Investing in Today's Uranium Market Challenges and Opportunities

by MZConsulting Inc

Milton Caplan, President, Dr. Terry Thompson, Senior Advisor

Presented at China Mining2008 November

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Outline

• Demand for Uranium

• Current State of the Market

• Strategies for Success

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Nuclear Power 2008

• Nuclear renaissance takes hold• New orders in China• France starts construction on Flamanville• Contracts signed in the USA• UK Government confirms support for nuclear new

build and British Energy to be sold to EDF• Ontario Canada starts bidding process for new

units• 36 units under construction, 99 planned and 232

proposedSource: WNA 10/08/08

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Uranium Supply and DemandtU

Source: WNA Market Report

“The global nuclear fuel market: supply and demand 2007-2030”

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2007 Production• More than half of supply comes from Canada, Australia

and Kazakhstan

• 7 companies control about 80% of the global production

• Ongoing problems at Cigar Lake, Rossing, Uranium One and others limiting production

2006 TU 2007 TU

Australia 7,593 8,611

Canada 9,862 9,476

Kazakhstan 5,279 6,637

Africa 7,045 6,571

Other 9,876 9,984

Total 39,655 41,279

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China

• Require over 10,000 tons of uranium/year by 2020

• Equal to 25% of current production!

• Major new discoveries needed to cope with significant new build

• China needs new ‘Elephants’– Mines close to road, power and mills

– >50M lb resource

Where is the uranium required to meet China’s nuclear program going to come from?

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Canadian Based Juniors• Difficult to invest in Majors

– Investment in Cameco is restricted– Areva is government owned– Australian mines are owned by large global mining companies

• There are about 140 publicly listed junior uranium companies in Canada

• No ownership limits at the exploration stage • Most companies own properties not only in Canadian uranium basins,

but in the USA, Central Asia, Africa and Australia • Only a small number are ever likely to enter production • Most explorers don’t have the resources, or permitting and mining

expertise to enter production • Many surviving companies likely to be bought out

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Economic Crisis

• The recent global financial crisis has had a major impact– No money for major

energy projects– No money for mining

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Uranium in 2008

• Spot price fall below $50• Long term price at $75• Uranium stocks dropping

even on good nuclear industry news

• Credit is tight to nonexistent.

• No money available for exploration

• Cash is king

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Current State of the Market

2007(%)

2008 (9 mo)(%)

Cameco CCO-T -16.2 -43.8

Denison DML-T -24.7 -70.1

Mega   MGA-T -52.5 -66.5

Paladin PDN-T -27.3 -49.1

Powertech PNE-T -49.0 -68.2

Pitchstone PXP-T -24.3 -82.1

Strathmore STM-X -33.7 -80.5

Uranium 1 UUU-T -44.8 -78.7

Triex TXM-X -48.7 -82.0

UEX UEX-T +17.6 -77.6

Ur Energy URE-T - 8.3 -83.0

West Pros WNP-X -81.7 -31.0

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Key TransactionsU Company Investor Date Property Type

Energy Metals Uranium One Aug 10/07 All Share exchange

CanAlaska Korean Cons. Oct 12/07 Cree East (Sask)

50% earn-in

Fission KEPCO Jan 31/08 Waterbury Lake (Sask)

50% earn-in

Ditem Sinosteel April 14/08 Various (Sask& Que)

50% earn-in

Titan JOGMEC May 23/08 Virgin Trend(Sask)

50% earn-in

Powertech Sinatom June 3/08 Share purchase

Rio Tinto Cameco & Mitsubishi

Aug 11/08 Kintyre (WA) Purchase

Bluerock/

Uranerz

Jindal Sept 12/08 Mongolian Purchase

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Is it a good time to Invest?

• Stock prices are low• Companies need money to proceed with plans• M&A activity has shifted from share exchange to

earn-ins to cash purchases as market has weakened.

• October 08/08- Cameco’s Grandey said “there will be plenty of chances to form joint ventures with smaller companies that need financing for their projects and have no way to raise any in these credit markets. Other companies can be simply taken over as they trade at dirt-cheap valuations."

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Issues

• Juniors want to sell out with good resources estimates and high prices

• Reluctant to sell at low prices• Strong belief that prices will rebound in the future• Potential buyers want to take advantage of the low

prices• In this market, survival is key

So how do we proceed to meet these needs?

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Strategies for Success

Two approaches going forward1. Fund exploration programs to “earn in” to a property

– Companies need cash to drill– Companies with cash want to protect it

2. Purchase a company through a combination of shares and cash (Partner approach)

– Seller benefits from staying in the market and gets cash in his pocket

– Cash buyer benefits from the expertise of the share buyer and more reasonable price

– Share buyer expands property portfolio without requiring cash.  

– Win-win situation that results in the best price for all parties

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MZConsulting• Extensive knowledge and experience in the Canadian and

international nuclear industry• Canadian-based, same as most junior uranium companies

in the world• Continuously monitors uranium companies with emphasis

on those believed most likely to succeed • Excellent relationships with these companies• Extensive analytical capability• Provide advice and support to clients looking for uranium

investments

Work with Asian clients to access uranium supply options at little cost and risk

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Summary

• The future demand for uranium remains strong• The financial crisis has had a major impact on the junior

mining sector• Prices of uranium companies are very low and cash is in

short supply• Only the best companies with high quality properties will

survive• Large users (China) can’t sit back and expect industry to

respond in current climate

For those with a long term view and cash available, now is an excellent time to get into the market and acquire juniors with good properties/prospects that have “elephant” characteristics

Thank You

Milton Caplan, PresidentMZConsulting Incmzconsulting@rogers.comwww.mzconsultinginc.com+1.647.271.4442