The History of Encore Energy
enCore energy is a second act for the management team behind uranium producer Energy Metals Corp.
Energy Metals was a very successful uranium exploration company that operated from 2004-2008 before it was acquired by Uranium One for $1.5 billion at the height of the last bull market.
Energy Metal’s success hinged on William Sheriff’s successful consolidation of the uranium sector. At Energy Metals Sheriff compiled the largest domestic uranium resource base in history.
He and his team are also experts at ISR (In-Situ Recovery) uranium mining which has certain advantages vs other types of mining like open pit.
Lower upfront capital, 30% lower operating costs and a smaller environmental footprint are just some of the advantages.
Sheriff is singularly focused on in-Situ recovery and once again building a second-to-none resource portfolio to feed America, the largest consumer of nuclear fuel in the world.
Source: enCore Energy
enCore Positioning for $100 uranium by 2030
Since 1999 enCore board member Mark Pelizza has a stellar track record internally forecasting the price of uranium and Sheriff’s team continue to use his expertise to inform their view on the future uranium price.
They believe Uranium prices should fundamentally increase around 10% per year until the end of the decade when the expectation is they will sit at or above $100/lb, excluding any geopolitical driven spikes.
Sheriff is making investment decisions based on the current pricing however and is confident in the profitability of soon to come on production at current, not higher prices.
The steady flow of uranium reactor refurbishments and new construction announcements globally is setting a strong tone for demand moving forward according to Sheriff. However investors need to be aware that demand growth takes 2-3 years to work its way through the value chain before it shows up in higher uranium prices, so patience may be needed.
The Plan for Alta Mesa
Alta Mesa is enCore Energy’s latest asset purchase and will be the second source of production for the company after the Rosita Extension in South Texas, scheduled to begin production in the middle of 2023.
Sheriff says it’s much cheaper to buy uranium resources than explore for them with US uranium in the ground largely adequate to supply the industry for now.
enCore’s secret sauce comes from management’s ability to quickly permit a property and to operate is effectively over time.
By dealing with the states, enCore is able to receive permitting much faster and cheaper than if they had to deal with the feds as well.
Permitting is once of the largest factors that determines the cost and timeline to bring new uranium production online. Operating in unique states like Texas and Wyoming give enCore a significant advantage vs other producers.
The reason enCore bought Alta Mesa is that prior to going idle, after the uranium downturn post Fukushima, it was one of the largest ISR mines in the US. The resources are there and so is the production equipment, it just needs to be refurbished, updated and tested.
Source: enCore Energy
Another big driver of the acquisition was the fact that Alta-Mesa came with 200,000 acres of private land right in the Texas uranium belt.
If we arrive at a time where uranium supply is tight, there is big exploration optionality on the property.
Lastly, enCore’s current CEO Paul Goranson actually operated the Alta-Mesa assets in a prior life and knows them intimately.
This embedded asset knowledge decreases operational risk significantly.
An Active Production Timeline, Today not Tomorrow
enCore is unique with assets scheduled to begin production in months not years. The uranium industry isn’t known for moving fast and you often hear management teams talk about 4 years like they are 4 months.
In Texas, enCore’s rosita extension is fully renovated, 85% of the wells are installed and the project is scheduled for first production in the second quarter of 2023, followed by the much larger plant at Alta Mesa 6 months later.
The facilities in South Texas have a combined capacity of 3.6 million pounds per year and are expected to be producing at full capacity by 2026.
enCore’s goal is to be producing 3 million pounds in 3 years and 5 million pounds of uranium in 5 years.
Source: enCore Energy
The Right Assets and the Right Management Team
The best uranium stocks offer either exciting exploration potential or near term production growth.
enCore checks the second box with production expected in six months and an ambitious growth runway over the next decade.
An ambitious production plan coupled with enough uranium exploration potential to sustain years of production makes enCore a key player in the domestic uranium industry.
The Uranium Value Chain (Left), Uranium Supply (Right)
enCore Energy
About Author
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.