Executive Summary / Key Takeaways

• enCore Energy is strategically positioned as the only multi-plant In-Situ Recovery (ISR) uranium producer in the United States, capitalizing on growing domestic demand for clean nuclear fuel.
• The company's core ISR technology offers inherent cost and environmental advantages over conventional mining, contributing to competitive extraction economics as production ramps up.
• Recent operational milestones, including the successful startup of a second IX circuit at Alta Mesa and increased drilling activity in South Texas, signal accelerating production capacity and resource development.
• While Q1 2025 results showed a net loss driven by increased activity costs and non-cash items like unrealized securities losses, the focus remains on optimizing extraction efficiency and leveraging a robust sales contract portfolio valued at over $330 million.
• Key risks include the ongoing remediation of material weaknesses in internal controls, pending litigation, and the inherent volatility of uranium market prices, which could impact future financial performance and capital access.

America's Clean Energy Ambition Meets Domestic Uranium Production

enCore Energy Corp., positioning itself as America's Clean Energy Company, is singularly focused on the acquisition, exploration, development, and extraction of uranium resources exclusively within the United States. Incorporated in 2009, the company has steadily built a portfolio centered around the proven In-Situ Recovery (ISR) technology, a method lauded for its lower environmental footprint and potentially lower operating costs compared to traditional hard rock mining. This strategic focus aligns directly with the increasing global and domestic emphasis on clean, reliable nuclear energy to meet growing electricity demands, including those from energy-intensive sectors like artificial intelligence.

The broader uranium market is currently characterized by a structural supply deficit, with global demand from 440 operable reactors (requiring approximately 175.20 million pounds of U₃O₈ annually as of January 2025) exceeding primary production. This gap has historically been filled by secondary supplies and stockpiles, which are reportedly dwindling. Against this backdrop, U.S. government policy has shown increasing support for domestic uranium production and nuclear energy, highlighted by recent Executive Orders referencing nuclear power and uranium as key to expanding U.S. energy independence and designating uranium as a critical mineral. This policy environment, coupled with incentives like the Inflation Reduction Act, is encouraging life extensions and potential recommissioning of U.S. nuclear plants, creating a favorable demand outlook for domestic suppliers like enCore.

The ISR Advantage: Technology Driving Operational Efficiency

At the heart of enCore's strategy is its expertise in ISR technology. This method involves injecting a lixiviant solution into the ore body to dissolve uranium, which is then pumped to the surface for processing. This bypasses the need for conventional mining and milling, reducing surface disturbance and potentially lowering capital and operating expenditures. enCore operates three of the eleven licensed and constructed Central Processing Plants (CPPs) in the U.S., providing a significant infrastructure advantage.

The company's operational focus is currently centered on its South Texas hub, specifically the Rosita and Alta Mesa CPPs, which commenced extraction operations in late 2023 and mid-2024, respectively. The Alta Mesa CPP, acquired in 2023, is a fully licensed facility with a production capacity of 1.5 million pounds of U₃O₈ per year through its Ion Exchange (IX) system. A key operational achievement in Q1 2025 was the successful startup of a second IX circuit at Alta Mesa, effectively doubling the total flow capacity from 2500 GPM to 5000 GPM. This expansion, coupled with the installation of additional injection and extraction wells in the permitted Wellfield 7 (PAA-7), is designed to accelerate extraction rates and increase uranium capture, utilizing approximately 75% of the current processing capacity. Wellfield solution head grades at Alta Mesa averaged approximately 54 mg/L U₃O₈ in 2024, peaking at 150 mg/L, with ongoing well installation aimed at maintaining or improving these grades. The recent installation of proprietary wellfield simulation software in Q1 2025 further enhances the company's ability to model and optimize underground flow patterns, potentially leading to improved extraction efficiency and lower operating costs per pound.

Ramping Production and Optimizing the Portfolio

enCore's strategy involves not only bringing existing facilities online but also developing a pipeline of future production assets and optimizing its portfolio. The Rosita CPP, with an 800,000 pound U₃O₈ per year capacity, serves as a central processing site for several satellite projects in South Texas. The Kingsville Dome CPP, also with an 800,000 pound capacity, is currently in standby and requires refurbishment before operations can commence, representing future potential capacity.

To support its production ramp-up and resource replacement, the company has significantly increased its drilling activity in South Texas, growing the number of active rigs from 6 at the start of 2024 to 22 by the end of Q1 2025. Beyond Texas, enCore holds key pipeline projects like the advanced-stage Dewey-Burdock project in South Dakota, which boasts demonstrated ISR resources and robust economics according to a 2024 PEA. While Dewey-Burdock holds crucial permits, including an NRC source material license (currently in timely renewal) and EPA underground injection permits/aquifer exemption, the latter are subject to ongoing appeals. Management has expressed confidence in successfully resolving these appeals. Initial permitting and exploration drilling are also underway at the Gas Hills and Dewey Terrace projects in Wyoming, further building the long-term development pipeline.

In a strategic move to focus on its core production pipeline, enCore completed the sale of its subsidiary holding the Crownpoint and Hosta Butte projects in New Mexico to Verdera Energy Corp. in April 2025. This transaction, the largest in a series of non-production asset divestments, provided enCore with 50 million non-voting preferred shares of Verdera, representing approximately 73% of Verdera on a fully diluted basis. This divestment streamlines enCore's portfolio and allows for greater focus on its near-term production assets.

Q1 2025 Performance: Investment in Growth Weighs on Near-Term Results

enCore's financial performance in the first quarter of 2025 reflects the ongoing investment in ramping up its production capabilities. Revenue for the three months ended March 31, 2025, was $18.239 million, a decrease from $30.394 million in the same period of 2024. This decrease was primarily attributable to a lower volume of uranium sold (290,000 pounds in Q1 2025 vs. 320,000 pounds in Q1 2024) and a lower realized sales price per pound ($62.89 vs. $94.98), dictated by market conditions.

Cost of sales also decreased to $18.262 million in Q1 2025 from $30.863 million in Q1 2024, reflecting the lower sales volume and purchases of uranium at a lower market price. The weighted average cost of uranium sold was $62.97 per pound in Q1 2025. Notably, the weighted average cost of extracted pounds related to cost of goods sold was $45.62 per pound, comprising $31.26 in cash costs and $14.36 in non-cash costs (including depletion). The company recognized $1.009 million in depletion costs capitalized into inventory and sold during Q1 2025, compared to none in Q1 2024, reflecting the commencement of extraction from capitalized mineral properties. Inventory impairment charges were $155,000 in Q1 2025.

Operating expenses (excluding stock option expense) increased significantly to $14.725 million in Q1 2025 from $10.991 million in Q1 2024. This increase directly reflects the heightened activity levels associated with the production ramp-up at Alta Mesa and Rosita, including increased wellfield installation and exploration expenditures. The net loss for Q1 2025 widened substantially to $25.387 million ($0.13 per share) compared to $7.742 million ($0.04 per share) in Q1 2024. This larger loss was primarily driven by the increased operating expenses and a significant unrealized loss on marketable securities of $9.876 million in Q1 2025, compared to an $821,000 loss in Q1 2024, due to unfavorable market conditions impacting the fair value of these investments.

Liquidity and Capital Strategy

As of March 31, 2025, enCore held cash and cash equivalents of $29.704 million and working capital of $35.677 million, down from $39.701 million and $57.334 million, respectively, at December 31, 2024. Historically, operations have been funded primarily through equity issuances. The company expects to meet its short-term cash requirements through existing working capital.

Long-term cash needs, driven by exploration and development activities, are anticipated to be met through a combination of existing working capital, expected operating cash flows, potential debt or equity financings, and property dispositions. The company made a $10.054 million principal payment on a uranium loan during Q1 2025, reducing the outstanding balance to $10.054 million as of March 31, 2025.

While management believes available resources and potential future funding will be sufficient for both short-term (next twelve months) and long-term needs, access to capital remains subject to market conditions and the company's financial performance.

Competitive Landscape and Positioning

enCore operates within a competitive global uranium market dominated by large international players like Cameco Corporation (CCJ) and includes other U.S.-focused producers and developers such as Uranium Energy Corp (UEC) and Energy Fuels Inc. (UUUU). enCore's key differentiator is its status as the only multi-plant ISR uranium producer in the United States as of March 31, 2025.

Compared to global giants like CCJ, enCore operates at a significantly smaller scale. CCJ holds a substantial global market share and benefits from diversified operations and robust financial health, including higher gross margins (34% TTM for CCJ vs. -10.55% TTM for EU) and stronger cash flow generation. However, enCore's ISR focus in the U.S. positions it to potentially benefit more directly from domestic policy support and the growing demand for U.S.-sourced uranium.

Against U.S. peers like UEC and UUUU, enCore shares the focus on domestic production and ISR technology (though UUUU also has conventional milling and rare earth interests). While TTM financial ratios show negative profitability metrics across the board for EU, UEC, and UUUU (reflecting the development stage and market volatility), EU's operational progress, particularly the multi-plant status and recent Alta Mesa expansion, provides a tangible base for potential production growth. EU's strategic divestment of non-core assets contrasts with UEC's acquisition-focused growth, highlighting different approaches to portfolio management. UUUU's diversification into rare earths offers a hedge against pure uranium market fluctuations, a strategy enCore has not pursued, maintaining a focused uranium play. enCore's proprietary ISR expertise and project database are intended to provide efficiency advantages, aiming for lower operating costs per pound compared to peers, although this is still being demonstrated at scale.

Indirect competition comes from other energy sources, particularly renewables, although nuclear energy's baseload capacity complements intermittent sources. Barriers to entry in the uranium mining sector, including stringent regulatory requirements and high capital costs, are significant and favor established players like enCore, helping to protect its market position against new entrants.

Risks and Outlook

Despite the favorable market backdrop and operational progress, enCore faces notable risks. The company has identified material weaknesses in its internal control over financial reporting, impacting its disclosure controls. While remediation efforts are underway, the effectiveness of these controls is not yet established, posing a risk of potential material misstatements. Furthermore, the company is subject to litigation, including a federal securities class action related to the internal control issues and cost capitalization, and an arbitration demand from its former CEO. While management views these as preliminary and not probable of an adverse outcome, they represent potential financial and reputational risks. Market risks, including the volatility of uranium prices and the price of the company's common shares, remain significant given the commodity nature of its product and reliance on equity financing. Potential tariffs on uranium imports could also impact the market dynamics, though U.S. policy currently appears supportive of domestic production.

Looking ahead, enCore's outlook is tied to the successful ramp-up of production at Rosita and Alta Mesa, the advancement of its pipeline projects like Dewey-Burdock, and favorable uranium market conditions. The company has secured a base level of projected income through its sales contract portfolio, with commitments totaling 8.315 million pounds of U₃O₈, valued at $68 million over the next three years and $269 million thereafter. This provides a foundation to support capital needs and production plans while retaining flexibility for opportunistic sales in a strong market. Management remains committed to cost efficiency and production optimization, anticipating further efficiencies as operations scale. The successful execution of its South Texas strategy and the advancement of its pipeline projects are critical to realizing its ambition of becoming a leading domestic uranium supplier.

Conclusion

enCore Energy is executing a focused strategy to become a significant domestic supplier of uranium, leveraging its multi-plant ISR infrastructure in South Texas and developing a promising pipeline of projects. The company's ISR technology offers a competitive edge in terms of cost and environmental impact, a crucial factor in the current market environment favoring clean energy and domestic supply. While recent financial results reflect the substantial investment required for production ramp-up and were impacted by non-cash items, operational progress at facilities like Alta Mesa demonstrates tangible steps towards increasing output and efficiency. Despite lacking proprietary, quantifiable technology differentiators, the investment thesis for enCore hinges on its ability to successfully scale production, manage operational costs, navigate regulatory hurdles for its pipeline projects, and effectively address internal control weaknesses and litigation risks. Supported by a favorable macro environment for nuclear energy and domestic uranium, and underpinned by a solid sales contract book, enCore is positioned to potentially benefit from the tightening uranium market. Investors will be closely monitoring production figures, cost trends, progress on pipeline development and permitting, and the resolution of internal control and legal matters as indicators of the company's trajectory.