Outlook for uranium cost in the Americas

AMERICAS’ RESOURCESINVESTMENT CONGRESS

IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY, 1 FEB 2011www.ObjectiveCapitalConferences.com

Outlook for uranium mining cost in the AmericasIan Hiscock – Consultant, CRU Strategies

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Level 2, Kalpataru Synergy, Opp. Grand Hyatt, Santa Cruz (East), Mumbai 400055, India

Tel: +91 22 3953 7395 Fax: +91 22 3953 7200 www.crustrategies.comCRU Strategies is a division of CRU International Limited

Uranium market outlook

Ian Hiscock – Consultant, CRU Strategies

• Brief introduction to CRU

• The uranium market in 2010

• The outlook for uranium

• Uranium mining in the Americas

Presentation Outline

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Leading research group focused on:

• Mining and metals

• Chemicals and fertilizers

Independent, with a global presence

• Established in the late 1960s

• Privately owned to ensure its independence

• Offices in London, Beijing, Santiago, India, Australia and North America

Introduction to CRU






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0

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Chinese import of more than 17,000 t U in 2010...Uranium imports, monthly, China, 2009-2010, tonnes U

7Data: CRU Analysis, GTIS

• Chiefly, a 28% decrease in U3O8 production at ERA’s Ranger mine. Approximately 1000 tonnes less than original target production.

• Olympic Dam was still recovering from a shaft failure at the beginning of the year

• Although Kazakh production rose by almost 25% year-on-year from 2009, they missed targeted production by a modest amount

...coupled with some supply disruptions...

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0

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...has resulted in market deficits. Concurrently, prices have increased more than 50%...UxC weekly price, US$/lb U3O8

9Data: CRU Analysis, UxC Consulting

8587899193959799

101103105

Jan-

2009

Feb-

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-200

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-200

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009

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-200

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...aided by further dollar depreciation. USD Trade Weighted Index, monthly, Jan ’09 = 100

10Data: CRU Analysis, US Federal Reserve






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-25%

-20%

-15%

-10%

-5%

0%

5%

2009 2010 2011

Market deficits are expected to continue through 2011, lending support to recent high pricesMarket balance, percentage of primary supply requirements

12Data: CRU Analysis

• Fundamental supply shortages over the next 10 years– Rapid increases in demand, particularly from China

– A legacy of underinvestment in exploration and mine development restricting primary supply

– Declining secondary supply

• An investment gap of 65,000tpa U3O8 emerges post 2020

Over the longer term, the market outlook is also very positive from the producer’s perspective...

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tonn

es U

3O8

World production Net primary demand

Projected supply from mines operating in 2020

Supply gap of ~65,000 tpa U3O8

Data: CRU Analysis

...with significant investment required to meet future demandNet primary demand vs. primary production, tonnes U3O8, 2020-2030

Long-term demand drivers

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• International agreements on climate change

• Localized pollution issues

• Strategic incentives to shift patterns in energy production and consumption.

• Increased demand from developing economies.

• Higher and more volatile supply costs

• New demand in developing economies.

• Increased mechanisation.• Possible shift in usage

patterns for personal transportation. Growth in

power demand

Price of Fossil fuels

CO2emissions

Energy security






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The Americas produced 22% of world primary supply in 2010, more than 80% of which was from Canada

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KazakhstanCanada

USABrazil

Australia

Namibia RussiaNiger

Uzbekistan

Ukraine

RoW

Many mines and prospects in the Americas are low-cost...

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1. Very high-grade material found in the Athabasca basin in Saskatchewan, Canada.– Low unit cost, but high initial capital and mining complex

2. Small ISL operations/projects in the USA, mostly in Wyoming but also in Nebraska, Utah and Texas.

In Latin America, only brazil produces uranium. Although there are many exploration prospects located in Chile, Peru and Argentina.

• Fraser Institute Survey of Mining Companies, The policy potential index, 2010 mid-year update, covering 51 jurisdictions

• Alberta (ranked number 1), Quebec, Yukon and Saskatchewan are all ranked in the top 5.

• In the USA, Alaska, Arizona, Nevada, Utah and Wyoming all feature in the top 20.

• Chile the most favourable in South America. Columbia, Mexico at and Peru are in the top 20.

• By contrast ranks for the principle mining districts in Australia (South and Western Australia) have fallen dramatically since last year. Average rank for Australian States is now 31

...and located in justifications that are considered favourable towards mining.

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Site costs:Labour, fuel, power, consumables, etc.

Business costs:Site costs +

realisations costs (i.e. sales & marketing,

transportation)

Corporate costs:Business costs +

corporate overhead + remediation costs

Economic costs:Corporate costs +

capital charge

CRU’s Value-Based Costing (VBC) methodology:

Benchmarking

Long run investment

decisions, long run price

Measure free cash flow

Business efficiency

CRU assess costs at four different levels

Most uranium production in the Americas comes from one very low-cost source.Economic Cost Curve, 2009

21Data: CRU Analysis

• Canada’s Athabasca basin in Saskatchewan is the focus for existing uranium production and exploration, however there is also exploration under way in Labrador, Quebec, Ontario and British Columbia.

• The USA has a few advanced projects, but involve only small tonnages

• Most projects in Latin America are currently at the very early stages of development.

• There are 100s of projects at the grass roots and advanced exploration stages but only a handful at the prefeasibility/ feasibility study stages...

• This is not unique to the Americas there are only about 100 in the world compared with more than 400 copper projects and 900 gold projects.

Production growth hinges on one large project, but exploration activity has picked up considerably.

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Thank you for listening

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CRU contacts for further information:

In LondonIan Hiscock, Consultant, CRU Strategies+44 20 7903 2244 [email protected] Macoun, Principal Consultant, CRU Strategies+44 20 7903 2200 [email protected]

In the USAIrv Adler, VP, Business Development, North America, CRU+1 260 918 3643 [email protected]

In SydneyPhilip Sewell, Business Development Manager, Australasia, CRU +61 2 9387 8842 [email protected]

In PerthAllan Trench, Regional Director, Australasia, CRU +61 (0)43 709 2466 [email protected]: www.crugroup.com

Contact details

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Outlook for uranium cost in the Americas