this call, when you're trying to get the 3000 metric tons by the end of '26 with your Phase 2, can you maybe walk me through some of the investments into the area what exactly you have to spend on your plans for the future year-by-year as much at the end. And also a longer term monetary impacts that you are just mentally working with what you're sort of expecting to see?

Yes. Well, the Phase 1, as I said, that's around $25 million. And that gets us up to say, up to 1000 tonnes of NdPr per year. And that's low because we're doing the crack and leach in the mill. And we're using existing SX building for the separation stage. So that's very low. And it's -- but it's a very attractive strike rate, obviously, on capital. We do not have all the final engineering completed on Phase 2, but we believe it could be between $250 million to maybe $350 million, somewhere in that order, that would provide a facility that would do 3,000 to 4,000 tons a year of NdPr. But it doesn't mean that that Phase 1 facility also wouldn't still potentially be operational. But the Phase 2 facility will include its own crack and leach circuit. So we don't have to do any flip flopping of the current uranium vanadium mill, between uranium runs and rare earth runs. So we believe that our operating costs are going to be low and really as competitive not as low as anybody outside of China. And -- but we have to show that we've secured enough monazite to run that on through.

Fair enough. That's very helpful. I'll stop hogging the question queue here and get back in queue. But thanks so much for answering your questions and keep on going all the different directions that you're going. I think it's very impressive.

Thank you, Heiko.

Your next question is from Mike Heim from Noble Capital Markets. Please ask your question.

Thanks. Hi, Mark. You just said that you believe your operating costs for the NdPr should be as low as anybody outside of China. If I were to look at minus or one of those and talk about gross margins, which we've never really talked about, is it reasonable be thinking about 50, 60, maybe even 70?

Well, yes, it depends a lot, Michael, on -- I mean, we have -- and again, the reason we haven't gone into real details is we're still and we have a good handle on what we believe they are. But we're still doing some of our engineering studies. But we believe that it's their robust margins. A big part, and I've talked about this before, and had been criticized a bit before, but it depends what you acquire your monazite for. And we're looking at a blended price of monazite, that includes purchasing and from our own sources, sort of a hybrid model a little different. So those are all factors that come up with what the ultimate cost is. But yes, I believe we are going to be in the same order of competitiveness of others, people that you just mentioned and others, and really, a lot of it's going to be focused on the fact that we're operating in an area that has low water cost, low power cost, very good people skills labor skills in the United States and compared to Australia, very favorable jurisdiction for low operating capital costs.

Now I can do the math on 100 metric tons or a million kilograms and see the potential of $65 million if we were running at peak or so. But that's just for the NdPr help during phase one, what happens to the other heavy REEs, can they still be sold off? Or will you kind of inventory them till you get them at they were?

They can, the SM+ we call it, samarium-plus, in heavier. We will make a concentrate that can either be sold, or we can hold it and the most likely scenario is we’ll probably hold it. And because really, the Dy and the Tb are a couple of the elements that particularly U.S. government is very, very interested in. And actually a lot of people in the world are very interested in those elements. So, as I said, it's a very tricky business here. The -- and I believe that the Chinese continue to manipulate the market at some level, because they want to continue to be the dominant force in rare earths in the world. And so, we're trying to position ourselves in a way that provides us and decouples from to have our own capabilities internal as much as possible.

Can you give us any indication how much the NdPr represents in terms of the overall value of the heavy metals?

Yes, in NdPr it varies, because not all four sources have heavies in them. For example, basanite has very little heavies, but the NdPr is generally speaking around 75% of the total value of the rare earth oxides that you recover. A lot of people try to count every element in the rare earth feeds. We really count the neodymium praseodymium and dysprosium and terbium. And so the heavies are generally about 25% of that value and the NdPr is around 75%. It could be 80% 70%, somewhere in that order.

Okay. And final question for me. You said twice that talking about Phase 2 and Phase 3? If you get enough monazite? Does that imply that you feel if contracts are lived up to you have enough for what you want to do with Phase 1?

Well, as I said, I think, we're rounding up what I'm believing is around 50% of our sort of line of sight to Phase 1. We are talking to multiple parties, and I know I've said this before, but we're talking to probably half a dozen different groups. And those all have the potential any one of them to fill up Phase 1. But again, we've got to get them signed up. And one of the things I've found is that a number of parties that were kind of looking at where and who they could do business with, a lot of them have come back to us because they feel that Energy Fuels offers something that others don't. And the main thing we offer is operating in the United States of America, processing in the United States of America, and also being able to operate in an environment where we don't have to pay these extraordinary operating costs, like you're seeing currently in Australia.

Okay, all right. Thank you, Mark.

[Operator Instructions] And your next question is from Joseph Reagor, from Roth MKM. Please ask your question.

Hey, Mark and team, thanks for taking the questions. So first thing and a lot of stuff I wanted to touch on already was, but just kind of a little bit of a housekeeping thing. Your G&A expense seems that the last four quarters it's been quite a bit elevated. Is there anything driving that or is that kind of like the new normal?

Well, the new normal is we're under increased operational activities across the company. So we've hired I think, last since the beginning a year I think we've hired like 30 some people. You know, we're developing a number of different projects in different locations. We're capitalizing some of that, but it's I think it's just the new normal of getting the flywheel going on the various projects that we have. So it doesn't just happen without making it happen. And when you go from more of a standby mode to an operational mode, there's a certain amount of burn rate that you just have to increase to get there. And Tom, I don't know if you -- Tom Brock, our CFO is on the line. I don't know if he has anything to add there.

No. Mark, thanks for the question. I agree, as we move out of this standby care and maintenance mode into an earnings mode. Of course, we've upgraded some talent added more boots on the ground to those projects that are underway. And I'd also add in that G&A, you've got for the three months ended or six months ended June 30, you've got stock-based compensation of $2.7 million. So with additional heads comes additional of units. But again, that's noncash.

Okay. That's helpful. Second thing, there were some reports a couple of weeks back about there being a potential moratorium on mining uranium for a certain section of Arizona. Does that impact you guys in any way or all of your assets like outside that specific area?

We don't believe so because we have valid existing rights. We have a number of assets that are fully permitted, ready to go, like Pinyon Plain. We're advancing that right now. And we're just full tilt on that project. There is discussion of a monument. We haven't heard exactly what the outcome is going to be there, but we do not believe it's going to change our activities at all with the Pinyon Plain Mine period.

Okay. So to be clear, your asset is outside where the proposed monument is or just cut out, has an exemption?

It is Inside, but it is a project that is fully permitted, been supported by the U.S. Force Service for 35 years. They've defended that. So we believe the valid existing rights are sound, and we're going to go forward with the project. David Frydenlund, our Legal Counsel is on the call. Dave, do you have any comments?

Mark, I think you summarized it. Under the law, you can't -- the President cannot -- any national mine in proclaimed is subject developed existing rights. The area where our mines in Arizona is subject to mining withdrawal right now, which is subject to fill existing rights. We've established all the existing rights which even upheld by the court for the Pinyon Plain Mine. So we expect that those will be honored in if a new monument is proposed.

Okay. I appreciate the clarity there. And I was under the impression you guys were exempt, but I just wanted to make sure we're clear on it. And then kind of a last thing. As you guys look at current operating expenses and growing the business, how should we think about when you guys will start to sell extra inventory or restart operations? Are we at the point where you guys do have a fixed price in mind, even if you can't disclose it? Or is there a fixed time line that you guys are aiming for? How should we think about that?

Well, we're really kind of focused on building a book where we have at least a $20 margin on our uranium production. And as you can see with a number of our inventory sales, we're getting more than that currently with a lot of our inventories. Now a lot of that's come from alternate feed. But we're trying to build a book with at least at $20 margin, likely more with some of our operations like Pinyon Plain. So -- but that's kind of how we're trying to approach it is everybody's got to get to a point where they're making money here. And we're not out there to do recreational mining, but we're just trying to build the book. And really, frankly, with the increased cost, the difficulty of getting additional labor reagents, we really need uranium prices to go up somewhere in the 70s plus before we'll continue to build that book.

Okay. Thanks. I appreciate the color. I'll turn it over.

[Operator Instructions] Next question is from Reed Rubin from -- sorry he is a private investor. Please ask your question.

Mark, Niger, produced 5% of uranium worldwide. And the mine is owned by a French company. Do you have any intelligence as to what might break there?

Look, I mean, they're certainly unrest. Coup going on in Niger, it does -- it's a country that has a long history of uranium production Reed. And -- but I really don't -- I am not close enough to the coal face there to figure out where that's going. But it does highlight a number of things, doesn't it, that when you look at where the uranium comes from around the world, place like Niger and Russia, Kazakhstan, Uzbekistan, there's risk in a lot of these developing countries. So yes, I don't have any real optics. I mean I've been reading some of the releases from like Global Atomic and others. But I don't have a crystal ball on where that's going.

Any implication in today's pricing?

You say any implications on current prices? Is that what you're saying?

Yes, sir. Yes.

Yes. Well, I think that whenever you look at -- historically, if you look at the uranium market, when the price starts to move, it usually isn't any one thing. I mean, if you go back to 2005 and '06, we had a number of floods in Athabasca had some flooding in at the Ranger mine in Australia. And so a lot of times, a number of these things working in concert really can move the price. Now I think that a number of things that are likely to move the price is, one, the price is too low for replacing uranium at current prices. You got the increasing demand, you got reactors staying online, you've got Japan firing up. And then you have something like Niger, putting a bit of a red flag over that country. And I think when you start looking at these things in concert, it has the potential to really move the price where it should be, which is at 70 or north of 70 to get additional new production coming to the market, cost roughly.

Thank you very much, sir.

Thank you, Reed.

Thank you. There are no further questions at this time. Please proceed, sir.

All right. Well, firstly, again, thank you for your interest in Energy Fuels, it is a unique story, as I said earlier. We're working hard, we're working really hard as a company, we're working well as a company, and we have got what I believe is an extraordinary future. It's difficult out there to actually deliver new production in our company as a company that delivers new production. We're not a promotional company and we're trying to build these fundamentals on something that will basically capitalize on the clean energy tech going forward and the energy transition. And I think we're well on our way and -- but I do appreciate our shareholders and the support of our shareholders. So thank you very much, and have a good day.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.