Q & A: with Dev Randhawa

August 31, 2018

Fission IR: Hi Dev, we have fielded some questions from shareholders and prospective shareholders this summer wanted to take this opportunity to get your thoughts on some recent uranium events, as well as to ask you some questions regarding Fission Uranium as it has been a few months since our last CEO Corner?

Dev: Sounds good.

Fission IR: Lots has happened since that last time we spoke to you. We would like to start with your thoughts on the recent events to industry giant Cameco and how that may affect the uranium market?

Dev: This will mark the first year that demand will outstrip supply. I think there is 190 million pounds of demand against 160 million pounds of production. So, this is the first year there is a gap or shortage. Kazakhstan and Cameco, the worlds biggest uranium producers, have really cutback production.  I see higher prices because of those cutbacks. What I don’t know is whether that will happen in three months, or six months, or a year. What I do know is that when the richest mine in the world shuts down (McArthur River of Cameco) the spot price and contract price will react to that.  The significant event will be when Cameco and Orano enter the market to buy 500,000 lbs. I think they put out a tender in August for that. They are looking for pounds – they have not done that in a long time. Its going to drive the market.

On a macro level, the demand for electricity keeps rising. Demand for cryptocurrencies and electric vehicles is increasing. This is all electrical energy. Which means the demand for uranium will continue to rise. The case for higher uranium prices is that the demand for electricity continues to rise – where is that supply going to come from? The uranium industry has seen a significant cutback as production peaked in 2016.  Overall, we see positive changes not seen in a long time.

Fission IR: What is happening at Fission Uranium these days and what is next for the company after the prefeasibility study is complete?

Dev: Well that’s a great question. Unfortunately, we can’t count on uranium prices to firm up. This is unprecedented to have the worlds largest public uranium company to shutdown production at the richest mine in the world. That’s how bad uranium prices really are. Its like Saudi Arabia shutting down oil production because oil prices are so low they cannot produce. What’s the best thing for low uranium prices? It is actually low uranium prices, which causes supply constraints. This is exactly what had to happen and did happen as supply dropped while demand continued to rise.  The funny thing there is more nuclear reactors being built today than there was during the time of Fukishima. The difference is the spot price was around $50-$70 back then and its roughly $26 right now. What’s happened? There has been a fundamental change in the way utilities buy uranium. They are not as long-term thinking, rather they are short term thinking while the long-term thinkers in Japan have been pulled out of the market for the time being.  Our business plan does coincide with that.  We have been careful to cutback expenditures, shrink our board, cut back where we can until wee see a significant move in the uranium price.  Having said that, it has moved up quite a bit from the lows at $18, but its too early to make any long-term decisions and say we are in a bull market.  As for the prefeasibility study, the plan is still to get that done this year and we are on schedule for that.

Fission IR: Can you please explain Fission’s strategy amid this low-price uranium environment and how the company has had to adjust?

Dev: Overall, our strategy is to hope for the best but plan for the worst. While we expect to see higher uranium prices this year, we are not sure they will, and we do not control that. Hope is not a strategy. What we have done, at different levels, is cutback our costs. It starts with the board. We shrunk the board from ten to eight.  We had the board members take more of their compensation in stock opposed to cash. We offered some of our salaried employees that as well. These are efforts to conserve cash, so we don’t have to raise equity funding at the bottom of a market cycle, which would be dilutive.  One of our employees was recruited away for a lot more money. That is a sign, or a direct result, of weak uranium prices and we were not able to offer raises to quality people, so we end up losing some people. Some commodities are doing better than others, as are some sectors so your going to lose people. What we always try to do is keep our key technical people such as geophysicists, geologists on the ground working. We dropped our overhead in the Vancouver office significantly. We miss those people, they were good people, part of our family. But when the board approached me to conserve cash over the next few years, it started at the top and some of them got fired. So, it all started with the board and the compensation at the very top. We haven’t touched any of the lower salaries, but we have made conscience decisions to cutback costs on marketing, marketing staff, all with the effort to conserve cash and prepare for a longer winter with respect to the uranium price.

Fission IR: What is Fission’s current cash balance and does the company have plans to raise more money?

Dev: As at July 31st, 2018 our cash balance was $27,452,992 dollars. In other words, we have enough money to last us until the end of next year.  If we must, we have options available to us.  Some of our peers hold debt, which we do not, so that is an option for us.  We can take on debt like both NexGen and Denison have done. Right now, it’s a sit and wait time until the market turns around, and in doing so we have made cutbacks to conserve cash.

Fission IR: Being a twenty-two-year uranium CEO that has gone through previous boom bust cycles, what does this market remind you of and what do you believe will happen to the sector over next twelve to twenty-four months?

Dev: Again, I think we will see an improvement this Fall. Typically, we see better prices each Fall. Its just the way the timing is with seasonality. I expect it go much higher, and by the Fall I hope we can make it to $30/lb. Hopefully $40 dollar plus next year.  That’s my own guess. The problem is this is subject to many minor things out of our control.  Tomorrow morning a politician could say “we are not going to buy uranium from so and so. What can you do?” My own experience tells me this year was definitely the low for uranium. The real key is that Cameco and Orano have to buy some pounds. They have to go into the market and buy these pounds. That’s significant, as these are major producers. That’s a key piece as well as Japan getting more active in the market.

Fission IR: What are your thoughts on the new market participant in Yellow Cake PLC and their IPO this summer?

Dev: First of all, I know these people. It just shows you that generalists are looking at uranium for the first time. It doesn’t surprise me that it happened in London. I find they are more ahead of the curve. They are more forward looking across the pond compared to North America. Speaking from experience, that’s the first place I found love back in 2004 / 2005. I find that in the U.K. they are more agnostic and look at things from a mathematical or fundamental standpoint, unlike here in North America where there is more emotion. Yellow Cake PLC came in at a time when they acknowledged that there was a ‘fundamentally mispriced market,’ uranium demand was higher than supply, when electrical demand is rising and anticipated to rise by 300% by 2050. They then aimed to raise $150M, and they received $220M and this was done at $23/lb uranium price.  Its encouraging.

Fission IR: What do you think the uranium sector needs to do better job of?

Dev: Educating people and creating more transparency with the contracts between producers and consumers. Uranium is the only non-carbon energy resource that is base load power. You can turn it on or off as you need, which you cannot do with other resources.

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