Investor Update August 2014

Transcription

1 Investor Update August 2014

2 2 Cautionary Statements This presentation contains certain forward-looking statements and forward-looking information that are based on the current internal expectations, estimates, projections, assumptions and beliefs of Uranium Participation Corporation ( Uranium Participation Corp. or the Corporation ). Forwardlooking statements generally can be identified by the use of forward-looking terminology such as may, will, expect, intend, estimate, anticipate, plan, should, believe or continue or the negative thereof or variations thereon or similar terminology. By their very nature, forwardlooking statements involve numerous factors, assumptions and estimates. A variety of factors, many of which are beyond the control of Uranium Participation Corp., may cause actual results to differ materially from the expectations expressed in the forward-looking statement. These factors include, but are not limited to, volatility and sensitivity to market prices for uranium, demands for nuclear power and the impact of change in foreign currency exchange. Additional information about the material factors or assumptions on which forward-looking information is based and the material risk factors that may affect actual results is contained in the Corporation s Annual Information Form dated May 5, 2014, included under Risk Factors. These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forward-looking statements. Although management reviews the reasonableness of its assumptions and estimates, unusual and unanticipated events may occur which render them inaccurate. Under such circumstances, future performance may differ materially from those expressed or implied by the forward-looking statements. Except where required under applicable securities legislation, Uranium Participation Corp. does not undertake to update any forward-looking information statement.

3 3 Global Nuclear Trends/Issues Traditional 20 countries with nuclear power in steady state, but a few in slow decline Currently 30 countries with nuclear power capacity Up to 20 serious newcomer states About 10 fast growth/new build expansion countries Japanese restarts a big question Two units possibly by early 2015 Restart applications for 19 units have been submitted UxCo estimates units operating by 2018.

4 Demand Growth Fueled by New Builds 4 China India Russia USA Japan UAE Ukraine South Korea Top 3 represent over 60% of the 545 reactors under construction, planned or proposed Source: World Nuclear Association, August 2014 Under Construction Planned Proposed

5 5 China Nuclear Plans Post-Fukushima, complete review undertaken of existing nuclear regulations and safety features Delays in new construction approvals linked to government s need to gain public acceptance in nuclear program October 2012, State Council approved new nuclear safety plan and new nuclear energy targets 58 GWe by 2020, 96 GWe by 2025 Currently 20 operating units ~17 Gwe Under construction: 29 units / ~33 GWe should all be online by mid-2018

6 6 World Nuclear Power Reactors Today there are 94% more reactors under construction and planned than at the peak of the nuclear renaissance in Source: Ux Consulting, World Nuclear Association Proposed Planned Under Construction

7 U 3 O 8 Daily and Long-term Prices 7 $80.00 (US$/lb U 3 O 8 ) $70.00 $60.00 $50.00 $40.00 Daily Price Long-term Price $30.00 $20.00 January August 2014 Published by UxCo

8 Why is Uranium Price Falling Oversupply situation Lack of demand due to Japanese situation Uranium demand down approximately million lbs. to 167 million lbs. Too much supply Primary production million lbs. Secondary supplies 54.6 million lbs. End of HEU impact is mixed Reduced supply from Russian warheads Excess enrichment capacity

9 Nuclear Fuel Cycle Uranium Mining and Milling Waste Management Program U 3 O 8 U 235 = 0.711% Spent Fuel Storage at Reactors Conversion to UF 6 Reprocessing Spent Fuel Light Water Power Reactors Natural UF 6 U 235 = 0.711% UO 2 Fuel Rods Enrichment U 235 = % Depleted UF 6 Tails U 235 = % Low Enriched UF 6 Fuel Fabrication

10 10 Primary Uranium Supply Uranium production continues to increase even at low uranium prices Production increased by 8.8% from 2011 to production up by 1.7% Production concentrated in hands of mega-producers 9 producers represent ~90% of world production Various new projects have been canceled/delayed AREVA, BHP, Cameco, and Uranium One have all altered plans Production cuts limited to date Kayelekera (3.3 Mlbs), U.S. mines (1.5 Mlbs), Rossing (limited) Issue is majority of high cost production is hedged

11 Long Term Contracting Volume ( 90 14) UxC M lbs. U 3 O 8 e US$ per lb. U 3 O U.S. Utilities Non-U.S. Utilities Long Term Price Source: Uranium Market Outlook, Q2 2014

12 Historical Supply Million pounds U3O8 275 Eastern Production 250 Western Production Commercial Requirements 225 Spot Price Three Mile Island March 1979 UxC Chernobyl April 1986 US$/lb U3O8 $99 Fukushima $90 March 2011 $81 $72 $63 $54 $45 $36 $27 $18 $ $0

13 13 Secondary Supplies Russian HEU Deal ended in 2013 Russia could still use HEU internally, but no chance of HEU-II deal U.S. Department of Energy excess uranium inventories are lower, but still substantial 111 million pounds U 3 O 8 equivalent in 2012 Russian government still holds large quantities in various forms Russia intends to mainly use its own inventories to fuel domestic reactors Commercial inventories held by utilities and suppliers Japanese utilities sitting on as much as 100 million pounds U 3 O 8 e Enrichers will continue to underfeed plants, especially URENCO and Russia (14 15 million lbs. Bottom Line: secondary supplies will continue to be a low cost supply source through 2020 and beyond at 8-15% of total supply.

14 14 Near Term Uncovered Demand UxC Lbs. U 3 O 8 (million) Non-U.S. Utilities U.S. Utilities Base Demand - Source: Uranium Market Outlook, Q2 2014

15 15 Annual Spot Price Projections $80.00 (US$/lb U 3 O 8 ) $70.00 $60.00 $50.00 $40.00 Low Price Mid Price High Price $30.00 $20.00 Source: Uranium Market Outlook, Q2 2014, Ux Consulting Company

16 UPC ACTIVITIES 16

17 17 Investment Strategy At least 85% of net proceeds of any equity offering is invested in uranium Primary objective is to achieve appreciation in the value of its uranium holdings Investment strategy is to buy and hold and not to actively speculate on short-term prices

18 Investment Portfolio - 07/31/14 (All figures are CDN$ 000s except per/unit costs) 18 Investments in Uranium: COST MARKET U 3 O 8 8,676,811 lbs $409,301 $269,298 UF 6 2,153,471 KgU $353,357 $187,727 1 TOTAL: $762,658 $457,025 U 3 O 8 average cost and market value per pound: In CAD $ $ In USD $ $ UF 6 average cost and market value per KgU: In CAD $ $ In USD $ $ ) Includes a Cdn$4.0 million fair value adjustment for inventory held at USEC. 2) Converted at the July 31, 2014 exchange rate of $

19 Equity Performance 19

20 20 Premium (Discount) to NAV 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% (As of July 31, 2014)

21 21 Share Price & NAV/share $20.00 $15.00 $10.00 $5.00 $0.00 SHARE PRICE NAV/SHARE (As of May 30, 2014)

22 22 Storage Facilities Cameco Eurodif USEC LES ConverDyn Comurhex U 3 O 8 UF 6

23 23 Corporate Information Exchange TSX:U Ron Hochstein (President & CEO) Shares Outstanding M Jim Anderson (CFO) Market Cap. $614 M Dick McCoy (Chairman) (as of July 31, 2014) Paul Bennett (Director) Thomas Hayslett (Director Net Asset Value $484.9 M Jeff Kennedy (Director) NAV/Share $4.15 Garth MacRae (Director) (as of July 31, 2014) Cash $30.6 M Liquidity (3 mos. avg) 497,000 Ganpat Mani (Director)

24 24 Ron F. Hochstein, President & C.E.O. 595 Bay Street, Suite 402 Toronto ON M5G 2C2 Tel: