Energy Fuels Outlook for the Fiscal Year Ended September 30, 2013 ("FY-2013")
Energy Fuels continues to execute its corporate strategy, which balances prudent, measured operations in the midst of the current uranium price environment, while concurrently positioning the Company to realize the economic benefits of anticipated improvements in the price of uranium. Energy Fuels believes the uranium market outlook is positive (as outlined below in Market Outlook for FY-2013) and is supported by strong supply and demand fundamentals within the sector.
With respect to operations management in the current uranium pricing environment, the Company is tailoring its production levels to meet the delivery requirements specified in its term contracts, which include pricing terms at a significant premium to the current uranium spot price. In doing so, the Company will maximize its realized selling price for produced U3O8 and avoid investment in excess concentrate inventories. Energy Fuels believes its term supply contracts are important intangible assets that significantly diminish the financial impact of the current uranium price on the Company. The Company is also able to fulfill this targeted level of production output utilizing sources with relatively lower marginal cash costs of production, including stockpiled ore inventories, mined Arizona Strip ore and alternate feed materials.
Energy Fuels expects significant improvements in the uranium price over the medium to long-term and is maintaining and selectively growing its asset base in a manner that positions the Company to realize the associated economic benefits of a higher uranium price. Production on the Arizona Strip is anticipated to continue in FY-2013. The Company is maintaining its formerly producing mines on the Colorado Plateau on standby. Development of the Canyon Mine in Arizona is anticipated to continue, securing a relatively lower-cost ore feed to the White Mesa Mill. Permitting at the Sheep Mountain Project is anticipated to continue, advancing a second major production center for the Company. The Company is evaluating potential new supplies of alternate feed materials for the White Mesa Mill (which carry no mining costs). The Company will continue to evaluate additional toll milling and/or ore purchase agreements with third-parties who own uranium properties within trucking distance of the White Mesa Mill. Energy Fuels will also continue to evaluate growth through accretive acquisitions.
As outlined below, Energy Fuels provides the following updated outlook for FY-2013 and provides the following outlook for uranium sales and production for the quarter-ended March 31, 2013 ("Q2-2013"):
- FY-2013 Sales: The Company expects to sell 1,000,000 to 1,050,000 pounds of U3O8 during FY- 2013, of which 957,000 pounds is expected to be sold under term contracts and the remainder sold into the spot market. V2O5 sales are estimated to be between 1,700,000 and 1,800,000 pounds during FY-2013. - Q2-2013 Sales: The Company expects to sell 533,334 pounds U3O8, during Q2-2013 of which 100% will be sold under term contracts. - FY-2013 Production: The Company expects to produce approximately 1,000,000 pounds of U3O8 during FY-2013, sourced from both conventional ore and alternate feed sources. Conventional ore production is expected to include ore mined from the Beaver, Pandora, Arizona 1 and Daneros mines. Given the expected processing of Beaver and Pandora ores, Energy Fuels also anticipates production of between 1,700,000 and 1,800,000 pounds of V2O5 in FY-2013. - Q2-2013 Production: The Company expects to produce 250,000 to 300,000 pounds of U3O8 during Q2-2013, sourced from alternate feed sources and conventional ore from the Beaver and Pandora mines. - FY-2013 Mining Activities: Mining on the Arizona Strip is expected to continue during FY- 2013 at the Arizona 1 and Pinenut mines. Effective October 17, 2012, the Company placed the Daneros and Beaver mines on standby. In addition, the Pandora mine was placed on standby in December 2012. - FY-2013 Project Development: As previously announced, Energy Fuels plans to invest in high priority development projects and maintain general permitting and exploration activities during FY-2013. The Company expects to continue development of the Canyon mine in Arizona in FY- 2013. The Company anticipates development expenditures at the Canyon mine to be $3.9 million to $4.4 million during FY-2013. In addition, Energy Fuels expects to continue permitting activities at the Sheep Mountain Project at an anticipated cost of approximately $1.1 million during FY-2013. The Company expects other permitting and exploration expenditures to be approximately $1.8 million for FY- 2013.