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

Canada Research | Page 54 of 87UraniumExhibit 69: EV/lb for Select US-Focused Uranium Equities$5.00US$EV/lb$4.00$3.00$2.00$1.00$0.000.100.47 0.49 0.591.011.672.144.54STM URRE PWE URE (2) PEN URE (1) UEC URZNote: URE(1) reflects 26.6 Mlbs 43-101 resources; URE(2) also reflects historic and potential poundsSource: Raymond James Ltd., Capital IQ, Thomson ONEPathfinder Acquisition – Deal Highlights. On July 24, 2012, Ur-Energy announced theacquisition of the historically-productive Shirley Basin (SB) and Lucky Mc (LM) mines –both in Wyoming – from Pathfinder, a subsidiary of Areva. Per the agreement, Ur-Energy is to pay US$13.25 mln in cash. The properties cover 5,100 acres, including twoareas which saw significant production (>71 Mlbs) during the 1960s – 1990s. Historicremaining resources are estimated at 10 Mlbs at SB and 4.7 Mlbs at LM, both grading0.21%. During production, the mines used conventional mining techniques, but SB wasalso home to the earliest in-situ uranium production in the US. Both sites areundergoing reclamation, with bonds of US$10.9 mln required at SB and US$1.4 mlnrequired at LM. We also note SB is one of the only licensed uranium ISL waste disposalsites in the US. Ur-Energy would additionally receive Pathfinder’s entire US database.The deal is expected to close in 6 – 12 months and is contingent on the NRC approving achange of control for the NRC License at SB, as well as transfer of state mining licensesat both operations. Ur-Energy has paid an initial US$1.325 mln into escrow, which willbe released at close. A break fee for both parties is equal to the same amount –US$1.325 mln.Our View on Pathfinder: Low Cost, ISL-Amenable Pounds. We view the acquisition as astrong positive for Ur-Energy for three primary reasons: (i) low cost, ISL-amenablepounds should bolster the current LC mine plan (see Potential Concerns section); (ii)strategic value of the vast Pathfinder database; and (iii) potential waste service revenues.At an implied cost of only US$0.90/lb, the company has added nearly 15 Mlbs of historicresources, which grade an order of magnitude above existing Lost Creek resource poundsat 0.05%. SB is the centerpiece of the transaction: significant historic drilling suggestssolid potential to upgrade pounds to 43-101 categories as shallow (250 ft – 350 ft to topof ore), ISL-amenable material with good hydrology over a single, ~100 ft thick horizon.Though Ur-Energy takes over reclamation work at SB and the LM mine site (LM tailingsfacility was fully reclaimed and is now in possession of the US DOE), bond requirementsare small and actual payments by Ur-Energy can be stretched over many years,minimizing impact to the company’s balance sheet. These payments could even beoffset by future potential revenues generated by waste disposal services at SB,particularly with increasing ISL development in Wyoming.The Pathfinder database should also provide a vast amount of geological, drilling andengineering data on hundreds of projects in more than 20 US states; we believe thisinformation adds value for target generation on Ur-Energy’s already-owned ground,could be re-sold in portions to other companies active in the area, and should helpdefine future M&A targets for the company.Raymond James Ltd. | 2200 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2