Energy Fuels looks to be the name in US uranium mining

Uranium prices look poised to finally come back around, and Energy Fuels (TSX: EFR; US-OTC: EFRFF) is hoping to be one of the first places for investors to park their capital.

The company is the only conventional uranium producer in the U.S., with 1.2 million lb. uranium oxide (U₃O₈) produced this year. “Conventional” refers to the fact that Energy Fuels takes uranium from the ground the old-fashioned way: it digs it out. In contrast, the rest of U.S. uranium production comes from in-situ recovery systems, which pump fluids into the ground that carry mineralization out.

But Energy Fuels isn’t digging rather than pumping as a point of principle — it is simply blessed with properties that are high grade enough to make conventional mining economic.

Ore processed at the company’s White Mesa mill averages 0.62% U₃O₈, which represents some of the highest grades found in the world outside of Saskatchewan’s Athabasca basin. That high-grade material is coming from over the Utah border, as it is being mined at the company’s Arizona One mine, 56 km south of Fredonia, and trucked  500 km to White Mesa, which is located in Blanding, Utah.

White Mesa can process up to 1,800 tonnes of ore per day and has produced as much as 4.5 million lb. U₃O₈ per year in the past, when prices where more conducive to larger-scale production. The mill was built back in 1980, and refurbished by Energy Fuels in 2007 for US$31 million.

The mill can handle uranium-bearing tailings from third-party producers, and is the only facility in North America that can process such alternate feeds. Energy Fuels CEO Stephen Antony calls it a profitable line of business, given that Energy Fuels is free from any mining costs.

But White Mesa and Arizona One are only part of the Energy Fuels story. The mill stands in the midst of a flurry of Energy Fuel assets that the company designates as “standby” mines. The list includes Pinenut in Arizona; Henry Mountains, Daneros and La Sal Complex in Utah; and Whirlwind and the Sunday complex in Colorado.

With these assets standing at the ready, Antony says the company could produce 3.5 million lb. U₃O₈ if prices climb above US$75 per lb.

The larger production profile would involve bringing the Sheep Mountain project online in Wyoming. To ensure it’s well-positioned for any climb in prices, the company is engaged in the permitting process at the project.

And its vision of production growth doesn’t stop there. At the end of May the company announced that it was looking to take over Strathmore Minerals (TSX: STM) in an all-stock deal that would give Strathmore shareholders 1.47 Energy Fuels shares for each of their own — a 31% premium at the time.

The deal would unlock synergies that come from the two companies having complementary asset bases in the southwest U.S. and in Wyoming.

The most near-term synergy involves Strathmore’s Roca Honda project in northwestern New Mexico, which is 400 km from White Mesa. That is close enough to be within trucking distance, and eliminates the need to build another mill.

There are more synergies to be found up in Wyoming between Energy Fuels’ Sheep Mountain and Strathmore’s Gas Hill project. The projects are just 45 km from one another, which could mean a common processing facility, increased mine life and easier permitting, along with the usual savings in general and administrative expenses when two companies become one.

The deal would land Energy Fuels some well-heeled partners, since Strathmore is partnered with Korea Electric Power Corp. (KEPCO) and Sumitomo of Japan.

KEPCO, which generates 93% of South Korea’ electricity, has the right to earn up to 40% in Gas Hills by spending another US$32 million on development, while Sumitomo has a 40% stake in Roca Honda.

With partners like that, and synergistic assets set to unleash new torrents of production, Energy Fuels may soon become the dominant uranium player not only in the southwest, but throughout the U.S.