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. ” 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 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. TSX: U | 2

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 TSX: U | 3

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

Uranium Investment Portfolio As at June 30 th , 2016 Investments in Uranium Quantity CAD$ Fair Value Uranium oxide in concentrate (U 3 O 8 ) 9,470,024 lbs $332,628,000 Uranium hexafluoride (UF 6 ) 1,903,471 KgU $187,027,000 (1) Total Investments in Uranium $519,655,000 U 3 O 8 Average Fair Value per lb. CAD$ Fair Value • In Canadian dollars (2) $35.12 • In United States dollars $27.00 UF 6 Average Fair Value per KgU. CAD$ Fair Value • In Canadian dollars (2) $98.26 • In United States dollars $75.53 (1) The fair value of UF 6 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. TSX: U | 5

Uranium Price History 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 ”) TSX: U | 6

Uranium Price History Source: UxC TSX: U | 7

Premium (Discount) to NAV Is investor perception a good indicator for uranium price movements in the near future? Source: Company Data TSX: U | 8

Compelling Entry Point • Implied price of U 3 O 8 of less than US$24.00/lb – CAD$4.00 share price translates into an implied price of U 3 O 8 equivalent held by UPC of less than US$24.00/lb U 3 O 8 – 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 TSX: U TSX: U | 9 | 9

Current Trend is an Anomaly / Opportunity Source: UxC TSX: U | 10

UPC at Historically Low Share Price Source: UxC TSX: U | 11

Dramatic Growth in Nuclear Energy • 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 operation this year  24 more in process of licensing restart Source: UxC , World Nuclear Association (“WNA”), The Independent TSX: U | 12 TSX: U | 12

China’s 13 th 5-Year Plan “More than a thousand new nuclear reactors may be constructed and commissioned by 2050” (Agneta Rising, director general of WNA) • 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 TSX: U | 13 Source: UxC , World Nuclear Association (“WNA”), The Independent TSX: U | 13

Chinese Nuclear Renaissance • 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 Source: UxC TSX: U | 14

Global Growth in Nuclear Capacities • Expected global nuclear capacities + 37% 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 TSX: U | 15

+75% of 2025 Requirements Uncovered • 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 TSX: U | 16

Strong Uranium Market Fundamentals • 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 TSX: U | 17