Objective Capital's Industrial Metals, Minerals & Mineable Energy Investment Summit 2011 Ironmongers' Hall, City of London 3 November 2011 Speaker: Steven Markey, CRU Strategies

1. INDUSTRIAL METALS, MINERALS
& MINEABLE ENERGY
INVESTMENT SUMMIT
Uranium post-Fukushima: the impact on equities
Philip Macoun – CRU Strategies
IRONMONGERS’ HALL, CITY OF LONDON THURSDAY, 3 NOV 2011
www.ObjectiveCapitalConferences.com

2. Uranium Post Fukushima – the Impact on Equities?
Philip Macoun

3. Uranium equities - Dumped in March, then it just got worse
CRU | THE INDEPENDENT AUTHORITY 3

4. Continuing lack of interest – volumes are minimal
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5. Even less interest in physical U3O8
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6. Presentation Outline
• Introduction to CRU
• A brief look at the fundamentals
• Mining costs
• Will uranium attract sufficient investment to meet future
supply needs?
• Summary
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7. Presentation Outline
• Introduction to CRU
• A brief look at the fundamentals
• Mining costs
• Will uranium attract sufficient investment to meet future
supply needs?
• Summary
CRU | THE INDEPENDENT AUTHORITY 7

11. In Uranium.....
Published
reports and
consulting
assignments
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12. Presentation Outline
• Introduction to CRU
• A brief look at the fundamentals
• Mining costs
• Will uranium attract sufficient investment to meet future
supply needs?
• Summary
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13. Short term impact of Fukushima on demand is significant;
longer term a reduction of around 3-4% per annum.
Net Primary Demand, pre-Fukushima forecast vs. preliminary post-Fukushima numbers
Pre-Fukushima Preliminary Post-Fukushima
100
Short-term down10-20% per annum
90
80
70
60
kt U 3 O8
50
40
30
20
10
0
2009 2010 2011 2012 2013 2014 2015 2016
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14. Mine supply has the potential to outstrip demand in the
short-term...
120
Almost 6% growth per annum in potential supply
100
Potential Supply kt U 3 O8
80
60
40
20
0
2009 2010 2011 2012 2013 2014 2015 2016
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15. Our five year balance: Short-term downward pressure on
price; we are still short of uranium in 5 years time
15
Balance mostly taken up by
reduction in supply and
10
Chinese strategic stockpiling
5
0
kt U 3 O8
2009 2010 2011 2012 2013 2014 2015 2016
-5
-10
China Strategic stockpiling
-15
-20
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16. Presentation Outline
• Introduction to CRU
• A brief look at the fundamentals
• Mining costs
• Will uranium attract sufficient investment to meet future
supply needs?
• Summary
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17. Costs at ISL mines are more exposed to consumable prices;
conventional mines are more sensitive changes to labour rates.
Cost breakdown 2010, by input and mine type, weighted average according to 2010 production
Labour Energy Consumables Services and Maintenance Capital
100%
7% 5% 5%
4% 5%
90%
80% 21%
22%
Averaging almost 30%
70%
80% H2SO4 3%
60%
50% 17%
51%
40%
65%
30%
20% 44%
6%
10%
14%
0%
ISL Open pit Underground
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18. Sulphuric acid prices have risen considerably since 2009
increasing costs at ISL mines particularly in Kazakhstan
Sulphuric Acid Sulphur
Western Australia South Africa Black Sea FOB Vancouver
300 500
450
250 400
350
200
300
$/tonne
$/tonne
150 250
200
100 150
100
50
50
0 0
2006
2008
2009
2010
2011
2012
2013
2014
2015
2007
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
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19. The commodities boom has lead to a severe shortage of skilled
labour in the mining industry – uranium is no exception...
60
USA Canada Australia
50
Labour rates in nominal US$/hr
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ... 2015
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19

20. ...US dollar depreciation has compounded the problem in
Australia and Canada, reducing competitiveness...
Canadian Dollar Australian Dollar RSA Rand
Zambian Kwacha Russian Rouble Kazakh Tenge
Appreciation Depreciation
180
Index: Local currency vs. US$
160
140
120
100
80
60
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
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21. ...however steep rises in wages are expected in the
developing world.
16
Kazakhstan Russia South Africa
14
12
Labour in nominal US$/hr
10
8
6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ... 2015
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22. Average costs in US Dollars are up more than 20% in 2010
compared to 2009
Business Costs Curve 2010
50
45
40
Nominal US$/lb of U 3 O8
35
30
25
20
15
10
5
0
0 10000 20000 30000 40000 50000 60000
Cumulative Production (tonnes U 3 O8 )
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23. The project pipeline: lower grades and a smaller resource
base on average...
1000
Closed Mine
Operating Mine
100
Grade (kg U3O8/t)
Development
Feasibility
Exploration
10 Stalled
1
0.1
0.1 1 10 100 1000 10000
Pre-Mined Resource (mt ore)
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24. ...over the long term we still expect that a price over $60 will
be required to attract sufficient new supply.
Economic Costs Curve, 2030, 90th percentile
160
140
120
Nominal US$/lb of U 3 O8
LRMC at $97/lb, or $63/lb in real terms
100
80
60
40
20
0
0 20 40 60 80 100 120 140 160 180
Cumulative Production ('000 tonnes U 3 O8 )
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25. Breakdown of uranium supply
Uranium supply, by source type and by country
Secondary Supply Reprocessed material from
surplus nuclear weapons or used
fuel
Primary Supply Mined uranium
Data: CRU

26. What is happening to primary supply ?
Even after the impact of Fukushima on the demand outlook, the
supply of primary uranium will need to nearly double by 2020
160000
140000
120000
100000 Secondary
80000
Primary
60000
40000
20000
0
2010 2020
26

27. What is happening to primary supply ?
Even after the impact of Fukushima on the demand outlook, the
supply of primary uranium will need to nearly double by 2020
Primary
160000
supply
140000 must
120000 increase
100000
by 98% !
80000 Secondary
Primary
60000
40000
20000
0
2010 2020
27

28. Presentation Outline
• Introduction to CRU
• A brief look at the fundamentals
• Mining costs
• Will uranium attract sufficient investment to meet future
supply needs?
• Summary
CRU | THE INDEPENDENT AUTHORITY 28

29. The uranium price has outperformed all base metals over the
last decade...
Base metals index: Aluminium, Copper, Lead, Nickel, Tin and Zinc
Uranium Oil Aluminium Copper Lead Nickel Tin Zinc
Base Metals Uranium
1400
1400
1200
1200
Price Index: 2000=100
1000
Price Index: 2000=100
1000
800
800
600
600
400
400
200
200
0
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011f
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011f
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30. ...however prices have tracked much more closely over the
last five years
Base Metals Uranium
250
200
Price Index: 2006=100
150
100
50
0
2006 2007 2008 2009 2010 2011
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31. Compared to other mined commodities uranium prices are
expected to perform well over the next 5 years...
Arid Tin, Zinc, Uranium, Nickel, Aluminium,
(+15%) Molybdenum, Vanadium, Alumina, Cobalt
Tropical Manganese, Copper, Lead, Palladium
(0 to +15%)
Platinum, Potash, Iron Ore, Finished Steel (HRC)
Temperate
(0 to -15%)
Met Coke, Phosphate Rock, Tungsten, Gold
Ammonia, Coking Coal, Urea, Sulphuric Acid,
Polar Silver, Sulphur
(-15%)
Source: CRU Note: * 2016 annual outturn price forecast CRU | THE INDEPENDENT AUTHORITY 31
(Nominal US$ or benchmark) versus Sep 2011 spot

32. However, from an investors perspective the ideal commodity
is NOT all about price!
Demand Issues
Supply Constraints Regional issues – what are
the market now and in the
is there a scramble emerging? the risks?
future
Consumption growth Resource availability Entry opportunities
Substitution Supply response Attitude to mining
Recyclability Producer consolidation Synergy issues
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33. Uranium has been scored against a number of other
commodities...
Therm Coal
Aluminium
Uranium
Met Coal
Iron Ore
Nickel S
Nickel L
Weight
Copper
Potash
Silver
PGM
Gold
Zinc
Tin
Consumption growth 1 4 4 3 3 3 2 3 3 3 2 4 4 2 3
Substitution 1 3 4 4 4 3 2 4 3 3 3 4 4 2 3
Recycling 1 4 5 3 2 5 1 5 3 3 3 3 2 1 3
Resources 1 3 2 1 4 2 3 5 5 3 4 3 3 2 2
Supply Response 1 4 4 4 4 2 2 3 4 2 3 3 4 2 3
Producer
consolidation level 1 3 5 4 4 2 0 3 2 2 3 3 3 0 2
Entry Barriers 1 2 4 4 3 3 1 4 2 4 2 3 4 2 2
Attitude to mining 1 2 3 4 2 4 4 4 4 2 3 3 2 4 4
Synergy / Technical
Match 1 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5
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34. ...and ranks highly despite a higher risk profile.
40
Demand Supply Risk
35
30
25
Score
20
15
10
5
0
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35. Presentation Outline
• Introduction to CRU
• A brief look at the fundamentals
• Mining costs
• Will uranium attract sufficient investment to meet future
supply needs?
• Summary
CRU | THE INDEPENDENT AUTHORITY 35

36. Conclusions
Uranium – Post Fukushima?
• The market impact of Fukushima
– Significant in the short-term – to both demand and sentiment
– Has not greatly altered the long-term demand
– Life is now much more difficult for new projects
• Mining costs have risen above pre-global financial crisis
levels...
• ...and are expected to rise further as projects in the pipeline
have lower grades and a smaller resource base on average
• But – to meet rising demand, primary supply must double
• Prices will need to rise to attract new investment
• Uranium should be an attractive commodity for companies
and long-term investors going forward
CRU | THE INDEPENDENT AUTHORITY 36

37. Thank you
CRU contacts for further information:
In London
Philip Macoun, Principal Consultant, CRU Strategies
(+44 20 7903 2200 * philip.macoun@crugroup.com
Ian Hiscock, Consultant, CRU Strategies
(+44 20 7903 2244 * ian.hiscock@crugroup.com
In the USA
Irv Adler, VP, Business Development, North America, CRU
(+1 260 918 3643 * irv.adler@crugroup.com
In Sydney
Philip Sewell, Business Development Manager, Australasia, CRU
(+61 2 9387 8842 * philip.sewell@crugroup.com
In Perth
Allan Trench, Regional Director, Australasia, CRU
(+61 (0)43 709 2466 * allan.trench@crugroup.com
Website: www.crugroup.com
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