Deja Vu or a Real Paradigm Shift by James C. Cornell, President

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Deja Vu or a Real Paradigm Shift?by James C.
Cornell, President CEO, RWE NUKEM, Inc.World
Nuclear Fuel Market, Prague
June 6, 2005
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(No Transcript)
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1996 Kurt Schreiber, RWE NUKEM

• I really believe that the current fuel market
  situation is not a temporary and transient one.
  Rather, I am convinced that the market is really
  on its way to more stability, reliability and
  predictability.

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1996 Dale Alberts, Rio Algom

• I conclude that we will develop a healthy,
  mature, competitive uranium mining industry in
  the United States which will produce somewhere
  between 10 to 20 million pounds per year from
  lo-cost ISL and a few conventional operations.
• I believe the suspension agreements will stay in
  effect for their duration.

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1996 Gerry Grandey, Cameco

• If recent prices are sustainable McArthur River
  and Cigar Lake could be producing as much as 36
  million pounds (13,850 tU) by year 2000.
• In Australia, a number of long-dormant projects
  such as North Ranger, Kintyre, Koongara, and
  Yeelirrie can be readied for development and may
  contribute up to 18 million pounds (6,925 tU) per
  year by the turn of the century.

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1996 Tom Neff, MIT

• It is now questionable whether Kazakhstan
  could produce enough material to manage to fill
  their U.S. quota, let alone sell much anywhere
  else. The same is probably also true with
  Uzbekistan.
• The amount of Russian material available in
  adequate condition to be exported is probably
  very small, tails stripping is pretty much coming
  to an end, inventory is coming to an end, and
  Krasnokamensk is shutting down, however slowly.

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Western World Supply-Demand Projection, 1996
Million lbs U3O8
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Western World Supply-Demand Projection 1996
Million lbs U3O8
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1997 Julian Steyn, Energy Resources
International

• The foregoing has tried to show that although
  there have been inventory changes in the 1990s,
  inventories are still very substantial and likely
  to provide on the order of a quarter of world
  supply for the next decade or two.

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1997 Jim Cornell, RWE NUKEM

• During the time frame between today and 2003,
  we see an oversupply that would vary between
  five and forty million pounds per year.
• The only things that are going to prevent a
  collision between these huge inventory
  dispositions and increased production is a cut in
  one or the other.

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1997 Peter Lenny, Uranerz Exploration and Mining
Limited

• About 2000, we will have many new mines open and
  operating.
• Not only are utility inventories reduced, not
  only are all the civil and governmental
  stockpiles eliminated, but the pipeline
  inventories are certainly substantially reduced
  as well.

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1997 Warren Davies, Energy Resources Australia

• The uranium production industry has contracted
  about as far as it can go.

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Market Squeeze Leads to Further Consolidation
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Production Squeeze-Outs

• France

Spain

Gabon
U.S. Producers IUC/NFS IMC-Agrico Rio Algom
et al.
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1997 Robert Van Namen, Duke Power

• If we let market forces dictate, and keep
  government out, I think we can count on
  stability.
• The more government gets in, the more material
  is artificially kept off the market, the more
  perception drives things instead of reality.

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1997 James J. Graham, ConverDyn

• Perception With HEU and DOE inventory
  looming, theres plenty of conversion available.
• Reality If supply does indeed dramatically
  exceed demand, the primaries may not all survive
  on the remaining market share as economics erode!
  Does our industry want to rely on
  government-controlled fuel supply based upon the
  governments history of interference?

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Cast Away
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1996 Misapprehensions

• Blinded By The Price
• CIS Production Forecast Too Low
• Continuing Russian U. sales overlooked
• Commercial Inventories to Play Bigger Role
• Unforeseen USEC Inventory Liquidation

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1997 Reconsiderations

• Sobered by price retreat
• Still some excess exuberance
• Scope of inventories clearer, but implications
  not universally accepted
• Big new production increases still planned, but
  some conference participants skeptical

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Western World Production Forecasts
Million lbs U3O8
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A Series Of Unfortunate Events
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World Supply and Demand January 05 Ux Market
Outlook
Million lbs U3O8
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World Supply-Demand, Less HEU-II
Million lbs U3O8
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World Supply Demand,Less HEU-II and
ERA-Jabiluka
Million lbs U3O8
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Western World Supply-DemandLowered Tails Assay,
Boosted Production
Prospective Production
t/U
Planned Production
Operating Production
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Western World Supply-DemandImpact of DOE
Inventory Sales
Prospective Production
t/U
Planned Production
Operating Production
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Inventories vs. Uranium Market
Market
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How Much More Re-Enriched Tails?
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Hedge Fund Uranium Purchasing?
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Nuclear Fuel Cycle vs- ExxonMobil
10 Billion
Annual RevenuesWestern Nuclear Fuel Cycle
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More Warhead HEU?
Russian ICBM Warhead
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Room For New Producers?
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Final Thoughts