Cash-strapped Energy Fuels can pay for uranium mill but not for clean up
A Canadian company looking to build the first new uranium mill in the United States in nearly three decades is burning through cash at a rate that could leave it broke right about the time it hopes to secure its final approvals from Colorado public health officials.
Energy Fuels Inc., a Toronto, Ontario-based company seeking state approval for the Piñon Ridge Mill in far western Colorado, admits in its own financial filings that “there is a significant doubt as to whether the company will be able to continue as a going concern and realize its assets and pay its liabilities as they fall due.”
In a consolidated financial statement for the six months ending March 31, Energy Fuels states: “The company’s cash balances have reached a point where they can support current operations only through early calendar year 2011 without additional financing.”
That lack of cash is a serious concern, say environmentalists and state public health officials. Set against the backdrop of the British Petroleum Gulf oil spill and its astronomical environmental and business costs, they say any company looking to mill uranium in Colorado has to be prepared to pay the enormous costs of catastrophe clean up and reclamation.
Environmentalists and residents of both Montrose and neighboring San Miguel counties bitterly opposed the proposed milling project during special-use permit hearings last fall. News of the thin cash reserves of the company behind the proposal is fueling further opposition.
Frank Filas, Energy Fuels environmental manager, downplayed concerns in an interview with the Colorado Independent:
“So far this company has been able to raise $45 million. A lot of that went into investing in mine properties. A lot has also gone into investing in the mill property and the permitting associated with it,” Filas said.
“So yeah, our cash resources are much smaller than they were, so we’ll be financing this project in phases, and basically the next phase will be to get investments to carry us through the permitting and the final design phase of the project.”
Put up or shut down
Documents obtained by the Independent indicate Energy Fuels is spending between $250,000 and $285,000 a month and had cash reserves of a little more than $2.6 million as of March 31 – or about enough to last through January of 2011, which is when the state must wrap up its permit process for the Piñon Ridge Mill.
Proposed for an 880-acre site in the Paradox Valley about 12 miles west of Naturita, the mill would produce about 770,000 pounds of uranium a year by processing 500 tons of ore each day from surrounding mines in the Uravan Mineral Belt.
The area once supplied yellowcake for Cold War-era weapons but left a toxic legacy that lingers to this day. Still, there is a considerable push for a nuclear-power renaissance to replace carbon-spewing, fossil-fuel-fed power plants. Energy Fuels is banking on that resurgence, first abroad and then domestically.
“Once the permits are approved, that’s going to allow us to go after and get the financing we need for the mill, which we don’t know what exact dollar amount that is, but it’s in the neighborhood of about $150 million if you include the bond with the state also,” Filas said, referring to the company’s proposed $12 million surety bond in the event of a worst-case cleanup scenario.
“That’ll be a big chunk of change that we’ll need to come up with, but we think we’re in pretty good position to do that, and obviously some of it depends on things that are currently outside of our control like the current long-term price of uranium and those types of things.”
The true cost of a uranium disaster
Travis Stills, managing attorney with the Durango-based Energy Minerals Law Center, which is suing Montrose County over the Piñon Ridge special-use permit, said: “$12 million to clean up a $150 million project seems out of line, and with the existing cleanups – the Cotter Mill – the most recent numbers are coming in around $43 million.”
Currently the state’s only uranium mill, Cotter Corp’s Cotter Mill near Cañon City, is an EPA Superfund Cleanup site with its own contamination issues from the 1950s and ’60s. In an April Site Reclamation Plan filed with the state, Cotter put the cleanup price at $23.2 million and the Colorado Department of Public Health and Environment (CDPHE) countered with $43.7 million.
Besides imploring the state to demand a much higher surety bond from Energy Fuels, Stills generally questioned the strategy of using county and state permit approvals as a basis for rounding up more investors.
“[Energy Fuels] suggested that they would be able to raise a lot more money and capital to work with once they got the county permit, and if I’m correct, the stock price has dropped by more than half in that amount of time, so their ability to raise money just by announcing a permit, if that’s what it is, that’s a pretty questionable goal,” Stills said.
Energy Fuels’ stock was trading at 16 cents a share on Tuesday, down from 40 cents a share a year ago.
“It wouldn’t be the first operation that made all of their money by mining investors instead of mining the resource,” Stills added.
Taxpayers on the hook for industry catastrophes
CDPHE spokesman Warren Smith said the state will thoroughly review the Energy Fuels’ bonding proposal and make its own recommendation at the appropriate time.
“The worst case scenario would be, say, the company goes out of business and walks away and the state has to clean it up,” Smith said. “They have to have enough financial assurance that the state wouldn’t have to bring money to the table to do that.”
Smith also said there is precedent for the state rejecting an application on socio-economic grounds.
“Several years ago Cotter Corp. had an application for a radioactive materials license where they wanted to accept out-of-state waste to put into their impoundment, and we rejected that application due to the information that we had about the potential socio-economic impacts on the town,” Smith said. “Yeah, we can do that, and we have done that.”
Again, Energy Fuels’ Filas downplayed the financial concerns.
“It’s a moot point actually,” he said. “The bottom line is that, assuming the state approves our license, they are not going to give us the go-ahead until we place that bond money in their hands. It’s not like they have to worry about it too much; it’s just not going to happen without a reclamation bond in place for whatever amount that they think is necessary.”
A series of meetings on the project will be held in southwestern Colorado in June, starting with a CDPHE public-input session from 6 to 9 p.m., Tuesday, June 8, at the Montrose Pavilion in Montrose and followed by a special session of the San Miguel County board of commissioners from 4 to 7 p.m., Wednesday, June 9, at the Telluride Firehouse in Telluride.