Uranium Market Outlook

Q1 | 2021

A PUBLICATION OF UXC.COM

1501 MACY DRIVE ROSWELL, GA 30076 PH +1 770 642-7745 FX +1 770 643-2954

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Table of Contents Executive Summary ______i Market Trends and Latest Developments ...... i Essay: The U.S. Government’s Role in the Uranium Market ...... i Price and Contracting Review ...... ii Supply and Demand Overview ...... ii Price Indicator Technical Analysis ...... iii Market Outlook and Price Forecast...... iv Introduction ______7 Conventions Used in the Report ...... 7 1 – Essay: The U.S. Government’s Role in the Uranium Market______8 1940s-1960s: Monopsonist Founder of the Domestic Uranium Industry ...... 8 1970s-1980s: Handing the Reins to the Commercial Industry ...... 9 1990s: End of the Cold War, Nonproliferation & Privatization...... 10 2000s: Formulating (and Ignoring) an Inventory Disposition Strategy ...... 12 • Barter of NUF6 for GDP Cleanup ...... 12 • U.S. HEU Disposition Program ...... 13 • 2012 Five-Party Tails Re-enrichment Deal ...... 14 • Seeking to Restrain DOE Inventory Disposition ...... 14 2016-2021: U.S. Government Pivots ...... 15 • HEU Downblending as a National Security Matter ...... 15 • Suspension of UF6 Barter ...... 15 • Uranium Reserve ...... 16 What’s Left? Composition of U.S. Government Inventories ...... 17 • American Assured Fuel Supply (AAFS) ...... 17 • MOX Back-Up Reserve...... 18 • HEU ...... 18 • Natural UF6 ...... 18 • Off-Spec UF6 and Non-UF6 ...... 19 • Depleted Uranium as UF6 ...... 19 Analysis: Future Role of the U.S. Government ...... 19 Conclusions ...... 21 2 – Uranium Contracting and Price Review ______22 Spot Market Contracting Review ...... 22 • 2020 Spot Contracting Activity ...... 22 • 2021 Spot Contracting Activity ...... 27 Long-Term Contracting Review ...... 28 • 2020 Term Contracting Activity ...... 28 • 2021 Term Contracting Activity ...... 30 U3O8 Price Review ...... 33 • Weekly Ux U3O8 Price ...... 33 • Trends in Long-Term Contract Pricing ...... 34 Ux LT U3O8 Price Movements ...... 34 Escalation Factors ...... 35 Escalated LTC Prices Compared to the Spot Price Outlook ...... 35 Buy/Hold Alternative ...... 36 3 – Requirements and Demand Outlook ______37 Key Reactor Developments by Region ...... 38 Regional Highlights ...... 39 • North America ...... 39 • Western Europe ...... 39 • Eastern Europe ...... 40 • Asia & Oceania ...... 41 • Africa & Middle East...... 42 • South America ...... 42 Reactor Capacities Anticipated by 2035 by Country ...... 43

Quarterly Changes to Base Case Nuclear Power Forecast ...... 46 Alternative UxC Reactor Forecast Scenarios ...... 47 Demand Forecast Scenarios ...... 48 • Reactor Requirements vs. Market Demand ...... 48 • UxC Uranium Market Demand ...... 48 UxC Requirements Model (URM) ...... 48 Demand Updates ...... 49 • Reviewing Uncovered Utility Requirements ...... 50 Spot and Term Demand Outlook...... 53 • Spot Demand in 2021-2022 ...... 53 Near-Term Spot Demand Estimates ...... 54 • Long-Term Demand Over Next 12 Months ...... 55 4 – Production and Supply Outlook ______57 Production Forecast ...... 57 • UxC Production Forecast Comparisons ...... 57 Key Assumptions in the Mid-Case Production Scenario ...... 57 Key Assumptions in the High-Case Production Scenario ...... 58 Key Assumptions in the Low-Case Production Scenario ...... 59 • Key Production Changes since the Last Report ...... 60 • Existing Production ...... 61 Canada ...... 61 Australia ...... 61 Kazakhstan ...... 62 United States...... 65 Romania ...... 66 India ...... 66 • Planned Production ...... 67 Canada ...... 67 Africa ...... 69 Australia ...... 70 U.S...... 70 Greenland ...... 71 Spain ...... 72 Secondary Supplies ...... 74 • U.S. Department of Energy ...... 74 UF6 Barter ...... 74 NNSA HEU Downblending ...... 74 DOE High Assay Depleted Uranium ...... 75 Uranium Reserve ...... 75 • Russian Government Inventories ...... 76 • Enricher Uranium Sales ...... 76 Urenco ...... 76 Orano ...... 77 Russia ...... 78 • Commercial Inventories ...... 79 Utility Inventory Holdings ...... 79 Uranium Investment Funds ...... 81 • Fuel Banks ...... 82 • MOX and RepU ...... 83 • Secondary Supplies Forecast & Analysis ...... 85 Policy Issues Affecting the Market ...... 86 • U.S. Uranium Reserve ...... 86 • Russian Suspension Agreement ...... 87 2020 Amendment to the RSA ...... 87 Legislative Codification of the RSA Extension ...... 88 Re-Export of Material Under the RSA ...... 88 • Iran Sanctions ...... 89 5 – Near-Term Technical Analysis & Spot Market Indicators ______90 Near-Term Technical Analysis ...... 90 Near-Term Spot Price Indicators ...... 92 Long-Term Spot Price Indicators...... 92

6 – Market Outlook and Price Forecasts ______95 Near-Term Outlook for Spot Prices ...... 95 • Spot Demand ...... 95 • Spot Supply...... 96 • Financial Activity ...... 96 • Outlook – 3 Months ...... 97 • Outlook – 12 Months ...... 98 Medium-Term Outlook (2022-2024) ...... 99 • Demand Outlook ...... 99 • Supply/Demand Balance ...... 99 • Interest & Exchange Rates ...... 101 • Unutilized Production Capacity ...... 102 UxC Spot U3O8 Price Forecasts ...... 105 • Uranium Price Formation: Key Factors ...... 107 • Mid Price Scenario ...... 110 • High Price Scenario ...... 113 • Low Price Scenario ...... 116 • Composite Spot Price Scenario ...... 119 UxC Long-Term U3O8 Price Forecasts ...... 122 • Mid LT Base Price Scenario ...... 123 • High LT Base Price Scenario ...... 123 • Low LT Base Price Scenario...... 123 • Composite LT Base Price: Probability Analysis ...... 123 Appendix A – Forecasting and Indicator Methodologies ______125 U-PRICE® Forecasting Methodology ...... 125 • Model Structure...... 125 Demand Submodel ...... 127 Supply Submodel ...... 127 Price Submodel ...... 128 Spot Price Indicator System Methodology ...... 129 • Near-Term Indicator Methodology ...... 129 • Long-Term Indicator Methodology ...... 131

Appendix B – UxC U3O8 Price Supplement ______133 Ux U3O8 Price Indicators ...... 133 UxC Broker Average Price (BAP) ...... 136 • Daily UxC Broker Average Price (BAP) ...... 136 • UxC Participating Brokers ...... 137 • UxC Price Averaging...... 138 Monthly Averages: Daily vs. Weekly Indicators ...... 139 Fund Implied Price (FIP) ...... 140 CME/NYMEX UxC Uranium U3O8 (UX) Futures Activity ...... 141 UxC-Numerco Forward Price Curve ...... 143 Appendix C – Statistical Review ______144 Historical Review ...... 144 Industry Data ...... 146 Future Outlook and Forecasts...... 148

© 2021 UxC 3 List of Figures Uranium Market Outlook - Q1 2021 List of Figures Figure E-1. Ux U3O8 Prices ...... ii Figure E-2. Monthly Spot Volume vs. Price ...... ii Figure E-3. Utility LTC Volume ...... ii Figure E-4. Uncovered Requirements...... iii Figure E-5. Mid-Case Uranium Supply/Demand Balance ...... iii Figure E-6. Long-term Spot Market Indicators vs. Spot Price ...... iv Figure E-7. UxC Price Forecast Comparison ...... iv Figure 1. Uranium Rush – A Family Board Game ...... 8 Figure 2. Megatons to Megawatts Intergovernmental Agreement ...... 10 Figure 3. U.S. DOE Excess HEU Disposition ...... 13 Figure 4. Overview of 2012 Five-Party Tails Re-Enrichment Deal ...... 14 Figure 5. U.S. Government Inventory Disposition, 2005-2035 ...... 20 Figure 6. Monthly Spot Uranium Volume by Form ...... 22 Figure 7. Annual Spot Uranium Volumes by Form, 1990-2021 ...... 23 Figure 8. Spot Volume by Need vs. Weekly Price, 1999-2021 ...... 25 Figure 9. Spot Volume by Method vs. Weekly Price, 1999-2021 ...... 25 Figure 10. Investor Spot Purchases ...... 25 Figure 11. Quarterly Spot Volume by Buyer, 1996-2021 ...... 26 Figure 12. Quarterly Spot Volume by Seller, 1996-2021 ...... 26 Figure 13. Seasonal Trends vs. 2020 Activity Levels ...... 27 Figure 14. Monthly Spot Volume vs. Price, 2004-2021 ...... 28 Figure 15. Utility LTC Volume Over the 1990-2021 Period ...... 29 Figure 16. 2020 LTC Deliveries by Utility Buying Group ...... 29 Figure 17. 2020 LTC Deliveries by Form ...... 30 Figure 18. Term Contracting Volume by Method, 1998-2021 ...... 30 Figure 19. Annual Volatility in Ux U3O8 Price ...... 33 Figure 20. Recent Ux U3O8 Prices ...... 33 Figure 21. Recent Ux U3O8 Prices ...... 34 Figure 22. Buy/Hold Alternative Pricing Evaluation ...... 36 Figure 23. Map of UxC Nuclear Regions ...... 38 Figure 24. Nuclear Generating Capacity Percentages by Region, 2015, 2020, 2030 & 2035 ...... 43 Figure 25. UxC Nuclear Generating Capacity Forecast, 2008-2035...... 44 Figure 26. UxC Base, High, and Low Case Nuclear Capacity Forecasts, 2008-2035 ...... 47 Figure 27. Comparison of URM Uranium Market Demand Cases, 2008-2035 ...... 49 Figure 28. URM Base Demand Cases with & without Inventory Build, 2008-2035...... 50 Figure 29. Comparison of Uncovered Utility Uranium Requirements, 2005-2035 ...... 51 Figure 30. Uncovered Utility Uranium Requirements, 2020-2035...... 52 Figure 31. Annual Spot Volumes ...... 53 Figure 32. 2005-2021 Actual and Expected Spot U3O8 Volume ...... 54 Figure 33. Utility LTC Volume Over the 1990-2021 Period ...... 55 Figure 34. 2021 Utility LTC Activity ...... 56 Figure 35. Market Demand vs. Mid-Case Production Sources, 2008-2035 ...... 57 Figure 36. Market Demand vs. High-Case Production Sources, 2008-2035 ...... 58 Figure 37. Market Demand vs. Low-Case Production Sources, 2008-2035 ...... 59 Figure 38. Orano’s Inventories and Work-in-Progress ...... 78 Figure 39. U.S. Commercial & Government Inventories, 1983-2019 ...... 80 Figure 40. Total Natural Uranium Equivalent EU Utilities’ Inventories, 2005-2019 ...... 81 Figure 41. Mid-Case Secondary Supplies Disposition, 2018-2035 ...... 85 Figure 42. Ux Weekly Spot Price, 1987-2021 ...... 90 Figure 43. Ux Price vs. 30-Week Moving Average ...... 91 Figure 44. Net Changes in the Uranium Spot Price by Month, 1969-2021 ...... 91 Figure 45. Near-Term Net Indicator Values vs. Price, 1995-2021 ...... 92 Figure 46. Long-Term Net Indicator Values vs. Price, 1989-2021 ...... 93 Figure 47. Market Demand vs. Mid-Case Production Sources, 2008-2035 ...... 100 Figure 48. Market Reactions to Significant Developments ...... 107 Figure 49. Mid Projection, Current vs. Constant $ ...... 111 Figure 50. UxC Mid Spot Price Scenario Projection and Annual Variance, 1987-2035 ...... 112 Figure 51. High Projection, Current vs. Constant $...... 114 Figure 52. UxC High Spot Price Scenario Projection and Annual Variance, 1987-2035 ...... 115

Figure 53. Low Projection, Current vs. Constant $ ...... 117 Figure 54. UxC Low Spot Price Scenario Projection and Annual Variance, 1987-2035 ...... 118 Figure 55. UxC Price Forecast Comparison ...... 119 Figure 56. Composite, Current vs. Constant $ ...... 119 Figure 57. UxC Composite Scenario U3O8 Price Projection Comparison, 1987-2035 ...... 121 Figure 58. UxC Mid-point Spot U3O8 Price Projection Comparison, 1987-2035 ...... 121 Figure 59. UxC U3O8 Long-Term Base Price Projection Comparison, 2004-2035 ...... 124 Figure A-1. Uranium Price Forecasting Model: U-PRICE ...... 125 Figure A-2. Near-Term Uranium Net Indicator Value vs. Ux U3O8 Price, 1990-2021 ...... 129 Figure A-3. Long-Term Uranium Net Indicator Value vs. Spot Price, 1989-2021 ...... 131 Figure B-1. Ux U3O8 Prices – Spot, 1987-2021 ...... 135 Figure B-2. Ux U3O8 Prices, 2004-2021 ...... 135 Figure B-3. UxC Broker Average Price vs. Ux U3O8 Price, 2009-2021 ...... 136 Figure B-4. Daily UxC Broker Average Price vs. Monthly Average, 2009-2021 ...... 138 Figure B-5. Monthly Averages of UxC Broker Average Price vs. Ux U3O8 Price, 2009-2021 ...... 139 Figure B-6. Ux U3O8 Price vs. Fund Implied Price (FIP), 2006-2021 ...... 140 Figure B-7. Ux U3O8 Prices vs. CME & NL Forward Price Curves ...... 142 Figure B-8. NYMEX UX Futures Activity – Total Contracts by Transaction Month, Year ...... 142 Figure B-9. NYMEX UX Futures Activity – Total Contracts by Settlement Month ...... 142 Figure B-10. NYMEX UX Futures Activity – Open Interest by Settlement Month ...... 142 Figure B-11. UxC-NL U3O8 Forward Price Curve, 2012-2035 ...... 143 Figure C-1. Monthly Spot U3O8 Volume by Form vs. Price, 1999-2021 ...... 144 Figure C-2. Utility Long-term Uranium Contracting Volumes, 1990-2021 ...... 145 Figure C-3. ESA Fuel Loaded vs. Deliveries Made ...... 147 Figure C-4. Euratom Average Spot & Long-term Uranium Prices vs. Deliveries to EU Utilities ...... 147 Figure C-5. Comparison of Previous Year’s EU Uranium Requirements ...... 147 Figure C-6. URM Uranium Market Demand Comparison, 2008-2035 ...... 148 Figure C-7. URM Base Demand Cases with & without Inventory Build, 2008-2035...... 148 Figure C-8. UxC Uncovered Utility Requirements, 2020-2035 ...... 149 Figure C-9. Comparison of EIA U.S. Utility Unfilled Requirements, 2001-2029 ...... 150 Figure C-10. WNA 2017 & 2019 World Uranium Reactor Requirements Forecasts, 2016-2040 ...... 150 Figure C-11. World Uranium Production by Country, 1998-2035 ...... 153 Figure C-12. World Uranium Market Demand vs. Mid-Case Potential Supply Sources, 2008-2035 ...... 153 Figure C-13. UxC Composite and Mid U3O8 Spot Price Projections, Current vs. Constant $ ...... 154 Figure C-14. UxC High and Low U3O8 Spot Price Projections, Current vs. Constant $ ...... 154 Figure C-15. UxC U3O8 Spot Price Projection Comparison, 1987-2035 ...... 155 Figure C-16. UxC U3O8 Long-Term Base Price Projection Comparison, 2004-2035 ...... 155

© 2021 UxC 5 List of Tables Uranium Market Outlook - Q1 2021 List of Tables Table 1. Total Volumes of U.S. Government Inventories as of End of 2020...... 17 Table 2. Quarterly Spot Market Statistics, 2020-2021 ...... 27 Table 3. Utility Long-Term Contracts Summary, 2020 ...... 28 Table 4. 2020 Utility Awarded Long-Term Uranium Contracting Activity ...... 31 Table 5. 2021 Utility Awarded Long-Term Uranium Contracting Activity ...... 31 Table 6. Trends in LT Contract Terms & Conditions ...... 32 Table 7. Escalator Review, 1989-2019 ...... 35 Table 8. LTC Price vs. Spot Price Projections, 2021-2030 ...... 35 Table 9. Reactor Units & Nuclear Capacities Anticipated by Country by 2035 ...... 44 Table 10. Quarterly Changes to Base Case Forecast by Region/Country...... 46 Table 11. UxC Base, High, and Low Case Nuclear Reactor and Capacity Forecasts, 2018-2035...... 47 Table 12. UxC Uranium Market Demand Forecasts, 2018-2035 ...... 50 Table 13. UxC Total Uranium Requirements Volume Estimate, 2021-2035 ...... 52 Table 14. UxC Uncovered Uranium Requirements Volume Estimate, 2021-2035 ...... 52 Table 15. UxC Uncovered Uranium Requirements Percentage Estimate, 2021-2035 ...... 52 Table 16. Potential Spot Purchases ...... 53 Table 17. Potential Utility Long-Term Contracting Activity Over Next 12 Months ...... 56 Table 18. Russian Export to U.S. Quota Calculations based on Amended RSA, 2021-2040, UxC Est...... 88 Table 19. Long-Term Uranium Indicators as of Q1 2021 ...... 94 Table 20. 3-Month Spot Price Variance ...... 97 Table 21. 12-Month Spot Price Variance ...... 98 Table 22. Arguments for 2022-2024 Price Movements ...... 104 Table 23. Key Assumptions Used to Develop Spot U3O8 Price Scenarios ...... 107 Table 24. Key Factors Used to Develop Mid Price Scenario ...... 110 Table 25. UxC Annual Spot Price Projections – Mid Price Scenario, 2021-2035 ...... 112 Table 26. Key Factors Used to Develop High Price Scenario ...... 113 Table 27. UxC Annual Spot Price Projections – High Price Scenario, 2021-2035 ...... 115 Table 28. Key Factors Used to Develop Low Price Scenario ...... 116 Table 29. UxC Annual Spot Price Projections – Low Price Scenario, 2021-2035 ...... 118 Table 30. Probabilities for Periods of Increasing, Stable, and Declining Spot Prices ...... 119 Table 31. UxC Annual Price Projections – Composite Price, 2021-2035 ...... 120 Table 32. UxC Composite Spot Price Weightings, 2021-2035 ...... 120 Table 33. Probabilities for Periods of Increasing and Declining Long-Term Base Prices ...... 124 Table 34. UxC Annual Long-Term Base Price Projections, 2021-2035 ...... 124 Table 35. UxC Composite Long-Term Base Price Weightings, 2021-2035 ...... 124 Table A-1. Historical Near-Term Uranium Spot Market Indicators ...... 130 Table A-2. Historical Long-Term Uranium Spot Market Indicators ...... 132 Table B-1. Ux U3O8 Month-End Prices, 1987-2021 ...... 133 Table B-2. UxC Broker Average Price (BAP) Bid, Mid-Point, and Offer ...... 137 Table B-3. UxC Participating Brokers ...... 137 Table B-4. Ux U3O8 MAP vs. Monthly Average (MA) of UxC Broker Average Price ...... 139 Table B-5. CME Monthly Activity, 2016-2021 ...... 141 Table B-6. UxC-NL U3O8 Forward Price Curve, 2021-2025 ...... 143 Table C-1. Spot Market Statistics, 2017-2021 ...... 144 Table C-2. Utility Long-Term Uranium Contracts Summary, 2016-2020 ...... 145 Table C-3. Natural Uranium Feed Deliveries and Average Contract Prices to EU Member Utilities ...... 146 Table C-4. URM World Uranium Market Demand Forecast, 2018-2035 ...... 148 Table C-5. UxC Uncovered Uranium Requirements Volume Estimate, 2021-2035 ...... 149 Table C-6. EIA U.S. Utility Unfilled Uranium Requirements, 2017-2029 ...... 150 Table C-7. WNA World Uranium Reactor Requirements Forecast, 2018-2035 ...... 150 Table C-8. Existing Mines & Processing Facilities, Mid-Case, 2018-2035 ...... 151 Table C-9. New Mine Development – Planned & Potential, Mid-Case, 2018-2035 ...... 152 Table C-10. Secondary Supplies, Mid-Case, 2018-2035 ...... 152 Table C-11. UxC Annual Spot and Long-Term Base Price Projections, 2021-2035 ...... 156

Introduction

The Uranium Market Outlook is organized as follows: Chapter 1 contains a topical essay that addresses key events and their potential market impact. This quarter’s essay, “The U.S. Government’s Role in the Uranium Market,” reviews the changing role that the U.S. government has had in the uranium market over the past eight dec- ades and examines how the U.S. government is likely to influence the market going forward.

In Chapter 2 – Uranium Contracting and Price Review, recent spot and long-term market activity over the previous quarter is reviewed, and current contract terms and conditions are summarized. Chapter 3 – Requirements and Demand Outlook looks at recent developments affecting reactor requirements in the world’s regional markets, along with a review of requirements forecasts. An updated view on uncovered utility reactor requirements is also presented. This section also examines the spot demand outlook over the next three years and the long-term contract demand outlook over the next 12 months.

Chapter 4 – Production and Supply Outlook reviews recent production developments worldwide and the current status of major world projects. Also examined are inventory sellers and potential spot supply over the next three years. Chapter 5 – Near-Term Technical Analysis & Spot Market Indicators presents a technical analysis of near-term price movements and a detailed update of the long-term spot price indicators, designed by UxC to quantify market factors that are affecting price outlook two years forward.

In the final chapter of this report, Chapter 6 – Market Outlook and Price Fore- casts, the market is analyzed in terms of one-year and intermediate-term perspectives, and forecasts are presented for the spot price and long-term base price through 2035. The near-term availability of supply by price, market trends, and bullish and bearish arguments for price movements are also presented in this chapter.

The report contains three appendices. The first appendix, Appendix A – Forecast- ing and Indicator Methodologies, details the various methodologies used in this report to forecast price, supply, demand, and market price indicators. The second appendix, Appendix B – UxC U3O8 Price Supplement, contains data specifically on the various Ux Prices and related indicators. The third appendix, Appendix C – Sta- tistical Review, contains tables and figures that provide additional and expanded data to those presented in the body of the report.

Conventions Used in the Report

Unless otherwise stated, quantities are given in millions of pounds U3O8e and prices in terms of US$/lb U3O8. Price forecasts are presented in current (year-of-delivery) dollars.