URANIUM SALE CONTRACTS UNDERPIN LANCE PROJECTS

Transcription

1 15 March 2016 Cmpanies Annuncement Office Via Electrnic Ldgement URANIUM SALE CONTRACTS UNDERPIN LANCE PROJECTS Highlights 7,900,000 punds f U3O8 under lng term cntracts US$440,000,000 in revenue in cntract prtfli Weighted Average Price f US$56 per lb U3O8 75% f Stage 1 prductin under cntract 54% f Stage 2 prductin under cntract Nn-dilutive Streaming Finance under final review Peninsula Energy Limited (Peninsula r Cmpany) annunced n March 12, 2016 that it had added its fifth lng term uranium cncentrate sale and purchase cntract t its supply agreements. The Cmpany is pleased t prvide this update n the benefit that the ttality f these cntracts cntribute t building a glbal, sustainable, lw-cst uranium cncentrate prducer. Term Cntracts Deliver Slid Results The fifth lng term cntract signed by Peninsula is fr delivery f 4.0 millin punds f U3O8 ver a 10-year perid cmmencing at the end f This agreement als cntemplates increasing the quantity t 50% f annual Lance prductin frm 2026 nwards. Terms relating t the increased quantities are t be negtiated in 2022 when prevailing market cnditins are frecast t be mre favurable fr prducers. Peninsula has 7.9 millin punds f U3O8 under cntract fr delivery t majr utilities lcated in the United States and Eurpe. Prjected revenue under these existing lng term cntracts nw exceeds US$440,000,000. These cntracts prvide a substantial earnings stream t the Cmpany whilst allwing it t retain significant quantities f planned U3O8 prductin fr future cntracting during perids f anticipated imprvement in uranium prices. Level 2, 100 Railway Rad, Subiac WA 6008 PO Bx 8129, Subiac East WA 6008 Phne: +61 (0) Fax: +61 (0)

2 Peninsula Energy Limited -2- The weighted average delivery price fr these five cntracts ver the next 10 years is US$56/lb U3O8. This cmpares very well t the US$45/lb U3O8 weighted average delivered price achieved ver the past decade by the fur largest publicly traded uranium mining cmpanies 1. Cmmenting n the prtfli f existing cntracts Managing Directr and CEO Mr. Gus Simpsn stated Over the past five years Peninsula has been fcussed n demnstrating t United States and Eurpean utilities its capacity t becme a reliable lng term supplier f uranium. The establishment f gd relatins with end-users has prvided a significant lng term revenue stream that underpins the Cmpany s develpment in the shrt term and prvides a slid basis fr its lng term grwth. During the perid apprximately 75% f Stage 1 prductin is cmmitted t lng term cntracts and under the existing sale agreements 54% f annual Stage 2 prductin is cmmitted during the next 10 years. This supprts the expansin at the Lance Prjects, yet still leaves sufficient planned prductin available fr additinal cntracts t be entered int when pricing is predicted t be strnger. Nn-Dilutive Capital Expenditure Funding In additin t cnventinal debt and equity funding Peninsula is pleased t annunce that it is investigating Incme Streaming as a means t financing the Cmpany s future expansin plans. With the successful initiatin f prductin at Lance the Cmpany has received several prpsals and executed ne nn-binding term sheet fr an Incme Streaming facility t fund its expansin plans at Lance. Incme Streaming is a nn-dilutive mechanism that sees a prprtin f future sales revenue, ver a finite time perid, being exchanged fr a ne-ff upfrnt cash payment that is t be used fr additinal capital expenditure. Typically this wuld invlve less than 5% f the prduced material ver the specific time perid and wuld be structured t affrd a cmmercial return t the prvider but als t minimise the cashflw impact t the Cmpany. The Uranium Market The uranium market is characterised by deliveries made under term r spt cntracts. During the perid sale arrangements under term cntracts have been the predminant sale and purchase arrangement between prducers and utilities as they seek security f supply and lng term price predictability. During the 3 year perid between 2013 and 2015, the annual vlume f uranium cntracted by utilities has been significantly less than the previus 7 years and substantially less than annual uranium cnsumptin. Level 2, 100 Railway Rad, Subiac WA 6008, PO Bx 8129, Subiac East WA 6008 Phne: +61 (0) Fax: +61 (0)

3 Peninsula Energy Limited -3- Figure 1 Annual Cntracted Vlume (Surce: UxC) A number f factrs have caused the reduced level f cntracting ver the past 3 years. Vlumes cntracted abve the annual levels f cnsumptin prir t 2012 cmbined with the flw-n impact f the Fukushima incident, (e.g. Japanese utility withdrawal frm the market), and enricher underfeeding partly replacing demand fr natural uranium has seen utilities runff a majr prtin f their existing cntracted vlumes. A return t mre nrmal cntracting levels is expected ver 2016 thrugh 2018 as existing term cntracts expire, demand fr uranium cntinues t increase and insufficient new prductin enters the market. Peninsula is well psitined t benefit frm this rising market. Over the past 5 years, the Cmpany has invested significant time in building relatinships with Nrth American and Western Eurpean utilities, increasing their awareness f Peninsula, ur assets and grwth plans. Develpment f Stage 2 and ultimately Stage 3 at the Lance Prjects will prvide Peninsula with the capacity t secure new lng term cntracts in an imprved market. Sustained Grwth in Nuclear Pwer Generatin There are currently 440 perable nuclear pwer reactrs glbally, capable f generating 384 GWe f carbn free electricity per annum. A further 65 reactrs are currently under cnstructin and an additinal 510 reactrs are planned r prpsed in the future. Operating reactrs will cnsume apprximately 170 millin punds f U3O8 in 2016 with a frecast grwth rate f apprximately 4% p.a. Currently the majrity f uranium is cnsumed in the develped ecnmies with the majrity f grwth in nuclear pwer ccurring in the emerging ecnmies. This grwth is led by China, India and Russia, and supprted by cuntries such as the United Arab Emirates, Suth Africa and Saudi Arabia. All f these cuntries are seeking increased quantities f reliable carbnfree baselad pwer generatin. In the case f Middle East natins, a mve t nuclear pwer generatin will enable il and gas used dmestically fr pwer generatin t be re-directed t exprt markets. It is estimated that Saudi Arabia burns US$45 billin f il annually t generate electricity dmestically. Level 2, 100 Railway Rad, Subiac WA 6008, PO Bx 8129, Subiac East WA 6008 Phne: +61 (0) Fax: +61 (0)

4 Peninsula Energy Limited -4- China Currently has 30 perating reactrs generating 27 GWe f electricity, with a further 24 reactrs under cnstructin that will prvide an additinal 27 GWe f electricity. By 2020, China is aiming fr 58 GWe f electricity t be generated frm nuclear with a further 30 GWe f additinal capacity under cnstructin. Frm a lnger term perspective, China is targeting 120 t 150 GWe f electricity frm nuclear pwer by 2030, which requires China t cmmence cnstructin n 5-6 additinal reactrs each year between nw and Over the past 10 years, China has taken a number f significant steps t increase its use f nuclear pwer. China has recently develped its wn prprietary reactr technlgy (Hualn 1) and nw leads the wrld with the lwest capital cst fr cnstructing new reactrs. China als plans t be a majr player in the exprt and implementatin f this technlgy glbally. India Currently has 21 perating reactrs generating 5.3 GWe f electricity, with a further 6 reactrs under cnstructin prviding an additinal 4.3 GWe f electricity. India s mst recently annunced plans are seeking t increase its nuclear pwer capacity t 13.5 GWe within 10 years. Russia Currently has 35 perating reactrs generating 26 GWe f electricity, with a further 8 reactrs under cnstructin prviding an additinal 7 GWe f electricity. With its wn prprietary reactr technlgy and full nuclear fuel cycle capability, Russia cntinues t be very active in the exprt market and has signed agreements t finance and build new reactrs in cuntries such as Turkey, Egypt and India. United Arab Emirates In partnership with Suth Krea, the United Arab Emirates is currently cnstructing 4 nuclear pwer reactrs that will prvide 5.6 GWe f electricity when cmmissined ver the next 2-4 years. Suth Africa Has annunced plans fr up t 8 new reactrs t generate 9.6 GWe f electricity and the prcurement prcess fr the supply f the reactrs t cmmence in the first half f In advance f the prcurement prcess, Suth Africa signed framewrk nuclear pwer agreements with cuntries such as Russia, China and France. Saudi Arabia Has annunced plans t cnstruct up t 16 nuclear pwer reactrs ver the next 20 years t generate up 17 GWe per annum. A 2010 ryal decree identified nuclear pwer as essential t help meet grwing demand fr bth electricity generatin and water desalinatin, while reducing reliance n depleting hydrcarbn resurces. In January 2016, China and Saudi Arabia signed a memrandum f understanding n the cnstructin f a high-temperature gas-cled nuclear pwer reactr. Against this backdrp f increasing demand fr nuclear pwer, investment in majr new uranium mines t fuel future reactrs has been significantly reduced ver the past 3 t 4 years due t the lack f price incentive brught abut by the Fukushima accident. Given the lead time fr regulatry apprvals fr new uranium mines, a supply deficit lms large ver the next 5 years (refer Figure 2 belw). Level 2, 100 Railway Rad, Subiac WA 6008, PO Bx 8129, Subiac East WA 6008 Phne: +61 (0) Fax: +61 (0)

5 Peninsula Energy Limited Mlbs/yr U3O Tday 2012A 2013A 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Figure 2 Frecast Uranium Supply & Demand (Surce: UxC, WNA, IAEA, NIW, Raymnd James Ltd.) Cnclusin Imprvement in uranium prices is expected t be driven by the increased use f nuclear pwer as a means f cst effective carbn free baselad pwer generatin. Peninsula nw has a substantial prtfli f lng term cntracts at prices that prvide a significant margin ver all-in sustaining csts f prductin. These lng term cntracts prvide an excellent revenue base that underpin the develpment at the Lance Prjects. Whilst prductin capacity f Stage 1 is cmmitted t cntracts, Peninsula has sufficient uncntracted Stage 2 and Stage 3 prductin capacity t capitalise n an expected imprvement in uranium demand and pricing ver the next 3 t 4 years. Yurs sincerely Secndary Supplies Existing Mines Frecast New Mines Ttal Demand Jhn (Gus) Simpsn Managing Directr/CEO 1) Infrmatin surced frm public reprts issued by Camec Crpratin, Energy Resurces Australia, Paladin Energy and Uranium One. Abut PEN: Peninsula is a uranium prducer in the Pwder River Basin, Wyming, USA, which cmmenced prductin f U3O8 in December 2015 frm its Lance Prjects, lcated apprximately 75 km NE f Gillette, Wyming. Peninsula is licenced t prduce 3 millin punds f U3O8 per annum frm the Lance Prjects. Fr further infrmatin, please cntact ur ffice n +61 (0) during nrmal business hurs. Level 2, 100 Railway Rad, Subiac WA 6008, PO Bx 8129, Subiac East WA 6008 Phne: +61 (0) Fax: +61 (0)