EQUITY RESEARCH. ANATOLIA ENERGY LIMITED High grade, low cost ISR uranium developer in Turkey

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1 EQUITY RESEARCH 30 JANUARY 2015 TURKEY URANIUM PRELIMINARY ECONOMIC ASSESSMENT EXCHANGE: ASX:AEK CAPITAL PROFILE Share price (A$) week range (A$/share) to Number of shares (M) Options and warrants (M) 68.5 Performance shares (M) 12.7 Fully diluted (M) Market capitalisation (undiluted) (A$M) 23.2 Debt (A$M) - Mar 15F Enterprise value (A$M) Blenham Ventures (Doyen) (6.46%), Contango (4.04%) Board and Mgmt (3.2%) Avg monthly volume (M) Cash (A$M) - Mar 15F Price/Cash (x) Listed company options: DIRECTORS Major shareholders: Azarga Resources (11.33%), Aterra Capital (9.69%), Sprott Asset Mgmt (8.96%), RMB Resources (6.46%), No ^A Class and D Class perf. shares on JORC milestones up to 20Mlbs U 3 O 8. ANATOLIA ENERGY LIMITED High grade, low cost ISR uranium developer in Turkey Share Price: A$0.075 INVESTMENT POINTS Temrezli Project (Turkey): 1mlbpa plant, LOM 10 years. Low capex (US$30m), and low opex (US$20.22/lb) - the lowest cost quartile for the sector. Measured and Indicated resource 11.25Mlbs at 0.122% U 3O 8 with regional exploration upside: Exploration Target 30-50Mlbs U 3O 8. PFS expected Feb '15. Updated PEA (May 14) indicates project after tax NPV 10 A$149M (LT uranium price US$60/lb, AUD:USD 0.90). NPV breakeven ~US$30/lb. AEK test work suggests uranium recovery of 80%+, good leach kinetics and low reagent consumption. Positive hydrological and metallurgical test work results released Jan '15 expected to drive further opex reduction. Project momentum is building: COO appointed (Jan '15) - former Cameco VP of US ISR operations; community relations outreach expanding with local office at Sorgun opened; EIA approval expected 2H15; financing term sheets well advanced for $30M debt; forward sales contracts for 2017 in negotiation - contract price expected to be around US$50-55/lb U 3O 8. Positive drill results at Sefaatli (4Q14) support potential for satellite conventional operation to supplement Temrezli; target zone defined over 4.6km 2 ; drill results include 2.5m at 0.21% U 3O 8; 0.09% U 3O 8. Low EV to resource ratio compared to ISR peers: ~US$2.30/lb Vs select peer range of US$5-22/lb (MI). We have a 12 month price target for AEK of 20cps and 18 month target of 30+cps. Blue chip share register includes specialist mining fund RMB (part of Rand Merchant Bank), Aterra Capital, Azarga Resources, Doyen, and Sprott. Turkey has a stable democracy and rapidly expanding GDP of nearly 4%pa since Transparent mining law recognizes uranium. Major mining company presence. 8 nuclear energy reactors approved (construction started Apr '14); 12 nuclear reactors are expected online by The uranium price is US$36.75/lb (spot, 26 Jan); US$49.50/lb (contract, 31 Dec). Investor confidence continues to build with uranium fund UPC registering a C$200M capital raise Oct '14. Positive fundamentals longer term are expected to drive the incentive price above US$60/lb from 2H16. COMPANY STATISTICS Speculative Buy Temrezli Project (100% AEK) is on track for low cost ISR uranium production 2H16. PFS expected Feb '15 to confirm robust economics with 11.3Mlb resource (MI) at 0.122% U 3 O 8 and NPV breakeven ~US$30/lb U 3 O 8. An exciting opportunity with high potential for rerating: 12 month price target 20cps. Hikmet Akin (Non Exec Chairman) Paul Cronin (Interim CEO and Managing Dir) Robert Annett (Non Exec Dir) Patrick Burke (Non Exec Dir) Mr Paul Cronin, Interim CEO and MD Tel: (UK) Tel: (Aust) Mr Scott Mison, Company Secretary Tel: +(61) (Perth) Anatolia Energy Limited, West Perth, Australia Analyst: John Wilson johnwilson@rcresearch.com.au Year End June Dec-14a Mar-15F 2014A 2015F 2016F Exploration and evaluation (A$M) Corporate (A$M) Exploration/(Expl.+ Corporate) (%) Funding duration at current burn (years) Shares on issue (pr end) (m shares) Drilling - RAB (m) 4,750 2,000 1,000 8,750 4,000 Drilling - Other/Diamond (m) 1,000 1, ,000 2,000 Land holding ('000 ha)* Capital raisings (A$M) Funding from JV partners (A$M) Cash (A$M) Cash backing (Ac/share) * Tenements held and under application. Quarters refer to calendar year. Drill metres are RCR estimates. RCR Jan 2015 Disclaimer & disclosure attached. Copyright 2015 by RCR Pty Ltd. All rights reserved. 1

2 COMPANY COMMENT EQUITY RESEARCH Overview: Anatolia Energy is a Perth based company, relisted on the ASX Feb 11 with a new management team and focus on uranium. The company holds a 100% percent interest in the advanced stage Temrezli uranium project in an historic uranium exploration district in Turkey. Board and Management: Members of AEK s board and management team have exceptional international uranium market expertise and access. This includes Chairman Dr Hikmet Akin, former global president and CEO of Uranerz GmbH. Former Managing Director, Mr Jim Graham resigned 4Q14 for health reasons. Temrezli Project: (Uranium, Turkey) Located in the Yozgat-Sorgun district of Central Anatolia, 200km east of Ankara. Historic work was undertaken in the 1980s by the Turkish government (MTA) which drilled 507 holes (74,000m), and most of this data is now held by AEK. AEK has completed an additional 94 holes for 13,800m. In May 2014 as part of the Updated PEA, the company announced an upgraded JORC resource of 13.3Mlbs U 3O 8 grading 0.116% (MII, 200ppm cut-off, CSA Global) of which 85% is Measured and Indicated. The resource comprises 21 stacked sandstone lenses along a ~3km strike down to ~200m depth. Lenses are 1 to 6m thick with good grade continuity. There is potential to increase resources along strike extensions of over 12km, with a total resource target of 20-25Mlbs. AEK metallurgical test work suggests uranium recovery of 85%, good leach kinetics and low reagent consumption. Preliminary Economic Assessment: (PEA, July 2013) by WWC Engineering, indicates potential for an economically robust ISR project using alkaline leach (bicarbonate and oxygen) at Temrezli. Plant capacity 1mlbpa, LOM 10 years, production potential Opex is US$22.30/lb (includes US$11.29/lb for ongoing wellfield development) - the lowest cost quartile for the sector; pre-production capex is US$30m. Updated PEA (WWC Engineering, May 14): Hydrological pump tests undertaken for the Updated PEA by HydroSolutions has resulted in increased confidence in ISR engineering parameters to support wider wellfield spacing and revised opex of US$20.22/lb, down 9.3% from US$22.30/lb in the PEA; modeled metallurgical recoveries average 75%, considered conservative, and could exceed 80% in practice. The project is in a rural area with excellent infrastructure, including sealed road, water, power (~1km), and towns. No environmental impediments anticipated and the company indicates it enjoys broad community support. Hydrological test work 4Q14 confirms high production flow rates of 48L/min represents a 26% improvement over PEA flow rate assumptions of 38L/min. The tests were conducted at Site B, Lens 1 which accounts for about 30% of the project resource and is expected to be the site of initial production. Metallurgical results 4Q14 also demonstrated improved recoveries of 84.9%, which compares with 75% used in the economic model. Test results will be factored into the PFS and are expected to drive a significant reduction in opex, including restoration and reclamation, to ~US$15/lb or lower which compares with US$20.22/lb used in the updated PEA. Pre-production well field costs should also fall, however, overall capex is anticipated to increase modestly to ~US$33-35M with inclusion of an expanded evaporation pond and contingency costs. Feasibility Study and next steps: The PFS is expected Feb 15. The EIS will be submitted shortly thereafter with state approvals anticipated 2H15. The project received the key Operation Licence Oct 13; the final operations permit necessary for project construction is expected 2H15 at which point AEK is expected to make a project development decision. Financing discussions are well advanced in conjunction with uranium forward sales; announcements anticipated 1H15. It is expected the project could carry US$30M in debt with a further US$10M equity required for working capital Regional Prospects: (Uranium, Turkey) AEK is targeting high grade uranium mineralization near Temrezli. There are two key areas of focus: Sefaatli (40km away), and Sorgun (30km away). Sefaatli historic MTA work intercepted uranium mineralization over a 9km strike length. The tenement holds an additional 18km of prospective strike associated with the Tuglu Tepe and Deliler prospects. Drilling 4Q14 (~5,664m) confirmed high grade uranium mineralization including 2.5m at 0.215% U 3O 8 from 82m. The deposit occurs in 5 stacked lenses, is shallow <150m depth, high grade. The deeper mineralisation, below the water table, may be amenable to ISR. Phase 2 drilling anticipated March (6,000m). Resource expected 2H15. West Sorgun drilling confirmed new discovery reported 1Q13. Regional Exploration Target is 30-50mlbs grading % U 3O 8 at Temrezli, Sefaatli and West Sorgun. Uranium Market Outlook: The uranium spot price is US$36.75/lb (26 Jan) having rallied to a recent two year high of US$44/lb (17 Nov '14) up 40% from 30 June low of US$28/lb; the contract price is US$49.50/lb (31 Dec '14). The underlying spot price rally reflects tighter market conditions driven in part by production shutdowns and a boost to sentiment from key approvals for Japanese reactor restarts; and return to the spot and term market of US utilities after a long absence. Further, uranium fund Uranium Participation Corp raised C$57.6M Feb 14 and filed a prospectus Oct '14 to raise a further C$200M - a signal of increasing investor confidence in the sector turnaround. The U.TO share price has been a good leading indicator of the uranium price, and while volatile, there has been a clear uptrend since bottoming Jul '14. A price resurgence to US$60/lb is anticipated 2H16, driven by renewed demand from Japan and ongoing global growth in nuclear reactor construction. Growth is especially strong in China where installed nuclear capacity projections are GWe by 2020, and 200 GWe by 2030 which compares with a 17 GWe capacity today (20 reactors). RCR uranium spot price forecasts are CY14 US$33.21/lb (actual), CY15 US$39.25/lb, CY16 US$50.00/lb, long term US$55/lb (LT contract price US$65/lb). Valuation: RCR s Temrezli project de-risked after tax NPV 10 is A$149M ($0.41/share; discounting US$60lb U 3O 8 long term (real), AUD:USD 0.90) and based on Updated PEA (May 14; see RCR valuation table). Discounting at 8%, after tax NPV rises to US$170M. The project economics are increasingly robust with key engineering parameters confirmed. NPV breakeven is estimated at ~US$30/lb. There is significant potential valuation upside with anticipated ongoing regional exploration success. Peer comparison valuation: based on a valuation measure of US$10/lb attributable uranium resource (MII) from select ISR producer peers in Wyoming, viz: TSX:URE and TSX:URZ (see peer comparison table), AEK valuation is A$0.40/share; or assuming US$15/lb (MI resource) valuation rises to A$0.52/share. Investment Comment: AEK represents one of the best uranium investment opportunities in the sector with low cost production visibility, increasing technical confidence and PFS expected Feb '15. Our 12 month price target for the company is $0.20/share. We anticipate a significant rerating as AEK moves to production in Our 18 month price target is $0.30+/share. The company is currently trading at ~US$2.30/lb (M+I uranium resource) and could be re-rated to US$15/lb in line with Wyoming based peer ISR producers over the next 2 years. AEK s valuation gap compared to Wyoming peers is expected to quickly close in our view, given the high quality of the Temrezli Project, anticipated fast track development decision and financing (expected 2H15), and given that Turkey is a favorable and supportive jurisdiction for mining investment. RCR Jan 2015 Disclaimer & disclosure attached. Copyright 2015 by RCR Pty Ltd. All rights reserved. 2

3 KEY PROJECTS EQUITY RESEARCH Ownership/ JV Target Process Project Project Option Partner Type Route Status Location Temrezli 100% na U Alkaline ISR PFS Turkey Sefaatli 100% na U na Adv. Expl. Turkey West Sorgun 100% na U na Mid Expl. Turkey RESERVES AND RESOURCES/MINERALISED MATERIAL Code for reporting mineral resources - Australian (JORC) CSA Global 2011 Uranium Classification Project Ore U 3 O 8 Cut Off U 3 O 8 U 3 O 8 U 3 O 8 Eq U 3 O 8 Equity Mt % ppm Kt Mlb Mlb Reserves Resources Temrezli Measured 100% Temrezli Indicated 100% Temrezli Inferred 100% Total Mineralised Material (est., non compliant with JORC) Updated PEA (May 2014) comparison with Original PEA (July 2013). Updated PEA cash operating cost US$20.22/lb, capex US$30.2M. Temrezli Project schedule: PFS expected Feb 15. The EIS will be submitted shortly thereafter with state approvals anticipated 2H15. AEK project development decision expected 2H15. Financing discussions are well advanced in conjunction with uranium forward sales - announcements anticipated 1H15. Production potential 2H16. RCR Jan 2015 Disclaimer & disclosure attached. Copyright 2015 by RCR Pty Ltd. All rights reserved. 3

4 EQUITY RESEARCH Location Chart: Turkey. AEK is targeting high grade uranium mineralization. Total regional Exploration Target 30-50mlbs grading % U 3 O 8 at Temrezli, Sefaatli and West Sorgun; adjacent to key infrastructure roads, power and water. Temrezli resource: 13.2mlbs grading % U 3 O 8 (MII) defined over 3km; potential resource upside to 20m-25mlbs U 3 O 8. Sefaatli satellite prospect: 27km of prospective strike, including 18km associated with the Tuglu Tepe and Deliler prospects drilled 4Q14 (~6,500m). High grade uranium mineralization confirmed: best intercept - 2.5m at 0.215% U 3 O 8 from 82m. The deposit occurs in 5 stacked lenses, is shallow <150m depth, high grade, above the water table with open pit potential. Phase 2 drilling anticipated 1H15. RCR Jan 2015 Disclaimer & disclosure attached. Copyright 2015 by RCR Pty Ltd. All rights reserved. 4

5 ANATOLIA ENERGY LIMITED VALUATION EQUITY RESEARCH Base Resource Base NAV Adjusted Equity Val'n NAV Factor Value (%) (US$/lb) (A$M) (%) (A$M) Assumptions LT Realised Uranium Price : US$/lb LT Exchange Rate: AUUS Projects Temrezli project : 100% % Resources and Exploration Temrezli (resource est. +100%) : 100% % Other Sub-total Exploration Assets + Cash Tax losses^^ Liabilities - Debt Corporate Reclamation AEK Net Assets Fully diluted shares (M) Cash on Option Conversion^ AEK Net Asset Value per share : A$/share AEK Net Asset Value Diluted : A$/share dil ^Most options are out of the money: 48M options have a strike price of 18cps ($8.6m); expiry ^^ Tax losses incurred prior to 30 June 2010 have been forfeited. Sensitivity of Net Asset Value to Equity Raising Price: Adjusted Uranium Price Sensitivity (A$M) AEK NAV (assuming A$10M capex raised in share issue at A$0.15) AEK NAV (assuming A$10M capex raised in share issue at A$0.10) AEK NAV (assuming A$10M capex raised in share issue at A$0.08) TEMREZLI URANIUM PROJECT KEY ASSUMPTIONS (derived from Updated PEA - May 2014) RESOURCE ESTIMATES Resource Recoverable Uranium Resource Tonnes Grade Uranium Conversion Uranium Cutoff Mt % U 3O 8 Mlbs % Mlbs Resource (M,I) Temrezli 200ppm Resource (Inf) Temrezli 200ppm RCR modelling assumptions (based on Updated PEA) MINING METHOD PROCESS METHOD IN-SITU RECOVERY (ISR) CENTRALISED URANIUM PLANT 1. Ion exchange 2. Satellite facilities RESOURCE CONVERSION :% 100% (Measured and Indicated) RESOURCE CONVERSION :% 50% (Inferred) BASE CASE ASSUMPTIONS AVERAGE HEAD GRADE - U 3 O 8 :% 0.12 HIGH GRADE :% 0.20 RECOVERY - URANIUM :% 75 URANIUM PRODUCTION :Mlbspa 1.0 PEA assumes 3 year ramp up to 1mlbpa. LOM production total 9.2Mlbs U 3 O 8. CAPITAL COSTS :US$mpa 30.2 ONGOING CAPITAL COSTS :US$Mpa 29.5 OPERATING COSTS: :US$/lb plus royalties/taxes :US$/lb 1.95 Total production costs :US$/lb CORPORATE TAX :% 20 Corporate income tax could fall to 16% with investment tax incentives. ROYALTY :% 5 Net Royalties: Government Right 4%; Discovery Right 1%. MARKETING :% 1 MINE LIFE :Years 10+ Years COMMISSION PROJECT : 1H16 36 month ramp-up. Pre production, wellfield development, centralised processing plant. Includes sustaning capex and wellfield developmentcosts of US$11.29/lb. Estimated royalties (5% of net revenue as per below; approx 3.25% of gross revenues at US$60/lb). These figures are preliminary in nature and are intended to provide only a general indication of project scale and economic robustness. Considerable refinement may result from subsequent studies and operating experience. RCR Jan 2015 Disclaimer & disclosure attached. Copyright 2015 by RCR Pty Ltd. All rights reserved. 5

6 EQUITY RESEARCH ANATOLIA ENERGY PEER COMPARISON EV/RESOURCE RATIO (US$/lb) Uranium Resource Share Price Enterprise Project (direct interest) Shares Current 52w Hi-Lo Debt Cash Other Value Equity Resource Grade EV/resource M LC/sh # LC/sh LC/sh LC$M LC$M LC$M LC$M % M+I,I U 3 O 8 % Mlbs U$/lb Ur-Energy Inc [Comment: (TSX:URE) Lost Creek in production. Commissioned August 2013.] Lost Creek (WY, USA) na na MII M+I Uranerz Energy Corporation [Comment: (TSX:URZ) Nichols Ranch in production. Commissioned April 2014.] Nichols Ranch (WY, USA) na na various MII M+I Peninsula Energy Limited ^ [Comment: (ASX:PEN) Lance Project under construction; final permits received Apr '14 (SML). First production expected 2015.] Lance Project (WY, USA) na na MII M+I Anatolia Energy Limited [Comment: (ASX:AEK) Temrezli funding to be finalised, fast track government and land holder approvals anticipated. Production potential 2016.] Temrezli Project (Turkey) na na MII M+I Alliance Resources Limited [Comment: (ASX:AGS) Four Mile Project in production; commissioned April 2014.] Four Mile Project (Australia) na na MII M+I LC: local currency # Closing share prices as at 29 January ^Debt plus undraw n debt. AUUS: 0.78 Blue indicates comps based on Measured, Indicated and Inferred Resource CAUS: 0.79 Red indicates comps based on Measured and Indicated Resource ANATOLIA's valuation compared to ISR peers indicates there is huge potential for a market rerating as Temrezli fast tracks development and moves from explorer to production in RCR 12 month price target for AEK is 20cps and 18 month target of 30+cps. Chart shows AEK EV to resource (MI) ratio (US$/lb) compared to ISR peers at different stages of development. Source: AEK presentation Nov '14 RCR Jan 2015 Disclaimer & disclosure attached. Copyright 2015 by RCR Pty Ltd. All rights reserved. 6

7 URANIUM PRICE CHARTS EQUITY RESEARCH Long-term and spot average uranium prices: December 2014 (US$/lb). The spot uranium price has risen strongly from a near 10 year low of US$28/lb (30 June 2014) to a recent high of US$44/lb (17 November). The spot price is currently US$36.75/lb (26 Jan). The contract price is US$49.50/lb (31 December) US $/lb U3O8 (month end prices) Long term Spot price Source: Cameco, RCR Uranium Participation Corp (TSX:U) is an exchange traded fund that invests in uranium concentrates - its share price has been a good leading indicator of the uranium price and the below chart shows a clear uptrend since the uranium price bottomed Jun '14. The company raised C$57.6m Feb 14 and filed a prospectus Oct '14 to raise a further C$200M - a sign of increasing investor confidence in the sector. Uranium Participation Corp share price chart: 12 month to 27 January 2015 (C$). RCR Jan 2015 Disclaimer & disclosure attached. Copyright 2015 by RCR Pty Ltd. All rights reserved. 7

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At the date of this report, neither RCR, nor any of its associates, hold any interests or entitlements in shares mentioned in this report with the exception that either or both of John Wilson (either directly or through Resource Capital Investments Pty Limited (RCI)), or RCI, as trustee of the Resource Capital Investments Fund owns shares in Anatolia Energy Limited, RIO and BHP. Analyst Certification: All observations, conclusions and opinions expressed in this report reflect the personal views of RCR analysts and no part of the analyst s or RCR s compensation was, is, or will be, directly or indirectly related to specific recommendations or views expressed in the report. Officers, directors, consultants, employees and independent contractors of RCR are prohibited from trading in the securities of U.S. companies that are, or are expected to be, the subject of research reports or other investment advice transmitted to RCR clients for a blackout window of 14 days extending before and after the date such report is transmitted to clients or released to the market. Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated and Inferred Resources: RCR publishes mineral resources based on standards recognized and required under securities legislation where listed mining and exploration companies make their exchange filings and uses the terms measured", "indicated" and "inferred" mineral resources. U.S. investors are advised that while such terms are recognized and required under foreign securities legislation, the SEC allows disclosure only of mineral deposits that can be economically and legally extracted. 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