Q & A with Dev and Ross

December 10, 2019

Fission IR: We hear a lot of bullish talk about the uranium sector lately and that the prices are expected to move higher anytime...almost imminently, can you please comment on that…give us your opinion?

Dev Randhawa (Chairman & CEO): Good point…The way I see it uranium prices have nowhere to go but up in the next year.  Fundamentally speaking, the uranium price will eventually behave similar to ALL commodities when the current (spot) price is trading at approximately ½ the average price to produce a pound. Whether it be lumber, gold, wheat, oil, uranium or most any other commodity, when the market price is ½ the cost of production, major curtailments begin to occur or have already taken place. And so, this is the case for the uranium market currently. Cameco has closed it largest mine (McArthur River) and its Key Lake mine indefinitely until the uranium price trades consistently for two quarters above $50/lb. Current spot price is $26. Kazatomprom, the worlds largest producer has also announced, earlier this year, an extension to its production curtailment program. Initial reduction of 20% was announced in Dec 2017. The effect of this extension (14mm lbs annually) will push the market a further 8% into deficit by 2021. There are no major mines currently under development.

Other factors supporting a move higher in the uranium price are…A growing annual demand for uranium underpinned by rising environmental concerns and changes to the global energy mix. (Nuclear currently represents only 10% of energy supply) New reactor builds in China and India Long tern Utility contracts expiring without being renewed puts increasing demand pressure on the remaining inventories.

So, as the saying goes, “the best remedy for low prices is low prices”. The uranium sector is no different. This bear market has been prolonged by the significant drop in demand due to Fukushima. However, the over supply has been cleaning up aided by Cameco buying spot inventories to honour long term contacts thus hastening the reduction of spot market inventories available.

Fission IR: We hear on the street that the reason Fission conducted an Underground Only PFS is because you were getting negative feed back regarding the difficulty in obtaining a permit for the open pit concept which involves mining underneath Patterson Lake…?

Ross McElroy (President & COO): That is an interesting perspective, but it is not at all factual.  Fission conducted an Underground Only PFS scenario based entirely on an economic and operational evaluation.  Previously, we conducted a PEA level study of an underground only option and saw that it had many economic and operation advantages.    

People should keep in mind that potential water issues are common in any mine plan for any Canadian operation.  Whether it is in the form of a lake, or sub-surface water, every mine plan has to deal with surface and underground water flow.  A dyke and berm wall is certainly viable for an open-pit operation at PLS, but so is underground workings below Patterson Lake.  Both scenarios have been successfully undertaken at several northern Saskatchewan uranium mine operations in the past, and there is nothing unique with the Triple R deposit.  In fact, our advantage is the shallow depth of the ore body allows for lower risk and flexibility in mine design, which other projects do not have.   

The ability to obtain a permit for the open pit concept at Patterson Lake has had nothing whatsoever to do with our decision to undertake the prefeasibility study for a solely underground concept. The decision was based entirely on economics. By completing this U/G only PFS we have learned that the U/G only process is largely simplified and offers some significant economic benefits: In particular, magnitudes less earth movement, smaller capital cost and lesser timeline to completion.  

At the moment we are leaning in favour of the U/G only option for the above stated reasons (overall economic returns being quite similar).

Our next move is to embark on a feasibility study. We do feel fortunate however that we retain the two options for the ultimate decision.