NBCFM Research | Initiating Coverage Oil, Gas & Consumable Fuels September 3, 2024 Industry Rating: Market Weight (NBF Economics & Strategy Group) Analyst Mohamed Sidibé, CPA (416) 869-6436 ● mohamed.sidibe@nbc.ca Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines Company Ticker Stock Rating Risk Rating Shares O/S Dividend Yield Market Cap. (Mln) Price Target Total Return Cameco Corporation CCO / CCJ OP - 435.2 0.0% C$23,930.6 C$54.99 C$74.00 34.6% Denison Mines Corp. DML / DNN OP Speculative 892.4 0.0% C$1,990.0 C$2.23 C$3.50 57.0% NexGen Energy Ltd. NXE OP Speculative 564.5 0.0% C$4,577.9 C$8.11 C$11.00 35.6% Source: LSEG, Company Reports, NBF Estimates Highlights Uranium Powering the Energy Revolution The renewed global focus on nuclear energy as a key source of low carbon power has pushed the demand for nuclear energy and propelled the uranium market back into focus. This, coupled with rising geopolitical tensions affecting supply security and an underinvestment in new mines and projects since the Fukushima incident has led to a tight market, pushing uranium prices higher. With demand expected to continue to grow as the number of reactors under construction increases, we expect prices to remain higher for longer to incentivize the right supply response. Overall, we are constructive on the uranium market and uranium prices going forward. Our report includes a comprehensive overview of the uranium market. Plenty of Upside Left In Equities: Initiating on A Proven Leader And Two Rising Stars In The Space Cameco Corporation (Outperform Rated, C$74.00 Price Target) — A Fully Integrated Player Within The Uranium/Nuclear Space. We initiate coverage of Cameco Corporation with an Outperform rating and C$74.00 price target. We derive our price target using a blended average of long-term and short-term valuation of NAV and EBITDA, respectively. We use a 1.7x NAV target multiple and an 18x EV/EBITDA 2025 vs. the company’s current valuation of 1.35x and 13x, respectively. NexGen Energy (Outperform Rated, C$11.00 Price Target) — Bullseye: The Arrow Deposit, A Strategic Asset In The Uranium Market. We initiate coverage of NexGen Energy Limited with an Outperform rating and C$11.00 price target. We derive our price target using a 1.25x NAV multiple on our depreciable asset NAV vs. current valuation of 0.88x NAV. Denison Mines Corp. (Outperform Rated, C$3.50 Price Target) — Phoenix Rising: Diversified Portfolio And Strong Balance Sheet Set The Stage For Success. We initiate coverage of Denison Mines Corp. with an Outperform rating and C$3.50 price target. We derive our price target using a 1.10x NAV multiple on our depreciable asset NAV vs. current valuation of 0.70x. Denison Mines is our top pick in the space. For required disclosures, please refer to the end of the document. TABLE OF CONTENTS URANIUM MARKET OVERVIEW 2 EXECUTIVE SUMMARY OF OUR INITIATION ON CAMECO, NEXGEN ENERGY AND DENISON MINES 5 DETAILED URANIUM MARKET OVERVIEW 7 Demand Outlook 7 Supply Outlook 12 The Nuclear Fuel Cycle – From Mining to Reactor 16 Historical Prices and Our Price Forecast 18 APPENDIX 20 CAMECO CORPORATION (OUTPERFORM RATED, C$74.00 PRICE TARGET) Investment Thesis 23 Our Operating Assumptions 27 Valuation 28 Sensitivity Analysis 28 Upcoming Catalysts 29 Target Price and Rating 29 Financial & Operating Summary Table 31 Company Overview 32 Asset Overview 32 Appendix: Management & Directors 38 Risks 42 NEXGEN ENERGY LTD. (OUTPERFORM RATED, C$11.00 PRICE TARGET) Investment Thesis 43 Our Operating Assumptions 47 Valuation 48 Liquidity Outlook 48 Sensitivity Analysis 49 Upcoming Catalysts 49 Target Price and Rating 50 Financial & Operating Summary Table 51 Company Overview 52 Asset Overview 52 Appendix: Management & Directors 53 Risk Rating: Speculative 57 DENISON MINES CORP. (OUTPERFORM RATED, C$3.50 PRICE TARGET) Investment Thesis 58 Our Operating Assumptions 62 Valuation 63 Liquidity Outlook 64 Sensitivity Analysis 65 Upcoming Catalysts 65 Target Price and Rating 66 Financial & Operating Summary Table 67 Company Overview 68 Asset Overview 68 Appendix: Management & Directors 72 Risk Rating: Speculative 76 DISCLOSURES 77 All dollar amounts in CDN$ unless otherwise noted. All pricing as at August 29, 2024 All NBF research mentioned in this document is available at https://nbf-library.bluematrix.com Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 2 URANIUM MARKET OVERVIEW Executive Summary The renewed global focus on nuclear energy as a key source of low carbon power has pushed the demand for nuclear energy and propelled the uranium market back into focus. This, coupled with rising geopolitical tensions affecting supply, an underinvestment in new mines and projects since the Fukushima incident has led to a tight market, pushing uranium prices higher. In 2023, uranium spot prices increased 90% and on average YTD spot prices are now 51% higher at US$90/lbs than the 2023 average of US$60/lbs. With this report, we aim to provide a comprehensive analysis of the uranium market focusing on main demand and supply drivers, the nuclear fuel cycle and our future outlook on prices. Demand Outlook Supported by New Reactor Builds Dominated by China and India and Elevated Uncovered Uranium Requirements Uranium demand is mainly driven by the nuclear power sector and as such has historically been fairly predictable and tied to the number of reactors in use and their respective requirements. The nuclear power sector has now seen a resurgence on the back of a push towards achieving energy security and reducing greenhouse gas emissions. Different policy initiatives have been entered into such as the COP 28 pledge to triple nuclear energy signed in 2022 that has driven reactor life extensions in countries like France, the U.S., Canada, Finland and Belgium but most importantly new reactor builds with a total of 61 reactors in construction with China representing 27 reactors and India representing seven. There are currently 439 operable reactors with the U.S., France, China and Japan as the countries with the most reactors in operation. Additionally, the rising concerns around energy security and independence, as well as rising prices, should push utilities to be more active on the long-term contracting front to secure the necessary supply to operate their reactors. Demand for operating reactors have averaged ~156 million pounds of U3O8 over the last five years, and as we look forward and based on estimates from UxC, we expect uranium demand to grow from 197 million pounds of U3O8 in 2023 to 222 million pounds of U3O8 in 2030E, primarily driven by China and India. Figure 1: Number of Reactors Under Construction (left) Uncovered Utility Uranium Requirements (right) Source: International Atomic Energy Agency, UxC, LLC Primary Supply to Remain Tight Near-term Driven by Geopolitical Tensions and Lack of Investment in Exploration/Development Uranium supply is heavily concentrated geographically and by companies with Kazakhstan, Canada and Australia representing 69% of total 2023 primary production of 143 million pounds. Over the past decade, primary supply has not been able to meet the total uranium demand from reactors driven by a decrease in reinvestment into exploration, brownfield and greenfield projects, as well as production curtailments, following the Fukushima accident in 2011 which pushed countries to rethink their nuclear strategies. This was further exacerbated by geopolitical events such as the Russia-Ukraine conflict and the Niger military coup which impacted overall supply. Uranium supply remains tight near term with no new major projects 0 5 10 15 20 25 30 35 Number of Reactors Under Construction Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 3 expected to come online until later in the decade, but that could still be impacted by permitting and financing issues. We expect uranium production to continue to not be able to meet total uranium demand in the near term, with the secondary supplies expected to continue to fill the gap but not for too long given energy security concerns. All eyes will be on greenfield projects that will be key in closing the supply gap starting in 2029E. We forecast a CAGR of 6% to reach production of 232 million pounds by 2030E, primarily driven by new production out of Canada and Kazakhstan. Figure 2: Supply Growth From Current Operations and Greenfield Projects Key To Bring the Market Back Into Equilibrium Source: UXC, LLC, NBF Estimates. The dashed spot prices represent NBF forecast. Secondary Supplies Set to Diminish and Unlikely To Keep Filling the Gap As we noted above, the industry has mostly lived off inventories since the 90s with secondary supplies coming in to fill the gap between uranium demand and primary mine production. They represented 30% of total supply of 204 million lbs U3O8 in 2023 and come from various sources. But secondary supplies are likely to decrease on a go-forward basis as supply security limits the drawdown of commercial inventories and government stockpiles and underfeeding activities get reduced (outside Russia) given the loss of Russian enrichment capacity. This could be partially offset by recycling as more spent fuel becomes more available, but we do expect ultimately that secondary supplies will no longer be enough to support the growing gap between total demand and primary supply in the longer term. We provide below a summary table of total inventories per region as of the end of 2021 according to the IAEA. Figure 3: Regional Secondary Inventories As At The End Of 2021 Source: International Atomic Energy Agency $- $20 $40 $60 $80 $100 $120 0 50 100 150 200 250 300 2022 2023 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E Uranium Spot Price (US$/lbs) Uranium U3O8 (mln lbs) Demand (ex-inventory) Inventory Demand Uncovered Uranium Requirement Current Operations + Restarts Secondary Supplies Greenfield Projects Spot Uranium (US$/lbs U3O8) Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 4 Uranium Prices: Higher for Longer to Incentivize Supply Growth that Will Be Needed to Fill the Deficit Uranium prices have been on an uptrend since 2018 with a notable increase since 2023 on the back of continuous tight supply and increasing demand. While we can argue that current prices are incentive enough for new projects, these levels would need to be sustained for much longer to ensure these projects can be funded and remain economical once online. Based on our analysis of the uranium cost curve, our supply demand analysis and given geopolitical tensions and concerns around supply security, we expect uranium prices to remain elevated until 2027 driven by the continuous growth in reactor builds and the Russian uranium import bank in the U.S., as utilities become more concerned about securing their necessary uranium requirements. We would note that these elevated prices would also be required to incentive new greenfield and brownfield projects which are required to fill the growing gap that we see building up towards the end of the decade. Our price forecast for uranium spot prices can be found below. Figure 4: NBF Price Deck vs. Consensus Source: NBF Estimates, TradeTech, LLC, S&P Global Market Intelligence Risks To Our Price Deck Figure 5: Bullish and Bearish Case Source: NBF Estimates Spot Q1/24A Q2/24A Q3/24E Q4/24E 2024E 2025E 2026E 2027E 2028E LT Uranium U3O8 Spot Prices (US$/lbs) NBF $80 $97 $89 $84 $95 $91 $98 $103 $103 $90 $80 (US$/lbs) Consensus n/a $90 $92 $92 $98 $102 $94 $86 $81 % Difference -7% 3% -1% -1% 1% 9% 4% -1% Bearish Case Bullish Case - U.S. DOE extends the waiver deadline for Russian LEU deliveries. - Financial players within the space become heavy sellers. - Production comes online faster than we currently expect. - A resolution of various conflicts in the world could dampen the geopolitical premium in uranium spot prices currently. - A slow down in reactor construction and extension would dampen the demand outlook. - U.S. DOE apply a stringent view on waivers for Russian LEU deliveries, forcing utilities to secure alternate supply sources sooner-than-expected. - Sulfuric acid issues out of Kazakhstan persist longer-than-expected weighing on primary production growth. - Delays in financing and permitting of required greenfield projects needed to fill the supply gap. - More geopolitical tensions in regions with meaningful supply would further exacerbate the supply gap. Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 5 EXECUTIVE SUMMARY OF OUR INITIATION ON CAMECO, NEXGEN ENERGY AND DENISON MINES We initiate coverage of Cameco Corporation (CCO: TSX, Outperform, C$74 price target), NexGen Energy Ltd. (NXE: TSX, Outperform, C$11.00 price target) and Denison Mines Corp. (DML: TSX, Outperform, C$3.50 price target). Our top pick is Denison Mines given the company’s attractive portfolio, discounted valuation and solid balance sheet. We provide below some key points and charts that put our coverage universe into perspective. Overall, we are constructive on the uranium market and uranium prices on the back of the current geopolitical tensions, focus on energy security and growing uranium demand. To arrive to our rating and price targets, we have assessed the following: 1) Jurisdictions – The Safer the Better: A safer jurisdiction should benefit producers and developers amidst increasing geopolitical tensions. All three companies check this box, though Cameco does have exposure to Kazakhstan which can be seen riskier given the supply chain risks it can be exposed to via the Russia Ukraine conflict. 2) Current Valuation vs. Historical Valuation : We have taken a historical view to see where multiples have been vs. spot prices in the past as well as where names are currently trading vs. peers. Denison is the cheapest on P/NAV and EV/lbs, followed by NexGen in the developer group, while Cameco trades at a premium to producer peers (and rightly so, given its size, strategic importance and asset quality). Figure 6: Historical P/NAV Multiples vs. U3O8 Spot Prices 2010-2024 (left Chart) July 2023- August 2024 (right Chart) Source: S&P Global Market Intelligence, UxC, LLC Figure 7: Uranium Producers and Developers Peer Comparable Source: NBF Estimates, LSEG and S&P Global Market Intelligence $- $20 $40 $60 $80 $100 $120 0.00x 0.20x 0.40x 0.60x 0.80x 1.00x 1.20x 1.40x 1.60x 1.80x 2.00x Uranium U3O8 Spot Prices (US$/;bs) P/NAV Weighted Average Peers P/NAV Uranium Spot Prices $50 $60 $70 $80 $90 $100 $110 0.60x 0.80x 1.00x 1.20x 1.40x 1.60x 1.80x Uranium U3O8 Spot Prices (US$/;bs) P/NAV CCO NXE DML Weighted Average Peers P/NAV Uranium Spot Prices Cameco Corporation Producer TSX:CCO $54.28 $23,622 $17,329 1.34x $37.33 $17.29 n/a Kazatomprom Producer KAS:KZAP $37.30 $9,674 $12,596 n/a $13.08 $7.73 n/a NexGen Energy Ltd. Developer TSX:NXE $8.03 $4,535 $3,327 0.88x $13.55 $9.63 $14.46 Paladin Energy Ltd Producer ASX:PDN $9.79 $3,854 $2,596 0.67x $39.65 $14.16 n/a Uranium Energy Corp. Producer NYSEAM:UEC $5.08 $2,077 $2,077 0.58x n/a $6.50 n/a Denison Mines Ltd. Developer TSX:DML $2.22 $1,981 $1,453 0.70x $13.48 $5.08 $6.27 Boss Energy Limited Producer ASX:BOE $2.84 $1,164 $784 0.61x n/a $10.67 n/a Energy Fuels Inc. Producer TSX:EFR $6.42 $1,051 $771 0.48x $39.85 $9.40 n/a IsoEnergy Ltd. Developer TSX:ISO $3.09 $552 $405 0.45x n/a $1.38 n/a Lotus Resources Limited Developer ASX:LOT $0.23 $421 $284 0.40x $13.33 $1.81 $2.33 Global Atomic Corporation Developer TSX:GLO $1.34 $304 $223 0.22x $2.99 $1.36 $3.28 Weighted Average 1.07x $25.78 $12.04 n/a Producer Weighted Average 1.15x $28.43 $12.81 n/a Developer Weighted Average 0.76x $13.08 $7.17 $10.39 P/NAV EV/2P (US$/lbs) EV/Total Resources EV(adjusted for initial capex)/ Total Resources Company Stage Ticker & Exchange Share Price in Local Currency Market Cap in Local Currency Market Cap (US$ mln) Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 6 3) Implied Current Prices – The Cheaper The Better : Denison once again scores the best on this metric, followed by Cameco then NexGen. Now we would note that while Cameco’s implied price is lower than Denison’s , its realized prices at current spot prices would be much lower. Figure 8: Cameco, Denison Mines, NexGen Energy Share Price Performance vs. Uranium Spot Prices (left) & Current Implied Uranium Prices Using Our Valuation (right) Source: LSEG and NBF Estimates 4) Risk Profile In Terms Of Operations and Balance Sheet : Cameco scores best here given its historical track record, tier-one asset with low-cost structure and stronger balance sheet. Both Denison and NexGen are awaiting the receipt of permits on their flagship projects as well as financing to initiate construction. However, we would note that Denison’s financing requirements are more attractive vs. NexGen ’s , despite NexGen scoring better on operating costs, production size and FCF generation. Figure 9: Assets on the SP Global Cost Curve 2024 (left) – We have updated the 2024 cost curves to include our estimates for Cameco’s assets (in red), Denison Mine’s assets (in grey) and NexGen Energy’s asset (in orange). Wh ile we do not expect NexGen and Denison’s assets to come online until 2028/2029, we have included them on this chart to provide perspective on their costs vs. current operations. Source: S&P Global Market Intelligence and NBF Estimates - 5% 9% 142% - 4% 17% 56% - 13% 13% 44% - 7% 38% 142% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160% YTD 1-year 3-year CCO DML NXE Uranium Spot Prices $- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 DML CCO NXE Implied Uranium Price Current Spot Price CCO NBF Estimate Of 2025 Realized Price At Current Spot Price $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 110.00 120.00 130.00 140.00 C1 Cash Costs (US$/lbs) Cumulative Uranium U3O8 Production (mln lbs U3O8) Karatau Akbastau South Inkai Akdala Kharasan Beverley Katco Inkai Rook I Khiagda McArthur River Langer Heinrich Cigar Lake Phoenix Zarechnoye Husab Dalur Honeymoon Gryphon Rossing Olympic Dam Somair Gryphon Inkai Rook I McArthur River Cigar Lake Phoenix Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 7 DETAILED URANIUM MARKET OVERVIEW Demand Outlook Uranium demand is primarily driven by its use as fuel in nuclear reactors for electricity generation, as such, demand is heavily influenced by the number and type of reactors in operation, the rate of new reactor construction and nuclear policies. Currently there are 33 countries, including Taiwan, operating nuclear power reactors with a combined capacity of ~390GWe. The countries with the most operating nuclear reactors are the U.S. (94), France (56), China (56), Russia (36) and South Korea (26). China and India are currently the two countries growing their nuclear capacity the most with 28 and seven reactors under construction, respectively. Figure 10: Number of Reactors Under Construction (Top Chart) and Operable Reactors (Bottom Chart) Source: World Nuclear Association and International Atomic Energy Agency Up until 2013, uranium demand was on the rise on the back of a global expansion of nuclear power driven by rising global energy demand and by countries such as China, India and Russia, while established markets such as the U.S., France and Japan continued to showcase steady demand. However, the Fukushima Daiichi nuclear disaster in 2011 led to a global reassessment of nuclear safety and energy policies that negatively affected demand. Notably, Japan shut down all its nuclear reactors and Germany accelerated its nuclear phase-out plan. Since then, concerns around climate change and energy security grew and as countries such as China, India and the UAE continue to grow their nuclear ambitions, leading to a stabilization, then growth of uranium demand. From 2018 onwards, a supply response to the decreasing demand seen since 2013, a continuous drawdown of inventory and concerns around future supply security pushed utilities to start thinking about their contracting strategies. 0 5 10 15 20 25 30 Number of Reactors Under Construction 0 100 200 300 400 500 600 700 800 900 0 10 20 30 40 50 60 70 80 90 100 TWh Generated in 2023 Number of Operable Reactors Operable Reactors TWh Generated (2023) Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 8 Figure 11: Historical World uranium production and reactor requirements (tonnes U) Source: World Nuclear Association Nuclear Power Is Back in Vogue and Construction Is Dominated By Asia Recent mandates like the COP28 Pledge, the EU Net-Zero Industry Act, ADVANCE Act, Great British Nuclear Act and China’s Five -Year Plan have put an emphasis on energy security and the reduction of greenhouse gases globally. This, added to rising global energy demand has seen a significant growth in new nuclear reactors being built, specifically by China and India. UxC currently forecasts a growth in nuclear energy to 479 reactors or ~444GWe net in 34 countries in 2030 from 439 operable reactors and ~395 GWe net in 2023. This growth is mainly driven by new reactors being built, specifically in China and India (which represent 56% of total new builds), the extensions of mine life at current operating reactors, the restart of some of the previously shut down reactors and the potential of small modular reactors (SMRs). Figure 12: Nuclear Power Capacity Forecast Source: UxC, LLC Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 9 New Builds : According to the International Atomic Energy Agency (IAEA), there are currently 62 nuclear reactors under construction, with China and India representing 35 of those 62 reactors and 88 planned reactors and 344 reactors proposed according to the World Nuclear Association (WNA). Most of these constructions are pressurized water reactors (PWR) with over 50 under construction. Nuclear reactors take on average ~8 years to get built, though some can take much longer. The shortest construction times were achieved with PWRs in China and Pakistan according to the World Nuclear Association. We provide below in Figure 13, a graph by the WNA of the median construction times for reactors since 1981. Figure 13: SMR Designs in Development Source: World Nuclear Association Extensions of Life at Current Operating Reactors : Many countries such as France, the U.S., Canada, Finland and Belgium have announced extension of the operating life of their nuclear reactors amidst discussions around energy security and the decision to fight climate change. In France and the U.S. for example, reactors’ life ar e expected to be extended beyond their initial 40-year lifespan to 50 years or more and up to 80 years, respectively. In Canada, the Ontario Power Generation (OPG) is advancing plans to extend the life of the Pickering nuclear power plant until at least 2026 and potentially up to 30 years. Reactor Restarts : Following the Fukushima incident, Japan had shut down all its nuclear reactors but in recent years, the country has been restarting some of its reactors after it meets new standards. South Korea and Taiwan are other countries where nuclear reactors have been restarting to help alleviate power shortages, reduce greenhouse gas energy and provide a stable energy supply. Small Modular Reactors: Small modular reactors (SMRs) are an additional source of potential capacity that could come online and bolster uranium demand. These are advanced nuclear reactors that have a power capacity of up to 300 MW(e) per unit, which is about one-third of the generating capacity of traditional nuclear power reactors. Many of the benefits of SMRs are inherently linked to the nature of their design – small and modular. According to the IAEA, SMRs offer savings in cost and construction time (~2-3 years) and can be deployed incrementally to match increasing energy demand. These benefits further entrench nuclear energy as a reliable, cost-effective and relatively safe energy source, accelerating the significant uptick in reactor capacity with more than 80 commercial SMR designs currently being developed and commissioned. Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 10 Figure 14: SMR Designs in Development Source: World Nuclear Association Unit Capability Factors of Nuclear Reactors Continue The Trend Established Since 2000: According to the IAEA Power Reactor Information System, the unit capability factor of nuclear reactors remain around the ~80% level with BWR reactors achieving the highest capacity factors consistently. We provide below in Figure 15 a graph of net electrical capacity generated and the unit capability factors for commercially operated reactors with data according to the IAEA. While each reactor’s uranium requirement is different, as we look at the net electrical capacity generated over 2016, 2020, 2021 and 2023 compared to the uranium concentrate required, we calculate an average requirement of ~0.41-0.45 million pounds of U3O8 per GWe generated. It is important to note that the requirement per reactor depends on the type of reactors, the fuel burnup and the thermal efficiency of the reactor amongst other things. Given the unit capability factors of reactors remain fairly consistent, we could expect the required uranium per reactor to remain relatively flat, though this will likely change as reactor technology advances. Figure 15: Unit Capability Factor Trend Source: International Atomic Energy Association Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 11 Geopolitical Tensions Add to Concerns Around Energy Security, Thus Contributing to The Growing Demand While long-term contracting has picked up since 2020, we have not yet returned to the replacement rates whereby utilities would be contracting out more than their annual required uranium requirements. However, the rising concerns around energy security and independence, as well as rising prices, should push utilities to be more active on the long-term contracting front to secure the necessary supply to operate their reactors. According to UxC, the uncovered uranium requirements in 2025 only sits at 5% of total world requirements of 176.2 million pounds; however, as we look past 2028, this grows to 41% of 193.8 million pounds of U3O8 in 2029 and 79% of 218.5 million pounds of U3O8 in 2035. Asia and Oceania are once again a major driver of the uncovered requirement where 75% of total uranium requirements are uncovered by 2030 given the aggressive reactor construction campaign, as well as from the United States with 72% of uranium requirements uncovered in 2030 (See Figure 16). Figure 16: Utility Long-term Contract Volume, 1990-2024 (left) Uncovered Utility Uranium Requirements, 2024-2040 (right) Source: UxC, LLC - The introduction of bills such as the H.R. 1042 – Prohibiting Russian uranium Impots Act which became law, should push utilities to come back to the contracting market in the USA as the January 1, 2028, deadline for import waivers approaches. - Since the military coup Niger , the operating environment in the country has become much more unstable, with authorities notably revoking multiple permits and operating licenses, thus putting further pressures on supply concerns. This should also push Western utilities that had entered contracts with operations in Niger to look for new sources of supply. Uranium Demand Summary Incorporating all of the above, we expect primary uranium demand to grow at a CAGR of 1% from 2023 to 2030, supplemented by secondary demand from financial players and demand related to speculative purchasing from the likes of hedge funds. As we previously highlighted, total uranium demand is likely to surpass total primary mine supply until 2029E when major greenfield projects are expected to come online. The balance until then is expected to be filled by secondary supplies. Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 12 Figure 17: Uranium Demand Outlook vs. Current Production Outlook Source: UxC, LLC and NBF Estimates Supply Outlook Production from uranium mining represents the majority of supply at about 70% of 2023 total supply of 204 million pounds of U3O8, with secondary supplies and other unconventional sources representing the remainder. Notably, over half of uranium mine production is from state-owned mining companies, some of which prioritize secure supply over market considerations. For example, in 2023 Australia, Kazakhstan and Canada alone represented ~67% of total uranium production from mines of 143 million lbs U3O8 and adding in Niger and Namibia, this share increases to ~82%. A similar level of concentration can be found at the asset level, with nine of the largest producing mines representing just under ~60% of total primary production in 2023. This elevated level of concentration at the country and company level heavily exposes the commodity to geopolitical events as we have seen with the impact of the Russian invasion of Ukraine on Kazakhstan export transport route or with the impact of the Niger coup on mining assets in the country. Figure 18: Uranium Production By Country in 2023 (left) Major Uranium Producing Assets by Region in 2023 (right) Source: UxC, LLC and NBF Estimates As we look ahead, these countries will continue to represent the majority of primary production, though we do expect more increases from jurisdictions like the USA, Russia and Africa in the coming years. As part of our analysis of the supply outlook, we leverage data from UxC and finetune estimates based on our 0 50 100 150 200 250 300 2022 2023 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E Uranium U3O8 (mln lbs) Demand (ex-inventory) Inventory Demand Uncovered Uranium Requirement Current Operations + Restarts Secondary Supplies Greenfield Projects 22mln lbs , 15% 12mln lbs , 9% 29mln lbs , 20% 54mln lbs , 38% 7mln lbs , 5% 7mln lbs , 5% 11mln lbs , 7% Africa Australia Canada Kazakhstan Other Russia Ukraine(SkhidGZK) United States Uzbekistan (Navoiyuran) 6 12 5 8 14 15 5 5 7 8 Rössing Husab Four Mile Olympic Dam McArthur River Cigar Lake Kaz.-SaUran + RU-6 Muyunkum Budenovskoye 2 Inkai Africa Australia Canada Kazakhstan Uranium produciton (mln lbs U3O8) Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 13 assumptions and experience on project restarts, ramp ups, expansions and specific company commentary. The current supply forecast includes current operations (including planned expansions), project restarts, clearly defined brownfield projects and greenfield projects that have been sufficiently derisked and are advancing through or towards development. We forecast an overall supply growth CAGR of 6% from 143 million pounds U3O8 in 2023 to 232 million pounds in 2030, driven by new greenfield projects out of Canada and growth in current operations in Kazakhstan, Canada and the United States. The majority of supply growth until 2027 is expected to come from current operations (70% of total growth from 2024 to 2026), followed by new greenfield projects from 2027 onwards (94% of total growth from 2027 to 2030). Figure 19: Uranium Production Share by Country (left) Uranium production From Existing Operations And Greenfield Projects (right) Source: UxC, LLC and NBF Estimates We expect positive momentum in terms of supply growth and mine restarts in the near term, though tempered by continuous potential impact from geopolitical events, while the medium to longer-term outlook relies on unproven greenfield projects: 2024 Supply Growth Should Materialize : We expect mine supply to increase 13% y/y driven by Canada, Kazakhstan and the United States. 2025 Growth Could Be At Risk From Geopolitical Events : We expect a lower level of growth from 2024 to 2025 at 7% y/y. This is driven by production out of Africa, Kazakhstan, the U.S. However, we note that Kazakh production could further be impacted by sulphuric acid shortages and Kazatomprom applying for changes in its subsoil use agreements that would see production levels lower vs. prior expectations. Kazatomprom recently announced a lowering of its initial intentions for 2025 production volumes of 30,500 - 31,500 tU (100% basis) to a lower production of between 25,000 and 26,500 tU (100% basis), an approximately 12% growth compared to its 2024 guidance. Additionally, risks remain around the Niger supply with multiple companies recently having their permits revoked. Finally, continuous supply chain issues and labour constraints could impact some of the project restarts in the U.S. and Canada. 2027E and Beyond Growth Depends On Greenfield Projects : It is important to note that these projects tend to be impacted by delays in their expected timeline to production as a result of permitting, financing and technical issues. We point to the likes of the Lance project from Peninsula Energy which was expected to start in 2023 but is now delayed to late 2024, or to the Cigar Lake mine which was initially planned to produce in 2007 but did not reach production until 2014 as a result of flooding during construction. Additionally, Kazatomprom pointed to its inability to catch up with the construction works schedule at the newly developed deposits as the reason for its recent production volume intention reduction. Some of the major greenfield projects that we expect over the coming decade are highlighted in Figure 20 below. 0 50 100 150 200 250 300 Uranium U3O8 (mln lbs) Current Operations + Restarts Greenfield Projects Demand 14% 15% 12% 8% 8% 6% 23% 20% 35% 38% 39% 31% 6% 6% 4% 0% 20% 40% 60% 80% 100% 2024 2026E 2030E Africa Australia Canada Kazakhstan Other Russia Ukraine United States Uzbekistan Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 14 Figure 20: Uranium Greenfield Projects Modelled, 2027E-2030E Source: UxC, LLC and NBF Estimates It is important to note that while we have good visibility into supply coming online over the next five to seven years, we do expect current operations to start declining into the 2030s, offsetting parts of the production growth. Given the lengthy time to production from discovery of 15.7 years according to S&P Global Market Intelligence and a considerable lack of exploration spend within the space in the past decade, we expect concerns around mine supply to remain an ongoing focus. Critical Supplies to Uranium Production Some Major Supply Risks To Our Model Geopolitical Tensions : Given the concentration of production in a few countries, changes in governments, civil unrests or conflicts in countries or neighbouring countries can negatively impact production, as we have seen in Kazakhstan and Niger. Disruption In Reagents and Other Inputs Needed To Produce Uranium Concentrate : The current impact of the sulphuric acid shortage in Kazakhstan on overall global production highlights the importance that different inputs play in the production of uranium. Sulphuric acid is widely used in many industries and as such it is vulnerable to global demand changes. Other important inputs such as water and energy can affect our supply estimates. Regulatory Risks : Stringent environmental and permitting regulations, specifically in North America, can be cause for delays to new uranium mining projects. Price Risk and Economic Risks : Mining projects are capital intensive and to be economically viable need the right incentive pricing in place. Uranium prices are volatile, so sudden price spikes or drops can impact supply. Additionally, the price movements specifically for term uranium tend to impact companies’ ability to raise financing. Operational Risks : Unexpected geological conditions, supply chain disruptions, technical failures can all impact mining operations and affect overall supply. We have seen the impact to market from operational issues at McArthur River mine and Cigar Lake mine. Secondary Supplies As noted above, the industry has mostly lived off inventories since the 90s with secondary supplies coming in to fill the gap between uranium demand and primary mine production. Secondary supplies can be thought of as inventories reintroduced to the market. They represented 30% of total supply of 204 million lbs U3O8 in 2023 and come from various sources: 0 10 20 30 40 50 60 2027 2028 2029E 2030E Uranium Production (mln lbs U3O8) Dasa (Niger) Budenovskoye 6/7 (Kazakhstan) Zhalpak (Kazakhstan) Shirley Basin (US) Soktamo (Finland) Arrow (Canada) Phoenix (Canada) Uranium Market Overview and Outlook; Initiating Coverage: Cameco, NexGen Energy and Denison Mines NBCFM Research | September 3, 2024 15 Government Inventories : These represent primarily legacy materials from various nuclear weapons programs such as the U.S. Russian HEU agreement, also known as the Megatons to Megawatts program. These essentially would take highly enriched uranium (HEU) from dismantled nuclear weapons and down blend them to produce low enriched uranium (LEU) for use in reactors. The volumes entering the market from this source have decreased over the last few years and represented ~3% of total supply of 204 million lbs U3O8 in 2023. Underfeeding/ Re-enriching Tails : This has also resulted in large quantities of uranium entering the market, specifically after the Fukushima accident. Underfeeding is the process by which primary enrichers use less feedstock to produce a given amount of enriched uranium, which leaves left-over uranium the potential to be re-enriched, thus providing an additional source of uranium. The role of these enrichment supplies has decreased recently since the invasion of Ukraine by Russia which removed supply of enrichment services to the market, thus pushing the enrichment facilities to curtail underfeeding activities. Major players are Urenco, Orano and TVEL. These represented ~6% of total supply of 204 million lbs U3O8 in 2023. Commercial Inventories : These include inventories held at utilities, producers and intermediaries such as financial players (hedge funds, brokers, traders, uranium funds). Utilities represent the majority of these commercial inventories with ~85% of inventories. Given current market uncertainties, we would expect utilities to improve their inventory balance by upflexing existing contracts and creating a bigger safety net. We have observed this trend in both the U.S. and European utility inventory balance in 2023. These represented ~18% of total supply of 204 million lbs U3O8 in 2023. o United States : ~110 million pounds of U3O8 held by owners and operators of U.S. civilian nuclear power reactors as at 2023, up from ~102 million pounds in 2022 but still lower than its peak of 128 million pounds of U3O8 in 2016 according to the U.S. EIA. o Europe : The latest report from Euratom Supply Agency (ESA) notes that utilities held approximately 37,655t of natural uranium in various forms as at 2023 up from 35,710tU in 2022. o China : It is estimated that China held inventorie