Mehran Bagherzadeh | Investor Relations

URANIUM ENERGY CORP

Direct: (604) 682-9775 ext. 313
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Supply Shocks: Uranium prices expected to move higher as two major mines suffer incidents

Event: Two of the world’s largest uranium mines that account for 8% of global production experienced incidents recently that will likely lift uranium prices.

Bottom line: Positive – Supply disruptions from two of the world’s largest uranium mines will likely cause uranium prices to move higher. Combined with the fact that the spot market is very thin, as 20% or less of total annual sales are transacted at spot, a reduction of supply from one of the larger spot market sellers (BHP) will cause notable upward pressure on prices. We expect U3O8 spot prices to push through US$40/lb. this week (from US$38/lb.) into the mid-40s and perhaps higher.

· BHP’s Olympic Dam mega copper-gold-uranium mine in Australia has announced that the largest of its three mills has been damaged due to an electrical fault. The company expects that the mill will be down for six months as a result.

o It is estimated that production could be impacted by as much as 30% (or 2.6M lbs. U3O8) out of a previously expected 8.7M lbs.

o The Olympic Dam mine accounts for approximately 6% of the world’s annual U3O8 production. Last year, approximately 148M lbs. was produced from mines (global demand was 175M lbs.).

o Uranium is considered a by-product at Olympic Dam, which is more focused on the copper and gold production arising from the operation. As such, the uranium produced here is generally sold in the thin spot market.

§ As a result of this event, we expect less supply in the spot market and a large corresponding price increase.

· Rio Tinto’s Rossing mine located in Namibia had a fire break out in its final product recovery plant (“FPR”). This is the location where uranium oxide is packed or export.

o The fire occurred on Feb 12 at around noon and was contained two hours later. Fire brigades from Swakopmund and Arandis were called in to assist.

o As a result of the fire there are some concerns among employees of radiation leakage. However, initial assessments of the affected area at the FPR plant showed that no radiation leakage occurred.

§ The fire was restricted to the roasters inside the facility, as such most of the damage was contained there. The roasters are used to burn off excess moisture in the final product, before drumming takes place. The exact cause of the fire remains unknown at this stage.

o Rio Tinto’s Rossing mine produces about 3.0M lbs. U3O8 annually and accounts for about 2% of global supply. Rio Tinto has noted that operations will continue at the mine however with damage to the FPR it remains unknown when Rio can ship the final product out of the mine and into the market.

o Unlike at Olympic Dam, Rossing’s production has already been scaled down to meet Rio Tinto’s long-term contract requirements, which are at a higher price point than the current US$38/lb. spot price

· Cantor Fitzgerald Canada Research continues to hold the view that a violent upward move in the price of uranium is inevitable based on an unavoidable supply deficit occurring in 2020 where uranium supply from all sources (mine level and secondary) does not meet increased demand (particularly China).

o With primary supply at the mine level already notably below current demand levels (148M lbs. vs. 175M lbs.), few new mines coming online within the next five years, long term all-in sustaining costs at US$80/lbs., and unexpected supply shocks as those listed today, we believe uranium will need to undergo dramatic price increases to incentivize supply to meet demand – otherwise the world will have inactive nuclear reactors and an electricity shortage.

Rob Chang
Senior Analyst and Head of Metals & Mining - Canada

CANTOR FITZGERALD | 181 University Avenue, Suite 1500 | Toronto, ON | M5H 3M7 | 416.849.5008 | rchang@cantor.com | www.cantor.com | AIM: RobbyChang@gmail.com