Uranium Sector Review Exploration, Development & Production March Quarter 2011 Resource Capital Research This report is subject to copyright and may not be redistributed without written permission from RCR. The information contained in this report is for use by US, Canadian and Australian residents only. Copies are available for purchase from RCR. 28 March 2011 Uranium Sector Review March Quarter 2011 Resource Analyst (Uranium): John Wilson Resource Analyst: Dr Tony Parry Resource Analyst: Dr Trent Allen Resource Capital Research Suite 1306 183 Kent Street Sydney, NSW 2000 Tel: +612 9252 9405 Fax: +612 9251 2859 Email: [email protected] Web: www.rcresearch.com.au Resource Capital Research ACN 111 622 489 Resource Capital Research Contents Contents .............................................................................................................................. 2 Overview and Investment Comment ........................................................................................ 3 RCR March Quarter Featured Company Summary ...................................................................... 7 [Industry Background and Analysis ........................................................................................... ] Comparative Charts ............................................................................................................... 9 Financial Data ..................................................................................................................... 12 Company Statistics .............................................................................................................. 12 Reserves, Resources and Historic Mineralisation ...................................................................... 13 Valuation and Performance Data ........................................................................................... 13 Exploration, Development and Production Companies [Aura Energy Limited .................................................................................................... ] Australian-American Mining Corp Limited...................................................................... 14 Bannerman Resources Ltd .......................................................................................... 16 [CanAlaska Uranium Limited .......................................................................................... ] Deep Yellow Limited................................................................................................... 18 Energy and Minerals Australia Limited .......................................................................... 20 Energy Resources of Australia Limited* ........................................................................ 22 Energy Ventures Limited ............................................................................................ 24 [Extract Resources Limited ............................................................................................ ] Greenland Minerals and Energy Limited ........................................................................ 26 [Northern Minerals Limited ............................................................................................ ] Paladin Energy Limited* ............................................................................................. 28 Peninsula Energy Limited............................................................................................ 30 PepinNini Limited ....................................................................................................... 32 [Stonehenge Metals Limited ........................................................................................... ] Toro Energy Limited................................................................................................... 34 Ur-Energy Inc ........................................................................................................... 36 [Uranium Price Fundamentals .................................................................................................. ] [Uranium Company Share Price Performance Tables ................................................................... ] Market Charts………………………………………………………………………………………………………………………………………..65 Report Contributors ............................................................................................................. 40 Disclosure and Disclaimer ..................................................................................................... 41 * Indicates companies with detailed financial projections and valuation available. [This is the Abridged Report version of the March Quarter RCR Uranium Sector Review. The purchase price of RCR’s March quarter Subscriber Reports (uranium, gold, rare and minor metals, and iron ore) is A$110 per report. The annual subscription rate for all RCR reports is A$440 – commodities covered may vary from quarter to quarter. Purchase details and research services for institutional investors can be found at www.rcresearch.com.au] March Quarter 2011 Disclaimer and disclosure attached. Copyright© 2011 by Resource Capital Research Pty Ltd. All rights reserved. 2 Resource Capital Research Overview and Investment Comment Market performance summary table 28 March 2011 Current 1 month 3 month 6 month 12 month Price* Performance (%) Spot Uranium Price :US$/lb 60.0 -12 -3 28 42 Uranium Participation Corp :C$/Share 7.0 -23 -13 6 18 Merrill Lynch Uranium Equity Index 459.4 -19 -14 17 15 Share Prices - Select Companies Energy Resources of Australia :A$/share 8.31 -19 -26 -39 -56 Paladin Energy :A$/share 3.75 -24 -24 1 -3 Cameco :C$/Share 30.6 -23 -24 8 13 Denison Mines :C$/Share 2.7 -27 -17 48 88 Uranium One :C$/Share 4.4 -32 -8 58 102 Australian companies with one or more uranium project na -7 6 45 62 Canadian companies with one or more uranium project na -10 6 58 71 Market Indices World Markets (all sectors) Morgan Stanley World Index 1325.9 -2 4 13 14 Equity market performance Global uranium The Merrill Lynch Uranium Equity Index (a global basket of uranium equities hit by high equities) is down 19% over the past month, down 14% over 3 months volatility following and up 15% over the past 12 months. The sector has been adversely events in Japan. impacted by serious crises at a number of Japan’s nuclear power plants following a devastating earthquake and tsunami March 11. In the past 1 month, the uranium mining majors have had negative The Merrill Lynch share price performance: Cameco (CCO) is down 23% (3 month Uranium Equity Index performance -24%), Denison Mines (DML) is down 27% (3 month is down 19% over the performance -17%), Uranium One (UUU) down 32% (3 month past 1 month. performance -8%), Energy Resources of Australia (ERA) down 19% (3 month performance -26%) and Paladin (PDN) down 24% (3 month performance -24%). The market valuation of Australian companies with one or more uranium projects is down 7% over the past month, up 6% over the past 3 months, and up 62% over the past 12 months. Canadian companies with one or more uranium projects are down 10% over the past month, up 6% over the past 3 months, and up 71% over the past 12 months. Uranium price outlook The uranium spot price at US$60/lb is The uranium spot price is US$60/lb (Trade Tech; UxC US$62.50/lb), down from a recent and following a volatile quarter it is back to the same price it was in high of US$68/lb. December. It has partially recovered from its plummet mid March to US$49/lb on news of the partial meltdown at the Fukushima nuclear plant in Japan. Immediately prior to the massive Japanese earthquake on 11 March, the spot price had been trading at US$68/lb. The uranium spot market is likely to We expect the spot market to be characterised by heightened volatility experience increased around the US$60/lb mark in the coming months. volatility over the next 3 to 9 months. The long term contract uranium price is US$73/lb (28 February), up from US$65/lb three months ago. While the impact of the Japanese quake may weaken discretionary inventory purchases, and produce March Quarter 2011 Disclaimer and disclosure attached. Copyright© 2011 by Resource Capital Research Pty Ltd. All rights reserved. 3 Resource Capital Research some delays to new reactor construction programs, the impact on contract prices is likely to be temporary, remaining at or quickly returning to +US$70/lb territory, the likely level necessary to support development decisions at a number of advanced projects, particularly in Namibia, eg the large scale Extract (ASX:EXT) and Bannerman (ASX:BMN) projects, and potentially Deep Yellow (ASX:DYL). Impact of the Japanese earthquake The full impact of the Japanese earthquake and tsunami is yet to be The full impact of the determined. Indeed the reactors at the Fukushima plant, the worst Japanese earthquake affected by the earthquake, appear to be stabilising, though, at the time is yet to be of writing, they are not yet fully under control. However, as the risk of determined. reactor damage becomes clearer, the question remains as to what impact the crisis will have on the rate of nuclear power expansion elsewhere in the world and the associated impact on uranium demand. The answer to both questions may not be evident for 12 months. However, it appears likely that the nuclear expansion trajectory will be flatter, due to the possibility of constrained reactor life extensions, and increased reactor capex driven by an expectation of increased regulatory requirements and associated