EX-99.1 2 exhibit99-1.htm EXHIBIT 99.1

Energy Fuels Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

Exhibit 99.1

 

Energy Fuels Inc.

Condensed Consolidated Interim Financial Statements

For the three and six months ended
June 30, 2014
(Unaudited)
(Expressed in U.S. Dollars)

ENERGY FUELS INC.

Condensed Interim Consolidated Statements of Financial Position

(Unaudited)

(Expressed in thousands of U.S. dollars)

		June 30, 2014			December 31, 2013
ASSETS
Current assets
Cash and cash equivalents	$	14,690		$	6,628
Marketable securities (Note 5)		321			409
Trade and other receivables		582			653
Inventories (Note 6)		31,301			28,040
Assets held for sale (Note 8)		4,487			4,415
Prepaid expenses and other assets		889			757
		52,270			40,902
Non-current
Property, plant and equipment (Note 8)		70,715			100,969
Investment in Virginia Energy Resources Inc. (Note 7)		860			1,012
Intangible assets		5,388			7,772
Restricted cash (Note 10)		16,770			25,478
	$	146,003		$	176,133
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	7,381		$	5,442
Deferred revenue		1,650			1,429
Current portion of long-term liabilities
Decommissioning liability (Note 10)		172			172
Loans and borrowings		810			378
		10,013			7,421
Non-current
Decommissioning liability (Note 10)		14,624			13,627
Loans and borrowings		19,197			17,952
		43,834			39,000
Shareholders' equity
Capital stock (Note 11)	$	232,835		$	232,089
Contributed surplus		22,271			21,182
Share purchase warrants		4,714			4,838
Deficit		(157,036	)		(120,366	)
Accumulated other comprehensive loss		(615	)		(610	)
		102,169			137,133
	$	146,003		$	176,133

Additional footnote references
   Commitments and contingencies (Note 14)
   Subsequent events (Note 15)

Approved by the Board

(signed) Stephen P. Antony , Director

(signed) Larry Goldberg , Director

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

2

ENERGY FUELS INC.

Condensed Interim Consolidated Statements of Comprehensive Loss

(Unaudited)

(Expressed in thousands of U.S. dollars, except per share amounts)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2014			2013			2014			2013
REVENUES (Note 13)	$	13,525		$	4,954		$	24,886		$	39,041
COST OF SALES
Production cost of sales		(7,876	)		(3,783	)		(15,351	)		(29,820	)
Depreciation, depletion and amortization		(853	)		(274	)		(1,949	)		(4,082	)
Impairment of inventories		-			(563	)		-			(1,964	)
TOTAL COST OF SALES		(8,729	)		(4,620	)		(17,300	)		(35,866	)
GROSS PROFIT		4,796			334			7,586			3,175
Care and maintenance expenses		(903	)		(1,612	)		(1,540	)		(3,015	)
Selling, general and administrative expenses (Note 13)		(4,104	)		(3,523	)		(9,039	)		(9,483	)
Finance income (expense) (Note 13)		647			(832	)		(2,757	)		(2,050	)
Impairment of plant, property and equipment (Note 9)		(30,781	)		-			(30,781	)		-
Other income (expense)		18			101			(131	)		(55	)
NET LOSS BEFORE TAXES		(30,327	)		(5,532	)		(36,662	)		(11,428	)
Income tax expense		(1	)		-			(8	)		(8	)
NET LOSS FOR THE PERIOD		(30,328	)		(5,532	)		(36,670	)		(11,436	)
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS
Unrealized gain (loss) on available-for-sale assets		(68	)		-			352			-
Gains on available-for-sale financial assets reclassified to profit or loss (Note 5)		-			-			(198	)		-
Share of other comprehensive income (loss) of Virginia Energy Resources Inc.		118			(23	)		59			(23	)
Foreign currency translation adjustment		(746	)		362			(218	)		750
COMPREHENSIVE LOSS FOR THE PERIOD	$	(31,024	)	$	(5,193	)	$	(36,675	)	$	(10,709	)
					-
LOSS PER COMMON SHARE					-
BASIC AND DILUTED LOSS PER SHARE	$	(1.54	)	$	(0.39	)	$	(1.87	)	$	(0.76	)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

3

ENERGY FUELS INC.

Condensed Interim Consolidated Statements of Shareholders' Equity

(Unaudited)

(Expressed in thousands of U.S. dollars)

		Six Months Ended
		June 30,
		2014			2013
Capital stock (Note 11)
Balance, beginning of period	$	232,089		$	179,427
Shares issued for exercise of share purchase warrants		607			-
Shares issued for Investment in Virginia Energy		-			3,945
Shares and warrants issued for private placement		-			5,684
Shares issued for consulting fees		-			132
Shares issued for exercise of options		139			-
Share issuance costs		-			(403	)
Balance, end of period		232,835			188,785
Contributed surplus
Balance, beginning of period		21,182			19,805
Share-based compensation		1,108			35
Stock options exercised (Note 12)		(19	)		-
Balance, end of period		22,271			19,840
Share purchase warrants
Balance, beginning of period		4,838			4,103
Warrants issued for private placement		-			837
Share issuance costs - private placement		-			(58	)
Exercised share purchase warrants		(124	)		-
Balance, end of period		4,714			4,882
Deficit
Balance, beginning of period		(120,366	)		(35,083	)
Net loss for the period		(36,670	)		(11,436	)
Balance, end of period		(157,036	)		(46,519	)
Accumulated other comprehensive loss
Balance, beginning of period		(610	)		(957	)
Unrealized gain on available-for-sale assets		352			-
Gains on available-for-sale financial assets reclassified to profit or loss		(198	)		-
Share of comprehensive loss of equity-accounted investees		59			(23	)
Foreign currency translation reserve		(218	)		773
Balance, end of period		(615	)		(207	)
Total shareholders' equity	$	102,169		$	166,781

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

4

ENERGY FUELS INC.

Condensed Interim Consolidated Statements of Cash Flows

(Unaudited)

(Expressed in thousands of U.S. dollars)

		Six Months Ended
		June 30,
		2014			2013
OPERATING ACTIVITIES
Net loss for the period	$	(36,670	)	$	(11,436	)
Items not involving cash:
Depletion, depreciation and amortization		4,468			8,031
Stock-based compensation		1,108			35
Finance expense		2,757			2,050
Unrealized foreign currency translation		(438	)		(127	)
Impairment of plant, property and equipment (Note 9)		30,781			-
Impairment of inventories		-			1,964
Other expense		(79	)		55
Share of equity-accounted investee		211			-
Cash received for services not yet provided		222			-
Change in non-cash working capital		(2,880	)		3,259
Expenditures on reclamation of mineral interests		(131	)		-
Interest received		30			274
		(621	)		4,105
INVESTING ACTIVITIES
Development expenditures on property, plant and equipment		(970	)		(469	)
Expenditures on exploration, evaluation and development		(689	)		(8,166	)
Expenditures for Investment in Virginia Energy Resources Inc.		-			(269	)
Deposits received on assets held for sale		1,479			-
Proceeds from sale of property, plant and equipment		-			1,090
Proceeds from sale of marketable securities		415			780
Change in cash deposited with regulatory agencies for decommissioning liabilities, net of interest		8,708			1,964
		8,943			(5,070	)
FINANCING ACTIVITIES
Issuance of common shares upon exercise of warrants, net of share issuance costs		483			6,205
Stock option exercises		120			-
Repayment of borrowings		(77	)		152
Interest paid on convertible debentures		(869	)		(882	)
		(343	)		5,475
INCREASE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD		7,979			4,510
Effect of exchange rate fluctuations on cash held		83			(262	)
Cash and cash equivalents - beginning of period		6,628			3,613
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	14,690		$	7,861
Non-cash investing and financing transactions:
Issuance of shares for acquisition of joint venture interests		-			682
Issuance of shares for investment in Virginia Energy		-			3,945

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

5

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

1. REPORTING ENTITY AND NATURE OF OPERATIONS

Energy Fuels Inc. was incorporated under the laws of the Province of Alberta and is now incorporated in the Province of Ontario. Energy Fuels Inc. registered and head office is located at 2 Toronto Street, Suite 500, Toronto, Ontario, Canada, M5C 2B6 and its principle place of business and the head office of the Company’s U.S. subsidiaries is located at 225 Union Blvd. Suite 600, Lakewood, Colorado, 80228 USA.

Energy Fuels Inc. and its subsidiary companies (collectively, the “Company” or “EFI”) are engaged in uranium mining and related activities, including acquisition, exploration and development of uranium and vanadium bearing properties, and extraction, processing and selling of uranium and vanadium.

Uranium, the Company’s primary product, is produced in the form of uranium oxide concentrates (“U3O8”) and sold to various customers for further processing. Vanadium, a co-product of some of the Company’s mines, is also produced and is in the form of vanadium pentoxide (“V2O5”). The Company also processes uranium bearing waste materials, referred to as “alternate feed materials”.

In fiscal 2013, due to market conditions, the Company placed certain of its mines on standby.

In October 2013, the Company announced the change in its fiscal year end from September 30 to December 31, effective as of December 31, 2013. Accordingly, for the 2013 reporting year, the Company reported its audited consolidated financial statements for the fifteen month period ending December 31, 2013, compared with the twelve month period ended September 30, 2012. The interim reporting periods and their respective comparative periods in 2014 are as follows:

	Period	Comparative Period
	Three months ended March 31, 2014	2 nd Quarter: Three months ended March 31, 2013
	Six months ended June 30, 2014	3 rd Quarter: Six months ended June 30, 2013
	Nine months ended September 30, 2014	4 th Quarter: Nine months ended September 30, 2013

2. BASIS OF PRESENTATION

Statement of Compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting (“IAS 34”) and do not include all of the information required for full annual financial statements and should be read in conjunction with the annual audited financial statements of the Company for the 15 month period ended December 31, 2013.

These condensed consolidated interim financial statements were approved by the Board of Directors of the Company on August 11, 2014.

Use of Estimates and Judgments

The preparation of condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the 15 month period ended December 31, 2013.

6

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

The accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied to the consolidated financial statements as at and for the 15 month period ended December 31, 2013 except for as summarized below.

New accounting standards adopted during the current period

The Company has adopted the following new standards, including any consequential amendments to other standards, with a date of initial application of January 1, 2014.

(i)	IFRS 13 Fair value measurement
(ii)	IFRIC 21 Levies
(iii)	Amendments to IAS 32 Financial Instruments: presentation

The nature and effects of the changes are explained below.

(i) IFRS 13 Fair Value Measurement

IFRS 13 Fair Value Measurement (“IFRS 13”), which provides guidance on how fair value should be applied where its use is already required or permitted by other IFRS standards, and includes a definition of fair value, and is a single source of guidance on fair value measurement and disclosure requirements for use with all IFRS standards. This standard also requires additional disclosure about fair value measurement. As a result of adopting IFRS 13, the Company provided additional disclosures in Note 4.

(ii) IFRIC Interpretation 21, Levies

On January 1, 2014 the Company adopted IFRIC Interpretation 21, Levies (“IFRIC 21”) 2014 with retrospective application. IFRIC 21 provides guidance on the accounting for a liability to pay a levy, if that liability is within the scope of IAS 37, Provisions, Contingent Liabilities and Contingent Assets. The interpretation was issued to address diversity in practice around when the liability to pay a levy is recognized. The adoption of IFRIC 21 did not have a material impact on these financial statements.

(iii) Amendments to IAS 32 Financial Instruments: presentation

The amendments to IAS 32 Financial Instruments: presentation (“IAS 32”) clarify the criteria that should be considered in determining whether an entity has a legally enforceable right to off-set financial assets and liabilities if that right is: not contingent on a future event; and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. Amendments to IAS 32 are applicable to annual periods beginning on or after January 1, 2014, with retrospective application required. The adoption of the amendments to IAS 32 did not have a material impact on these financial statements.

7

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

4. FAIR VALUE MEASURMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes the significance of the inputs used in making fair value measurements. The fair value of financial assets and financial liabilities included in Level 1 are determined by reference to quoted prices in active markets for identical assets and liabilities.

The fair value of financial assets and financial liabilities in Level 2 include valuations using inputs based on observable market data, either directly or indirectly, other than quoted prices. Level 3 valuations are based on inputs that are not based on observable market data. The Company has no financial instruments measured at fair value categorized in Level 2 or 3 (valuation technique using non-observable market inputs) as at June 30, 2014.

Financial assets and financial liabilities measured at fair value on a recurring basis include:

		Level 1			Level 2			Level 3			Total
Marketable securities		321			-			-			321
Convertible debentures		19,371			-			-			19,371
	$	19,692		$	-		$	-		$	19,692

As at June 30, 2014, the fair values of cash and cash equivalents, restricted cash, short-term deposits, receivables, accounts payable, accrued liabilities and loans and borrowings approximate their carrying values because of the short-term nature of these instruments.

5. MARKETABLE SECURITIES

Marketable securities are classified as available-for-sale financial assets, are stated at their fair values, and consist of the following:

		June 30,			December 31,
		2014			2013
		$			$
Mega Uranium Ltd.
1,750,000 common shares (December 31, 2013 - 2,877,000)		312			243
Bayswater Uranium Corporation
nil common shares (December 31, 2013 - 2,759,807 common shares)		-			157
Other		9			9
		321			409

In the three and six months ended June 30, 2014 the Company sold nil and 2,877,000 shares of Mega Uranium Ltd. (“Mega”) for gross proceeds of nil and $411 and recorded a gain of $198 in the statement of profit and loss (June 30, 2013 - $473). The Company also exchanged 2,759,807 shares of Bayswater Uranium Corporation ("Bayswater") for 1,750,000 shares of Mega.

The Company has classified its investments in Mega and Bayswater as available-for-sale investments and unrealized gains and losses or changes in fair value are recorded in other comprehensive income until realized.

The Company’s investments in marketable securities are classified as Level 1 in the fair value hierarchy outlined in IFRS 7 Financial Instruments: Disclosures as their fair value has been determined based on a quoted price in an active market.

8

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

6. INVENTORIES

		June 30,			December 31,
		2014			2013
		$			$
Concentrates and work-in-progress		21,774			19,754
Inventory of ore and alternate feed in stockpiles		5,796			4,618
Raw materials and consumables		3,731			3,668
		31,301			28,040

7. EQUITY ACCOUNTED INVESTEES

The following table reconciles the summarized financial information to the carrying amount of Energy Fuels interest in Virginia Energy.

Carrying amount of interest in associate at December 31, 2013	$	1,012
Share of loss in Virginia Energy for the six months ended March 31, 2014		(211	)
Share of other comprehensive income in Virginia Energy for the six months ended March 31, 2014		59
Balance, June 30, 2014	$	860

Virginia Energy generally releases its financial statements after Energy Fuels releases its financial statements. Accordingly, the Company records its share of Virginia Energy’s comprehensive income or loss using information available from the previous quarter. The Company has recorded a loss of $211 in other income (expense) and a gain of $59 in other comprehensive income (loss) for its share of comprehensive income or loss of Virginia Energy for the six months ended March 31, 2013.

9

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

8. PROPERTY, PLANT AND EQUIPMENT

								Mineral Properties
		Plant and						Care and			Pre-development
		equipment			Operating			maintenance			and non-operating			Total
Cost
Balance at September 30, 2012	$	80,618		$	2,288		$	-		$	63,990		$	146,896
Acquisition of Colorado Plateau Partners LLC & Arizona Strip Partners LLC		-			-			-			1,997			1,997
Additions		3,174			3,057			-			13,297			19,528
Acquisition of Strathmore Minerals Corp		965			-			-			34,706			35,671
Disposals for the period		(1,502	)		-			-			-			(1,502	)
Reclassification to operating		-			5,179			-			(5,179	)		-
Reclassification to care and maintenance		-			(3,169	)		3,169			-			-
Revision of decommissioning liability		(2,071	)		(28	)		93			334			(1,672	)
Reclassified to assets held for sale (2)		-			-			-			(4,415	)		(4,415	)
Balance at December 31, 2013	$	81,184		$	7,327		$	3,262		$	104,730		$	196,503
Additions		858			-			-			701			1,559
Revision of decommissioning liability		920			-			-			-			920
Balance at June 30, 2014	$	82,962		$	7,327		$	3,262		$	105,431		$	198,982
Depreciation, depletion, disposals and impairment
Balance at September 30, 2012		15,341			37			-			11,994			27,372
Depreciation for the period		8,460			-			-			-			8,460
Depletion for the period		-			622			-			-			622
Disposals for the period		(1,177	)		-			-			-			(1,177	)
Reclassification to care and maintenance		-			(232	)		232			-			-
Impairment		36,298			4,173			2,730			17,056			60,257
Balance at December 31, 2013	$	58,922		$	4,600		$	2,962		$	29,050		$	95,534
Depreciation for the period		657			-			-			-			657
Depletion for the period		-			1,295			-			-			1,295
Impairment (1)		22,594			1,432			300			6,455			30,781
Balance at June 30, 2014	$	82,173		$	7,327		$	3,262		$	35,505		$	128,267
Carrying amounts
At September 30, 2012	$	65,277		$	2,251		$	-		$	51,996		$	119,524
At December 31, 2013	$	22,262		$	2,727		$	300		$	75,680		$	100,969
At June 30, 2014	$	789		$	-		$	-		$	69,926		$	70,715

(1)	During the six months ended June 30 2014, the Company tested its property, plant and equipment for impairment (excluding any assets acquired pursuant to the acquisition of Strathmore Minerals Corp. and Titan Uranium Inc.) and recognized an impairment loss of $30,781. A summary of the impairment charge by asset is provided in Note 9.
(2)	During the 15 months ended December 31, 2013 the Company identified some non-core assets and reclassified them to assets held for sale (see Note 15).

10

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

Pre-development and non-operating properties

The Company enters into exploration agreements from time to time whereby it may earn an interest in certain mineral properties by issuing common shares, making cash option payments and/or incurring expenditures in varying amounts by specified dates.

The following is a summary of the carrying value of pre-development non-operating property expenses shown by area of interest:

		June 30,			December 31,
		2014			2013
		$			$
Colorado Plateau		-			2,282
Henry Mountains		-			1,170
Arizona Strip		-			3,002
Wyoming		43,854			43,372
New Mexico		26,072			25,854
Total		69,926			75,680

9. IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT

Impairment for the six months ended June 30, 2014

The Company considers both quantitative and qualitative factors to assess impairment.

In the three months ended June 30, 2014, the Company identified the drop in the U3O8 spot and long-term prices from April 1, 2014 through July 31, 2014 and a significant deterioration in the Company’s expectation of future uranium prices, as indicators of impairment and as such the Company performed a test of impairment.

For the purpose of performing impairment analysis, the Company’s White Mesa Mill together with its mines located in the Colorado Plateau, Henry Mountains and Arizona Strip geographic regions represent a single cash generating unit (“CGU”) (collectively referred as “WMM CGU”).

Based on the impairment analysis, the Company recorded an impairment loss of $30,781, in the quarter ended June 30, 2014, with respect to the WMM CGU. No impairment was recorded with respect to the Company’s mineral properties in the Wyoming and New Mexico area.

11

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

The following table summarizes the impairment charges for property, plant and equipment related to the WMM CGU by area of interest for the six month period ending June 30, 2014:

		As at June 30, 2014
		Pre-			Impairment			Post-
		impairment			loss			impairment
Plant and equipment		23,384			(22,595	)		789
Total plant and equipment		23,384			(22,595	)		789
Mineral Properties
Operating
Arizona Strip		1,431			(1,431	)		-
Total operating		1,431			(1,431	)		-
Care and maintenance
Colorado Plateau		300			(300	)		-
Total care and maintenance		300			(300	)		-
Pre-development and non-operating
Colorado Plateau		2,284			(2,284	)		-
Henry Mountains		1,170			(1,170	)		-
Arizona Strip		3,001			(3,001	)		-
Wyoming		43,855			-			43,855
New Mexico		26,071			-			26,071
Total pre-development and non-operating		76,381			(6,455	)		69,926
Total		101,496			(30,781	)		70,715

Key Assumptions

The recoverable amount in the impairment analysis was based on the fair value less costs of disposal using discounted cash flow projections and various other pricing scenarios. Key assumptions used in the calculation of recoverable amounts include discount rates, uranium prices, future timing of production volume including the date when a mineral property can be brought into production and the expected cost to produce uranium and future care and maintenance and operating costs.

The Company’s estimate of future uranium sales prices were based primarily on the uranium prices prepared by industry analysts. For the purpose of the impairment analysis, management estimated a long-term uranium price of $43.50/lb. for the period up to December 31, 2014; a price range of $44.00/lb. to $52.00/lb. for the period 2015 to 2018 and $55.00/lb. to $60.50/lb. for the period 2019 to 2022. The Company used a pre-tax real discount rate of 10.5% based on the Company’s estimated weighted-average cost of capital for discounting the cash flow projections.

Impairment charges recognized against property, plant and equipment may be reversed if there are changes in the assumptions or estimates used in determining the recoverable amounts of the WMM CGU which indicate that a previously recognized impairment loss may no longer exist or may have decreased.

Sensitivity analysis

As the discounted cash flow analysis did not show any value as of June 30, 2014 the Company has written off all the cost basis associated with the WMM CGU. As such a 5% increase or decrease in the future uranium prices or a 1% increase of decrease in the discount rate would not result in a change in the recoverable amount.

12

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

10. DECOMMISSIONING LIABILITIES AND RESTRICTED CASH

The following table summarizes the Company’s decommissioning liabilities:

		June 30,			December 31,
		2014			2013
		$			$
Reclamation obligations, beginning of period		13,799			15,199
Revision of estimate (1)		920			(1,933	)
Liability from acquisition of Colorado Plateau Partners LLC &
Arizona Strip Partners LLC		-			54
Liability from acquisition of Strathmore Minerals Corp		-			105
Accretion		208			416
Reclamation work		(131	)		(42	)
Reclamation obligations, end of period		14,796			13,799
Site restoration liability by location:
Exploration drill holes		172			172
White Mesa Mill		9,283			8,206
Colorado Plateau		2,077			2,053
Henry Mountains		447			441
Daneros		79			78
Arizona Strip		1,418			1,550
Sheep Mountain		1,320			1,299
		14,796			13,799
Site restoration liability:
Current		172			172
Non-current		14,624			13,627
		14,796			13,799

(1) Revision of estimates is as a result of a change in the risk-free discount rates used to calculate decommissioning liabilities.

The decommissioning and reclamation of the White Mesa mill and U.S. mines are subject to legal and regulatory requirements. Estimates of the costs of reclamation are reviewed periodically by the applicable regulatory authorities. The above accrual represents the Company’s best estimate of the present value of future reclamation costs, discounted using risk-free interest rates ranging from 0.20% to 3.34% based on US Treasury rates of varying lengths ranging from 1 to 30 years. The total undiscounted decommissioning liability as at June 30, 2014 is $27,963 (December 31, 2013 - $27,963). Reclamation costs are expected to be incurred between 2014 and 2040.

13

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

Restricted cash, which is held by or for the benefit of regulatory agencies to settle these future obligations, are comprised of the following:

		June 30,			December 31,
		2014			2013
		$			$
Restricted cash, beginning of period		25,478			28,525
Restricted cash from acquisition of Colorado Plateau Partners LLC & Arizona Strip Partners LLC		-			54
Restricted cash from acquisition of Strathmore Minerals Corp		-			902
Refunds and returns for the period (1)		(8,708	)		(4,003	)
Restricted cash, end of period		16,770			25,478

(1) Mill and mine reclamation

The Company has cash, cash equivalents and fixed income securities as collateral for various bonds posted in favour of the State of Utah, the applicable state regulatory agencies in Colorado, Wyoming, New Mexico and Arizona and the U.S. Bureau of Land Management for estimated reclamation costs associated with the White Mesa mill and mining properties. Cash equivalents are short-term highly liquid investments with original maturities of three months or less. The restricted cash will be released when the Company has reclaimed a mineral property. During the three and six months ended June 30, 2014, the Company had a net refunds and returns of $8,708 from its collateral account (December 31, 2013 – $4,003) as a result of the restructuring of the Company’s surety arrangements and the reduction of bonding requirements at some of the Company’s projects.

11. CAPITAL STOCK

Authorized capital stock

The Company is authorized to issue an unlimited number of Common Shares without par value, unlimited Preferred Shares issuable in series, and unlimited Series A Preferred Shares. The Series A Preferred shares are non-redeemable, non-callable, non-voting and with no right to dividends. The Preferred Shares issuable in series will have the rights, privileges, restrictions and conditions assigned to the particular series upon the Board of Directors approving their issuance.

Issued capital stock

The issued and outstanding capital stock consists of Common Shares as follows:

		2014						2013
		Shares			Amount $			Shares			Amount $
Balance, January 1,		19,601,251			232,089			13,642,672			179,427
Shares issued for exercise of share purchase warrants		61,301			607			-			-
Shares issued for exercise of options		15,000			139			-			-
Shares issued for Virginia Energy shares		-			-			437,028			3,908
Shares issued for Virginia Energy advisory fees		-			-			5,405			39
Shares and warrants issued for private placement (e)		-			-			947,616			5,684
Shares issued for consulting fees		-			-			17,000			132
Share issuance costs		-			-			-			(14	)
Balance, June 30,		19,677,552			232,835			15,049,721			189,176

14

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

12. SHARE-BASED PAYMENTS

Stock options

The Company has established a stock option plan whereby the Board of Directors may grant options to employees, directors and consultants to purchase common shares of the Company. The maximum number of authorized but unissued shares available to be granted under the plan shall not exceed 10% of its issued and outstanding common shares. The exercise price of the options is set at the Company’s closing share price on the day before the grant date.

For the six months ended June 30, 2014, the Company granted 307,250 stock options (June 30, 2013 – 50,000) with a fair value of $1,600 to its employees, directors and consultants recording stock-based compensation and recorded an expense of $1,108 (June 30, 2013 – $35). These options were granted with the following vesting conditions: 50% - immediately, 25% - one year after grant date, 25% - two years after grant date.

The fair value of stock options granted to employees, directors and consultants was estimated on the dates of the grants using the Black-Scholes option pricing model with the following assumptions used for the grants made during the period:

	Risk-free rate	1.600%
	Expected life	5.0 years
	Expected volatility	81%*
	Expected dividend yield	0.0%

*Expected volatility is measured based on the Company’s historical share price volatility over the expected life of the warrants.

The summary of the Company’s stock options at June 30, 2014 and the changes for the periods ending on those dates is presented below:

					Six months ended
					June 30, 2014
					Weighted
		Range of			Average
		Exercise Prices			Exercise Price			Number of
		Cdn$			Cdn$			Options
Balance, beginning of period		7.60 - 44.22			14.27			795,318
Transactions during the period:
Granted		9.05			9.05			307,250
Exercised (1)		8.75			8.75			(15,000	)
Forfeited		7.60 - 44.22			15.56			(63,165	)
Expired		17.50			17.50			(12,000	)
Balance, end of period		7.60 - 44.22			11.96			1,012,403

(1) Exercised on April 4, 2014

15

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

The following table reflects the actual stock options issued and outstanding as of June 30, 2014:

		Options outstanding						Options Exercisable
					Weighted average						Weighted average
Exercise price					remaining						remaining
(Cdn$)		Quantity			contractual life			Quantity			contractual life
$0.00 to $9.99		494,800			4.43			342,450			4.36
$10.00 to $19.99		457,150			2.73			457,150			2.73
$20.00 to $29.99		39,326			1.54			39,326			1.54
$30.00 to $39.99		7,527			1.45			7,527			1.45
$40.00 to $49.99		13,600			1.18			13,600			1.18
		1,012,403			3.48			860,053			3.29

13. SUPPLEMENTAL FINANCIAL INFORMATION

The components of revenues are as follows:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2014			2013			2014			2013
Uranium concentrates	$	13,454		$	2,937		$	24,673		$	32,925
Vanadium concentrates		-			1,953			-			5,990
Alternate feed materials processing and other		71			64			213			126
Revenues	$	13,525		$	4,954		$	24,886		$	39,041

The components of selling, general and administrative expenses are as follows:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2014			2013			2014			2013
Intangible asset amortization	$	(1,256	)	$	(304	)	$	(2,383	)	$	(3,222	)
Selling expenses		(66	)		(445	)		(145	)		(972	)
General and administrative		(2,782	)		(2,774	)		(6,511	)		(5,289	)
Selling, general and administrative expenses	$	(4,104	)	$	(3,523	)	$	(9,039	)	$	(9,483	)

The components of finance income (expense) are as follows:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2014			2013			2014			2013
Accretion expense	$	(103	)	$	(80	)	$	(207	)	$	(162	)
Gain (loss) on sale of marketable securities (Note 5)		-			(188	)		198			(91	)
Foreign exchange		(7	)		8			(7	)		6
Change in value of convertible debentures		1,177			(227	)		(1,914	)		(1,125	)
Interest expense		(428	)		(476	)		(857	)		(952	)
Interest income		8			131			30			274
Finance income (expense)	$	647		$	(832	)	$	(2,757	)	$	(2,050	)

16

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

A summary of depreciation, depletion and amortization expense recognized in these financial statements are as follows:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2014			2013			2014			2013
Recognized in production cost of sales	$	(853	)	$	274		$	(1,949	)	$	(3,534	)
Recognized in care and maintenance expenses		-			220			-			220
Recognized in selling, general and administrative		(1,308	)		420			(2,516	)		(2,986	)
Depreciation, depletion and amortization	$	(2,161	)	$	914		$	(4,465	)	$	(6,300	)

14. COMMITMENTS AND CONTINGENCIES

General legal matters

The Company is involved, from time to time, in various legal actions and claims in the ordinary course of business. In the opinion of management, the aggregate amount of any potential liability is not expected to have a material adverse effect on the Company’s financial position or results.

One of the Company’s subsidiaries, Energy Fuels Resources (USA) Inc. (“EFRI”), formerly Denison Mines (USA) Corp., entered into a unit price construction contract with KGL Associates, Inc. (“KGL”) in 2009 relating to the construction of tailings cell 4B at the Company’s White Mesa Mill. Performance under this contract was under dispute in an action commenced in January 2011 in the Seventh Judicial District Court, San Juan County, Utah. In the dispute, EFRI sought approximately $3,250 in damages from KGL, including project completion costs, KGL sought payment of approximately $1,650 for alleged project labor and/or equipment inefficiencies, and both parties sought prejudgment interest, attorney fees and costs. The parties agreed to resolve this matter in binding arbitration. Under the Arrangement Agreement dated May 23, 2012 between the Company and Denison Mines Corp., Denison agreed to fully indemnify the Company in connection with this litigation and will receive any proceeds from arbitration. In February 2014 the arbitrator found in favor of Denison and awarded damages, interest, attorneys’ fees and costs to Denison in excess of $4,800. In July 2014, Denison and KGL filed motions with the District Court to confirm and vacate the award, respectively. At hearing, the court granted Denison’s motion and denied KGL’s motion, and a proposed order reflecting these rulings will be submitted to the court for signature shortly.

In April, 2013, the Colorado Department of Public Health and Environment (“CDPHE”) re-issued the radioactive materials license (the “License”) to the Company for the proposed Piñon Ridge Mill. In May, 2013, Sheep Mountain Alliance and Rocky Mountain Wild, two non-government organizations, filed a suit in Denver District Court challenging the re-issuance of the License. In May, 2014, the Company filed a Motion for Remand, asking the Court to remand this matter back to the previous Hearing Officer for additional action intended to cure the purported procedural deficiencies alleged by Plaintiffs. If the Motion for Remand is denied, the judicial review process would likely resume, at the conclusion of which the court may decide to uphold, reverse, or reverse and remand CDPHE’s decision to re-issue the License. If the Motion for Remand is granted, then the expectation is that, after hearing further submissions by the parties, the previous Hearing Officer will re-issue his decision. Based on that decision, and any subsequent intermediate review process by CDPHE’s Executive Director, the License matter will be re-presented to CDPHE for a final administrative determination. Depending on that determination, either side or both will be entitled to seek a new judicial appeal in the Denver District Court.

In November, 2012, the Company was served with a Plaintiff’s Original Petition and Jury Demand in the District Court of Harris County, Texas, claiming unspecified damages from the disease and injuries resulting from mesothelioma from exposure to asbestos, which the Plaintiff claims was contributed to by being exposed to asbestos products and dust while working at the White Mesa Mill. The Plaintiff has also named a number of manufacturers of asbestos and asbestos-related products in the law suit. The Company does not consider this claim to have any merit, and therefore does not believe it will materially affect the Company’s financial position, results of operations or cash flows. Plaintiff has produced a medical expert report, work history, and answers to discovery. In January, 2013, the Company filed a Special Appearance to Challenge Personal Jurisdiction, Motion to Transfer Venue, Motion to Dismiss for Forum Non Conveniens and Original Answer Subject Thereto.

17

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

In January, 2013, the Ute Mountain Ute tribe filed a Petition to Intervene and Request for Agency Action challenging the Corrective Action Plan approved by the State of Utah Department of Environmental Quality (“UDEQ”) relating to nitrate contamination in the shallow aquifer at the White Mesa Mill site. This challenge is currently being evaluated, and may involve the appointment of an administrative law judge to hear this matter. The Company does not consider this action to have any merit. If the petition is successful, the likely outcome would be a requirement to modify or replace the existing Corrective Action Plan. At this time, the Company does not believe any such modification or replacement would materially affect the Company’s financial position, results of operations or cash flows. However, the scope and costs of remediation under a revised or replacement Corrective Action Plan have not yet been determined and could be significant.

In March, 2013, the Center for Biological Diversity, the Grand Canyon Trust, the Sierra Club and the Havasupai Tribe (the “Plaintiffs”) filed a complaint in the U.S. District Court for the District of Arizona (the “District Court”) against the Forest Supervisor for the Kaibab National Forest and the U.S. Forest Service (“USFS”, collectively, the “Defendants”) seeking an order declaring that the USFS failed to comply with environmental, mining, public land, and historic preservation laws in relation to the Company’s Canyon mine, and setting aside any approvals regarding exploration and mining operations at the Canyon mine. In addition, the Plaintiffs sought injunctive relief directing operations to cease at the mine and enjoining the USFS from allowing any further exploration or mining-related activities at the Canyon mine until the USFS fully complies with all applicable laws. In April 2013, the Plaintiffs filed a Motion for Preliminary Injunction to enjoin the Defendants from allowing construction and/or mining activities to occur at the Canyon mine and suspending all USFS approvals. This motion was denied by the District Court In September, 2013. In October 2013 Plaintiffs appealed the District Court’s Order to the 9th Circuit Court of Appeals, and filed two Emergency Motions for an Injunction Pending Appeal. In November 2013, the Company decided to place shaft sinking operations on standby at the Canyon Mine, due to market conditions, and to lessen the expense of the litigation at the mine. At the same time, the Company entered into a stipulation agreement with Plaintiffs under which the Company agreed to keep shaft sinking operations on standby until the earlier of the date the District Court issues a final appealable order on the merits of Plaintiffs’ claims, or December 31, 2014, and Plaintiffs have agreed to stay their appeal and Emergency Motions. In the meantime, Proceedings on the merits of the case are ongoing. If the Plaintiffs are successful on the merits, the Company may be required to maintain the mine on standby pending resolution of the matter. Such a required prolonged stoppage of mine development and mining activities could have a significant impact on the Company.

In August, 2011, the Company’s subsidiary, Roca Honda Resources, LLC, filed an application for a permit to dewater certain aquifers underlying Roca Honda’s proposed uranium mine site. The Pueblo of Acoma protested the permit application, and a hearing on the merits was held in November, 2013. In December, 2013, the Hearing Officer recommended approval of the application, and the State Engineer adopted the recommendation. In January, 2014 Acoma Pueblo filed a notice of appeal and separately filed a Complaint for Declaratory Judgment, in the Eleventh Judicial District Court of McKinley County. The Company does not believe the appeal and Complaint have merit and intends to defend against those actions. In March, 2014, the Company filed a Motion to Dismiss the Complaint, on the basis that the appeal is the exclusive remedy. If the appeal is successful, the likely outcome would be remand of the permit back to the State Engineer for reconsideration or possible withdrawal of the permit. The Company does not believe any such outcome would materially affect the Company’s financial position, results of operations or cash flows. On July 10, 2014, at the request of the parties, the Court issued an Order staying these proceedings, and directing the parties to file a status report within 90 days regarding the status of settlement negotiations and whether the stay should be extended or lifted.

In April 2014, the Grand Canyon Trust filed a Clean Air Act citizen suit in federal district court for alleged violations of the Clean Air Act National Emissions Standards for Hazardous Pollutants, Subpart W, at the White Mesa Uranium Mill. In July 2014, the plaintiffs filed a notice of intent to add additional purported violations to their April 2014 suit. The Complaint, as proposed to be amended, alleges that radon from one of the Mill’s tailings impoundments exceeds the standard, that the mill is in violation of a requirement that only two impoundments may be in operation at any one time, and that certain other violations related to the manner of measuring and reporting radon results from one of the tailings cells occurred in 2013. The Complaint asks the court to impose injunctive relief, civil penalties of up to $38 per day per violation, costs of litigation including attorneys’ fees, and other relief. The Company does not consider the April 2014 claims to have merit, and intends to defend against those claims. The Company believes those issues are being addressed through the proper regulatory channels and that the Company is currently in compliance with all applicable regulatory requirements relating to those matters. The Company is currently evaluating the purported 2013 violations referred to in the July 2014 notice.

18

ENERGY FUELS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

(Expressed in thousands of U.S. Dollars except share and per share amounts)

15. SUBSEQUENT EVENTS

On July 2, 2014 the Company closed a transaction whereby the Company has created a strategic joint venture to facilitate the future development or sale of the Copper King gold/copper project in Wyoming. The Company has contributed the Copper King Project to CK Mining Corp. ("CK Mining"), a newly formed private company, in consideration of cash in the amount of $1,500 and newly issued common stock of CK Mining, representing 50% of its issued and outstanding shares after giving effect to such issuance. A private investor group with extensive experience in developing gold projects and building mining companies will hold the other 50% of CK Mining.

On July 3, 2014 the Company has entered into definitive agreements to sell certain of its non-core uranium assets to a private investor group for a total of approximately $2,050, payable in a combination of cash, secured promissory notes, and the assumption by the purchasers of certain existing Company debt. The assets in the transaction include the Piñon Ridge mill license and related assets and certain other mining assets located along the Colorado-Utah border, including the Sunday Complex, the Willhunt project, the San Rafael project, the Sage mine, the Van 4 mine, the Farmer Girl project, the Dunn project and the Yellow Cat project. The Piñon Ridge Project and certain of the Mining Assets will be conveyed to the purchasers through the sale of one of the Company’s wholly-owned subsidiaries, which is also the licensee for the Piñon Ridge Project. The remainder of the Mining Assets will be conveyed to the purchasers through separate asset transactions involving other subsidiaries of the Company.

19