President Biden recently signed the Prohibiting Russian Uranium Imports Act banning the import of enriched uranium from Russia, currently providing about 25% of the reactor fuel in the U.S. This ban, due to take effect on August 11, has released approximately $2.7B in funding to develop the U.S. uranium fuel industry further. Among the beneficiaries of this legislation is Energy Fuels (NYSE:UUUU). The stock is riding the wave and has been up over 22% in the past month. It trades at a relative discount, making it an attractive option for value investors looking to participate in the shifting uranium market.
Stockpiling Uranium and Rare Earth Elements
Energy Fuels is a mining development company and the leading producer of uranium in the United States. The company explores mines and processes uranium and rare earth elements (REE). As part of its projected 2022 long-haul uranium supply contracts, it has recommenced operations at three of its established uranium mines, in Pinyon Plain, La Sal, and Pandora.
Expecting to reach full capacity by late 2024, the company aims to achieve run-rate production between 1.1 to 1.4 million pounds per annum (MLBPA) and intends to stockpile ore by 2025. Management expects to yield 150,000 to 500,000 pounds of finished U3O8, depending on the timing of the mine’s initialization, with the 150,000 pounds baseline arising solely from their alternate feed recycling program.
Two additional mines, Whirlwind and Nichols Ranch, are in the making, and the company predicts initial production within a year. Once operational, these mines are expected to increase the company’s run-rate production to 2 million pounds per annum (MLBPA) of U3O8 by 2025. The company is also advancing the permitting and development processes at Roca Honda, Sheep Mountain, and Bullfrog projects, which may further boost run-rate production to 5MLBPA.
Further, Energy Fuels is securing positions in several heavy mineral sand (“HMS”) deposits worldwide, providing a rich source of ”magnetic” REEs used in Electric Vehicles (EVs) and an array of clean energy and advanced technologies. The firm has made notable progress in developing the Bahia HMS project in Brazil, a potential source of 3,000 – 10,000 tonnes per year of monazite sand concentrate to the Mill, depending on production rates, offering decades of rare earth oxide supply.
Energy Fuels’ Recent Financials
The company recently reported financial results for the first quarter ending March 31, 2024. Revenue of $25.43 million slightly missed expectations by $0.94 million, despite being a 29.7% rise year-over-year. GAAP EPS, at $0.02, remained on target with consensus predictions.
The company’s financial standing remains solid, with no debt and a liquidity pool surpassing $220 million. The working capital comprises $54.78 million in cash and equivalents, marketable securities worth $140.80 million, and inventory valued at $28.25 million. The evaluation of the company’s product inventory alone stands at approximately $40.82 million, providing over $20 million in additional liquidity.
What Is the Price Target for UUUU Stock?
Analysts following the company are bullish on the stock. For example, B. Riley analyst Matthew Key recently assigned a Buy rating with a $9 price target. He noted that the company’s production of uranium, vanadium, and rare earth elements has the potential to generate robust earnings in the coming years.
Energy Fuels is rated a Strong Buy based on the recommendations and price targets assigned by three Wall Street analysts over the past three months. The average price target for UUUU stock is $8.42, representing an upside of 28.35% from current levels.
The stock has been volatile, though trending upward and gaining over 14% in the past year. It sits in the lower half of its 52-week price range of $5.16-$9.02 and demonstrates positive price momentum, trading over the 20-day (6.25) and 50-day (6.19) moving averages. The stock also trades at a relative discount with a P/B of 2.79x, compared to the Uranium industry average of 4.43x.
Summary
Energy Fuels has emerged as a favorable investment prospect. Due to the decision made by the U.S. government, the company is well positioned for robust growth as it picks up the pace in producing uranium and rare earth elements, critical components in clean energy and advanced technology applications. The stock trades at a discount relative to its industry counterparts, exhibiting positive momentum, making it enticing for value investors.
