AMERICA S NEXT URANIUM DEVELOPER

Transcription

1 AMERICA S NEXT URANIUM DEVELOPER Investor Presentation December 2016 TSX: AZZ / FRA: P8AA / OTCMKTS: PWURF

2 DISCLAIMER / SAFE HARBOR STATEMENT Certain statements in this presentation are forward-looking statements. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Often, but not always, forward-looking statements can be identified by the use of words such as plans, expects, budget, scheduled, estimates, forecasts, intends, anticipates, or believes or variations (including negative and grammatical variations) of such words and phrases or statements that certain actions, events or results may, could, would, should, might or will be taken, occur or be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Azarga Uranium Corp. s ( Azarga or the "Company ) actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. These forward-looking statements reflect management's current views and are based on certain expectations, estimates and assumptions which may prove to be incorrect. Material expectations, estimates and assumptions pertaining to forward looking statements include, but are not limited to: the timing of draft and final permits and licenses necessary to project finance and develop the Company s Dewey Burdock Project, the improvement of uranium markets and uranium pricing, the availability of additional capital to enable the Company to continue as a going concern and the Company s mineral properties provide a pipeline for continued growth. A number of risks and uncertainties could cause its actual results to differ materially from those expressed or implied by the forward looking statements, including, but not limited to: global economic conditions; uranium price fluctuations; government regulation and policy risks; public involvement in the permitting process; Native American involvement in the permitting process; environmental regulatory requirements and risks; the market price of the Company s shares; public acceptance of nuclear energy and competition from other energy sources; the Company will require significant amounts of additional capital in the future; competition for properties and experienced employees; uranium industry competition and international trade restrictions; exposure to emerging markets; possible loss of interests in exploration and development properties; mining and mineral exploration is inherently dangerous and subject to factors beyond the Company s control; the Company s mineral resources are estimates; the nature of exploration and development projects; political risk; currency fluctuations; the Company has no history of mining operations; property title rights; dependence on key personnel and qualified and experienced employees; delineation of mineral reserves and additional mineral resources; insurance coverage; dilution from further equity financing and outstanding stock options and share purchase warrants; the Company has never paid dividends and may not do so in the foreseeable future; litigation and other legal proceedings; technical innovation and obsolescence; disclosure and internal controls; and conflicts of interest. Undue reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are in many cases beyond the Company s control. Forward-looking statements are not guarantees of future performance and the Company s actual results of operations, financial condition and liquidity, and the development of the industry in which it operates, may differ materially from statements made or incorporated by reference in this presentation. The Company undertakes no obligation to update forward-looking statements if management s beliefs, estimates and opinions or the Company s circumstances as at the date hereof should change. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether, as a result of new information, future events or otherwise. Additional information about these and other assumptions, risks and uncertainties are set out in the "Risks and Uncertainties" section in the Company's MD&A filed with Canadian security regulators. Certain technical data in this presentation was taken from the technical report entitled NI Technical Report Preliminary Economic Assessment Dewey-Burdock Uranium ISR Project, South Dakota, USA dated 29 January 2015, prepared by Douglass H. Graves of TREC Inc. and Steve E. Cutler of Roughstock Mining Services (the Technical Report and PEA ) and is subject to the assumptions, qualifications and procedures described therein. The Technical Report and PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would categorize them as Mineral Reserves. There is no certainty that the results of the Technical Report and PEA will be realized. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. Mr. John Mays, P.E. is the Qualified Person who supervised the preparation of the exploration technical data in this presentation. This presentation shall not constitute an offer to sell or the solicitation of an offer to buy securities. 2

3 WE ARE EXPERIENCED MINE DEVELOPERS BELIEVE IN URANIUM UPSIDE OWN THE HIGHEST GRADE UNDEVELOPED ISR URANIUM PROJECT, DEWEY BURDOCK, AMONG PEER GROUP 1 HAVE A PIPELINE OF PROJECTS ARE TSX MAIN BOARD LISTED AND RESOURCED TO SUCCEED Notes: 1. Various company announcements and research notes; refer to slide 14 for additional details. 3

4 MINE DEVELOPERS Richard Clement Chairman Professional Geologist with 35-years+ experience in uranium, 10-years with Azarga Uranium Corp. Blake Steele President and Chief Financial Officer Former SouthGobi Resources Finance Director and previously with Deloitte in Audit and Financial Advisory practices John Mays Chief Operating Officer 20-years+ experience in design, construction and operation of ISR uranium mines and formerly Chief Engineer, UrAsia Energy Curtis Church Vice President and Director 18-years mining and exploration experience, 8-years based in Central Asia 4

5 URANIUM UPSIDE Why Uranium? Climate change initiatives require nuclear energy Meeting carbon emissions goals to thwart climate change would be very difficult to achieve without an increase in nuclear capacity. 1 Laszlo Varro - Chief Economist of the International Energy Agency Nuclear energy makes sense Supplies reliable base load power, unlike wind or solar Avoids carbon emissions, unlike coal, oil or natural gas Provides price stability Global demand forecasting strong growth nuclear reactors operable in 30 countries world-wide 58 nuclear reactors under construction 512 nuclear reactors ordered, planned or proposed Notes: 1. Nuclear Street IEA Economist Varro Says Touts Nuclear Power to Control Climate Change. 2. World Nuclear Association World Nuclear Power Reactors (1 November 2016). 5

6 URANIUM UPSIDE Strong demand growth forecast when supply has been cut back URANIUM DEMAND IS GROWING Global reactor pipeline consists of 1,018 1 nuclear reactors compared to pre-fukushima 225 nuclear reactors under construction, ordered or planned 1 representing 50% of current operating reactors China accelerating nuclear growth plans 58 GWe of installed capacity forecast by , 150 GWe by 2030 (currently 32 GWe) nuclear reactors forecast to be constructed per year, increasing to 10 per year after (35 reactors currently operable 1 ) India 22 reactors currently operable, 5 under construction, 64 ordered, planned or proposed 1 Japanese restarts moving forward 3 reactors restarted, 5 approved for restart and 24 have applied 3 U.S. continues to strongly rely on nuclear, generates 63% of carbon-free electricity 5 In 2016, first new U.S. nuclear reactor started in 20+ years, 4 more under construction 1 SUPPLY HAS BEEN CUT BACK U 3 O 8 supply has decreased by 11% from 2013 to Mined supply reduced in price downturn Rabbit Lake, Kayelekera and Honeymoon operations suspended 7 Cameco: production halts at McArthur River and Cigar Lake planned for 2017 Kazatomprom: production increases not justified given current market conditions US-Russian HEU Agreement ended 2013 Notes: 1. World Nuclear Association World Nuclear Power Reactors (1 November 2016). 2. Haywood Securities Inc. Target & Commodity Price Revisions (31 May 2016). 3. UBS Global I/O: Miner s Price Review (1 December 2016). 4. World Nuclear Association Nuclear Power in China (30 November 2016). 5. World Nuclear Association Nuclear Power in the USA (November 2016) 6. Cantor Fitzgerald Quarterly Commodity Outlook (27 October 2016). 7. Company announcements. 6

7 URANIUM UPSIDE Supply deficit on the horizon 1 URANIUM SURPLUS/DEFICIT Assumes projects with estimated break-even costs of US$70/lb or higher come into production Millions of lbs U 3 O URANIUM SURPLUS/DEFICIT Assumes US$40/lb uranium prices and production shutdowns based on the estimated expiration of long-term contracts Millions of lbs U 3 O 8 Notes: 1. Cantor Fitzgerald Quarterly Commodity Outlook (27 October 2016). 7

8 URANIUM UPSIDE Analysts forecast a recovery in Uranium price US$/lb Fukushima incident Analysts forecast Source: TradeTech for historical spot. Analysts forecast is based on average of 8 analyst forecasts (analysts include: BMO, Cantor Fitzgerald, Dundee, Haywood, Royal Bank of Canada, TD Bank, Scotiabank and UBS). 8

9 URANIUM UPSIDE New production requires higher prices HIGHER PRICES ARE NEEDED 1 US$/lb Cantor Fitzgerald analysis estimates long-term all-in sustaining costs of US $80/lb 2 0 Spot Long-term contract Long-term equilibrium FUEL CYCLE IS LONG SO MARKETS REACT EARLY Mining / milling UF 6 conversion U-235 enrichment Fuel fabrication Fuel loading months Note 1: TradeTech for Spot and Long-term contract price. 2. Cantor Fitzgerald Quarterly Commodity Outlook (27 October 2016). 9

10 HIGHEST GRADE UNDEVELOPED ISR PROJECT DEWEY BURDOCK SOUTH DAKOTA, USA 10

11 HIGHEST GRADE UNDEVELOPED ISR PROJECT What is in-situ recovery (ISR) mining? Produces >48% of global uranium 1 Injection wells add oxygen and carbon dioxide to groundwater creating a lixiviant solution in the layer of earth containing the uranium ore Uranium dissolves into the solution Recovery wells pump the solution back to the surface to a processing facility and then returned to injection wells after removal of uranium Monitoring wells are checked regularly to ensure uranium and lixiviant is not escaping the uranium deposit Source: United States Nuclear Regulatory Commission ( Note 1: World Nuclear Association World Mining Uranium Production (July 2016). 11

12 HIGHEST GRADE UNDEVELOPED ISR PROJECT Why we like ISR so much?... It s cheaper and more reliable Environmental impact manageable no waste rock tailings, minimal dust Operate at approximately two-thirds the cost of conventional mines 1 Average capital expenditure of constructing ISR mine less than 15% of conventional mine 1 Only sandstone hosted deposits with the right hydrological and geological conditions amenable to ISR Provide greater operational flexibility and ability to adapt to changes in uranium price Note 1: Tradetech The Nuclear Review (October 2016). ISR VS CONVENTIONAL GRADE AND CASH COST COMPARISON USING CAMECO AS A GUIDE Reserves grade (% U 3 O 8 ) Cash cost (US$/lb) Conventional Ave = 13.8% McArthur River & Key Lake Cigar Lake Ave = US$21/lb Inkai ISR Ave = 0.1% Nebraska & Wyoming Ave = US$19/lb Grades of Athabasca assets average 150x more than ISR BUT ISR has 10% lower cash cost! Notes: Data sourced from Dundee s Cameco research note of 1 June Cash cost numbers are 2017 F to take into account when assets are in steady state production and based on weighted average of production. 12

13 HIGHEST GRADE UNDEVELOPED ISR PROJECT Dewey Burdock: Location and infrastructure Edgemont uranium district in south west South Dakota, approximately 60 miles from Cameco s Crow Butte mine in Nebraska Mineral rights and surface rights covering approximately 17,420 acres and 13,160 acres, respectively Well served for infrastructure Sixteen miles from Edgemont, serviced by two lane, all weather gravel road 10 miles Residential / light use power already at site will supply first two years, then 15 miles of 69kV line to be built to substation to provide upgraded power for central processing plant in third year Two 3,000 foot wells to be drilled on site to pump water from the Madison Formation Source: Technical Report and PEA. 13

14 HIGHEST GRADE UNDEVELOPED ISR PROJECT Dewey Burdock: Highest grade among peers NI COMPLIANT RESOURCE Measured & Indicated: 8,582,000 lbs at average grade of 0.25% Inferred: 3,528,000 lbs at average grade of 0.05% Source: Technical Report and PEA. Only includes ISR amendable resources. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. Effective date of resource estimate 29 January HIGHEST GRADE AMONG PEERS DEWEY BURDOCK 2 Grade (U 3 O 8 %) CENTENNIAL Life of mine project size (lbs) Notes: 1. Peers include: Uranium Energy Corp. s Goliad, Energy Fuels Nichols Ranch, UR-Energy s Lost Creek and Shirley Basin, and Peninsula Energy s Lance. Peer grade data is sourced from latest NI for Measured plus Indicated Resources for all except Lance, where data is published according to the Australian JORC Code for Measured plus Indicated Resources. Life of Mine project size data comes from the latest published stated life of mine production from each project, with the exception of Uranium Energy Corp. s Goliad project, which comes from latest NI for Measured plus Indicated Resources. 2. Source: Technical Report and PEA; includes some Inferred Resources in production. 3. Source: NI Preliminary Assessment Powertech Uranium Corp. Centennial Uranium Project Weld County, Colorado, SRK, 2 June 2010; includes some Inferred Resources in production. 14

15 HIGHEST GRADE UNDEVELOPED ISR PROJECT Dewey Burdock: 2015 PEA demonstrating robust economics ROBUST PROJECT ECONOMICS 1 Annual U 3 O 8 production Mine life (incl. two year ramp-up) Total LOM production Initial capital expenditure Cash operating costs - Plant and well field operating - Restoration / de-commissioning - Site management / overhead Local taxes and royalties Sustaining capital costs 1.0m lbs 11 years 9.7m lbs US$27.0m or US $2.80/lb US$12.53/lb US$8.50/lb US$1.25/lb US$2.78/lb US$6.33/lb US$14.00/lb US$284.2m / Free cash flow pre-tax / post-tax US$220.9m US$149.4m / NPV (8% disc) pre-tax / post-tax US$113.8m Initial capital expenditure of US$27m is sector leading for a project of this size Lowest quartile life of mine uranium C1 cash costs US$12.53/lb Pre-tax IRR of 67% at US$65/lb longterm uranium price (note: post-federal tax IRR of 57%) Vanadium has not been incorporated; however, assays and historical data indicate significant vanadium is present IRR pre-tax / post tax 67% / 57% Notes: 1. Source: Technical Report and PEA, which is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would categorize them as Mineral Reserves. There is no certainty that the results of the Technical Report and PEA will be realized. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. 15

16 HIGHEST GRADE UNDEVELOPED ISR PROJECT Dewey Burdock: Status of key permits Final Source and Byproduct Materials License UIC Class III UIC Class V Issued April 2014 ASLB partially dismissed contentions on NRC license on 30 April 2015 Remaining contentions concerning protection of historic and cultural resources have path to completion Anticipate receiving draft permits in near-term Subsequent to draft permits being issued, public comment period in advance of final permits being issued Ground Water Disposal Plan Water Rights Permit Large Scale Mine Plan Permit Applications complete and recommended for approval by South Dakota DENR staff South Dakota permit hearings for final approval commenced in late-2013, continuance ordered until completion of federal regulatory approvals (NRC and EPA) 16

17 PIPELINE OF PROJECTS Summary of projects USA ASIA Dewey Terrace (WY) Dewey Burdock (SD) Kyzyl Ompul (Kyrgyz) Savageton (WY) Aladdin (WY) Centennial (CO) Development projects with NI Resources and PEAs Exploration projects with NI Resources Green fields exploration 17

18 PIPELINE OF PROJECTS Centennial: Second project for development NI COMPLIANT RESOURCE Indicated: 10,371,571 lbs at average grade of 0.09% Inferred: 2,325,514 lbs at average grade of 0.09% Source: NI Preliminary Assessment Powertech Uranium Corp. Centennial Uranium Project Weld County, Colorado, SRK, 2 June 2010 PROJECT ECONOMICS 1 Annual U 3 O 8 production Total LOM production Initial capital expenditure Cash operating costs 2 Pre-tax NPV (8% discount) 3 0.7m lbs 9.5m lbs US$71.1m or US$7.5/lb US$34.95/lb US$51.8m Notes: 1. Source: NI Preliminary Assessment Powertech Uranium Corp. Centennial Uranium Project Weld County, Colorado, SRK, 2 June 2010, which is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would categorize them as Mineral Reserves. There is no certainty that these results will be realized. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. 2.Includes US$10.63/lb of satellite/ well-field development costs and $5.59 of local taxes and royalties. 3. At US$65/lb uranium price and including a 20% contingency on costs and capital expenditure. 18

19 RESOURCED TO SUCCEED Financial resources and capital structure FINANCIAL RESOURCES Cash and listed securities 1 US$1.7m Note: 1. As at 30 September 2016 (last quarterly filing). Includes cash of US$1.6m. SHARE PERFORMANCE C$/share 0.40 CAPITAL STRUCTURE Shares outstanding 1 Share price (TSX: AZZ) 2 Market cap (CAD) Market cap (USD) m C$0.26/share C$19.2m US$14.6m Notes: 1. As at 30 September As at 9 December Based on 1 CAD = 0.76 USD exchange rate Source: TMX Money. 19

20 RESOURCED TO SUCCEED Investment summary DEVELOPMENT ASSETS WITH COMBINED PRE-TAX NPV >US$200m 1 CLASS LEADING FLAGSHIP DEWEY BURDOCK Highest grade undeveloped ISR uranium project among peer group 2 Robust economics at low uranium prices; lowest quartile C1 cash costs PORTFOLIO OF PROJECTS AT VARIOUS DEVELOPMENT STAGES Two economically assessed development projects, two exploration projects with established NI resources and two green fields exploration projects VARIETY OF POTENTIAL UPCOMING CATALYSTS Progression of Dewey Burdock permitting Off-take or sales agreements over future uranium production Results of geological work on exploration assets Dewey Burdock moving to the construction phase Notes: 1. Sum of pre-tax NPV s for Dewey Burdock and Centennial. 2. Various company announcements and research notes; refer to slide 14 for additional details. 20

21 Corporate office Suite #140, 5575 DTC Parkway Greenwood Village, Colorado USA International operations Level 5-1, Suite 9, Sun s Group Centre 200 Gloucester Road Wanchai Hong Kong SAR info@azargauranium.com Web: 21