Uran Report 2018 Everything You Need to Know About Uranium!

Uran Report 2018 Everything you need to know about uranium!

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Want to know our Top 3 Uranium Picks for 2017? www.palisade-research.com

Dear Readers,

On the following pages, we present to interesting companies from this industry sector with numbers and facts. The com- uranium report. Uranium is a “hot” topic bined market cap of all uranium compa- Jochen Staiger is founder and and many people don´t like to say the nies is only around US$9 billion worldwi- CEO of Swiss Resource Capital least and some hate it. But without urani- de, a crazy small market with a fascinating AG, located in Herisau, um there would be a major problem with outlook. Climate change and clean air Switzerland. As chief-editor and the base load energy supply in the world require nuclear energy. “There’s really founder of the ﬁrst two resource and e-mobility would be still a dream of only one technology that we know of that IP-TV-channels Commodity-TV the future. Swiss Resource Capital AG supplies carbon-free power at the scale and its German counterpart Want to know our has made it its business to topically and modern civilization requires, and that is Rohstoff-TV, he reports about comprehensively inform metals and nuclear power” – Ken Caldeira of Stan- companies, experts, fund commodity investors, interested parties ford University’s Department of Global managers and various themes Top 3 Uranium Picks and the individual who wants to become Ecology. around the international mining an investor in various commodities and business and the correspondent mining companies. On our website www. Commodities are the base of our econo- metals. for 2017? - mic cohabitation. Without commodities panies and information as well as articles there are no products, no technical inno- related to commodities. Our series of vations and no real economic life. We special reports started with lithium and need a reliable and constant base load silver. Now we move on to uranium as it energy supply in our highly industrialized is the energy metal of the future whether world. With our special reports we would we like it or not. Wind and solar energy like to give you the necessary insights www.palisade-research.com and inform you comprehensively. - te energy balance including the amount In addition, our two Commodity IP-TV of energy used to build it. This report channels www.Commodity-TV.net & shall give the reader an idea about the are always availab- real facts of the uranium industry and the le to you free of charge. For the go we energy supply from nuclear power world- recommend our new Commodity-TV wide. China especially needs nuclear po- App to download on iPhone or Android, wer plants to solve its air pollution prob- which also provides real-time charts, lems because most of the electrical share prices and the latest videos. My Tim Roedel is chief-editorial- and energy is generated by coal power team and I hope you will enjoy reading chief-communications-manager plants. Today around 450 nuclear power the special report on uranium and hope at SRC AG. He has been active in plants are in operation in more than 30 that we can provide you with new infor- the commodity sector since 2007 countries globally and 70 are under con- mation, impressions and ideas. Only the and held several editor- and struction. Over 165 nuclear power plants one who gets broadly informed and ta- chief-editor-positions, e.g. at the are planned or ordered by 2040 and if we kes matters relating to investments in his publications Rohstoff-Spiegel, all want to drive with emission free own hand will be amongst the winners Rohstoff-Woche, Rohstoffraketen, e-cars, bikes or motor scooters we need and preserve his wealth during these dif- Wahrer Wohlstand and First those nuclear power plants urgently as Mover. He owns an enormous we cannot reliably generate the neces- commodity expertise and a sary extra power with wind and solar alo- wide-spread network within the ne. Yours Jochen Staiger whole resource sector.

We also interviewed the experts Scott Melbye and Dr. Christian Schärer about the uranium markets and the future prospects. Of course, we present you some

www.resource-capital.ch | [email protected] Satisfying the Hunger for Energy and improving the Carbon Footprint at the same time? – Nuclear Energy can combine both!

The global energy demand has multi- What is Uranium? plied since the end of the 1980s, especially due to the emerging countries and in particular the BRIC countries Brazil, One of only two elements Russia, India and China. About 11.5% of that can sustain nuclear ﬁssion the total energy demand is met by nucle- chain reactions ar energy. Fossil fuels like coal and oil are still burned for energy production. Now for some information about the ele- - ment uranium itself. Uranium was named ars ago is the increasing demand for re- after the planet Uranus and is a chemical duction of CO emissions and the more element with the element symbol U and 2 noticeable phenomenon of “global war- the atomic number 92. Uranium is a me- ming”. In particular, the energy consu- tal whose isotopes are radioactive. Natu- ming industrial nations and the emerging rally occurring uranium in minerals is - comprised of the isotope 238U (99.3%) ciency and improve their carbon foot- and 235U (0.7%). print in the coming years. This cannot be achieved by burning coal and oil. The alternatives are renewable energies – thermic neutrons and besides the very which need tremendous time and cost rare plutonium isotope 239Pu, the only expenditures - or nuclear energy which known natural occurring nuclide that is can provide lot of energy CO neutral. - 2 This possibility of the fast and almost tions. Therefore, it is used as a primary clean energy generation has long been energy source in nuclear power plants recognized by some countries who are and nuclear weapons. increasing the construction of new nuclear power plants.

Supply Gap inevitable in the future

Today only 90% of the global uranium mines. The number of nuclear reactors will double in the coming 10 to 20 years. Source: www.periodictable.com The previous main supplier of uranium – Russia’s nuclear weapons arsenal – Occurrence doesn’t exist anymore. Where will the needed uranium come from? The exis- Uranium does not occur pure in nature ting mines can be expanded and new but always in form of oxides in minerals. mines opened but not at the current ura- There are some 230 uranium minerals that nium spot price of around US$ 20 per could locally be of economic importance. pound. An enormous supply gap seems There is a large range of uranium depo- to be inevitable at least at the current sits from magmatic hydrothermal to sedi- market price. That is the situation inves- mentary types. tors should be aware of – a sharply rising The highest uranium grades are encoun- uranium spot price and an inevitable tered in unconformity-type deposits with connected second uranium boom. average uranium grades of 0.3 to 20%. These deposits are mined by the two largest uranium producers. The largest

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz single uranium resource in the world is The Cold War makes Uranium Olympic Dam with a proven uranium acceptable content of more than 2 million tonnes at an average uranium grade of 0.03%. The The newly created uranium sector had its biggest boost after the Second World world is in Jachymov (Czech Republic) War due to the beginning of the Cold war. produced from hydrothermal veins. The victorious powers of the Second According to the International Atomic Wold War, which rivaled for global domi- Energy Agency (IAEA) the largest urani- nance, now needed the highest possible um reserves are in the USA, Niger, Aus- number of nuclear weapons and also tralia, Kazakhstan, Namibia, South Afri- vast quantities of uranium. This resulted ca, Canada, Brazil, Russia, Ukraine and in a systematic exploration for useable Uzbekistan. uranium occurrences in all states of the USA. The previous Atomic Energy Com- mission (AEC) had the exclusive right to buy all of the produced uranium in the USA for over three decades. The greed Short outline of the for more and more nuclear armament led to extreme high prices per pound of ura- history of the commer- nium for those days. As a result, the se- cial uranium industry arch for uranium was conducted in all U.S. states in the 1950s and 1960s. The USA had a strong uranium industry at the end of the 1960s that was a global leader From the beginnings to the ﬁrst from mining to enrichment. atomic bomb The Soviet Union initially expanded existing uranium mines in East Germany and Czechoslovakia. This was necessary as a by-product in Saxon and English mi- because Russia had no knowledge of nes at the beginning of the 19th century. uranium occurrences in its own country Until the 1930s there was little use for the until the end of the Second World War. In radioactive raw material. It was used for the 1950s and 1960s Russia began with coloring glass and ceramics as well as in an uranium exploration which led to large photography. The shadowy existence of discoveries in Siberia and Kazakhstan. the uranium changed suddenly as Hitler came into power in Germany, and an unprecedented spiral of armament and Rise and temporary slump of testing of new weapons technologies civilian use of uranium began. Above all the “Third Reich” acce- lerated the expedited mining of uranium. Already in 1953 the former U.S. president These mining activities were exclusively Eisenhower conceived a program for the in the region of Jachymov (the German civilian use of uranium. “Atoms for Pea- name is Sankt Joachimstal) in today’s - Czech Republic. The German supply submarine U-234, that was seized by and resulted in the demand for additional two U.S. destroyers two days after the amounts of uranium. The civilian nuclear end of the war and towed to the USA had power had its beginning and was quickly uranium ore from Jachymov on board. advanced by other nations. According to leading U.S. scientists, After a 25-year long uranium boom con- parts of this uranium ore were used to cerns have been increasingly voiced build the Hiroshima atomic bomb. warning of the appearing lack of security

www.resource-capital.ch | [email protected] Historical development of the uranium prices, the uranium production and important events. (Source: Energy Fuels)

in many nuclear power plants. After the developed via shafts, drifts, ramps or almost Maximum Credible Accident in spiral declines. Ingressing groundwater the American nuclear power plant Three and the ventilation of the mine often pose Mile Island and the Super Maximum Cre- problems. The exact production method dible Accident in Chernobyl, the general is chosen according to the characteri- public turned its back more and more to stics of the deposit. The form of the ore- nuclear power. In addition, the collapse body and the distribution of the uranium of the Soviet Union resulted in a building in it are especially pivotal. An orebody stop of nuclear weapons and therefore no further uranium was needed. ground methods where less waste mate- Many nations decided not to install new rial is produced as by open pit methods. nuclear reactors and some countries swit- Ore bodies near the surface and very large ore bodies are primarily mined by all uranium mines were closed because open pit mining methods. This enables the market price for uranium had fallen to the use of low cost large equipment. Mo- US$ 5 per pound in the meantime. The dern open pit mines can have a depth uranium for the operation of the still exis- from a few to over 1,000 m and a diame- ting reactors came from old stockpiles or ter of several kilometers. Open pit mines Russia’s disarmament program. often produce large amounts of waste material. Like in underground mines, large amounts of water have to be drained Uranium Production from the open pit however the ventilation is less problematic. Basically, there are two uranium production methods: the conventional production and the production via in-situ leaching ISR Mining or rather in-situ recovery (ISR). The exact mining method depends on the proper- The ISR method uses injection wells to ties of the ore body, (like depth, shape, pump water and small amounts of CO 2 ore content, tectonic) and the type of and oxygen into the sandstone horizons country rock as well as other factors. to leach out the uranium. From recovery wells, the pregnant solution is pumped to the surface for processing. The whole Conventional Production method takes place completely underground. The advantages of this method The majority of the uranium is mined in are obvious: there are no large earth mo- underground mines. The deposits are vements like in open pit mines, no waste

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz rock stockpiles or tailings ponds for hea- vy metals and cyanide. At the surface only the wells are visible and the area around the wells can be used without constraints for farming. With the ISR method low grade deposits can be economically mined, the capital costs for the - duced. The whole method can be implemented with a minimum of manpower In-situ recovery process which reduces drastically the operating (Source: U.S. Nuclear Regulatory Commission) costs. According to a study of the World Nuclear Association, 25% of the produced uranium outside of Kazakhstan actors and 372 reactors are in the plan- comes from ISR mines. ning phase. After a 20 year stop a renais- sance of the uranium sector is pending – especially in China. Overview of currently operating reactors per country (Source: www.iaea.org/PRIS) The current status of the Uranium Market

But how does today’s uranium market look like? It is certain that the lack of investments into the procurement structure of the past 40 years – in the infrastructure of mines and processing plants – will very likely prove to be a windfall for the uranium investors in the future! Nevertheless, despite opposition against nuclear energy since the catastrophe in Chernobyl and even more after the events in the nuclear plants in Fukushi- ma (Japan) the number of plants worldwide is at a record high. Only 30 countries currently operate (as of September 1st, 2017) 448 nuclear reactors with a total electrical net output of around 392 gigawatts.

Most of these reactors (99) are located in the USA. But this is only half the truth because emerging countries like China and India need more and more energy and have been focusing on a massive expansion of their nuclear power capacities for some time. It is of no surprise that currently 57 additional nuclear reactors are under construction. The planning was completed for an additional 170 re-

www.resource-capital.ch | [email protected] Demand situation In the fall of 2015 the state-owned power plant manufacturer Power Constructi- on Corporation of China (Beijing) predic- China is only at the beginning ted the rise of its country among the of the nuclear age biggest user of nuclear energy worldwide the Chinese government is planning While many self-appointed experts have the construction of more than 80 nuclear predicted the end of the nuclear age, it is reactors in the coming 15 years and only in the development phase in the more than 230 new nuclear reactors until most populous country in the world. 2050. According to information from China is operating 38 reactors where most of the electricity is generated by the energy sector whose approval by the coal power plants. Since the beginning National People’s Congress has been of 2015, 15 new nuclear reactors were planned in March 2016 provides for a put into service. The expansion of the faster expansion of the nuclear capacity: nuclear energy sector in China is enor- to date the capacity was to increase to mous and occurs with breathtaking 58 gigawatts during the coming 5 years, speed! Over two thirds of the Chinese but now over 90 gigawatts are under di- energy consumption is still met by coal scussion. In the year 2005 the planning power plants. Although China is mining was 40 gigawatts until 2020. Until 2030 its own coal deposits on a large scale, it 110 reactors should be in operation. In is, besides India, one of the biggest coal the year 2016 alone China started the importers of the world. 30% of the glo- construction of 6 new reactors. In total bally produced coal is imported by these 19 nuclear reactors are in the constructi- two countries. A certain dependency on phase. According to concepts for the from these coal imports is obvious. This energy sector initial US$ 75 billion are is the point China’s leadership wants to budgeted for the nuclear expansion. In a avoid. The obligation to implement cli- second step China’s nuclear power ge- Overview of reactors currently under mate friendly and clean possibilities for neration should be expanded to 120 – construction per country energy generation is only secondary 160 gigawatts by 2030! (Source: www.iaea.org/PRIS) matter. While in Germany the elimination of electricity generation from nuclear energy was decided after the events in Fu- kushima, China has decided the opposi- te and will do everything possible to light of the rising energy demand – due to the increasing prosperity – and a cata- strophic carbon footprint China’s approach seems only logical.

India expands civil nuclear program massively

Besides China, India is the second of the so called “BRIC-Countries” which is pursuing a similar course. The second most populous country in the world plans to expand its nuclear energy capacity by 70 gigawatts. In contrast, India’s

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz current total electrical net output is only Currently Brazil is operating only one around 6.2 gigawatts. nuclear power plant with two reactors. A But India has slept through the entry into third reactor is under construction and is the nuclear energy and is now despera- expected to be connected to the power tely trying to search for mineable depo- grid in 2018. The construction of 4 addi- sits but has to expand its overloaded tional reactors is expected until 2030. power grid at the same time. A tenfold increase of the nuclear energy capacities not only seems to be reasonable but Rising global expansion of also very necessary. nuclear energy deposits. A tenfold expansion of their Besides the 30 nations with operating own nuclear energy capacities would nuclear reactors, 17 additional countries mean an increase of the total global nuc- are planning to install nuclear power lear electricity generation by 10%. plants. Among those countries are But where will the additionally needed Egypt, the United Arab Emirates (four re- uranium come from? Currently, only a actors under construction), Jordan, Tur- few of the 22 Indian nuclear reactors key and Indonesia. are operating with full power. While Ja- pan, China, Russia and South Korea could secure uranium resources world- The USA is close to an energy wide, India missed out completely. collapse - take agreements with companies from The USA has a special status. With 99 the USA, Canada, Namibia, Kazakhs- reactors, they have by far the biggest tan, Russia, Great Britain und South Korea. Nevertheless, the USA is threatened by Currently 6 nuclear reactors are under a collapse of the energy supply. The USA construction in India and 20 additional is still the country with the highest elec- will follow until 2030. tricity consumption per capita. And the hunger for energy of the Americans is increasing. In addition, the USA is facing -reduc- Russia and Brazil with increa- 2 sing nuclear capacity tions which were agreed to in Kyoto and Paris. Because many of the coal power The two remaining BRIC-Countries, plants were built in the 1950s and 1960s, Russia and Brazil have also announced - a massive expansion of their nuclear po- nomically. They have to be shut down wer plants. Currently Russia operates 35 sooner rather than later. The electricity nuclear reactors with around 27 giga- consumption is rising continuously. The watts. 7 reactors are in the construction USA has no choice but to increase the phase and 2 were connected to the po- number of its nuclear reactors during the wer grid in 2016. Furthermore, Russia coming years. Of course, photovoltaic plans the construction of an additional plants, wind farms, hydroelectric power 26 nuclear power plants which should plants or geothermic energy provide cli- increase the percentage of the nuclear mate friendly energy but these energy energy in the Russian energy mix from - currently 16% to 19%. In a second step on for the pressing energy problems. Russia wants to increase this quota to They are very expensive and their per- 25%. By the year 2030 Russia wants to formance is dependent on the time of build 26 reactors. day and weather. Nuclear energy is the-

www.resource-capital.ch | [email protected] Overview of currently operating reactors (blue), currently shutdown reactors (grey), reactors under construction (green) and permanently shutdown reactors (red). China, India, South Korea, Russia, the United Arab Emirates and the USA are currently working increased at the expansion of their reactor ﬂeet. (Source: www.iaea.org/PRIS)

refore the only climate friendly energy Long-term supply contracts generating possibility. In light of the expire soon amount of additional electricity demand during the coming two to three decades The previous cycle of contract conclusi- regenerative energies can only be an ad- ons which was dominated by the urani- dition to the total energy mix. um price peaks of the years 2007 and Therefore, a law for expansion and fun- 2010 was the reason that the plant ope- ding of the energy generation by nuclear rators signed contracts at higher price energy was created within the “Clean levels and very long durations of 8 to 10 Energy Act of 2009” a program to provi- years. On the one hand, these old con- de carbon free energy. Both U.S. gover- tracts are ending and on the other hand ning parties worked on a US$ 18.5 billi- the plant operators didn’t look for a on plan for doubling of the nuclear power replacement of such deliveries. The for- capacities until 2030. At the beginning of ward contracts of the plant operators are 2010 President Obama announced that declining and therefore the required the U.S. government will provide in the quantities for which there are no contrac- 2011 federal budget additional funds of tual obligations are increasing and have US$ 36 billion of government guaran- to be contractually secured in the future. tees for the construction of a new gene- As expected the unmet demand will be

ration of nuclear power plants. This just less than one billion pounds of U3O8 would be a tripling of the originally in the coming 10 years. At the same time, planned budget. over 70% of the expected reactor de- During the past years an application for mands are not contractually secured un- lifetime extension of 60 years total ope- til 2025. For a little traded commodity like rating time was made for over 60 U.S. uranium this return to more “normal” nuclear reactors. In addition, there are long term contracts could put tremen- 40 applications for the construction of dous pressure on the long-term prices as new nuclear power plants that should be well as on the spot prices. The internati- connected to the power grid by 2025. onal plant operators are showing more Until now only 4 plants are under cons- and more buying signals which are en- truction and additional 16 are in a con- couraging. crete planning phase.

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz Conclusion duced in total just 26.835 tons uranium in 2016. In 2009, they produced 28.000 Fact is that currently 448 reactors are in tons uranium. Australia has problems operation and an additional 300 reactors with BHP Billiton’s Olympic Dam Mine, will be added until 2030. 57 plants are already under construction and 170 ad- in this country. In Canada, the producti- ditional plants are in the concrete plan- on start in Cameco’s MacArthur River ning phase. Even if half of the old reac- Mine had to be postponed many times tors should be shut down until then 600 due to repeated groundwater ingresses. to 700 reactors would be in operation in In Niger planned mine openings also had 2030. to be postponed. Furthermore, 90% of the long-term delivery contracts between the uranium producers and the energy generating com- The uranium production in the panies are expiring by the end of 2019 USA has hit rock bottom which could get the established nuclear energy nations like the USA into trouble The situation in the USA is even worse. especially. Although the Obama government has approved a US$ 54 billion program for the funding of the nuclear energy industry, it is not clear from where the neces- The Supply Situation sary uranium will be derived. The uranium industry in the USA is only a shadow of the past. During the past 40 years The established producers are there have been no investments in de- running out of air velopment of new deposits and almost 95% of the needed uranium was deri- The established uranium producing ved from the disarmament programs. nations Australia, Canada, Russia and The US- American nuclear reactors Niger have problems to expand their consume 18.000 tons uranium per year. production further. All four countries pro- An expansion of the capacities would

Overview, age of currently operating reactors. Many will be (have to be) replaced by more powerful ones. (Source: www.iaea.org/PRIS)

www.resource-capital.ch | [email protected] Annual uranium production 2016 (conversion factor tonnes uranium (tU) to tonnes U O is 1:1.18) 3 8 (Source: http://www.wise-uranium.org/)

also be an increase of the needed rebuilding or the expansion of their ura- amount of uranium. The World Nuclear nium production but one region has Association (WNA) estimates that climbed to the top of the uranium pro- 40,000 tons uranium per year will be duction: Central Asia. Kazakhstan espe- needed in the USA alone by 2025. Even cially could multiply its uranium produc- at the peak of the US-American uranium tion during the past 10 years. The production during the 1960s and 1970s, uranium production of the previous So- such an amount could not have been viet Republic increased from 2000 to produced by the mines in the USA. The 2016 from 1,870 to over 24,500 tons. US-American uranium production rea- Kazakhstan surpassed the previous lea- ched its previous peak in 1980. During der Canada in 2009 and is responsible that year 29,000 tons uranium were pro- for close to 40% of the global uranium duced. After the end of the Cold War production. dis armed nuclear weapons became the most important source for the US-Ame- rican uranium demand. This resulted in Massive production cuts were a decline of the American uranium pro- already initiated duction from 23,400 to currently 1,125 tons uranium per year. As a direct result, Kazakhstan is part of the nations which the majority of the infrastructure and the can mine uranium at the lowest costs. permitted production facilities were clo- The country is however not willing to sed or completely dismantled. Currently give away its uranium resources to ab- there are only a few mines in Texas, Ari- solute low prices anymore. At the begin- zona and Wyoming. ning of 2017 the state-owned group Ka- zatomprom announced that the uranium production will be cut by at least 10% in Kazakhstan – the new uranium 2017. This would take around 2,500 superpower But Kazatomprom is not the only urani- Almost all established uranium pro- um producer which opts for production cuts in light of the ridiculous uranium

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz price. The uranium–major Cameco also apons have been disarmed. The remai- announced production cuts. These are ning 15% will be reduced by 30% mea-

3O8 for ning that from the original amount only the Rabbit Lake Mine and 2 million 5% will be disarmed. pounds of U3O8 for the MacArthur River According to this new contract only 5% Mine which rank among the 10 largest of the original amount will be disarmed uranium mines globally. From the Hu- during the coming 10 years, while 85% sab Mine in Niger 5 million pounds of of the original amount was disarmed in

U3O8 per year are missing and from the the past 20 years. This material has Langer Heinrich Mine in Namibia 1.5 been already consumed in form of fuel million pounds of U3O8. elements. The future disarmament uranium is minimal compared to the amount of the past 20 years and will have no big Supply gap unavoidable - condary supply for the uranium market In spite of the massive production ex- will fall from currently 9% to below 5% pansion in Kazakhstan during the past by 2030. Therefore, the whole amount years a large supply gap will form in the of Russia’s secondary supply will re- uranium sector in the foreseeable future. main in Russia because Russia has not There is already such a gap. Until now this gap could be closed with material nuclear weapons at the free market sin- from nuclear waste. But the nuclear in- ce 2013. dustry consumes about 10% more uranium than is currently produced. The 449 nuclear reactors worldwide are Summary consuming around 68,000 tons uranium per year, only approximately 62,000 The supply side in the uranium sector is tons are covered by the global uranium going through a transition phase. The production. The International Atomic secondary supply from Russia’s disar- Energy Agency (IAEA) estimates that the med nuclear weapons becomes less global uranium demand will rise to and less important. While in 2006 37% 140.000 tons uranium by 2030 due to of the demand was covered by disar- the construction of new nuclear power med nuclear weapons, currently it is plants. The percentage of primary sup- only 9%. Concurrently the number of ply has to increase because Russia has nuclear reactors will increase rapidly. reached the end of its nuclear disarma- This rapidly increase in demand will not ment. be completely covered by the established uranium producers – at least not at the current uranium spot price of US$

New disarmament contracts 20 per pound U3O8. From where will the without effect to the uranium needed uranium in the future come market from? An increased production can only be The currently existing disarmament con- achieved with a higher uranium price tract between the USA and Russia, New and associated large investments in the START, will not change that. It provides expansion of existing and the construc- for a further reduction of the nuclear we- tion of new mines. The basic problem is apons arsenal by 30%. These 30% still the relatively low uranium spot price, don’t include the total weapons arsenal which doesn’t allow producers to mine at the end of the Cold War but only from - 2011. Since 1990 85% of all nuclear we- ve deposits.

www.resource-capital.ch | [email protected] Experts estimate that there are less than 650,000 tons of economically recoverable uranium at a market price of US$ 40 per pound uranium.

At an annual consumption of around 68,000 tons uranium, these resources would not even last for 10 years assu- ming a constant market price of US$ 40 as well as a constant demand. This will rise inevitably.

If the market price for uranium would increase and would justify production costs of US$ 80 per pound uranium the triple amount of 2.12 million tons uranium could be mined economically.

At a uranium price of US$ 130 per pound approximately 5.7 million tons uranium Uranium resources recoverable at a uranium could be mined economically. At the cur- price of under US$ 40. rent consumption, the known reserves (Source: Wise Uranium Project) would last for 83 years.

Conclusion

Doubling of demand is not faced by any expansion of the supply!

The uranium spot price is as far from the US$ 130 per pound uranium as the current demand will be from future demand. According to a conservative estimate of the International Atomic Energy Agency (IAEA) this will double during the coming years. The aforementioned range can be cut in half in 10 to 15 years. It shows that the still – apparently cheap way of generating electricity can only be used if the market price for the starting product uranium increases again. Sup- Uranium resources recoverable at a uranium ply and demand determine the market price of US$ 80 price for uranium too. (Source: Wise Uranium Project) If the market price doesn’t allow an economical production, it will have to increase. In the case of uranium, the demand will increase sharply due to the

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz construction of several hundred new nuclear reactors so that the market price - tor who has recognized that trend in time.

High demand is uncovered to date

As expected the unmet demand will be just less than one billion pounds of U3O8 in the coming 10 years. At the same time, over 70% of the expected reactor needs are not contractually secured until 2025. For a little traded commodity like uranium this return to more “normal” long term contracts could put tremendous pressure on the long-term prices as well as on the spot prices. The international plant operators are showing Uranium resources recoverable at a uranium buying signals more and more. price of US$ 130. (Source: Wise Uranium Project)

The best uranium stocks pro- mise multiplication potential!

We have taken the current situation of - nium spot price plus the expected future summary of promising uranium stocks. Our focus is especially on development companies with very promising projects appreciation due to a higher uranium spot price, in this connection also a high takeover chance. At the end of 2015 the merger (in fact a takeover) of Fission Uranium with (by) Denison Mines failed due to, among other things, the vote of Fission’s shareholders. This example shows that the investor can act on the assumption that there will be other takeover or merger possibilities in the future. That is because the uranium sector is currently undervalued and has to be

www.resource-capital.ch | [email protected] Interview with Dr. Christian Schärer – Manager of the Uranium Resources Fund and partner of Incrementum AG

Dr. Schärer you are manager of mand. China and India especially consis- the Uranium Resources Fund (ISIN tently advance the expansion of their LI0122468528) of LLB Fundservices AG - in Liechtenstein. What is your strategy kushima and the nuclear phase-out in and what precisely represents the German-speaking regions this results in Fund? total to a capacity expansion of the nuclear energy production from 390 gig The Fund invests heavily in companies watts (2016) to 580 gig watts in 2030. which are involved in the development The predicted demand growth of around and mining of uranium deposits. The 3% per year is to be seen against this Dr. Christian Schärer is a partner in Fund predominantly has shares of mi- background. Incrementum AG and responsible for ning companies in its portfolio. The in- special mandates. from the emerging supply gap at the ura- Since the reactor accident in Fukushi- During the course of his study he was nium market. This supply gap is the re- ma the uranium price is permanently looking for strategic success factors sult of a scissor movement of supply and under pressure. What are the main rea- of successful business models. A demand at the uranium market. While sons for this price collapse and how do topic that fascinates him until today supply has been stagnant for years due you assess the current market situati- and inspires him when selecting to falling uranium prices, the demand is on? promising investment opportunities. continuously growing with high visibility of 3% per year. Until now the supply de- At the uranium spot market, the price Dr. Schärer studied business dropped during the past 6 years from administration at the Universität well as secondary sources. But this will US$ 75 per pound to currently US$ 20. A Zürich and he received his PhD movement that puts tremendous pressu- extra-occupational at the re on the producers. Three reasons seem Bankeninstitut Zürich for an analytical to be primarily responsible: First, the sale survey of the investment strategy of Nuclear energy, especially in the Ger- of uranium from inventory of the Japane- Swiss pension funds in the real estate man-speaking region, is controversial se nuclear power plant operators that sector. Since 1991 he has gained and the politic has initiated the exit out were disconnected from the power grid comprehensive ﬁnancial market of nuclear energy. Nevertheless, you after the reactor catastrophe in Fukushi- knowledge in several roles as see an increase in demand by 3% per ma. Second, the sale by uranium pro- investment adviser, broker and year? ducers with liquidity shortages and pro- portfolio manager. ducers with uranium as a by-product - which then sell the uranium with little Since summer 2004 Dr. Schärer’s tuation in Germany or in Switzerland on price sensitivity. Third, the restraint of the focus as an entrepreneur, adviser and one side and the global perspectives on buyers, which are not stressed by falling portfolio manager is on several the other side. Contrary to Germany, the prices despite low inventories. investment themes with material emerging economies in Eastern Europe asset character. He brings his or Asia count on the expansion of nucle- The uranium spot price has marked a practice-oriented ﬁnancial market ar energy. At the end of 2016, there were multi-year low with US$ 18 this past No- knowledge as board member to 448 reactors online, a historically record vember and has risen moderately since. companies. number! This price increase was stimulated by the The construction of new nuclear power announcement of a production cut of plants should reduce CO emissions and 10% by the largest uranium producer in 2 air pollution as well as the dependence the world Kazatomprom. In this context, on imports of fossil fuels. In addition, precautionary purchases resulted in sig- nuclear energy provides the baseload to the power grids which are constantly un- uranium producers. This rally has already der pressure due to the fast-growing de-

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz the securities are traded again at the bre- With their behavior (tightening of the sup- akout level of the bottom formation. With ply) the producers are preparing the a view at the emerging supply gap an in- ground for a medium-term price turna- teresting entry opportunity for the long- round at the uranium market when the term oriented investor is opening again. stagnant supply cannot satisfy the stea- At the beginning of this year there was dy demand from China and India against some short-term hustle and bustle due this background. The uranium prices will to the announcement that the largest have to rise in direction US$ 70 perma- uranium producer in the world, Kazatom- nently to stimulate the necessary expan- prom, is planning to reduce production by 10%. Precautionary purchases resul- Returning to your question: we expect the share prices of uranium producers. that a change for the better could materi- This rally was short lived due to the lack alize by 2018. During that timeframe an of follow-through buying at the physical inventory cycle comes to an end for many uranium market and the shares of the European and American nuclear power uranium producer were sold again. From plant operators. They will have to come a technical perspective the supposed to the market to rebuild their inventories. breakout from the bottom formation was This impulse could become the catalyst a false alarm. Or positively expressed: of a sustainable turnaround. Normally the with view at the looming supply gap the market will anticipate this turnaround wi- long term oriented investor is provided with another interesting entry opportunity.

Is such a fund, focused on a single com- How do the uranium producers come to modity, not too specialized and therefo- terms with these low uranium prices re too risky? and when do you expect a rebound? An investment in the fund is a focused The price decline at the uranium market bet on the emerging supply gap at the is a tremendous challenge for the pro- uranium market. An attractive return po- - tential is opening up in front of an inves- kable in this environment. The costs are tor with a medium-term investment hori- While supply has been stagnant for years consistently reduced accordingly. Pro- zon which could also be very risky. due to falling uranium prices, the demand is duction plans are adjusted to the low Therefore, the fund is suitable as comple- continuously growing. (Source: WNA, UX Consulting) The existing capital is allocated with much discipline. Development and expansion projects are rescaled or cancelled accordingly. It is noteworthy that some producers have started to buy uranium at the spot market to meet the long-term commit- ments entered into. The current spot price is obviously below their production costs! These actions have the advantage that the yet not produced uranium stays in the ground and can be sold for higher prices at the market.

www.resource-capital.ch | [email protected] portfolio but not as a basic investment. uncertainty about the future perspectives The Uranium Resources Fund has bet- of the civil use of nuclear energy is res- ween 25 and 30 positions in the portfolio. ponsible for that. Against this background we became very humble although the background of the current state of the uranium market. of the uranium market. Our primary goal is to remain a player when the uranium market rebounds. What do you recommend to investors who are interested in an investment in Our portfolio is therefore based on three the uranium sector? pillars. The core of the portfolio is comprised of 2 solid basic investments. First The outlined supply gap and the related an investment in Uranium Participation potential of rising uranium prices are only (U CN), a Canadian holding company foreseeable at the moment. The exact which invests in physical uranium. If we timing of the expected turnaround at the are right the supply gap at the uranium uranium market is uncertain despite the market will be closed by the increasing good perspectives. If, against expecta- uranium price. Uranium Participation will tions, the current phase of lethargy continues for a longer time the air will become thin very fast for some uranium position in the Canadian industry leader producers. Their balance sheets are Cameco (CCO CN). The company has a emaciated after the persistent price col- broad-based portfolio of World Class As- lapse and the cost reduction potentials - are mostly exhausted. Even for a de- vidend despite the challenging environ- veloper of new uranium projects the en- ment. vironment is challenging because their projects become economically viable When the prices begin to climb only the and thereby feasible with increasing ura- uranium production on the market will project stages. Who bets everything on deliver. To be on the safe side we invest one card at that constellation takes a big in companies with low production costs risk – possibly too big. The stake within a and that have a solid order book. It is good to know in this context that only a reasonable. In addition, we suggest a relatively small amount of the annual ura- timely scaled build-up of the positions. nium production is traded at the spot market. The main portion of the uranium production is processed within long-term What are your selection criteria for the delivery contracts at a predetermined selection of your fund holdings? (forward) price. We invest in companies - their production in the past at a predeter- ce based on the described positive me- mined price, which is considerably hig- dium-term prospects three weeks before her than the current spot prices. This sof- the reactor accident in Fukushima. These tens the current psychological strain. An events have pushed back the positive example for a company in this category starting position by 5 to 6 years. The de- is Ur-Energy (URE CN). commissioning of the Japanese reactor - Third, we invest in explorers and develo- ting reactors worldwide and the related pers that are advancing development

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz and mining projects on a world class le- tractive from a strategic point of view. In vel. Of special interest are those that can addition, I like that, by global compari- start their production in the timeframe of son, low investment volume of less than the expected supply gap. They will bene- EUR 100 million is necessary to bring the - mine to production. This is the result of dition, these assets should have the the excellent infrastructure (water, elec- necessary size to qualify as take-over tricity, and workforce) and the attractive targets. We assume that after the price geographic location. Due to the fact that turnaround at the uranium market a con- the uranium deposit is near the surface solidation wave will roll through and mi- low cost open pit mining is possible. Low ning companies from outside the sector investment volume, low production costs would like to position themselves in the and an annual production volume of uranium business as well. This would about 4.4 million pounds make the pro- make sense due to the low cyclical sen- ject from an economic perspective very sitivity and the relative high visibility of attractive. the uranium production. In addition, the state fund from Oman recently took a long term holding in “Ber- Currently which are your biggest indivi- keley Energia” with the investment of dual positions and why? around US$120 million within a conver- tible bond. Thereby the construction of Besides the mentioned standard assets - Uranium Participation and Cameco assume the conversion of the bond into sets like Uranium Energy (UEC US), Ber- shares of the company later Oman will keley Energia (BKY LN), NexGen Energy be, with a holding around 37%, a strate- (NXE CN), Energy Fuels (EFR CN), Fissi- gic major shareholder. A clear commit- on Uranium (FCU CN) or Denison Mines ment to the long term intact perspectives of the uranium market! aforementioned acquisition strategy.

In addition, do you keep an eye on smaller uranium companies which could become interesting during the coming months?

some attractive investment possibilities. If I have to name one of my favorites it would be Berkeley Energia after the company has started the construction of the Salamanca uranium mine in Spain and will commence production in 2019, latest. At that time many nuclear reactor operators in the EU might start to renew their long-term delivery contracts. Ber- keley Energia is in an excellent position because the Salamanca mine will be the EU-region. This makes the project at-

www.resource-capital.ch | [email protected] Interview with Scott Melbye Executive Vice President of Uranium Energy, Commercial V.P. of Uranium Participation Corp. and Advisor to the CEO of Kazatomprom

Mr. Melbye, over the course of your career you have held positions as Exe- hours back into town. Experiences like cutive Vice President, Marketing of Ura- this helped me develop a real passion nium One, President of Cameco Inc., for the resource business. Years later, I Chair of the Board of Governors of the graduated from Arizona State University World Nuclear Fuel Market and Presi- dent of the Uranium Producers of Ame- role with uranium broker, Nukem Inc. in rica. Currently, you are serving as Exe- New York. cutive Vice President of Uranium Energy, Commercial V.P. of Uranium Participation Corp., and as the Advisor Since mid-2015 we saw signiﬁcant vo- Scott Melbye is a 33-year veteran of to the CEO of Kazatomprom. In other latility in the uranium spot-price. It went the nuclear energy industry having words: You are THE uranium expert! from 40 to 18 and back to 26 US$. So, held leadership positions in major What led to your uranium-career? have we already seen the bottom? uranium mining companies as well as industry-wide organizations. Through Thank you, that is very nice of you to The short answer is yes, even though we to June 2014, Melbye was Executive say. I feel fortunate to have spent my en- will have some starts and stops before Vice President, Marketing, for Uranium tire career in the uranium and nuclear we fully gain traction (as has been the One, responsible for global uranium energy business. Our industry is quite case recently with the price back down sales activities. Prior to this, Melbye unique in that it is a fairly small and inter- around the US$20 level). The industry spent 22 years with the Cameco national community of quality, smart, has been in a six-year bear market that Group of companies, both in the and devoted people who are all pulling began after Fukushima in March 2011. Saskatoon head ofﬁce and with their together to supply 11 percent of global This has been a long and challenging U.S. subsidiaries. He had last served electricity supplies with highly reliable, downturn, as it would be for any commo- as President of Cameco Inc., the clean-air, base-load energy. dity. While this period has challenged the subsidiary responsible for marketing My introduction to the uranium business patience of uranium investors, the depth and trading activities with annual was at a very young age. Being a se- and breadth of this downturn has sowed sales exceeding 30 million pounds cond-generation uranium miner, I grew the seeds of an even more robust and

U3O8. Melbye was formerly the Chair up around the business. My father, - of the Board of Governors of the World Chuck Melbye, graduated from the Co- eing years of low prices beginning to Nuclear Fuel Market and President of lorado School of Mines in 1950. He ex- take its toll on the supply side of the mar- the Uranium Producers of America. He plored and developed uranium deposits ket. Production cutbacks are becoming also currently serves as Executive throughout the Colorado Plateau, Wyo- the norm, as higher priced legacy term Vice President of Uranium Energy and ming and even Paraguay, with joint ven- VP-Commercial for Uranium ture partners such as Southern Califor- in the low U$20 per pound U3O8 range Participation Corporation and Advisor nia Edison, Korea Electric Power and are simply unsustainable over the longer to the CEO of Kazatomprom, the Taiwan Power Company. I recall an early term. All-in production costs of the lo- world’s largest uranium producer in memory at the age of 12 travelling to west cost mines are higher than the cur- Kazakhstan. He also sits on the Moab, Utah with my father to meet a be- rent depressed price level. Further, the advisory board of the Colorado School arded and dusty old prospector at the current price environment fails to incenti- of Mines, Nuclear Engineering vize the majority of undeveloped uranium program. Melbye received a Bachelor out the exploration maps over the break- projects towards construction. of Science in Business Administration fast table, we jumped in his old pickup with specialization in International truck and headed out a jeep trail into the Business from Arizona State remote red-rock canyons and plateaus Japan is going to bring its reactors back University in 1984. to the grid step-by-step, but cancelled at the prospective outcropping, we took a supply-contract with Cameco in early some scintillometer readings, bagged 2017. Will Japan put too much pressure some mineral samples (kicking a scorpi- on the spot-price?

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz The pace of the Japanese recovery has certainly been a disappointment. Most analysts, including me, have been wrong as to how quickly their reactor restarts would occur. The good news is that positive developments have been taking hold during 2017 (despite Cameco’s high-pro- Power, which appears to be isolated to those parties). Japan now has 26 restart applications submitted to Federal regula- tors, with twelve Safety Review approvals being handed down by the NRA. Another level of hurdles has been the legal challenges raised in three jurisdictions and the requirement of local govern ments to consent to each reactor restart. Great progress has been made Uranium production in Kazakhstan on these fronts in recent months as ap- being implemented. This supports ob- (Source: Kazatomprom) pellate courts have overturned all three servations that a peaking of mine pro- of these lower court rulings. We are ex- pecting to see a total of nine reactors production cutbacks have been announ- - ced, including Cameco’s Saskatchewan rently operating today). These don’t and U.S. operations, Areva’s Niger mi- sound like big numbers, but should be nes, Paladin’s Namibian Langer Heinrich viewed as positive developments for mine and Kazakhstan’s 10% reduction in both market fundamentals and sentiment output. The 10% reduction in output in the uranium industry. Furthermore, - - cant, as Kazakhstan is the world’s largest get of having nuclear provide at least producer of uranium, accounting for 20% of Japanese energy supplies going about 40% of global mine supplies. Cle- forward. arly, the move signaled a new disciplined and responsible market approach. Earlier this year, Kazakhstan also announced In the last few months, a couple of pro- that progress to date on that goal amoun- ducers reported that they are planning ted to a solid 13% production reduction to cut their production, including Kaz- based on 1st quarter 2017 results. atomprom where you serve as an advi- Furthermore, a senior Kazatomprom re- sor. Will this signiﬁcantly affect the ura- presentative also announced at an in- nium spot-price? dustry meeting that “further production - This is absolutely a key catalyst in the - uranium price recovery that has been ment. long in coming. Global uranium producti- Finally, while not a production cutback, on amounted to 162 million pounds in we received great news earlier in 2017 2016. While this continued a trend of an- that the U.S. Department of Energy has nual uranium production increases in the bowed to pressure from the U.S. pro- face of low prices, the rate of increase ducers and reduced the amount of government inventories that are released to

www.resource-capital.ch | [email protected] the market by over 1 million pounds per ty, like uranium, this return to more nor- year in 2017 and 2018. This may not mal long term contracting levels should sound like much, but combined with an- put considerable upward pressure on nounced production cutbacks, about 16 long term and spot prices. We are begin- million pounds of annual supply has now ning to see the signs of this increased been removed from the market. It should buying activity by global utilities which is also be recognized that an additional 17 very encouraging. million pounds per year will be removed by 2025 from the expected resource de- pletion of currently operating mines. New reactors are being built and older ones will be shut down. What does this mean for the future demand? Do new Many long-term contracts will run out in reactors need more uranium than older the next 12 to 18 months. Utilities are ones? beginning to return to the market. Will they get their uranium for less than 30 Ten reactors were added to the global US$ per pound? grid during the 2016 calendar year, exceeding the mark set in 2015 for the Only in the very near term and until such highest growth rate of nuclear power ca- time renewed utility uranium procure- pacities in the past 25 years. The World ment levels pick back up. This is the Nuclear Association reports that 447 re- other key catalyst that has me excited actors are operable in 30 countries. The- right now. se reactors have a capacity of 392 gigawatts of electricity and supply about 11 and those nearing completion, are now percent of the world’s electrical require- expected to generate a cumulative fuel ments. Currently, 56 nuclear reactors are requirement of 173 million pounds of under construction in 14 countries with

U3O8 in 2018. This fuel requirement is ex- the principal drivers of this expansion pected to grow to 194 million pounds by being China, Russia, India, the U.S. and 2030. While this demand for uranium is the United Arab Emirates. fairly steady and predictable, the The new reactors are all of designs which procurement decisions of utilities can exceed 1000 megawatts and more than vary based on contract coverage, inven- compensate for the retirement of some tories, forecasts of future prices and risk older smaller reactors that have reached tolerance. The previous contracting cy- the end of their operating lives. The total cle, brought on by uranium price spikes demand for uranium will increase with in 2007 and 2010, resulted in utilities ru- the requirements of the larger reactors shing to contract at higher prices and for balanced against the retirement of the ol- very long terms. While these old cont- der smaller units with designs typically racts are expiring, the utilities have not less than 1,000 MWe. been moving to replace these supplies. A trend to keep our eyes on, and not yet As a result, the forward coverage of utili- factored into the near-term supply and ties has fallen appreciably, increasing the demand analysis, is the growing emer- uncommitted requirements that will need gence of Small Modular Reactor (‘SMR”) designs. These are reactor designs which needs (under recently revised conserva- have a 50-100-megawatt range of out- tive estimates) currently total around 742 put, and are similar to the small, compact million pounds over the next 10 years, U.S. naval reactors which have operated which is higher than the 705 million safely since the 1950’s. SMR’s can be pounds of uncommitted demand exis- mass produced in factories and shipped ting in 2011. In a thinly traded commodi- on site. They are scalable in nature, can

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz accommodate small grids like islands and remote areas, require much lower upfront capital, and have a faster pay- back period due to short construction times. The U.S. Nuclear Regulatory Commission is updating their regulations to accommodate these small-scale power producers, which has been a big barri- er to entry to date. While these reactors will use less uranium than today’s large units, this potential new growth area is a very welcome development.

Just to give the readers some numbers: How much uranium does a new reactor need for the ﬁrst load and how much does it need for further loads? Model of a Mini Atom Reactor (SMR) in se being built in Georgia) require about Beijing (Quelle: Imaginechina) Great question and something that adds 1.65 million pounds for an initial core, to near term uranium requirements due with a reload requiring around 1.1 to the 59 reactors currently under const- pounds. This can, of course, vary based ruction. A reactor under steady-state on operating cycle-length and tails assay operation refuels only once every 12 – 24 (depending on the relative prices of ura- months depending on their optimal fuel nium and enrichment). management and operating strategy. At these periodic refueling outages, approximately one-third of the reactor core is The new leading nuclear nation will be replaced with fresh fuel and the remai- China. How will their current construction plans effect the uranium sector? locations in the core. The oldest fuel that has been in the reactor for several years China continues to lead the global nucle- is retired to spent fuel storage for ultima- ar growth story, expanding from their te disposal (or is reprocessed into new currently installed 33 gigawatts of capa- fuel). city from 36 reactors, to close to 100 gigawatts within the next ten years. The operating cycle, the entire reactor core Chinese government has increased its needs to be loaded with fresh fuel. This emphasis on nuclear energy as a way to creates what is known as the “initial core deliver vast amounts of electricity, without adding to the severe air pollution cri- about 1.5 times the uranium required in a typical reload (the reason it is not 3 times major cities. In terms of reactor require- more has to do with lower U-235 enrich- ments Chinese annual uranium consump- - tion will rise from 20 million lbs in 2017, lectively across all of the new reactor to over 60 million pounds by 2030. start-ups, the bump in global require- This all has a profound impact on global ments is substantial, not to mention that uranium supplies, as China possesses these requirements tend to be procured relatively little in the way of quality dome- earlier than subsequent reloads. stic geologic uranium reserves, despite To put this into actual numbers, a new its large geography. As such, China sta- Westinghouse AP-1000 reactor (like tho- te-owned companies have been aggres-

www.resource-capital.ch | [email protected] There is extremely high air pollution in the Chinese cities. sively pursuing uranium imports to the past 11 months. The challenge is not that (Source: Kyodo News) tune of about 50 million pounds of U3O8 nuclear reactors are uncompetitive with per year, taking advantage of the uranium their low US$0.03 to $0.05 per kilowatt downturn and accumulating an un- hour generating cost. The market struc- der-valued commodity that they will ra- ture in these supposedly de-regulated pidly consume at their current growth jurisdictions are severely distorted by the rate. Their investments in foreign uranium high levels of subsidies granted renewa- deposits and production assets also have bles, and compounded by low natural gas prices. Unfortunately, renewables While their massive investment in the provide the lowest level of as-needed re- Husab uranium mine in Namibia will liability, and gas prices cannot be relied advance this mine’s development earlier upon to stay low forever (or simply th- than economics would otherwise dictate, rough the cold winter weather months). other investments in existing mines, like Meanwhile, the potential loss of 24/7 re- Langer Heinrich, also in Namibia, will take liable and carbon-free base load electricity from nuclear is put in jeopardy. Indi- circulation” for western utilities. vidual states, like New York and Illinois, and the Federal government through the Department of Energy and the Federal Much has been said lately about the Electricty Reliability Commission (FERC) nuclear energy program of the United have been taking real concrete steps to States, currently the world’s largest reform these market dysfunctions and ﬂeet. So-called de-regulated electricity preserve this critically important base markets and low natural gas prices load nuclear power in the name of reliabi- have put some plants under economic lity and grid stability. The performance of stress. What is the Trump Administrati- U.S. nuclear power plants during recent on doing to address the continued via- “polar vortex” winters, and hurricanes, bility of nuclear energy in the U.S.? have only reinforced the need for this po- licy shift by the Trump Administration. We have actually seen a great deal of po- Elsewhere in the regulated markets of sitive developments on this front in the the Southeastern United States, we are

Swiss Resource Capital AG | Poststrasse 1 | 9100 Herisau | Schweiz seeing the construction of four new reac- production (new developments or mine tors of the Westinghouse AP-1000 de- expansions) to come to the market is sign. Unfortunately, these massive cons- estimated by BMO, in their March 2017 truction projects have been caught up in uranium market outlook, to be higher the bankruptcy restructuring of Wes- than US$60 per pound U3O8. This, and - the prolonged licensing and permitting vely manage these construction pro- process required to bring on new programs. As a result, both of these projects duction (as much as 10 years or more for were thrown into jeopardy. The good a major conventional mine/mill complex), news is that the Vogtle units 3&4 in Geor- make for an interesting situation as the gia will proceed to completion under a uranium market is expected to move into new construction manager, Bechtel, and will be supported by extended loan gua- contracting volumes. rantees from the Trump Administration. The Summer units 2&3 in South Carolina remain in suspension, but here too, the In summary: What are your feelings - about the current supply-demand-sta- als and potential investors looking at tus in the uranium sector and could this ways to complete these reactors and lead to another uranium-price upward bring them into operation. trend? Finally, last week, the Palisades nuclear power plant in Michigan, that was slated The uranium market has required a great to be retired in 2018, is now pursuing a deal of patience from investors as it has plan to extend operations for four additi- worked through the over-supply condi- onal years. Also, continuing a long-term tions that emerged out of the Fukushima trend, we have seen most U.S. reactors events in 2011. Having said that, as we pursue (and receive) approvals for licen- head into the end of 2017, we have a se extensions to add 20 to 40 years of very exciting development materializing additional operating years to their safe that is rarely seen, but certainly coveted, and useful lives. by commodity investors. With the record number of reactors operating, and coming on-line around the world, we are Let’s come to uranium supply. Do you seeing a robust and growing global de- see major new mines starting producti- mand for uranium. While utilities have on in the next ﬁve to eight years? What recently been heavily covered under does the pipeline look like and what contract from past cycles, we see a new price will most companies need to ad- contracting cycle emerging that will put vance development, and bring their renewed stress on available supplies in projects into production? the coming years. The trend of global uranium production cutbacks, like those This development should be startling to announced by Kazakhstan earlier this the nuclear generating companies, and year, have been long in coming. These probably explains the current, and very cutbacks will likely continue at a time strategic appetite for Chinese invest- when the pipeline for new supplies is at a ment. Beyond the large Chinese Husab low point, and lead-times required to re- mine, we see very little in terms of new verse that trend could be rather prolon- mine development. From a producer’s ged. The price impact could be acute. viewpoint this is not surprising, given the This is certainly the right time to be posi- six-year period of challenging price con- tioned in uranium investments to capita- ditions we have experienced. The incen- lize on an emerging, sustained, price re- tive price for meaningful new uranium covery.

www.resource-capital.ch | [email protected] Blue Sky Uranium Early stage chance with prospect of low cost open pit mining!

The majority of standard uranium mines the exclusive right to complete airborne produce the uranium ore by underground geophysical surveys over an area of mining techniques raising the constructi- 2.265 million hectares. After a detailed on and mining costs. The Canadian de- study the company decided to acquire velopment company Blue Sky Uranium the mining rights for Anit, Ivana and San- owns several huge uranium licenses in Argentina which, after initial inspection of anomalies were discovered on these the drill results, can probably be mined projects. The three license areas cover by open pit methods. This is an enor- an area of 269.000 hectares in total and mous cost advantage which promises are located in the province of Rio Negro, not only faster mining but also high mar- Argentina. Anit, Ivana and Santa Barbara gins. are situated within a 140km long trend which hosts several known uranium deposits. Besides the near surface uranium Amarillo Grande mineralization, Amarillo Grande also Uranium-Vanadium Project: Location, Resources and This is interesting because the price of Mining Possibilities vanadium has more than doubled since the fall of 2016 und vanadium as by-pro- Amarillo Grande which consists of three low-cost production. The uranium and subprojects: Anit, Ivana and Santa Bar- vanadium ore occur in depths of 0 to bara. In 2010 Blue Sky Uranium received 25m whereby the deposits can extend over several kilometers. The overburden is comprised of only slightly compacted sand which results in favorable mining and extremely low drill costs. Mining will be carried out by a so-called scraper which strips the rock layers and a con- veyer loads the stripped material directly on a following truck. No drilling and blas- ting is necessary, which drastically reduces the mining costs. In addition, the company does not need the majority of excavators usually needed. The ore material could be processed in a central processing plant located between the three subprojects by means of the low- Blue Sky Uranium's projects in Argentina make it possible to mine low grade deposits. An example for such a mine is Langer Heinrich in Namibia where the corresponding resources are mined for less than US$18 per pound of uranium. It should be noted that Blue Sky Uranium has the advantage of the additional vanadium resources.

www.blueskyuranium.com Amarillo Grande 3.375.000 3.400.000 3.425.000 3.450.000 3.475.000 3.500.000 Uranium-Vanadium Project: 0 0 0 0 0 0 . . 5 5 2 2 6 6 . .

Ivana 5 5

0 ³ 0 Ivana is the largest and southernmost 0 0 0 0 . . 0 0 0 0 6 6 . . subproject. It covers 118,000 hectares 5 5 and hosts a 25km long anomaly. Within a 0 0 0 0 0 0 . . 5 5 7 7 5 5 4,500m x 1,500m corridor a high-grade . . 5 5 mineralization was discovered by

sampling and drilling corresponding to 0 0 0 0 0 0 . . 0 0 5 5 5 5 . . previous radiometric surveys. Initial 5 5 sampling provided results of up to 1.81% 0 0 0 0 0 0 . . 5 5 2 2 5 5

U O over 0.75 m. This sample was col- . . 3 8 5 5 lected only 2m below the surface. Location of the Amarillo Grande licences. 0 0 0 0 0 0 . . 0 0 0 0 5 5 . . Follow-up drilling provided among other 5 5 things - 30.000 15.000 0 30.000 Meters 0 0 0 . 5 7 4 . 5 3,136ppm U O over 1m, 3.375.000 3.400.000 3.425.000 3.450.000 3.475.000 3.500.000 3 8 References: Sector AMARILLO GRANDE PROJECT Ivana 2,182ppm U O and 1,285ppm V O Anit MINING TENURES 3 8 2 5 Sta Barbara New Tenures Date: September 01, 2017 over 2m, Exploration Claims Prep. by: JMR/AT/DL/GP Datum: GK - P94/Z3

2,087ppm U3O8 and 1,892ppm V2O5 over 1m, tention is on a 1,000m x 200m corridor

1,861ppm U3O8 over 3m, within a paleo channel. 1,473ppm U3O8 and 721ppm V2O5 over 1m and for 81 drill holes an average grade of

1,410ppm U3O8 over 1m. 0.03% U3O8 and 0.075% V2O5 over 2.6m. In the western and central zones - 103 pits were discovered which had ura- dium mineralization of up to 20m in nium grades of more than 50ppm where-

thickness. All these drill results are by on average 1.97m with 0.04% U3O8 from maximum depths of 23m! and 0.11% V2O5 were detected. A drill campaign, which started in May 2017, In September 2017 released drill results could extend the strong mineralized cor- 1,114ppm U3O8 and up to 3,411ppm ridor by 2km to the northeast and sug- V2O5. The very high-grade vanadium re- gest that the corridor continues to the source especially attracted the attention north and south. of the management so that additional work and drilling is planned in this area. Blue Sky’s management believes that Amarillo Grande this corridor could be 5km or more long. Uranium-Vanadium Project: Test works also showed that the majority Anit of the present uranium and vanadium re- The second subproject, Anit, covers by wet screening because coarse gravel around 24,000 hectares and lies between in particular contains hardly any uranium. Ivana and Santa Barbara. Anit is located This could reduce transport and proces- on a 15km long trend showing near sur- sing costs and achieve production at se- face uranium mineralization. Special at- veral satellite projects concurrently.

www.blueskyuranium.com Amarillo Grande gic environment. The National Commis- Uranium-Vanadium Project: sion of Atomic Energy could already con- Santa Barbara Sampling at Sierra Colorado could prove

The third subproject Santa Barbara lies up to 0.65% U3O8 and 1.55% V2O5 as northwest of Anit and is still at a very ear- well as traces of molybdenum. ly stage. Blue Sky Uranium could already Blue Sky Uranium’s second project Tier- identify several anomalies on the project ras Coloradas is situated northeast of and wants to make a new discovery Sierra Colorada and to date was explo- soon. red only sporadically for existing deposits although the company detected near surface mineralization by radiometric Amarillo Grande surveys. Uranium-Vanadium Project: The Cerro Parva project covers around current activities 67,800 hectares and is located only 40km east of Cerro Solo. Currently the company is increasingly fo- The Chubut projects are intended for a cusing its activities on Anit and especial- future pipeline expansion and therefore ly on Ivana. Ivana especially is at the fo- are not currently in the development focus because the company tries to extend cus of the company. the discovered high-grade areas and provide a resource estimate as quickly as possible. To this end the company works Grosso Group: with an electrical tomography program the game changer covering 11km and a drill program comprised of 3,000m. Metallurgical test runs Blue Sky Uranium belongs to the Grosso are conducted concurrently to establish Group. The Grosso Group is a resource an optimal leaching process and to recei- management company that is in operati- ve the highest possible recovery rates. on since 1993. The company is specialized on South America and especially on Argentina. During this time, they made Exploration projects in Chubut three multi million ounces precious me- Province - nerships could be entered with resource Blue Sky Uranium has additional explo- giants like Barrick, Areva, Rio Tinto, Teck ration projects in the Chubut Province and Yamana. Company chief Joe Grosso south of Rio Negro. was awarded Argentina’s Mining Man of The Sierra Colorada project covers the Year in 2005. The Grosso Group has around 39,900 hectares. The project is a vast network of industry and political located 96km from Cerro Solo project contacts in Argentina. (not Blue Sky Uranium) in a similar geolo-

www.blueskyuranium.com Summary: three projects, two open pit mining methods. Together this elements, prospect of low cost promises, due to several existing high- mining! grade sections, a very good chance for an early production and especially for a Blue Sky Uranium is a real early stage low-cost production which needs only a chance at an imminent uranium boom fraction of the capital costs that similar market. Although the company has al- conventional mines require. An own production should be within the realms of development progress on its three ad- possibility with the very well networked vanced projects within Amarillo Grande, Grosso Group in Argentina. an initial resource estimate which is planned for the fourth quarter of 2017 may bring clarity on the dimension of the resources at Ivana. Two things seem ob- jectively speaking crystal clear: First, the rocks at Ivana and also at Anit contain, resources also and second, the existing resources can be mined most likely by

Interview with Nikolaos Cacos, CEO of Blue Sky Uranium

What did the company achieve within in pleted to date throughout the project the last 12 months? area. Phase I (1390 meters in 98 holes) RC drilling results from Ivana were previ- Blue Sky Uranium has completed Phase ously reported by the Company on June I drilling at all three target areas on its 19, 2017.The follow-up exploration pro- Amarillo Grande uranium-vanadium program at Ivana comprised 858 meters of Nikolaos Cacos, CEO ject in Rio Negro Province, Argentina, RC drilling and 6.5-line kilometers of ET and has also completed a follow-up re- surveying. verse circulation (RC) drilling and electrical tomography (ET) geophysical pro- What are the main catalysts for your with elevated uranium-vanadium on the company within the next 6 months? area. Blue Sky Uranium‘s goal is to complete Drilling and geophysical surveying are the 43-101 until year end. expected to resume at the Ivana. Additi- - onally, the Company is advancing with a exploration by Blue Sky from 2007 to program on uranium-vanadium minerali- 2012 as part of the Grosso Group’s stra- zed material from Ivana. tegy of adding alternative energy focus A total of 3729 meters of RC drilling in to its successful portfolio of metals ex- 256 holes and 22.5-line kilometers of ET ploration companies. The close proximi- geophysical surveying have been com- ty of several major targets suggests that

www.blueskyuranium.com if resources are delineated a central pro- costs are also contributing to a revival in cessing facility would be envisioned. The nuclear power. - Looking ten years ahead, the market is le year-round, with nearby rail, power and port access. 2015 Nuclear Fuel Report reference The near-surface mineralization, ability to scenario (post Fukushima accident) locally upgrade, amenability to leaching shows a 26% increase in uranium de- and central processing possibility sug- mand over 2015-25 (for a 30% increase gest a potentially low-cost development in reactor capacity – many new cores will scenario for a future deposit. be required). Demand thereafter will de- As the Vanadium market starts to heat up pend on new plants being built and the we are very excited about the prospects rate at which older plant is retired – the of this by-product of production on Blue reference scenario has a 22% increase in Sky Uranium‘s properties. uranium demand for the decade 2020 to 2030. We believe the uranium bull is just around What is your opinion about the current the corner. conditions of the uranium market?

Concerns over climate change have renewed interest in nuclear energy as it is a carbon-free source of electricity with no CO emissions. Other factors that are in 2 addition, improved reactor performance, extended fuel cycles, increased generating capacity and reduced operating

Blue Sky Uranium Corp. ISIN: CA0960495079 WKN: A12GAR FRA: MAL2 TSX-V: BSK

Shares issued: 71.7 million Options: 0.4 million Warrants: 4.3 million Fully diluted: 76.4 million

Contact: Blue Sky Uranium Corp. Suite 411 - 837 West Hastings Street Vancouver, BC, Canada V6C 3N6

phone: +1-604-687-1828 fax: +1-604-687-1858

[email protected] www.blueskyuranium.com (Quelle:(Source: BigCharts) BigCharts) 46

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