Uranium Investment Pure Commodity Play. November 2017 Investor Update

Transcription

1 Uranium Investment Pure Commodity Play November 2017 Investor Update

2 Cautionary Statements This presentation contains certain forward-looking statements and forward-looking information based on the current internal expectations, estimates, projections, assumptions and beliefs of Uranium Participation Corporation ( Uranium Participation Corp. or the Corporation ). Forward-looking 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, forward-looking 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, available on SEDAR, included under Risk Factors. These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forwardlooking 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 or statement. This presentation contains information and statistics relating to the global uranium and nuclear power industries. With respect to information and statistics derived from third-party publications and reports, while the Corporation believes these third party sources are reliable as of their respective dates, the information and statistics has not been independently verified by the Corporation or any of their affiliates or advisers. Such information and statistics may be inaccurate and we cannot assure you the degree of accuracy with which such information and statistics are stated or compiled. None of the Corporation, nor any of its affiliates or advisers, makes any representation as to the accuracy or completeness of such information and statistics. Readers should not place undue reliance on any of such information and statistics contained in this presentation. TSX: U 2

3 Investment Strategy Primary objective: To achieve appreciation in the value of its uranium holdings through increases in uranium price Investment strategy: Buy and hold physical uranium inventories for long-term appreciation; Does not actively speculate on uranium prices Investor profile: Commodity focused or generalist investors looking for direct exposure to uranium prices UPC holds physical uranium in inventory No mineral resource or project risks No mine or processing operating risks At least 85% of the net proceeds of equity offerings is to be invested, or held for investment, in uranium holdings TSX: U 3

4 Business Structure & Activities UPC (TSX: U) is a publically traded corporation UPC is not an ETF or closed or open end fund Activities are directed by an independent Board of Directors Denison Mines Inc. serves as the Company s Manager, under a management services agreement, and takes direction from the UPC Board of Directors Purchase or sale of uranium holdings at Board s discretion Ability to manage premium/discount to Net Asset Value (NAV) 1 NCIB: to repurchase of shares if trading at a discount Shelf prospectus: to issue equity if trading at a premium Standard corporate reporting and fiduciary responsibilities (1) Subject to applicable regulatory approval(s) TSX: U 4

5 UPC Uranium Investment Portfolio As at October 31 st, 2017 UPC Investments in Uranium Quantity CAD$ Fair Value Uranium oxide in concentrate (U 3 O 8 ) 10,680,024 lbs $274,706,000 Uranium hexafluoride (UF 6 ) 1,903,471 KgU $138,046,000 Total Uranium Fair Value $412,752,000 U 3 O 8 Average Fair Value per lb. Fair Value In Canadian dollars (1) $25.72 In United States dollars $19.95 UF 6 Average Fair Value per KgU. Fair Value In Canadian dollars (1) $72.52 In United States dollars $56.25 (1) Fair values are month-end spot prices published by Ux Consulting Company, LLC, translated at the month-end noon exchange rate of $ TSX: U 5

6 Uranium Price History Current uranium prices similar to price levels in , prior to rapid rise in spot and long-term prices in 2007 on significant cyclical contracting volumes Source: UxC Consulting Company, LLC ( UxC ) TSX: U 6

7 Uranium Price History Source: UxC Consulting Company, LLC ( UxC ) TSX: U 7

8 Premium (Discount) to NAV CAD$40.6M financing announced Sept. 25, CAD$3.50/share Source: Company Data TSX: U 8

9 Compelling Entry Point Uranium fundamentals setting the stage for a meaningful turnaround? 2015 & 2016: highest annual growth in nuclear capacity in 25 years Significant production cuts from world s largest producers Uncovered utility demand reaches ~21% by 2020 and 65% by 2025 Sustained low price environment means very few new sources of supply in the pipeline Uranium holdings could be of strategic interest Utilities looking for risk-free way to acquire significant supplies for future Implied value is lower than many miners cost of production The majority of the material purchased by utilities is contracted based on the long-term price (currently US$31.00/lb U 3 O 8 ), while UPC s NAV is reported based on the spot price TSX: TSX: U U 9 9

10 2015 & 2016: Highest annual growth in nuclear capacities in 25 years China Plans to build 99 reactors by 2030 Government investment of over USD$100Bn India 25% nuclear energy powered by 2050 Russia 7 reactors under construction An average of one large reactor per year is due to come on line to 2028 Saudi Arabia Global Reactor Count 447 Plans to build 16 reactors by 2030 First reactor to come online in South Korea 25 reactors provide 1/3 of South Korea s power Building reactors on budget & on time in UAE Source: UxC, World Nuclear Association ( WNA ), Institute For Energy Research Construction Ordered Or Planned Proposed Operating TSX: U 10

11 Global Drivers For Nuclear Power Clean Air & Climate Change Reliable & Affordable Electricity Energy Diversity Economic Growth & Job Creation Did You Know? One uranium fuel pellet (about the size of your fingernail) produces the same energy as: 17,000 cubic feet of natural gas 149 gallons of oil 1,780 pounds of coal Source: Nuclear Energy Institute TSX: U 11

12 China s 13 th 5-Year Plan In 2015, China s CO 2 emissions from energy use declined by 0.1%, the first decline in emissions since 1998 Nuclear power grew by 28.9%, more than doubling the 10-year average of 12.4% Massive Chinese Nuclear Buildout 37 reactors in operation 20 under construction 40 planned 143 proposed 240 total reactors on the horizon Hydro Tidal and Wave Wind Nuclear Biomass Solar CSP Geothermal Solar PV Wind + gas backup Natural Gas Oil Coal CO 2 Emissions by Energy Source Grams per Kilowatt-hour ,001 TSX: U 12 Source: WNA, UxC Uranium Market Outlook Q3 2017, BP China Energy Market Statistical Review, Intergovernmental Panel on Climate Change

13 Chinese Nuclear Renaissance China Growth: U 3 O 8 Demand, Reactor Units & Capacities Reactor Units (Per UxC Q3'2017) China has pledged to produce 15% of its primary energy from non-fossil sources by % of its primary energy from non-fossil sources by Units Electrical Capacity Gwe : China accounted for 23% of global energy consumption 34% of net energy consumption growth. Source: UxC Uranium Market Outlook Q3 2017, BP China Energy Market Statistical Review TSX: U 13

14 Production Cutbacks Continue Cameco 2017: McArthur/Key Lake to be suspended for 10 months in Jan Estimated ~14-15 million lbs U to be curtailed at a minimum AREVA 2017: At NEI WNFC (Toronto) announced 2017 guidance would be between 13% and 16% lower at Somair & Cominak Various news outlets suggest further cuts expected Kazatomprom 2017: Various projects to be curtailed such that uranium production for 2017 is reduced by ~10% (+5 million lbs U ) Equates to ~3% of the total world uranium production Cameco 2016: Rabbit Lake Suspended Operations (4 million lbs U /yr) McArthur - Reduction (2 million lbs U /yr) U.S. Operations Suspending Operations (2.5 million lbs U /yr) Paladin August 2016: Langer Heinrich revised plan; Reduction of 1.5 million lbs U /yr Suspended mining to process stockpiles TSX: U 14

15 Favorable Fundamentals Market Demand vs. Mid-Case Production (million pounds U 3 O 8 - per UxC Q3'2017) Analysts and industry experts point to looming supply shortfall Declining production profile 2016 production: 163.4M lbs 2017 forecast: 154.4M lbs Ext. Mines New Mines Secondary High Demand* Base Demand* * includes inventory build With necessary new mine production difficult to incentivize without significant increases in commodity price, and pressure on existing operations expected as contracts expire, low production scenario is plausible. Source: UxC Uranium Market Outlook Q TSX: U 15

16 1.2 Billion lbs. of Required Contracting by Utility Uranium Requirements (million pounds U 3 O 8 - per UxC Q3'2017) Covered Demand Uncovered US Utilities Uncovered Non-US Utilities Covered* *Covered does not include inventory build Source: UxC Uranium Market Outlook Q Uncovered Demand Year Utility Contracting Volumes Spot Volume (Million lbs) Uncovered demand: ~21% uncovered in % uncovered by 2025 Long-Term Volume (Million lbs) Utility long-term contracting volumes are ~75% below height in 2005 bull market Large volumes of long-term contracts from beginning to roll off and must be replaced TSX: U 16

17 Why Invest in Uranium? Curtailments by top producers are helping to balance market The uranium spot price is near a 12-year low, similar to late 2016 when the price found support at the USD$20/lb level, before bouncing over 40% At USD$20/lb, even the lowest cost uranium mining operations in the world struggle to break-even on an estimated all-in cost/lb basis Global growth in nuclear power is accelerating 2015 & 2016: Highest annual growth in annual capacity in 25 years 447 units operable, with 58 units under construction on order/planned and 349 proposed in countries around the world Case for potential supply shortage & upward pressure on price Price spike in 2007 was associated with significant long-term utility contracting volumes, which are rolling off in the coming years, and could trigger a new contracting cycle Uncovered demand reaches 21% by 2020 and 65% by 2025 Sustained low price environment means few significant sources of new supply are in the development pipeline to meet growing demand TSX: TSX: U U 17 17

18 Corporate Information Market Summary Management & Directors Exchanges TSX: U David Cates (President & CEO) Shares Outstanding (1) M Mac McDonald (Chief Financial Officer) Warrants (1) nil Scott Melbye (VP Commercial) Options (1) nil Fully Diluted Shares (1) M Paul J. Bennett (Director) Share Price (2) CAD$3.53 Thomas Hayslett (Director) Market Cap (2) CAD$426.4M Jeff Kennedy (Chairman) Daily Trading Volume (3) 221,228 shares Garth A.C. MacRae (Director) (1) As of August 31 st, 2017 per UPC s Interim Financial Statements (2) Based on shares outstanding above and UPC share price as at September 29 th, 2017 (3) Average daily trading volume over the 3-months ended September 29 th, 2017, per Bloomberg Ganpat Mani (Director) Dorothy Sanford (Director) Proudly managed by: TSX: DML NYSE MKT: DNN TSX: U 18

19 Notes

20 Investor Update TSX: U For Further Information: Phone: x366 info@uraniumparticipation.com Online: uraniumparticipation.com