June 26, 2018 - 8:38 AM EDT
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Hidden Value in Anfield Energy: The Shootaring Uranium Mill

President Trump’s administration is making it clear that it intends to support the nuclear industry on the grounds of national security. Against the backdrop of depressed prices for uranium, the key carbon-free fuel in generating nuclear energy, and a buzz in Washington, the value of the assets of Anfield Energy (TSX-V: AEC) (OTCQB: ANLDF), including its overlooked conventional uranium mill, could soon be realized.

In May, the Department of the Interior dubbed uranium a “critical mineral.” Energy Secretary Rick Perry has been called upon to take the necessary actions to keep coal and nuclear power plants running. Elsewhere on Capitol Hill, the Department of Energy is finally scaling back on dropping uranium into the spot market, something it has been doing as part of dismantling the idled A-Plant uranium enrichment site in Piketon, Ohio.

Another significant event for the future of uranium happened in January when Energy Fuels (NYSE American: UUUU)(TSX: EFR) and Ur-Energy (NYSE American: URG)(TSX: URE) filed a 232 petition with the Commerce Department calling for an investigation into uranium imports as a matter of national security, further asking Trump to use his power to crack-down on imports to “ensure the long-term viability of the U.S. uranium mining industry.”

Republican Senator John Barrasso of Wyoming, chair of the Senate’s Environment and Public Works Committee, supports the companies and the efforts needed to preserve the U.S. industry.

Coupled with mines being put on maintenance and production being curtailed to prevent any further drop in uranium prices, the tide for the metal looks like it is starting to turn. To that point, Eight Capital analyst David Talbot sees this level as an opportunistic entry point into the sector.

The U.S. derives about 20 percent of its electricity from its 99 nuclear power plants. Yet, the country generates less than 3 percent of the uranium supply for its own needs, instead relying on Russia, Kazakhstan, Uzbekistan and other countries that do not share the U.S.’s democratic values to meet uranium demand.

Moreover, the only uranium enrichment plant, where “yellowcake” is converted to gaseous UF6 for use in nuclear fuel, was shut down in October, citing a need for improvement in business conditions.

This nuclear power environment has resulted in investors not giving much value to companies’ uranium assets, a mood that could quickly change as conditions improve, sparked by efforts in Washington to bolster domestic supply and globally to support prices.

The U.S. has just three licensed conventional uranium mills and only the White Mesa mill in Utah of Energy Fuels is currently operating. Mining multinational Rio Tinto’s Sweetwater mill in Wyoming has been on standby for well over a decade. Anfield Energy owns the third facility, the Shootaring Canyon mill situated 48 miles south of Hanksville, Utah in Ticaboo.

The plant was built in 1980 and operations were halted in 1982 due to depressed uranium prices. Stockpiles on the surface at the mill are estimated to be 370,000 pounds of U3O8 at an average grade of 0.147%.

It’s interesting that Uranium One bought the mill from U.S. Energy Corp. in 2008, agreeing to pay up to $90 million for the acquisition of the mill and nearby mining claims. Keith Larson, CEO at U.S. Energy, had picked the mill up about a decade earlier for next to nothing when uranium was out of favor.

In what could be a great move as part of the uranium super cycle, Anfield made the prescient move to buy the mill from Uranium One in 2014 for about $7.5 million (including $2.5 million in shares paid to U.S. Energy). Uranium One divested assets to focus its efforts on uranium ISR (in-situ recovery) methods. For the purchase price, Anfield got the mill and properties in Utah and Arizona containing an historical Measured and Indicated resource estimate of 6.8 million pounds of U3O8.

In a phone conversation with Baystreet.ca, Anfield CEO Corey Dias made it clear that there are many advantages to sitting on the Shootaring mill at this time. Dias explained that all uranium mills create an environmental liability once producing and that the other two remaining mills in the U.S. (there were 40+ operating in the 1980s) are dealing with those liabilities. Because of its limited time operating, Shootaring is still extremely clean and faces few, if any, such problems.

“The scarcity of radioactive materials licenses for a conventional uranium mill makes ours an extremely valuable asset when the time is right to bring Shootaring back online,” said Dias.

Dias was referring to the recent decision of the Colorado Department of Public Health and Environment to revoke the permit for the planned Pinon Ridge uranium mill near Naturita in the western part of the state. Pinon Ridge says it is still going to pursue constructing the mill, albeit through an appeal or application for a new license.

The proposed Colorado mill lends some color to the value of Anfield’s Shootaring mill. It is expected that the Pinon Ridge mill, which would be capable of processing 500 tons per day of uranium and vanadium ore, will cost about $120 million to build. Shootaring has a capacity of 750 tons.

“We’re just waiting,” said Dias. “We can continue to work on upgrading the historical resources on our uranium properties and, when we’re ready to turn on the spigot, we will allocate capital to refurbish Shootaring.” It can take 6-8 years (and obviously into the tens and hundreds of millions of dollars) to construct a mill from the dirt up, giving Anfield a clear advantage in time to market. “We think we have a number of positives on our side, not to mention the ability to add capacity, if need be, at Shootaring,” added Dias.

Anfield indeed has many advantages over peers, most certainly over any peer that carries a paltry $5 million market capitalization like Anfield. Not only does the company have ISR and conventional uranium assets – and access to Uranium One’s processing plant in Wyoming – in addition to its mill, industry giant Uranium One is backstopping its supply chain. To wit, utilities can feel confident in penning supply agreements with Anfield knowing that all uranium needs will be fulfilled.

Ultimately, what we have is a uranium climate that looks like ripe for government incentives at all levels. The winds of change feel like they are starting to blow and when they gain speed, there may not be a little company better positioned to capitalize and grow long legs than Anfield.

Disclaimer: Nothing in this article should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this article is not provided to any individual with a view toward their individual circumstances. Baystreet.ca has been paid a fee of four thousand dollars for Anfield advertising. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this article as the basis for any investment decision. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in this article is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.

Source: Livemoney (June 26, 2018 - 8:38 AM EDT)

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