Clock - Uranium Supply Crunch and Critical ... - Andrew Johns

Canada Research | Page 16 of 87UraniumBoth of these solutions should support higher uranium prices. We remind readers thaturanium demand is largely price inelastic, given the uranium component of fuel typicallycomprises ~10% of reactor operating costs (much less if including capital depreciation).Exhibit 17: RJL Supply Surplus/Deficit (Mlbs/year)30.0100.0Supply Surplus/Deficit (Mlbs/yr)20.010.00.0-10.0-20.0-30.0-40.0-50.050.00.0-50.0-100.0-150.0Cumulative Surplus/Deficit (Mlbs)-60.0-200.020082009201020112012201320142015201620172018201920202021202220232024202520262027202820292030Source: Raymond James Ltd., UxC, WNA, NIW, Company ReportsScenariosSupply Scenarios. Our model reflects our view of the most likely growth curves foruranium supply and demand. We have also run scenarios assuming specific events occuror do not occur. Below, our reference total supply curve is compared against our modelif we assume that DOE increases transfers to 20% of reactor requirements (~10Mlbs/year) – i.e., a positive for supply. Also portrayed are three supply-negativescenarios: BHP does not pursue the Olympic Dam expansion; Kazakhstan maintains goforwardoutput at 2011A levels (50.6 Mlbs/year), and no new mines start-up in Africa,which are generally lower grade and of higher geopolitical risk than other regions. Thesescenarios are compared against our total demand curve in blue (recall, includes burn,new cores, and inventory build).We see more downside risk to ourtotal supply curve, which couldsupport prices furtherExhibit 18: RJL Global Uranium Supply Scenarios vs. RJL Total Demand (Mlbs/yr)3253002752502252001751502010201120122013201420152016201720182019RJL Total Demand RJL Total Supply RJL - DOE Dispose 20% of U.S. Req'tsNo Olympic Dam Expansion Nil Kazakh Growth No New Africa MinesSource: Raymond James Ltd., UxC, WNA, NIW, Company Reports20202021202220232024202520262027202820292030Raymond James Ltd. | 2200 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2