KIVALLIQ ENERGY CORPORATION V.KIV

Dundee: Uranium projects that might meet CNNC’s criteria

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According to Dundee Capital Markets:

CNNC to Buy AREVA Stock, Eyes Uranium Projects in Kazakhstan, Canada and Australia

Event: CNNC Eyes Uranium Projects in Kazakhstan, Canada and Australia – to Buy AREVA Stock with CGN

Impact: Positive –Chinese nuclear utilities are actively in search of uranium

CNNC on the hunt for uranium (see article). Media reports provide further evidence that China seeks, and will likely become more aggressive in obtaining interest in uranium projects globally. CNNC will be targeting projects with at least 30K tonnes of uranium, cash productions costs less than US$25/lb, and total production costs less than $45/lb. (Note: The article didn’t differentiate between 30k t of U or U3O8 – therefore the range might be 66.5 to 78 MM lbs U3O8).

CNNC and CGN seek to purchase shares in AREVA shares (see article). CNNC confirmed last week that it and CGN will purchase an unspecified amount of shares Areva, the largest uranium producer in the world, owned 87% by the French Government. CNNC already owns 25% of Paladin Energy’s (PDN-T, BUY, C$0.50 target) Langer Heinrich in Namibia, 37.2% of the Azelik mine in Niger (on C&M); while China General Nuclear Power (CGN) group owns other deposits including the massive 500 MM lb + Husab project in Namibia.

Kazakhstan, Canada and Australia are sought jurisdictions. We have discussed how Chinese and Russian nuclear utilities (and therefore Governments) are likely to go the project purchase route (see our May 12th Weekly), while others tend to deal with intermediaries and sign off-takes. We expect both China and Russia to aggressively finance and sell reactors around the world, particularly to developing nations, and help reduce risk by supplying fuel nuclear for life. There are not many uranium projects available that meet its criteria, especially in these jurisdictions. This bodes well for this short list of projects as they become highly prized targets.

Projects that Dundee believes might meet CNNC’s criteria:

Canada:

• Fission Uranium’s (FCU, BUY, C$2.40 target) PLS project;

• Cameco’s (CCO-T, BUY, C$24.00 target) Millennium Deposit;

• UEX (UEX-T, Neutral, C$0.70 target) and AREVA’s Shea Creek deposit;

• Rio Tinto’s (RIO-N, Not Rated) Roughrider Deposit.

Australia:

• Cameco’s Yeelirrie project (no public economic studies);

• Energy Resources of Australia’s (ERA-ASX, Not Rated) Ranger Deeps (if they are allowed to permit this).

Kazakhstan:

• KazAtomProm? Uranium One? Let’s assume Kazakhstan isn’t for sale due to Russian influence, although KazAtomProm has allowed minority interest in the past.

• AREVA? Cameco? We don’t see either company giving up interest in these world class assets either.

Projects that Dundee believes might just miss CNNC’s criteria:

Canada:

• Phoenix deposit at Wheeler River (right size, high grade, no economic studies yet);

• AREVA’s Midwest project (just under the size threshold, older economic study).

• Kivalliq Energy’s (KIV, BUY, No target) Angilak project (might fall under the size threshold now but upside is considerable, no economic studies yet but high grades bode well).

Australia:

• Cameco’s Kintyre (costs are higher);

• Toro Energy’s (TOE-ASX, Neutral, A$0.09 target) Wiluna-Lake Maitland project (might miss on costs, not size);

• Laramide’s (LAM-T, Neutral, C$0.80 target) Westmoreland project (might just miss on size, notwithstanding upside, and cost– PEA needs updating as well).

Moving farther afield:

Good companies tend to be found in top jurisdictions. Cameco and AREVA are the best examples. But coming later to the table, Dundee believes that CNNC may have to 1) move further afield into Europe, the Americas and Africa where we believe there are projects that meet its criteria; or 2) into slightly smaller or higher cost projects:

• Spain – Berkeley’s (BKY-ASX, BUY, A$0.70 target) combined Retortillo-Alameda-Zona 7 meets all criteria;

• Peru - Plateau Uranium’s (PLU-V, Not Rated) Macusani Plateau projects well exceed the size and cost thresholds

• Niger - Global Atomic Fuels (Private, Not Rated) Dasa deposit clearly has the size - cost are not yet proven, but will likely meet criteria;

• South Africa - Peninsula Energy’s (PEN-ASX, BUY, A$0.04 target) Karoo project is nearly the right size, but costs are not proven;

• USA – Virginia Energy’s (VUI-V, Not Rated) Coles Hill as the largest deposit in the USA meets the size threshold, although it’s a bit more expensive and under a uranium mining ban