Energy Fuels Issues Letter to Shareholders

14 Mar 2019

Energy Fuels Inc., a leading producer of uranium and vanadium in the United States, is pleased to present the following Letter to Shareholders from President and Chief Executive Officer ("CEO") Mark S. Chalmers:

Dear Fellow Shareholders:

Well, a full year has gone by since my first shareholder letter as President and Chief Executive Officer of Energy Fuels. The past year has been very exciting for the Company, and I believe we achieved a number of significant milestones as we continue to pursue our strategy of building Energy Fuels into a uranium mining and energy company of major global significance. Moreover, on behalf of the Board of Directors and my Management Team, I thank you for your continued support of Energy Fuels.

Last year in my letter to shareholders, I introduced a light-hearted phase: "Energy Fuels might be small, but we're mighty!" I ended my letter with a goal to report that we would be "larger and mightier" in 2019. I am pleased to report to you that I believe the Company has made significant strides in this regard, despite a continued difficult uranium market.

In this year's letter, I wish to introduce another light-hearted phrase I routinely use around the office: "Energy Fuels punches above its weight!" In addition to thinking big and pursuing great goals, we seek challenges and opportunities that many larger organizations would only hope to achieve. I want all of our shareholders to understand that, working as a team, our competitive spirit drives us to always be the very best we can be, creating shareholder value wherever we can find it, regardless of what challenges come before us.

Make no mistake about it, our primary focus remains – and always will be – large-scale, profitable uranium production. All of our activities support this focus. We continue to maintain our industry-leading uranium production capabilities, including licensed and permitted projects that we believe can resume and increase production quicker and on a greater scale than any of our peers in an environment of improving uranium market fundamentals, and hopefully the successful conclusion of our efforts supporting the ongoing Section 232 investigation into uranium imports into the U.S.

So let me get started on some of our major accomplishments over the past year and provide some insight into our thinking for 2019:

  1. Leading U.S. Uranium Producer: In 2018, Energy Fuels remained the largest U.S. producer of uranium having produced 917,000 pounds of U3O8 from a combination of production from our Nichols Ranch in situ recovery project in Wyoming and from our White Mesa Mill in Utah. We decreased uranium production in 2018 in order to conserve cash and in-ground resources, and our uranium production in 2019 will decrease further, because we expect vanadium production to supplant uranium production at the White Mesa Mill. We expect to temporarily focus on vanadium production, because significant cash flow from vanadium may be available to us for as long as vanadium prices remain strong. But, as I stated above, Energy Fuels' primary focus is uranium, and everything we do supports this focus – including vanadium production.
  2. Stronger Balance Sheet and Share Performance: In May 2018, Energy Fuels qualified for inclusion on the Russell 3000 Index. This allowed the Company to experience a several-fold increase in share liquidity. This, along with the significant catalysts ahead of us, also put the Company 'on the radar' of a number of larger funds. Another benefit to being included on the Russell indices is that the Company was able to raise funds through our at-the-market facility during the annual rebalance at a very cheap cost of capital. As a result, we were able to repay, in full, all our Wyoming Industrial Development bonds totaling $8.7 million and save significant interest expense. During the rebalance period, our strategies significantly strengthened the Company's balance sheet to one of the best in the sector, while at the same time our share price outperformed our peers.
  3. Bolstering U.S. National Security: In January 2018, Energy Fuels and Ur Energy co-petitioned the U.S. Department of Commerce (DOC) under Section 232 of the Trade Expansion Act of 1962, asking them to look into the threat of increasing quantities of uranium being imported into the U.S. from state-owned and state-subsidized enterprises in Russia, Kazakhstan, Uzbekistan, and China. In July 2018 the DOC initiated the investigation. We are seeking a remedy which will limit imports into the U.S., effectively reserving 25% of the U.S nuclear market for U.S. uranium producers. It is the Company's belief that a report will be delivered to the President of the United States in mid-April 2019. The President will then have up to 90 days to adjust trade, if he sees fit. While there is no guarantee of the outcome of this initiative, we feel our position is extremely compelling, and that the President can protect U.S. national security by helping to support the domestic uranium mining industry at a negligible cost.
  4. Capturing the Vanadium Opportunity: The possibility of Energy Fuels resuming vanadium production was introduced in my past shareholder letter. Vanadium is a mineral used in high-strength steel, titanium and other alloys, in the chemical industry, and in batteries used in renewable energy systems. During 2018, vanadium prices rose dramatically, reaching a peak near $29 per pound. Today, the price remains strong at over $17 per pound. Thanks to the excellent technical work of our talented and dedicated staff at the White Mesa Mill, the team tested and designed an innovative means to recover the substantial solubilized inventory of vanadium contained in our tailings solutions. Late in 2018 and into early 2019, this system was commissioned and is now performing exceptionally well, producing commercial quantities of very high quality V2O5 with an average purity of 99.6%. Assuming vanadium price strength continues, we estimate we can recover approximately four million pounds of V2O5 during 2019 and 2020. This has the potential to generate significant revenues and cash flows for the Company during the next two years that we intend to reinvest toward further strengthening our industry-leading uranium capabilities. In addition, the Company embarked on a test mining campaign at our La Sal mine complex to determine if certain vanadium ores can be more selectively mined to capture higher vanadium grades by using modern "real-time" analytical equipment. While final results are still pending, I am happy to note that significant improvements in grade-control have been observed, which have the strong potential to improve the economics of these uranium/vanadium mines in the future.
  5. Steady Alternate Feed Material Business: Our alternate feed recycling business, which has been a mainstay for the Company during periods of low uranium prices, continued to contribute materially to Energy Fuels' bottom line. We collected approximately $7 million in fees (or uranium value equivalent) during 2018, and we recovered 424,000 pounds of uranium for third parties during the year. As a point of reference, this program effectively recycled a years' worth of fuel for a nuclear reactor. Due to our focus on vanadium recovery, we do not expect to earn any alternate feed revenue in 2019. However, we continue to pursue multiple opportunities, and this remains an important part of our business plan over the long-term.
  6. Abandoned Uranium Mine Opportunity: We continued to advance the potential for Energy Fuels to participate in the clean-up of Cold War era abandoned uranium mines. We offer the U.S. government one of the most cost-effective and 'shovel ready' solutions for this cleanup. As of the writing of this letter, the EPA has collected approximately $1.7 billion in trust from various parties to pay for the cleanup of these abandoned mines. While the Company has not obtained any of this work to date, our White Mesa Mill is in an excellent position to assist with these cleanups, while also recycling the cleanup material to recover uranium. As a company which values sustainability, and responsible cradle-to-grave principles, this opportunity remains a high priority for us looking to the future.

Lastly, in addition to the initiatives mentioned above, Energy Fuels continues to seek other sources of revenue, cost-cutting measures, and catalysts, which will support our uranium production over the long term.

With 2019 off to a quick and exciting start, we reflect proudly on 2018 when we believe we took major steps forward toward achieving our objective of being "larger and mightier" than the year before. While Rome was not built in a day, or even a year, we are passionate about seeking – and realizing – shareholder value and sustainability in every possible way.

Next year, I look forward to writing once again with an update on how we are doing by "punching above our weight" on our journey to becoming a uranium company of major global significance.


Mark S. Chalmers
President and CEO

Energy Fuels |