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The DOE Spreads the Contracting Love; Who Can Execute Long Term ?

DISCLAIMER: Any written content contained herein should be viewed strictly as analysis & opinion and not in any way as investment advice. No compensation was received for this report. Visitors to this site are encouraged to conduct their own due diligence.


As part if the initial US Department of Energy (DOE) uranium purchase program for the establishment of a strategic reserve, on December 15, those selected to provide initial uranium inventory were notified. The initial RFP amounted to $75.0M, as allocated by Congress in 2020. The initial purchases were for an estimated 1.0M lbs (385 tU) of domestically produced uranium. Those selected to provide initial inventory are displayed below, along with as much detail as was released by the respective company.

Note that all sales from the selected companies are expected to be completed in Q1/2023. What is also worth remembering is that though the initial contracted volumes are low, the larger, longer term goal of the US reserve is to revitalize and incentivize the domestic uranium mining and conversion industry. This is to be accomplished via a much larger purchasing program which is expected to encompass 10 years and total $1.50B over total contract life. This places a premium on US-sourced uranium in an effort to minimize the amount of foreign uranium (amounting to 60% of current US requirements) imported primarily from countries such as Kazakhstan and Russia.

Based on the prices and volume allocations as disclosed above, we can tell that volume discounts were justifiably given. The toe-hold initial contracts serve two purposes:

1) The DOE conducted enough due diligence to endorse and validate the various mine restart plans (or initial production plans) from the selected companies mining projects.

2) A relationship with the DOE has been established with the longer term goal from the individual companies being the demonstration for reliable and consistent production over the greater 10- year purchasing period.

Those companies which can prove to be reliable partners will certainly benefit from consistent, above market contracting with minimal variability. It is unlikely that all the above companies will be able to make the long-term cut so contract volumes can prove to be significant over the full 10-year purchase duration. Those that can prove reliable will benefit greatly.

Production execution is now paramount. What do the current restart plans look like from the companies selected above?


Peninsula Energy (PENMF): Following a ~$22M financing in November, the company is fully financed and was first out of the gate in November to announce an official restart from the Lance ISR operations located in Wyoming. Production is expected as early as Q1/2023, we forecast a gradual ramp to ~700,000 lbs of uranium produced in FY/2024. The company has solid fundamentals with ~$31.0M in cash & ST investments along with 310,000 lbs in physical inventory. Not to mention that the Lance property has the largest upside from any US ISR property given nearly 38M in Inferred lbs which were excluded from any financial projection. More here:

Energy Fuels (UUUU): Over the last few years, Energy Fuels has been undergoing a transformation, repositioning itself from being an exclusive uranium producer to now a Rare Earth Elements (REE) and Vanadium producer. Since 2018, much of the forward looking company milestones and guidance have revolved around the new outlook prioritizing REEs. This pivot has been reaffirmed of late given the announced $120.0M sale (November, yet to close) of the Alta Mesa ISR uranium project, arguably their best uranium asset. Nichols Ranch (acquired for $166.0M in 2015) has thus far been a disappointment. Energy Fuels currently holds 760,000 lbs in physical U3O8 inventory along with $77M in cash & equivalents (as of September 30, 2022). More here:

Ur-Energy (URG): Announced an official restart to the Lost Creek (Wyoming) ISR operations on December 19. Following restart capex of ~$15.0M, uranium production is expected to commence in Q1/2023, we now forecast ~700,000 lbs produced in FY/2024 (up from a forecast of ~400,000 lbs prior to the restart decision). Note that Lost Creek initially began production in 2013 and has to date produced ~2.7M lbs of uranium. Ur-Energy currently holds 320,000 lbs in physical inventory along with $37.0M in cash & equivalents. More here:

enCore Energy (EU): enCore continues to target 2023 as the timeframe for initial production out of the Rosita (Texas) ISR facility. Much of the focus has already shifted longer term to developments post-Rosita, owing to its relatively short LOM (at best ~1.5 years). Though the focus and company-maker was always the Dewey Burdock project (located in South Dakota and purchased from Azarga Uranium for $178.0M in 2021), this past November’s $120.0M purchase of the Alta Mesa asset from Energy Fuels has likely bumped Alta Mesa to the head of the cue (though the transaction has yet to close). Though management has previous experience with Alta Mesa and that for all intents and purposes it is a quality ISR asset, questions have since risen as to the rationale for the Dewey Burdock purchase. The company currently holds $11.5M in cash & equivalents.

Uranium Energy Corp. (UEC): It has been many years since ISR production out of the Texas based Hobson facility. An official re-start decision has yet to be made, we assume if ever, Burke Hollow may be the asset to begin with. Of late, management has been less focused with near term production but more interested in buying assets in the Athabasca Basin. Recent highlight transactions include a 5% toehold in Wheeler River (following a bidding war with Denison Mines (DNN)) and the purchase of the Roughrider project from Rio Tinto (RIO). Management has historically been more focused on deals rather than operational execution. UEC currently holds 866,000 lbs in physical U3O8 inventory along with $93.0M in cash & equivalents.


As 2022 comes to an end, we remind everyone that context is key and investments should only be made given a long term outlook and thesis. The past 20 years alone has been volatile for the spot price given a plethora of impactful market events ranging from floods to production cuts to Fukushima. All the best into 2023!

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