Energy Fuels (NYSE: UUUU) Stock is Unique Rare Earths Play

Uranium and rare earths exploration and mining company Energy Fuels, Inc. NYSE: UUUU stock has seen a resurgence in late 2020. The surge can continue into 2021 due to a perfect storm of catalysts including the Biden administration clean energy agenda, U.S. uranium reserves plan, ESG thematic investing, electric vehicles (EVs) momentum spilling over into EV battery technologies including charging and rare earth materials. In the markets, sometimes the change in context can turn a turd into treasure as evidenced by the FOMO driven spike in so many stocks that would otherwise be deemed ridiculously valued based on fundamentals (or lack thereof). This is exactly what’s happening to Energy Fuels by having the only fully licensed and operating uranium mill in the U.S. The context is the surge in demand for renewable energy technologies, many of which require rare earths materials. Speculative risk-tolerant investors seeking to get some exposure into a rare earths supply chain aggregator can look for opportunistic pullback levels on Energy Fuel shares.

Energy Fuels Niche

China has cornered the rare earths market with 70% of global rare earth production. The U.S. currently imports nearly all rare earths despite having the resources in the U.S. The problem is extracting rare earths which typically have radioactivity. Ironically, clean energy requires dealing with pesky radioactive components, notably splitting them and storing the waste. That is exactly what Energy Fuels’ White Mesa Mills plant does. Separates the radioactive material extracting uranium with the storage and licenses to store the radioactive waste.

U.S. Rare-Earth Minerals Production Executive Order

As a national emergency, President Trump signed an executive order seeking to increase domestic production of rare-earth minerals on Sept. 28, 2020. The order directs the Interior Department to use the Defense Production Act to speed up the development of mines with the objective of reducing reliance on China for rare-metals that are critical to many manufacturing industries. This is a boon to Energy Fuels as they enter the rare earths business officially in Q1 2021 as announced on Dec. 14, 2020, in a three-year supply deal with The Chemours Company NYSE: CC to acquire a minimum of 2,500 tons of monazite annually for the processing of rare earth elements (REE) and uranium. This amount can supply 10% of the total current U.S. demand in end-use products. REEs are used in clean energy and advanced technologies ranging from EVs, wind turbines, cell phones, computers, flat panel displays, advanced optics, medicine and national defense applications. Monazite is rich in uranium and recoverable REEs.

Uranium Reserves Bill

As part of the U.S. government funding bill passed on Dec. 21, 2020, $75 million was allocated to begin the process for building a U.S. uranium reserve under a 10-year implementation plan. Energy Fuels CEO, Mark Chalmers commented, “Any funds used through a Department of Energy program to purchase uranium from the White Mesa Mill can have a ‘multiplier effect’, by not only supporting the domestic uranium mining industry, but also by advancing other important clean energy priorities, including rare earth production.”

At-the-Market Sell Program

On Dec. 31, 2020, UUUU implemented an “at-the-market” program to sell up to $35 million of common shares to raise cash. Total volume was 3.25 million shares, so there’s going to be at least 10-days of selling at that rate. On the bright side, this isn’t dilution via secondary offering, but it will impact shares negatively. While this can generate downside pressure, it can also provide opportunistic pullback opportunities for risk-tolerant investors.    

 UUUU Opportunistic Pullback Levels

Using the rifle charts on the monthly and weekly time frames provides a broad view of the landscape for UUUU stock. The monthly rifle chart has a stochastic mini pup breakout that caused shares to spike through the upper Bollinger Bands (BBs) at $3.76 as the monthly 5-period moving average (MA) rises to $2.27. Shares have definitely gotten ahead of themselves after triggering the monthly market structure low (MSL) buy trigger above $2.35 and peaking near the $4.88 Fibonacci (fib) level. The weekly rifle chart uptrend has been powered by the weekly stochastic mini pup which is stalling at the 90-band as reversion sets in. The at-the-market sell program has stalled the momentum as the weekly 5-period MA tries to catch up at $3.51. The sell program can provide opportunistic pullback levels at the $3.37 fib, $3.14 fib, $2.74 fib. $2.47 fib and the $2.19 fib. While the narrative has improved with a strong operating game plan, Energy Fuels will need to execute seamlessly in 2021 to justify the elevated price levels. Upside trajectories can range from the $5.09 fib upwards to the $9.31 fib.