The Reality of the Uranium Market

Treva Klingbiel, PresidentMINExpo International 2012

Best known foruranium marketprice reporting

(since August 1968)

TradeTech Website

TradeTech’s Business ActivitiesSpecializing in the front-end of the nuclear fuel cycle

• Market Analysis and Daily, Weekly and Monthly Price indicators.

• TradeTech’s Monthly Exchange Value is longest running pricesseries – in publication since 1968

• Quarterly Market Study : Projections of Supply/Demand/Price

• Specialized Consulting (e.g., procurement and contracting,competitor analysis)

The leading independent source ofuranium market information

The Four Realities Of The Uranium Market

• Fuel Cycle Dictates Buying Behavior

• Spot Market

• Long Term Market

• Market Fundamentals

o Has been described as a very immaturemarket, and is definitely a boutique market

o No open exchange like London MetalsExchange

o Market reporters, like TradeTech, publishprice indicators

How Does the Uranium Market Work?

Uranium Processing

“Enriched UF6”

“Natural” UF6 (uranium hexafluoride)

U3O8 or Yellow Cake

Uranium has to be further processedto become nuclear fuel.

Reality 1

The Nature of the Nuclear Fuel Cycle DictatesThat Utilities Procure Uranium Far in Advance of

Actual Loading into Reactor

Primary Supply= 75%

SecondarySupply = 25%2011

Spot Market= 15%

Long-TermMarket = 85% 68%

7%

17%

8%

Current Uranium Supply Sources and Markets

The Dynamic Pricing ModelAn econometric approach to spot price forecasting

Reality 2Spot Prices are not linked to Production Costs

Changing Spot Market (Buyer Breakdown)

Financial1% Producer

4%

Utility90%

Trader5% Financial

26%

Producer25%Utility

23%

Trader26%

2000 Current

0

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15

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25

30

35

40

45

50

Buyer Seller Buyer Seller Buyer Seller Buyer Seller Buyer Seller

Million Pounds U3O8

Investor Processor

Producer Trader

Utility

2008 2009

2010 2011

© 2012 TradeTech

2012

Spot Volume By Buyer/Seller Type

Investors/speculators were net sellers in 2008, for thefirst time

The Spot Market Characteristics

• More perception driven than 10 years ago.

• Some correlation to outside markets.

• Although still not efficient, increased liquidity has led toincreased potential for volatility.

• Less driven by clearing price fundamentals.

The Dynamic Pricing Model• Based on 3 variables that TradeTech has publishedsince 1968.

Active Demand, Active Supply and Spot Price.

• The historic correlation is defined by an algorithm.

• TradeTech utilizes its awareness of the market to forecastAS and AD over the forward 24 months, and future pricesare calculated.

TradeTech’s neutrality aids access to information.

The Historic AS/AD/ Price Relationship

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US Dollars Per Pound U3O8Million Pounds U3O8

Active Demand Active Supply Exchange Value

Active Demand finally outstripsActive Supply

Credit crisis sparksstock liquidation

Intermediaries returnto the market sensing strong

fundamentals prior to Fukushima

DPM Characteristics

• 2 years of historic data is used to forecast 2 years forward.

• The model is continually optimised to generate the closestpossible correlation. For example:

i) It calculates the relative sensitivity to changes in demandversus changes in supply.

ii) A quadratic function exists to provide a multiplier effect toreflect market exuberance when price movement is marked.

iii) Price resistance levels are also built in.

Historic Spot Price Projection (DPM Q1 2011)

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90

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Active Supply

Spot Price

Million Pounds U3O8 US$ per Pound U3O8

Fukushima Impact~$15-20/lb

Market exuberancewas expected to continue

The Forward Availability ModelForecasting Long Term Prices through to 2025

Reality 3Projected Production is NOT Available for sale

Long Term Price Premium

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1996-1999 2000-2001 2002-2004 2005-2007 2008-2010 2011 to date

Simply adding 10% to a spot priceprojection is no longer relevant

The Classic Supply and Demand Balance

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Million Pounds U3O8

Total Demand

Low Cost Secondary Supply

Existing Production

New Production

Prime Contracting Period

Prime Contracting Period (PCoP)

The Reality – Year 1 FAM Profile (Illustration)

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Total Demand

Available Demand

Low Cost Secondary Supply

Existing Production

Million Pounds U3O8

SpotBalance/

Oversupply

Potential Supply Deficitin the PCoP

The Reality – Year 2 FAM Profile (Illustration)

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Potential Supply deficit in thePrime Contracting Period

Total Demand

Available Demand

Low Cost Secondary Supply

Existing Production

Million Pounds U3O8

The Reality – Year 3 FAM Profile (Illustration)

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Potential Supplydeficit/surplus in the

Prime Contracting Period?

Total Demand

Available Demand

Low Cost Secondary Supply

Existing Production

Million Pounds U3O8

FAM Characteristics

• The Long Term Price is largely defined by S&D in the PrimeContracting Period (PCoP) - defined as a six year periodbeginning 3 years forward (T+3 to T+9).

• TradeTech uses its awareness of contracting activity to tracksupply availability.

• A Forward Availability (FAM) Profile is generated for eachyear being forecast.

• Surplus/deficit is run against the TradeTech productioncost curve to generate a long term price forecast through to2025.

Reality 4Good Market Fundamentals

-20 0 20 40 60 80 100

GermanyBelgiumSweden

SwitzerlandUK

SpainPakistanArmeniaSlovakia

PolandMalasyia

IranIndonesia

BulgariaBelarus

NetherlandsArgentina

Czech RepublicRomaniaLithuania

TurkeyVietnam

South AfricaSaudi Arabia

CanadaBrazil

FinlandUkraineFranceTaiwan

UAEJapanKorea

USARussia

IndiaChina

GWe to be added from 2011-2025

© 2012 TradeTech

Largest regional growth area: Asia

China’s growthaccounts for over45% of the world’sNuclear CapacityGrowth by 2025

Nuclear Capacity Growth

Global Uranium Requirements (Q2 Projections)

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100

150

200

250

300Million Pounds U3O8

Stock Building

Other Asia, Africa

Japan

East & SE Asia (ex. Japan)

Russia

Non-EU Europe (ex. Russia)

France

European Union (ex. France)

USA

Americas (ex. USA)

2005 Expectations~1% pa growth

2012 Q2Expectations

~4.5% pa growth

2012 Japan Provisional Impact~4 % pa growth

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70

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Million Pounds U3O8

US DOE Tails Stripping

TVA BLEU/US HEU

US DOE Sales

Western Underfeeding

Russian Supply

Russian HEU Feed

MOX/RepU

Secondary Supply (Q2 2012 Projections)

Russian HEUDeal Ending Soon

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Million Pounds U3O8

Call On Mine Production (Q2 Requirements less Secondary Supply)

Russian HEU Deal Ends

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Million Pounds U3O8

Total Existing Production

Secondary Supply

2012 Q2 Requirements

Supply & Demand (Inc. Existing Supply Only)

Current and Projected Uranium by Country

0 10 20 30 40 50 60 70

UZBEKISTAN

UNITED STATES

RUSSIA

OTHER

CANADA

AUSTRALIA

AFRICA

KAZAKHSTAN

Million Pounds U3O8

2020 2011

© 2012 TradeTech

Five Pivotal Projects(defined as large and low cost or with strategic value to the stakeholders)

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Million Pounds U3O8

ODM Expansion

Husab

Imouraren

Kazakh Growth

Cigar

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300

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Million Pounds U3O8

Total Existing Production

Secondary Supply

2012 Q2 Requirements

Supply & Demand (Inc. Existing Supply Only)

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50

100

150

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300

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Million Pounds U3O8

Husab

Imouraren

Kazakh Growth

Cigar

Total Existing Production

Secondary Supply

2012 Q2 Requirements

Supply & Demand (Inc. Existing Supply & Pivotals Only)Q2 with ODM removed

High Risk OfSingle Project Failure

Market opensup post 2020

Conclusions 1:

•Reality 1: Tthe structure of the market is changing due to the participation of investorsand the financial community.

•Reality 2: Spot Price will not necessarily reflect production cost/clearing costfundamentals.

• Reality 3: Long Term Prices more clearly linked to production costs AND production isnot currently marketable.

They can be linked, both by arbitrage between the markets and psychologically.

• TradeTech has developed 2 separate models to reflect the reality of theSpot and Long Term markets.

Conclusions 2:

Reality 4 : Firm Market Fundamentals...

• Nuclear power growth look robust.

• Reducing Secondary Supply supports COMP.

• Pivotal Projects have high importance, but will not be enough.

•Potential for a price rise by 2025 to $80 per pound U308.

Market developments and forecasts revised quarterly

Treva KlingbielPresident

treva.klingbiel@tradetech.com

TradeTech7887 E. Belleview Avenue, Suite 888

Englewood, Colorado, USADirect Phone +1 (303) 573-3520

www.uranium.info