The Changing Face of Secondary Supply: An Emerging Second Market James C' Cornell President and CEO

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The Changing Face of Secondary SupplyAn
Emerging Second MarketJames C.
CornellPresident and CEORWE NUKEM,
Inc.Nuclear Energy Institute International
Nuclear Fuel ConferenceOctober 17, 2005Santa
Fe, NM
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RWE NUKEM Delivery Commitments vs.Uranium
Production of the Big Producers
Million lbs U3O8
NUKEM

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Traditional Uranium Market Players
Primary Producers
Utility Customers
RWE NUKEM, Inc.
RIO TINTO Uranium
bhpbilliton
Secondary Supplies
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New Uranium Market Roster
Institutional Investors
Primary Producers
Utilities
bhpbilliton
RIO TINTO Uranium
RWE NUKEM, Inc.
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New Names Entering The Old Game

• Adit Capital
• American Fuel Resources (AFR)
• Uranium Participation Corporation (UPC)
• Evolution Markets (EVO)

• Total Identified U. Holdings
• /- 9 Million Pounds U3O8e

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What Do They See That We Dont See?
40 - 60
Financial View
25 - 35
Trade View
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Uranium Participation Corporation
Publicly Traded Uranium
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U3O8 Spot Price Uranium Market
Adit Capital Purchasing
UPC Purchasing
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UPC Implied Uranium Values (Each share unit
includes ¼ warrant to buy additional share _at_
C6.25)

• Recent Share Prices (TSE)
• (less cash and warrant values)
• C 5.83
• C 6.10
• C 6.50

• Implied Uranium Value
• (US/lb.)
• 38.87
• 40.66
• 43.33

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UPC Uranium Values Implied by Warrant Values
(Warrant is Right To Buy Addl UPC share _at_C6.25
before 5/07)

• Recent Warrant Prices
• C 1.27
• C 1.30
• C 1.40

• Implied Uranium Value (US/lb.)
• US 50.00
• US 51.33
• US 61.37

(Exchange rate C 1 US .85)
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WNA Reference CaseWestern Uranium Supply vs.
Reactor Requirements(Includes Rosatom Exports,
Excludes Rosatom Requirements)
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WNA Reference CaseWestern Uranium Supply vs.
Reactor Requirements2005-2008
208 182 156 130 104 78 52 26 0
Commercial Inventories
Million lbs U3O8
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Patricia Mohr, Vice President and commodity
markets specialist, The Scotiabank Group,
Toronto
It will be at least 15 months to two years
before we see new production. I know 15 months
is not long for people in your industry, but it
is a very long time in financial or equity
markets.
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Real Market Demand Estimated
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I understand that volumes have risen sharply in
both the spot and term markets this year.
Patricia Mohr, Scotiabank Group
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I don't really see anything standing in the
way of prices continuing to move up, at least
until Cigar Lake comes on line.

I'd almost stake my life on uranium prices
moving higher because there is nothing out
there to prevent that from occurring.

Patricia Mohr, Scotiabank Group
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Energy Price Outlook 1990-99 2003 2004 2005 2
006F 2007F Average Sept 20 Annual F SPOT
URANIUM, U3O8 10.58 11.34 19.32 30.75 27.95 39 41
(US/lb) NYNEX NATURAL GAS 2.04 6.50 6.19 12.
49 8.50 9.00 8.00 (US/mmbtu) WTIOIL 19.69 31.
04 41.40 68.23 58 60-65 50 (US/bbl) Historica
l data The UX Consulting Company, LLC and Scotia
Economics Scotiabank Group
Source Scotiabank Group
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Investor View of the Uranium Market

• Macro View
• Lots of new reactors
• Inventory accumulation, not liquidation
• Huge gap between primary production and demand
• Long lead times for new production
• Competing energy fuels (coal/gas/oil) all making
  new price highs

• Micro View
• Very thin market
• Investors competing with trade for scarce
  supplies
• Investors not overly price-conscious
• Confirmation through steady price increases since
  spring 2003

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Kazakh Mining IPO Structure
4.25 min Endeavour Capital
UrAsia
Signature Resources
Canaccord Capital
Akdala S. Inkai17,500 tu 237,860 Capacity
3000 MTU p.a Production 1.7 min lbs in
2005 Depth lt500m
Reserves 55,000 MTU Capacity 2000 MTU
p.a. Production starts 2008 Depth 600-750 m
Paid by UrAsia 37.5 min Cash 37.5 min
Stock 24 min cash bonus uponcommencement of
production
Brokered Private Placement 234 min Cash 116
min Stock More if raised capital exceeds 300
min
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Hedge Fund Uranium -- Where To?

• Now that they've got, what will they do with it?
• Hold forever?
• Orderly sale or quick exit?

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Future Market Developments

• New pricing model?
• New investment products?

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Conclusion Fad or Future?

• New Paradigm or passing fad?
• On balance positive or negative?