Uranium Investment Pure Commodity Play July 2016 Cautionary - - PowerPoint PPT Presentation

Uranium Investment

Pure Commodity Play

July 2016

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.”

• r 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 dated May 11, 2015, 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 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.

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Investment Strategy

• Primary objective: to achieve appreciation in the value of its

uranium holdings through increases in uranium price

• Investment strategy: to buy and hold uranium inventories and

not to 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 any equity offering is to be invested in uranium holdings

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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

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(1) Subject to applicable regulatory approval(s)

Uranium Investment Portfolio

Investments in Uranium Quantity CAD$ Fair Value

Uranium oxide in concentrate (U3O8) 9,470,024 lbs $332,628,000 Uranium hexafluoride (UF6) 1,903,471 KgU $187,027,000(1) Total Investments in Uranium $519,655,000

U3O8 Average Fair Value per lb. CAD$ Fair Value

• In Canadian dollars(2)

$35.12

• In United States dollars

$27.00

UF6 Average Fair Value per KgU. CAD$ Fair Value

• In Canadian dollars(2)

$98.26

• In United States dollars

$75.53

(1) The fair value of UF6 has been reduced by $1,167,000 to reflect the risk associated with the remaining material held at the USEC Facility, as further described in the Company’s MDA for the period ended Feb. 29, 2016 (2) Canadian dollar denominated fair market values are based on month-end spot prices published by Ux Consulting Company, LLC translated at the month-end noon exchange rate of $1.3009.

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As at June 30th, 2016

Uranium Price History

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Current uranium prices similar to price levels in 2005, prior to rapid rise in spot and long-term prices in 2007 on significant cyclical contracting volumes

Source: UxC Consulting Company, LLC (“UxC”)

Uranium Price History

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Source: UxC

Premium (Discount) to NAV

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Is investor perception a good indicator for uranium price movements in the near future?

Source: Company Data

Compelling Entry Point

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• Implied price of U3O8 of less than US$24.00/lb

– CAD$4.00 share price translates into an implied price of U3O8 equivalent held by UPC of less than US$24.00/lb U3O8 – Historically there have been few opportunities to acquire UPC at such an attractive “discount” to NAV (8-12%) while uranium prices are also at historic lows

• Inventory could be of strategic interest

– Utilities looking for a risk-free way to procure significant supplies for future years – 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$41.00/lb U3O8), while UPC’s NAV is reported based on the spot price

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Current Trend is an Anomaly / Opportunity

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Source: UxC

UPC at Historically Low Share Price

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Source: UxC

Dramatic Growth in Nuclear Energy

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• Highest annual growth in 25 years
• Global addition to nuclear capacity in 2015

hit 10.2GW, the most in 25 years

• Operable & Pipeline Reactors
• 440 units currently operable (30 countries)
• 65 new reactors under construction
• 173 on order or planned, 337 proposed
• China investing USD$780Bn by 2030
• Plans to build 110 reactors by 2030
• India: 25% nuclear energy by 2050
• Japan recovery gaining strength
• Imports 84% of its energy requirements
• 5 units expected back in commercial
• peration this year
• 24 more in process of licensing restart

Source: UxC, World Nuclear Association (“WNA”), The Independent

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China’s 13th 5-Year Plan

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• Accelerating construction plans
• 33 reactors in operation
• 21 under construction (+69%)
• 42 planned (+191%)
• 136 proposed (+603%)
• 6-8 reactors to be approved each year
• 29 GWe currently
• 58 GWe by 2020-21 (+100% from today)
• 150 GWe by 2030 (+417% from today)
• Focus on air pollution crisis and COP21
• Moratorium on new coal power plants

Source: UxC, World Nuclear Association (“WNA”), The Independent

“More than a thousand new nuclear reactors may be constructed and commissioned by 2050” (Agneta Rising, director general of WNA)

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Chinese Nuclear Renaissance

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Source: UxC

• China has pledged to

produce 15% of its primary energy from non-fossil sources by 2020

• And 20% of its primary

energy from non-fossil sources by 2030

• Currently obtains only

12% of its primary energy from non-fossil sources

• Nuclear Energy is the

primary vehicle to achieve this objective

1 Metric Ton = 2,204 Pounds

Global Growth in Nuclear Capacities

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+ 37%

• Expected global

nuclear capacities increasing by 37% from 2015 to 2030 (~2.5%/year on avg.)

• Growth is driven by

emerging Chinese & Indian nuclear energy programs with a primary objective of increasing sources of clean power

Source: UxC

+75% of 2025 Requirements Uncovered

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• Uncovered demand

reaches ~25% in 2019 and rises dramatically thereafter

• Utility long-term

contracting volumes required to return to “normal” levels (+200 Mlbs/year) to replace long-term contracts from 2006-2008 which are falling off

• 2011-2015 long-term

contracting levels remained low, with <100 Mlbs/year

Source: UxC

Strong Uranium Market Fundamentals

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• Analysts and industry

experts point to looming supply shortfall

• Existing production

sources generally flat around 150 Mlbs/year

• Timing depends on

demand growth and ability for new mine production to emerge and “fill the gap”

• Will new production

be incentivized if prices remain low?

Source: UxC

Uranium Pure Play Potential

• UPC is a unique investment opportunity

– Company buys and holds physical uranium inventories and does not to actively speculate on uranium prices – Provides investors with pure uranium play potential with no exposure to mineral resource, project or mine operating risk

• UPC offers exposure to commodity price change

– Spot price spike in 2007 associated with significant long-term contracting cycle – with many of those 8-10 year contracts expected to fall off in coming years – Uncovered demand reaches ~25% by 2019 and rises to +75% by 2025 – suggesting need for significant long term contracting

• UPC is trading at a significant discount to NAV

– “Negative” stock sentiment despite strong fundamental case for potential supply shortage and upward pressure on uranium prices

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Corporate Information

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Market Summary Management & Directors

Exchanges TSX: U David Cates (President & CEO) Shares Outstanding(1) 115.6 M Mac McDonald (Chief Financial Officer) Warrants(1) nil Scott Melbye (VP Commercial) Options(1) nil Fully Diluted Shares(1) 115.6 M Paul J. Bennett (Director) Share Price(2) CAD$4.03 Thomas Hayslett (Director) Market Cap(2) CAD$466.06 M Jeff Kennedy (Director) Daily Trading Volume(3) 383.98 shares Garth A.C. MacRae (Director) Ganpat Mani (Director) Dorothy Sanford (Director) Richard H. McCoy (Chairman)

(1) As of May 5, 2016 – per UPC’s Feb. 29, 2016 Annual Report (2) Based UPC share prices as of June 30, 2016 and shares outstanding above (3) Average daily trading volume over the 3 months ended June 30, 2016

Proudly managed by:

TSX: DML | NYSE MKT: DNN

For Further Information:

Phone: 416.979.1991 x366 Email: info@uraniumparticipation.com Online: www.uraniumparticipation.com

Investor Update TSX: U