Uranium Initial notes

March 14, 2021

Public perception is big in this space: People are weary/scared of ‘nuclear’
Uranium is an important part of baseload energy
Uranium is cheap on a cash basis and produces no carbon
Uranium markets Very price dependent and very small
- There is Lots of Uranium on earth
- More demand at good prices = Return $ to shareholders
  - Global costs Takes $50-$60 a pound in order to be viable
Market needs to 2x price of uranium
New reactors are under construction
- 50 in progress
- Some old reactors retire
  - Interesting to see the MW/GW of reactors taken offline
To track the number of nuclear power being added/removed
- Calculate the Net # of MW/GW
  - When they come online
  - When the come offline
Takes years for Uranium to be mined
- Can’t just massively increase supply if demand is hitting
  - Uranium mining is Capital intensive
  - New plants take time to pass regulation, development
  - Uranium Fuel Cycle takes 18-24 Months from Start-Finish (see below)
VERY DIFFERENT THE GAS/SHALE industry for mining (attaining greater supply)

Uranium Fuel Cycle

18-24 months
- Mine uranium ore
- Crush rock ore into powder and stacked into drums to ship to processing plant U3O8
- Uranium goes from black to yellow (UO3 - Uranium trioxide) at processing plant ‘Yellowcake’
- Enriched at a plant by adding chemicals and processing UO3 -> UO2 (Uranium dioxide) which is the UO2 that is used for nuclear fuel
- Fabricated into Pellets
- Pellets are put into rods

Top Uranium Producers Worldwide (2021)

These numbers are captured from the World Nuclear Association using 2021 Uranium production

Kazakhstan ~ 45%
Namibia ~ 12%
Canada ~ 9%
Australia ~ 9%
Uzbekistan ~ 7%
Russia ~ 5%
Niger ~ 5%
China ~ 4%
India ~ 1%
Ukraine ~ 1%
South Africa ~ 1%
Others ~ 1%

Producers shutdowns

Producers shutdowns have occurred (mainly due to Covid) causing a supply shortage
Market prices initially took off a bunch naturally… (supply/demand economics)
$50 spot price necessary for some of these mines to be profitable basic math
- Can't be pulling uranium out of the ground for $50 and sell for $15-16
Efficient producers getting shutdown were interesting
- Kazakhstan cheapest production in the world got shut down
- Canadians (two of the highest grade mines in the world)
  - McArthur lake
  - Cigar lake

China

China has what’s called the 3-legged stool
- 1. ) Domestic production
  - So far not so good at finding Uranium
  - They are willing to go to length (been digging deep for tests)
- 2.) Ownership of Uranium assets overseas
  - They can do this through acquisition of projects or joint ventures
  - China only has access to 2 / 5 of the top Uranium producers
    - Kazakhstan & Namibia
    - Australia currently does not allow china to even discuss having control of Uranium assets so that’s a non-starter due to current politics
    - Canada has laws to prevent > 49% ownership
  - Niger is currently sovereign under France so China would have to operate in partnership with France unless China is willing to undertake responsibility
  - Namibia
    - Friendly with Uranium production/mining
    - CGN owns 90% of the whosub mine
    - CNNC has controlling interest in the rossing mine
    - CNNC has 25% of Lenn-Heinrick mine
  3.) Accumulating pounds of Uranium in the Spot Market/Inventory
  - Big buyer in kaKazakhstan
  - Been in accumulation mode during the bear market
    - China has the long-game outlook
China’s Inventory:
- People confuse the Large inventory right now, some say China is done buying, but Brandon Munro states everyone’s wrong and that China has lots more buying to do as the current stockpile is for security for further project rollouts
- China is going to by more as the current high-end estimates are that by 2040 China will consume the same amount of Uranium that is currently mined each year today
- China has to buy more as inference from the two points from above, nations like Russia and the United States will not like the squeeze in price that will inevitably occur when China needs to buy more. So China purchasing more will have impacts globally on the Uranium market in time where supply shortages are very evident

Uranium Revisited

October 9, 2021

People need to understand that $21/lb -> $50/lb
- Makes uranium market ½ as attractive
- Last ½ of market still very ‘fun’ (2-3x in 2years)
IEA estimates the total cost to produce 1 pound of Uranium is $55-65 per pound
- Total cost (not just mining)
  - Production
  - Refinement
  - Shipping
In the United States
- 14% of total electrical consumption is Nuclear Energy
- 20% of baseload consumption is Nuclear Energy
Due to Inflation, the price doesn’t go up relative to cost of production
Current Supply + Demand Economics
- 200M/lbs of Demand in Uranium globally
- 130M/lbs supply in Uranium globally
- 70M/lbs supply deficit globally!!
Immediate moves in Uranium price have already occurred
- Note: Sprott ATM offering in Aug 17-19 kicked prices into action
Shutting down mines takes 2 years to get back to full production
Process
- Mine - Refinement - Yellowcake - (Taking 1 year of time)
Supply can be relatively unaffected by price for up to 3 years
Demand for uranium relative to price is extremely inelastic
Sprott getting involved sped up the timeframe of investment thesis
Some above ground inventories may sell to Sprott
Increase in liquidity when $SPUT is listed on NYSE
- Although may not be the case anymore according to Rick Rule as he did not anticipate such a vast amount of $ to flow into the Toronto Stock Exchange
Restarting 40 Nuclear Power Plants in Japan
- Increase demand by 20M lbs/year
- Reduce supply available for sale in their inventories
Utility companies have been playing chicken with signing long-term price contracts
- Been buying directly off spot markets for past few years as its been cheap
- With entrance of Sprott buying consistently in spot market, they have soaked up most of the bid
  - Due to this you will start to see increase in utility signing long term contracts
  - Good for market in general as a previously stagnant market is coming alive again
$SPUT being ‘green lit’ before Q1 2022 is very optimistic

Uranium Thesis

Clean Carbon-free Energy
- Baseload energy
Demand outpaces Supply
- Supply demand fundamentals
- China on Track to consume current globally supply today by 2040
Energy crisis globally
- Puts pressure on Nations to go Nuclear as
  - Pushed politically to go “clean” (greenwashing)
  - Its scientifically the most least carbon emitting Energy Source according to the United Nations
  - Renewed realizations that Solar + Wind + battery storage will not cut it.
Japan restarting Nukes
EU Taxonomy Green Label + incentives
Plans For New Reactors Worldwide - Constantly being updated
Greenflation/Inflation
- oil/gas increasing is burden to consumers
  - Considering “dirty” fossil fuels
  - Shift for economic/ecological solution
Biden $6B program

Uranium Revisited 2022

Feb 7, 2022
- URA rebalancing has completed (word from Justin Huhn - Uranium Insider)
Fed 9, 2022 (AFTER MARKET CLOSE COMMENTS ON CAMECO)
- RBC - Cameco: "Well-positioned to benefit from positive trends in uranium. We are encouraged by increased long-term contracting activity signaling that the contract cycle is gaining momentum, which is a long term positive for Cameco"
- TD - Cameco: - "Contracting Cycle Gaining Momentum. The resumption of a term contract cycle is the final indicator we have been looking for to suggest that uranium pricing is setting the stage for another leg higher.”
- Cameco's Disciplined Approach to McArthur Restart well Received by market