EX-99.2 3 exhibit99-2.htm EXHIBIT 99.2 Energy Fuels Inc.: Exhibit 99.2 - Filed by newsfilecorp.com

Exhibit 99.2

ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

INTRODUCTION

This Management’s Discussion and Analysis (“MD&A”) of Energy Fuels Inc. and its subsidiary companies (collectively, “Energy Fuels” or the “Company”) provides a detailed analysis of the Company’s business and compares its financial results with those of the previous year. This MD&A is dated as of August 13, 2014 and should be read in conjunction with the Company’s condensed interim consolidated financial statements and related notes for the three and six months ended June 30, 2014 and the Company’s consolidated annual financial statements and MD&A for the 15 months ended December 31, 2013. In November 2013, the Company changed its fiscal year end from September 30 to December 31. As a result of this change, the Company’s first half results for 2014 include the financial statements for the three and six months ended June 30, 2014, with comparative figures for the three and six month periods ended June 30, 2013 which are the comparable periods for last year.

Effective November 5, 2013, the Company completed a consolidation of its common shares on the basis of 50 pre-consolidation common shares for each post-consolidation common share. All share and per share amounts in this MD&A are shown on a post-consolidation basis.

This MD&A was written to comply with the requirements of National Instrument 51-102 – Continuous Disclosure Obligations. All financial information in this discussion and analysis is presented in United States dollars, unless otherwise stated.

Other continuous disclosure documents, including the Company’s press releases, quarterly and annual reports, technical reports, Annual Information Form (“AIF”) and Form 40-F are available through its filings with the securities regulatory authorities in Canada at www.sedar.com (“SEDAR”) and in the United States at www.sec.gov/edgar.shtml (“EDGAR”), and on the Company’s website at www.energyfuels.com.

In this discussion, the terms “Company”, “we”, “us”, and “our” refer to Energy Fuels and, as applicable, the Company’s wholly-owned subsidiaries: Energy Fuels Resources Corporation (“EFRC”), Energy Fuels Holdings Corp. (previously known as Denison Mines Holdings Corp.) (“EFHC”), Magnum Uranium Corp. (“Magnum”), Titan Uranium Inc. (“Titan”), Strathmore Minerals Corp. (“Strathmore”) and their respective subsidiaries. This MD&A contains forward looking information and forward looking statements within the meaning of applicable Canadian and United States securities laws. See “Cautionary Statement Regarding Forward-Looking Statements” starting on page 9 of this MD&A.

SUMMARY OF QUARTERLY RESULTS

Results for the eight most recent quarters ending with the quarter ended June 30, 2014 are:

 

  June 30     Mar 31     Dec 31     Sept 30  

 

  2014(1)   2014     2013     2013  

$000, except per share data

$    $    $    $   

Total revenues

  13,525     11,361     776     24,504  

Net Income (loss)

  (30,328 )   (6,342 )   (3,375 )   (70,472 )

Basic & diluted net income (loss) per share

  (1.54 )   (0.32 )   (0.18 )   (4.30 )

 

                        

 

                       

 

  June 30     Mar 31 *     Dec 31 *     Sept 30 *  

 

  2013     2013     2012     2012  

$000, except per share data

$    $    $    $   

Total revenues

  4,954     34,087     8,927     25,028  

Net Income (loss)

  (5,532 )   (5,904 )   (2,042 )   (19,160 )

Basic & diluted net income (loss) per share

  (0.39 )   (0.40 )   (0.15 )   (1.41 )

(1) Includes an impairment loss of $30.78 million as discussed below.
* Adjusted as a result of the finalization of the purchase allocation of EFHC in June 2013.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

RESULTS OF OPERATIONS

General

For the three months ended June 30, 2014, the Company recorded a net loss of $30.33 million or $1.54 per share, compared to a net loss of $5.53 million or $0.39 per share for the three months ended June 30, 2013.

For the six months ended June 30, 2014, the Company recorded a net loss of $36.67 million or $1.87 per share, compared to a net loss of $11.44 million or $0.76 per share for the six months ended June 30, 2013.

For the three and six months ended June 30, 2014, the Company recorded an impairment loss of $30.78 million or $1.57 per share related to the impairment of its White Mesa Mill cash generating unit.

Revenues

Revenues for the three months ended June 30, 2014 totaled $13.53 million, of which $13.45 million were sales of 236,667 pounds of uranium concentrates, all of which were pursuant to term contracts, at an average price of $56.85 per pound. Revenues for the three months ended June 30, 2013 totaled $4.95 million, of which $2.94 million resulted from sales of 50,000 pounds of U3O8 pursuant to term contracts at an average price of $58.75 per pound. The Company’s revenues from uranium are largely based on delivery schedules for long-term contracts, which can vary from quarter to quarter.

Revenues for the three months ended June 30, 2013 also included the sale of $1.95 million of vanadium in the form of V2O5. There were no vanadium sales in the three months ended June 30, 2014, as the Company is not producing vanadium at this time.

Revenues for the six months ended June 30, 2014 totaled $24.89 million, of which $24.67 million were sales of 428,334 pounds of uranium concentrates, all of which were pursuant to term contracts at an average price of $57.60 per pound. Revenues for the six months ended June 30, 2013 totaled $39.04 million, of which $32.93 million were sales of 583,334 pounds of uranium concentrates, all of which were pursuant to term contracts at an average price of $56.44 per pound. The Company’s revenues for uranium are largely based on delivery schedules for long-term contracts, which can vary from quarter to quarter.

Revenues for the six months ended June 30, 2013 also included the sale of $5.99 million of vanadium in the form of V2O5. There were no vanadium sales in the six months ended June 30, 2014, as the Company is not producing vanadium at this time.

Operating Expenses

Production and Cost of Sales

For the three months ended June 30, 2014, the Company’s uranium production totaled 225,420 pounds of U3O8, of which 90,832 pounds were from alternate feed materials and 134,588 pounds were from the Company’s Arizona mines. During the three months ended June 30, 2013, the Company processed conventional uranium and vanadium ores from the Company’s mines on the Colorado Plateau, as well as alternate feed materials. Uranium and vanadium production for the three months ended June 30, 2013 totaled 333,785 pounds of U3O8, including 94,779 pounds from alternate feed materials, and 490,405 pounds of V2O5.

Cost of goods sold for the three months ended June 30, 2014 totaled $8.73 million, which consisted of $7.88 million of mining and milling production costs and $0.85 million of depreciation, depletion and amortization. Cost of goods sold for the three months ended June 30, 2013 totaled $4.62 million, which consisted of $3.78 million of mining and milling production costs, $0.27 million of depreciation, depletion and amortization, and impairment of inventories of $0.56 million.

For the six months ended June 30, 2014, the Company’s uranium production totaled 351,376 pounds of U3O8, of which 216,788 pounds were from alternate feed materials and 134,588 pounds were from the Company’s Arizona mines. During the six months ended June 30, 2013, the Company processed conventional uranium and vanadium ores from the Company’s mines on the Colorado Plateau, as well as alternate feed materials. Uranium and vanadium production for the six months ended June 30, 2013 totaled 801,672 pounds of U3O8, including 146,400 pounds from alternate feed materials, and 1,302,882 pounds of V2O5.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

Cost of goods sold for the six months ended June 30, 2014 totaled $17.30 million, which consisted of $15.35 million of mining and milling production costs and $1.95 million of depreciation, depletion and amortization. Cost of goods sold for the six months ended June 30, 2013 totaled $35.87 million, which consisted of $29.82 million of mining and milling production costs, $4.08 million of depreciation, depletion and amortization, and impairment of inventories of $1.96 million.

Impairment of property, plant and equipment

During the period ended June 30, 2014, as a result of (a) the drop in the U3O8 spot and long-term prices from April 1, 2014 through July 31, 2014, (b) a significant deterioration in the Company’s expectation of future uranium prices, and (c) the Company’s expectation to place the White Mesa Mill and all associated mines that feed the White Mesa Mill (collectively referred to as the White Mesa Mill Cash Generating Unit – the “WMM CGU”) on standby once current planned near term production at the White Mesa Mill and the Pinenut mine has been completed, the Company tested its plant, property and equipment related to the WMM CGU for impairment. The Company estimated the fair value of the WMM CGU using discounted cash-flow analysis that utilized forecasts of estimated U3O8 prices and determined that the fair value less costs to sell the WMM CGU, were less than their aggregate carrying values. Accordingly, the Company recognized an impairment loss of $30.78 million.

No impairment was recorded with respect to the Company’s pre-development and non-operating properties in Wyoming and New Mexico, which are not a part of the WMM CGU.

Selling, General and Administrative

Selling, general and administrative expense includes costs associated with marketing uranium, the corporate general and administrative costs, and the non-cash costs of amortization of above-market sales contract value associated with the Denison acquisition. General and administrative expenses consist primarily of payroll and related expenses for personnel, contract and professional services, stock-based compensation expense and other overhead expenditures. Selling, general and administrative expenses totaled $4.10 million and $9.04 million for the three months and six months ended June 30, 2014, respectively, compared to $3.52 million and $9.48 million for the three and six months ended June 30, 2013, respectively.

Amortization of the intangible asset recorded for the U3O8 sales contract values in excess of spot price at the June 29, 2012 acquisition date of Denison Mines Holdings Corp. and all of its US assets and subsidiaries (the “Denison US Mining Division”) totaled $1.26 million and $2.38 million for the three and six months ended June 30, 2014, respectively, compared with $0.30 million and $3.22 million for the three and six months ended June 30, 2013, respectively. The amount for each period is directly related to the revenue from uranium concentrate volumes sold each period (discussed above), as all the revenues earned for the periods are from the contracts acquired.

Selling expenses totaled $0.07 million and $0.15 million for the three months and six months ended June 30, 2014, respectively, compared to $0.45 million and $0.97 million for the three and six months ended June 30, 2013, respectively. The decrease in all periods relates to the lack of vanadium revenue in the current year compared to last year, as vanadium revenue had higher selling expenses related to commissions and freight compared with the uranium selling expenses.

General and administrative expenses totaled $2.78 million and $6.51 million for the three months and six months ended June 30, 2014, respectively, compared to $2.77 million and $5.29 million for the three and six months ended June 30, 2013, respectively. For the three months ended June 30 for each period general and administrative expenses were virtually the same period over period. For the six months ended June 30, 2014 compared with June 30, 2013, the increase in general and administrative expenses was primarily related to stock based compensation of $0.96 million recorded in the first quarter of 2014 compared with nil in the first quarter of 2013.

Care and Maintenance Expenses

The Company’s Beaver, Pandora and Daneros mines were placed on standby in the last quarter of calendar year 2012, as a result of market conditions. In November 2013 the Company placed shaft sinking operations on its Canyon mine on standby, and in February 2014 the Company placed its Arizona 1 mine on standby. Costs related to the care and maintenance of these and other standby mines decreased due to the Company’s increased cost efficiencies which are achieved once the mines are placed on standby. Care and maintenance expenses totaled $0.90 million and $1.54 million for the three and six months ended June 30, 2014, compared with $1.61 million and $3.02 million for the three and six months ended June 30, 2013, respectively.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

Other Income and Expenses

Finance income was $0.65 million for the three months ended June 30, 2014, and consists of a change in the mark-to-market values of the Company’s convertible debentures (the “Debentures”) totaling $1.18 million partially offset by interest expense of $0.43 million and accretion expense related to the decommissioning liability of $0.10 million.

Finance expense was $2.76 million for the six months ended June 30, 2014, and consists primarily of a change in the mark-to-market values of the Company’s convertible debentures totaling $1.91 million, interest expense of $0.86 million and accretion expense related to the decommissioning liability of $0.21 million.

Finance expense totaled $0.83 million for the three months ended June 30, 2013 and consists of a change in mark-to-market value of the Debentures of $0.23 million, interest expense incurred on the Debentures of $0.48 million, and accretion expense related to the decommissioning liability of $0.08 million and a change in the mark-to-market values of marketable securities of $0.19 million partially offset by interest income of $0.13 million.

Finance expense totaled $2.05 million for the six months ended June 30, 2013 and consists of a change in mark-to-market value of the Debentures of $1.13 million, interest expense incurred on the Debentures of $0.95 million, and accretion expense related to the decommissioning liability of $0.16 million and a change in the mark-to-market values of marketable securities of $0.09 million partially offset by interest income of $0.27 million.

OUTLOOK FOR THE YEAR ENDING DECEMBER 31, 2014

General

Spot prices and long-term prices for uranium began the year at $34.50 and $47.00 per pound, respectively. By August 12, 2014 the spot and long-term prices had fallen to $30.00 and $44.00 per pound, respectively. Prices in the short and medium term continue to be under pressure from excess supplies and weak demand. In the longer term, Energy Fuels believes prices will improve but over a more extended time frame than previously forecast. Accordingly, the Company is implementing further cash conservation efforts for the short and medium-term to position the Company to better preserve its cash resources, maintain its resource base and be able to re-start production as market conditions warrant.

The Company utilizes various industry forecasts to assist in its business planning, evaluation of existing and future mining projects, and assessment of its valuation of long-lived assets. The Company has evaluated, and will continue to evaluate price forecasts from relevant sources to determine the Company’s expectation of future uranium prices. Based on its evaluation of these forecasts and other factors, the Company has taken an impairment allowance in the quarter ended June 30, 2014 (as discussed above) and has revised its business plan and operations as discussed below. The Company intends to continue to closely monitor U3O8 prices, and may change operating plans under actual or expected market conditions as necessary.

Production and operations

The Company plans to extend the current run at the White Mesa Mill into the fourth quarter of 2014. This will allow the Company to produce the inventory required to fulfill all of its existing long-term contracts that must be met with produced pounds. Upon completion of the current mill run, the mill will be placed on standby pending improvements in market prices.

At June 30, 2014, the Company had approximately 494,000 pounds of finished goods inventory. For the second half of the year, the Company expects to produce an additional 475,000 pounds which, combined with its existing finished goods inventory, will result in sufficient finished inventory to fulfill all production requirements for its long-term contracts that require U3O8 produced by its own operations. The Company will continue to receive alternate feed materials at the White Mesa Mill for future processing. Environmental and permit compliance and maintenance activities will continue at the White Mesa Mill in order to allow the facility to restart mineral processing operations as required.

As previously announced, the Company plans to continue mining at the Pinenut mine until the economic resources of the mine have been depleted, which is estimated to occur in the first quarter of 2015. Ore mined at the Pinenut mine after the mill has completed its planned ore production run in 2014 will be stockpiled for processing in a future mill run.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

The Company also expects to continue to maintain, and update as necessary, all permits on its other existing mines. These mines will remain on standby until market conditions improve. Expenditures for permitting activities for new mines will be adjusted to coincide with expected dates of production based on price forecasts. Corporate and field overhead will be reduced to coincide with these lower levels of activity.

Sales

With respect to its sales strategy in the short-term, as a result of the relatively weak uranium spot price, Energy Fuels plans to focus only on sales pursuant to its term contracts, which require deliveries of 371,666 lbs. for the second half of 2014, of which 180,000 pounds will be from material to be purchased to coincide with the related sale and 191,667 pounds from material produced at the White Mesa Mill. The Company expects these sales in the second half of the year to result in average realized prices of $57.23/lb. , which would be well-above the expected spot market price. At current prices, the Company does not expect to produce or sell any product at spot prices.

Significant Events since June 30, 2014

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 $1.50 million 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 $2.05 million, 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.

USE OF PROCEEDS FROM PUBLIC OFFERING

The following table outlines the proposed use of funds for direct project categories (excluding general working capital) from the net proceeds received from the October 15, 2013 public offering as compared to the actual expenses incurred to June 30, 2014.

 

  Estimated        

Use of Financing Net Proceeds (000's)

  Allocation of Net     Actual Costs Incurred  

(excluding General Working Capital)

  Proceeds     to June 30, 2014  

 

           

 Continued exploration and development of the Company's Roca Honda, Sheep Mountain, Gas Hills, Juniper Ridge and Canyon Mine mineral properties

$  2,500   $  2,300  

 Identification and evaluation of future potential mineral property acquisitions

  750     -  

 

$  3,250   $  2,300  

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2014, the Company had working capital of $42.26 million including $14.69 million in cash and 494,000 pounds of finished goods inventory. The Company believes it has sufficient cash and resources to carry out its business plan beyond calendar year 2015, and will therefore continue as a going concern for the foreseeable future.

Cash and Financial Condition

Cash and cash equivalents were $14.69 million at June 30, 2014, compared to $6.63 million at December 31, 2013. The increase of $8.06 million was due primarily to cash provided by investing activities of $8.94 million and gain on foreign exchange on cash held of $0.08 million partially offset by cash used in operations of $0.62 million and financing activities of $0.34 million.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

Net cash provided by investing activities was $8.94 million, which was primarily related to cash received of $8.71 million from a reduction in the collateral required to secure mine and mill reclamation bonds posted by the Company, proceeds from sale of marketable securities of $0.41 million, and deposits received on assets held for sale of $1.48 million, partially offset by expenditures for property, plant and equipment of $0.97 million and exploration, evaluation, permitting and development activities of $0.69 million.

Net cash used in financing activities totaled $0.34 million consisting primarily of $0.87 million payment of interest on convertible debentures, $0.08 million repayment of borrowings, partially offset by $0.60 million from the issue of common shares from the exercise of warrants and options.

Net cash used in operating activities of $0.62 million is comprised of the net loss of $36.67 million for the period adjusted for non-cash items and for changes in working capital items. Significant items not involving cash were a $30.78 million impairment of property, plant and equipment, a $4.47 million depreciation and amortization of property, plant and equipment and intangible assets, a $2.76 million non-cash effect of finance expense, primarily the $1.91 million change in value of the Debentures, and $1.11 million related to stock based compensation.

Contingencies

Legal matters

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 $3.25 million in damages from KGL, including project completion costs, KGL sought payment of approximately $1.65 million for alleged project labor and/or equipment inefficiencies, and both parties sought pre-judgment 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 $4.8 million. At a hearing in July 2014, the District Court confirmed the arbitrator’s findings.

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 represented 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. 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.

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.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

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 exceeded 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 $37,500 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.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

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.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.

DIVIDENDS

The Company has not paid dividends in the past, and it does not expect to pay dividends in the near future. If the Company generates earnings in the future, it expects that they will be retained to finance further growth. The directors of the Company will determine if and when dividends will be declared and paid in the future based on the Company’s financial position at the relevant time.

OUTSTANDING SHARE DATA

At August 13, 2014, there were 19,698,472 common shares issued and outstanding, 1,079,069 warrants issued and outstanding to purchase a total of 1,079,069 common shares, and 1,012,403 stock options outstanding to purchase a total of 1,012,403 common shares for a total of 21,789,944 common shares on a fully-diluted basis. In addition, at August 13, 2014, there were 22,000 Debentures outstanding, convertible into a total of 1,466,667 common shares.

CONTROLS AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer of the Company are responsible for designing internal controls over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The control framework that has been used is the COSO (1992) framework.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

There was no change in the Company’s internal controls over financial reporting that occurred during the second quarter of 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Disclosure controls and procedures

Disclosure controls and procedures have been designed to provide reasonable assurance that all relevant information required to be disclosed by the Company is accumulated and communicated to senior management as appropriate to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation of the design effectiveness of the disclosure controls and procedures as of June 30, 2014, that the disclosure controls and procedures provide reasonable assurance that material information is made known to them by others within the Company, and are appropriately designed.

Since the December 31, 2013 evaluation, there have been no material changes to the Company’s disclosure controls and procedures.

Limitations of controls and procedures

The Company’s management, including the Chief Executive Officer and Chief Financial Officer believe that any internal controls over financial reporting and disclosure controls and procedures, no matter how well designed, can have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance that the objectives of the control system are met.

ADDITIONAL IFRS FINANCIAL PERFORMANCE MEASURES

The Company has included the additional IFRS measure “Gross Profit” in the financial statements. Management noted that “Gross Profit” provides useful information to investors as an indication of the Company’s principal business activities before consideration of how those activities are financed, sustaining capital expenditures, corporate and exploration and evaluation expenses, finance income and costs, and taxation.

QUALIFIED PERSON

The disclosure of scientific and technical information regarding Energy Fuels’ properties in this MD&A was prepared under the supervision of Stephen P. Antony, P.E. President and Chief Executive Officer of Energy Fuels, who is a Qualified Person in accordance with the requirements of National Instrument 43-101.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This MD&A contains forward looking information and forward looking statements within the meaning of applicable Canadian and United States securities laws. Those statements appear in a number of places in this MD&A and include, but are not limited to, statements and information regarding the Company’s current intent, belief or expectations primarily with respect to: the Company’s business objectives and plans; exploration and development plans and expenditures; estimation of mineral resources and reserves; mineral grades; Energy Fuels’ expectations regarding additions to its mineral reserves and resources through acquisitions and development; success of the Company's permitting efforts, including receipt of regulatory approvals, permits and licenses and treatment under governmental regulatory regimes and the expected timeframes for receipt of such approvals, permits, licenses and treatments; possible impacts of regulatory actions; capital expenditures; expansion plans; success of the Company's mining and/or milling operations; availability of equipment and supplies; availability of alternate feed materials for processing; the Company’s processing technologies; future production costs, including costs of labor, energy, materials and supplies; future effective tax rates; future benefits costs; future royalties payable; the outcome and possible impacts of disputes and legal proceedings in which the Company is involved; the timing and amount of estimated future production, including Energy Fuels’ expectations regarding expected price levels required to support production and the Company’s ability to increase production as market conditions warrant; sales volumes and future uranium and vanadium prices and treatment charges; future trends in the Company’s industry; global economic growth and industrial demand; global growth in and/or attitudes towards nuclear energy; changes in global uranium and vanadium and concentrate inventories; expected market fundamentals, including the supply and demand for uranium and vanadium; the Company’s and industry’s expectations relating to future prices of uranium and vanadium; currency exchange rates; environmental risks; reclamation costs, including unanticipated reclamation expenses; collateral requirements for surety bonds; title disputes or claims; the adequacy of insurance coverage; and legal proceedings and the potential outcomes therefrom.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

In certain cases, forward looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “is likely”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, “continue”, or “believes”, and similar expressions, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”.

Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Energy Fuels believes that the expectations reflected in this forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct, and such forward-looking information included in this MD&A should not be unduly relied upon. This information speaks only as of the date of this MD&A. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward looking statements contained in this MD&A.

Readers are cautioned that it would be unreasonable to rely on any such forward looking statements and information as creating any legal rights, and that the statements and information are not guarantees and may involve known and unknown risks and uncertainties, and that actual results are likely to differ (and may differ materially) and objectives and strategies may differ or change from those expressed or implied in the forward looking statements or information as a result of various factors. Such risks and uncertainties include risks generally encountered in the development and operation of mineral properties and processing facilities such as: risks associated with mineral and resource estimates, including the risk of errors in assumptions or methodologies; risks associated with estimating production, forecasting future price levels necessary to support production, and the Company’s ability to increase production in response to any increases in commodity prices; uncertainties and liabilities inherent in mining operations; geological, technical and processing problems, including unanticipated metallurgical difficulties, ground control problems, process upsets and equipment malfunctions; risks associated with labour disturbances and unavailability of skilled labour; risks associated with the availability and/or fluctuations in the costs of raw materials and consumables used in the Company's production processes; risks associated with environmental compliance and permitting, including those created by changes in environmental legislation and regulation and delays in obtaining permits and licenses that could impact expected production levels or increases in expected production levels; actions taken by regulatory authorities with respect to mining and processing activities; risks associated with the Company’s dependence on third parties in the provision of transportation and other critical services; title risks; the adequacy of insurance coverage; uncertainty as to reclamation and decommissioning liabilities; the ability of the Company’s bonding companies to require increases in the collateral required to secure reclamation obligations; the potential for, and outcome of, litigation and other legal proceedings, including potential injunctions pending the outcome of such litigation and proceedings; the ability of Energy Fuels to meet its obligations to its creditors; risks associated with the Company’s relationships with its business and joint venture partners; failure to obtain industry partner, government and other third party consents and approvals, when required; competition for, among other things, capital, acquisitions of mineral reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; risks posed by fluctuations in exchange rates and interest rates, as well as general economic conditions; risks inherent in the Company’s and industry’s forecasts or predictions of future uranium and vanadium price levels; fluctuations in the market prices of uranium and vanadium, which are cyclical and subject to substantial price fluctuations; the risks associated with asset impairment as a result of decreases in uranium prices; risks associated with lack of access to markets and the ability to access capital; the market price of Energy Fuels’ securities; public resistance to nuclear energy or uranium mining; uranium industry competition and international trade restrictions; and the other factors discussed under “Risk Factors” in the Company’s Annual Information Form dated March 26, 2014 available at http://www.sedar.com, and in its Form 40-F available at http://www.sec.gov/edgar.shtml.

The Company cautions that the foregoing list of risks and uncertainties is not exhaustive. Additional information on these and other factors which could affect operations or financial results are included under the heading “Risk Factors” in the Company’s Annual MD&A and in the Company’s Annual Information Form each dated March 26, 2014 available at http://www.sedar.com, and in its Form 40-F available at http://www.sec.gov/edgar.shtml. The forward-looking statements and forward-looking information contained in this MD&A are expressly qualified by this cautionary statement. The Company does not undertake any obligation to publicly update or revise any forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting any forward looking statements or information except as expressly required by applicable securities laws. If the Company does update one or more forward looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward looking statements.

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ENERGY FUELS INC.
Management’s Discussion and Analysis
Six Months Ended June 30, 2014
(Expressed in thousands of U.S. Dollars, Unless Otherwise Noted)

Cautionary Note to United States Investors Concerning Estimates of Measured, Indicated and Inferred Resources: This MD&A may use the terms “Measured”, “Indicated” and “Inferred” Resources. United States investors are advised that, while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. “Inferred Mineral Resources” have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable.

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