Energy Fuels estimates $1.8B value for Madagascar mineral sands project

[Ben Graham]

Energy Fuels (NYSE: UUUU) (TSX: EFR) has released an updated feasibility study (FS) for its 100%-owned heavy mineral sands (HMS) project in Madagascar, highlighting its strong economics and potential to be a contributor to the global rare earth supply chain.

The project, Vara Mada, was acquired by the company in 2024 through its takeover of Australia’s Base Resources. At the time, Energy Fuels pegged the project (then known as Toliara) as a major source of monazite, a phosphate mineral that contains rare earth elements. It also cited the project’s potential output of ilmenite and zircon, which are sources of titanium and zirconium respectively.

The FS report estimated that the Vara Mada could produce approximately 959,000 tonnes of ilmenite, 66,000 tonnes of zircon and 24,000 tonnes of monazite, plus 8,000 tonnes of rutile, a naturally occurring titanium dioxide mineral. The project has an initially modelled mine life of 38 years, with the potential to increase following refinements and further drilling.

Based on these forecasts and a current resource estimate for the Ranobe deposit, the FS gave the Vara Mada an after-tax net present value (at 10% discount) of $1.8 billion — equating to $7.30 per share — and an internal rate of return of 24.9%.

“The FS confirms what we’ve known since we acquired the project in 2024. Vara Mada is a generational, one-of-a-kind project that has the potential to positively alter the dynamics of global rare earth and critical mineral supply chains,” Mark Chalmers, CEO of Energy Fuels, said in a news release Thursday.

Shares of Energy Fuels rose as much as 2% in New York following the FS release, sending its market capitalization to $4.5 billion.

Source of rare earth oxides

In its press release, Energy Fuels said Vara Mada serves as a key part of its diversified critical materials business centered around its White Mesa mill in Utah.

Once in production, monazite material from Vara Mada would be transported to White Mesa for further processing into light and heavy rare earth oxides. The facility is only functioning uranium mill in the US, but has the capability to process monazite into rare earth oxides.

“Monazite concentrates produced from Vara Mada, and other HMS projects globally, are a rich source of both light and heavy ‘magnet’ REEs, used in a variety of clean energy and advanced technologies, including electric and hybrid vehicles, advanced robotics and manufacturing, consumer electronics, renewable energy, and key defense technologies,” Chalmers noted.

Under its current “Phase 1” capacity, the White Mesa mill can process up to 10,000 tonnes of monazite concentrate per year into up to 1,000 tonnes of neodymium-praseodymium (NdPr) oxide. Energy Fuels has plans to expand its processing capabilities into heavy rare earths, producing up to 48 tonnes of dysprosium and 14 tonnes of terbium oxides. The expanded facility, it says, could be operational as soon as the fourth quarter of 2026.

Energy Fuels produces first heavy rare earth oxides

Together with monazite produced at its other HMS projects, the total rare earth production could supply up to 30% of US demand for light REE oxides and 85% of US demand for heavy REE oxides, Energy Fuels said, citing Benchmark Mineral Intelligence’s supply forecast.

Final investment decision

As noted by Energy Fuels, a final investment decision (FID) on the Vara Mada project would require the formalization of certain fiscal terms, including the addition of monazite production to the existing mining permit. The company and the government of Madagascar are still in negotiations based on the previously disclosed memorandum of understanding signed by the parties in December 2024, it said.

In the feasibility report, the pre-FID capital costs for the project is estimated at $121 million, while the post-FID capital costs would total over $900 million over two stages.